Wealthfront hits record revenue but swings to heavy loss

Wealthfront reported record annual revenue of USD $365.0 million for the fiscal year and a 17% increase in total platform assets to USD $94.1 billion, as it expanded its product line and absorbed a large, IPO-related stock-based compensation charge.

Fourth-quarter revenue rose 16% year on year to USD $96.1 million. The group posted a GAAP diluted net loss of USD $134.8 million for the quarter, versus GAAP diluted net income of USD $32.1 million a year earlier.

For the full year, Wealthfront reported a GAAP diluted net loss of USD $43.2 million, compared with GAAP diluted net income of USD $181.8 million in the prior year. The swing reflected higher GAAP expenses, driven mainly by stock-based compensation tied to the flotation.

GAAP expenses for the quarter jumped to USD $310.7 million from USD $51.8 million a year earlier, including a one-time, IPO-related stock-based compensation charge of USD $239.0 million. For the year, GAAP expenses totalled USD $476.2 million, up from USD $187.4 million.

Adjusted EBITDA increased 22% in the quarter to USD $44.2 million and rose 20% for the year to USD $170.7 million. The adjusted EBITDA margin was 46% in the quarter and 47% for the year. Wealthfront expects adjusted EBITDA margins to decline sequentially but remain above 40% in the first quarter of fiscal 2027.

Operating cash flow in the quarter rose to USD $33.3 million from USD $19.9 million. Free cash flow increased to USD $33.0 million from USD $19.0 million. For the year, operating cash flow was USD $152.2 million and free cash flow was USD $151.1 million.

Cash and cash equivalents ended the period at USD $440.8 million, up from USD $142.9 million at the end of the prior year. Total assets were USD $1.42 billion, and total liabilities were USD $801.0 million, according to the company's unaudited balance sheet.

Assets growth

Total platform assets reached USD $94.1 billion at quarter end, up from USD $80.2 billion a year earlier. Investment advisory assets rose 29% to USD $48.7 billion, while cash management assets increased 7% to USD $45.4 billion.

In the fourth quarter, platform net deposits were negative USD $360 million, compared with net deposits of USD $2.67 billion in the prior-year quarter. For the full year, net deposits totalled USD $6.66 billion, down from USD $17.71 billion.

Funded clients rose 17% year on year to 1.42 million, while funded accounts increased 16% to 1.84 million.

Wealthfront also reported a second consecutive record quarter of net cross-account transfers from cash management to investment advisory, which it attributed to a "Cash-to-Invest transition environment".

Product changes

Wealthfront raised the base annual percentage yield on its cash account by five basis points to 3.30%, after the effective federal funds rate stabilised at a higher level within its target range.

It also added features to the cash account, including transaction search, real-time debit card notifications for individual and joint accounts, and higher daily withdrawal limits of up to USD $1 million for qualified clients.

In lending, Wealthfront launched early access to Wealthfront Home Lending and began a measured rollout. The initial release started in Colorado and expanded to Texas and California. A full rollout in those states, along with early access in additional states, is expected later in the year.

The company also rolled out the Wealthfront Treasury Money Market Fund (WLTXX). The fund invests primarily in US Treasury securities and carries a 0.25% expense ratio. Wealthfront said it is intended as a cash management option, with interest generally exempt from state and local taxes. It was released to select clients in December, with a full rollout scheduled to be completed in March.

Capital actions

The board authorised a USD $100 million share repurchase programme in March. 

CEO, President & Director David Fortunato linked the quarter's asset growth to shifts within the platform.

"We capped off a milestone year in the fourth quarter as we went public and drove another quarter-end record in Total Platform Assets due in large part to a second consecutive record quarter in net cross account transfers from Cash Management to Investment Advisory," Fortunato said.

CFO & Treasurer Alan Imberman highlighted cash generation and early fiscal 2027 deposit trends.

"Fiscal 2027 is off to a strong start with total net deposit growth in February amidst a dynamic macro-environment," Imberman said.