Financial Engines Reports Fourth Quarter And Full Year 2012 Financial Results

Our investment advisory and management services are provided through our subsidiary, Financial Engines Advisors L.L.C., a federally registered investment adviser. 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.

Financial Tables
FINANCIAL ENGINES, INC. AND SUBSIDIARIES   Unaudited Consolidated Balance Sheets
				December 31,
				2011					2012
Assets				(In thousands, except per share data)
Current assets:
Cash and cash equivalents				$	145,002				$	181,231
Accounts receivable, net of allowances of $67 in 2011 and $102 in 2012					30,495					44,627
Prepaid expenses					3,008					3,093
Deferred tax assets					13,155					15,293
Other current assets					3,498					3,647
Total current assets					195,158					247,891
Property and equipment, net					3,926					13,366
Internal use software, net					10,723					10,339
Long-term deferred tax assets					31,424					20,639
Direct response advertising, net					8,851					10,236
Other assets					4,361					4,362
Total assets				$	254,443				$	306,833
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable				$	9,740				$	15,008
Accrued compensation					13,262					12,279
Deferred revenue					9,691					7,831
Other current liabilities					124					260
Total current liabilities					32,817					35,378
Long-term deferred revenue					1,533					1,166
Long-term deferred rent					459					6,653
Other liabilities					74					250
Total liabilities					34,883					43,447
Contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value - 10,000
authorized as of December 31, 2011 and 2012;
None issued or outstanding as of December 31, 2011 and 2012					-					-
Common stock, $0.0001 par value - 500,000
authorized as of December 31, 2011 and 2012;
45,784 and 47,915 shares issued and outstanding
at December 31, 2011 and 2012, respectively					5					5
Additional paid-in capital					298,196					323,448
Accumulated deficit					(78,641	)				(60,067	)
Total stockholders’ equity					219,560					263,386
Total liabilities and stockholders’ equity				$	254,443				$	306,833

FINANCIAL ENGINES, INC. AND SUBSIDIARIES Unaudited Consolidated Statements of Income
					Three Months Ended									Year Ended
					December 31,									December 31,
					2011				2012					2011				2012
					(In thousands, except per share data)
Revenue:
Professional management					$	31,509			$	43,233				$	108,215			$	150,872
Platform						8,833				7,609					32,891				32,373
Other						532				537					2,979				2,577
Total revenue						40,874				51,379					144,085				185,822
Costs and expenses:
Cost of revenue (exclusive of amortization of internal use software)						12,906				18,602					49,717				70,025
Research and development						5,538				6,767					21,182				25,483
Sales and marketing						8,398				10,046					30,710				39,206
General and administrative						3,663				4,266					13,518				15,537
Amortization of internal use software						1,647				1,565					5,923				6,125
Total costs and expenses						32,152				41,246					121,050				156,376
Income from operations						8,722				10,133					23,035				29,446
Interest income						8				4					10				3
Other income						-				100					-				100
Income before income taxes						8,730				10,237					23,045				29,549
Income tax expense						2,958				3,776					7,900				10,975
Net and comprehensive income						5,772				6,461					15,145				18,574
Net income per share attributable
to holders of common stock
Basic					$	0.13			$	0.14				$	0.34			$	0.40
Diluted					$	0.12			$	0.13				$	0.31			$	0.37
Shares used to compute net income per share
attributable to holders of common stock
Basic						45,596				47,552					44,783				46,741
Diluted						49,550				50,761					49,407				50,211

FINANCIAL ENGINES, INC. AND SUBSIDIARIES Unaudited Consolidated Statements of Cash Flows
				2010					2011					2012
				(In thousands)
Cash flows from operating activities:
Net income				$	63,575				$	15,145				$	18,574
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization					1,816					2,191					3,084
Amortization of internal use software					3,703					5,577					5,726
Stock-based compensation					7,659					5,823					10,372
Amortization of deferred sales commissions					1,155					1,423					1,932
Amortization and impairment of direct response advertising					1,185					2,734					5,149
Provision for doubtful accounts					191					152					311
Loss on fixed asset disposal					7					-					20
Excess tax benefit associated with stock-based compensation					(456	)				(1,023	)				(1,962	)
Changes in operating assets and liabilities:
Accounts receivable					(6,158	)				(6,704	)				(14,444	)
Prepaid expenses					(842	)				(206	)				(85	)
Deferred tax assets					(51,144	)				6,566					8,648
Direct response advertising					(4,330	)				(6,953	)				(6,515	)
Other assets					(2,665	)				(3,026	)				(2,631	)
Accounts payable					1,319					3,333					6,844
Accrued compensation					6,506					(2,345	)				(983	)
Deferred revenue					110					2,274					(2,228	)
Deferred rent					(26	)				167					6,270
Other liabilities					(25	)				35					4
Net cash provided by operating activities					21,580					25,163					38,086
Cash flows from investing activities:
Purchase of property and equipment					(2,361	)				(2,922	)				(11,903	)
Capitalization of internal use software					(5,860	)				(5,224	)				(5,389	)
Restricted cash					(950	)				(360	)				550
Net cash used in investing activities					(9,171	)				(8,506	)				(16,742	)
Cash flows from financing activities:
Payments on term loan payable					(8,056	)				-					-
Payments on capital lease obligations					(2	)				-					(22	)
Net share settlements for stock-based awards minimum tax withholdings					(921	)				(1,718	)				(699	)
Excess tax benefit associated with stock-based compensation					456					1,023					1,962
Proceeds from issuance of common stock, net of offering costs					90,338					14,103					13,644
Net cash provided by financing activities					81,815					13,408					14,885
Net increase in cash and cash equivalents					94,224					30,065					36,229
Cash and cash equivalents, beginning of year					20,713					114,937					145,002
Cash and cash equivalents, end of year				$	114,937				$	145,002				$	181,231
Supplemental cash flows information:
Income taxes paid, net of refunds				$	1,154				$	(194	)			$	194
Interest paid				$	184				$	6				$	12
Non-cash operating, investing and financing activities:
Stock dividend				$	5,480				$	-				$	-
Purchase of property and equipment under capital lease				$	-				$	-				$	255
Capitalized stock-based compensation for internal use software				$	439				$	293				$	353
Capitalized stock-based compensation for direct response advertising				$	60				$	44				$	64

FINANCIAL ENGINES, INC. AND SUBSIDIARIES

Reconciliation of GAAP to Non-GAAP Operating Results

The table below sets forth a reconciliation of net income to non-GAAP Adjusted EBITDA based on our historical results:

				Three Months Ended December 31,									Year Ended December 31,
Non-GAAP Adjusted EBITDA				2011				2012					2011				2012
				(In thousands, unaudited)
Net income				$	5,772			$	6,461				$	15,145			$	18,574
Interest expense (income)					(8	)			(4	)				(10	)			(3	)
Income tax expense					2,958				3,776					7,900				10,975
Depreciation					583				1,009					2,191				3,084
Amortization of internal use software					1,550				1,463					5,577				5,726
Amortization and impairment of direct response advertising					865				1,454					2,734				5,149
Amortization of deferred sales commissions					417				468					1,423				1,932
Stock-based compensation					1,901				2,872					5,823				10,372
Non-GAAP Adjusted EBITDA				$	14,038			$	17,499				$	40,783			$	55,809

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:

				Three Months Ended December 31,								Year Ended December 31,
Non-GAAP Adjusted Net Income				2011				2012				2011				2012
				(In thousands, except per share data, unaudited)
Net income				$	5,772			$	6,461			$	15,145			$	18,574
Stock-based compensation, net of tax (1)					1,175				1,775				3,598				6,410
Income tax benefit from release of valuation allowance					(160	)			-				(160	)			-
Non-GAAP Adjusted Net Income				$	6,787			$	8,236			$	18,583			$	24,984
Non-GAAP Adjusted Earnings Per Share				$	0.14			$	0.16			$	0.38			$	0.50
Shares of common stock outstanding					45,596				47,552				44,820				46,741
Dilutive restricted stock and stock options					3,954				3,209				4,587				3,470
Non-GAAP adjusted common shares outstanding					49,550				50,761				49,407				50,211

(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.

__________________________

i Please see “About Non-GAAP Financial Measures” for definitions of the terms Adjusted Net Income, Adjusted Earnings Per Share, and Adjusted EBITDA.

ii Operating metrics include both advised and subadvised relationships.

iii 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, 2011 and the Form 10-K to be filed for the year ended December 31, 201

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