Envestnet Executive Insights: Tamarac and Envestment Synergies, Full Conversion

On Thursday, Envestnet, Inc. (NYSE:ENV) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Tamarac and Envestment Synergies

Peter Heckmann – Avondale Partners: Can you talk about taking the best pieces of Tamarac and Envestnet and how you combine those and the opportunity to cross-sell between the two? If I’m correct, I believe that Tamarac was also investing to create some additional applications that you may already have. So, talk a little bit about cost of revenue and cost synergies there from that acquisition, if you would?

Judson Bergman – Chairman and CEO: Investment Tamarac is a practice management and rebalancing software that supports high-end Registered Investment Advisors. We have to our own APM or advisors portfolio manager software trading and rebalancing software that supports the advisor who has adopted the unified managed account as a core operating chassis for their business, but a number of high-end RIAs have not adopted the UMA, the unified managed account, as a chassis for their practices and have multiple brokerage accounts or multiple custodial accounts. For those advisors who rebalance at a household level, the Tamarac solution is ideal. We’re going to support both our APM solution and the Tamarac solution for the foreseeable future going forward because they support different practice patterns in this marketplace. Already we are providing some significant expense savings for Tamarac in the way we reconcile the accounts that Tamarac is supporting with software. We also have identified a number of opportunities with Tamarac clients who want access to a broader product suite, access to a separate account managers and outside strategists that enable us to do some upsell or some cross-sell in products. Over time, we expect that the synergies with Tamarac are going to be heavily weighted towards revenue synergies as opposed to expense synergies. We’ve got – prior to the Tamarac merger, we had a senior and continued to have our senior engineering team based in Sunnyvale, California with substantial resources in Trivandrum, India to support our ongoing engineering and development effort. Tamarac brings a very accomplished team that’s Seattle based and we welcome that team and expect that we will continue to invest in not only the Envestnet Advisor Suite, but we will integrate Tamarac’s advisor ex suite of offerings, which are a subset. It’s rebalancing its CRM integration, its reporting and its rebalancing software. That we’ve already done in an initial stage of the integration concurrent with our May release and we are going to continue to integrate that more fully throughout the rest of this year in the August and November releases.

Peter Heckmann – Avondale Partners: Pete, did you call any acquisitions entirely got cash or did you do a little bit of a borrowing in the quarter?

Pete D’Arrigo – CFO: There is no borrowing. Those are all funded with internally generated cash and the cash we had on the balance sheet.

Full Conversion

Christopher Donat – Sandler O’Neill: Just want to sure, Jud, with your comment that – with this large enterprise client that full conversion was unlikely this year. You still would expect a full conversion next year, right? This doesn’t mean you’d expect something less than a full conversion/

Judson Bergman – Chairman and CEO: No I would not say that we still expect a full conversion next year. We expect to do business and we expect that the business will grow in pieces rather than a full conversion this year. Next year is a long time away. These conversions are part of large and complex organizations. They take time and what we’ve proven is our ability to over time move clients from a part of business to a bigger piece of business. We expect now that the business will grow in segments rather than in one initial full conversion. It is our hope that in the future there will be a full conversion, but that is uncertain.

Christopher Donat – Sandler O’Neill: I understand the future is always uncertain. You guys seem to be doing pretty good job at delivering here. Then just more on the number side, you said last quarter that you though this large enterprise client could in many ways replace the lost licensing revenue coming from the fidelity relationship. Is that still the case in terms of magnitude even though I recognize timing might be a little bit different?

Judson Bergman – Chairman and CEO: Yes, the overall scope of the opportunity is very large. It’s one example of some very large opportunities that are in our pipeline and the size of the opportunity is as great as it’s always been. The timing and our legging into the opportunity is what is less certain than I had indicated in our last call.