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Text: I'm joined today by our CEO, Bill Crager; and CFO, Pete D'Arrigo.
Such comments are not guarantees of future performance, and therefore, you should not put undue reliance on them.
We also will be discussing certain non-GAAP information.
As we look back on 2020, we recognize how hard a year it was for so many people.
The pandemic impacting every single person's life, and for so many, in devastating in tragic ways.
We honor the incredible work of healthcare workers and the frontline workers who have shown such brave resilience and dedication over these months.
While the difficult and practical implications of the pandemic have played out, a digital rumble began to shake across the economic landscape.
Cloud-based companies like Envestnet engaged from the first moment, leveraging our service and support infrastructure to help our clients navigate these disrupted times.
We also spent the year paving the way toward an exciting and accelerated digital future.
Last year, we took swift action to ensure the safety of our employees.
We met the extraordinary demands of the year managing historic account and trade volumes as we grew the company and improved the way we served our clients.
We added a net 1.5 million accounts last year, completed 15 million service tasks and executed an incredible 76 million individual trade orders.
This was executed by our team as we worked remotely and while our clients worked remotely.
We completed a significant and important initiative to streamline our organizational structure and add leadership talent, which positions us to operate more as one Envestnet, both internally and also for the marketplaces that we serve.
And despite the headwinds created by March market values, we grew impressively, delivering very solid financial results.
We reported just shy of $1 billion in revenue, which is 10% higher than a year ago, and adjusted EBITDA grew 26% compared to 2019.
And importantly, we chartered the course for advancing a tremendous opportunity for our industry to better serve its customers, further expanding our strategic purpose, developing a bold investment plan to capture the sizable opportunity before us as we make financial wellness a reality for everyone.
Over our history, Envestnet has been very successful in anticipating, investing in and driving the future.
We began 20 years ago as a TAMP, a turnkey asset management platform, a category we invented, and we continue to lead by a substantial margin.
Over time, our capabilities expanded.
We unbundled our own investment solutions from the core technology, enabling advisors in powerful new ways, opening access to the industry's largest marketplace of investment solutions and strategies.
We launched the first unified managed account, the UMA, bringing multiple investment strategies into one brokerage account, improving how advisors at optimize asset allocation and tax efficiency within client portfolios.
This powerful integration of technology with investment product made it far easier for advisors to deliver portfolio strategies while to help drive down the costs for end investors.
We forged an integrated future of data and planning-centric advice for advisors to deliver to their clients.
Our acquisitions of Yodlee in 2015 and MoneyGuide in 2019 were critical as we evolved into an industry-leading integrated wealth platform.
Impact investing, overlay solutions, direct indexing, integrated access to credit insurance, and just announced this week, trust services, the scope of what we are doing, the progress we are making in each of these areas and the growth potential they represent for us are very important to note.
The scale, capabilities and how we utilize data are significant competitive differentiators for us, and we plan to build on it.
Envestnet is proud to work with thousands of firms, including 17 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of fintech companies.
We are the industry leader in wealthtech, supporting more than 106,000 financial advisors, 13 million investor accounts and more than $4.5 trillion in assets.
We have the scale and infrastructure to grow from here.
Our consumer financial data aggregation capabilities are unmatched: 17,000 data sources, 470 million connected accounts, which grew by over 62 million last year, 35 million users, and also in the past year, nearly three million households that benefited from a financial planning experience using our award-winning software.
We and our customers, financial services firms and the advisors who work for them, are improving the financial lives of millions of people.
This has enabled us to become the financial wellness ecosystem powering the industry into the future.
We are using modern technology to create linkages and building out a network that becomes an evolving system, ever-adapting, ever-engaging, ever-improving connections that the consumer defines the batteries of and will call upon when, where and how they choose.
This is a bigger vision, one that will provide our customers the super power to engage in intelligent, holistic servicing of the consumer's financial life.
That's why we're accelerating our investments in the ecosystem.
These investments, which I've been referencing for the past few earnings calls, are in three areas.
First, we are making major enhancements to our already strong capabilities on behalf of our existing customers.
We're making it easier for them to work with us, easier for them to leverage all that we offer, eliminating friction from the process.
For instance, we're providing an integrated trading environment that will bring together the feature sets of investment, FolioDynamix and Tamarac into a singular tool.
Advisers will have the entire universe of investment strategies and solutions just a click away.
We're also digitizing and hyperpersonalizing more of the end consumer experience with more use of data, intelligence and insight.
The second area is data.
Data is embedded in all that we do.
We've been redefining the way data is used to create better intelligence, insight and guidance for advisors to help their clients.
Nobody else has a data engine quite like this.
Envestnet can connect the data from a person's daily financial transactions with our market-leading financial planning capability, which we've broken down into powerful, focused financial apps that tie into a financial strategy, and with a click, advisors can then execute on it.
We're using more and more of the intelligence in our data to drive recommended actions.
For example, our recently launched recommendations engine addresses the individual's needs against the backdrop of an extraordinary data set.
We are seeing promising evidence as firms use the data to grow faster and discover new opportunities within their existing customer base.
Digital experience is the third area of investment for us.
We are on the cusp of making this intelligent, connected financial life in reality with our innovative digital environment for end consumers, powerfully taking the parts of the financial life and bringing them together in an extraordinary and accessible experience.
We will empower advisors to offer this as the financial center for their clients in a powerful way that they have not experienced before.
This is just the start of the progress that we are making.
With investment at the center of the financial wellness ecosystem, we can engage with future partners in incredibly value-creating ways.
Our strategy opens a network of potential partnerships that expands far beyond our current marketplace beyond our walls, an existing network of investment managers, insurance companies, lenders, banks, custodians, broker-dealers and RIA firms.
An example could be in healthcare or even in personal wellness.
We'll also open our platform and inspire third-party developers who can create new apps, addressing emerging marketplace needs and/or utilizing our infrastructure to engage underserved parts of the financial services market.
In doing so, we gain access to millions of consumers.
We can improve their financial lives by deploying Envestnet solutions through a broader network of fintech companies and nontraditional outlets that are utilizing embedded finance as part of their strategy, while providing the essential bridge back to full-service advice within our advisor community.
As the orchestrator of this large and growing ecosystem, the revenue potential for us is significant.
While life changed over the course of the last year, in many ways, it also sped up.
We sped up as well.
Trends that have been emerging for years are accelerating at a faster pace, more digital, more intelligent, more consumer-driven.
Consumer expectations have grown so quickly, whether it's a grocery delivery, mortgage approval or the ability to open and fund a new investment account.
And we are leading our industry in helping our customers meet the expectations of consumers now and into the future.
I wrote about this in a white paper that we published earlier this week called, The Intelligent Financial Life.
Our supplemental deck includes a link.
I encourage you to read it and watch the related video.
In a nutshell, here's what it says.
Today, most people have two distinct financial lives, how they interact with their money each day and then how they plan for their money into the future.
Neither of these connects with each other, resulting in a complex challenge for the individual, oftentimes leading to extraordinary stress in their lives.
The white paper was a call to action for our industry, a playbook for more deeply engaging and impacting the financial lives of consumers while unlocking tremendous opportunities for companies that enable this.
What's required to empower this intelligent financial life is an interconnected ecosystem that brings it all together for the consumer.
We, Envestnet, are uniquely positioned to deliver on the intelligent financial life by leaning into our ecosystem, expanding the ability for Envestnet and other participants in our vast and growing network to deliver what the consumer is demanding and to capitalize on this large and quickly growing opportunity.
The outcome of this strategy is connecting people with their money and empowering more impactful decisions in ways financial consumers have not experienced before.
For Envestnet, it means a broader reach into the market, faster revenue growth as the model is utilized and more operating leverage from our increasingly scaled infrastructure, yielding a higher profitability in the long run.
The opportunity to create value for all participants in our ecosystem is massive and growing.
With Envestnet at the center of it, we can curate, connect and orchestrate everything that can impact the consumer's financial life, empowering advisors and firms to reach deeper into relationships, doing more, adding value, creating growth.
With our industry-leading footprint and capabilities, there is no better firm positioned to capitalize on this opportunity than Envestnet.
And the time to do this is now.
Today, I'm going to review our results for the fourth quarter and full year and provide context for our 2021 outlook and beyond.
Consistent with earlier in the year, our fourth quarter results were strong.
Adjusted revenue for the quarter was $264 million, above expectations, as we saw outperformance across all revenue lines.
Asset-based revenue benefited from favorable net flows and continued adoption of higher value fiduciary solutions.
Subscriptions-based revenue performed well, driven by higher-than-expected usage in the data and analytics segment.
Operating expenses came in consistent with our expectations for the quarter with a relatively low level of spending already factored into our forecast.
As a result, our adjusted EBITDA of $65 million was also ahead of expectations, as were our adjusted earnings per share of $0.69.
For the full year, adjusted revenue was $999 million, 10% higher than in 2019 despite the significant market pullback in the first quarter of 2020.
Adjusted EBITDA came in 26% higher than last year at $243 million.
Our adjusted EBITDA margin for the year was 24.3%, three percentage points above the prior year.
As we discussed in the November earnings call, this is not an appropriate starting point as we look forward into 2021 and beyond.
Expense management and pandemic-related circumstances lowered our 2020 expenses significantly and unsustainably for the long term.
Around $25 million to $30 million of operating expense favorability can be attributed solely to an operating environment that limited travel, caused delays in hiring and generally reduced spending activity.
This is important context as we consider our outlook for 2021.
As we built our spending plans for this year, we see three drivers of increase in our operating expenses compared to 2020.
First is what I would call normal expense growth to support the needs of the business today, including supporting additional customer activity as the business grows.
Normal expense growth typically is lower than our revenue growth as we've proven our ability to expand margin over time.
The total increase in this category is around $10 million or a little more than 2% above last year.
Second is what I would characterize as a partial restoration of normal spending levels that we experienced prior to the pandemic for certain items.
In this category, we've assumed a broad resumption of business activity over the course of 2021, but still at levels below where they were prior to the pandemic.
In the second category, we're expecting increases in our travel and entertainment expense and fully restoring our annual marketing spend.
This category also represents around $10 million of year-over-year increase in operating expense.
Depending on how circumstances unfold, some of this expense could be pushed further out if travel remains limited.
Third is the acceleration of investment spending to capitalize on the sizable opportunity Bill described earlier.
These investments will ramp up over the next couple of quarters as we add headcount and other resources in product engineering, marketing and go-to-market activities to accelerate revenue growth in the business longer term.
In 2021, these investments account for around $30 million of increased operating expense The spend in these three categories, combined with an increase in our asset-based cost of revenue, will result in our operating expenses growing faster than revenue in 2021 as we noted in November, effectively reversing the temporary margin lift we saw in 2020.
Specific guidance for the full year of 2021 includes the following: adjusted revenue growth of 10.5% to 12% compared to 2020.
That's approximately $1.10 to $1.12 billion.
By segment, this is driven by strong double-digit growth in our wealth business as we continue adding new firms, advisors and accounts to the platform and deploy additional solutions through our installed base.
We expect revenue growth in data and analytics to be in line with last year as we see ongoing momentum with financial institutions and fintech firms, while continuing to address pricing pressure in the analytics space.
By revenue line item, we expect asset-based revenue to be up nearly 20%, reflecting the strong fundamentals of the wealth business.
As usual, our guidance is market neutral to the end of the prior quarter, in this case, December 31.
Subscription revenue is expected to grow in the low to mid-single digits, and we're expecting a decline in professional services and other revenue as we continue to deemphasize such fees.
Adjusted EBITDA should be between $225 million and $235 million, slightly below 2020, as the increase in operating expenses will more than offset the contribution from higher revenues.
Adjusted earnings per share is expected to be between $1.95 and $2.08.
This is down from the $2.57 we delivered in 2020 due to the modest decline in adjusted EBITDA and an increase in depreciation expense.
Our guidance also includes the early adoption of a new accounting standard, impacting how we account for our convertible notes, which will lower earnings per share by $0.20.
Some additional color on our 2021 guidance and trends we expect to see during the year.
This is a big contributor to the EBITDA guidance for the quarter.
As we expect to restore spending to more normal levels and ramp up our investment activity, operating expenses should increase somewhat more meaningfully in the second quarter and the second half of the year.
Turning to the balance sheet.
We ended the year with $385 million in cash and a net leverage ratio of two times EBITDA, down from 2.1 at the end of September.
Similar to last quarter, our $500 million revolver remains entirely undrawn.
So we remain comfortable that we have the liquidity and flexibility to invest in growth opportunities, both organically and through strategic activities without increased risk to our operations.
As we support our customers' needs across the ecosystem and begin to benefit from the investments we're making now, we believe revenue growth can accelerate into the mid-teens within the next five years.
Over time, EBITDA margins should reach the mid- to upper 20s as we continue to benefit from our increasing scale.
The age of the intelligent connected financial life is coming, and our industry will need to deliver this to consumers: an interconnected experience that supports the consumer completely from today's spending to tomorrow's plans, fully linked, intelligent and accessible to help them make the best financial decisions when they need it, even when they aren't aware that they do need it.
Connecting the financial lives of millions of consumers is a massive opportunity.
It requires a financial wellness ecosystem, and that is what is emerging here at Envestnet.
We are building upon the significant capabilities we offer in the marketplace today.
We are positioned to become the core long-term essential provider that helps the industry connect people much more powerfully to their money.
With our expertise, data-driven intelligence, leading financial planning tools, integrated capabilities to execute trades, insurance policies, loans, trust and more and a consumer-friendly technology to view everything in one single place, Envestnet is the company that is best positioned to connect consumers' financial lives and make financial wellness a reality for everyone.
I could not be more excited about this future.
With that, Pete and I are happy to take any questions.

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q4 adjusted earnings per share $0.69.
sees fy 2021 adjusted net income per diluted share $1.95 - $2.08.

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