Company Reports

Today, Envestnet announced that it has agreed to be acquired by Bain Capital at a share price of $63.15, a 2.4% premium to the close price on July 10 and an 11.7% premium to the close price on April 15. This is right before media reports indicated that Envestnet was exploring a sale. The deal does not surprise us, as Envestnet has been no stranger to takeover interest over the past five years. We intend to raise our fair value estimate to $63 from $57 as we do not see many hurdles for the deal to be completed, which is expected to close in the fourth quarter of 2024.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

Envestnet reported solid first-quarter results. Revenue increased 9% to $325 million, driven by asset-based fees that benefited from net flows and market appreciation boosting asset levels. Subscription-based fees were roughly flat as growth in wealth solutions was largely offset by continued softness in the data and analytics (Yodlee) segment. Envestnet generated $70 million of adjusted EBITDA, which equates to about 350 basis points of margin expansion from the year-ago period as the firm works to control expenses. The firm reduced its headcount by 10% during 2023. As we incorporate this quarter’s results, we expect to increase our $52 fair value estimate by a single-digit percentage due to assets and operating margins coming in a tad bit above our expectations. We attribute the current share price being above our fair value estimate largely to media reports that Envestnet has received takeover interest from private equity firms.

On April 16, Reuters reported that Envestnet is exploring a potential sale of itself and has been working with investment bank Morgan Stanley. As a result, the firm’s shares rose 9.3% versus a 0.2% decline in the Morningstar US Market Index.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

Envestnet reported decent operating results in the fourth quarter but a tepid and lower visibility outlook. Revenue of $318 million in the fourth quarter beat our estimate of $311 million and the FactSet estimate of $312 million, with wealth solutions subscriptions ahead of our estimate. On this $318 million, Envestnet generated $76 million in adjusted EBITDA, which beat our consensus estimates as the firm’s restructuring efforts are reducing adjusted expense growth, and the company benefited from some expense timing. We maintain our narrow moat rating and $48 fair value estimate per share on Envestnet.

Amid languishing stock performance, Bill Crager announced he will step down as Envestnet CEO at the end of March 2024. The news comes as Envestnet has seen meaningful changes in its management and board in recent years. In our view, the news does not change the likelihood that Envestnet sells itself, which we see as more dependent on market sentiment and financing conditions. We will maintain our narrow moat rating and $48 fair value estimate on Envestnet’s shares and regard shares as fairly valued.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

Bloomberg has reported that narrow-moat-rated Envestnet is exploring selling its data and analytics segment Yodlee. The Bloomberg's Dec. 13 article does not mention how much Envestnet is looking to fetch for Yodlee but, given revenue declines in recent years and a tepid outlook, we'd expect it to go for less than the company paid for it. We will maintain our $48 fair value estimate on Envestnet's shares and view Envestnet's shares as roughly fairly valued. We attribute the positive market reaction to the fact that a sale would remove a revenue-lagging segment and may increase Envestnet's strategic focus rather than expectations of a lofty sales price.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

Narrow-moat-rated Envestnet reported a mixed third quarter. Revenue of $317 million fell 1% shy of the FactSet consensus but expense control on adjusted expenses resulted in adjusted EBITDA and adjusted EPS coming in at 2% and 4% higher than the consensus, respectively. However, the firm’s fourth-quarter revenue outlook was disappointing. Relative to our expectations, asset levels were in line, but the firm’s asset-based fee rate implies about 9.6 basis points in the fourth quarter, down from 10.0 basis points in the third quarter. In addition, Envestnet is seeing some softness in its subscription businesses. As we tweak our model, we expect to decrease our fair value estimate on Envestnet by 5%-15%.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

On the afternoon of Sept. 25, Envestnet announced that Joshua Warren will become the firm’s chief financial officer effective Nov. 15, replacing Pete D’Arrigo. While Envestnet has done well over the years in terms of increasing its revenue, its ability to widen operating margins has disappointed investors to the point that activist investors such as Impactive Capital began to get involved. We believe a new CFO from outside the firm may bring a fresh perspective, thus we are modestly positive on the change, but it is not enough to materially alter our $54 fair value estimate or narrow moat rating on Envestnet’s shares.

Envestnet reported an okay second quarter. Revenue of $312 million were 1% below the FactSet consensus while adjusted EBITDA of $58 million and adjusted EPS of $0.46 was roughly in line. The firm’s wealth solutions business is being affected by industrywide trends such as the shift toward cash while the Yodlee business is experiencing continued softness. While management only modestly tweaked its guidance, we note that the firm’s profit guidance is weighted heavily toward the fourth quarter. Overall, we are maintaining our fair value estimate of $54 as market appreciation is offset by lower data and analytics revenue.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

During the first quarter of 2023, Envestnet reported solid results at its larger wealth solutions segment but its smaller data and analytics (Yodlee) segment struggled. Revenue, adjusted EBITDA, and adjusted EPS were $299 million, $55 million, and $0.46 compared with the FactSet consensus estimates of $301 million, $54 million, and $0.44, respectively. We will maintain our narrow moat rating and $54 fair value estimate on Envestnet’s shares.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, sought to capitalize on the move to independent RIAs from wirehouse firms and the move to a fee-based advice from a commission-based model.

Envestnet finished the year with a fourth quarter that was a tad soft. Market headwinds weighed on asset-based fees that were down 15%, and the firm’s Yodlee business continues to run light. That said, wealth solutions subscription revenue growth of 10% was solid, in our view. Overall, there was little that would change our long-term view of the firm, and we will maintain our narrow economic moat rating and fair value estimate of $54 on Envestnet’s shares.

Envestnet was founded in 1999 to offer independent advisors access to a comprehensive wealth-management platform. The firm’s founder, the late Jud Bergman, recognized two major trends in the industry. The first was the move away from the wirehouse firms. The second was the move from a commission-based toward a fee-based model.