Envestnet (NYSE:ENV), a leading provider of unified wealth
management technology and services to financial advisors, today
reported financial results for its third quarter ended September
30, 2014.
Three Months Ended
Nine Months Ended Key
Financial Metrics September 30, % September
30, % (in millions except per share data)
2014 2013
Change 2014 2013
Change Adjusted Revenues(1) $
88.6 $ 69.9 27 % $ 251.9 $ 168.3 50 % Adjusted EBITDA(1) $ 14.7 $
10.0 46 % $ 39.3 $ 27.6 43 % Adjusted Net Income per Share(1) $
0.21 $ 0.14 50 % $ 0.57 $ 0.39 46 %
Financial Results for the Third Quarter of 2014 Compared to
the Third Quarter of 2013:
- Adjusted Revenues(1) increased 27% to
$88.6 million for the third quarter of 2014 from $69.9 million for
the third quarter of 2013.
- Revenues from assets under management
(AUM) or assets under administration (AUA) increased 26% to $74.9
million for the third quarter of 2014 from $59.6 million for the
third quarter of 2013; total revenues, which include licensing and
professional services fees, increased 27% to $88.6 million for the
third quarter of 2014 from $69.9 million for the third quarter of
2013.
- Adjusted EBITDA(1) increased 46% to
$14.7 million for the third quarter of 2014 compared to $10.0
million for the third quarter of 2013.
- Adjusted Net Income(1) was $7.9
million, or $0.21 per diluted share, for the third quarter of 2014
compared to $5.1 million, or $0.14 per diluted share, for the third
quarter of 2013.
- Net income attributable to Envestnet,
Inc. was $3.8 million, or $0.10 per diluted share, for the third
quarter of 2014 compared to $1.3 million, or $0.04 per diluted
share, for the third quarter of 2013.
“Envestnet provides truly integrated wealth management solutions
to advisors and advisory firms looking to provide better client
outcomes and profitably grow their business,” said Jud Bergman,
Chairman and CEO.
“During the third quarter, Envestnet onboarded a record $46
billion in new assets from conversions, reflecting strong demand
for our unified offerings from large institutions and registered
investment advisors. We believe Envestnet will continue to grow
organically through ongoing adoption of our wealth management
solutions by advisors, and to accelerate that growth over time with
disciplined strategic activity, such as the recently completed
Placemark acquisition,” concluded Mr. Bergman.
Key Operating Metrics (AUM/A Only) as of and for the Quarter
Ended September 30, 2014:
- Assets: $219.6 billion, up 37% from
September 30, 2013
- Accounts: 897,551, up 37% from
September 30, 2013
- Advisors: 24,887, up 14% from September
30, 2013
- Gross sales: $31.2 billion, resulting
in net flows of $16.9 billion
The following table summarizes the changes in AUM and AUA for
the quarter ended September 30, 2014:
Gross
Redemp- Net Market
Reclass to In Millions Except
Accounts 6/30/14 Sales tions
Flows Impact Licensing
9/30/14 Assets under Management (AUM) $ 53,063
$ 5,404 $ (2,345 ) $ 3,059 $ (1,187 ) $ - $ 54,935
Assets under
Administration (AUA) 156,723 25,765
(11,945 ) 13,820 (2,746 )
(3,158 ) 164,639
Total AUM/A $ 209,786
$ 31,169 $ (14,290
) $ 16,879 $
(3,933 ) $ (3,158 ) $
219,574 Fee-Based Accounts 836,253 84,708 (23,410 ) 897,551
During the third quarter, Envestnet added $12.8 billion of
conversions included in the above AUM/A gross sales figures, and an
additional $33.6 billion of conversions in Licensing. Also during
the third quarter, approximately $3.2 billion in assets were
reclassified from AUA to Licensing in connection with client
conversion activity.
Review of Third Quarter 2014 Financial Results
Adjusted revenues increased 27% to $88.6 million for the third
quarter of 2014 from $69.9 million for the third quarter of 2013.
The increase was primarily due to a 26% increase in revenues from
AUM or AUA to $74.9 million from $59.6 million in the prior year
period.
Total operating expenses increased 21% to $82.6 million in the
third quarter of 2014 from $68.1 million in the third quarter of
2013. Cost of revenues increased 30% to $39.1 million in the third
quarter of 2014 from $30.2 million in the third quarter of 2013 due
to the increase in revenue from AUM or AUA and a higher mix of AUM
products which carry a relatively high cost of revenue.
Compensation and benefits increased 23% to $25.8 million in the
third quarter of 2014 from $21.1 million in the prior year period
primarily due to an increase in headcount to support growth in the
business. General and administration expenses increased 12% to
$13.4 million in the third quarter of 2014 from $12.0 million in
the prior year period.
Income from operations was $6.0 million for the third quarter of
2014 compared to $1.7 million for the third quarter of 2013. Net
income attributable to Envestnet, Inc. was $3.8 million, or $0.10
per diluted share, for the third quarter of 2014 compared to $1.3
million, or $0.04 per diluted share, for the third quarter of 2013.
Adjusted EBITDA(1) in the third quarter of 2014 was $14.7 million,
compared to $10.0 million in the third quarter of 2013. Adjusted
Net Income(1) was $7.9 million, compared to $5.1 million in the
third quarter of 2013. Adjusted Net Income Per Share(1) was $0.21,
compared to $0.14 in the third quarter of 2013.
At September 30, 2014, Envestnet had $105.9 million in cash and
cash equivalents and $30.0 million in debt. On October 1, 2014,
Envestnet completed its acquisition of Placemark Holdings, Inc. for
approximately $66 million in cash.
Conference Call
Envestnet will host a conference call to discuss third quarter
2014 financial results today at 5:00 p.m. ET. The live webcast can
be accessed from Envestnet’s investor relations website at
http://ir.envestnet.com/. The call can also be accessed live over
the phone by dialing (888) 481-2844, or for international callers
(719) 325-2402. A replay will be available one hour after the call
and can be accessed by dialing (877) 870-5176 or (858) 384-5517 for
international callers; the conference ID is 9381195. The dial-in
replay will be available for one week and the webcast replay will
be available for one month following the date of the conference
call.
About Envestnet
Envestnet, Inc. (NYSE: ENV) is a leading provider of unified
wealth management technology and services to investment advisors.
Our open-architecture platforms unify and fortify the wealth
management process, delivering unparalleled flexibility, accuracy,
performance and value. Envestnet solutions enable the
transformation of wealth management into a transparent,
independent, objective and fully-aligned standard of care, and
empower advisors to deliver better results.
Envestnet’s Advisor Suite® software empowers financial advisors
to better manage client outcomes and strengthen their practice.
Envestnet provides institutional-quality research and advanced
portfolio solutions through our Portfolio Management Consultants
group, Envestnet | PMC®. Envestnet | Tamarac provides leading
rebalancing, reporting and practice management software.
(1) Non-GAAP Financial Measures
“Adjusted revenues” exclude the effect of purchase accounting on
the fair value of acquired deferred revenue. Under United States
generally accepted accounting principles (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 EBITDA” represents net income before deferred revenue
fair value adjustment, interest income, imputed interest on
contingent consideration, income tax provision, depreciation and
amortization, non-cash compensation expense, restructuring charges
and transaction costs, re-audit related expenses, severance, fair
market value adjustment on contingent consideration, litigation
related expense, other income and pre-tax loss attributable to
non-controlling interest.
“Adjusted net income” represents net income before deferred
revenue fair value adjustment, imputed interest on contingent
consideration, non-cash compensation expense, restructuring charges
and transaction costs, re-audit related expenses, severance, fair
market value adjustment on contingent consideration, amortization
of acquired intangibles, litigation related expense, other income
and net loss attributable to non-controlling interest. Reconciling
items are tax effected using the income tax rates noted in the
reconciliation table found in this release.
“Adjusted net income per share” represents adjusted net income
divided by the diluted number of weighted-average shares
outstanding.
See reconciliation of Non-GAAP Financial Measures at the end of
this press release. These 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
(the “Company”) expected financial performance and outlook, 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, difficulty in sustaining rapid revenue growth,
which may place significant demands on the Company’s
administrative, operational and financial resources, fluctuations
in the Company’s revenue, the concentration of nearly all of the
Company’s revenues from the delivery of investment solutions and
services to clients in the financial advisory industry, the
Company’s reliance on a limited number of clients for a material
portion of its revenue, the renegotiation of fee percentages or
termination of the Company’s services by its clients, the Company’s
ability to identify potential acquisition candidates, complete
acquisitions and successfully integrate acquired companies, the
impact of market and economic conditions on the Company’s revenues,
compliance failures, regulatory actions against the Company, the
failure to protect the Company’s intellectual property rights, the
Company’s inability to successfully execute the conversion of its
clients’ assets from their technology platform to the Company’s
technology platform in a timely and accurate manner, general
economic conditions, changes to the Company’s previously reported
financial information as a result of political and regulatory
conditions, as well as management’s response to these factors. More
information regarding these and other risks, uncertainties and
factors is contained in the Company’s filings with the Securities
and Exchange Commission (“SEC”) which are available on the SEC’s
website at www.sec.gov or the Company’s 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 6, 2014 and, unless required
by law, the Company undertakes 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,
2014 2013 Assets Current assets: Cash and cash
equivalents $ 105,899 $ 49,942 Fees and other receivables, net
24,514 19,848 Deferred tax assets, net 4,380 2,462 Prepaid expenses
and other current assets 6,357 7,155 Total current
assets 141,150 79,407 Property and equipment,
net 16,438 12,766 Internally developed software, net 6,740 5,740
Intangible assets, net 32,210 35,698 Goodwill 77,918 74,335
Deferred tax assets, net 8,367 8,367 Other non-current assets
4,710 4,929 Total assets $ 287,533 $ 221,242
Liabilities and Equity Current liabilities: Accrued expenses
$ 38,584 $ 35,242 Accounts payable 7,537 5,528 Bank indebtedness
30,000 - Contingent consideration 6,095 6,008 Deferred revenue
5,958 6,245 Total current liabilities 88,174
53,023 Contingent consideration 8,981 11,297 Deferred
revenue 4,270 1,148 Deferred rent 2,910 2,051 Lease incentive 5,726
3,547 Other non-current liabilities 2,682 2,404 Total
liabilities 112,743 73,470 Redeemable units in
ERS, LLC 1,500 - Equity: Stockholders' equity 172,734
147,772 Non-controlling interest 556 - Total
liabilities and equity $ 287,533 $ 221,242
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, 2014
2013 2014 2013 Revenues: Assets under
management or administration $ 74,899 $ 59,580 $ 212,707 $ 137,150
Licensing and professional services 13,678
10,300 39,238 30,987 Total revenues 88,577
69,880 251,945 168,137 Operating
expenses: Cost of revenues 39,111 30,154 111,503 66,600
Compensation and benefits 25,833 21,063 74,449 55,475 General and
administration 13,428 11,985 38,514 30,840 Depreciation and
amortization 4,253 4,467 13,290 10,666 Restructuring charges
- 474 - 474 Total operating expenses
82,625 68,143 237,756 164,055
Income from operations 5,952 1,737 14,189 4,082 Other income
(expense) (11 ) 4 1,909 195 Income
before income tax provision 5,941 1,741 16,098 4,277 Income tax
provision 2,173 435 5,812 1,312
Net income 3,768 1,306 10,286 2,965 Add: Net loss
attributable to non-controlling interest - -
195 - Net income attributable to Envestnet, Inc. $
3,768 $ 1,306 $ 10,481 $ 2,965 Net income per share
attributable to Envestnet, Inc.: Basic $ 0.11 $ 0.04 $ 0.30
$ 0.09 Diluted $ 0.10 $ 0.04 $ 0.28 $ 0.08 Weighted
average common shares outstanding: Basic 34,674,245
33,686,112 34,447,619 32,912,084 Diluted
37,006,796 35,871,975 36,832,154
35,260,044
Envestnet,
Inc. Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited) Nine Months
Ended September 30, 2014
2013 OPERATING ACTIVITIES: Net income $ 10,286
$ 2,965
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 13,290 10,666 Deferred rent and lease
incentive 173 (784 ) Provision for doubtful accounts - 153 Deferred
income taxes - (1,375 ) Stock-based compensation expense 8,443
6,281 Excess tax benefits from stock-based compensation expense
(5,086 ) (2,704 ) Imputed interest expense 1,108 392 Fair market
value adjustment on contingent consideration (342 ) - Changes in
operating assets and liabilities: Fees and other receivables, net
(4,613 ) (8,302 ) Prepaid expenses and other current assets 3,966
(2,993 ) Other non-current assets (736 ) (1,265 ) Accrued expenses
3,212 7,946 Accounts payable 2,009 1,891 Deferred revenue 2,835 754
Other non-current liabilities 278 960
Net cash provided by operating activities 34,823
14,585
INVESTING ACTIVITIES: Purchase
of property and equipment (5,249 ) (4,301 ) Capitalization of
internally developed software (2,562 ) (2,293 ) Acquisition of
businesses, net of cash acquired (1,288 ) (8,992 )
Net cash used in investing activities (9,099 )
(15,586 )
FINANCING ACTIVITIES: Proceeds from bank
indebtedness 30,000 - Payment of contingent consideration (6,000 )
- Proceeds from exercise of warrants - 4 Proceeds from exercise of
stock options 3,146 5,578 Issuance of ERS, LLC redeemable units
1,500 - Payment of promissory note (1,500 ) - Issuance of
restricted stock - 1 Purchase of treasury stock for stock-based
minimum tax withholdings (1,999 ) (586 ) Excess tax benefits from
stock-based compensation expense 5,086 2,704
Net cash provided by financing activities 30,233
7,701
INCREASE IN CASH AND CASH
EQUIVALENTS 55,957 6,700
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 49,942 29,983
CASH AND CASH EQUIVALENTS, END OF PERIOD $
105,899 $ 36,683
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,
2014 2013 2014
2013 Revenues $ 88,577 $ 69,880
$ 251,945 $ 168,137 Deferred revenue fair value adjustment -
- - 160 Adjusted
revenues $ 88,577 $ 69,880 $ 251,945 $ 168,297
Net income $ 3,768 $ 1,306 $ 10,286 $ 2,965 Add
(deduct): Deferred revenue fair value adjustment - - - 160 Interest
income (6 ) (4 ) (101 ) (13 ) Interest expense 22 - 22 - Imputed
interest expense on contingent consideration 285 392 1,108 392 Fair
market value adjustment on contingent consideration 118 - (342 ) -
Income tax provision 2,173 435 5,812 1,312 Depreciation and
amortization 4,253 4,467 13,290 10,666 Non-cash compensation
expense 2,676 2,015 8,443 6,462 Restructuring charges and
transaction costs 978 1,119 1,664 2,173 Re-audit related expenses -
118 - 3,005 Severance - 193 - 425 Litigation related expense - - 18
7 Other income - - (1,825 ) - Pre-tax loss attributable to
non-controlling interest 405 -
935 - Adjusted EBITDA $ 14,672 $ 10,041
$ 39,310 $ 27,554 Net income $ 3,768 $
1,306 $ 10,286 $ 2,965 Add (deduct): Deferred revenue fair value
adjustment - - - 93 Imputed interest expense on contingent
consideration 171 228 665 228 Fair market value adjustment on
contingent consideration 71 - (205 ) - Non-cash compensation
expense 1,606 1,169 5,065 3,748 Restructuring charges and
transaction costs 690 648 1,203 1,260 Re-audit related expenses -
68 - 1,742 Severance - 112 - 247 Amortization of acquired
intangibles 1,373 1,537 4,371 3,366 Litigation related expense - -
11 4 Other income - - (1,095 ) - Net loss attributable to
non-controlling interest 224 -
542 - Adjusted net income $ 7,903 $
5,068 $ 20,843 $ 13,653 Diluted number
of weighted-average shares outstanding 37,006,796
35,871,975 36,832,154 35,260,044
Adjusted net income per share - diluted $ 0.21
$ 0.14 $ 0.57 $ 0.39
Note:
Adjustments, excluding non-deductible
transaction costs, are tax effected using an income tax rate of
40.0% and 42.0% for 2014 and 2013, respectively. Pre-tax loss
attributable to non-controlling interest assumes losses are
allocated to Envestnet Retirement Solutions, LLC members pro-rata
based on ownership percentage.
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, 2013 2013
2014 2014 2014
Platform Assets Assets Under Management (AUM) $
41,932 $ 45,706 $ 49,383 $ 53,063 $ 54,935 Assets Under
Administration (AUA) 118,228 132,215
146,748 156,723
164,639 Subtotal AUM/A 160,160 177,921 196,131
209,786 219,574 Licensing 326,567
358,919 376,341 412,141
448,169
Total Platform Assets $ 486,727
$ 536,840 $ 572,472 $
621,927 $ 667,743
Platform Accounts AUM
200,648 211,039 226,452 239,367 255,359 AUA 456,461
524,806 566,139
596,886 642,192 Subtotal AUM/A 657,109
735,845 792,591 836,253 897,551 Licensing 1,425,102
1,508,254 1,559,188
1,659,313 1,830,678
Total
Platform Accounts 2,082,211
2,244,099 2,351,779
2,495,566 2,728,229
Advisors
AUM/A 21,759 22,838 24,369 24,945 24,887 Licensing 7,511
7,794 8,025
8,583 11,266
Total Advisors
29,270 30,632
32,394 33,528 36,153
Notes:
(1)
During the third quarter of 2014,
approximately $3.2 billion in assets, 23,000 accounts and 1,100
advisors were reclassified from AUA to Licensing in connection with
client conversion activity.
(2)
Metrics as of September 30, 2014 exclude
Placemark, which added approximately $15.4 billion in AUM, 45,000
accounts and 3,400 advisors as of October 1, 2014.
Envestnet, Inc.Investor
Relations312-827-3940investor.relations@envestnet.comorMedia
Relationsmediarelations@envestnet.com
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