Envestnet executives mum on Yodlee sale, despite revenue pressure

The impact of Visa’s Plaid acquisition for $5.3 billion continues to fuel speculation about the future of data aggregator Yodlee, which Envestnet acquired in 2015 for $590 million.

At issue is whether Envestnet is exploring options for Yodlee, including a possible sale. This is further to reports Yodlee is a drag on Envestnet’s overall revenue, rumors potential buyers could include Mastercard, PayPal and Ant Financial, and that the company has hired a financial adviser as it explores strategic alternatives for Yodlee. According to a report from Piper Sandler reviewed by Bank Innovation, revenue for Envestnet’s data and analytics segment, which encompasses Yodlee, grew only 1% year over year.

In a fourth-quarter earnings call last week, Envestnet executives acknowledged pressure on Yodlee’s revenue, driven by competition in the investment management analytics business, the impact of the U.K.’s open banking changes and the shift from professional services to integrated offerings for financial institution clients.

Despite these headwinds, Envestnet executives highlighted growth opportunities for the Yodlee data aggregation business, bolstered by agreements with financial institutions, including JPMorgan Chase, and a “full pipeline of similar agreements” that will launch in the future.

See also: Visa’s Plaid acquisition spurs speculation about Yodlee’s fate

Despite the upside potential for Yodlee from agreements with institutions, analysts continued to press Envestnet executives on the call about the potential for Yodlee’s sale, a possibility JPMorgan analyst Will Cuddy called the “elephant in the room.” Executives responded that the company “does not comment on rumors or speculation,” and highlighted the value of “owning the data,” and the potential for partnerships, including a recent tie-up with Equifax.

“Envestnet is executing and we see tremendous opportunities to continue investing in our business, both on wealth and also in data,” said interim CEO Bill Crager. “As an industry leader with about $1 billion in revenue today, we have a long runway for growth and value creation, value for our customers, value for our employees, and value for our shareholders.”

Recent analyst research suggests a sale would accomplish a number of strategic objectives. A post-earnings report from investment bank William Blair reviewed by Bank Innovation suggests the rationale for a Yodlee sale by Envestnet could include a desire to pursue Visa’s competitors, along with private equity buyers, in the aftermath of Visa’s Plaid acquisition; a response to the enhanced regulatory scrutiny of Yodlee’s business; and a desire to raise cash and focus on the company’s wealth business.

There are enough hints to make strategic alternatives for Yodlee, or the whole business, feel likely, William Blair concluded in its report.

Speculation that Envestnet could explore a possible Yodlee sale first surfaced in January in a report from Raymond James analysts, who claimed that a shift from Envestnet being the owner of Yodlee to a client of Yodlee would result in “minimal disruption” to Envestnet’s financial adviser client base.

Envestnet last week reported that 2019 fourth-quarter total revenues increased 14% to $239.9 million, compared with $210.1 million for the fourth quarter of 2018.

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