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,
2020.
Three months ended
Nine months ended
Key Financial Metrics
September 30,
%
September 30,
%
(in millions except per share
data)
2020
2019
Change
2020
2019
Change
GAAP:
Total revenues
$
252.6
$
236.1
7
%
$
734.4
$
660.2
11
%
Net income (loss)
$
2.3
$
(3.0
)
n/m
$
(10.3
)
$
(20.6
)
(50
)%
Net income (loss) per diluted share
attributable to Envestnet, Inc.
$
0.03
$
(0.06
)
n/m
$
(0.19
)
$
(0.40
)
(53
)%
Non-GAAP:
Adjusted revenues(1)
$
252.7
$
239.3
6
%
$
735.0
$
666.9
10
%
Adjusted net revenues(1)
$
181.5
$
175.0
4
%
$
533.4
$
488.4
9
%
Adjusted EBITDA(1)
$
67.6
$
54.5
24
%
$
178.0
$
131.8
35
%
Adjusted net income(1)
$
40.2
$
32.4
24
%
$
103.2
$
76.3
35
%
Adjusted net income per diluted
share(1)
$
0.72
$
0.60
20
%
$
1.88
$
1.46
29
%
n/m - not meaningful
"During the third quarter Envestnet again delivered strong
financial results, managing through these uncertain days, while
supporting our clients and executing on our strategic plan," said
Bill Crager, Chief Executive Officer.
"Our mission is to make financial wellness a reality for
everyone. We are building the ecosystem that enables a new standard
for personal financial services," concluded Mr. Crager.
Financial Results for the Third Quarter of 2020
Asset-based recurring revenues increased 9% from the third
quarter of 2019, and represented 55% of total revenues for the
third quarter of 2020 compared to 54% for the third quarter 2019.
Subscription-based recurring revenues increased 7% from the third
quarter of 2019, and represented 43% of total revenues for the
third quarter of 2020, consistent with the third quarter of 2019.
Professional services and other non-recurring revenues decreased
22% from the prior year period. Total revenues increased 7% to
$252.6 million for the third quarter of 2020 from $236.1 million
for the third quarter of 2019.
Total operating expenses for the third quarter of 2020 increased
2% to $240.9 million from $236.2 million in the prior year period.
Cost of revenues increased 9% to $78.5 million for the third
quarter of 2020 from $71.9 million for the prior year period.
Compensation and benefits decreased 1% to $94.4 million for the
third quarter of 2020 from $95.6 million for the prior year period.
Compensation and benefits were 37% of total revenues for the third
quarter of 2020, compared to 40% in the prior year period. General
and administration expenses decreased 7% to $39.0 million for the
third quarter of 2020 from $42.0 million for the prior year period.
General and administrative expenses were 15% of total revenues for
the third quarter of 2020, compared to 18% in the prior year
period.
Income from operations was $11.7 million for the third quarter
of 2020 compared to loss of $0.1 million for the third quarter of
2019. Net income was $2.3 million for the third quarter of 2020
compared to net loss of $3.0 million for the third quarter of 2019.
Net income per diluted share attributable to Envestnet, Inc. was
$0.03 for the third quarter of 2020 compared to net loss per
diluted share attributable to Envestnet, Inc. of $0.06 for the
third quarter of 2019.
Adjusted revenues(1) for the third quarter of 2020 increased 6%
to $252.7 million from $239.3 million for the prior year period.
Adjusted net revenues(1) for the third quarter of 2020 increased 4%
to $181.5 million from $175.0 million for the prior year period.
Adjusted EBITDA(1) for the third quarter of 2020 increased 24% to
$67.6 million from $54.5 million for the prior year period.
Adjusted net income(1) increased 24% for the third quarter of 2020
to $40.2 million from $32.4 million for the prior year period.
Adjusted net income per diluted share(1) for the third quarter of
2020 increased 20% to $0.72 from $0.60 in the third quarter of
2019.
Balance Sheet and Liquidity
As of September 30, 2020, the Company had $362.9 million in cash
and cash equivalents and $862.5 million in outstanding debt. The
outstanding debt as of September 30, 2020 included $345 million in
convertible notes maturing in 2023 and $517.5 million in
convertible notes maturing in 2025. The Company's $500 million
revolving credit facility was undrawn as of September 30, 2020.
Outlook
The Company provided the following outlook for the fourth
quarter and full year ending December 31, 2020. This outlook is
based on the market value of assets on September 30, 2020. We
caution that we cannot predict the market value of our assets on
any future date and, in particular, in light of recent market
volatility. See “Cautionary Statement Regarding Forward-Looking
Statements.”
In Millions Except Adjusted EPS
4Q 2020
FY 2020
GAAP:
Revenues:
Asset-based
$
141.5
-
$
142.5
Subscription-based
108.0
-
108.5
Total recurring revenues
$
249.5
-
$
251.0
Professional services and other
revenues
6.0
-
6.5
Total revenues
$
255.5
-
$
257.5
$
989.8
-
$
991.8
Asset-based cost of revenues
$
74.0
-
$
74.5
$
275.6
-
$
276.1
Total cost of revenues
$
81.5
-
$
82.0
Net income
(a)
-
(a)
(a)
-
(a)
Diluted shares outstanding
55.5
55.0
Net income per diluted share
(a)
-
(a)
(a)
-
(a)
Non-GAAP:
Adjusted revenues (1):
Asset-based
$
141.5
-
$
142.5
Subscription-based
108.0
-
108.5
Total recurring revenues
$
249.5
-
$
251.0
Professional services and other
revenues
6.0
-
6.5
Total revenues
$
255.5
-
$
257.5
$
990.5
-
$
992.5
Adjusted net revenues (1)
$
181.0
-
$
183.5
$
714.4
-
$
716.9
Adjusted EBITDA(1)
$
60.0
-
$
61.0
$
238.0
-
$
239.0
Adjusted net income per diluted
share(1)
$
0.64
$
2.51
-
$
2.53
(a) The Company 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
2020 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://ir.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. Over 105,000 advisors and more than 5,100
companies including: 17 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 the
Envestnet platform to grow their business and client
relationships.
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. Under GAAP, we
record 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 does not reflect the full amount of revenue that would
have been recorded by these entities had they remained stand-alone
entities.
“Adjusted net revenues” represents adjusted revenues less
asset-based cost of revenues. Under GAAP, we are required to
recognize as revenue certain fees paid to investment managers and
other third parties needed for implementation of investment
solutions included in our assets under management. Those fees also
are required to be recorded as cost of revenues. This non-GAAP
metric presents adjusted revenues without such fees included, as
they have no impact on our profitability.
Adjusted revenues and Adjusted net revenues have limitations as
financial measures, should be considered as supplemental in nature
and are not meant as a substitute for revenue prepared in
accordance with GAAP.
“Adjusted EBITDA” represents net income before deferred revenue
fair value adjustment, interest income, interest expense, accretion
on contingent consideration and purchase liability, income tax
provision (benefit), depreciation and amortization, non-cash
compensation expense, restructuring charges and transaction costs,
severance, fair market value adjustment on contingent consideration
liability, litigation and regulatory related expenses, foreign
currency, non-income tax expense adjustment, gain on acquisition of
equity method investment, loss allocation from equity method
investments and (income) loss attributable to non-controlling
interest.
“Adjusted net income” represents net income before deferred
revenue fair value adjustment, accretion on contingent
consideration and purchase liability, non-cash interest expense,
non-cash compensation expense, restructuring charges and
transaction costs, severance, fair market value adjustment on
contingent consideration liability, amortization of acquired
intangibles, litigation and regulatory related expenses, foreign
currency, non-income tax expense adjustment, gain on acquisition of
equity method investment, loss allocation 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 or net income 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 2020, 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, and its impact on financial institutions, the global
economy or capital markets, as well as our products, clients,
vendors and employees, and our results of operations, the full
extent of which is currently unknown; changes and volatility in
financial and capital markets, 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 conditions, political
and regulatory conditions, the impact of fluctuations in market
condition 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, 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://ir.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 5, 2020 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,
2020
2019
Assets
Current assets:
Cash and cash equivalents
$
362,918
$
82,505
Fees receivable, net
76,328
67,815
Prepaid expenses and other current
assets
41,966
32,183
Total current assets
481,212
182,503
Property and equipment, net
48,983
53,756
Internally developed software, net
87,478
60,263
Intangible assets, net
452,583
505,589
Goodwill
906,697
879,850
Operating lease right-of-use-assets,
net
76,090
82,796
Other non-current assets
48,218
37,127
Total assets
$
2,101,261
$
1,801,884
Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities
$
141,290
$
137,944
Accounts payable
29,609
17,277
Operating lease liabilities
13,835
13,816
Contingent consideration
1,549
—
Deferred revenue
40,037
34,753
Total current liabilities
226,320
203,790
Convertible Notes
749,918
305,513
Revolving credit facility
—
260,000
Contingent consideration
11,741
9,045
Deferred revenue
2,307
5,754
Non-current operating lease
liabilities
83,820
88,365
Deferred tax liabilities, net
36,088
29,481
Other non-current liabilities
37,700
32,360
Total liabilities
1,147,894
934,308
Equity:
Total stockholders’ equity
954,673
869,094
Non-controlling interest
(1,306
)
(1,518
)
Total liabilities and equity
$
2,101,261
$
1,801,884
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,
2020
2019
2020
2019
Revenues:
Asset-based
$
137,744
$
126,591
$
394,801
$
355,595
Subscription-based
107,897
100,583
317,427
275,928
Total recurring revenues
245,641
227,174
712,228
631,523
Professional services and other
revenues
6,918
8,906
22,183
28,668
Total revenues
252,559
236,080
734,411
660,191
Operating expenses:
Cost of revenues
78,545
71,870
222,327
205,595
Compensation and benefits
94,428
95,587
300,423
285,590
General and administration
38,979
42,016
118,537
124,961
Depreciation and amortization
28,951
26,735
85,077
73,167
Total operating expenses
240,903
236,208
726,364
689,313
Income (loss) from operations
11,656
(128
)
8,047
(29,122
)
Other expense, net
(8,836
)
(9,813
)
(18,546
)
(23,088
)
Income (loss) before income tax provision
(benefit)
2,820
(9,941
)
(10,499
)
(52,210
)
Income tax provision (benefit)
497
(6,977
)
(161
)
(31,591
)
Net income (loss)
2,323
(2,964
)
(10,338
)
(20,619
)
Add: Net (income) loss attributable to
non-controlling interest
(413
)
(116
)
(12
)
247
Net income (loss) attributable to
Envestnet, Inc.
$
1,910
$
(3,080
)
$
(10,350
)
$
(20,372
)
Net income (loss) per share attributable
to Envestnet, Inc.:
Basic
$
0.04
$
(0.06
)
$
(0.19
)
$
(0.40
)
Diluted
$
0.03
$
(0.06
)
$
(0.19
)
$
(0.40
)
Weighted average common shares
outstanding:
Basic
53,800,048
52,215,469
53,464,101
50,414,427
Diluted
55,558,983
52,215,469
53,464,101
50,414,427
Envestnet, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2020
2019
OPERATING ACTIVITIES:
Net loss
$
(10,338
)
$
(20,619
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
85,077
73,167
Provision for doubtful accounts
2,323
1,243
Deferred income taxes
79
(37,626
)
Non-cash compensation expense
45,721
43,167
Non-cash interest expense
12,255
17,195
Accretion on contingent consideration and
purchase liability
1,308
1,240
Payments of contingent consideration
—
(578
)
Fair market value adjustment to contingent
consideration liability
(2,056
)
—
Gain on acquisition of equity method
investment
(4,230
)
—
Loss allocation from equity method
investment
4,280
1,507
Impairment of right of use assets
1,426
—
Other
556
—
Changes in operating assets and
liabilities, net of acquisitions:
Fees receivables, net
(10,825
)
6,164
Prepaid expenses and other current
assets
(11,139
)
(4,784
)
Other non-current assets
(1,807
)
(6,113
)
Accrued expenses and other liabilities
3,393
(9,732
)
Accounts payable
12,084
(6,859
)
Deferred revenue
1,488
1,231
Other non-current liabilities
2,084
3,242
Net cash provided by operating
activities
131,679
61,845
INVESTING ACTIVITIES:
Purchases of property and equipment
(8,824
)
(16,098
)
Capitalization of internally developed
software
(40,257
)
(23,649
)
Investments in private companies
(13,875
)
(3,200
)
Acquisitions of businesses, net of cash
acquired
(20,257
)
(321,571
)
Net cash used in investing activities
(83,213
)
(364,518
)
Envestnet, Inc.
Condensed Consolidated
Statements of Cash Flows (continued)
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2020
2019
FINANCING ACTIVITIES:
Proceeds from issuance of Convertible
Notes due 2025
517,500
—
Convertible Notes due 2025 issuance
costs
(14,540
)
—
Proceeds from borrowings on revolving
credit facility
45,000
175,000
Payments on revolving credit facility
(305,000
)
(75,000
)
Revolving credit facility issuance
costs
—
(2,103
)
Payments of deferred consideration on past
acquisitions
(1,879
)
—
Payments of contingent consideration
—
(171
)
Proceeds from exercise of stock
options
8,053
7,029
Taxes paid in lieu of shares issued for
stock-based compensation
(16,283
)
(19,697
)
Issuance of restricted stock units
3
4
Net cash provided by financing
activities
232,854
85,062
EFFECT OF EXCHANGE RATE CHANGES ON
CASH
(1,009
)
(178
)
INCREASE (DECREASE) IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH
280,311
(217,789
)
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, BEGINNING OF PERIOD
82,755
289,671
CASH, CASH EQUIVALENTS AND RESTRICTED
CASH, END OF PERIOD (a)
$
363,066
$
71,882
(a) The following table provides a reconciliation of cash, cash
equivalents and restricted cash to amounts reported within the
Condensed Consolidated Balance Sheets:
September 30,
September 30,
2020
2019
Cash and cash equivalents
$
362,918
$
71,632
Restricted cash included in prepaid
expenses and other current assets
—
82
Restricted cash included in other
non-current assets
148
168
Total cash, cash equivalents and
restricted cash
$
363,066
$
71,882
Reconciliation of Non-GAAP
Financial Measures
(in thousands)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2020
2019
2020
2019
Total revenues
$
252,559
$
236,080
$
734,411
$
660,191
Deferred revenue fair value adjustment
(a)
91
3,250
607
6,670
Adjusted revenues
252,650
239,330
735,018
666,861
Asset-based cost of revenues
(71,133
)
(64,339
)
(201,600
)
(178,474
)
Adjusted net revenues
$
181,517
$
174,991
$
533,418
$
488,387
Net income (loss)
$
2,323
$
(2,964
)
$
(10,338
)
$
(20,619
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
91
3,250
607
6,670
Interest income (b)
(262
)
(448
)
(850
)
(2,859
)
Interest expense (b)
8,139
8,986
21,907
24,345
Accretion on contingent consideration and
purchase liability (c)
398
498
1,308
1,240
Income tax provision (benefit)
497
(6,977
)
(161
)
(31,591
)
Depreciation and amortization
28,951
26,735
85,077
73,167
Non-cash compensation expense (d)
15,852
15,389
43,197
43,241
Restructuring charges and transaction
costs (e)
4,993
4,151
14,461
24,725
Severance (f)
2,715
2,387
18,566
8,147
Fair market value adjustment on contingent
consideration liability (c)
(74
)
—
(2,056
)
—
Non-recurring litigation and regulatory
related expenses (c)
1,809
2,065
6,029
2,065
Foreign currency (b)
(37
)
363
(68
)
208
Non-income tax expense adjustment (c)
1,795
362
1,341
1,480
Non-recurring gain (b)
—
—
(4,230
)
—
Loss allocation from equity method
investments (b)
994
957
4,280
1,507
(Income) loss attributable to
non-controlling interest
(603
)
(210
)
(1,103
)
31
Adjusted EBITDA
$
67,581
$
54,544
$
177,967
$
131,757
(a)
For the three months ended
September 30, 2020 and 2019, $91 and $3,249 were included within
subscription-based revenues, respectively, in the condensed
consolidated statements of operations. For the nine months ended
September 30, 2020 and 2019, $605 and $6,664 were included within
subscription-based revenues, respectively, in the condensed
consolidated statements of operations. The remaining amounts for
all periods were included within professional services and other
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
administrative expenses in the condensed consolidated statements of
operations.
(d)
For the three months ended
September 30, 2020, the entire amount was included in compensation
and benefits in the condensed consolidated statements of
operations. For the nine months ended September 30, 2020, $45,721
was included in compensation and benefits and a fair value
adjustment of $(2,524) included in other expense, net, in the
condensed consolidated statements of operations. All of 2019
included in compensation and benefits in the condensed consolidated
statements of operations.
(e)
For the three months ended
September 30, 2020 and 2019, $3,992 and $3,240 were included within
general and administrative expenses, respectively, in the condensed
consolidated statements of operations. For the three months ended
September 30, 2020 and 2019, $969 and $911 were included within
compensation and benefits, respectively, in the condensed
consolidated statements of operations. For the nine months ended
September 30, 2020 and 2019 , $11,485 and $14,071 were included
within general and administrative expenses, respectively, in the
condensed consolidated statements of operations. For the nine
months ended September 30, 2020 and 2019, $2,764 and $10,654 were
included within compensation and benefits, respectively, in the
condensed consolidated statements of operations. The remaining
amounts for the 2020 periods were included within other expense,
net in the condensed consolidated statements of operations.
(f)
Included within compensation and
benefits 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,
2020
2019
2020
2019
Net income (loss)
$
2,323
$
(2,964
)
$
(10,338
)
$
(20,619
)
Income tax provision (benefit) (a)
497
(6,977
)
(161
)
(31,591
)
Loss before income tax provision
(benefit)
2,820
(9,941
)
(10,499
)
(52,210
)
Add (deduct):
Deferred revenue fair value adjustment
(b)
91
3,250
607
6,670
Accretion on contingent consideration and
purchase liability (d)
398
498
1,308
1,240
Non-cash interest expense (c)
4,738
5,006
10,682
14,268
Non-cash compensation expense (f)
15,852
15,389
43,197
43,241
Restructuring charges and transaction
costs (e)
4,993
4,151
14,461
24,725
Severance (g)
2,715
2,387
18,566
8,147
Fair market value adjustment on contingent
consideration liability (d)
(74
)
—
(2,056
)
—
Amortization of acquired intangibles
(h)
18,510
19,242
56,014
51,048
Non-recurring litigation and regulatory
related expenses (d)
1,809
2,065
6,029
2,065
Foreign currency (c)
(37
)
363
(68
)
208
Non-income tax expense adjustment (d)
1,795
362
1,341
1,480
Non-recurring gain (c)
—
—
(4,230
)
—
Loss allocation from equity method
investments (c)
994
957
4,280
1,507
(Income) loss attributable to
non-controlling interest
(603
)
(210
)
(1,103
)
31
Adjusted net income before income tax
effect
54,001
43,519
138,529
102,420
Income tax effect (i)
(13,772
)
(11,097
)
(35,325
)
(26,117
)
Adjusted net income
$
40,229
$
32,422
$
103,204
$
76,303
Basic number of weighted-average shares
outstanding
53,800,048
52,215,469
53,464,101
50,414,427
Effect of dilutive shares:
Options to purchase common stock
331,728
953,184
458,232
1,107,995
Unvested restricted stock units
610,442
548,057
548,858
662,364
Convertible notes
730,267
9,875
280,375
11,637
Warrants
86,498
—
46,562
—
Diluted number of weighted-average shares
outstanding
55,558,983
53,726,585
54,798,128
52,196,423
Adjusted net income per share -
diluted
$
0.72
$
0.60
$
1.88
$
1.46
(a)
For the three months ended
September 30, 2020 and 2019, the effective tax rate computed in
accordance with GAAP equaled 17.6% and 70.2%, respectively. For the
nine months ended September 30, 2020 and 2019, the effective tax
rate computed in accordance with GAAP equaled 1.5% and 60.5%,
respectively.
(b)
For the three months ended
September 30, 2020 and 2019, $91 and $3,249 were included within
subscription-based revenues, respectively, in the condensed
consolidated statements of operations. For the nine months ended
September 30, 2020 and 2019, $605 and $6,664 were included within
subscription-based revenues, respectively, in the condensed
consolidated statements of operations. The remaining amounts for
all periods were included within professional services and other
revenues in the condensed consolidated statements of
operations.
(c)
Included within other expense,
net in the condensed consolidated statements of operations.
(d)
Included within general and
administrative expenses in the condensed consolidated statements of
operations.
(e)
For the three months ended
September 30, 2020 and 2019, $3,992 and $3,240 were included within
general and administrative expenses, respectively, in the condensed
consolidated statements of operations. For the three months ended
September 30, 2020 and 2019, $969 and $911 were included within
compensation and benefits, respectively, in the condensed
consolidated statements of operations. For the nine months ended
September 30, 2020 and 2019, $11,485 and $14,071 were included
within general and administrative expenses, respectively, in the
condensed consolidated statements of operations. For the nine
months ended September 30, 2020 and 2019, $2,764 and $10,654 were
included within compensation and benefits, respectively, in the
condensed consolidated statements of operations. The remaining
amounts for the 2020 periods were included within other expense,
net in the condensed consolidated statements of operations.
(f)
For the three months ended
September 30, 2020, $15,852 included in compensation and benefits
in the condensed consolidated statements of operations. For the
nine months ended September 30, 2020, $45,721 included in
compensation and benefits and a fair value adjustment of $(2,524)
included in other expense, net, in the condensed consolidated
statements of operations. All of 2019 included in compensation and
benefits in the condensed consolidated statements of
operations.
(g)
Included within compensation and
benefits in the condensed consolidated statements of
operations.
(h)
Included within depreciation and
amortization in the condensed consolidated statements of
operations.
(i)
An estimated normalized effective
tax rate of 25.5% have been used to compute adjusted net income for
the three and nine months ended September 30, 2020 and 2019.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(in thousands)
(unaudited)
Three months ended September
30, 2020
Envestnet
Wealth Solutions
Envestnet Data
& Analytics
Nonsegment
Total
Total Revenues
$
204,294
$
48,265
$
—
$
252,559
Deferred revenue fair value adjustment
(a)
91
—
—
91
Adjusted revenues
204,385
48,265
—
252,650
Less: Asset-based cost of revenues
(71,133
)
—
—
(71,133
)
Adjusted net revenues
$
133,252
$
48,265
$
—
$
181,517
Revenues:
Asset-based
$
137,744
$
—
$
—
$
137,744
Subscription-based
62,783
45,114
—
107,897
Total recurring revenues
200,527
45,114
—
245,641
Professional services and other
revenues
3,767
3,151
—
6,918
Total revenues
204,294
48,265
—
252,559
Operating expenses:
Cost of revenues:
Asset-based
71,133
—
—
71,133
Subscription-based
1,272
6,019
—
7,291
Professional services and other
30
91
—
121
Total cost of revenues
72,435
6,110
—
78,545
Compensation and benefits
59,522
26,540
8,366
94,428
General and administration
22,248
8,308
8,423
38,979
Depreciation and amortization
20,406
8,545
—
28,951
Total operating expenses
$
174,611
$
49,503
$
16,789
$
240,903
Income (loss) from operations
$
29,683
$
(1,238
)
$
(16,789
)
$
11,656
Add:
Deferred revenue fair value adjustment
(a)
91
—
—
91
Accretion on contingent consideration and
purchase liability (b)
341
57
—
398
Depreciation and amortization
20,406
8,545
—
28,951
Non-cash compensation expense (c)
8,685
4,458
2,709
15,852
Restructuring charges and transaction
costs (d)
944
33
4,016
4,993
Non-income tax expense adjustment (b)
1,860
(65
)
—
1,795
Severance (c)
2,154
495
66
2,715
Fair market value adjustment on contingent
consideration liability (b)
—
(74
)
—
(74
)
Non-recurring litigation and regulatory
related expenses (b)
—
1,809
—
1,809
Income attributable to non-controlling
interest
(603
)
—
—
(603
)
Other
(2
)
—
—
(2
)
Adjusted EBITDA
$
63,559
$
14,020
$
(9,998
)
$
67,581
(a)
Included within
subscription-based revenues in the condensed consolidated
statements of operations.
(b)
Included within general and
administrative expenses in the condensed consolidated statements of
operations.
(c)
Included within compensation and
benefits in the condensed consolidated statements of
operations.
(d)
$3,992 included within general
and administrative expenses, $969 included within compensation and
benefits and $32 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, 2020
Envestnet
Wealth Solutions
Envestnet Data
& Analytics
Nonsegment
Total
Total Revenues
$
590,399
$
144,012
$
—
$
734,411
Deferred revenue fair value adjustment
(a)
607
—
—
607
Adjusted revenues
591,006
144,012
—
735,018
Less: Asset-based cost of revenues
(201,600
)
—
—
(201,600
)
Adjusted net revenues
$
389,406
$
144,012
$
—
$
533,418
Revenues:
Asset-based
$
394,801
$
—
$
—
$
394,801
Subscription-based
184,516
132,911
—
317,427
Total recurring revenues
579,317
132,911
—
712,228
Professional services and other
revenues
11,082
11,101
—
22,183
Total revenues
590,399
144,012
—
734,411
Operating expenses:
Cost of revenues:
Asset-based
201,600
—
—
201,600
Subscription-based
3,691
16,684
—
20,375
Professional services and other
47
305
—
352
Total cost of revenues
205,338
16,989
—
222,327
Compensation and benefits
194,906
82,455
23,062
300,423
General and administration
69,358
26,162
23,017
118,537
Depreciation and amortization
59,907
25,170
—
85,077
Total operating expenses
$
529,509
$
150,776
$
46,079
$
726,364
Income (loss) from operations
$
60,890
$
(6,764
)
$
(46,079
)
$
8,047
Add:
Deferred revenue fair value adjustment
(a)
607
—
—
607
Accretion on contingent consideration and
purchase liability (b)
1,087
221
—
1,308
Depreciation and amortization
59,907
25,170
—
85,077
Non-cash compensation expense (c)
27,437
11,665
6,619
45,721
Restructuring charges and transaction
costs (d)
5,864
489
8,108
14,461
Non-income tax expense adjustment (b)
1,532
(191
)
—
1,341
Severance (c)
14,593
2,587
1,386
18,566
Fair market value adjustment on contingent
consideration liability (b)
—
(2,056
)
—
(2,056
)
Non-recurring litigation and regulatory
related expenses (b)
—
6,029
—
6,029
Income attributable to non-controlling
interest
(1,103
)
—
—
(1,103
)
Other
(31
)
—
—
(31
)
Adjusted EBITDA
$
170,783
$
37,150
$
(29,966
)
$
177,967
(a)
$605 included within
subscription-based revenues and $2 included within professional
services and other revenues in the condensed consolidated
statements of operations.
(b)
Included within general and
administrative expenses in the condensed consolidated statements of
operations.
(c)
Included within compensation and
benefits in the condensed consolidated statements of
operations.
(d)
$11,485 included within general
and administrative expenses, $2,764 included within compensation
and benefits and $212 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, 2019
Envestnet
Wealth Solutions
Envestnet Data
& Analytics
Nonsegment
Total
Revenues
$
188,224
$
47,856
$
—
$
236,080
Deferred revenue fair value adjustment
(a)
3,250
—
—
3,250
Adjusted revenues
191,474
47,856
—
239,330
Less: Asset-based cost of revenues
(64,339
)
—
—
(64,339
)
Adjusted net revenues
$
127,135
$
47,856
$
—
$
174,991
Revenues:
Asset-based
$
126,591
$
—
$
—
$
126,591
Subscription-based
57,353
43,230
—
100,583
Total recurring revenues
183,944
43,230
—
227,174
Professional services and other
revenues
4,280
4,626
—
8,906
Total revenues
188,224
47,856
—
236,080
Operating expenses:
Cost of revenues:
Asset-based
64,339
—
—
64,339
Subscription-based
1,248
6,030
—
7,278
Professional services and other
165
88
—
253
Total cost of revenues
65,752
6,118
—
71,870
Compensation and benefits
60,836
28,956
5,795
95,587
General and administration
25,476
11,573
4,967
42,016
Depreciation and amortization
18,414
8,321
—
26,735
Total operating expenses
$
170,478
$
54,968
$
10,762
$
236,208
Income (loss) from operations
$
17,746
$
(7,112
)
$
(10,762
)
$
(128
)
Add:
Deferred revenue fair value adjustment
(a)
3,250
—
—
3,250
Accretion on contingent consideration and
purchase liability (b)
498
—
—
498
Depreciation and amortization
18,414
8,321
—
26,735
Non-cash compensation expense (c)
9,317
3,844
2,228
15,389
Restructuring charges and transaction
costs (d)
733
624
2,794
4,151
Non-income tax expense adjustment (b)
299
63
—
362
Severance (c)
1,076
1,218
93
2,387
Non-recurring litigation and regulatory
related expenses (b)
—
2,065
—
2,065
Loss attributable to non-controlling
interest
(210
)
—
—
(210
)
Other
46
(1
)
—
45
Adjusted EBITDA
$
51,169
$
9,022
$
(5,647
)
$
54,544
(a)
$3,249 included within
subscription-based revenues and $1 included within professional
services and other revenues in the condensed consolidated
statements of operations.
(b)
Included within general and
administrative expenses in the condensed consolidated statements of
operations.
(c)
Included within compensation and
benefits in the condensed consolidated statements of
operations.
(d)
$3,240 included within general
and administrative expenses and $911 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, 2019
Envestnet
Wealth Solutions
Envestnet Data
& Analytics
Nonsegment
Total
Revenues
$
517,819
$
142,372
$
—
$
660,191
Deferred revenue fair value adjustment
(a)
6,670
—
—
6,670
Adjusted revenues
524,489
142,372
—
666,861
Less: Asset-based cost of revenues
(178,474
)
—
—
(178,474
)
Adjusted net revenues
$
346,015
$
142,372
$
—
$
488,387
Revenues:
Asset-based
$
355,595
$
—
$
—
$
355,595
Subscription-based
148,457
127,471
—
275,928
Total recurring revenues
504,052
127,471
—
631,523
Professional services and other
revenues
13,767
14,901
—
28,668
Total revenues
517,819
142,372
—
660,191
Operating expenses:
Cost of revenues:
Asset-based
178,474
—
—
178,474
Subscription-based
4,371
17,281
—
21,652
Professional services and other
5,012
457
—
5,469
Total cost of revenues
187,857
17,738
—
205,595
Compensation and benefits
165,610
91,913
28,067
285,590
General and administration
71,326
29,611
24,024
124,961
Depreciation and amortization
46,057
27,110
—
73,167
Total operating expenses
$
470,850
$
166,372
$
52,091
$
689,313
Income (loss) from operations
$
46,969
$
(24,000
)
$
(52,091
)
$
(29,122
)
Add:
Deferred revenue fair value adjustment
(a)
6,670
—
—
6,670
Accretion on contingent consideration and
purchase liability (b)
1,240
—
—
1,240
Depreciation and amortization
46,057
27,110
—
73,167
Non-cash compensation expense (c)
23,586
11,799
7,856
43,241
Restructuring charges and transaction
costs (d)
1,789
1,393
21,543
24,725
Non-income tax expense adjustment (b)
1,407
73
—
1,480
Severance (c)
2,244
5,714
189
8,147
Non-recurring litigation and regulator
related expenses (b)
—
2,065
—
2,065
Loss attributable to non-controlling
interest
31
—
—
31
Other
111
—
2
113
Adjusted EBITDA
$
130,104
$
24,154
$
(22,501
)
$
131,757
(a)
$6,664 included within
subscription-based revenues and $6 included within professional
services and other revenues in the condensed consolidated
statements of operations.
(b)
Included within general and
administrative expenses in the condensed consolidated statements of
operations.
(c)
Included within compensation and
benefits in the condensed consolidated statements of
operations.
(d)
$14,071 included within general
and administrative expenses and $10,654 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,
2019
2019
2020
2020
2020
(in millions, except accounts
and advisors data)
Platform Assets
Assets under Management (“AUM”)
$
188,739
$
207,083
$
185,065
$
215,994
$
228,905
Assets under Administration (“AUA”)
316,742
343,505
312,472
344,957
375,860
Total AUM/A
505,481
550,588
497,537
560,951
604,765
Subscription
2,947,582
3,205,281
2,875,394
3,247,400
3,498,353
Total Platform Assets
$
3,453,063
$
3,755,869
$
3,372,931
$
3,808,351
$
4,103,118
Platform Accounts
AUM
934,811
935,039
970,896
1,007,386
1,018,817
AUA
1,136,430
1,193,882
1,254,856
1,252,247
1,318,730
Total AUM/A
2,071,241
2,128,921
2,225,752
2,259,633
2,337,547
Subscription
9,692,714
9,793,175
10,090,172
10,003,156
10,639,399
Total Platform Accounts
11,763,955
11,922,096
12,315,924
12,262,789
12,976,946
Advisors
AUM/A
39,735
40,563
40,971
41,206
41,450
Subscription
60,319
61,180
62,077
62,404
63,862
Total Advisors
100,054
101,743
103,048
103,610
105,312
The following table summarizes the changes in AUM and AUA for
the three months ended September 30, 2020:
6/30/2020
Gross
Sales
Redemptions
Net
Flows
Market
Impact
9/30/2020
(in millions except account
data)
AUM
$
215,994
$
12,526
$
(10,151
)
$
2,375
$
10,536
$
228,905
AUA
344,957
33,944
(19,618
)
14,326
16,577
375,860
Total AUM/A
$
560,951
$
46,470
$
(29,769
)
$
16,701
$
27,113
$
604,765
Fee-Based Accounts
2,259,633
77,914
2,337,547
The above AUM/A gross sales figures include $8.4 billion in new
client conversions. The Company onboarded an additional $33.9
billion in subscription conversions during the three months ended
September 30, 2020, bringing total conversions for the quarter to
$42.3 billion.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105006052/en/
Investor Relations investor.relations@envestnet.com (312)
827-3940
Media Relations mediarelations@envestnet.com
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