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FNGN Investor PresentationQ3 2015
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The following information contains forward-looking statements. These forward-looking statements are based onthe Company’s current expectations and beliefs, as well as a number of assumptions concerning future events and
market trends and opportunities. These forward-looking statements include, but are not limited to, anticipatedfeatures, benefits and success of Income+, IRA Management, Social Security guidance and retirement incomeplanning services, descriptions of potential market and/or growth opportunities and trends, as well as generalbusiness objectives. The Company makes no representations regarding its intentions or plans to enter or pursueany such opportunities or trends, or the likelihood of achieving any penetration into these potential markets or ofsuccessfully pursuing any such opportunities, trends or objectives. These statements are subject to risks,uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that
could cause actual results to differ materially from the results discussed in the forward-looking statements.Factors which may cause actual results to differ from those discussed in the forward-looking statements include,but are not limited to, those discussed in our most recent SEC filings as described below, as well as changes inmarket opportunities, demographics and trends, in the financial markets and economy as a whole, and in theCompany’s business plans, initiatives or strategies. You are cautioned not to place undue reliance on such
forward-looking statements because actual results may vary materially from those expressed or implied. Allforward-looking statements are based on information available to the Company as of the date specified for suchinformation, if a date is given, or on this date and Financial Engines assumes no obligation to, and expresslydisclaims any obligation to, update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise. For more information on the risks and uncertainties affecting theCompany please see our most recent SEC filings, including our Form 10-K filed for the year ended December 31,2014 and the Form 10-Q filed for the period ended September 30, 2015. This data is presented for informationonly and is not intended to constitute an offer or solicitation with respect to any securities issued by the Company.
Forward-Looking Statements
| p. 02
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10,000 baby boomers
turn 65 every day in the United StatesThis trend is expected to
continue until 2030. 1 Defined Benefit Plan Only Defined Contribution Plan Only
60%1980 2011
7%
| p. 03
Both 2
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And studies show...
50% of households with a net worth of lessthan $500,000 DO NOT have a formalretirement income plan.
more than
- The Cerulli Report, Evolution of the Retirement Investor 2014,
Cerulli Associate, Inc.
| p. 04
of participants in TargetDate Funds use them
incorrectly.62%Representing 87% of all TDF assets.
Participants using Help earned higher median
annual returns than those who did not.
3.32%an average of
net of fees
Retirement Help makes a significant impact.
Help defined as managed accounts, online advice, or
proper usage of target-date funds.
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Providing investment adviceto those who have been ignored
Personalized, independent
investment management and advice
through the workplace
using proprietary, scalable technology
| p. 05
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Powerful trends drive growth & opportunity
| p. 06
InvestingExpertise
Nobel laureate
co-founder
RetirementDollars
$22 trillion
Demographics
78 millionBaby Boomers
WorkplaceAccess
524,000 plansoverall
WorkplaceAccess
Over 9 million
participantsTechnology
Personalizationat scale
OPPORTUNITY
ADVANTAGE
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Top DC managed account provider1
Brinker Capital
$38.0 BILLIONMorningstar
Financial Engines
$13.0 BILLIONFidelity
$12.5 BILLIONGuided Choice
$3.5 BILLIONStadion
$2.2 BILLIONProManage
$1.6 BILLION
$1.4 BILLIONStandard
(Mainspring Managed)
TOTAL AUM FOR
COMPETITORS:
$72.2 BILLION
As of June 30, 2015,
TOTAL AUM FOR FNGN:
| p. 07
$114.5 BILLION
Denotes year-over-year growth
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Company highlights
• Services help invest before andspend during retirement
• Leader in a large market drivenby powerful trends
• Scalable, proprietaryinvestment technologyplatform
• High growth, recurring
revenue, high operatingleverage 9.2 over
million individuals have
access to our services
$108 over
billion in assets under
management
| p. 08
Members in all 50 states
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Scalable technologydelivers high quality at low costs
| p. 9
ONLINE ADVICE
Self guided, online experience for
those looking to validate their
own decision-making.
FINANCIAL EDUCATION& EVALUATIONCreating awareness and
highlighting opportunityfor improving retirementreadiness.
PROFESSIONALMANAGEMENT
Providing ongoing
monitoring to create a
personalized anddiversified investment
portfolio.401(k)
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401(k) Plans Participants 401(k) Assets
Focused workplace distributionbroad opportunity in large plans
524,000 46 million $4.4 trillion
0.4% 49%
51%
Current partners• Aon Hewitt
• Empower Retirement
• Fidelity
• Mercer
• T. Rowe Price
• Vanguard
• Voya Financial
• Wells Fargo• Xerox HR Solutions
| p. 10
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Largest installed baseof America’ s largest 401(k) plans
…representing some of theMOST COMPLEX plans
| p. 11
Market leader among large 401(k) plans
• Advice available to over 9.2 million participants
• 142 FORTUNE 500
• 662 employers; representing 954 billion inplan assets
• Managing 913,000 accounts worth $108 billion
• Half of members have less than $53,000 balance
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Exclusive accesswith high barriers to entry
| p. 12
$954 billionassets under contract
• Independence
• Blue chip customers
• Data connectivity
• Access for all employees• Technology to personalize
employer assetretention
Employers require:
98%
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Four opportunities for growth
AUM
$6.9B ongoingcontributions
Marketappreciation
Annual campaigns
Digital marketingNear retiree services
Advisor access
Financial planning
Total incomeplanning
Social Security
Pensions
Other retirementassets
| p. 13
AUC
401(k)
IRA
4.NEWCAPABILITIES
3.INCREASEDENROLLMENT
2.BUILT-INGROWTH
1.AUCGROWTH
AUM
New employers
New providers
401(k)
AUC
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Potential new markets
GrowthOpportunity Assets(billions)
Current AUC $954
Current AUM $108
DC + IRA $14,400
DC + IRA + DB $22,000
Total DC $6,900
$954B
$3.6T
$6.9T
$14.4T
$22.0T
Current partners $3,600
| p. 14
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Delivering services for near retirees
| p. 15
5 years from retirement
Get portfolio income-ready
In retirementGenerate payouts
Approaching retirementCreate total Income Plan
Plan Participants age50+ hold 68% of assets
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Consistent growthacross key top line metrics
Members(thousands)
AUM(billions)
| p. 16
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2010 2011 2012 2013 2014
Recurring revenue growth
Revenue(millions)
$112
$144
$186
$239
$282
of 2014 revenue came from existing employers
Professional
Management
Platform, other
| p. 17
~99%
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Demonstrated profitability trends
35%25% 28% 30% 33%
Adj.
EBITDA
Margin
Non-GAAP Adjusted EBITDA (millions)
| p. 18
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Financial Highlights •Revenue increased 8% to $78.8 million year over year
•Professional Management revenue increased 11% year over year to $70.2 million
•Non-GAAP Adjusted Net Income increased to $12.5 million from $12.0 million a
year ago
2
•Non-GAAP Adjusted EBITDA increased 2% year over year to $25.1 million3
Business Highlights•Acquisition of The Mutual Fund Store announced; expected to close in late Q1’16
•Assets under contract were $954 billion
•Assets under management were $108 billion
•Managing over 913,000 individual portfolios
Q3 2015 highlights1
| p. 19
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Summary
Leader in a large market driven by powerful trends• America’s largest independent investment advisor
• AUM larger than all DC managed account competitors combined
• $22 trillion retirement market driven by Boomer demographics
• Financial Engines enjoys access to signed clients with $954 billion in AUC
Growth opportunities• Untapped potential in existing customer base
• Growth opportunities from services designed to help near retirees
• Over 50% of $4.4 trillion 401(k) assets concentrated in large employer plans
Recurring revenue growth with high margins• 2014 Professional Management revenue CAGR 33%
• ~99% of revenue came from existing employer customers in each of the last 4 years
• Non-GAAP Adjusted EBITDA margin of 32% TTM
| p. 20
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About the Financial Engines and Aon Hewitt research dated May 2014.
•Research results presented for informational and evaluative purposes only.
•Within the Help group, managed accounts and online advice are provided by Financial Engines Advisors L.L.C.
Financial Engines does not sponsor or serve as investment advisor to target date funds.
•The data for the research are drawn from 14 large 401(k) plans. Collectively the plans represent over 723,000
participants with over $55 billion in assets.
•Usage analysis based on 401(k) account and savings data collected between January 2013 and June 2013. 8 of the
14 plans in the Usage analysis were also in the Usage portion of the September 2011 Help report.
•Median returns are calculated based on a sample of 14 plans, 8 of which were also in the September 2011 Help
report, using data from calendar years 2006 – 2012, inclusive. Observations are equal weighted both across plans
and across years.
•Portfolio balances are calculated as of the start of each calendar year of the research period. Portfolio balances
are calculated exclusive of any plan loan balances outstanding.
•
All reported risk levels are forward-looking annual standard deviation values.•All returns reported in the research are net of fees, including fund specific management and expense fees, and
managed account fees.
•For a complete copy of the research study, visit www.financialengines.com.
“Help” research disclosure
| p. 21
http://www.financialengines.com/http://www.financialengines.com/
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Slide 3: 1 Pew Research Center: www.pewresearch.org/daily-number/baby-boomers-retire/; 2 EBRI, “FAQs About Benefits—
Retirement Issues: What are the trends in U.S. retirement plans?” www.ebri.org/publications/benfaq/index.cfm?fa=retfaq14 . Slide 4: Source: Aon Hewitt Associates and Financial Engines research: “Help in Defined Contribution Plans: 2006 Through 2012”, May
2014.
Slide 6: Source: Cerulli Retirement Markets 2014 Report (2014 retirement assets (DC, DB and IRA) and plans data); U.S. Census
Bureau July 1, 2006 (baby boomer data). Workplace access based on Financial Engines data as of September 30, 2015.
Slide 7: Based on The Cerulli Edge – Retirement Edition, 3Q 2015, Issue #6, page 13; Data as of September 30, 2015.
Slide 8: Based on Financial Engines data as of September 30, 2015.
Slide 10: Source: Cerulli Retirement Markets 2014 Report (2014 plans, active participants, 401(k) assets); See our Forward-Looking
Statements earlier in this presentation.
Slide 11: Based on Financial Engines data as of September 30, 2015. These Financial Engines customers have consented to disclosure
of their relationships with Financial Engines. This does not constitute an endorsement or approval of the advisory services
provided. All trademarks are the property of their respective owners.
Slide 12: Based on Financial Engines data as of September 30, 2015. All employers who make available our Professional Management
service have made us the sole in-plan provider. Employer asset retention based on the average employer AUM retention for the 3
years ending 12/31/14 for employers offering Professional Management services.
Slide 13: Based on Financial Engines data as of September 30, 2015. Ongoing contributions over the four most recent fiscal quarters.
Slide 14: Source: Cerulli Retirement Markets 2014 Report (2014 DC, IRA, and DB data); PLANSPONSOR 2015 Recordkeeping Survey
(current partners DC data as of 12/31/14). Based on Financial Engines data as of September 30, 2015 (AUM, AUC). See our
Forward-Looking Statements earlier in this presentation.
Footnotes
| p. 22
http://www.pewresearch.org/daily-number/baby-boomers-retire/http://www.pewresearch.org/daily-number/baby-boomers-retire/http://www.pewresearch.org/daily-number/baby-boomers-retire/http://www.pewresearch.org/daily-number/baby-boomers-retire/http://www.pewresearch.org/daily-number/baby-boomers-retire/http://www.pewresearch.org/daily-number/baby-boomers-retire/http://www.pewresearch.org/daily-number/baby-boomers-retire/http://www.pewresearch.org/daily-number/baby-boomers-retire/
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Slide 15: Based on Financial Engines data as of September 30, 2015.
Slide 16, 17: Based on Financial Engines data as of December 31, 2014. See our Forward-Looking Statements earlier in this
presentation.
Slide 18: See Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on August 5, 2015 for a reconciliation of Adjusted
EBITDA. Non-GAAP Adjusted EBITDA is defined as net income before net interest expense (income), income tax expense (benefit),
depreciation, amortization of internal use software, amortization of direct response advertising, amortization of deferred commission
and non-cash stock-based compensation. Margin: Adjusted EBITDA as a percent of revenue.
Slide 19: 1 Based on Financial Engines data as of September 30, 2015. 2 Adjusted Net Income represents net income before non-cash
stock-based compensation expense, net of tax and certain other items such as the income tax benefit from the release of valuationallowances, if applicable for the period. 3 Non-GAAP Adjusted EBITDA is defined as net income before net interest expense (income),
income tax expense (benefit), depreciation, amortization of internal use software, amortization of direct response advertising,
amortization of deferred commission and stock-based compensation.
Slide 20: Source: For independence methodology and ranking, see InvestmentNews RIA Data Center.
(http://data.investmentnews.com/ria/). Cerulli Retirement Markets 2014 Report (2014 401(k) assets and retirement asset data);
Cerulli Edge 3Q 2015 for AUM vs. competitor’s AUM; Financial Engines data as of September 30, 2015 (AUC, Non-GAAP Adjusted
EBITDA TTM). See our Forward-Looking Statements earlier in this presentation.
Footnotes (cont.)
| p. 23
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Appendix
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• Assets under management (AUM) is defined as the amount of retirement plan assets
that we manage as part of our Professional Management service. Our quarter-end
AUM is the value of assets under management as reported by plan providers at or
near the end of each quarter. Our members are the plan participants who are enrolled
in our Professional Management service as reported by plan providers at or near the
end of each quarter.
• Assets under contract (AUC) is defined as the amount of assets in retirement plans
under contract for which the Professional Management service has been made
available to eligible participants. Our AUC and eligible participants do not include
assets or participants in plans where we have signed contracts but for which we have
not yet made the Professional Management service available. Eligible participants are
reported by plan providers as of various points in time.
• For further detail and definitions of other terms used in this presentation, please refer
to the Company’s most recent quarterly and annual filings with the SEC.
Definitions
Financial Engines® and Retirement Help for Life® are registered trademarks or service marks of Financial Engines, Inc. Advisory services
provided by Financial Engines Advisors L.L.C., a federally registered investment advisor and wholly owned subsidiary of Financial
Engines, Inc. Financial Engines does not guarantee future results. | p. 25
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Reconciliation of GAAP to Non-GAAP Operating Results
1 For the calculation of non-GAAP Adjusted Net Income, an estimated statutory tax rate of 38.2% has been applied to non-cash
stock-based compensation for all periods presented.
The table below sets forth a reconciliation of net income to non-GAAP Adjusted EBITDA based on our historical results:
The table below sets forth a reconciliation of net income to non-GAAP Adjusted Net Income and non-GAAP Adjusted Earnings Per Share based on our
historical results:
| p. 26
Three Months Ended
September 30, Nine Months Ended
September 30,
Non-GAAP Adjusted EBITDA 2014 2015 2014 2015(In thousands, unaudited)
Net income $ 9,007 $ 8,477 $ 26,878 $ 24,878
Interest income, net (44 ) (119 ) (121 ) (263 )
Income tax expense 6,014 5,723 17,520 13,649
Depreciation and amortization 1,261 1,539 3,493 4,484
Amortization of internal use software 1,479 1,139 4,432 3,433
Amortization and impairment of directresponse advertising 1,534 1,406 4,631 4,132
Amortization of deferred salescommissions 369 453 1,173 1,217
Stock-based compensation 4,895 6,480 14,745 19,196
Non-GAAP Adjusted EBITDA $ 24,515 $ 25,098 $ 72,751 $ 70,726
Three Months Ended
September 30, Nine Months Ended
September 30, Non-GAAP Adjusted Net Income 2014 2015 2014 2015
(In thousands, except per share data, unaudited)
Net income $ 9,007 $ 8,477 $ 26,878 $ 24,878
Stock-based compensation, net of tax 3,025 4,005 9,112 11,863
Non-GAAP Adjusted Net Income $ 12,032 $ 12,482 $ 35,990 $ 36,741
Non-GAAP Adjusted Earnings PerShare $ 0.23 $ 0.24 $ 0.68 $ 0.69
Shares of common stock outstanding 51,811 51,655 51,481 51,586
Dilutive stock options, RSUs and PSUs 1,501 1,279 1,805 1,353
Non-GAAP adjusted common sharesoutstanding 53,312 52,934 53,286 52,939
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For illustration only. Results may vary under different market conditions. Financial Engines does not guarantee future performance.
Lifetime income assumes purchase of an optional out-of-plan fixed immediate annuity before age 85. Financial Engines is not affiliated
with any annuity providers.
Income+Sell stocks, buy bonds to increase floor
| p. 27
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For illustration only. In each subsequent year, any additional increases in income would be evaluated based on market performance
and current market conditions. Results may vary under different market conditions. Financial Engines does not guarantee future
performance. Lifetime income assumes purchase of an optional out-of-plan fixed immediate annuity before age 85. Financial Engines
i t ffili t d ith it id
Income+Sell stocks, buy bonds to increase floor