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Envestnet Reports Third Quarter 2022 Financial Results

Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the three and nine months ended September 30, 2022.

 

 

Three months ended

 

 

 

Nine months ended

 

 

Key Financial Metrics

 

September 30,

 

%

 

September 30,

 

%

(in millions, except per share data)

 

 

2022

 

 

 

2021

 

 

Change

 

 

2022

 

 

 

2021

 

 

Change

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

306.7

 

 

$

303.1

 

 

1

%

 

$

946.9

 

 

$

866.9

 

 

9

%

Net income (loss)

 

$

(8.7

)

 

$

11.4

 

 

n/m

 

 

$

(47.6

)

 

$

18.0

 

 

n/m

 

Net income (loss) per diluted share attributable to Envestnet, Inc.

 

$

(0.13

)

 

$

0.21

 

 

n/m

 

 

$

(0.81

)

 

$

0.33

 

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues(1)

 

$

306.7

 

 

$

303.1

 

1

%

 

$

947.1

 

 

$

867.1

 

9

%

Adjusted EBITDA(1)

 

$

53.5

 

 

$

66.2

 

 

(19

)%

 

$

166.3

 

 

$

205.5

 

 

(19

)%

Adjusted net income(1)

 

$

29.5

 

 

$

39.9

 

 

(26

)%

 

$

92.6

 

 

$

125.3

 

 

(26

)%

Adjusted net income per diluted share(1)

 

$

0.45

 

 

$

0.61

 

 

(26

)%

 

$

1.41

 

 

$

1.92

 

 

(27

)%

n/m - not meaningful

“Envestnet continued to successfully execute our strategy while driving positive net flows and accounts growth during the third quarter. We also built on our position as a leader in the digital engagement marketplace through strategic announcements with Tata Consultancy Services (TCS) and FNZ. Our partnership with TCS provides increased scale while simultaneously reducing our expenses, and by partnering with FNZ we will create real-time account opening and funding, as well as automating key servicing and maintenance for the life cycle of the client/account. These collaborations will ultimately create additional revenue streams as we continue to focus on driving better outcomes for enterprises, advisors, and their clients,” said Bill Crager, Chief Executive Officer.

“Our continued execution, combined with the strategic actions we’ve taken, strongly position Envestnet for future success. We are delivering newly modernized technology and solutions that strengthen the Envestnet ecosystem, laying the foundation for accelerated revenue growth into the future,” concluded Mr. Crager.

Financial Results for the Third Quarter of 2022

Asset-based recurring revenues decreased 4% from the third quarter of 2021, and represented 58% of total revenues for the third quarter of 2022 compared to 61% for the third quarter of 2021. Subscription-based recurring revenues increased 9% from the third quarter of 2021, and represented 40% of total revenues for the third quarter of 2022, compared to 37% for the third quarter of 2021. Professional services and other non-recurring revenues increased 6% from the prior year period. Total revenues increased 1% to $306.7 million for the third quarter of 2022 from $303.1 million for the third quarter of 2021.

Total operating expenses for the third quarter of 2022 increased 7% to $307.7 million from $288.9 million in the prior year period. Cost of revenues increased to $110.1 million for the third quarter of 2022 from $109.8 million for the prior year period. Compensation and benefits increased 6% to $116.8 million for the third quarter of 2022 from $109.8 million for the prior year period. Compensation and benefits were 38% of total revenues for the third quarter of 2022, compared to 36% for the prior year period. General and administration expenses increased 20% to $47.4 million for the third quarter of 2022 from $39.4 million for the prior year period. General and administration expenses were 15% of total revenues for the third quarter of 2022, compared to 13% for the prior year period.

Loss from operations was $1.0 million for the third quarter of 2022 compared to income of $14.1 million for the third quarter of 2021. Net loss was $8.7 million for the third quarter of 2022 compared to net income of $11.4 million for the third quarter of 2021. Net loss per diluted share attributable to Envestnet, Inc. was $(0.13) for the third quarter of 2022 compared to net income per diluted share attributable to Envestnet, Inc. of $0.21 for the third quarter of 2021.

Adjusted revenues(1) for the third quarter of 2022 increased 1% to $306.7 million from $303.1 million for the prior year period. Adjusted EBITDA(1) for the third quarter of 2022 decreased 19% to $53.5 million from $66.2 million for the prior year period. Adjusted net income(1) decreased 26% for the third quarter of 2022 to $29.5 million from $39.9 million for the prior year period. Adjusted net income per diluted share(1) for the third quarter of 2022 decreased 26% to $0.45 from $0.61 in the third quarter of 2021.

Balance Sheet and Liquidity

As of September 30, 2022, Envestnet had $241.3 million in cash and cash equivalents and $862.5 million in outstanding debt. The outstanding debt as of September 30, 2022 included $345 million in convertible notes maturing in 2023 and $517.5 million in convertible notes maturing in 2025. Envestnet's $500 million revolving credit facility was undrawn as of September 30, 2022.

Outlook

Envestnet provided the following outlook for the fourth quarter and full year ending December 31, 2022. This outlook is based on the market value of assets under management or administration as of September 30, 2022. We caution that we cannot predict the market value of these assets on any future date. See “Cautionary Statement Regarding Forward-Looking Statements.”

In Millions, Except Adjusted EPS

 

4Q 2022

 

FY 2022

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

166.5

 

-

 

$

167.5

 

 

 

 

 

 

Subscription-based

 

 

122.5

 

-

 

 

123.0

 

 

 

 

 

 

Total recurring revenues

 

$

289.0

 

-

 

$

290.5

 

 

 

 

 

 

Professional services and other revenues

 

 

5.0

 

-

 

 

5.5

 

 

 

 

 

 

Total revenues

 

$

294.0

 

-

 

$

296.0

 

$

1,241.0

 

-

 

$

1,243.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based cost of revenues

 

$

96.0

 

-

 

$

96.5

 

 

 

 

 

 

Total cost of revenues

 

$

104.6

 

-

 

$

105.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 

65.6

 

 

 

 

 

65.5

 

 

Net income per diluted share

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues (1):

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

166.5

 

-

 

$

167.5

 

 

 

 

 

 

Subscription-based

 

 

122.5

 

-

 

 

123.0

 

 

 

 

 

 

Total recurring revenues

 

$

289.0

 

-

 

$

290.5

 

 

 

 

 

 

Professional services and other revenues

 

 

5.0

 

-

 

 

5.5

 

 

 

 

 

 

Total revenues

 

$

294.0

 

-

 

$

296.0

 

$

1,241.0

 

-

 

$

1,243.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

52.0

 

-

 

$

54.0

 

$

218.0

 

-

 

$

220.0

Adjusted net income per diluted share(1)

 

$

0.42

 

-

 

$

0.43

 

$

1.82

 

-

 

$

1.84

(a) Envestnet does not forecast net income and net income per diluted share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

Conference Call

Envestnet will host a conference call to discuss third quarter 2022 financial results today at 5:00 p.m. ET. The live webcast and accompanying presentation can be accessed from Envestnet’s investor relations website at http://investor.envestnet.com/. A replay of the webcast will be available on the investor relations website following the call.

About Envestnet

Envestnet, Inc. (NYSE: ENV) is transforming the way financial advice and wellness are delivered. Our mission is to empower advisors and financial service providers with innovative technology, solutions and intelligence to make financial wellness a reality for everyone. Nearly 106,000 advisors and approximately 6,900 companies including: 16 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.

For more information on Envestnet, please visit www.envestnet.com and follow us on Twitter @ENVintel.

(1) Non-GAAP Financial Measures

“Adjusted revenues” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. On January 1, 2022, the Company adopted ASU 2021-08 whereby it now accounts for contract assets and contract liabilities obtained upon a business combination in accordance with ASC 606. Prior to the adoption of ASU 2021-08, we recorded at fair value the acquired deferred revenue for contracts in effect at the time the entities were acquired. Consequently, revenue related to acquired entities for periods subsequent to the acquisition did not reflect the full amount of revenue that would have been recorded by these entities had they remained stand-alone entities. Adjusted revenues has limitations as a financial measure, should be considered as supplemental in nature and is not meant as a substitute for revenue prepared in accordance with GAAP.

“Adjusted EBITDA” represents net income (loss) before deferred revenue fair value adjustment, interest income, interest expense, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, accretion on contingent consideration and purchase liability, fair market value adjustment on contingent consideration liability, fair market value adjustment to investment in private company, litigation and regulatory related expenses, foreign currency, gain on settlement of liability, gain on insurance reimbursement, non-income tax expense adjustment, dilution gain on equity method investee share issuance, income or loss allocations from equity method investments and (income) loss attributable to non-controlling interest.

“Adjusted net income” represents net income before deferred revenue fair value adjustment, non-cash interest expense, cash interest on our convertible notes, non-cash compensation expense, restructuring charges and transaction costs, severance, accretion on contingent consideration and purchase liability, fair market value adjustment on contingent consideration liability, fair market value adjustment to investment in private company, amortization of acquired intangibles, litigation and regulatory related expenses, foreign currency, gain on settlement of liability, gain on insurance reimbursement, non-income tax expense adjustment, dilution gain on equity method investee share issuance, income or loss allocations from equity method investments and (income) loss attributable to non-controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income. The normalized tax rate is based solely on the estimated blended statutory income tax rates in the jurisdictions in which we operate. We monitor the normalized tax rate based on events or trends that could materially impact the rate, including tax legislation changes and changes in the geographic mix of our operations.

“Adjusted net income per diluted share” represents adjusted net income attributable to common stockholders divided by the diluted number of weighted-average shares outstanding.

See reconciliations of Non-GAAP Financial Measures on pages 10-16 of this press release. Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company’s Non-GAAP Financial Measures should not be viewed as a substitute for revenues, net income (loss) or net income (loss) per share determined in accordance with GAAP.

Cautionary Statement Regarding Forward-Looking Statements

The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.’s expected financial performance and outlook for the fourth quarter and full year of 2022, its strategic operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and the Company’s actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, a pandemic or health crisis, including the COVID-19 pandemic; changes and volatility in financial and capital markets, including as a result of the current conflict between Russia and Ukraine, which could result in changes in demand for our products or services or in the value of assets on which we earn revenue; the possibility that the anticipated benefits of any of our acquisitions will not be realized to the extent or when expected; difficulty in sustaining rapid revenue growth, which may place significant demands on our administrative, operational and financial resources; the concentration of nearly all of our revenues from the delivery of our solutions and services to clients in the financial services industry; our reliance on a limited number of clients for a material portion of our revenues; the renegotiation of fee percentages or termination of our services by our clients; our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; the impact of market and economic conditions on revenues; our inability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner; our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium financial applications; compliance failures; adverse judicial or regulatory proceedings against us; liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest; changes in laws and regulations, including tax laws and regulations; general economic, political and regulatory conditions; the impact of fluctuations in market conditions; and interest rates on the demand for our products and services and the value of assets under management or administration; the impact of market conditions on our ability to issue debt and equity; the impact of fluctuations in interest rates on our cost of borrowing and our financial performance; the results of our investments in research and development, our data center and other infrastructure; our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information; failure of our systems to work properly; our ability to realize operating efficiencies; the advantages of our solutions as compared to those of others; the failure to protect our intellectual property rights; our ability to establish and maintain intellectual property rights; our ability to retain and hire necessary employees and appropriately staff our operations, and management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in our filings with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at www.sec.gov or our Investor Relations website at http://investor.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of November 8, 2022 and, unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

September 30,

 

December 31,

 

 

 

2022

 

 

 

2021

 

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

241,330

 

 

$

429,279

 

Fees receivable, net

 

 

96,098

 

 

 

95,291

 

Prepaid expenses and other current assets

 

 

55,078

 

 

 

42,706

 

Total current assets

 

 

392,506

 

 

 

567,276

 

 

 

 

 

 

Property and equipment, net

 

 

60,061

 

 

 

50,215

 

Internally developed software, net

 

 

173,285

 

 

 

133,659

 

Intangible assets, net

 

 

398,082

 

 

 

400,396

 

Goodwill

 

 

996,267

 

 

 

925,154

 

Operating lease right-of-use-assets, net

 

 

83,472

 

 

 

90,714

 

Other non-current assets

 

 

99,548

 

 

 

73,768

 

Total assets

 

$

2,203,221

 

 

$

2,241,182

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accrued expenses and other liabilities

 

$

207,025

 

 

$

225,159

 

Accounts payable

 

 

19,447

 

 

 

19,092

 

Operating lease liabilities

 

 

12,133

 

 

 

10,999

 

Deferred revenue

 

 

34,082

 

 

 

33,473

 

Current portion of long-term debt

 

 

343,581

 

 

 

 

Total current liabilities

 

 

616,268

 

 

 

288,723

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

509,006

 

 

 

848,862

 

Non-current operating lease liabilities

 

 

109,749

 

 

 

105,920

 

Deferred tax liabilities, net

 

 

14,976

 

 

 

21,021

 

Other non-current liabilities

 

 

12,938

 

 

17,114

Total liabilities

 

 

1,262,937

 

 

 

1,281,640

 

 

 

 

 

 

Equity:

 

 

 

 

Total stockholders’ equity

 

 

940,758

 

 

 

957,089

 

Non-controlling interest

 

 

(474

)

 

 

2,453

 

Total liabilities and equity

 

$

2,203,221

 

 

$

2,241,182

 

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

177,131

 

 

$

184,008

 

 

$

571,820

 

 

$

513,458

 

Subscription-based

 

 

123,747

 

 

 

113,572

 

 

 

356,601

 

 

 

335,905

 

Total recurring revenues

 

 

300,878

 

 

 

297,580

 

 

 

928,421

 

 

 

849,363

 

Professional services and other revenues

 

 

5,817

 

 

 

5,473

 

 

 

18,489

 

 

 

17,533

 

Total revenues

 

 

306,695

 

 

 

303,053

 

 

 

946,910

 

 

 

866,896

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues

 

 

110,108

 

 

 

109,836

 

 

 

361,872

 

 

 

303,199

 

Compensation and benefits

 

 

116,837

 

 

 

109,839

 

 

 

369,453

 

 

 

316,101

 

General and administration

 

 

47,388

 

 

 

39,393

 

 

 

157,867

 

 

 

117,463

 

Depreciation and amortization

 

 

33,408

 

 

 

29,850

 

 

 

97,208

 

 

 

88,252

 

Total operating expenses

 

 

307,741

 

 

 

288,918

 

 

 

986,400

 

 

 

825,015

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(1,046

)

 

 

14,135

 

 

 

(39,490

)

 

 

41,881

 

Other expense, net

 

 

(5,346

)

 

 

(3,551

)

 

 

(9,691

)

 

 

(14,803

)

Income (loss) before income tax provision (benefit)

 

 

(6,392

)

 

 

10,584

 

 

 

(49,181

)

 

 

27,078

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

2,271

 

 

 

(854

)

 

 

(1,542

)

 

 

9,074

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(8,663

)

 

 

11,438

 

 

 

(47,639

)

 

 

18,004

 

Add: Net loss attributable to non-controlling interest

 

 

1,373

 

 

 

302

 

 

 

3,205

 

 

 

401

 

Net income (loss) attributable to Envestnet, Inc.

 

$

(7,290

)

 

$

11,740

 

 

$

(44,434

)

 

$

18,405

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to Envestnet, Inc.:

 

 

 

 

 

 

 

 

Basic

 

$

(0.13

)

 

$

0.22

 

 

$

(0.81

)

 

$

0.34

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

(0.13

)

 

$

0.21

 

 

$

(0.81

)

 

$

0.33

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

55,226,777

 

 

 

54,547,858

 

 

 

55,109,387

 

 

 

54,400,247

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

55,226,777

 

 

 

55,388,627

 

 

 

55,109,387

 

 

 

55,287,972

 

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

2022

 

 

 

2021

 

OPERATING ACTIVITIES:

 

 

 

 

Net income (loss)

 

$

(47,639

)

 

$

18,004

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

97,208

 

 

 

88,252

 

Provision for doubtful accounts

 

 

(468

)

 

 

2,051

 

Deferred income taxes

 

 

(4,380

)

 

 

7,078

 

Release of uncertain tax positions

 

 

(3,095

)

 

 

 

Non-cash compensation expense

 

 

62,583

 

 

 

50,307

 

Non-cash interest expense

 

 

5,436

 

 

 

4,889

 

Accretion on contingent consideration and purchase liability

 

 

 

 

 

656

 

Payments of contingent consideration

 

 

 

 

 

(2,360

)

Fair market value adjustment to contingent consideration liability

 

 

 

 

 

(1,067

)

Fair market value adjustment to investment in private company

 

 

 

 

 

(758

)

Gain on settlement of liability

 

 

 

 

 

(1,206

)

Loss allocations from equity method investments

 

 

5,332

 

 

 

5,553

 

Dilution gain on equity method investee share issuance

 

 

(6,934

)

 

 

 

Lease related impairments, including right of use assets

 

 

14,050

 

 

 

1,537

 

Loss on property and equipment disposals - office closures

 

 

3,710

 

 

 

 

Other

 

 

319

 

 

 

249

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Fees receivable, net

 

 

1,546

 

 

 

(38,030

)

Prepaid expenses and other current assets

 

 

(8,610

)

 

 

569

 

Other non-current assets

 

 

(3,914

)

 

 

4,854

 

Accrued expenses and other liabilities

 

 

(23,168

)

 

 

26,637

 

Accounts payable

 

 

(867

)

 

 

4,122

 

Deferred revenue

 

 

(2,329

)

 

 

(1,065

)

Other non-current liabilities

 

 

(2,545

)

 

 

(298

)

Net cash provided by operating activities

 

 

86,235

 

 

 

169,974

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchases of property and equipment

 

 

(13,114

)

 

 

(15,779

)

Capitalization of internally developed software

 

 

(67,755

)

 

 

(49,024

)

Acquisition of proprietary technology

 

 

(15,000

)

 

 

(25,517

)

Acquisitions of businesses, net of cash acquired

 

 

(104,185

)

 

 

(32,794

)

Investments in private companies

 

 

(16,351

)

 

 

(8,926

)

Advance for technology solutions

 

 

(4,000

)

 

 

(3,000

)

Issuance of notes receivable to equity method investees

 

 

(6,350

)

 

 

 

Net cash used in investing activities

 

 

(226,755

)

 

 

(135,040

)

-continued-

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

2022

 

 

 

2021

 

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from exercise of stock options

 

 

2,559

 

 

 

920

 

Capital contributions - non-controlling shareholders

 

 

 

 

 

3,201

 

Taxes paid in lieu of shares issued for stock-based compensation

 

 

(20,613

)

 

 

(17,314

)

Finance lease payments

 

 

(14,544

)

 

 

 

Share repurchases

 

 

(9,235

)

 

 

(2,097

)

Revolving credit facility issuance costs

 

 

(1,872

)

 

 

 

Payments of contingent consideration

 

 

(750

)

 

 

(9,200

)

Other

 

 

5

 

 

 

(666

)

Net cash used in financing activities

 

 

(44,450

)

 

 

(25,156

)

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

 

(3,128

)

 

 

(544

)

 

 

 

 

 

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(188,098

)

 

 

9,234

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

 

429,428

 

 

 

384,714

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (a)

 

$

241,330

 

 

$

393,948

 

(a) The following table reconciles amounts from the condensed consolidated balance sheets to cash, cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows:

 

 

September 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

Cash and cash equivalents

 

$

241,330

 

 

$

393,799

 

Restricted cash included in prepaid expenses and other current assets

 

 

 

 

149

Total cash, cash equivalents and restricted cash

 

$

241,330

 

 

$

393,948

 

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Total revenues

 

$

306,695

 

 

$

303,053

 

 

$

946,910

 

 

$

866,896

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

67

 

 

 

162

 

 

 

227

 

Adjusted revenues

 

$

306,749

 

 

$

303,120

 

 

$

947,072

 

 

$

867,123

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(8,663

)

 

$

11,438

 

 

$

(47,639

)

 

$

18,004

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

67

 

 

 

162

 

 

 

227

 

Interest income (b)

 

 

(1,239

)

 

 

(202

)

 

 

(2,273

)

 

 

(569

)

Interest expense (b)

 

 

4,242

 

 

 

4,242

 

 

 

13,307

 

 

 

12,682

 

Income tax provision (benefit)

 

 

2,271

 

 

��

(854

)

 

 

(1,542

)

 

 

9,074

 

Depreciation and amortization

 

 

33,408

 

 

 

29,850

 

 

 

97,208

 

 

 

88,252

 

Non-cash compensation expense (d)

 

 

17,265

 

 

 

18,885

 

 

 

62,583

 

 

 

50,307

 

Restructuring charges and transaction costs (e)

 

 

3,895

 

 

 

3,403

 

 

 

27,267

 

 

 

11,215

 

Severance (d)

 

 

1,125

 

 

 

207

 

 

 

11,379

 

 

 

10,498

 

Accretion on contingent consideration and purchase

liability (c)

 

 

 

 

 

81

 

 

 

 

 

 

656

 

Fair market value adjustment on contingent consideration liability (c)

 

 

 

 

 

(927

)

 

 

 

 

 

(1,067

)

Fair market value adjustment to investment in private company (b)

 

 

 

 

 

 

 

 

 

 

 

(758

)

Non-recurring litigation and regulatory related expenses (c)

 

 

(2,050

)

 

 

1,512

 

 

 

5,333

 

 

 

5,159

 

Foreign currency (b)

 

 

308

 

 

 

97

 

 

 

613

 

 

 

110

 

Gain on settlement of liability (b)

 

 

 

 

 

(1,206

)

 

 

 

 

 

(1,206

)

Gain on insurance reimbursement (b)

 

 

 

 

 

(968

)

 

 

 

 

 

(968

)

Non-income tax expense adjustment (c)

 

 

(325

)

 

 

(831

)

 

 

(112

)

 

 

(1,102

)

Dilution gain on equity method investee share issuance (b)

 

 

 

 

 

 

 

 

(6,934

)

 

 

 

Loss allocations from equity method investments (b)

 

 

2,387

 

 

 

1,508

 

 

 

5,332

 

 

 

5,553

 

(Income) loss attributable to non-controlling interest

 

 

820

 

 

 

(114

)

 

 

1,637

 

 

 

(554

)

Adjusted EBITDA

 

$

53,498

 

 

$

66,188

 

 

$

166,321

 

 

$

205,513

 

(a)

 

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

 

Included within other expense, net in the condensed consolidated statements of operations.

(c)

 

Included within general and administration expenses in the condensed consolidated statements of operations.

(d)

 

Included within compensation and benefits in the condensed consolidated statements of operations.

(e)

 

For the three months ended September 30, 2022 and 2021, $4.1 million and $1.5 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $0.2 million and $1.9 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $27.5 million and $6.0 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $0.2 million and $5.2 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, respectively, in the condensed consolidated statements of operations.

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income (loss)

 

$

(8,663

)

 

$

11,438

 

 

$

(47,639

)

 

$

18,004

 

Income tax provision (benefit) (a)

 

 

2,271

 

 

 

(854

)

 

 

(1,542

)

 

 

9,074

 

Income (loss) before income tax provision (benefit)

 

 

(6,392

)

 

 

10,584

 

 

 

(49,181

)

 

 

27,078

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (b)

 

 

54

 

 

 

67

 

 

 

162

 

 

 

227

 

Non-cash interest expense (d)

 

 

1,443

 

 

 

1,443

 

 

 

4,917

 

 

 

4,295

 

Cash interest - Convertible Notes (d)

 

 

2,479

 

 

 

2,479

 

 

 

7,439

 

 

 

7,439

 

Non-cash compensation expense (e)

 

 

17,265

 

 

 

18,885

 

 

 

62,583

 

 

 

50,307

 

Restructuring charges and transaction costs (g)

 

 

3,895

 

 

 

3,403

 

 

 

27,267

 

 

 

11,215

 

Severance (e)

 

 

1,125

 

 

 

207

 

 

 

11,379

 

 

 

10,498

 

Accretion on contingent consideration and purchase

liability (c)

 

 

 

 

 

81

 

 

 

 

 

 

656

 

Fair market value adjustment on contingent consideration liability (c)

 

 

 

 

 

(927

)

 

 

 

 

 

(1,067

)

Fair market value adjustment to investment in private company (d)

 

 

 

 

 

 

 

 

 

 

 

(758

)

Amortization of acquired intangibles (f)

 

 

18,649

 

 

 

17,390

 

 

 

53,814

 

 

 

51,370

 

Non-recurring litigation and regulatory related expenses (c)

 

 

(2,050

)

 

 

1,512

 

 

 

5,333

 

 

 

5,159

 

Foreign currency (d)

 

 

308

 

 

 

97

 

 

 

613

 

 

 

110

 

Gain on settlement of liability (d)

 

 

 

 

 

(1,206

)

 

 

 

 

 

(1,206

)

Gain on insurance reimbursement (d)

 

 

 

 

 

(968

)

 

 

 

 

 

(968

)

Non-income tax expense adjustment (c)

 

 

(325

)

 

 

(831

)

 

 

(112

)

 

 

(1,102

)

Dilution gain on equity method investee share issuance (d)

 

 

 

 

 

 

 

 

(6,934

)

 

 

 

Loss allocations from equity method investments (d)

 

 

2,387

 

 

 

1,508

 

 

 

5,332

 

 

 

5,553

 

(Income) loss attributable to non-controlling interest

 

 

820

 

 

 

(114

)

 

 

1,637

 

 

 

(554

)

Adjusted net income before income tax effect

 

 

39,658

 

 

 

53,610

 

 

 

124,249

 

 

 

168,252

 

Income tax effect (h)

 

 

(10,112

)

 

 

(13,670

)

 

 

(31,683

)

 

 

(42,904

)

Adjusted net income

 

$

29,546

 

 

$

39,940

 

 

$

92,566

 

 

$

125,348

 

 

 

 

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

 

55,226,777

 

 

 

54,547,858

 

 

 

55,109,387

 

 

 

54,400,247

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

Options to purchase common stock

 

 

74,559

 

 

 

201,103

 

 

 

123,267

 

 

 

207,281

 

Unvested restricted stock units

 

 

208,367

 

 

 

570,515

 

 

 

378,061

 

 

 

614,005

 

Convertible notes

 

 

9,898,549

 

 

 

9,898,549

 

 

 

9,898,549

 

 

 

9,898,549

 

Warrants

 

 

 

 

 

69,151

 

 

 

 

 

 

66,439

 

Diluted number of weighted-average shares outstanding

 

 

65,408,252

 

 

 

65,287,176

 

 

 

65,509,264

 

 

 

65,186,521

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share - diluted

 

$

0.45

 

 

$

0.61

 

 

$

1.41

 

 

$

1.92

 

(a)

 

For the three months ended September 30, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled (35.5)% and (8.1)%, respectively. For the nine months ended September 30, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled 3.1% and 33.5%, respectively.

(b)

 

Included within subscription-based revenues in the condensed consolidated statements of operations.

(c)

 

Included within general and administration expenses in the condensed consolidated statements of operations.

(d)

 

Included within other expense, net in the condensed consolidated statements of operations.

(e)

 

Included within compensation and benefits in the condensed consolidated statements of operations.

(f)

 

Included within depreciation and amortization in the condensed consolidated statements of operations.

(g)

 

For the three months ended September 30, 2022 and 2021, $4.1 million and $1.5 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $0.2 million and $1.9 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $27.5 million and $6.0 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $0.2 million and $5.2 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, respectively, in the condensed consolidated statements of operations.

(h)

 

An estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income for the three and nine months ended September 30, 2022 and 2021.

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 

 

 

Three Months Ended September 30, 2022

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

257,335

 

 

$

49,360

 

 

$

 

 

$

306,695

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

 

 

 

 

 

 

54

 

Adjusted revenues

 

$

257,389

 

 

$

49,360

 

 

$

 

 

$

306,749

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

177,131

 

 

$

 

 

$

 

 

$

177,131

 

Subscription-based

 

 

75,975

 

 

 

47,772

 

 

 

 

 

 

123,747

 

Total recurring revenues

 

 

253,106

 

 

 

47,772

 

 

 

 

 

 

300,878

 

Professional services and other revenues

 

 

4,229

 

 

 

1,588

 

 

 

 

 

 

5,817

 

Total revenues

 

 

257,335

 

 

 

49,360

 

 

 

 

 

 

306,695

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

102,409

 

 

 

 

 

 

 

 

 

102,409

 

Subscription-based

 

 

1,308

 

 

 

6,460

 

 

 

 

 

 

7,768

 

Professional services and other

 

 

(99

)

 

 

30

 

 

 

 

 

 

(69

)

Total cost of revenues

 

 

103,618

 

 

 

6,490

 

 

 

 

 

 

110,108

 

Compensation and benefits

 

 

77,010

 

 

 

26,174

 

 

 

13,653

 

 

 

116,837

 

General and administration

 

 

31,463

 

 

 

7,851

 

 

 

8,074

 

 

 

47,388

 

Depreciation and amortization

 

 

24,637

 

 

 

8,771

 

 

 

 

 

 

33,408

 

Total operating expenses

 

$

236,728

 

 

$

49,286

 

 

$

21,727

 

 

$

307,741

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

20,607

 

 

$

74

 

 

$

(21,727

)

 

$

(1,046

)

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

 

 

 

 

 

 

54

 

Depreciation and amortization

 

 

24,637

 

 

 

8,771

 

 

 

 

 

 

33,408

 

Non-cash compensation expense (c)

 

 

11,235

 

 

 

2,991

 

 

 

3,039

 

 

 

17,265

 

Restructuring charges and transaction costs (d)

 

 

928

 

 

 

1,264

 

 

 

1,703

 

 

 

3,895

 

Severance (c)

 

 

686

 

 

 

281

 

 

 

158

 

 

 

1,125

 

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

 

(2,050

)

 

 

 

 

 

(2,050

)

Non-income tax expense adjustment (b)

 

 

(343

)

 

 

18

 

 

 

 

 

 

(325

)

Loss attributable to non-controlling interest

 

 

820

 

 

 

 

 

 

 

 

 

820

 

Other (e)

 

 

352

 

 

 

 

 

 

 

 

 

352

 

Adjusted EBITDA

 

$

58,976

 

 

$

11,349

 

 

$

(16,827

)

 

$

53,498

 

(a)

 

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

 

Included within general and administration expenses in the condensed consolidated statements of operations.

(c)

 

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

 

For the three months ended September 30, 2022, $4.1 million was included within general and administration expenses, $0.2 million was included within compensation and benefits expenses, and $(0.4) million was included in other expense, net, in the condensed consolidated statements of operations.

(e)

 

For the three months ended September 30, 2022, $0.4 million was included within other expense, net, in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30, 2022

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

802,903

 

 

$

144,007

 

 

$

 

 

$

946,910

 

Deferred revenue fair value adjustment (a)

 

 

162

 

 

 

 

 

 

 

 

 

162

 

Adjusted revenues

 

$

803,065

 

 

$

144,007

 

 

$

 

 

$

947,072

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

571,820

 

 

$

 

 

$

 

 

$

571,820

 

Subscription-based

 

 

218,080

 

 

 

138,521

 

 

 

 

 

 

356,601

 

Total recurring revenues

 

 

789,900

 

 

 

138,521

 

 

 

 

 

 

928,421

 

Professional services and other revenues

 

 

13,003

 

 

 

5,486

 

 

 

 

 

 

18,489

 

Total revenues

 

 

802,903

 

 

 

144,007

 

 

 

 

 

 

946,910

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

332,138

 

 

 

 

 

 

 

 

 

332,138

 

Subscription-based

 

 

4,177

 

 

 

18,643

 

 

 

 

 

 

22,820

 

Professional services and other

 

 

6,833

 

 

 

81

 

 

 

 

 

 

6,914

 

Total cost of revenues

 

 

343,148

 

 

 

18,724

 

 

 

 

 

 

361,872

 

Compensation and benefits

 

 

234,413

 

 

 

80,334

 

 

 

54,706

 

 

 

369,453

 

General and administration

 

 

103,824

 

 

 

28,633

 

 

 

25,410

 

 

 

157,867

 

Depreciation and amortization

 

 

71,674

 

 

 

25,534

 

 

 

 

 

 

97,208

 

Total operating expenses

 

$

753,059

 

 

$

153,225

 

 

$

80,116

 

 

$

986,400

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

49,844

 

 

$

(9,218

)

 

$

(80,116

)

 

$

(39,490

)

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

162

 

 

 

 

 

 

 

 

 

162

 

Depreciation and amortization

 

 

71,674

 

 

 

25,534

 

 

 

 

 

 

97,208

 

Non-cash compensation expense (c)

 

 

35,889

 

 

 

8,378

 

 

 

18,316

 

 

 

62,583

 

Restructuring charges and transaction costs (d)

 

 

18,109

 

 

 

2,014

 

 

 

7,144

 

 

 

27,267

 

Severance (c)

 

 

4,909

 

 

 

1,492

 

 

 

4,978

 

 

 

11,379

 

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

 

5,333

 

 

 

 

 

 

5,333

 

Non-income tax expense adjustment (b)

 

 

(52

)

 

 

(60

)

 

 

 

 

 

(112

)

Loss attributable to non-controlling interest

 

 

1,637

 

 

 

 

 

 

 

 

 

1,637

 

Other (e)

 

 

352

 

 

 

2

 

 

 

 

 

 

354

 

Adjusted EBITDA

 

$

182,524

 

 

$

33,475

 

 

$

(49,678

)

 

$

166,321

 

(a)

 

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

 

Included within general and administration expenses in the condensed consolidated statements of operations.

(c)

 

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

 

For the nine months ended September 30, 2022, $27.5 million was included within general and administration expenses, $0.2 million was included within compensation and benefits expenses and $(0.4) million was included in other expense, net in the condensed consolidated statements of operations.

(e)

 

For the nine months ended September 30, 2022, $0.4 million was included within other expense, net, in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

 

 

 

Three Months Ended September 30, 2021

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

254,734

 

 

$

48,319

 

 

$

 

 

$

303,053

 

Deferred revenue fair value adjustment (a)

 

 

67

 

 

 

 

 

 

 

 

 

67

 

Adjusted revenues

 

$

254,801

 

 

$

48,319

 

 

$

 

 

$

303,120

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

184,008

 

 

$

 

 

$

 

 

$

184,008

 

Subscription-based

 

 

66,988

 

 

 

46,584

 

 

 

 

 

 

113,572

 

Total recurring revenues

 

 

250,996

 

 

 

46,584

 

 

 

 

 

 

297,580

 

Professional services and other revenues

 

 

3,738

 

 

 

1,735

 

 

 

 

 

 

5,473

 

Total revenues

 

 

254,734

 

 

 

48,319

 

 

 

 

 

 

303,053

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

102,298

 

 

 

 

 

 

 

 

 

102,298

 

Subscription-based

 

 

1,271

 

 

 

6,084

 

 

 

 

 

 

7,355

 

Professional services and other

 

 

173

 

 

 

10

 

 

 

 

 

 

183

 

Total cost of revenues

 

 

103,742

 

 

 

6,094

 

 

 

 

 

 

109,836

 

Compensation and benefits

 

 

67,592

 

 

 

26,468

 

 

 

15,779

 

 

 

109,839

 

General and administration

 

 

26,086

 

 

 

7,570

 

 

 

5,737

 

 

 

39,393

 

Depreciation and amortization

 

 

22,928

 

 

 

6,922

 

 

 

 

 

 

29,850

 

Total operating expenses

 

$

220,348

 

 

$

47,054

 

 

$

21,516

 

 

$

288,918

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

34,386

 

 

$

1,265

 

 

$

(21,516

)

 

$

14,135

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

67

 

 

 

 

 

 

 

 

 

67

 

Depreciation and amortization

 

 

22,928

 

 

 

6,922

 

 

 

 

 

 

29,850

 

Non-cash compensation expense (c)

 

 

9,661

 

 

 

3,667

 

 

 

5,557

 

 

 

18,885

 

Restructuring charges and transaction costs (d)

 

 

2,863

 

 

 

(55

)

 

 

595

 

 

 

3,403

 

Severance (c)

 

 

(49

)

 

 

227

 

 

 

29

 

 

 

207

 

Accretion on contingent consideration and purchase liability (b)

 

 

62

 

 

 

19

 

 

 

 

 

 

81

 

Fair market value adjustment on contingent consideration liability (b)

 

 

 

 

 

(927

)

 

 

 

 

 

(927

)

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

 

1,512

 

 

 

 

 

 

1,512

 

Non-income tax expense adjustment (b)

 

 

(905

)

 

 

74

 

 

 

 

 

 

(831

)

Income attributable to non-controlling interest

 

 

(114

)

 

 

 

 

 

 

 

 

(114

)

Other

 

 

(63

)

 

 

(9

)

 

 

(8

)

 

 

(80

)

Adjusted EBITDA

 

$

68,836

 

 

$

12,695

 

 

$

(15,343

)

 

$

66,188

 

(a)

 

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

 

Included within general and administration expenses in the condensed consolidated statements of operations.

(c)

 

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

 

For the three months ended September 30, 2021, $1.5 million was included within general and administration expenses and $1.9 million was included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

 

 

 

Nine Months Ended September 30, 2021

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

721,441

 

 

$

145,455

 

 

$

 

 

$

866,896

 

Deferred revenue fair value adjustment (a)

 

 

227

 

 

 

 

 

 

 

 

 

227

 

Adjusted revenues

 

$

721,668

 

 

$

145,455

 

 

$

 

 

$

867,123

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

513,458

 

 

$

 

 

$

 

 

$

513,458

 

Subscription-based

 

 

197,663

 

 

 

138,242

 

 

 

 

 

 

335,905

 

Total recurring revenues

 

 

711,121

 

 

 

138,242

 

 

 

 

 

 

849,363

 

Professional services and other revenues

 

 

10,320

 

 

 

7,213

 

 

 

 

 

 

17,533

 

Total revenues

 

 

721,441

 

 

 

145,455

 

 

 

 

 

 

866,896

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

281,829

 

 

 

 

 

 

 

 

 

281,829

 

Subscription-based

 

 

3,778

 

 

 

17,208

 

 

 

 

 

 

20,986

 

Professional services and other

 

 

280

 

 

 

104

 

 

 

 

 

 

384

 

Total cost of revenues

 

 

285,887

 

 

 

17,312

 

 

 

 

 

 

303,199

 

Compensation and benefits

 

 

195,560

 

 

 

77,765

 

 

 

42,776

 

 

 

316,101

 

General and administration

 

 

71,669

 

 

 

25,513

 

 

 

20,281

 

 

 

117,463

 

Depreciation and amortization

 

 

67,283

 

 

 

20,969

 

 

 

 

 

 

88,252

 

Total operating expenses

 

$

620,399

 

 

$

141,559

 

 

$

63,057

 

 

$

825,015

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

101,042

 

 

$

3,896

 

 

$

(63,057

)

 

$

41,881

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

227

 

 

 

 

 

 

 

 

 

227

 

Depreciation and amortization

 

 

67,283

 

 

 

20,969

 

 

 

 

 

 

88,252

 

Non-cash compensation expense (c)

 

 

27,080

 

 

 

9,691

 

 

 

13,536

 

 

 

50,307

 

Restructuring charges and transaction costs (d)

 

 

8,049

 

 

 

119

 

 

 

3,047

 

 

 

11,215

 

Severance (c)

 

 

4,134

 

 

 

3,634

 

 

 

2,730

 

 

 

10,498

 

Accretion on contingent consideration and purchase liability (b)

 

 

572

 

 

 

84

 

 

 

 

 

 

656

 

Fair market value adjustment on contingent consideration liability (b)

 

 

 

 

 

(1,067

)

 

 

 

 

 

(1,067

)

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

 

5,159

 

 

 

 

 

 

5,159

 

Non-income tax expense adjustment (b)

 

 

(1,335

)

 

 

233

 

 

 

 

 

 

(1,102

)

Income attributable to non-controlling interest

 

 

(554

)

 

 

 

 

 

 

 

 

(554

)

Other

 

 

41

 

 

 

 

 

 

 

 

 

41

 

Adjusted EBITDA

 

$

206,539

 

 

$

42,718

 

 

$

(43,744

)

 

$

205,513

 

(a)

 

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

 

Included within general and administration expenses in the condensed consolidated statements of operations.

(c)

 

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

 

For the nine months ended September 30, 2021, $6.0 million was included within general and administration expenses and $5.2 million was included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

 

 

 

As of

 

 

September 30,

 

December 31,

 

March 31,

 

June 30,

 

September 30,

 

 

2021

 

2021

 

2022(1)

 

2022

 

2022

 

 

(in millions, except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

Assets under Management (“AUM”)

 

$

327,279

 

$

362,038

 

$

361,251

 

$

325,209

 

$

315,883

Assets under Administration (“AUA”)

 

 

431,040

 

 

456,316

 

 

432,141

 

 

352,840

 

 

350,576

Total AUM/A

 

 

758,319

 

 

818,354

 

 

793,392

 

 

678,049

 

 

666,459

Subscription

 

 

4,670,827

 

 

4,901,662

 

 

4,736,537

 

 

4,312,114

 

 

4,134,414

Total Platform Assets

 

$

5,429,146

 

$

5,720,016

 

$

5,529,929

 

$

4,990,163

 

$

4,800,873

Platform Accounts

 

 

 

 

 

 

 

 

 

 

AUM

 

 

1,276,066

 

 

1,345,274

 

 

1,459,093

 

 

1,491,861

 

 

1,522,968

AUA

 

 

1,193,069

 

 

1,217,076

 

 

1,186,180

 

 

1,061,484

 

 

1,135,302

Total AUM/A

 

 

2,469,135

 

 

2,562,350

 

 

2,645,273

 

 

2,553,345

 

 

2,658,270

Subscription

 

 

14,810,664

 

 

14,986,531

 

 

15,151,569

 

 

15,312,144

 

 

15,596,403

Total Platform Accounts

 

 

17,279,799

 

 

17,548,881

 

 

17,796,842

 

 

17,865,489

 

 

18,254,673

Advisors

 

 

 

 

 

 

 

 

 

 

AUM/A

 

 

41,696

 

 

39,735

 

 

39,800

 

 

38,394

 

 

38,417

Subscription

 

 

66,489

 

 

68,808

 

 

67,168

 

 

66,838

 

 

67,348

Total Advisors

 

 

108,185

 

 

108,543

 

 

106,968

 

 

105,232

 

 

105,765

(1) Certain assets and accounts have been reclassified from AUA to AUM to better reflect the nature of the services provided to certain customers.

The following table summarizes the changes in AUM and AUA for the three months ended September 30, 2022:

 

 

6/30/2022

 

Gross

Sales

 

Redemptions

 

Net

Flows

 

Market Impact

 

Reclass to Subscription

 

9/30/2022

 

 

(in millions, except account data)

AUM

 

$

325,209

 

 

$

24,912

 

 

$

(15,971

)

 

$

8,941

 

 

$

(17,762

)

 

$

(505

)

 

$

315,883

 

AUA

 

 

352,840

 

 

37,880

 

 

(19,986

)

 

 

17,894

 

(17,544

)

 

 

(2,614

)

 

 

350,576

Total AUM/A

 

$

678,049

 

 

$

62,792

 

 

$

(35,957

)

 

$

26,835

 

 

$

(35,306

)

 

$

(3,119

)

 

$

666,459

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

 

2,553,345

 

 

 

 

 

 

 

114,147

 

 

 

 

 

(9,222

)

 

 

2,658,270

 

The above AUM/A gross sales figures include $23.6 billion in new client conversions. The Company onboarded an additional $35.8 billion in subscription conversions during the three months ended September 30, 2022, bringing total conversions for the quarter to $59.4 billion.

Asset and account figures in the “Reclass to Subscription” columns for the three months ended September 30, 2022 represent enterprise customers whose billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, with no impact on total platform assets or accounts.

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