SUNNYVALE, Calif.--(BUSINESS WIRE)--Nov. 3, 2016--
Financial Engines (NASDAQ:FNGN), America’s largest independent
investment advisori, today reported financial results for its
third quarter ended September 30, 2016.
Financial results for the third quarter of 2016 compared to the third
quarter of 2015:ii
-
Revenue increased 43% to $112.4 million for the third quarter of 2016
from $78.8 million for the third quarter of 2015.
-
Professional management revenue increased 46% to $102.6 million for
the third quarter of 2016 from $70.2 million for the third quarter of
2015.
-
Net income decreased 16% to $7.1 million for the third quarter of 2016
from $8.5 million for the third quarter of 2015.
-
Diluted earnings per share decreased 31% to $0.11 per share for the
third quarter of 2016 from $0.16 per share for the third quarter of
2015.
-
Non-GAAP adjusted EBITDAii increased 45% to $36.3 million
for the third quarter of 2016 from $25.1 million for the third quarter
of 2015.
-
Non-GAAP adjusted net incomeii increased 56% to $19.4
million for the third quarter of 2016 from $12.5 million for the third
quarter of 2015.
-
Non-GAAP adjusted earnings per shareii increased 29% to
$0.31 for the third quarter of 2016 from $0.24 for the third quarter
of 2015.
Key operating metrics as of September 30, 2016:iii
-
Assets under contract (“AUC”) were $1.04 trillion.
-
Assets under management (“AUM”) were $134.4 billion.
-
Professional management clients were over 992,000.
-
Asset enrollment rates across all employer plans was 11.9%iv.
“Financial Engines is in a strong position and focused on helping
millions of everyday Americans achieve their financial goals. The
acquisition of The Mutual Fund Store earlier this year enables us to
accelerate this effort by bringing a broader product offering to our
clients,”said Larry Raffone, president and chief executive officer of
Financial Engines. “By delivering personalized comprehensive financial
services that historically only affluent investors could access, we are
fulfilling our mission to serve those that need help the most while
continuing to grow as a company.”
Review of Financial Results for the Third Quarter of 2016
Revenue increased 43% to $112.4 million for the third quarter of 2016
from $78.8 million for the third quarter of 2015. The increase in
revenue was driven primarily by $29.2 million of revenue for the third
quarter of 2016 related to acquisitions. Professional management revenue
increased 46% to $102.6 million for the third quarter of 2016 from $70.2
million for the third quarter of 2015, driven primarily by $27.2 million
of professional management revenue related to acquisitions.
Costs and expenses increased 56% to $100.9 million for the third quarter
of 2016 from $64.7 million for the third quarter of 2015. This was due
primarily to employee-related costs, including wages, cash incentive
compensation expense and non-cash stock-based compensation expense due
primarily to the addition of approximately 330 new employees gained
through acquisitions. In addition, we incurred a $4.1 million loss on
reacquired franchisee rights. Advisor center variable incentive cash
compensation expense increased, related to ongoing asset management at
acquired advisor centers and fees paid to plan providers for data
connectivity increased. Intangibles amortization and facilities expenses
increased related primarily to acquisitions and marketing programs
expense increased due primarily to radio and digital advertising. As a
percentage of revenue, cost of revenue was 45% for the third quarter of
2016 compared to 42% for the third quarter of 2015.
Income from operations was $11.6 million for the third quarter of 2016,
which included a $4.1 million loss on reacquired franchisee rights, $3.5
million of integration expenses attributable to acquisitions, and $2.7
million of additional amortization of intangible assets, compared to
income from operations of $14.1 million for the third quarter of 2015.
As a percentage of revenue, income from operations was 10% for the third
quarter of 2016 compared to 18% for the third quarter of 2015.
Net income was $7.1 million, or $0.11 per diluted share, for the third
quarter of 2016 compared to net income of $8.5 million, or $0.16 per
diluted share, for the third quarter of 2015. On a non-GAAP basis,
adjusted net incomeii was $19.4 million and adjusted earnings
per shareii were $0.31 for the third quarter of 2016 compared
to adjusted net income of $12.5 million and adjusted earnings per share
of $0.24 for the third quarter of 2015.
“Our Q3 results show continued balanced growth across our key financial
and operating metrics,” said Ray Sims, chief financial officer of
Financial Engines. “Looking ahead, we believe we will effectively
deliver new offerings that will bring meaningful value to plan sponsors
and their participants and contribute to our sustained long term growth.”
Assets Under Contract and Assets Under Management
AUC increased by 9% year-over-year to $1.04 trillion as of September 30,
2016 from $954 billion as of September 30, 2015, due primarily to
contributions, market performance, and new employers making our services
available, partially offset by cancellations. AUC for plans in which the
Income+ service has been made available was $440 billion as of September
30, 2016, which increased 61% from $273 billion as of September 30, 2015.
AUM increased by 24% year-over-year to $134.4 billion as of September
30, 2016, from $108.0 billion as of September 30, 2015. The increase in
AUM was driven primarily by new assets from new and existing clients,
new AUM of $9.8 billion acquired through acquisition and market
performance, partially offset by cancellations.
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Q4'15
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Q1'16
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Q2'16
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Q3'16
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(In billions)
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AUM, beginning of period
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$
|
108.0
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$
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113.4
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$
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122.0
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$
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125.3
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New assets - new clients(1)
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4.3
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3.0
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4.6
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4.4
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New assets - existing clients(2)
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1.9
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1.9
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2.0
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|
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2.2
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New assets - acquisitions(3)
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—
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9.8
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—
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—
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Asset cancellations -voluntary(4)
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(2.4
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)
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(2.0
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)
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(1.8
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)
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(1.9
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)
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Asset cancellations - involuntary(5)
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(1.8
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)
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(3.3
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)
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(1.4
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)
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(1.8
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)
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Assets withdrawn - existing clients(6)
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—
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—
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(0.1
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)
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(0.1
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)
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Net new assets
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2.0
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|
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9.4
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3.3
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2.8
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Market movement and other(7)
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3.4
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(0.8
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)
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—
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6.3
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AUM, end of period
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$
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113.4
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$
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122.0
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$
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125.3
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$
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134.4
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(1)
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New assets from new clients represents the aggregate amount of new
AUM, measured at or near the end of the quarter, from new clients
who enrolled in our professional management service.
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(2)
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New assets from existing clients represents the aggregate amount of
new AUM within the quarter from existing clients who originally
enrolled in our professional management service during a prior
period, including employee and employer contributions of $2.0
billion for the current period. Employer and employee contributions
are estimated each quarter from annual contribution rates based on
data received from plan providers or plan sponsors.
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(3)
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The value of the AUM acquired on February 1, 2016 from The Mutual
Fund Store transaction, as measured on March 31, 2016.
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(4)
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Voluntary cancellations represent the aggregate amount of assets,
measured at or near the start of the quarter, for clients who have
voluntarily terminated their professional management service
relationship within the period.
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(5)
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Involuntary cancellations represent the aggregate amount of defined
contribution assets, measured at or near the start of the quarter,
for clients whose professional management service relationship was
terminated within the quarter period for reasons other than a
voluntary termination.
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(6)
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Assets withdrawn represents the amount of voluntary withdrawals from
IRA and taxable accounts by existing clients.
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(7)
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Market movement and other represents factors affecting AUM including
estimated market movement, plan administrative and investment
advisory fees, client loans and hardship and other account
withdrawals, retirement income drawdown payouts and voluntary
withdrawals from IRA and taxable accounts, and timing differences
for the data feeds for clients enrolled in our professional
management service throughout the period.
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For quarters presented prior to Q1’16, new assets were measured as of
the time of enrollment and cancellations were measured at the time of
cancellation. Effective Q1’16, new assets were measured at or near the
end of the quarter and cancellations were measured at or near the
beginning of the quarter. Differences resulting from this definitional
change are considered to be immaterial for the periods presented.
For further information on the AUM data above, please refer to our Form
10-Q to be filed for the period ended September 30, 2016.
Aggregate Investment Style Exposure for Portfolios Under Management
As of September 30, 2016, the approximate aggregate investment style
exposure of the portfolios we managed was as follows:
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Domestic equity
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45
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%
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International equity
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26
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%
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Bonds
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26
|
%
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Cash and uncategorized assets(1)
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3
|
%
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|
Total
|
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|
100
|
%
|
|
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|
(1)
|
|
Uncategorized assets may include CDs, options, warrants and other
vehicles not currently categorized.
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Quarterly Dividend
On October 25, 2016, Financial Engines’ Board of Directors declared a
regular quarterly cash dividend of $0.07 per share of the Company’s
common stock. The cash dividend will be paid on January 6, 2017 to
stockholders of record as of the close of business on December 14, 2016.
Outlook
Financial Engines’ growth strategy includes focusing on increasing
penetration within existing professional management plan sponsors,
enhancing and extending services to individuals entering and in
retirement, and expanding the number of plan sponsors.
Based on financial markets remaining at October 31, 2016 levels, the
Company estimates that 2016 revenue will be in the range of $421 million
to $423 million, 2016 GAAP net income will be approximately $29 million
and 2016 non-GAAP adjusted EBITDA will be approximately $134 million
plus or minus $1 million.
Under typical financial market conditions, Financial Engines estimates
that 2017 revenue will be in the range of $468 million to $475 million,
2017 GAAP net income will be in the range of $49 million to $52 million
and non-GAAP adjusted EBITDA will be in the range of $153 million to
$157 million. A reconciliation of our non-GAAP adjusted EBITDA outlook
to our GAAP net income outlook is contained in the accompanying
financial tables.
We are currently estimating the remaining acquisition-related expenses
in the fourth quarter of 2016 to be approximately $5 million, excluding
non-cash stock-based compensation expense, in addition to $14.0 million
of acquisition-related expenses and a $4.1 million loss of reacquired
franchisee rights incurred in the first three quarters of 2016. We also
expect approximately $5 million of acquisition-related expenses to be
incurred in the first quarter of 2017. These expenses will be added back
to net income in the calculation of non-GAAP adjusted EBITDA and
non-GAAP adjusted net income. The related tax effect adjustment will be
calculated using an estimated statutory tax rate of 38.2%.
Please refer to the tables included in this release that reconcile our
GAAP net income to non-GAAP adjusted EBITDA, non-GAAP adjusted net
income and non-GAAP adjusted earnings per share.
Conference Call
The Company will host a conference call to discuss its third quarter
2016 financial results as well as its 2016 outlook on Thursday, November
3, 2016 at 5:00 p.m. ET. The live webcast and presentation can be
accessed from the Company's investor relations website at www.financialengines.com.
The conference call can also be accessed live over the phone by dialing
(888) 348-6435, or (412) 902-4238 for international callers. A replay
will be available beginning approximately one hour after the call and
can be accessed from the Company’s investor relations website, or by
dialing (877) 870-5176, or (858) 384-5517 for international callers; the
conference ID is 10093038. The conference call replay will be available
until November 10, 2016.
About Non-GAAP Financial Measures
This press release and its attachments include certain non-GAAP
supplemental performance 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 EBITDA, non-GAAP
adjusted net income, and non-GAAP adjusted earnings per share. Adjusted
EBITDA represents net income before net interest expense (income),
income tax expense (benefit), depreciation, amortization of intangible
assets, including internal use software, amortization and impairment of
direct response advertising, amortization of deferred sales commissions,
non-cash stock-based compensation expense and expenses related to the
closing and integration of acquisitions, if applicable for the period.
Adjusted net income represents net income before non-cash stock-based
compensation expense, amortization of intangible assets related to
assets acquired, including customer relationships, trade names and
trademarks, expenses related to the closing and integration of
acquisitions and certain other items such as the income tax benefit from
the release of valuation allowances, if applicable for the period,
partially offset by the related tax impact of these items. Adjusted
earnings per share is defined as adjusted net income divided by the
weighted average of dilutive common share equivalents outstanding.
Further information regarding the non-GAAP performance measures included
in this press release, including a reconciliation of non-GAAP financial
measures to the most directly comparable GAAP measures, is contained in
the financial tables and will be contained in the Company’s Form 10-Q to
be filed for the quarter ended September 30, 2016.
To supplement the Company’s consolidated financial statements presented
on a GAAP basis, management believes that these non-GAAP measures
provide our Board of Directors, management and investors with additional
information and greater transparency with respect to our performance and
decision-making. We feel these performance measures provide investors
and others with a better understanding and ability to evaluate our
operating results and future prospects and provides the same performance
measurement information as utilized by management. 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.
Our management uses non-GAAP adjusted EBITDA, adjusted net income and
adjusted earnings per share as measures of operating performance, for
planning purposes, including the preparation of annual budgets, to
allocate resources to enhance the financial performance of our business,
to evaluate the effectiveness of our business strategies and in
communications with our Board of Directors concerning our financial
performance. In addition, management currently uses non-GAAP measures in
determining cash incentive compensation.
About Financial Engines
Financial Engines is America’s largest independent investment advisor1.
We help people make the most of their money by providing full-service
financial planning, including professional investment management and
advice. Headquartered in Sunnyvale, CA, Financial Engines was co-founded
in 1996 by Nobel Prize-winning economist William F. Sharpe. We serve as
a comprehensive financial advisor for our workplace customers, and offer
help to more than nine million people across over 700 companies
(including 147 of the Fortune 500). Our unique approach, combined with
powerful online services, dedicated advisors and personal attention,
promotes greater financial wellness and helps more Americans to meet
their financial goals.
For more information, visit www.financialengines.com.
©[1998-2016] Financial Engines, Inc. All rights reserved. Financial
Engines® is a registered trademark of Financial Engines, Inc. All
advisory services provided by our investment advisory subsidiaries,
including Financial Engines Advisors L.L.C., Financial Engines Advisor
Center, LLC, and registered investment advisors known as The Mutual Fund
Store. Financial Engines does not guarantee results and past performance
is no guarantee of future results.
Forward-Looking Statements
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 “plan to,” “designed to,”
“will,” “can,” “expect,” “estimates,” “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: the anticipated impact of the acquisition and integration of
The Mutual Fund Store including accelerating our ability to help people
achieve their financial goals; our ability to effectively deliver new
offerings that bring value to plan sponsors and participants and
contribute to our sustained long term growth; our focus on areas that we
believe will drive an increase in asset enrollment and retention; the
anticipated impact of our 2016 initiatives and investments on our future
growth; Financial Engines’ expected financial performance and outlook,
including reconciliation information related thereto and factors which
may impact our outlook; and the benefits and anticipated uses 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, risks related to the
acquisition of The Mutual Fund Store, including our ability to fully
realize the anticipated benefits of the transaction and to successfully
integrate The Mutual Fund Store’s business with Financial Engines in a
timely manner or at all, unanticipated costs or complexities related to
and integration of The Mutual Fund Store, and the potential impact of
the transaction, or reaction thereto, on our business, operating results
and financial condition, 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 correctly identify and invest appropriately in growth
opportunities, our ability to introduce new services and accurately
estimate the impact of any future services on our business, the risk
that the anticipated benefits of our investments in these services or in
growth opportunities may not outweigh the resources and costs associated
with these investments or the liabilities associated with the operation
of these services, 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 Form 10-Q for the quarter ended September
30, 2016, as filed with the SEC, and in other reports filed by the
Company with the SEC from time to time, including the Company’s 10-K
filed for the year ended December 31, 2015. 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 the date stated or November 3, 2016 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.
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 For independence methodology and ranking, see
InvestmentNews RIA Data Center. (http://data.investmentnews.com/ria/).
ii
Please see “About Non-GAAP Financial Measures” for definitions of the
terms adjusted net income, adjusted earnings per share, and adjusted
EBITDA.
iii Operating metrics include both advised and
subadvised relationships.
iv Information regarding
enrollment rates and the component AUC can be found in the section
entitled “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in the Company’s Securities and Exchange
Commission (“SEC”) filings, including the Form 10-K for the year ended
December 31, 2015.
|
|
|
Financial Tables
|
|
|
|
FINANCIAL ENGINES, INC. AND SUBSIDIARIES
|
|
Unaudited Consolidated Balance Sheets
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
2015
|
|
|
2016
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
305,216
|
|
|
$
|
118,806
|
|
|
Short-term investments
|
|
|
39,936
|
|
|
|
—
|
|
|
Accounts receivable, net
|
|
|
71,287
|
|
|
|
95,344
|
|
|
Prepaid expenses
|
|
|
4,486
|
|
|
|
6,998
|
|
|
Other current assets
|
|
|
3,061
|
|
|
|
4,107
|
|
|
Total current assets
|
|
|
423,986
|
|
|
|
225,255
|
|
|
Property and equipment, net
|
|
|
20,385
|
|
|
|
25,885
|
|
|
Intangible assets, net
|
|
|
7,085
|
|
|
|
202,434
|
|
|
Goodwill
|
|
|
—
|
|
|
|
305,545
|
|
|
Long-term deferred tax assets
|
|
|
21,780
|
|
|
|
36,098
|
|
|
Direct response advertising, net
|
|
|
7,186
|
|
|
|
6,409
|
|
|
Other assets
|
|
|
2,158
|
|
|
|
2,255
|
|
|
Total assets
|
|
$
|
482,580
|
|
|
$
|
803,881
|
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
26,933
|
|
|
$
|
29,140
|
|
|
Accrued compensation
|
|
|
17,101
|
|
|
|
22,188
|
|
|
Deferred revenue
|
|
|
6,400
|
|
|
|
6,811
|
|
|
Dividend payable
|
|
|
3,615
|
|
|
|
3,713
|
|
|
Other current liabilities
|
|
|
1,169
|
|
|
|
4,077
|
|
|
Total current liabilities
|
|
|
55,218
|
|
|
|
65,929
|
|
|
Long-term deferred rent
|
|
|
9,485
|
|
|
|
12,176
|
|
|
Long-term tax liabilities
|
|
|
2,206
|
|
|
|
2,206
|
|
|
Other liabilities
|
|
|
524
|
|
|
|
448
|
|
|
Total liabilities
|
|
|
67,433
|
|
|
|
80,759
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value - 10,000 authorized as of
December 31, 2015 and September 30, 2016; None issued or
outstanding as of December 31, 2015 and September 30, 2016
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, $0.0001 par value - 500,000 authorized as of
December 31, 2015 and September 30, 2016; 52,972 and 63,185 shares
issued and 51,695 and 61,908 shares outstanding as of December 31,
2015 and September 30, 2016, respectively
|
|
|
5
|
|
|
|
6
|
|
|
Additional paid-in capital
|
|
|
461,139
|
|
|
|
762,561
|
|
|
Treasury stock, at cost (1,277 shares and 1,277 shares as of
December 31, 2015 and September 30, 2016, respectively)
|
|
|
(47,637
|
)
|
|
|
(47,637
|
)
|
|
Retained Earnings
|
|
|
1,640
|
|
|
|
8,192
|
|
|
Total stockholders’ equity
|
|
|
415,147
|
|
|
|
723,122
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
482,580
|
|
|
$
|
803,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ENGINES, INC. AND SUBSIDIARIES
|
|
Unaudited Consolidated Statements of Income
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
|
|
(In thousands, except per share data)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional management
|
|
$
|
70,225
|
|
|
$
|
102,641
|
|
|
$
|
206,501
|
|
|
$
|
281,518
|
|
|
Platform
|
|
|
7,501
|
|
|
|
7,035
|
|
|
|
23,126
|
|
|
|
21,306
|
|
|
Other
|
|
|
1,087
|
|
|
|
2,748
|
|
|
|
2,371
|
|
|
|
7,891
|
|
|
Total revenue
|
|
|
78,813
|
|
|
|
112,424
|
|
|
|
231,998
|
|
|
|
310,715
|
|
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
32,950
|
|
|
|
50,230
|
|
|
|
97,532
|
|
|
|
136,101
|
|
|
Research and development
|
|
|
8,753
|
|
|
|
9,599
|
|
|
|
26,537
|
|
|
|
27,833
|
|
|
Sales and marketing
|
|
|
15,526
|
|
|
|
21,743
|
|
|
|
46,248
|
|
|
|
61,892
|
|
|
General and administrative
|
|
|
6,280
|
|
|
|
11,189
|
|
|
|
19,720
|
|
|
|
35,598
|
|
|
Amortization of intangible assets, including internal use software
|
|
|
1,223
|
|
|
|
4,012
|
|
|
|
3,680
|
|
|
|
11,137
|
|
|
Loss on reacquired franchisee rights
|
|
|
—
|
|
|
|
4,092
|
|
|
|
—
|
|
|
|
4,092
|
|
|
Total costs and expenses
|
|
|
64,732
|
|
|
|
100,865
|
|
|
|
193,717
|
|
|
|
276,653
|
|
|
Income from operations
|
|
|
14,081
|
|
|
|
11,559
|
|
|
|
38,281
|
|
|
|
34,062
|
|
|
Interest income, net
|
|
|
119
|
|
|
|
149
|
|
|
|
263
|
|
|
|
133
|
|
|
Other expense, net
|
|
|
—
|
|
|
|
(185
|
)
|
|
|
(17
|
)
|
|
|
(645
|
)
|
|
Income before income taxes
|
|
|
14,200
|
|
|
|
11,523
|
|
|
|
38,527
|
|
|
|
33,550
|
|
|
Income tax expense
|
|
|
5,723
|
|
|
|
4,376
|
|
|
|
13,649
|
|
|
|
14,031
|
|
|
Net and comprehensive income
|
|
$
|
8,477
|
|
|
$
|
7,147
|
|
|
$
|
24,878
|
|
|
$
|
19,519
|
|
|
Dividends declared per share of common stock
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
$
|
0.21
|
|
|
$
|
0.21
|
|
|
Net income per share attributable to holders of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.16
|
|
|
$
|
0.12
|
|
|
$
|
0.48
|
|
|
$
|
0.32
|
|
|
Diluted
|
|
$
|
0.16
|
|
|
$
|
0.11
|
|
|
$
|
0.47
|
|
|
$
|
0.32
|
|
|
Shares used to compute net income per share attributable to
holders of common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
51,655
|
|
|
|
61,838
|
|
|
|
51,586
|
|
|
|
60,608
|
|
|
Diluted
|
|
|
52,934
|
|
|
|
63,001
|
|
|
|
52,939
|
|
|
|
61,657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ENGINES, INC. AND SUBSIDIARIES
|
|
Unaudited Consolidated Statements of Cash Flows
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
|
|
2015
|
|
|
2016
|
|
|
|
|
(In thousands)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
24,878
|
|
|
$
|
19,519
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,484
|
|
|
|
6,670
|
|
|
Amortization of intangible assets
|
|
|
3,433
|
|
|
|
10,819
|
|
|
Stock-based compensation
|
|
|
19,196
|
|
|
|
24,307
|
|
|
Amortization of deferred sales commissions
|
|
|
1,217
|
|
|
|
1,244
|
|
|
Amortization and impairment of direct response advertising
|
|
|
4,132
|
|
|
|
3,547
|
|
|
Amortization of discount on short-term investments
|
|
|
(268
|
)
|
|
|
(5
|
)
|
|
Provision for doubtful accounts
|
|
|
733
|
|
|
|
689
|
|
|
Write-off of notes receivable
|
|
|
—
|
|
|
|
290
|
|
|
Deferred tax
|
|
|
(5,524
|
)
|
|
|
3,937
|
|
|
Loss on fixed asset disposal
|
|
|
—
|
|
|
|
200
|
|
|
Loss on sale of short-term investments
|
|
|
—
|
|
|
|
18
|
|
|
Excess tax benefit associated with stock-based compensation
|
|
|
(17,946
|
)
|
|
|
(9,587
|
)
|
|
Changes in operating assets and liabilities, net of acquired
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(6,546
|
)
|
|
|
(7,976
|
)
|
|
Prepaid expenses
|
|
|
(1,053
|
)
|
|
|
(998
|
)
|
|
Direct response advertising
|
|
|
(3,448
|
)
|
|
|
(2,778
|
)
|
|
Other assets
|
|
|
2,205
|
|
|
|
(908
|
)
|
|
Accounts payable
|
|
|
21,185
|
|
|
|
572
|
|
|
Accrued compensation
|
|
|
2,713
|
|
|
|
(988
|
)
|
|
Deferred revenue
|
|
|
1,595
|
|
|
|
274
|
|
|
Deferred rent
|
|
|
394
|
|
|
|
948
|
|
|
Other liabilities
|
|
|
—
|
|
|
|
(480
|
)
|
|
Net cash provided by operating activities
|
|
|
51,380
|
|
|
|
49,314
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(4,063
|
)
|
|
|
(5,497
|
)
|
|
Capitalization of internal use software
|
|
|
(3,562
|
)
|
|
|
(5,295
|
)
|
|
Purchases of short-term investments
|
|
|
(159,555
|
)
|
|
|
—
|
|
|
Maturities of short-term investments
|
|
|
135,000
|
|
|
|
—
|
|
|
Sale of short-term investments
|
|
|
—
|
|
|
|
39,923
|
|
|
Cash paid for acquisitions, net of cash acquired
|
|
|
—
|
|
|
|
(262,405
|
)
|
|
Net cash used in investing activities
|
|
|
(32,180
|
)
|
|
|
(233,274
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Payments on capital lease obligations
|
|
|
(86
|
)
|
|
|
(80
|
)
|
|
Payments related to business combinations
|
|
|
-
|
|
|
|
(1,771
|
)
|
|
Excess tax benefit associated with stock-based compensation
|
|
|
17,946
|
|
|
|
9,587
|
|
|
Net share settlements for minimum tax withholdings
|
|
|
(616
|
)
|
|
|
(688
|
)
|
|
Repurchase of common stock
|
|
|
(38,455
|
)
|
|
|
—
|
|
|
Proceeds from issuance of common stock
|
|
|
8,328
|
|
|
|
3,371
|
|
|
Cash dividend payments
|
|
|
(10,354
|
)
|
|
|
(12,869
|
)
|
|
Net cash used in financing activities
|
|
|
(23,237
|
)
|
|
|
(2,450
|
)
|
|
Net decrease in cash and cash equivalents
|
|
|
(4,037
|
)
|
|
|
(186,410
|
)
|
|
Cash and cash equivalents, beginning of period
|
|
|
126,564
|
|
|
|
305,216
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
122,527
|
|
|
$
|
118,806
|
|
|
Supplemental cash flows information:
|
|
|
|
|
|
|
|
|
|
Income taxes paid, net of refunds
|
|
$
|
1,325
|
|
|
$
|
2,927
|
|
|
Interest paid
|
|
$
|
9
|
|
|
$
|
10
|
|
|
Non-cash operating, investing and financing activities:
|
|
|
|
|
|
|
|
|
|
Issuance of common stock related to acquisition
|
|
$
|
—
|
|
|
$
|
267,018
|
|
|
Unpaid purchases of property and equipment
|
|
$
|
207
|
|
|
$
|
760
|
|
|
Purchase of property and equipment with noncash tenant improvement
allowance
|
|
$
|
—
|
|
|
$
|
1,952
|
|
|
Purchase of property and equipment under capital lease
|
|
$
|
216
|
|
|
$
|
—
|
|
|
Capitalized stock-based compensation for internal use software
|
|
$
|
319
|
|
|
$
|
569
|
|
|
Capitalized stock-based compensation for direct response advertising
|
|
$
|
78
|
|
|
$
|
68
|
|
|
Dividends declared but not yet paid
|
|
$
|
3,601
|
|
|
$
|
3,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ENGINES, INC. AND SUBSIDIARIES
|
|
Reconciliation of GAAP to Non-GAAP Operating Results
|
|
|
|
The table below sets forth a reconciliation of GAAP net income to
non-GAAP adjusted EBITDA based on our historical results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
Non-GAAP adjusted EBITDA
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
|
|
(In thousands, unaudited)
|
|
|
GAAP net income
|
|
$
|
8,477
|
|
|
$
|
7,147
|
|
|
$
|
24,878
|
|
|
$
|
19,519
|
|
|
Interest income, net
|
|
|
(119
|
)
|
|
|
(149
|
)
|
|
|
(263
|
)
|
|
|
(133
|
)
|
|
Income tax expense
|
|
|
5,723
|
|
|
|
4,376
|
|
|
|
13,649
|
|
|
|
14,031
|
|
|
Depreciation and amortization
|
|
|
1,539
|
|
|
|
2,363
|
|
|
|
4,484
|
|
|
|
6,670
|
|
|
Amortization of intangible assets (excluding internal use software)
|
|
|
—
|
|
|
|
2,710
|
|
|
|
—
|
|
|
|
7,301
|
|
|
Amortization of internal use software
|
|
|
1,139
|
|
|
|
1,187
|
|
|
|
3,433
|
|
|
|
3,518
|
|
|
Amortization and impairment of direct response advertising
|
|
|
1,406
|
|
|
|
1,122
|
|
|
|
4,132
|
|
|
|
3,547
|
|
|
Amortization of deferred sales commissions
|
|
|
453
|
|
|
|
413
|
|
|
|
1,217
|
|
|
|
1,244
|
|
|
Stock-based compensation
|
|
|
6,480
|
|
|
|
9,580
|
|
|
|
19,196
|
|
|
|
24,307
|
|
|
Acquisition-related expenses(1)
|
|
|
—
|
|
|
|
3,484
|
|
|
|
—
|
|
|
|
13,958
|
|
|
Loss on reacquired franchisee rights
|
|
|
—
|
|
|
|
4,092
|
|
|
|
—
|
|
|
|
4,092
|
|
|
Non-GAAP adjusted EBITDA
|
|
$
|
25,098
|
|
|
$
|
36,325
|
|
|
$
|
70,726
|
|
|
$
|
98,054
|
|
|
|
|
(1)
|
|
We expect to incur acquisition-related expenses throughout 2016 and
in the first quarter of 2017.
|
|
|
|
The table below sets forth a reconciliation of GAAP net income to
non-GAAP adjusted net income based on our historical results:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
Non-GAAP adjusted net income
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
|
|
(In thousands, unaudited)
|
|
|
GAAP net income
|
|
$
|
8,477
|
|
|
$
|
7,147
|
|
|
$
|
24,878
|
|
|
$
|
19,519
|
|
|
Stock-based compensation
|
|
|
6,480
|
|
|
|
9,580
|
|
|
|
19,196
|
|
|
|
24,307
|
|
|
Amortization of intangible assets (excluding internal use software)
|
|
|
—
|
|
|
|
2,710
|
|
|
|
—
|
|
|
|
7,301
|
|
|
Acquisition-related expenses
|
|
|
—
|
|
|
|
3,484
|
|
|
|
—
|
|
|
|
13,958
|
|
|
Loss on reacquired franchisee rights
|
|
|
—
|
|
|
|
4,092
|
|
|
|
—
|
|
|
|
4,092
|
|
|
Income tax expense from non-deductible transaction expenses(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,162
|
|
|
Tax-effect of adjustments(2)
|
|
|
(2,475
|
)
|
|
|
(7,588
|
)
|
|
|
(7,333
|
)
|
|
|
(18,969
|
)
|
|
Non-GAAP adjusted net income
|
|
$
|
12,482
|
|
|
$
|
19,425
|
|
|
$
|
36,741
|
|
|
$
|
51,370
|
|
|
|
|
(1)
|
|
This amount represents estimated additional income tax expense
incurred in the period for non-deductible transaction expenses
related to acquisition activity.
|
|
(2)
|
|
An estimated statutory tax rate of 38.2% has been applied to
eliminate the tax-effect for all periods presented.
|
|
The table below sets forth a reconciliation of GAAP diluted
earnings per share to non-GAAP adjusted earnings per share based
on our historical results:
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
Non-GAAP adjusted earnings per share
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
|
|
(In thousands, except per share data, unaudited)
|
|
|
GAAP diluted earnings per share
|
|
$
|
0.16
|
|
|
$
|
0.11
|
|
|
$
|
0.47
|
|
|
$
|
0.32
|
|
|
Stock-based compensation
|
|
|
0.12
|
|
|
|
0.15
|
|
|
|
0.36
|
|
|
|
0.39
|
|
|
Amortization of intangible assets (excluding internal use software)
|
|
|
—
|
|
|
|
0.04
|
|
|
|
—
|
|
|
|
0.12
|
|
|
Acquisition-related expenses
|
|
|
—
|
|
|
|
0.06
|
|
|
|
—
|
|
|
|
0.22
|
|
|
Loss on reacquired franchisee rights
|
|
|
—
|
|
|
|
0.07
|
|
|
|
—
|
|
|
|
0.07
|
|
|
Income tax expense from non-deductible transaction expenses(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.02
|
|
|
Tax-effect of adjustments(2)
|
|
|
(0.04
|
)
|
|
|
(0.12
|
)
|
|
|
(0.14
|
)
|
|
|
(0.31
|
)
|
|
Non-GAAP adjusted earnings per share
|
|
$
|
0.24
|
|
|
$
|
0.31
|
|
|
$
|
0.69
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of common stock outstanding
|
|
|
51,655
|
|
|
|
61,838
|
|
|
|
51,586
|
|
|
|
60,608
|
|
|
Dilutive stock options, RSUs and PSUs
|
|
|
1,279
|
|
|
|
1,163
|
|
|
|
1,353
|
|
|
|
1,049
|
|
|
Non-GAAP adjusted common shares outstanding
|
|
|
52,934
|
|
|
|
63,001
|
|
|
|
52,939
|
|
|
|
61,657
|
|
|
|
|
(1)
|
|
This amount represents estimated additional income tax expense
incurred in the period for non-deductible transaction expenses
related to acquisition activity.
|
|
(2)
|
|
An estimated statutory tax rate of 38.2% has been applied to
eliminate the tax-effect for all periods presented.
|
|
|
|
|
|
The table below sets forth a reconciliation of our 2016 outlook
for GAAP net income to our 2016 outlook for non-GAAP adjusted
EBITDA:
|
|
|
|
|
|
Outlook for Fiscal 2016
|
|
Non-GAAP adjusted EBITDA outlook
|
|
as of October 31, 2016
|
|
|
|
(In millions, unaudited)
|
|
GAAP net income outlook
|
|
$
|
29
|
|
Estimated interest income, net(1)
|
|
|
—
|
|
Estimated income tax expense(1)
|
|
|
20
|
|
Estimated depreciation and amortization(1)
|
|
|
9
|
|
Estimated amortization of intangible assets (excluding internal use
software)(1)
|
|
|
10
|
|
Estimated amortization of internal use software(1)
|
|
|
4
|
|
Estimated amortization and impairment of direct response advertising(1)
|
|
|
5
|
|
Estimated amortization of deferred sales commissions(1)
|
|
|
1
|
|
Estimated stock-based compensation(1)
|
|
|
33
|
|
Estimated acquisition-related expenses(1)
|
|
|
19
|
|
Estimated loss on reacquired franchisee rights(1)
|
|
|
4
|
|
Non-GAAP adjusted EBITDA outlook
|
|
$
|
134
|
|
|
|
(1)
|
|
The estimated items are provided solely for the purpose of
reconciling our 2016 outlook for GAAP net income to our 2016 outlook
for non-GAAP adjusted EBITDA and are not intended and should not be
construed as part of the Company’s outlook for 2016, which outlook
is limited to revenue, net income and non-GAAP adjusted EBITDA.
These items are subject to a number of variables which make them
inherently difficult to estimate accurately. In addition, actual
amounts for such items have historically varied and may continue to
vary significantly from period to period. Any variances in these
estimates may in turn have a significant impact on our 2016 outlook
and future GAAP results.
|
|
|
|
The table below sets forth a reconciliation of our 2017 outlook
for GAAP net income to our 2017 outlook for non-GAAP adjusted
EBITDA:
|
|
|
|
|
|
|
|
Outlook for Fiscal 2017
as of October 31, 2016
|
|
Non-GAAP adjusted EBITDA outlook
|
|
Low
|
|
|
High
|
|
|
|
(In millions, unaudited)
|
|
GAAP net income outlook
|
|
$
|
49
|
|
|
$
|
52
|
|
Estimated interest income, net(1)
|
|
|
—
|
|
|
|
—
|
|
Estimated income tax expense(1)
|
|
|
32
|
|
|
|
33
|
|
Estimated depreciation and amortization(1)
|
|
|
10
|
|
|
|
10
|
|
Estimated amortization of intangible assets (excluding internal use
software)(1)
|
|
|
11
|
|
|
|
11
|
|
Estimated amortization of internal use software(1)
|
|
|
7
|
|
|
|
7
|
|
Estimated amortization and impairment of direct response advertising(1)
|
|
|
5
|
|
|
|
5
|
|
Estimated amortization of deferred sales commissions(1)
|
|
|
1
|
|
|
|
1
|
|
Estimated stock-based compensation(1)
|
|
|
33
|
|
|
|
33
|
|
Estimated acquisition-related expenses(1)
|
|
|
5
|
|
|
|
5
|
|
Non-GAAP adjusted EBITDA outlook
|
|
$
|
153
|
|
|
$
|
157
|
|
|
|
(1)
|
|
The estimated items are provided solely for the purpose of
reconciling our 2017 outlook for GAAP net income to our 2017 outlook
for non-GAAP adjusted EBITDA and are not intended and should not be
construed as part of the Company’s outlook for 2017, which outlook
is limited to revenue, net income and non-GAAP adjusted EBITDA.
These items are subject to a number of variables which make them
inherently difficult to estimate accurately. In addition, actual
amounts for such items have historically varied and may continue to
vary significantly from period to period. Any variances in these
estimates may in turn have a significant impact on our 2017 outlook
and future GAAP results.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20161103006574/en/
Source: Financial Engines
Financial Engines
Amy Conley, (617) 556-2305
aconley@financialengines.com
or
Don
Duffy, (408) 498-6040
ir@financialengines.com
|
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