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Envestnet Reports Fourth Quarter and Full Year 2017 Financial Results

02/22/18 4:05 pm EST

CHICAGO--(BUSINESS WIRE)--Feb. 22, 2018-- Envestnet (NYSE:ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for its quarter and year ended December 31, 2017.

 
 

Three Months Ended

      Year Ended  

Key Financial Metrics (unaudited)

December 31, % December 31, %
(in millions except per share data)

2017

  2016 Change 2017   2016 Change
GAAP:
Total Revenues $ 182.9 $ 155.5 18 % $ 683.7 $ 578.2 18 %
Net Income (Loss) 17.6 (32.6 ) n/m (3.3 )

 

(55.6 ) (94 %)
Net Income (loss) per Diluted Share $ 0.38 $ (0.75 ) n/m $ (0.08 ) $ (1.30 ) (94 %)
 
Non-GAAP:
Adjusted Revenues(1) $ 182.9 $ 156.0 17 % $ 683.8 $ 579.4 18 %
Adjusted EBITDA(1) 38.7 30.4 27 % 128.9 99.4 30 %
Adjusted Net Income(1) 18.7 14.2 32 % 60.6 43.6 39 %
Adjusted Net Income per Diluted Share(1) $ 0.40 $ 0.32 25 % $ 1.31 $ 0.98 34 %

____________________

n/m – Not meaningful

 

“The fourth quarter completed a year of solid organic growth in revenue, adjusted EBITDA and earnings for Envestnet, driven by strong execution and a healthy market environment,” said Jud Bergman, Chairman and CEO. “As we begin 2018, we are focused on integrating FolioDynamix’s customers and employees. And, we continue to pursue our advice- and data- centric strategy to drive adoption of our wealth management and financial wellness platforms.”

“We see significant growth opportunities to establish Envestnet as the premier operating system for financial wellness, enabling better outcomes for a network of enterprises, advisors and clients,” concluded Mr. Bergman.

Financial Results for the Fourth Quarter of 2017 Compared to the Fourth Quarter of 2016:

Total revenues increased 18% to $182.9 million in the three months ended December 31, 2017 from $155.5 million in the three months ended December 31, 2016. Asset-based revenues, which were 61% and 60% of total revenues for the fourth quarter of 2017 and 2016, respectively, increased 18% from the prior year period. Subscription and licensing revenues increased 17% from the prior year period.

Total operating expenses for the fourth quarter of 2017 increased 7% to $170.2 million from $158.5 million in the prior year period. Cost of revenues increased 20% to $58.0 million for the fourth quarter of 2017 from $48.3 million for the fourth quarter of 2016. Compensation and benefits increased 7% to $65.3 million for the fourth quarter of 2017 from $61.0 million for the prior year period. Compensation and benefits were 36% of total revenues for the fourth quarter of 2017, compared to 39% for the prior year period. General and administration expenses decreased 12% to $30.8 million for the fourth quarter of 2017 from $35.2 million for the prior year period. General and administrative expenses were 17% of total revenues for the fourth quarter of 2017 compared to 23% for the prior year period.

Income from operations was $12.7 million for the fourth quarter of 2017 compared to a loss of $3.1 million for the fourth quarter of 2016. Net income attributable to Envestnet, Inc. was $17.6 million, or $0.38 per diluted share, for the fourth quarter of 2017 compared to a loss of $32.6 million, or a loss of $0.75 per diluted share, for the fourth quarter of 2016.

Adjusted Revenues(1) for the fourth quarter of 2017 increased 17% to $182.9 million from $156.0 million for the prior year period. Adjusted EBITDA(1) for the fourth quarter of 2017 increased 27% to $38.7 million from $30.4 million for the prior year period. Adjusted Net Income(1) increased 32% for the fourth quarter of 2017 to $18.7 million from $14.2 million for the prior year period. Adjusted Net Income per Diluted Share(1) for the fourth quarter of 2017 increased 25% to $0.40 from $0.32 in the fourth quarter of 2016.

The above results are unaudited and could change in connection with the completion of the audit of our full year financial statements.

FolioDynamix Acquisition

On January 2, 2018, Envestnet (“the Company”) completed its acquisition of FolioDynamix. In connection with the acquisition, Envestnet paid $195 million in cash for all the outstanding shares of FolioDynamix, subject to certain closing and post-closing adjustments, using a combination of cash on the Company’s balance sheet and borrowings under its revolving credit facility. As a standalone firm, the FolioDynamix platform supported approximately 28,000 advisors, 3.2 million accounts and $899 billion in assets as of December 31, 2017. FolioDynamix’s expected contribution to Envestnet’s 2018 financial results is included in the Outlook section below.

Recent Accounting Pronouncements

Effective January 1, 2018, Envestnet adopted ASU 2014-09, “Revenue from Contracts with Customers,” using the modified retrospective method. The new rules impact the accounting for revenue, as well as the costs to obtain customer contracts. While most of the changes in revenue and expense recognition will be immaterial to Envestnet’s financial results, revenues and cost of revenues will be lower under the new rules, beginning in the first quarter of 2018, due to the treatment of certain third party fees. The expected financial impact from these changes in accounting principles is included in the Outlook section below.

Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law in the U.S. The provisions of the new tax law that are effective during 2017 do not have a material impact on Envestnet’s financial statements due to a valuation allowance on our U.S. temporary differences. From a cash tax perspective, we also do not anticipate a material impact as a result of the new tax law due to the use of foreign tax credits and net operating losses. For 2017, we will pay foreign income tax and in the U.S. alternative minimum tax and state income tax.

For purposes of calculating and reporting adjusted net income and adjusted net income per share, we are reducing our estimated normalized effective tax rate from 40% to 27% beginning in 2018. This reflects the new 21% federal statutory rate and an incremental 6% for state taxes. The expected financial impact of this change in assumption is included in the Outlook section below.

Outlook

The Company provided the following outlook for the first quarter ended March 31, 2018 and full year ending December 31, 2018. This outlook is based on the market value of assets on December 31, 2017. As noted above, it also includes the anticipated contribution from FolioDynamix, the change in accounting for certain revenues and expenses under ASU 2014-09, and a lower normalized effective tax rate.

 
In Millions Except Adjusted EPS   1Q 2018   FY 2018
GAAP:    
AUM/A revenue $118.0 - $120.0 -
Subscription and licensing revenue 69.5 - 70.0 -
Professional services and other revenue 4.5 - 5.0 -
Revenues $192.0 - $195.0

$808.0

-

$823.0

 
Cost of revenues $63.0 - $64.5 -
Net Income - -
 
Diluted shares outstanding 47 -
Net Income per Diluted Share - -
 
Non-GAAP:
Adjusted Revenues(1)

$192.0

-

$195.0

$808.0

-

$823.0

Adjusted EBITDA(1) $30.5 - $31.5 $151.0 - $155.0
Adjusted Net Income per Diluted Share(1) $0.36 $1.78 - $ 1.83
 

The above outlook for adjusted revenues is equal to GAAP revenues, as the Company currently expects immaterial deferred revenue fair value adjustments in 2018. The Company does not forecast net income and net income per share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

As noted above, various items have been incorporated into the Company’s outlook for 2018. Estimates of the impact on growth in revenue and adjusted EBITDA are noted in the table below.

 
Approximate Impact on Growth vs. 2017
 
      Full Year 2018
Revenues   Adjusted EBITDA
Core Business       12-14%   15-17%
Adoption of ASU 2014-09 (2-3%) -
FolioDynamix 9-10% 5-6%
Growth Initiatives       -     (2-3%)  
 
Guidance Range       18-20%     17-20%  
 

Conference Call

Envestnet will host a conference call to discuss fourth quarter 2017 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 (866) 548-4713, or for international callers (323) 794-2093. A replay will be available two hours after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 1228086. 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 intelligent systems for wealth management and financial wellness. Envestnet's unified technology enhances advisor productivity and strengthens the wealth management process. Envestnet empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.

Envestnet enables financial advisors to better manage client outcomes and strengthen their practices. Institutional-quality research and advanced portfolio solutions are provided through Envestnet | PMC, our Portfolio Management Consultants group. Envestnet | Yodlee is a leading data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services. Envestnet | Tamarac provides leading rebalancing, reporting, and practice management software for advisors. Envestnet | Retirement Solutions provides retirement advisors with an integrated platform that combines leading practice management technology, research and due diligence, data aggregation, compliance tools, fiduciary solutions and intelligent managed account solutions.

More than 59,000 advisors and 2,900 companies including: 16 of the 20 largest U.S. banks, 39 of the 50 largest wealth management and brokerage firms, over 500 of the largest Registered Investment Advisers, 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 @ENVintel.

____________________
(1) Non-GAAP Financial Measures

“Adjusted revenues” excludes 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 (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, fair market value adjustment on contingent consideration, litigation related expense, foreign currency and related hedging activity, other income, non-income tax expense adjustment, impairment of equity method investment, loss allocation from equity method investment and loss attributable to non-controlling interest.

“Adjusted net income” represents net income (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, fair market value adjustment on contingent consideration, litigation related expense, foreign currency and related hedging activity, other income, non-income tax expense adjustment, impairment of equity method investment, loss allocation from equity method investment and 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.

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

See reconciliation of Non-GAAP Financial Measures on pages 9-11 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 first quarter and full year of 2018, 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, the possibility that the anticipated benefits of the Company’s acquisition of FolioDynamix will not be realized to the extent or when expected, potential exposure to state and local non-income tax obligations, the Company’s ability to remediate material weaknesses in internal controls over financial reporting and associated costs, 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 services industry, the impact of market and economic conditions on revenues, 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, potential dilution from issuing equity securities or a weaker balance sheet from using cash or incurring debt to finance acquisitions, the impact of market conditions on the Company’s ability to issue additional debt and equity to fund acquisitions, compliance failures, regulatory or third-party 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, political and regulatory conditions, the impact of fluctuations in interest rates on the Company’s business, ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytic solutions and market research services and premium FinApps, the results of our investments in research and development, our data center and other infrastructure, our ability to realize operating efficiencies, the advantages of our solutions as compared to those of others, our ability to retain and hire necessary employees and appropriately staff our operations, in particular our India operations, and 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 February 22, 2018 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)

 
  December 31,   December 31,

2017

2016

Assets
Current assets:
Cash and cash equivalents $ 60,115 $ 52,592
Fees and other receivables, net 51,522 44,268
Prepaid expenses and other current assets   19,470     16,224  
Total current assets   131,107     113,084  
 
Property and equipment, net 35,909 33,000
Internally developed software, net 22,174 14,860
Intangible assets, net 222,731 265,558
Goodwill 432,955 431,936
Other non-current assets   17,176     13,963  
Total assets $ 862,052   $ 872,401  
 
Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities $ 105,897 $ 87,763
Accounts payable 11,097 11,480
Current portion of debt 37,926
Contingent consideration 2,115 2,286
Deferred revenue   21,246     16,499  
Total current liabilities   140,355     155,954  
 
Convertible Notes 158,990 152,575
Revolving credit facility 81,168
Term Notes 100,409
Contingent consideration 666 2,582
Deferred revenue 12,047 15,643
Deferred rent and lease incentive 15,185 12,060
Deferred tax liabilities, net 969 5,555
Other non-current liabilities   15,102     13,436  
Total liabilities   424,482     458,214  
 
Redeemable units in ERS 900 900
 
Equity:
Stockholders’ equity 436,272 412,889
Non-controlling interest   398     398  
Total liabilities and equity $ 862,052   $ 872,401  
 

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 
  Three Months Ended   Year Ended
December 31, December 31,
2017   2016 2017   2016
Revenues:
Assets under management or administration $ 110,748 $ 93,529 $ 410,016 $ 352,498
Subscription and licensing 65,192 55,822 245,867 198,125
Professional services and other   6,922     6,129     27,796     27,541  
Total revenues   182,862     155,480     683,679     578,164  
 
Operating expenses:
Cost of revenues 58,006 48,271 219,037 180,590
Compensation and benefits 65,313 60,959 264,392 241,584
General and administration 30,832 35,186 121,010 115,435
Depreciation and amortization   16,028     14,127     62,820     63,999  
Total operating expenses   170,179     158,543     667,259     601,608  
Income (loss) from operations 12,683 (3,063 ) 16,420 (23,444 )
Other expense, net   (4,271 )   (3,832 )   (18,109 )   (17,046 )
Income (loss) before income tax provision (benefit) 8,412 (6,895 ) (1,689 ) (40,490 )
Income tax provision (benefit)   (9,233 )   25,679     1,591     15,077  
Net income (loss) 17,645 (32,574 ) (3,280 ) (55,567 )
Add: Net income (loss) attributable to non-controlling interest                
Net income (loss) attributable to Envestnet, Inc. $ 17,645   $ (32,574 ) $ (3,280 ) $ (55,567 )
 
Net income (loss) per share attributable to Envestnet, Inc.:
Basic $ 0.40   $ (0.75 ) $ (0.08 ) $ (1.30 )
 
Diluted $ 0.38   $ (0.75 ) $ (0.08 ) $ (1.30 )
 
Weighted average common shares outstanding:
Basic   44,404,104     43,155,793     43,732,148     42,814,222  
 
Diluted   46,957,681     43,155,793     43,732,148     42,814,222  
 

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 
  Year Ended
December 31,
2017   2016
OPERATING ACTIVITIES:            
Net loss $ (3,280 ) $ (55,567 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 62,820 63,999
Deferred rent and lease incentive 1,027 (438 )
Provision for doubtful accounts 867 1,122
Deferred income taxes (4,597 ) 5,584
Stock-based compensation expense 31,331 33,276
Non-cash interest expense 8,994 8,244
Accretion on contingent consideration and purchase liability 512 150
Fair market value adjustment on contingent consideration 1,588
Impairment of equity method investment 734
Loss allocation from equity method investment 1,469 1,420
Loss on disposal of fixed assets 76 398
Changes in operating assets and liabilities, net of acquisitions:
Fees and other receivables (8,121 ) 1,646
Prepaid expenses and other current assets (787 ) (3,290 )
Other non-current assets (1,690 ) (98 )
Accrued expenses and other liabilities 16,810 17,174
Accounts payable (442 ) (462 )
Deferred revenue 1,191 2,014
Other non-current liabilities         2,427           3,776  
Net cash provided by operating activities         108,607           81,270  
 
INVESTING ACTIVITIES:
Purchase of property and equipment (14,945 ) (13,967 )
Capitalization of internally developed software (12,624 ) (8,609 )
Investment in private company (1,450 ) (2,238 )
Purchase of ERS units (1,500 )
Acquisition of businesses, net of cash acquired                   (31,613 )
Net cash used in investing activities         (29,019 )         (57,927 )
 
FINANCING ACTIVITIES:
Payment of Term Notes (35,862 ) (8,000 )
Proceeds from borrowings on revolving credit facility 35,000 40,000
Payments on revolving credit facility (62,500 ) (40,000 )
Payments of contingent consideration (2,286 ) (3,729 )
Payments of definite consideration (445 )
Payments of purchase consideration liabilities (235 ) (3,256 )
Proceeds from exercise of stock options 7,951 4,924
Debt issuance costs (94 )
Purchase of treasury stock for stock-based tax withholdings (13,974 ) (10,966 )
Common stock acquired under the share repurchase program (1,448 )
Issuance of restricted stock         5           6  
Net cash used in financing activities         (72,440 )         (22,469 )
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH 375
 
INCREASE IN CASH AND CASH EQUIVALENTS         7,523           874  
 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 52,592 51,718
                   
CASH AND CASH EQUIVALENTS, END OF PERIOD $       60,115   $       52,592  
 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

 
  Three Months Ended   Year Ended
December 31,   December 31,
2017   2016 2017   2016
 
Total revenues $ 182,862 $ 155,480 $ 683,679 $ 578,164
Deferred revenue fair value adjustment   10     489     130     1,270  
Adjusted revenues $ 182,872   $ 155,969   $ 683,809   $ 579,434  
 
Net income (loss) $ 17,645 $ (32,574 ) $ (3,280 ) $ (55,567 )
Add (deduct):
Deferred revenue fair value adjustment 10 489 130 1,270
Interest income (93 ) (9 ) (201 ) (37 )
Interest expense 3,676 4,255 16,347 16,600
Accretion on contingent consideration and purchase liability 104 7 512 150
Income tax provision (benefit) (9,233 ) 25,679 1,591 15,077
Depreciation and amortization 16,028 14,127 62,820 63,999
Non-cash compensation expense 7,880 7,528 31,331 33,276
Restructuring charges and transaction costs 3,431 1,300 13,666 5,784
Severance 56 1,238 2,316 4,342
Fair market value adjustment on contingent consideration - 750 - 1,588
Litigation related expense - 1,526 1,033 5,591
Foreign currency and related hedging activity 198 (44 ) 494 (716 )
Other income - (1,384 ) - (1,384 )
Non-income tax expense adjustment (1,388 ) 6,229 346 6,229
Impairment of equity method investment - 734 - 734
Loss allocation from equity method investment 485 290 1,469 1,420
Loss (income) attributable to non-controlling interest   (61 )   294     316     1,081  
Adjusted EBITDA $ 38,738   $ 30,435   $ 128,890   $ 99,437  
 
Net income (loss) $ 17,645 $ (32,574 ) $ (3,280 ) $ (55,567 )
Income tax provision (benefit) (1)   (9,233 )   25,679     1,591     15,077  
Income (loss) before income tax provision $ 8,412 $ (6,895 ) $ (1,689 ) $ (40,490 )
Add (deduct):
Deferred revenue fair value adjustment 10 489 130 1,270
Accretion on contingent consideration and purchase liability 104 7 512 150
Non-cash interest expense 1,210 2,174 8,994 8,244
Non-cash compensation expense 7,880 7,528 31,331 33,276
Restructuring charges and transaction costs 3,431 1,300 13,666 5,784
Severance 56 1,238 2,316 4,342
Amortization of acquired intangibles 10,794 9,359 42,127 45,515
Fair market value adjustment on contingent consideration - 750 - 1,588
Litigation related expense - 1,526 1,033 5,591
Foreign currency and related hedging activity 198 (44 ) 494 (716 )
Other income - (1,384 ) - (1,384 )
Non-income tax expense adjustment (1,388 ) 6,229 346 6,229
Impairment of equity method investment - 734 - 734
Loss allocation from equity method investment 485 290 1,469 1,420
Loss (income) attributable to non-controlling interest   (61 )   294     316     1,081  
Adjusted net income before income tax effect 31,131 23,595 101,045 72,634
Income tax effect (2)   (12,452 )   (9,438 )   (40,418 )   (29,054 )
Adjusted net income $ 18,679   $ 14,157   $ 60,627   $ 43,580  
 
Basic number of weighted-average shares outstanding 44,404,104 43,155,793 43,732,148 42,814,222
Effect of dilutive shares:
Options to purchase common stock 1,596,965 1,206,908 1,649,225 1,278,827
Unvested restricted stock units   956,612     478,820     770,428     486,823  
Diluted number of weighted-average shares outstanding   46,957,681     44,841,521     46,151,801     44,579,872  
 
Adjusted net income per share - diluted $ 0.40   $ 0.32   $ 1.31   $ 0.98  

____________________
(1) For the three months ended December 31, 2017 and 2016, the effective tax rate computed in accordance with US GAAP equaled (109.8%) and (372.4%), respectively. For the year ended December 31, 2017 and 2016, the effective tax rate computed in accordance with US GAAP equaled (94.2%) and (37.2%), respectively.
(2) For 2017, an estimated normalized effective tax rate of 40% has been used to compute adjusted net income.

 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 
  Three Months Ended December 31, 2017
Envestnet   Envestnet | Yodlee   Nonsegment   Total
   
Total revenues $ 141,267 $ 41,595 $ - $ 182,862
Deferred revenue fair value adjustment     2     8     -       10  
Adjusted revenues $   141,269   $ 41,603   $ -   $   182,872  
 
Income (loss) from operations $ 27,172 $ (2,749 ) $ (11,740 ) $ 12,683
Add (deduct):
Deferred revenue fair value adjustment 2 8 - 10
Accretion on contingent consideration and purchase liability 104 - - 104
Depreciation and amortization 7,027 9,001 - 16,028
Non-cash compensation expense 3,620 2,743 1,517 7,880
Restructuring charges and transaction costs (402 ) - 3,828 3,426
Non-income tax expense adjustment (1,388 ) - - (1,388 )
Severance 12 44 - 56
Gain attributable to non-controlling interest     (61 )   -     -       (61 )
Adjusted EBITDA $   36,086   $ 9,047   $ (6,395 ) $   38,738  
 
Three Months Ended December 31, 2016
Envestnet Envestnet | Yodlee Nonsegment Total
 
Total revenues $ 119,215 $ 36,265 $ - $ 155,480
Deferred revenue fair value adjustment     215     274     -       489  
Adjusted revenues $   119,430   $ 36,539   $ -   $   155,969  
 
Income (loss) from operations $ 9,253 $ (4,819 ) $ (7,497 ) $ (3,063 )
Add (deduct):
Deferred revenue fair value adjustment 215 274 - 489
Accretion on contingent consideration and purchase liability 7 - - 7
Depreciation and amortization 5,998 8,129 - 14,127
Non-cash compensation expense 3,692 2,847 989 7,528
Restructuring charges and transaction costs 543 30 727 1,300
Non-income tax expense adjustment 6,229 - - 6,229
Severance 1,315 (77 ) - 1,238
Fair market value adjustment on contingent consideration - - 750 750
Litigation related expense - 1,526 - 1,526
Foreign currency and related hedging activity - - - -
Other loss - - 10 10
Loss attributable to non-controlling interest     294     -     -       294  
Adjusted EBITDA $   27,546   $ 7,910   $ (5,021 ) $   30,435  
 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 
  For the Year Ended December 31, 2017
Envestnet   Envestnet | Yodlee   Nonsegment   Total
   
Total revenues $

527,905

 

$ 155,774 $ - $ 683,679
Deferred revenue fair value adjustment     38     92     -       130  
Adjusted revenues $   527,943   $ 155,866   $ -   $   683,809  
 
Income (loss) from operations $ 75,449 $ (19,456 ) $ (39,573 ) $ 16,420
Add (deduct):
Deferred revenue fair value adjustment 38 92 - 130
Accretion on contingent consideration and purchase liability 512 - - 512
Depreciation and amortization 26,223 36,597 - 62,820
Non-cash compensation expense 15,191 10,880 5,260 31,331
Restructuring charges and transaction costs 366 - 13,300 13,666
Non-income tax expense adjustment 346 - - 346
Severance 1,954 346 16 2,316
Litigation related expense - 1,033 - 1,033
Loss attributable to non-controlling interest     316     -     -       316  
Adjusted EBITDA $   120,395   $ 29,492   $ (20,997 ) $   128,890  
 
For the Year Ended December 31, 2016
Envestnet Envestnet | Yodlee Nonsegment Total
 
Total revenues $ 447,632 $ 130,532 $ - $ 578,164
Deferred revenue fair value adjustment     329     941     -       1,270  
Adjusted revenues $   447,961   $ 131,473   $ -   $   579,434  
 
Income (loss) from operations $ 41,678 $ (38,547 ) $ (26,575 ) $ (23,444 )
Add (deduct):
Deferred revenue fair value adjustment 329 941 - 1,270
Accretion on contingent consideration and purchase liability 150 - - 150
Depreciation and amortization 24,784 39,215 - 63,999
Non-cash compensation expense 12,719 15,033 5,524 33,276
Restructuring charges and transaction costs 904 64 4,816 5,784
Non-income tax expense adjustment 6,229 - - 6,229
Severance 3,334 670 338 4,342
Fair market value adjustment on contingent consideration - - 1,588 1,588
Litigation related expense - 5,350 241 5,591
Foreign currency and related hedging activity - (462 ) - (462 )
Other loss - - 33 33
Loss attributable to non-controlling interest     1,081     -     -       1,081  
Adjusted EBITDA $   91,208   $ 22,264   $ (14,035 ) $   99,437  
 

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

 
  As of

December 31,

     

September 30,

 

December 31,

2016

  March 31, 2017   June 30, 2017  

2017

 

2017

(in millions except accounts and advisors data)
Platform Assets
Assets Under Management (AUM) $ 105,178 $ 113,544 $ 122,543 $ 131,809 $ 141,518
Assets Under Administration (AUA)   241,682     248,445     271,450     293,963     308,480
Subtotal AUM/A 346,860 361,989 393,993 425,772 449,998
Subscription and Licensing   748,125     763,372     825,829     867,967     926,880
Total Platform Assets $ 1,094,985   $ 1,125,361   $ 1,219,822   $ 1,293,739   $ 1,376,878
Platform Accounts
AUM 545,130 574,132 614,973 652,060 685,925
AUA   994,583     986,554     1,083,417     1,145,050     1,217,697
Subtotal AUM/A 1,539,713 1,560,686 1,698,390 1,797,110 1,903,622
Subscription and Licensing   4,558,883     4,263,002     4,811,390     4,925,146     5,027,900
Total Platform Accounts   6,098,596     5,823,688     6,509,780     6,722,256     6,931,522
Advisors
AUM/A 36,483 36,985 38,498 40,379 40,485
Subscription and Licensing   17,852     18,159     19,007     19,104     19,445
Total Advisors   54,335     55,144     57,505     59,483     59,930
 

The following tables summarize the changes in AUM and AUA for the three months ended December 31, 2017:

   

Gross

 

Redemp-

 

Net

 

Market

 
In Millions Except Accounts 9/30/2017

Sales

tions

Flows

Impact

12/31/2017
 
Assets under Management (AUM) $ 131,809 $ 14,218 $ (8,987) $ 5,231 $ 4,478 $ 141,518
Assets under Administration (AUA)   293,963   47,609   (43,982)   3,627   10,890   308,480
Total AUM/A $ 425,772 $ 61,827 $ (52,969) $ 8,858 $ 15,368 $ 449,998
 
Fee-Based Accounts 1,797,110 106,512 1,903,622
 

The above AUM/A gross sales figures include $28.7 billion in new client conversions. The Company onboarded an additional $22.4 billion in subscription and licensing conversions during the fourth quarter, bringing total conversions for the quarter to $51.1 billion.

The following tables summarize the changes in AUM and AUA for the year ended December 31, 2017:

           

Reclass (to)

 

Gross

Redemp-

Net

Market

from

In Millions Except Accounts 12/31/2016

Sales

tions

Flows

Impact

Licensing

12/31/2017
 
Assets under Management (AUM) $ 105,178 $ 50,331 $ (28,876) $ 21,455 $ 14,885 $ - $ 141,518
Assets under Administration (AUA)   241,682   121,653   (84,240)   37,413   34,276   (4,891)   308,480
Total AUM/A $ 346,860 $ 171,984 $ (113,116) $ 58,868 $ 49,161 $ (4,891) $ 449,998
 
Fee-Based Accounts 1,539,713 386,673 (22,764) 1,903,622
 

The above AUM/A gross sales figures include $49.6 billion in new client conversions. The Company onboarded an additional $57.1 billion in subscription and licensing conversions during 2017, bringing total conversions for the year to $106.7 billion.

Source: Envestnet, Inc.

Envestnet, Inc.
Investor Relations
investor.relations@envestnet.com
312-827-3940
or
Media Relations
mediarelations@envestnet.com

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