| 09 December 2009

Financial Engines announced today that it has filed a form S-1 with the SEC, signaling its intentions to go public. Goldman Sachs (GS), UBS Investment Bank (UBS), Piper Jaffray & Co. and Cowen and Company are expected to be the underwriters for the offering.

The Palo Alto-based company made a splash with individual investors in 1996 when it launched automated advice services developed by co-founder and Nobel Prize-winning economist Bill Sharpe. The company tried, unsuccessfully, to sell monthly subscriptions to anyone willing to push a button for the advice.

But they successfully reinvented themselves into a provider of services to employers and retirement plan providers. In 2004 they created Financial Engines Advisers in an effort to capture and manage assets directly. The firm recently announced it reached $25 billion in assets under management.

As always, the S-1 filings give us a chance to dig in to their performance and what drives the comany. According to the filing, the company generated revenues, through September 30 this year, of $58.8 million. This is 13% better than the $52.3 million they produced during the same period in 2008. Roughly 60% of their revenue was generated through "Professional Management" fees while the balance was generated through the automated advice platform.

But did they make any money, you wonder? Well, they did report net income through Sep 2009 of $1.7 million. But for each of the prior years going back to 2006 the company reported losses. In fact, the company reported a $6 million loss in 2008. So how much In the bank today? Roughly $15 million in cash. Not including the hoards they hope to raise with the offering.

As of September Financial Engines boasted a total of 765 plan sponsors as customers, representing approximately 7.6 million plan participants. Just over 340 plan sponsors (44%) subscribe to the full suite of their services, representing approximately 3.7 million participants. It is within that subgroup that Financial Engines offers their professional management services. As of September 30 of this year they had approximately $23.5 billion in AUM and managed about 383,000 accounts.

These are accounts that have entirely delegated their investment decision-making authority to Financial Engines. It's clear to us that the automated advice-offering services have morphed into a great way to generate interest in and lead flow to the asset management business, which we also suppose offers better margins, though we can't be sure.

While the amount of money expected to be raised as a result of the offering has not been set, the firm intends to use whatever funds it's able to roust up for the typical dalliances like paying down debt and "increase our visibility in the markets." In other words, Financial Engines ads coming soon to a screen near you.

There are also more than a few early funders who stand to (finally) benefit from this exit plan. Financial Engine's funding runs deep, deep, deep. They received over $100 million in funding going back to 1998 and 1999 from Thompson US, Charter Ventures, Foundation Capital, Financial Technology Ventures, Amerindo Investment Advisers, New Enterprise Associates, AIG, Chase, Chase H&Q, E*TRADE, Goldman Sachs, Intel, Merrill Lynch, State Street Global Advisors, Washington Mutual and Wells Fargo. Good things come to those who wait. We think.