Good morning, and thanks everybody for joining us. I'm Patrick O'Shaughnessy, the capital markets technology analyst here at Raymond James, and up next, we have Envestnet. On their behalf, we have CFO Josh Warren. Josh, thank you for joining us today. Hey, happy to be here. Thanks, Patrick. Perhaps we could just kick things off with a brief overview of the company, what Envestnet does, the nature of its client base, how you make money, et cetera. Sure. So think of Envestnet, we're the leading vertical software and solutions provider to independent financial advisors. You know, Patrick mentioned this is his 15th fireside chat. I'm sure you've been at a lot of companies that you've seen. If you've been mesmerized by artificial intelligence and think AI is going to replace the financial advisor, like nothing I'm going to tell you is going to get you excited about Envestnet over the next little bit here. There are 290,000 financial advisors in the United States. Approximately 45,000 of them are at what are known as wirehouses, like Morgan Stanley Smith Barney, UBS, Merrill Lynch, the kind of large, larger firms. The other 245,000, if you will, including Raymond James, are broker-dealers or, registered investment advisors, and that is who Envestnet's, sort of primary client base is. So think of us as serving 108,000 of that 245,000. That's kind of our advisor share, if you will. The revenue model, to your question, it's pretty simple. It's two things. We have sort of two pricing models, and that's necessary to meet the needs of this diverse industry. We have an asset-based, pricing model, basis points on AUM, and then we have a, subscription-based pricing model, which is more for, RIAs or financial planning tools. Think of that as like P times Q. So, like Raymond James Financial Advisors use our financial planning tool, and they pay a subscription fee to us for that. That's the revenue model, that's the client base. I think that's the, that's the overview. Happy to go into wherever you want. Terrific. Good foundation. We can go from there. You came to Envestnet a few months ago from BlackRock, which has been a long-time investor in Envestnet, as well as a business partner of Envestnet. What was it about Envestnet that influenced BlackRock to become a major shareholder? Sure. That's sort of how I ended up here. So I got to know Envestnet, and, you know, Bill Crager, our CEO, from running point as the lead on the BlackRock investment in Envestnet. So I got to know him actually being sort of on the other side of the table, and now I have crossed the chasm to being a, like, W-2 employee of Envestnet. It's the only public company on BlackRock, Inc.'s balance sheet. So, think of it as strategic for BlackRock, the asset manager, different from the funds managed by BlackRock. I used to work in the iShares business. We had, like, a 13G filing machine, because we owned, on an aggregated basis, like, 5% of every public company. But, Envestnet is the only public company that BlackRock, Inc. owns. It's sort of in a different category. And the reason it's strategic is because of the unique place in the ecosystem that Envestnet holds. Envestnet's open architecture, but to gain access to this sort of long tail, if you will, of financial advisors, BlackRock did a strategic investment in 2018. That was a PIPE, like a direct investment in Envestnet, as well as an integration of technology tools that help make the Envestnet Platform more valuable, that it goes and delivers to financial advisors. So think of that as, like, good for BlackRock, good for Envestnet, good for the advisor, good for the client. But the reason why, to answer your question, is it is just it occupies this unique place in the ecosystem as far as being the essential technology provider to a very wide and diverse array of financial advisors, which really are and is sort of the envy of the industry. I think maybe occupying the unique place in the ecosystem is perhaps answer this next question, but, you know, what is really differentiated about Envestnet? What is really hard for anybody else to try to replicate it? I mean, it is a incredibly competitive landscape. If you actually, like, look over the shoulder of a financial advisor and see what's on their desktop, it's a complicated jungle, if you will. There's something like 400 different providers of component parts. What's distinct about Envestnet is its breadth. We serve the needs of an advisor completely. An advisor builds their practice on Envestnet. Our research shows that 60% of advisors and firms want to buy more from a single provider. They want, you know, to go deeper, to do more with fewer and sort of streamlining those technology workflows. It's critical to maximizing the benefits that an advisor can offer to their clients, and given the replatforming that Envestnet has done over the last couple of years, we can now go to market as a bundle. We can now go to market as, effectively one Envestnet, from a series of component parts. So there's a lot of competition on the component parts, but, there isn't anything that replicates our breadth, and we believe that breadth is a distinct competitive advantage. You mentioned in your introduction the different channels within the U.S. wealth management industry, and I think from Envestnet's founding, really part of the reason why it thrived is it became sort of the outsourced enterprise software provider for independent broker-dealers or insurance broker-dealers. You know, but I think my perception is, to some extent, Envestnet's the victim of its own success. Your market penetration in that customer space is already so high that it's hard to win new customers in that space. Mm-hmm. Then when those customers might consolidate, that might present a risk event for you guys. So how does Envestnet continue to grow within those channels, the independent broker-dealer, the insurance broker-dealer channels? Mm-hmm. So first off, you're right. You know the company, that's exactly right. You know, we're not relying on advisor count growth going forward to power our revenue growth algorithm and our growth algorithm. So we're gonna compete, of course, for new advisors. We're gonna try and win new advisors. But look, over the next five years, the industry growth rate of advisors, as measured by like N number of advisors, is, you know, 0.1%. If we were relying on winning new advisors, I don't think that'd be a terribly exciting story. What we're trying to do is we're trying to go deeper with the advisors that we serve, and we believe that our breadth of offering positions us to do that. So what you've seen, to your, to your point, Patrick, like during 2023, our advisor count growth grew by a little less than 3%, but our account growth, like advisors using Envestnet to do something, grew by over 4%. So that's evidencing higher adoption. Maybe even taking a, like a slightly longer sweep of history, since the start of 2020 to where we ended the year in 2023, the number of accounts per advisor on the Envestnet platform grew by 50%. That would only have been possible given the replatforming that we've done to serve that. But I think that speaks to the customization and the needs of what the community demands and our ability to meet those needs, given kind of the place in the ecosystem that we occupy. So in terms of solving for the needs that your customers have, what's the innovation process at Envestnet? Has it been kind of, "Hey, here's a good idea we have. Let's build this, and then let's see if there's interest from our customers? Yeah. To what extent does it kind of involve your clients from day one to build those innovations? It's, of course, a bit of a push and a pull. I mean, remember, like I said, advisors build their business on Envestnet, so we review our roadmap with them actively. There's a pretty active kind of give and take and back and forth with our clients. A lot of our clients, particularly in the broker-dealer space, you know, it's a very compliance-driven, regulatory-driven sale. Like, you do the SOC 2 first, and then the disaster recovery policy first and the business continuity policy first, then you get to the features. But regarding that, you know, to your point, some of the more holistic vision that we're trying to deliver on. Look, I think candidly, we believe that's where the industry is heading. For the advisor, that means just frankly being less of a stock picker and more of a, call it a financial coach, delivering the full financial picture of a person's life. That includes, you know, obviously portfolio management, but also, you know, decisions with regard to some of the major life events in someone's life. Having that place of trust, that is what many advisors or all advisors strive to hold. That full financial picture involves, you know, spending, it involves investing, it involves credit, it involves like everything, like everything in your financial life. You know, we don't need to like own and operate every component for that, but we want to be the chassis, the means by which an advisor is delivering advice to a client. So think of the roadmap as a bit of a give and take, but we do have a vision for where the industry is going, which is much more connected, much more data infused, much more holistic in terms of the means by which it's prosecuted. So if you think about maybe where Envestnet is, I don't know if dominant competitively is the right phrase, but just, you know, you guys do very well in the enterprise broker-dealer channel. And, you know, I think my sense is you are the leading player there by a wide margin, and it would seem like switching costs for people who use the full breadth of your solutions are relatively high. Is there potentially more structural pricing power that you guys have in that particular channel going forward? Yeah, I mean, look, I think your premise is right and your understanding is right. And, you know, of course, we're taking a bit of a fresh look at pricing everywhere, including the broker-dealer channel. The one thing to be mindful of is, you know, these contracts, the relationships you described are underpinned by multi-year contracts, you know, five to seven to longer in duration. And so, you know, the good news is we don't have a lot of churn. You know, what comes along with that is, you know, these relationships are stable, static, sticky. You see that in high retention rates, you see that in high renewal rates. You may not see that in pricing like quarter to quarter to quarter. What you've seen for us in pricing quarter to quarter to quarter is really an output of activity. So, within the channel, you asked about, you know, our fee rate, which is a blend, an amalgam of all kinds of activity. It was, you know, like 10, 10 basis points, 10 basis points, 10 basis points, 10 basis points, and last quarter it was 9.8 basis points. The historical corridor, it's between 9.5 and 10.5. The average is either 9.9 or 10, somewhere in that range. We believe with regard to pricing, in addition to the contract negotiations and the like that I mentioned, one of the most significant trends is sort of what I talked about earlier with regard to customization, with regard to personalization. Personalization is after tax. You know, most asset managers operate in a, in like a tax agnostic way. And what we've seen, and this is more of a 40 Act construct than it is a pricing construct, though it largely is correlated with, with pricing. But our, within our, what we call our AUMA accounts, the accounts that we charge an asset management fee on or an, or an asset-based fee on, the mix of AUA, like assets under administration, you know, light touch to AUM, heavier touch, or the named fiduciary has grown. So in the last quarter, AUM made up 96% of our AUMA flows. The mix of AUA to AUM has shifted and transitioned over time, and I think that's entirely consistent with this higher touch model. The major drag, of course, is just interest rates. It's the economy, it's kind of the macro picture. The yield curve has been inverted for the last 18 months. Given that there's still cash balances building up, I'm sure others have talked about that, observed that. You've seen that in other places. We believe that when money returns to the market, you'll start to see that fee rate normalize. But again, we're talking within a band of like half a basis point in either direction historically. Let's switch gears to the RIA channel for a little bit here. You spoke earlier about, you know, a survey said, "Hey, people want more of a bundled solution. Mm-hmm. They want a comprehensive solution." And yet, I think, you know, from different other, you know, technology surveys that I've seen, it seems like RIAs say they want that- Mm-hmm. But then they don't follow through with their purchasing decisions. Do you think that starts to change in a world where the RIA industry is consolidating and becoming more professionally managed and, you know, wants to extract more operational efficiencies? Yeah, I think the answer is, I think so. Potentially hasn't materialized yet, but that seems to be the trend. I mean, look, the RIA share of assets has grown. RIAs are becoming, especially with all the M&A activity, there's almost like these net new wirehouses that are emerging. And there you'll start to have more of a home office-like construct. Again, this doesn't exist yet. We're only able to kinda view it from pattern recognition and analogy. There's this dynamic has been relatively new in the market. But what we've seen, and again, early days, but we are gaining traction in some of these outsourcing services. By outsourcing services, I mean actually doing a tax overlay service, actually doing more of a direct indexing as a service, as both a product and a service. That enhances the RIA value proposition. Remember, the RIA value proposition is to provide kind of AUM-based holistic financial advice, but we believe that is tax-aware, you know, data-infused, connecting to planning. So I think net-net, super early days of the RIA transformation, it's something we're excited to participate in. How much, how quickly, I think remains a little bit to be seen, but that's clearly the trend. And so you touched on this. The RIA channel is the fastest-growing channel within U.S. wealth management. I would argue maybe the competitive landscape for you is, is a little bit more challenging there than the independent broker-dealer channel. Mm-hmm. How do you think about Envestnet's growth opportunities with RIAs versus with the broker-dealers? Yeah, I mean, I think the nice thing about our growth algorithm and kind of our two pricing constructs is we don't need to rely on growth in a particular channel, broker-dealer or RIA, or like a subchannel within, you know, RIA, like, aggregated RIA, hybrid RIA, multifamily. We don't need a particular subchannel to do better or worse than the other to sort of compete and win. We believe, and it's only possible given the position that we've built over the years, that if we serve our clients' needs completely and holistically, we're well positioned to compete and win, regardless of channel. As the advice industry migrates from, you know, more of a commission basis to more of a fee-based account basis, you know, within fee-based accounts, that's just an exciting place to be for us. Value there runs to the part of the ecosystem where the portfolio is constructed, and that is investment. So it's an exciting thing to participate in, but we're not relying on, like, this channel must grow by X or that channel must grow by Y. We view it as clients may shift among channels, but our goal is to serve their needs completely and provide a pricing model and a pricing scheme that makes sense for them. In terms of serving your clients and, you know, adding new functionality, one of the things that I think you guys are pretty excited about is adding custodial capabilities for your clients. Mm-hmm. Is that something that would be primarily tailored towards the RIA channel, or is that something that's relevant for broker-dealers as well? And then I guess on, on top of that, is the opportunity to displace existing custodians or more if there's, like, a new breakaway broker team to become their custodian from day one? Y es to, like, four things you said there. So, yeah, yeah, like, yes to all the above. So look, many broker-dealers have their own clearing firms. I think the opportunity to displace a broker-dealer that self-clears is probably unlikely. It's certainly much more in the early days of this, geared more towards RIAs and in particular, breakaway RIAs, people forming kind of new RIAs, maybe that came from a wirehouse. Over time, potentially. I mean, we want to make the account opening process and sort of the conversion process easier. We want it to be more fully digital. We sort of want - we sometimes talk about having an easy button for advisors. And that's the technology integration and capability that we're building with a partner called FNZ. The technology is great. It's functional. We're waiting on regulatory licenses, which they hope to have in place this year to start to go to market. I wouldn't think of this as a big revenue opportunity for 2024. This is much, you know, even as the time has gotten, like, pushed out, this is much more of a medium-term bet, but one that we're really bullish on because it makes removing frictions from the ecosystem, removing points of, you know, inertia that maybe makes something hard and making advisors' ability to serve their client more difficult than it should be. Envestnet, I think, can be an enabler of a simpler, more streamlined, better process, and given where we are positioned in the ecosystem, we feel like value will run to us from that unlock. Makes sense. So I guess I touched on this a little bit briefly earlier, but there's a lot of industry consolidation going on right now in the advisor space- Mm-hmm. and all the channels. What's the impact on Envestnet from that consolidation? What are the opportunities? What are the risks? Yeah, so I would say a couple things. Anytime there's an M&A deal, it's a little bit situational. It kind of varies by type. First thing is, like every other software vendor or technology provider, when one of our clients acquires another firm, it's like: Great, we acquired a bunch of clients, and we didn't really have to do anything to do it. That's a good thing for us, and, you know, Envestnet tends to be the platform of choice for us. So, consolidation traditionally had been a real tailwind for Envestnet. The opposite is, of course, true when one of our clients gets acquired by a client using another firm. We lose clients, and we're like: What happened? Oh, well, they just got bought. You know, very, very little, very little one can do there. That, that tends to be most of our advisor churn, clients getting acquired or leaving the industry. But what's, I think, unique to Envestnet and has been a bit of, let's call it a near-term headwind, which hopefully will play out, ultimately to be long-term beneficial, is given our market leadership, we have some aspect of... It's called Envestnet on Envestnet crime. When, when two, when two Envestnet clients are combining, what tends to happen is the acquiring firm, you hit a breakpoint in, in the contract, you know, 'cause the target firm moves on to the acquiring firm's contract, usually in that case. In the short run, you have a bit of a revenue headwind. In the long run, I believe, and we believe, just the long run, the question is when and how much. In the long run, that's a good thing. You just have a client doing more business with Envestnet. So I think those long-term enterprise relationships, you know, those are the foundation. Those will continue to be the foundation. I think there's some mix shifting in there, and some timing, but, you know, it's just, it's just a feature of the industry. It's just kind of the... Like in other news, the sky is blue. It's just kind of the way the industry is playing out over time. Shifting gears a little bit, more of a high-level question here. So during your interactions with investors, kind of what are they asking Envestnet to do? Mm-hmm. What are they asking Envestnet to not do, to stay away from? And just in broad strokes, obviously. Yeah, I think, candidly, it's simplify and execute. You know, Envestnet has, having undergone this replatforming period, where Envestnet put together what was a series of disconnected, you know. Envestnet was a bit of a holding company with a series of verticals underneath it. Now that Envestnet has put it all together, the feedback is like, run the damn thing. Don't go out and try to chase shiny objects or different things. It's just to execute, and I think our investors are, I would describe them as either, patient, as in... or demanding in the sense they want to, they want to see it, and I think that's our expectation over the course of 2024, as we're in this kind of transition time and in a transition period. And, you know, it takes a little while for some of these investments that we've made to materialize through our PNL. Just to do it, just to actually run the damn thing and execute. So simplify and execute is the kind of coin of the realm. Gotcha, and then what are the metrics that you think really should matter the most to investors? I think, you know, back when I started covering Envestnet, it was advisor growth and asset growth, and maybe to some extent, those are still relevant. But what do you think are really going to be the key signposts to say, "Hey, Envestnet is really executing well here? I think it's are we delivering on what we say, meaning... And if we don't, we can at least tell you why and what we're doing to fix it. Let me give you an example, we haven't talked at all about our data and analytics business yet that had a disappointing 2023. 2023. It did not perform as well as Envestnet had hoped. But I think we know why, and we're taking steps to stabilize that business. So, that business, just to state it, revenue was down 14% year-over-year, much less than Envestnet had hoped. We took an impairment charge of a little less than $200 million in the fourth quarter. And what we have done as far as stabilizing that business, you know, we can point to it in the sequential revenue growth, what we did in Q4 relative to Q3. Q4 versus Q3, our revenue was up 3%. We view that as an early indication that we are actually stabilizing the business. If we're saying we're stabilizing the business, and you still see revenue going, you know, down 14%, then, like, you know, WTF? But for us, I think the measure you should hold us accountable to is, like, are we doing what we say we're going to do? And then can you prove it and demonstrate it in the numbers, which is ultimately where it comes to be. And let me just say, like, nobody's declaring mission accomplished with that, but we believe that business is turning a corner, and that Q4 is an early indication as to evidence of that. How does the management team and the board think about, you know, the returns on invested capital, whether it's an internal investment initiative or? Mm. You're kind of planning some acquisitions, which it sounds like you're probably pulling back from a little bit, in any case. But how do you guys just think about, you know, making sure you're getting the required returns on any investment that you're making? Yeah, so I guess maybe two ways. The first is, let me just talk about, like, capital allocation generally. I mean, in the short run, we're pretty focused on deleveraging and operational execution, and the operational execution will lead to further deleveraging. Our expectation as part of the commitment that we have to clients is we're going to continue to invest in the platform for growth, and we're going to continue to kind of keep the platform moving forward. But from a call it return of capital perspective, you know, step one is invest in the platform for growth and then de-lever. As we think about resource planning and allocation and the like, you can think of us as evaluating that on almost a cash basis, which is why, you know, my and our focus continues to or is free cash flow, you know, at the end of the day. Our budgeting includes costs, whether it's cash costs or stock costs, but whether a software project is capitalized or expensed, you know, that happens later. That's an accounting policy question from review of, like, Jira time tickets or time tracker in Jira. Our return is much more focused on making sure we've got the investment right, the outlay right. We view that as really a cash and economic outlay. And then from a return perspective, is it meeting client needs, driving growth, and then from a returns perspective, making sure we continue to invest in the platform as well as we, you know, de-lever. And then once we de-lever to, you know, we're now company was above four, we're now below 3.2 at the end of Q4. You know, over the course, we're, I think we're ahead of schedule, but over the course of 2024, our plan is to keep bringing that number, you know, ratably down, probably more in the second half of the year than in the first. But, you know, as we, as we kind of de-lever and as we return, then we're gonna look at all different types of things like M&A and buybacks and dividends and all kinds of different capital allocation alternatives. All right, terrific. I think we're out of time. That's a good spot to end. So thank you, everybody, for joining us, and thank you very much, Josh. Cool. Thank you. Appreciate it.