Envestnet Reports First Quarter 2020 Financial Results

CHICAGO -- May 7, 2020 -- 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, 2020.

 

 

Three months ended

 

 

Key Financial Metrics

 

March 31,

 

%

(in millions except per share data)

 

2020

 

2019

 

Change

GAAP:

 

 

 

 

 

 

Total revenues

 

$

246.5

 

 

$

199.7

 

 

23

%

Net income (loss)

 

$

(7.2

)

 

$

(18.3

)

 

(61

)%

Net income (loss) per diluted share attributable     

to Envestnet, Inc.                

 

$

(0.14

)

 

$

(0.38

)

 

(63

)%

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

Adjusted revenues(1)

 

$

247.0

 

 

$

199.7

 

 

24

%

Adjusted net revenues(1)

 

$

178.4

 

 

$

145.8

 

 

22

%

Adjusted EBITDA(1)

 

$

54.6

 

 

$

34.0

 

 

61

%

Adjusted net income(1)

 

$

31.2

 

 

$

19.4

 

 

61

%

Adjusted net income per diluted share(1)

 

$

0.57

 

 

$

0.39

 

 

46

%

n/m - not meaningful

                     

“During these unprecedented times, supporting our clients while ensuring the health and safety of our employees is our top priority. While we are accustomed to functioning effectively across multiple locations, today nearly 100% of our workforce is remote. Even so, our people and technology platforms have demonstrated the ability to support an historic level of volatility and client activity,” said Bill Crager, Chief Executive Officer.

“As we move forward, we are well positioned to help our clients navigate our new landscape. I am grateful for the commitment and dedication of our teams across the globe as we help advisors and firms improve the financial lives of their clients. Envestnet has been there for them throughout this extraordinary time. And we are ready to power the next phase of advice, with the ultimate goal of improving the financial lives of millions of American households,” concluded Mr. Crager.

COVID-19 Pandemic

We are closely monitoring developments with the COVID-19 pandemic and taking proactive measures to ensure business continuity. Our priority is to protect the well-being of our employees, while we continue to provide uninterrupted service and support to our clients. As part of our existing business continuity protocol, we created a pandemic steering committee that meets regularly and communicates information or guidance to employees and customers. Currently, nearly 100% of our employees are working remotely, with the tools they need to perform their jobs. We are implementing location-specific back-to-office plans incorporating guidance from the CDC, OSHA and in consideration of local regulations and ordinances. As the situation evolves, we will continue to support our customers and the health and well-being of our employees and other stakeholders.

Financial Results for the First Quarter of 2020

Asset-based recurring revenues increased 24% from the first quarter of 2019, and represented 55% of total revenues for the first quarters of both 2020 and 2019. Subscription-based recurring revenues increased 26% from the first quarter of 2019, and represented 42% of total revenues the first quarter of 2020 and 2019. Professional services and other non-recurring revenues decreased 6% from the prior year period. Total revenues increased 23% to $246.5 million for the first quarter of 2020 from $199.7 million for the first quarter of 2019. When excluding $17.4 million of revenue from acquisitions not included in the prior period, total revenue grew 15% for the three months ended March 31, 2020, compared to the first quarter of 2019.

Total operating expenses for the first quarter of 2020 increased 22% to $254.2 million from $208.4 million in the prior year period. Cost of revenues increased 22% to $74.9 million for the first quarter of 2020 from $61.6 million for the prior year period. Compensation and benefits increased 27% to $110.4 million for the first quarter of 2020 from $86.7 million for the prior year period. Compensation and benefits were 45% of total revenues for the first quarter of 2020, compared to 43% in the prior year period. General and administration expenses increased 1% to $41.1 million for the first quarter of 2020 from $40.5 million for the prior year period. General and administrative expenses were 17% of total revenues for the first quarter of 2020, compared to 20% in the prior year period.

Loss from operations was $7.6 million for the first quarter of 2020 compared to loss of $8.7 million for the first quarter of 2019. Net loss was $7.2 million for the first quarter of 2020 compared to net loss of $18.3 million for the first quarter of 2019. Net loss per diluted share attributable to Envestnet, Inc. was $0.14 for the first quarter of 2020 compared to net loss per diluted share attributable to Envestnet, Inc. of $0.38 for the first quarter of 2019.

Adjusted revenues(1) for the first quarter of 2020 increased 24% to $247.0 million from $199.7 million for the prior year period. Adjusted net revenues(1) for the first quarter of 2020 increased 22% to $178.4 million from $145.8 million for the prior year period. Adjusted EBITDA(1) for the first quarter of 2020 increased 61% to $54.6 million from $34.0 million for the prior year period. Adjusted net income(1) increased 61% for the first quarter of 2020 to $31.2 million from $19.4 million for the prior year period. Adjusted net income per diluted share(1) for the first quarter of 2020 increased 46% to $0.57 for the first quarter of 2020 from $0.39 in the first quarter of 2019.

Balance Sheet and Liquidity

As of March 31, 2020, the Company had $68.6 million in cash and cash equivalents and $635.0 million in outstanding debt. The outstanding debt as of March 31, 2020 included $290.0 million in borrowings under the Company's $500.0 million revolving credit facility and $345.0 million in convertible notes maturing in 2023.

Outlook

The Company provided the following outlook for the second quarter ending June 30, 2020 and full year ending December 31, 2020. This outlook is based on the market value of assets on March 31, 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

 

2Q 2020

 

FY 2020

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

116.0

 

 

-

 

$

116.5

 

 

 

 

 

 

 

Subscription-based

 

103.4

 

 

-

 

103.9

 

 

 

 

 

 

 

Total recurring revenues

 

$

219.4

 

 

-

 

$

220.4

 

 

 

 

 

 

 

Professional services and other revenues    

 

6.5

 

 

-

 

7.0

 

 

 

 

 

 

 

Total revenues

 

$

225.9

 

 

-

 

$

227.4

 

 

$

939.5

 

 

-

 

$

945.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based cost of revenues

 

$

60.5

 

 

-

 

$

61.0

 

 

$

257.0

 

 

-

 

$

262.0

 

Total cost of revenues

 

$

68.0

 

 

-

 

$

68.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 

55.0

 

 

 

 

 

55.0

 

 

Net income per diluted share

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues (1):

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

116.0

 

 

-

 

$

116.5

 

 

 

 

 

 

 

Subscription-based

 

103.5

 

 

-

 

104.0

 

 

 

 

 

 

 

Total recurring revenues

 

$

219.5

 

 

-

 

$

220.5

 

 

 

 

 

 

 

Professional services and other revenues

 

6.5

 

 

-

 

7.0

 

 

 

 

 

 

 

Total revenues

 

$

226.0

 

 

-

 

$

227.5

 

 

$

940.0

 

 

-

 

$

946.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net revenues (1)

 

$

165.0

 

 

-

 

$

167.0

 

 

$

678.0

 

 

-

 

$

689.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

47.5

 

 

-

 

$

48.5

 

 

$

200.0

 

 

-

 

$

203.0

 

Adjusted net income per diluted share(1)

 

 

 

$

0.47

 

 

 

 

$

1.92

 

 

-

 

$

2.02

 

(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 first 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 a leading provider of intelligent systems for wealth management and financial wellness. Envestnet's unified technology empowers enterprises and advisors to more fully understand their clients and deliver actionable intelligence that drives better outcomes and improves lives.

Envestnet Wealth Solutions enables enterprises and advisors to better manage client outcomes and strengthen their practices through its leading Wealth Management Operating System and advanced portfolio solutions. Envestnet | Tamarac provides portfolio management, reporting, trading, rebalancing and client portal solutions for registered independent advisers (“RIAs”). Envestnet | MoneyGuide provides goals-based financial planning applications. Envestnet Data & Analytics enables innovation and insights through its Envestnet | Yodlee data aggregation platform.

More than 103,000 advisors and more than 4,900 companies including: 16 of the 20 largest U.S. banks, 46 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of internet services companies, leverage Envestnet technology and services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences and 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. 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 costs 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 loss 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, non-recurring litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, non-recurring gain, loss allocation from equity method investment and (income) loss attributable to non-controlling interest.

“Adjusted net income” represents net loss 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, amortization of acquired intangibles, non-recurring litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, non-recurring gain, loss allocation from equity method investment 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 reconciliation 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 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 second 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 the 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 May 7, 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)

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2020

 

2019

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

68,601

 

 

$

82,505

 

Fees receivable, net

 

81,133

 

 

67,815

 

Prepaid expenses and other current assets   

 

37,699

 

 

32,183

 

Total current assets

 

187,433

 

 

182,503

 

 

 

 

 

 

Property and equipment, net

 

53,190

 

 

53,756

 

Internally developed software, net

 

68,227

 

 

60,263

 

Intangible assets, net

 

489,840

 

 

505,589

 

Goodwill

 

906,501

 

 

879,850

 

Operating lease right-of-use-assets, net

 

78,860

 

 

82,796

 

Other non-current assets

 

46,407

 

 

37,127

 

Total assets

 

$

1,830,458

 

 

$

1,801,884

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accrued expenses and other liabilities

 

$

132,142

 

 

$

137,944

 

Accounts payable

 

14,294

 

 

17,277

 

Operating lease liabilities

 

13,736

 

 

13,816

 

Contingent consideration

 

2,569

 

 

 

Deferred revenue

 

40,177

 

 

34,753

 

Total current liabilities

 

202,918

 

 

203,790

 

 

 

 

 

 

Convertible Notes due 2023

 

308,262

 

 

305,513

 

Revolving credit facility

 

290,000

 

 

260,000

 

Contingent consideration

 

12,222

 

 

9,045

 

Deferred revenue

 

6,277

 

 

5,754

 

Non-current operating lease liabilities

 

84,935

 

 

88,365

 

Deferred tax liabilities, net

 

26,680

 

 

29,481

 

Other non-current liabilities

 

34,967

 

 

32,360

 

Total liabilities

 

966,261

 

 

934,308

 

 

 

 

 

 

Equity:

 

 

 

 

Total stockholders’ equity

 

865,569

 

 

869,094

 

Non-controlling interest

 

(1,372

)

 

(1,518

)

Total liabilities and equity

 

$

1,830,458

 

 

$

1,801,884

 

                 

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Revenues:

 

 

 

 

Asset-based

 

$

134,811

 

 

$

108,934

 

Subscription-based

 

104,551

 

 

83,087

 

Total recurring revenues

 

239,362

 

 

192,021

 

Professional services and other revenues

 

7,177

 

 

7,645

 

Total revenues

 

246,539

 

 

199,666

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Cost of revenues

 

74,933

 

 

61,645

 

Compensation and benefits

 

110,430

 

 

86,717

 

General and administration

 

41,110

 

 

40,524

 

Depreciation and amortization

 

27,683

 

 

19,517

 

Total operating expenses

 

254,156

 

 

208,403

 

 

 

 

 

 

Loss from operations

 

(7,617

)

 

(8,737

)

Other expense, net

 

(1,537

)

 

(5,763

)

Loss before income tax provision (benefit)

 

(9,154

)

 

(14,500

)

 

 

 

 

 

Income tax provision (benefit)

 

(1,964

)

 

3,768

 

 

 

 

 

 

Net loss

 

(7,190

)

 

(18,268

)

Add: Net (income) loss attributable to non-controlling interest

 

(146

)

 

83

 

Net loss attributable to Envestnet, Inc.

 

$

(7,336

)

 

$

(18,185

)

 

 

 

 

 

Net loss per share attributable to Envestnet, Inc.:

 

 

 

 

Basic

 

$

(0.14

)

 

$

(0.38

)

 

 

 

 

 

Diluted

 

$

(0.14

)

 

$

(0.38

)

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

Basic

 

53,016,511

 

 

48,237,265

 

 

 

 

 

 

Diluted

 

53,016,511

 

 

48,237,265

 

             

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

     

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

OPERATING ACTIVITIES:

 

 

 

 

Net loss

 

$

(7,190

)

 

$

(18,268

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

27,683

 

 

19,517

 

Provision for doubtful accounts

 

1,026

 

 

451

 

Deferred income taxes

 

(1,587

)

 

169

 

Non-cash compensation expense

 

15,985

 

 

12,864

 

Non-cash interest expense

 

4,463

 

 

6,880

 

Accretion on contingent consideration and purchase liability

 

599

 

 

240

 

Gain on acquisition of equity method investment

 

(4,230

)

 

 

Loss allocation from equity method investment

 

2,030

 

 

203

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Fees receivables, net

 

(14,333

)

 

1,198

 

Prepaid expenses and other current assets

 

(6,793

)

 

(13,346

)

Other non-current assets

 

641

 

 

(1,060

)

Accrued expenses and other liabilities

 

(11,554

)

 

(34,495

)

Accounts payable

 

(3,205

)

 

5,179

 

Deferred revenue

 

5,598

 

 

7,039

 

Other non-current liabilities

 

(145

)

 

854

 

Net cash provided by (used in) operating activities

 

8,988

 

 

(12,575

)

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchases of property and equipment

 

(2,160

)

 

(5,247

)

Capitalization of internally developed software

 

(11,572

)

 

(7,185

)

Investments in private companies

 

(11,700

)

 

(1,000

)

Acquisitions of businesses, net of cash acquired

 

(20,257

)

 

(11,061

)

Net cash used in investing activities

 

(45,689

)

 

(24,493

)

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from borrowings on revolving credit facility

 

45,000

 

 

 

Payments on revolving credit facility

 

(15,000

)

 

 

Proceeds from exercise of stock options

 

3,408

 

 

3,163

 

Purchase of treasury stock for stock-based tax withholdings

 

(9,199

)

 

(9,819

)

Issuance of restricted stock units

 

2

 

 

2

 

Net cash provided by (used in) financing activities

 

24,211

 

 

(6,654

)

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

(1,496

)

 

112

 

 

 

 

 

 

DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

(13,986

)

 

(43,610

)

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD   

 

82,755

 

 

289,671

 

 

 

 

 

 

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

 

$

68,769

 

 

$

246,061

 

(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,

 

 

2020

 

2019

Cash and cash equivalents

 

$

68,601

 

 

$

245,735

 

Restricted cash included in prepaid expenses and other current assets   

 

 

 

158

 

Restricted cash included in other non-current assets

 

168

 

 

168

 

Total cash, cash equivalents and restricted cash

 

$

68,769

 

 

$

246,061

 

                 

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 

 

 

 

 

Three Months Ended

 

 

March 31,

 

 

2020

 

2019

Total revenues

 

$

246,539

 

 

$

199,666

 

Deferred revenue fair value adjustment (a)

 

439

 

 

6

 

Adjusted revenues

 

246,978

 

 

199,672

 

Asset-based cost of revenues

 

(68,592

)

 

(53,842

)

Adjusted net revenues

 

$

178,386

 

 

$

145,830

 

 

 

 

 

 

Net loss

 

$

(7,190

)

 

$

(18,268

)

Add (deduct):

 

 

 

 

Deferred revenue fair value adjustment (a)

 

439

 

 

6

 

Interest income (b)

 

(391

)

 

(1,510

)

Interest expense (b)

 

7,134

 

 

7,096

 

Accretion on contingent consideration and purchase liability (c)

 

599

 

 

240

 

Income tax provision (benefit)

 

(1,964

)

 

3,768

 

Depreciation and amortization

 

27,683

 

 

19,517

 

Non-cash compensation expense (d)

 

13,470

 

 

12,864

 

Restructuring charges and transaction costs (c)

 

2,820

 

 

7,366

 

Severance (e)

 

13,982

 

 

2,480

 

Non-recurring litigation and regulatory related expenses (c)

 

703

 

 

 

Foreign currency (b)

 

(494

)

 

(1

)

Non-income tax expense adjustment (c)

 

188

 

 

210

 

Non-recurring gain (b)

 

(4,230

)

 

 

Loss allocation from equity method investment (b)

 

2,030

 

 

203

 

(Income) loss attributable to non-controlling interest

 

(201

)

 

31

 

Adjusted EBITDA

 

$

54,578

 

 

$

34,002

 

(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 administrative expenses in the condensed consolidated statements of operations.

(d)

For the 2020 period, $15,994 included in compensation and benefits, and a fair value adjustment of $(2,524) of other 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)

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

 

 

March 31,

 

 

2020

 

2019

Net loss

 

$

(7,190

)

 

$

(18,268

)

Income tax provision (benefit) (a)

 

(1,964

)

 

3,768

 

Loss before income tax provision (benefit)

 

(9,154

)

 

(14,500

)

Add (deduct):

 

 

 

 

Deferred revenue fair value adjustment (b)

 

439

 

 

6

 

Accretion on contingent consideration and purchase liability (d)

 

599

 

 

240

 

Non-cash interest expense (c)

 

2,962

 

 

4,616

 

Non-cash compensation expense (e)

 

13,470

 

 

12,864

 

Restructuring charges and transaction costs (d)

 

2,820

 

 

7,366

 

Severance (f)

 

13,982

 

 

2,480

 

Amortization of acquired intangibles (g)

 

18,758

 

 

12,528

 

Non-recurring litigation and regulatory related expenses (d)

 

703

 

 

 

Foreign currency (c)

 

(494

)

 

(1

)

Non-income tax expense adjustment (d)

 

188

 

 

210

 

Non-recurring gain (c)

 

(4,230

)

 

 

Loss allocation from equity method investment (c)

 

2,030

 

 

203

 

(Income) loss attributable to non-controlling interest

 

(201

)

 

31

 

Adjusted net income before income tax effect

 

41,872

 

 

26,043

 

Income tax effect (h)

 

(10,670

)

 

(6,632

)

Adjusted net income

 

$

31,202

 

 

$

19,411

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

53,016,511

 

 

48,237,265

 

Effect of dilutive shares:

 

 

 

 

Options to purchase common stock

 

664,796

 

 

1,198,197

 

Unvested restricted stock units

 

600,567

 

 

656,798

 

Convertible notes

 

235,182

 

 

 

Warrants

 

42,551

 

 

 

Diluted number of weighted-average shares outstanding

 

54,559,607

 

 

50,092,260

 

 

 

 

 

 

Adjusted net income per share - diluted

 

$

0.57

 

 

$

0.39

 

(a)

For the three months ended March 31, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled 21.5% and (26.0)%, respectively.

(b)

Included within subscription-based 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 2020 period, $15,994 included in compensation and benefits, and a fair value adjustment of $(2,524) of other 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.

(f)

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

(g)

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

(h)

Estimated normalized effective tax rates of 25.5% have been used to compute adjusted net income for the three months ended March 31, 2020 and 2019.

 

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

     

 

 

Three months ended March 31, 2020

 

 

Envestnet

Wealth

Solutions

 

Envestnet Data

& Analytics

 

Nonsegment

 

Total

Total Revenues

 

$

198,420

 

 

$

48,119

 

 

$

 

 

$

246,539

 

Deferred revenue fair value adjustment (a)

 

439

 

 

 

 

 

 

439

 

Adjusted revenues

 

198,859

 

 

48,119

 

 

 

 

246,978

 

Less: Asset-based cost of revenues

 

(68,592

)

 

 

 

 

 

(68,592

)

Adjusted net revenues

 

$

130,267

 

 

$

48,119

 

 

$

 

 

$

178,386

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

134,811

 

 

$

 

 

$

 

 

$

134,811

 

Subscription-based

 

60,323

 

 

44,228

 

 

 

 

104,551

 

Total recurring revenues

 

195,134

 

 

44,228

 

 

 

 

239,362

 

Professional services and other revenues

 

3,286

 

 

3,891

 

 

 

 

7,177

 

Total revenues

 

198,420

 

 

48,119

 

 

 

 

246,539

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

68,592

 

 

 

 

 

 

68,592

 

Subscription-based

 

1,192

 

 

5,085

 

 

 

 

6,277

 

Professional services and other

 

8

 

 

56

 

 

 

 

64

 

Total cost of revenues

 

69,792

 

 

5,141

 

 

 

 

74,933

 

Compensation and benefits

 

72,588

 

 

30,113

 

 

7,729

 

 

110,430

 

General and administration

 

25,280

 

 

9,187

 

 

6,643

 

 

41,110

 

Depreciation and amortization

 

19,420

 

 

8,263

 

 

 

 

27,683

 

Total operating expenses

 

$

187,080

 

 

$

52,704

 

 

$

14,372

 

 

$

254,156

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

11,340

 

 

$

(4,585

)

 

$

(14,372

)

 

$

(7,617

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

439

 

 

 

 

 

 

439

 

Accretion on contingent consideration and purchase liability (b)

 

373

 

 

226

 

 

 

 

599

 

Depreciation and amortization

 

19,420

 

 

8,263

 

 

 

 

27,683

 

Non-cash compensation expense (c)

 

9,697

 

 

4,226

 

 

2,071

 

 

15,994

 

Restructuring charges and transaction costs (b)

 

1,189

 

 

185

 

 

1,446

 

 

2,820

 

Non-income tax expense adjustment (b)

 

250

 

 

(62

)

 

 

 

188

 

Severance (c)

 

11,002

 

 

1,660

 

 

1,320

 

 

13,982

 

Non-recurring litigation and regulatory related expenses (b)

 

 

 

703

 

 

 

 

703

 

Income attributable to non-controlling interest

 

(201

)

 

 

 

 

 

(201

)

Other

 

(12

)

 

 

 

 

 

(12

)

Adjusted EBITDA

 

$

53,497

 

 

$

10,616

 

 

$

(9,535

)

 

$

54,578

 

(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.

 

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

     

 

 

Three Months Ended March 31, 2019

 

 

Envestnet

Wealth

Solutions

 

Envestnet Data

& Analytics

 

Nonsegment

 

Total

Revenues

 

$

152,705

 

 

$

46,961

 

 

$

 

 

$

199,666

 

Deferred revenue fair value adjustment (a)

 

6

 

 

 

 

 

 

6

 

Adjusted revenues

 

152,711

 

 

46,961

 

 

 

 

199,672

 

Less: Asset-based cost of revenues

 

(53,842

)

 

 

 

 

 

(53,842

)

Adjusted net revenues

 

$

98,869

 

 

$

46,961

 

 

$

 

 

$

145,830

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

108,934

 

 

$

 

 

$

 

 

$

108,934

 

Subscription-based

 

41,026

 

 

42,061

 

 

 

 

83,087

 

Total recurring revenues

 

149,960

 

 

42,061

 

 

 

 

192,021

 

Professional services and other revenues

 

2,745

 

 

4,900

 

 

 

 

7,645

 

Total revenues

 

152,705

 

 

46,961

 

 

 

 

199,666

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

53,842

 

 

 

 

 

 

53,842

 

Subscription-based

 

2,008

 

 

5,669

 

 

 

 

7,677

 

Professional services and other

 

5

 

 

121

 

 

 

 

126

 

Total cost of revenues

 

55,855

 

 

5,790

 

 

 

 

61,645

 

Compensation and benefits

 

48,555

 

 

31,364

 

 

6,798

 

 

86,717

 

General and administration

 

20,184

 

 

9,485

 

 

10,855

 

 

40,524

 

Depreciation and amortization

 

11,267

 

 

8,250

 

 

 

 

19,517

 

Total operating expenses

 

$

135,861

 

 

$

54,889

 

 

$

17,653

 

 

$

208,403

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

16,844

 

 

$

(7,928

)

 

$

(17,653

)

 

$

(8,737

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

6

 

 

 

 

 

 

6

 

Accretion on contingent consideration and purchase liability (b)

 

240

 

 

 

 

 

 

240

 

Depreciation and amortization

 

11,267

 

 

8,250

 

 

 

 

19,517

 

Non-cash compensation expense (c)

 

5,677

 

 

4,188

 

 

2,999

 

 

12,864

 

Restructuring charges and transaction costs (b)

 

262

 

 

965

 

 

6,139

 

 

7,366

 

Non-income tax expense adjustment (b)

 

200

 

 

10

 

 

 

 

210

 

Severance (c)

 

350

 

 

2,048

 

 

82

 

 

2,480

 

Loss attributable to non-controlling interest

 

31

 

 

 

 

 

 

31

 

Other

 

22

 

 

1

 

 

2

 

 

25

 

Adjusted EBITDA

 

$

34,899

 

 

$

7,534

 

 

$

(8,431

)

 

$

34,002

 

(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.

 

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,

 

 

2019

 

2019

 

2019

 

2019

 

2020

 

 

(in millions, except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

Assets under Management (“AUM”)

 

$

176,144

 

 

$

182,143

 

 

$

188,739

 

 

$

207,083

 

 

$

185,065

 

Assets under Administration (“AUA”)

 

319,129

 

 

330,226

 

 

316,742

 

 

343,505

 

 

312,472

 

Total AUM/A

 

495,273

 

 

512,369

 

 

505,481

 

 

550,588

 

 

497,537

 

Subscription

 

2,546,483

 

 

2,835,780

 

 

2,947,582

 

 

3,205,281

 

 

2,875,394

 

Total Platform Assets

 

$

3,041,756

 

 

$

3,348,149

 

 

$

3,453,063

 

 

$

3,755,869

 

 

$

3,372,931

 

Platform Accounts

 

 

 

 

 

 

 

 

 

 

AUM

 

874,574

 

 

907,034

 

 

934,811

 

 

935,039

 

 

970,896

 

AUA

 

1,187,589

 

 

1,196,114

 

 

1,136,430

 

 

1,193,882

 

 

1,254,856

 

Total AUM/A

 

2,062,163

 

 

2,103,148

 

 

2,071,241

 

 

2,128,921

 

 

2,225,752

 

Subscription

 

8,909,581

 

 

9,492,653

 

 

9,692,714

 

 

9,793,175

 

 

10,090,172

 

Total Platform Accounts

 

10,971,744

 

 

11,595,801

 

 

11,763,955

 

 

11,922,096

 

 

12,315,924

 

Advisors

 

 

 

 

 

 

 

 

 

 

AUM/A

 

39,035

 

 

39,727

 

 

39,735

 

 

40,563

 

 

40,971

 

Subscription

 

57,594

 

 

59,292

 

 

60,319

 

 

61,180

 

 

62,077

 

Total Advisors

 

96,629

 

 

99,019

 

 

100,054

 

 

101,743

 

 

103,048

 

The following table summarizes the changes in AUM and AUA for the three months ended March 31, 2020:

 

 

12/312019

 

Gross

Sales

 

Redemptions

 

Net

Flows

 

Market

Impact

 

Reclass to

Subscription

 

3/31/2020

 

 

(in millions except account data)

AUM

 

$

207,083

 

 

$

20,986

 

 

$

(11,099

)

 

$

9,887

 

 

$

(31,905

)

 

$

 

 

$

185,065

 

AUA

 

343,505

 

 

39,934

 

 

(18,878

)

 

21,056

 

 

(50,144

)

 

(1,945

)

 

312,472

 

Total AUM/A

 

$

550,588

 

 

$

60,920

 

 

$

(29,977

)

 

$

30,943

 

 

$

(82,049

)

 

$

(1,945

)

 

$

497,537

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

2,128,921

 

 

 

 

 

 

117,673

 

 

 

 

(20,842

)

 

2,225,752

 

The above AUM/A gross sales figures include $20.1 billion in new client conversions. The Company onboarded an additional $25.0 billion in subscription conversions during the three months ended March 31, 2020, bringing total conversions for the quarter to $45.1 billion.

Asset and account figures in the “Reclass to Subscription” columns for the three months ended March 31, 2020 represent enterprise customers whose billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, with no impact on total platform assets or accounts.

Information is current only as of the date(s) indicated on the materials. We do not have any current intention, and expressly disclaim any obligation, to supplement, update or revise any of the information in these documents. The information contained in these documents should be considered accurate only as of the date of the relevant document. This information may change over time; therefore, visitors to this web site should not assume that the information contained in these documents remains accurate at a later time. Envestnet, Inc.'s press releases, presentations and printed remarks are included on this website for historical purposes only.

Except for historical information and discussions, statements set forth throughout this web site may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 or other applicable laws. These statements involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially, as discussed in the company's filings with the U.S. Securities and Exchange Commission.

Envestnet, Inc.'s financial performance is subject to risks and uncertainties, some of which are discussed in forward-looking statements contained in its reports filed with the U.S. Securities and Exchange Commission. Actual results may differ materially from those described in the forward-looking statements. The stock data above is presented for informational purposes only and is not intended for trading purposes. Stock information may be delayed and reflects stock splits. Historical investment performance is not an indication of future performance.

The information provided on the Investor Relations pages is hosted by a third party. Envestnet, Inc. does not control and is not responsible for any third party content and makes no representations as to the timeliness or accuracy of such content.