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Envestnet Reports First 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 months ended March 31, 2022.

 

 

Three months ended

 

 

Key Financial Metrics

 

March 31,

 

%

(in millions, except per share data)

 

2022

 

2021

 

Change

GAAP:

 

 

 

 

 

 

Total revenues

 

$

321.4

 

 

$

275.1

 

17

%

Net income (loss)

 

$

(14.7

)

 

$

14.9

 

n/m

 

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

 

$

(0.25

)

 

$

0.27

 

n/m

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

Adjusted revenues(1)

 

$

321.4

 

 

$

275.2

 

17

%

Adjusted EBITDA(1)

 

$

55.7

 

 

$

68.3

 

(18

)%

Adjusted net income(1)

 

$

31.0

 

 

$

41.9

 

(26

)%

Adjusted net income per diluted share(1)

 

$

0.47

 

 

$

0.64

 

(27

)%

n/m - not meaningful

“Envestnet has made substantial progress in bringing together the powerful capabilities of Envestnet to create more scalable, more intelligent, and more valuable solutions for our clients,” said Bill Crager, Chief Executive Officer.

“Our first quarter financial results continue to demonstrate the strength of our business and the hard work of the Envestnet team,” concluded Mr. Crager.

Financial Results for the First Quarter of 2022

Asset-based recurring revenues increased 27% from the first quarter of 2021, and represented 63% of total revenues for the first quarter of 2022 compared to 58% for the first quarter of 2021. Subscription-based recurring revenues increased 4% from the first quarter of 2021, and represented 36% of total revenues for the first quarter of 2022, compared to 40% for the first quarter of 2021. Professional services and other non-recurring revenues decreased 34% from the prior year period. Total revenues increased 17% to $321.4 million for the first quarter of 2022 from $275.1 million for the first quarter of 2021.

Total operating expenses for the first quarter of 2022 increased 27% to $328.1 million from $258.3 million in the prior year period. Cost of revenues increased 35% to $125.3 million for the first quarter of 2022 from $92.9 million for the prior year period. Compensation and benefits increased 26% to $126.8 million for the first quarter of 2022 from $100.7 million for the prior year period. Compensation and benefits were 39% of total revenues for the first quarter of 2022, compared to 37% for the prior year period. General and administration expenses increased 22% to $44.3 million for the first quarter of 2022 from $36.3 million for the prior year period. General and administration expenses were 14% of total revenues for the first quarter of 2022, compared to 13% for the prior year period.

Loss from operations was $6.7 million for the first quarter of 2022 compared to income of $16.8 million for the first quarter of 2021. Net loss was $14.7 million for the first quarter of 2022 compared to net income of $14.9 million for the first quarter of 2021. Net loss per diluted share attributable to Envestnet, Inc. was $0.25 for the first quarter of 2022 compared to net income per diluted share attributable to Envestnet, Inc. of $0.27 for the first quarter of 2021.

Adjusted revenues(1) for the first quarter of 2022 increased 17% to $321.4 million from $275.2 million for the prior year period. Adjusted EBITDA(1) for the first quarter of 2022 decreased 18% to $55.7 million from $68.3 million for the prior year period. Adjusted net income(1) decreased 26% for the first quarter of 2022 to $31.0 million from $41.9 million for the prior year period. Adjusted net income per diluted share(1) for the first quarter of 2022 decreased 27% to $0.47 from $0.64 in the first quarter of 2021.

Balance Sheet and Liquidity

As of March 31, 2022, Envestnet had $359.6 million in cash and cash equivalents and $862.5 million in outstanding debt. The outstanding debt as of March 31, 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 March 31, 2022.

Outlook

Envestnet provided the following outlook for the second quarter ending June 30, 2022 and full year ending December 31, 2022. This outlook is based on the market value of assets under management or administration as of March 31, 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

 

2Q 2022

 

FY 2022

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

196.5

 

-

 

$

197.5

 

 

 

 

 

 

Subscription-based

 

 

118.5

 

-

 

 

119.0

 

 

 

 

 

 

Total recurring revenues

 

$

315.0

 

-

 

$

316.5

 

 

 

 

 

 

Professional services and other revenues

 

 

9.0

 

-

 

 

9.5

 

 

 

 

 

 

Total revenues

 

$

324.0

 

-

 

$

326.0

 

$

1,329.8

 

-

 

$

1,339.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based cost of revenues

 

$

116.0

 

-

 

$

116.5

 

 

 

 

 

 

Total cost of revenues

 

$

129.5

 

-

 

$

130.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 

66.3

 

 

 

 

 

66.1

 

 

Net income per diluted share

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues (1):

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

196.5

 

-

 

$

197.5

 

 

 

 

 

 

Subscription-based

 

 

118.5

 

-

 

 

119.0

 

 

 

 

 

 

Total recurring revenues

 

$

315.0

 

-

 

$

316.5

 

 

 

 

 

 

Professional services and other revenues

 

 

9.0

 

-

 

 

9.5

 

 

 

 

 

 

Total revenues

 

$

324.0

 

-

 

$

326.0

 

$

1,330.0

 

-

 

$

1,340.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

55.5

 

-

 

$

56.5

 

$

255.0

 

-

 

$

260.0

Adjusted net income per diluted share(1)

 

$

0.45

 

-

 

$

0.46

 

$

2.17

 

-

 

$

2.23

(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 first 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. More than 106,000 advisors and over 6,500 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 the Company 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, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, 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, amortization of acquired intangibles, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, 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 9-12 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 second 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 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://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 May 5, 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)

 

 

 

March 31,

 

December 31,

 

 

2022

 

2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

359,614

 

$

429,279

Fees receivable, net

 

 

88,377

 

 

95,291

Prepaid expenses and other current assets

 

 

53,488

 

 

42,706

Total current assets

 

 

501,479

 

 

567,276

 

 

 

 

 

Property and equipment, net

 

 

62,848

 

 

50,215

Internally developed software, net

 

 

147,014

 

 

133,659

Intangible assets, net

 

 

400,876

 

 

400,396

Goodwill

 

 

925,003

 

 

925,154

Operating lease right-of-use-assets, net

 

 

88,011

 

 

90,714

Other non-current assets

 

 

74,539

 

 

73,768

Total assets

 

$

2,199,770

 

$

2,241,182

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accrued expenses and other liabilities

 

$

201,087

 

$

225,159

Accounts payable

 

 

18,854

 

 

19,092

Operating lease liabilities

 

 

10,439

 

 

10,999

Deferred revenue

 

 

44,427

 

 

33,473

Total current liabilities

 

 

274,807

 

 

288,723

 

 

 

 

 

Long-term debt

 

 

850,097

 

 

848,862

Non-current operating lease liabilities

 

 

103,332

 

 

105,920

Deferred tax liabilities, net

 

 

2,108

 

 

21,021

Other non-current liabilities

 

 

16,271

 

 

17,114

Total liabilities

 

 

1,246,615

 

 

1,281,640

 

 

 

 

 

Equity:

 

 

 

 

Total stockholders’ equity

 

 

951,449

 

 

957,089

Non-controlling interest

 

 

1,706

 

 

2,453

Total liabilities and equity

 

$

2,199,770

 

$

2,241,182

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

2021

Revenues:

 

 

 

 

Asset-based

 

$

202,717

 

 

$

159,375

 

Subscription-based

 

 

114,734

 

 

 

109,829

 

Total recurring revenues

 

 

317,451

 

 

 

269,204

 

Professional services and other revenues

 

 

3,912

 

 

 

5,901

 

Total revenues

 

 

321,363

 

 

 

275,105

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Cost of revenues

 

 

125,282

 

 

 

92,869

 

Compensation and benefits

 

 

126,849

 

 

 

100,714

 

General and administration

 

 

44,335

 

 

 

36,315

 

Depreciation and amortization

 

 

31,618

 

 

 

28,392

 

Total operating expenses

 

 

328,084

 

 

 

258,290

 

 

 

 

 

 

Income (loss) from operations

 

 

(6,721

)

 

 

16,815

 

Other expense, net

 

 

(5,967

)

 

 

(7,468

)

Income (loss) before income tax provision (benefit)

 

 

(12,688

)

 

 

9,347

 

 

 

 

 

 

Income tax provision (benefit)

 

 

2,020

 

 

 

(5,588

)

 

 

 

 

 

Net income (loss)

 

 

(14,708

)

 

 

14,935

 

Add: Net loss attributable to non-controlling interest

 

 

849

 

 

 

11

 

Net income (loss) attributable to Envestnet, Inc.

 

$

(13,859

)

 

$

14,946

 

 

 

 

 

 

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

 

 

 

 

Basic

 

$

(0.25

)

 

$

0.28

 

 

 

 

 

 

Diluted

 

$

(0.25

)

 

$

0.27

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

Basic

 

 

54,903,677

 

 

 

54,208,469

 

 

 

 

 

 

Diluted

 

 

54,903,677

 

 

 

59,917,648

 

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

2021

OPERATING ACTIVITIES:

 

 

 

 

Net income (loss)

 

$

(14,708

)

 

$

14,935

 

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

 

 

 

 

Depreciation and amortization

 

 

31,618

 

 

 

28,392

 

Provision for doubtful accounts

 

 

(1,747

)

 

 

298

 

Deferred income taxes

 

 

(18,955

)

 

 

(3,581

)

Non-cash compensation expense

 

 

21,814

 

 

 

14,137

 

Non-cash interest expense

 

 

2,599

 

 

 

2,015

 

Accretion on contingent consideration and purchase liability

 

 

 

 

 

388

 

Fair market value adjustment to contingent consideration liability

 

 

 

 

 

(140

)

Loss allocations from equity method investments

 

 

1,545

 

 

 

3,288

 

Other

 

 

(59

)

 

 

165

 

Changes in operating assets and liabilities:

 

 

 

 

Fees receivable, net

 

 

8,661

 

 

 

473

 

Prepaid expenses and other current assets

 

 

(8,377

)

 

 

1,756

 

Other non-current assets

 

 

(1,114

)

 

 

3,093

 

Accrued expenses and other liabilities

 

 

(27,320

)

 

 

(28,668

)

Accounts payable

 

 

(432

)

 

 

6,444

 

Deferred revenue

 

 

11,097

 

 

 

7,882

 

Other non-current liabilities

 

 

(1,361

)

 

 

(1,068

)

Net cash provided by operating activities

 

 

3,261

 

 

 

49,809

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchases of property and equipment

 

 

(3,896

)

 

 

(7,062

)

Capitalization of internally developed software

 

 

(21,671

)

 

 

(15,058

)

Acquisition of proprietary technology

 

 

(15,000

)

 

 

(25,517

)

Investments in private companies

 

 

(3,000

)

 

 

(2,538

)

Other

 

 

(2,500

)

 

 

 

Net cash used in investing activities

 

 

(46,067

)

 

 

(50,175

)

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

2021

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from exercise of stock options

 

 

658

 

 

 

522

 

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

 

 

(12,570

)

 

 

(9,541

)

Finance lease payments

 

 

(12,454

)

 

 

 

Revolving credit facility issuance costs

 

 

(1,869

)

 

 

 

Share repurchases

 

 

 

 

 

(1,672

)

Payments of contingent consideration

 

 

 

 

 

(1,000

)

Other

 

 

3

 

 

 

(479

)

Net cash used in financing activities

 

 

(26,232

)

 

 

(12,170

)

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

 

(627

)

 

 

(52

)

 

 

 

 

 

DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

(69,665

)

 

 

(12,588

)

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

 

429,428

 

 

 

384,714

 

 

 

 

 

 

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

 

$

359,763

 

 

$

372,126

 

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

 

 

March 31,

 

March 31,

 

 

2022

 

2021

Cash and cash equivalents

 

$

359,614

 

$

371,977

Restricted cash included in prepaid expenses and other current assets

 

 

149

 

 

Restricted cash included in other non-current assets

 

 

 

 

149

Total cash, cash equivalents and restricted cash

 

$

359,763

 

$

372,126

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

March 31,

 

 

2022

 

2021

Total revenues

 

$

321,363

 

 

$

275,105

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

80

 

Adjusted revenues

 

$

321,417

 

 

$

275,185

 

 

 

 

 

 

Net income (loss)

 

$

(14,708

)

 

$

14,935

 

Add (deduct):

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

80

 

Interest income (b)

 

 

(321

)

 

 

(170

)

Interest expense (b)

 

 

4,853

 

 

 

4,215

 

Income tax provision (benefit)

 

 

2,020

 

 

 

(5,588

)

Depreciation and amortization

 

 

31,618

 

 

 

28,392

 

Non-cash compensation expense (d)

 

 

21,814

 

 

 

14,137

 

Restructuring charges and transaction costs (e)

 

 

2,346

 

 

 

2,784

 

Severance (d)

 

 

3,106

 

 

 

4,914

 

Accretion on contingent consideration and purchase liability (c)

 

 

 

 

 

388

 

Fair market value adjustment on contingent consideration liability (c)

 

 

 

 

 

(140

)

Non-recurring litigation and regulatory related expenses (c)

 

 

3,077

 

 

 

1,709

 

Foreign currency (b)

 

 

(108

)

 

 

151

 

Non-income tax expense adjustment (c)

 

 

24

 

 

 

(566

)

Loss allocations from equity method investments (b)

 

 

1,545

 

 

 

3,288

 

(Income) loss attributable to non-controlling interest

 

 

377

 

 

 

(265

)

Adjusted EBITDA

 

$

55,697

 

 

$

68,264

 

(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 March 31, 2022 and 2021, $2.5 million and $1.8 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended March 31, 2022 and 2021, $(0.2) million and $1.0 million were included within compensation and benefits, 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

 

 

March 31,

 

 

2022

 

2021

Net income (loss)

 

$

(14,708

)

 

$

14,935

 

Income tax provision (benefit) (a)

 

 

2,020

 

 

 

(5,588

)

Income (loss) before income tax provision (benefit)

 

 

(12,688

)

 

 

9,347

 

Add (deduct):

 

 

 

 

Deferred revenue fair value adjustment (b)

 

 

54

 

 

 

80

 

Non-cash interest expense (d)

 

 

2,059

 

 

 

1,423

 

Cash interest - Convertible Notes (d)

 

 

2,480

 

 

 

2,480

 

Non-cash compensation expense (e)

 

 

21,814

 

 

 

14,137

 

Restructuring charges and transaction costs (g)

 

 

2,346

 

 

 

2,784

 

Severance (e)

 

 

3,106

 

 

 

4,914

 

Accretion on contingent consideration and purchase liability (c)

 

 

 

 

 

388

 

Fair market value adjustment on contingent consideration liability (c)

 

 

 

 

 

(140

)

Amortization of acquired intangibles (f)

 

 

17,520

 

 

 

16,478

 

Non-recurring litigation and regulatory related expenses (c)

 

 

3,077

 

 

 

1,709

 

Foreign currency (d)

 

 

(108

)

 

 

151

 

Non-income tax expense adjustment (c)

 

 

24

 

 

 

(566

)

Loss allocations from equity method investments (d)

 

 

1,545

 

 

 

3,288

 

Loss (income) attributable to non-controlling interest

 

 

377

 

 

 

(265

)

Adjusted net income before income tax effect

 

 

41,606

 

 

 

56,208

 

Income tax effect (h)

 

 

(10,610

)

 

 

(14,333

)

Adjusted net income

 

$

30,996

 

 

$

41,875

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

 

54,903,677

 

 

 

54,208,469

 

Effect of dilutive shares:

 

 

 

 

Options to purchase common stock

 

 

156,349

 

 

 

222,387

 

Unvested restricted stock units

 

 

568,914

 

 

 

562,612

 

Convertible Notes

 

 

9,898,549

 

 

 

9,898,549

 

Warrants

 

 

51,764

 

 

 

76,142

 

Diluted number of weighted-average shares outstanding

 

 

65,579,253

 

 

 

64,968,159

 

 

 

 

 

 

Adjusted net income per share - diluted

 

$

0.47

 

 

$

0.64

 

(a)

For the three months ended March 31, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled (15.9)% and (59.8)%, 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 March 31, 2022 and 2021, $2.5 million and $1.8 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended March 31, 2022 and 2021, $(0.2) million and $1.0 million were included within compensation and benefits, 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 months ended March 31, 2022 and 2021.

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 

 

 

Three months ended March 31, 2022

 

 

Envestnet

Wealth Solutions

 

Envestnet Data

& Analytics

 

Nonsegment

 

Total

Revenues

 

$

273,568

 

$

47,795

 

 

$

 

 

$

321,363

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

 

 

 

 

 

54

 

Adjusted revenues

 

$

273,622

 

$

47,795

 

 

$

 

 

$

321,417

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

202,717

 

$

 

 

$

 

 

$

202,717

 

Subscription-based

 

 

68,537

 

 

46,197

 

 

 

 

 

 

114,734

 

Total recurring revenues

 

 

271,254

 

 

46,197

 

 

 

 

 

 

317,451

 

Professional services and other revenues

 

 

2,314

 

 

1,598

 

 

 

 

 

 

3,912

 

Total revenues

 

 

273,568

 

 

47,795

 

 

 

 

 

 

321,363

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

117,428

 

 

 

 

 

 

 

 

117,428

 

Subscription-based

 

 

1,365

 

 

6,446

 

 

 

 

 

 

7,811

 

Professional services and other

 

 

15

 

 

28

 

 

 

 

 

 

43

 

Total cost of revenues

 

 

118,808

 

 

6,474

 

 

 

 

 

 

125,282

 

Compensation and benefits

 

 

78,644

 

 

30,166

 

 

 

18,039

 

 

 

126,849

 

General and administration

 

 

27,360

 

 

8,611

 

 

 

8,364

 

 

 

44,335

 

Depreciation and amortization

 

 

23,487

 

 

8,131

 

 

 

 

 

 

31,618

 

Total operating expenses

 

$

248,299

 

$

53,382

 

 

$

26,403

 

 

$

328,084

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

25,269

 

$

(5,587

)

 

$

(26,403

)

 

$

(6,721

)

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

 

 

 

 

 

54

 

Depreciation and amortization

 

 

23,487

 

 

8,131

 

 

 

 

 

 

31,618

 

Non-cash compensation expense (c)

 

 

11,290

 

 

3,535

 

 

 

6,989

 

 

 

21,814

 

Restructuring charges and transaction costs (d)

 

 

284

 

 

(3

)

 

 

2,065

 

 

 

2,346

 

Severance (c)

 

 

1,410

 

 

1,642

 

 

 

54

 

 

 

3,106

 

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

3,077

 

 

 

 

 

 

3,077

 

Non-income tax expense adjustment (b)

 

 

107

 

 

(83

)

 

 

 

 

 

24

 

Loss attributable to non-controlling interest

 

 

377

 

 

 

 

 

 

 

 

377

 

Other

 

 

 

 

2

 

 

 

 

 

 

2

 

Adjusted EBITDA

 

$

62,278

 

$

10,714

 

 

$

(17,295

)

 

$

55,697

 

(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 March 31, 2022, $2.5 million was included within general and administration expenses and $(0.2) 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)

 

 

 

Three Months Ended March 31, 2021

 

 

Envestnet

Wealth Solutions

 

Envestnet Data

& Analytics

 

Nonsegment

 

Total

Revenues

 

$

226,410

 

 

$

48,695

 

 

$

 

 

$

275,105

 

Deferred revenue fair value adjustment (a)

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Adjusted revenues

 

$

226,490

 

 

$

48,695

 

 

$

 

 

$

275,185

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

159,375

 

 

$

 

 

$

 

 

$

159,375

 

Subscription-based

 

 

64,012

 

 

 

45,817

 

 

 

 

 

 

109,829

 

Total recurring revenues

 

 

223,387

 

 

 

45,817

 

 

 

 

 

 

269,204

 

Professional services and other revenues

 

 

3,023

 

 

 

2,878

 

 

 

 

 

 

5,901

 

Total revenues

 

 

226,410

 

 

 

48,695

 

 

 

 

 

 

275,105

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

86,190

 

 

 

 

 

 

 

 

 

86,190

 

Subscription-based

 

 

1,213

 

 

 

5,391

 

 

 

 

 

 

6,604

 

Professional services and other

 

 

29

 

 

 

46

 

 

 

 

 

 

75

 

Total cost of revenues

 

 

87,432

 

 

 

5,437

 

 

 

 

 

 

92,869

 

Compensation and benefits

 

 

62,854

 

 

 

26,289

 

 

 

11,571

 

 

 

100,714

 

General and administration

 

 

20,699

 

 

 

8,516

 

 

 

7,100

 

 

 

36,315

 

Depreciation and amortization

 

 

21,228

 

 

 

7,164

 

 

 

 

 

 

28,392

 

Total operating expenses

 

$

192,213

 

 

$

47,406

 

 

$

18,671

 

 

$

258,290

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

34,197

 

 

$

1,289

 

 

$

(18,671

)

 

$

16,815

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

80

 

 

 

 

 

 

 

 

 

80

 

Depreciation and amortization

 

 

21,228

 

 

 

7,164

 

 

 

 

 

 

28,392

 

Non-cash compensation expense (c)

 

 

7,829

 

 

 

2,841

 

 

 

3,467

 

 

 

14,137

 

Restructuring charges and transaction costs (d)

 

 

1,365

 

 

 

147

 

 

 

1,272

 

 

 

2,784

 

Severance (c)

 

 

3,087

 

 

 

1,720

 

 

 

107

 

 

 

4,914

 

Accretion on contingent consideration and purchase liability (b)

 

 

342

 

 

 

46

 

 

 

 

 

 

388

 

Fair market value adjustment on contingent consideration liability (b)

 

 

 

 

 

(140

)

 

 

 

 

 

(140

)

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

 

1,709

 

 

 

 

 

 

1,709

 

Non-income tax expense adjustment (b)

 

 

(535

)

 

 

(31

)

 

 

 

 

 

(566

)

Income attributable to non-controlling interest

 

 

(265

)

 

 

 

 

 

 

 

 

(265

)

Other

 

 

16

 

 

 

 

 

 

 

 

 

16

 

Adjusted EBITDA

 

$

67,344

 

 

$

14,745

 

 

$

(13,825

)

 

$

68,264

 

(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)

For the three months ended March 31, 2021, $1.8 million was included within general and administration expenses and $1.0 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

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

March 31,

 

 

2021

 

2021

 

2021

 

2021

 

2022(1)

 

 

(in millions, except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

Assets under Management (“AUM”)

 

$

286,039

 

$

315,422

 

$

327,279

 

$

362,038

 

$

361,251

 

Assets under Administration (“AUA”)

 

 

408,858

 

 

426,416

 

 

431,040

 

 

456,316

 

 

432,141

 

Total AUM/A

 

 

694,897

 

 

741,838

 

 

758,319

 

 

818,354

 

 

793,392

 

Subscription

 

 

4,132,917

 

 

4,447,733

 

 

4,670,827

 

 

4,901,662

 

 

4,736,537

 

Total Platform Assets

 

$

4,827,814

 

$

5,189,571

 

$

5,429,146

 

$

5,720,016

 

$

5,529,929

 

Platform Accounts

 

 

 

 

 

 

 

 

 

 

AUM

 

 

1,138,183

 

 

1,209,761

 

 

1,276,066

 

 

1,345,274

 

 

1,459,093

 

AUA

 

 

1,192,668

 

 

1,163,991

 

 

1,193,069

 

 

1,217,076

 

 

1,186,180

 

Total AUM/A

 

 

2,330,851

 

 

2,373,752

 

 

2,469,135

 

 

2,562,350

 

 

2,645,273

 

Subscription

 

 

11,453,434

 

 

11,712,573

 

 

14,810,664

 

 

14,986,531

 

 

15,151,569

 

Total Platform Accounts

 

 

13,784,285

 

 

14,086,325

 

 

17,279,799

 

 

17,548,881

 

 

17,796,842

 

Advisors

 

 

 

 

 

 

 

 

 

 

AUM/A

 

 

41,177

 

 

41,259

 

 

41,696

 

 

39,735

 

 

39,800

 

Subscription

 

 

65,724

 

 

66,597

 

 

66,489

 

 

68,808

 

 

67,168

 

Total Advisors

 

 

106,901

 

 

107,856

 

 

108,185

 

 

108,543

 

 

106,968

 

(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 March 31, 2022:

 

 

12/31/2021

 

Gross

Sales

 

Redemptions

 

Net

Flows

 

Market

Impact

 

Reclassification(1)

 

3/31/2022

 

 

(in millions, except account data)

AUM

 

$

362,038

 

$

28,699

 

$

(15,967

)

 

$

12,732

 

$

(22,240

)

 

$

8,721

 

 

$

361,251

AUA

 

 

456,316

 

 

28,341

 

 

(19,912

)

 

 

8,429

 

 

(23,883

)

 

 

(8,721

)

 

 

432,141

Total AUM/A

 

$

818,354

 

$

57,040

 

$

(35,879

)

 

$

21,161

 

$

(46,123

)

 

$

 

 

$

793,392

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

 

2,562,350

 

 

 

 

 

 

82,923

 

 

 

 

 

 

 

2,645,273

(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 above AUM/A gross sales figures include $9.1 billion in new client conversions. The Company onboarded an additional $32.8 billion in subscription conversions during the three months ended March 31, 2022, bringing total conversions for the quarter to $41.9 billion.

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