|Financial Engines Reports First Quarter 2011 Financial Results|
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AUM Increases 37% to $41 Billion Year Over Year
26+ Month Enrollment Rate Reaches 12.2%
PALO ALTO, Calif., May 09, 2011 (BUSINESS WIRE) -- Financial Engines (NASDAQ: FNGN), the largest independent provider of investment management and advice to employees in retirement plans, today reported financial results for its first quarter ended March 31, 2011.
Financial results for the first quarter of 2011 compared to the first quarter of 2010:i
Key operating metrics as of March 31, 2011:ii
"Fundamental forces of demographics, the increasing importance of 401(k) plans, and the need for advice continue to drive growth in customers, assets and revenue," said Jeff Maggioncalda, president and chief executive officer of Financial Engines. "With improvements in enrollment and the successful launch of Income+, we remain optimistic about the significant market opportunity in front of us."
Review of Financial Results for the First Quarter of 2011
Revenue increased 33% to $32.3 million for the first quarter of 2011 from $24.3 million for the first quarter of 2010. The increase in revenue was driven primarily by the growth in Professional Management revenue, which increased 44% to $23.9 million for the first quarter of 2011 from $16.6 million for the first quarter of 2010.
Costs and expenses increased 26% to $28.5 million for the first quarter of 2011 from $22.6 million for the first quarter of 2010. This increase was due primarily to an increase in fees paid to plan providers for connectivity to plan and plan participant data, headcount, cash compensation, and costs associated with enrollment campaigns and member materials, offset by a decrease in non-cash stock-based compensation expense. As a percentage of revenue, cost of revenue (exclusive of amortization of internal use software) increased to 36% for the first quarter of 2011 from 35% for the first quarter of 2010. This was due primarily to an increase in fees paid to plan providers for connectivity to plan and plan participant data, which resulted from an increase in professional management revenue, contractual increases in plan provider fees as a result of achieving AUM milestones, and an increase in subadvisory campaign printed materials costs.
Income from operations was $3.8 million for the first quarter of 2011 compared to $1.8 million for the first quarter of 2010. As a percentage of revenue, income from operations was 12% for the first quarter of 2011 compared to 7% for the first quarter of 2010.
Net income increased to $2.6 million for the first quarter of 2011 from $1.6 million for the first quarter of 2010. Net income attributable to holders of common stock was $2.6 million, or $0.05 per diluted share, for the first quarter of 2011, compared to a net loss attributable to holders of common stock of $3.9 million, or $(0.25) per diluted share, for the first quarter of 2010, which included a one-time, non-cash charge of $5.5 million for a stock dividend related to the Company's initial public offering.
On a non-GAAP basis, Adjusted Net Incomei was $3.4 million and Adjusted Earnings Per Sharei were $0.07 for the first quarter of 2011 compared to Adjusted Net Income of $2.8 million and Adjusted Earnings Per Share of $0.06 for the first quarter of 2010. For the calculation of Adjusted Net Income, an estimated statutory tax rate of 38.2% has been applied to stock-based compensation for all periods presented.
"We are pleased with the growth in revenue, operating margin, AUM and the 26 month enrollment rate," said Ray Sims, chief financial officer of Financial Engines. "We continue to focus on our long-term objectives for financial performance and business growth and are gratified by our progress towards those goals."
Assets Under Contract and Assets Under Management
AUC increased by 43% to $412 billion as of March 31, 2011 from $289 billion as of March 31, 2010.
AUM increased by 37% to $41.0 billion as of March 31, 2011 from $29.9 billion as of March 31, 2010. The increase in AUM was driven by net new enrollment into the Professional Management service as well as by market appreciation and contributions.
Aggregate Investment Style Exposure for Portfolios Under Management
As of March 31, 2011, the aggregate investment style exposure of the portfolios we managed was approximately as follows:
Financial Engines' growth strategy includes focusing on increasing penetration within existing Professional Management plan sponsors, enhancing and extending services to individuals entering retirement and expanding the number of plan sponsors.
Based on financial markets remaining at March 31, 2011 levels, the Company estimates that its 2011 revenue will be in the range of $144 million to $149 million and that its 2011 non-GAAP Adjusted EBITDA will be in the range of $42 million to $44 million.
The Company will host a conference call to discuss first quarter 2011 financial results today at 5:00 PM ET. Hosting the call will be Jeff Maggioncalda, president and chief executive officer, and Ray Sims, chief financial officer. The conference call can be accessed live over the phone by dialing (877) 407-9039, or, for international callers, (201) 689-8470. A replay will be available beginning one hour after the call and can be accessed by dialing (877) 870-5176, or (858) 384-5517 for international callers; the conference ID is 370667. The replay will remain available until Friday, May 13, 2011 and an archived replay will be available at ir.financialengines.com for 30 calendar days after the call.
About Non-GAAP Financial Measures
This press release and its attachments include certain non-GAAP financial measures. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. generally accepted accounting principles (GAAP). These non-GAAP measures include non-GAAP Adjusted Net Income, non-GAAP Adjusted Earnings Per Share and non-GAAP Adjusted EBITDA. Non-GAAP Adjusted Net Income is defined as net income (loss) before stock-based compensation expense, net of tax, the impact of stock dividends issued and certain other items such as the income tax benefit from the release of valuation allowances. Non-GAAP Adjusted Earnings Per Share is defined as non-GAAP Adjusted Net Income divided by the weighted-average of dilutive common share equivalents outstanding. For all periods, the dilutive common share equivalents outstanding also include on a non-weighted basis the conversion of all preferred stock to common stock, the shares associated with the stock dividend and the shares sold in the initial public offering. This differs from the weighted average diluted shares outstanding used for purposes of calculating GAAP earnings per share. Non-GAAP Adjusted EBITDA is defined as net income (loss) before net interest (income) expense, income tax expense (benefit), depreciation, amortization of internal use software, amortization of direct response advertising, amortization of deferred commission and stock-based compensation. Further information regarding the non-GAAP financial measures included in this press release is contained in the attachments.
To supplement the Company's consolidated financial statements presented on a GAAP basis, management believes that these non-GAAP measures provide useful information about the Company's core operating results and thus are appropriate to enhance the overall understanding of the Company's past financial performance and its prospects for the future. These adjustments to the Company's GAAP results are made with the intent of providing both management and investors a more complete understanding of the Company's underlying operational results, trends and performance.
About Financial Engines
Financial Engines is the nation's largest independent investment advisor and is committed to providing everyone the trusted retirement help they deserve. The Company helps investors with their total retirement picture by offering personalized retirement plans for saving, investment, and retirement income. To meet the needs of different investors, Financial Engines offers both Online Advice and Professional Management. Professional Management includes Income+, which provides steady monthly payouts from a 401(k) that can last for life. Co-founded in 1996 by Nobel Prize-winning economist Bill Sharpe, Financial Engines works with America's leading employers and retirement plan providers to make retirement help available to millions of American workers. For more information, please visit www.financialengines.com.
This press release and its attachments contain forward-looking statements that involve risks and uncertainties. These forward-looking statements may be identified by terms such as "will," "expect," "believes," "intends," "may," "continues," "to be" or the negative of these terms, and similar expressions intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding Financial Engines' expected financial performance and outlook, its strategic operational plans, objectives and growth strategy, demographic and other trends, its market opportunity, its plans to evaluate investing more aggressively in 2011 to take advantage of potential growth prospects, and the benefits of our non-GAAP financial measures. These statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. These risks and uncertainties include, but are not limited to, our reliance on fees earned on the value of assets we manage for a substantial portion of our revenue, the impact of the financial markets on our revenue and earnings, unanticipated delays in rollouts of our services, our ability to increase enrollment, our ability to introduce new services and accurately estimate the impact of any future services on our business, our relationships with plan providers and plan sponsors, the fees we can charge for our Professional Management service, our reliance on accurate and timely data from plan providers and plan sponsors, system failures, errors or unsatisfactory performance of our services, our reputation, our ability to protect the confidentiality of plan provider, plan sponsor and plan participant data and other privacy concerns, acquisition activity involving plan providers or plan sponsors, our ability to compete, our regulatory environment and risks associated with our fiduciary obligations. More information regarding these and other risks, uncertainties and factors is contained in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the SEC, and in other reports filed by the Company with the SEC from time to time. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of May 9, 2011 and unless required by law, Financial Engines undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.
Our investment advisory and management services are provided through our subsidiary, Financial Engines Advisors L.L.C., a federally registered investment adviser. References in this press release to "Financial Engines," "our company," "the Company," "we," "us" and "our" refer to Financial Engines, Inc. and its consolidated subsidiaries during the periods presented unless the context requires otherwise.
i Please see "About Non-GAAP Financial Measures" for definitions of the terms Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted EBITDA.
SOURCE: Financial Engines