1/10 Thread on $ENV
I was curious on ENV since $V acquired Plaid in January for $5.3 Bn at >20x revenue.
Yodlee, a Plaid comp, posted $190 mn revenue last year. Yodlee is just ~20% of ENV's revenues. ENV's mcap is only ~4.6 Bn. And there are some talk about Yodlee sale.
Buy?
I was curious on ENV since $V acquired Plaid in January for $5.3 Bn at >20x revenue.
Yodlee, a Plaid comp, posted $190 mn revenue last year. Yodlee is just ~20% of ENV's revenues. ENV's mcap is only ~4.6 Bn. And there are some talk about Yodlee sale.
Buy?
2/10 Nah, I'll pass. Here's why.
Plaid is so ahead of Yodlee that any multiple comparison is not really prudent. Even if Yodlee gets bought by someone, it's very unlikely Yodlee will get anywhere near the multiple Plaid got.
Former head of strategy at Yodlee explains Plaid moat
Plaid is so ahead of Yodlee that any multiple comparison is not really prudent. Even if Yodlee gets bought by someone, it's very unlikely Yodlee will get anywhere near the multiple Plaid got.
Former head of strategy at Yodlee explains Plaid moat
3/10 In terms of relationship with banks/FIs, Plaid also did a much better job. Yodlee, on the other hand, seems to have a very dicey relationship with the banks.
4/10 Also, Yodlee's data sales business is under regulatory scrutiny. Data sales is ~40% of Yodlee's revenue, and 8-10% of ENV's revenue.
Although Yodlee is ~20% of ENV revenue, it is ~30% of ENV's gross profit. So this data sales business is likely to high margin.
Although Yodlee is ~20% of ENV revenue, it is ~30% of ENV's gross profit. So this data sales business is likely to high margin.
5/10 If data sales becomes off-limits, there is likely to be material erosion of Yodlee's value.
@BlueToothDDS had a good thread on Plaid. You can explore more on Plaid and Visa's acquisition here.
@BlueToothDDS had a good thread on Plaid. You can explore more on Plaid and Visa's acquisition here.
6/10 Beyond Yodlee, I like ENV's wealth solutions platform which is ~80% of ENV's topline.
Because of customer inertia, and switching costs due to process disruption, wealth management tech platform seems indeed very sticky.
ENV already has 1/3rd penetration among US advisors.
Because of customer inertia, and switching costs due to process disruption, wealth management tech platform seems indeed very sticky.
ENV already has 1/3rd penetration among US advisors.
7/10 As investors shift from active to passive, there is downward pricing pressure on ENV's topline.
This negative impact gets somewhat negated through higher margin in passive vs active strategies.
This negative impact gets somewhat negated through higher margin in passive vs active strategies.
8/10 While ENV generated $436 mn CFO in aggregate in last 5 years, it spent $886 mn on acquisitions during the same period.
As a result, ENV has become more levered i.e. 3.0x net debt to adjusted EBITDA.
As a result, ENV has become more levered i.e. 3.0x net debt to adjusted EBITDA.
9/10 Of course, the real leverage can prove to be higher if the adjustments are overstated.
Just see the differences among reported and adjusted margin numbers. Not inspiring for sure.
Just see the differences among reported and adjusted margin numbers. Not inspiring for sure.
10/10 Overall, there are just too many uncertainties and wide range of possible outcomes for me to be interested.
Bull case/DMs welcome.
Bull case/DMs welcome.
