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Envestnet, Inc. (NYSE:ENV)

Q4 2013 Results Earnings Conference Call

February 20, 2014 05:00 PM ET

Executives

Chris Curtis - SVP and Treasurer

Jud Bergman - Chairman and CEO

Pete D'Arrigo - Chief Financial Officer

Analysts

Peter Heckmann - Avondale Partners

Chris Shutler - William Blair

Jeff Houston - Barrington Research

Chris Donat - Sandler O'Neill

Irvin Liu - Stifel

Jennifer Dugan - Stern Agee

Operator

Good day everyone and welcome to the Envestnet Fourth Quarter 2013 Earnings Conference. Today’s call is being recorded. At this time I would like to turn the conference over to Mr. Chris Curtis, Senior Vice President and Treasurer. Please go ahead sir.

Chris Curtis

Thank you and good afternoon everyone. With me on today’s call are Jud Bergman, Chairman and Chief Executive Officer; and Pete D'Arrigo, Chief Financial Officer.

Our fourth quarter and full year 2013 earnings press release and associated Form 8-K can be found at envestnet.com under the Investor Relations section.

During this conference call, we will be discussing certain non-GAAP information, including adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share. This information is not calculated in accordance with GAAP and maybe calculated differently than other companies similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP information appear in today’s press release.

During the call we will also be discussing certain forward-looking information. These discussions are not guarantees of future performance and therefore you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause them to differ materially from what we expect. Please refer to our most recent SEC filings as well as our earnings press release, which are available on our website for more information on factors that could affect these matters.

This call is being webcast live and will be available for replay for one month on our website. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent material developments. We will take questions after our prepared remarks.

And with that I will turn the call to Jud.

Jud Bergman

Thank you, Chris. Hello everyone. I add my own welcome to you this afternoon.

2013 was a year of significant positive developments and strong results for our company. We delivered record sales and asset flows as well as record revenue and earnings. We also crossed the significant threshold of [advisory] adoption with over $500 billion with platform assets.

We continue to see compelling evidence that the financial advisory profession is moving steadily towards a tipping point in an important and far reaching transformation. This transformation will yield a financial advisory model better matched to today’s investment and market realities and far more [powerful] and rewarding for investors and advisors alike.

Even as Envestnet benefits from this important transformation, we are accelerating its progress with the wealth management solution directly supporting advisors who are aligned with this trend and uniquely positioning us to attract those advisors and their assets.

Our mission to unify and fortify the wealth management process and empower advisors to deliver better client outcomes continues to drive our business strategy and resonate with advisors. We remain committed to these guiding and principles. First, being advisor focused by empowering advisors to compete and to be more productive and to deliver better client outcomes. Second, being transformative, by helping to lead the wealth management process from (inaudible) at times conflicted and misalign system to one that is transparent, objective and fully aligned fiduciary standard. And third being technology empowered, by delivering a powerful and unified set of tools for advisors to deliver sophisticated investment strategies that benefit clients, while also providing their practices with operational lift.

We found this investment with the belief that the financial advisory profession needed to move beyond historic loops, a our sales focused wire house centric environment, vulnerable to conflicts of interest and inconsistent focus on the client’s debt interests, and from that toward a more transparent demonstrably objective and truly fiduciary based service model that empower independent advisors to access the industry’s best resources.

For both investors and advisors this transformation creates a context for financial advice that supports genuine alignment of interest and choose client centric advice for each client. This advice paradigm is enabled by innovative technology and open architecture access to the industry’s best products and its best tools for portfolio design, reporting, research, monitoring and overall reporting.

The transformation that we envisioned 14 years ago is now unfolded. Today affluent and high net worth investors increasingly are using financial advisors, and more advisors are moving into independent practice settings. More and more assets are being managed under a truly advisory fee based service model rather than the commission driven model in the past.

And advisors are increasingly investing in sophisticated platform technology as a strategic priority to enhance their practice’s efficiency and to scale up their ability to deliver the most customer centric advice to each client. This transformation’s tipping point is inside, maybe not this year or next but inevitably and soon.

More and more investment is emerging as a key agent and an enabling utility of this transformation. We believe we effectively function as an efficient and powerful pipeline for moving advisors aligned with this new advisory paradigm and the assets that they all receive and do a close and hard working partnership with Envestnet.

As 2013 unfolded we took important steps in enhancing and strengthening our platform. We launched Envestnet Intelligence, a so the platform features that provides business intelligence to our advisor partners and an unmatched ability to deploy practice management benchmarking and market information for more responsive customized portfolio design, execution and communications.

We also introduced the next generation of our platform featuring an enhanced advisor console with access to macro risk analytical tools, via fully mobile end to end wealth management platform. And we designed an innovative new investment offering, quantitative portfolios, which enable advisors to combine the benefits of low cost access to market data like an [ETS] with the benefit of separately managed accounts including active tax management and portfolio customization.

We believe that QPs will prove to be a smarter way to access market data. Today Envestnet serves more than 30,000 advisors, representing over 2 million investor accounts helping to unify and strengthen the wealth management process for both advisors and investors.

During 2013, our platform of assets exceeded the $0.5 trillion mark and now stands at $537 billion, a significant platform milestone that makes us the leading service provider to independent advisors. Envestnet clients had $74 billion in gross sales and $42 billion in net flows of assets under management or administration during the year. Included in those numbers were $27 billion in conversions, plus another $41 billion in license assets, thus far the most we’ve ever completed. That contributed to full year adjusted revenue of $243 million, up over 50% over the previous year and adjusted EBITDA of nearly $39 million, up over 60% in the prior year, all record levels for the company.

We are satisfied by the results we achieved during the year, but at the same time we know that the transformation of the financial advisory business that is so central to our firm’s mission remains an urgent work in progress.

In 2014, we will continue our efforts to advance this transformation, phenomenon that we are uniquely positioned to leverage on behalf of advisors, their clients and their shareholders. We expect to gain further adoption of our next generation platform, as well as invested intelligence. We will support a broader utilization of new platform offerings well matched to the [deviate] advisory demands including our quantitative portfolios and our newly introduced retirement solutions offering.

We also expect to continue on-boarding new enterprise relationships. We are particularly pleased by the new contract we signed earlier this month with William Blair & Company. Leveraging our advisor excise technology platform, William Blair will be able to deliver real time transparent reporting and other portfolio management efficiencies for the private wealth clients.

Turning to strategic activity, the integration of WMS is a critical undertaking throughout our organization in the upcoming year. The conversion process has already been completed for the first group of clients earlier this year. We expect to complete the implementation process for substantially all the clients by the end of 2014.

I will conclude with a few remarks in a moment, but first I'd like to turn it over to Pete D'Arrigo, our Chief Financial Officer to discuss our financial performance in greater detail.

Pete D'Arrigo

Thank you Jud and good afternoon everyone. In the fourth quarter of 2013, revenue from assets under management or administration grew 83% to $63.4 million compared to $34.7 million in the fourth quarter of 2012. Licensing and professional services revenue in the fourth quarter was $11 million, up 14% from $9.9 million a year ago. And total adjusted revenue increased 67% to $74.4 million in the fourth quarter from $44.6 million in the fourth quarter of last year.

Our cost of revenue increased to $32.4 million for the quarter from $16 million last year. As a percentage of revenue from assets under management or administration cost of revenue was 51%. Adjusted EBITDA was $11 million for the fourth quarter, 53% higher than 2012 fourth quarter. Adjusted earnings per share was, $0.15 in the fourth quarter increasing 50% from $0.10 last year.

We reported GAAP net income in the fourth quarter of $600,000, which is $0.02 per diluted share. This fourth quarter’s GAAP net income includes approximately $1.5 million of after-tax expense related to amortization of acquired intangibles, which has increased from prior period due to the acquisition of WMS. And it also includes approximately $2.7 million of after-tax expenses related to non-cash compensation, the secondary offering completed in October and the WMS transaction, cost related to the WMS transaction.

Our diluted share count during the fourth quarter was 36.3 million shares, up 2.5 million shares from the fourth quarter of 2012 due primarily to the impact of higher stock price on the calculation of diluted shares.

Looking forward, we expect our revenue from assets under management or administration to be up 81% to 85% in the first quarter compared to the first quarter of 2013. This reflects an effective fee rate of approximately 14.8 to 15.1 basis points on our beginning AUMA asset base of approximately $178 billion.

Licensing and professional services revenue for the first quarter 2014 should be up approximately 5% to 6% year-over-year on a GAAP basis. Growth in this line is going to be relatively slower throughout the year with the number of new contracts coming to implementation; there is revenue that’s going to be recognized over the estimated life of the client relationship.

Adjusted revenues for the first quarter should increase between 64% and 67% year-over-year. And we expect first quarter cost of revenue to be between 51% and 52% of AUMA revenue inline with the fourth quarter. We expect our adjusted EBITDA to increase 40% to 44% in the first quarter compared to the first quarter of last year.

Regarding income taxes, in the fourth quarter, our effective tax rate was approximately 51% on GAAP pre-tax earnings. The tax rate was notably higher than our statutory rates during the quarter due largely to certain Safe Harbor elections made in foreign jurisdictions.

We expect our effective tax rate for the first quarter of 2014 and the full year to be approximately 42%. Diluted shares outstanding should be approximately $36.6 million shares for the first quarter based on the current stock price, a meaningful increase from the first quarter of 2013. These expectations translate to adjusted earnings per share of approximately $0.15 in the first quarter of 2014.

Thank you again for your support of Envestnet and Jud has a few closing remarks.

Jud Bergman

Thank you, Pete. We remained fully committed to taking advantage of our extraordinary opportunity to act as a powerful agent of fundamental transformation across the financial advisory profession. In doing so, we believe we are well positioned to deliver substantial revenue and cash flow growth this year and beyond. Our long-term targets remain to grow top-line revenue organically by 20% per year and to grow adjusted cash flow by 25% per year, reflecting improving operating leverage in our business and to accelerate this organic growth overtime by disciplined strategic merger and acquisition activity.

During 2014 we expect to exceed our long-term target on both the top and bottom-line aided by a full year of revenue from the WMS acquisition. We expect revenue growth of 35% to 39% compared to 2013.

We expect continued operating leverage in our core business, while we integrate WMS and invest in on-boarding resources for large enterprise clients, as well as new initiatives like retirement solutions. As a result, we expect adjusted EBITDA to grow between 32% and 39% compared to 2013 meaningfully above our long-term target of 25%. Beginning in 2015, we expect the financial accretion from WMS should be significant, generating at least $10 million of cash flow once fully consolidated.

Thank you again for your time this afternoon. Thank you sincerely for your support of Envestnet. And with the conclusion of these prepared remarks, we are happy to take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) And we’ll first go to Peter Heckmann from Avondale Partners.

Peter Heckmann - Avondale Partners

Good afternoon gentlemen, nice results.

Jud Bergman

Thank you, Peter.

Pete D'Arrigo

Hi Pete, how are you?

Peter Heckmann - Avondale Partners

Great. Can you comment on the average basis point spread that you talked about for the first quarter 14.8 to 15.1? Is that a good number to use for the full year or do you see it migrating slightly upward as we move throughout the year?

Jud Bergman

Well, the trends that we have seen with the asset mix and the on-boarding over the last few years have been to see actually the average fee rate declining in sequential quarters, obviously it depends on the asset mix of the new business that comes on from the fourth quarter to the first quarter in the guidance there is a drop as a significant portion of the AUMA conversions that we talked about came in at lower fee rates and effective that average. So our trend over the past couple of years has been to see that dropping moderately, but again it will depend on the mix of new assets.

Peter Heckmann - Avondale Partners

Okay. That's fair, and when we look at those very large conversions of the fourth quarter, did you happen to comment what the mix was there in terms of AUM versus AUA? I think it’s in the press release, I just I mean need to (inaudible) better?

Jud Bergman

So it’s pretty heavily skewed towards AUA. Reporting in that fourth quarter it was above our overall year, yearly results and above what our long term expectations are but it was about 90% AUA including reporting to 10% AUM in that fourth quarter.

Peter Heckmann - Avondale Partners

All right, that's very helpful. And then just last question. You’ve a very strong balance sheet $50 million in cash and no debt, you stated longer term goal to make acquisitions, is it something that we’re actively, we should actively expect to see potentially something on the tape here the next couple of quarters or should we expect that the company that continue to work to convert to the [WMS] financial institutions and so maybe transaction might be more likely in the back half?

Jud Bergman

So, again setting back when we went public, we identified that disciplined merger and acquisition activity was the central part of our strategy. We believe that we can be a logical consolidating platform for wealth management technology, part of the main reason for this is that we have a core competence of doing complex conversions well, because so much of our activity comes from doing large scale conversions from large enterprise clients as well as large scale conversions from registered investment advisory firms. So, we see that discipline merger and acquisition activity is a way of leveraging this core operational strength. We identify back in 2010 that we thought we would do one or two strategic transactions and one or two consolidated transactions over the next three years. And that's about what we were able to do.

And we've also indicated that right now as if to the first two quarters of 2014, our conversion and integration teams are busy at work not only with WMS but on boarding new clients. Now that doesn't rule out our strategic activity, but I would not certainly expect that within the next two quarters.

Having said that, we expect that disciplined activity whether it's in acquiring, consolidating opportunities or in investing in strategic acquisitions will be an important part of our strategy going forward as it has been over the last two years.

Peter Heckmann - Avondale Partners

Sure, that makes sense. All right. Thanks for the color. I'll get back in the queue.

Operator

We'll now go to Chris Shutler from William Blair.

Chris Shutler - William Blair

Hey guys, good afternoon.

Jud Bergman

Hi Chris.

Pete D'Arrigo

Hi Chris

Chris Shutler - William Blair

So you guys you saw a 15% sequential increase in the number of AUA accounts in the quarter and that seem like a very strong number. Just wondering that, what drove that?

Jud Bergman

Well, first of all the organic flows were very strong throughout the year, including the fourth quarter. But we also had a particularly strong quarter for conversions from an asset level standpoint, although as indicated earlier they were heavily skewed towards assets under administration and performance reporting, type of service offering. So that has an effect. It makes our flows very strong. It is an endorsement by the advisor of our platform, but it also has a slightly adverse effect on our going forward average yield for assets under management or administration.

Chris Shutler - William Blair

Okay thanks. And then Jud on the QPs I know it’s still early but can you talk about progress or any early feedback so far from advisors? And maybe how many of the advisors on your platform today actually have access to the QPs versus maybe where that will going to?

Jud Bergman

So as I have said, we think this is a transformative and valuable innovative new product, you think it’s a smarter way to access data for tax sensitive advisors who cater to high network clients, I think it’s going to really be a have the potential of being a new category. So having said all of that we’ve also said that new product launches especially in the financial services area, we expect that there will be a slow build at first and today the advisor base that we service I would say less than 20% today has access to the quantitative portfolios. We are working through that, that’s been very promising. The feedback that we’ve gotten from home office, gatekeepers and the research side has been year firmly strong, as has the response from the advisors who are already putting their clients, their clients’ asset into the product into the portfolios.

Chris Shutler - William Blair

Okay, great. And the last one from me. Maybe can you just talk about the length of the implementation pipeline, but on the BD and RH sides of the business?

Jud Bergman

Well, again we try to build in certain amount of capacity. So that we are able to accommodate breakaway advisors and those breakaway advisors happen over with a very short lead time. We managing I think effectively our RIA pipeline registered investment advisor pipeline. Our enterprise pipeline is continuing to grow, those are the larger and more complex conversions, they are lumpier and they are far and less predictable in terms of when they are going to be coming across the finish line in part because we have dependencies with our partners the enterprises. So we continue to invest in on-boarding resources and that investment is paying off. I mean you can just -- it is not hard to do the math in terms of the total number of conversions that we did in 2013 compared that to 2012, 2011 or 2010, and you see that the significant ramp up and capability that we are able to demonstrate.

But we continue to invest in it and the pipeline I think is evidence of the healthy amount of demand for our product, our platform, our services and I do not believe that we are run the risk of loosing out our market share or promising new clients because we are not able to implement fast enough.

Chris Shutler - William Blair

Okay, good to hear. Thanks guys.

Operator

We’ll now move to Jeff Houston from Barrington Research.

Jeff Houston - Barrington Research

Hey guys thanks for taking my questions. I was hoping to get an update on the number of sales people you had at the end of 2013 and perhaps give a sense of what you are targeting for the end of ’14? And then third part of that question is the mix between the four different I believe that are enterprise, advisory, Tamarac and P&C. Thanks.

Jud Bergman

Those aren’t metrics that we are accustomed to reporting on a quarterly basis. We do put it in our 10-K once a year. We would expect that we are able to leverage our growth in terms of sales and marketing resources but the actual headcount we are trying to manage the growth in headcount and tie it basically to the growth in advisors that we are seeing.

So we target long-term growth in numbers of advisors in the mid single to high digit range, targeting 5% to 8% per year. And we have been growing faster than that lately, but that is our long-term target. Of course the real engine of growth comes from the same store sales that we get, advisors that utilize a fully integrated end to end platform grow their practices at over 100% of the rate that advisors that don’t use the fully integrated platform. So that’s our largest engine of organic growth, but we target sales marketing headcount to be at or below our long term target of advisor growth.

Jeff Houston - Barrington Research

Got it. That makes sense. Switching gears a bit into the competitive landscape, could you talk a bit about who you are seeing more of or less of within the TAMPs, custodians, and perhaps some new entrants and then maybe how these other firms are reacting to Envestnet’s disruptive technology?

Jud Bergman

Well, there are number of incumbents that we’ve seen ever since we started the business. And there are not, to my knowledge any new entrants over the -- that are effectively gaining share from advisors that we haven’t already identified. So we see that the competitive environment is a very dynamic one. Most of the investment into the wealth management technology space is being funded for companies that are trying to pull off a business to consumer or as they used to call it B2C but enabling technology, enabling aggregation, enabling portfolio management to the end client bypassing advisors. And lot has been written in the press about some of these new entrants to the space.

I have not seen evidence or any facts that would support that they are having tremendous success in attracting affluent or high net worth clients. But in our space, I know of no new participants either at TAMPs, turnkey asset management platforms or at single point application providers.

Jeff Houston - Barrington Research

That’s good color. Thank you.

Operator

We’ll now go to Chris Donat from Sandler O'Neill.

Chris Donat - Sandler O'Neill

Good afternoon, gentlemen.

Jud Bergman

Hi Chris.

Chris Donat - Sandler O'Neill

Hi. One question on the cost of revenues, because that’s been creeping up as a percentage of asset based revenue, 51% this quarter and maybe little higher. And when I look back two years ago, it’s 42%. Is this a function of the asset based revenue having more administrative assets in it or is it perhaps the sign of like a great rotation and more equity based fees for third-party managers rather than fixed income? Anyway, if you could help me understand what’s driving the trend?

Jud Bergman

Sure, it’s a very good question. The cost of goods sold is almost exclusively a function of our assets under management.

Chris Donat - Sandler O'Neill

Okay.

Jud Bergman

Not assets under administration, not licensed assets, not reporting assets. You see a fairly large jump as a result of the WMS acquisition and that’s a function of the type of asset that they had which was skewed towards separately managed accounts.

There also has been rapid growth which has been enabled by our Unified Managed Account chassis; our UMA platform has enabled the rapid growth of a number of third-party strategists who have now been available to advisors for the first time using this Unified Managed Account technology. So, what you’re seeing is I think the early stages of a new product life cycle, the third party strategist UMAs. And over time we expect that we will be able to gain efficiencies and generate some reduction in the basis point costs of those underlying strategists within the UMA. So, it’s two primary things, it’s the WMS acquisition and then it’s the -- you could say this, the market success of third party strategists. And what we’ve been able to demonstrate in the past is that those strategists as they see the scale that’s available and the ease of doing business from a firm like Envestnet, typically we see reductions in their marginal cost going forward as they gain scale in our platform.

Chris Donat - Sandler O'Neill

Okay. So this might be something where over time it creeps up but you do have some -- not necessarily levers but there is part of the formula should mitigate any increases?

Jud Bergman

That’s how we look at it.

Pete D'Arrigo

I think that’s a fair summary.

Chris Donat - Sandler O'Neill

Okay. And then Jud, just to your -- I it was your comment about, you expect substantially all of the WMS assets converted by year-end. Can you just remind us if it -- as far as the expense base tied to WMS, can you reduce that once you move 100% of the assets or is it substantially all the gating factor?

Jud Bergman

Okay again, and thanks for bringing that up again, because we have tried to be very forthcoming on it but it just is never quite forthcoming enough. Right? So we have a services agreement with the organization that we acquired WMS from Prudential. That legacy platform is a main frame system, it’s a fairly sophisticated system but it’s also a high cost system. So, we will not get full economies of scale until the conversion is 100% complete. So 75% of all that’s coming across doesn’t get us 75% of the efficiencies, it doesn’t get us none of the efficiencies, but it doesn’t get us 75% of the efficiencies.

We’ve got to be 100% converted to achieve a 100% of the efficiencies that we have dimensionalized for you.

Chris Donat - Sandler O'Neill

Okay, but now that the timing as you do think of the, as you said, substantially all by year end of this year, so and…?

Jud Bergman

Our expectation is that we are going to be substantially across the finish line with substantially all the clients by the end of the year.

Chris Donat - Sandler O'Neill

Okay. And any way to provide some sort of quantification of that first group that’s been converted, is it 5%, 10% asset (inaudible)?

Jud Bergman

What I would like to just point out is that we’ve successfully begun the migration and we have satisfied clients on the other side of that migration.

Chris Donat - Sandler O'Neill

Okay, that helps me get there. Thanks Jud.

Jud Bergman

Thanks Chris.

Operator

And we will now take a question from David Grossman from Stifel.

Irvin Liu - Stifel

Thanks guys, this is Irvin Liu calling for David Grossman. I just noticed that gross sales trends were strong yet again in the fourth quarter especially in AUA assets. Can you elaborate how much of this is new advisors just tipping their toes into the Envestnet product suite, or it’s like one or two solutions or if there are any indications that they are thinking of eventually adding more additional service offerings. Just what sort of incremental cross-sell opportunity once these new advisors are on-boarded?

Jud Bergman

Again, where we really get the leverage in our business model is as advisors move from trying an account here or there with perhaps an end client that would be most suited by a fee-based solution.

Moving from that testing it mode trying it mode to committing their practice towards transitioning from commission-based to fee-based or with those advisors which have the majority of assets on our platform who already are virtually 100% fee-based, but are looking to move pieces of their business over to us either all of their assets for the reporting or all of their assets for rebalancing and reporting or all of their assets for CRM and rebalancing and reporting.

So where we get our real growth organically is for the advisor that begin the process of moving most of their practice on to the investment platform and that’s where we have found that our value proposition is strongest. I’ve mentioned this number of times, we commissioned a study by the IK Group and this study found that advisors who use a fully integrated wealth management platform spend 40% less time with back office and technology problems. They spend 90% more face time with clients. And that translates into what I think is remarkable, it’s nearly astonishing, it’s up 110% greater account growth.

So our value proposition is that for the advisor that is on an end-to-end fully integrated platform, there is a substantial operational lift and that will help them grow their practice faster. So the advisors that are driving the growth are the advisors that understand that and buy into that.

Accounts per advisor, average accounts per advisor grew from 28 in December of ‘12 to 32 in December ‘13, that’s about 14% growth and that's why we’re bringing on hundreds of perhaps even thousands of new advisors that are just sinking their toes in the water.

So we are able to grow average accounts per advisor at the same time we’ve been able to grow the number of advisors. And I hope that’s helpful to you to understand where our growth is coming from?

Irvin Liu - Stifel

Indeed that is. Thanks.

Operator

(Operator Instructions) We’ll now go to Jennifer Dugan from Stern Agee.

Jennifer Dugan - Stern Agee

Hello.

Jed Bergman

Hi Jennifer.

Jennifer Dugan - Stern Agee

Hi, how are you? Did you guys say that the integration work for WMS is all done?

Jed Bergman

No, I said that we've completed that for several of their clients.

Jennifer Dugan - Stern Agee

Okay. So there is...

Jed Bergman

The integration work has been completed for several of the WMS clients.

Jennifer Dugan - Stern Agee

Okay. I guess what I'm trying to get off is kind of the magnitude of integration work as well as conversion expenses in 2014 versus 2013. And then also how that should trend over the course of the year, are they going to be fairly even or are they declining or maybe they are actually going up closer to year and again you'll be converting more clients at that time. I'm just trying to get a little bit better sense on the cost side, how that should play out over the course of the year?

Jud Bergman

So, I think it's going to be sort of an allocation of cost and how we spread that. We have really four demands on the implementation and conversion resources that we have being existing clients, new clients, the conversion work with WMS right now and then development for internal demands to improve the efficiency of the platform. And as we work through the year at certain areas of the, certainly with WMS as we make progress there that freeze up resources to apply to other areas.

So, I think the overall costs are pretty accurately reflected, it's going to be what areas can we apply those resources.

Jennifer Dugan - Stern Agee

Okay, great. And secondly can you give us some color on what the new deal pipeline looks like right now in terms of RFPs you’ve out there and how competitive those are looking?

Jud Bergman

You mean what kinds of sales pipeline?

Jennifer Dugan - Stern Agee

Yes, sales pipeline, sorry, yes.

Jud Bergman

We don't provide metrics on that, but I'll just say that we are filling the back end of the sales pipeline as rapidly as we're pulling new clients to the front end of the pipeline.

Jennifer Dugan - Stern Agee

Okay, great. Thank you.

Operator

And it appears there are no further questions at this time. I’ll turn the conference back over to Mr. Bergman for any additional or closing remarks.

Jud Bergman

Thank you for these questions. I feel that there is a deepening understanding of the opportunity as well as of the key metrics for our business and we are appreciative of that. We’re also sincerely appreciated of your time for dialing in this afternoon and for your support of Envestnet. Thank you very much. Good afternoon.

Operator

This concludes today’s presentation. Thank you for your participation.

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