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Envestnet Reports Second Quarter 2019 Financial Results

08/07/19 4:05 pm EDT

CHICAGO--(BUSINESS WIRE)--Aug. 7, 2019-- Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the three and six months ended June 30, 2019.

 

 

 

Three months ended

 

 

 

Six months ended

 

 

Key Financial Metrics

 

June 30,

 

%

 

June 30,

 

%

(in millions except per share data)

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

224.4

 

 

$

201.1

 

 

12%

 

$

424.1

 

 

$

399.1

 

 

6%

Net income (loss)

 

$

0.6

 

 

$

(6.0

)

 

n/m

 

$

(17.7

)

 

$

2.0

 

 

n/m

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

 

$

0.02

 

 

$

(0.12

)

 

n/m

 

$

(0.35

)

 

$

0.05

 

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues(1)

 

$

227.9

 

 

$

201.2

 

 

13%

 

$

427.5

 

 

$

399.2

 

 

7%

Adjusted net revenues(1)

 

$

167.6

 

 

$

144.4

 

 

16%

 

$

313.4

 

 

$

284.9

 

 

10%

Adjusted EBITDA(1)

 

$

43.2

 

 

$

34.8

 

 

24%

 

$

77.2

 

 

$

67.5

 

 

14%

Adjusted net income(1)

 

$

24.5

 

 

$

19.3

 

 

27%

 

$

43.9

 

 

$

36.9

 

 

19%

Adjusted net income per diluted share(1)

 

$

0.46

 

 

$

0.41

 

 

12%

 

$

0.85

 

 

$

0.78

 

 

9%

n/m - not meaningful

“In the second quarter, Envestnet delivered solid growth in adjusted revenues, adjusted EBITDA and adjusted earnings per share,” said Jud Bergman, Chairman and CEO.

“We continue to expand the ways advisors and financial institutions deliver unified advice for their clients, whether through our industry leading wealth management platform, financial planning tools, or implementing solutions via our insurance and credit exchanges, as we work to enable advisors and financial institutions to deliver financial wellness to their clients,” concluded Mr. Bergman.

Financial Results for the Second Quarter of 2019:

The Company’s financial results for the second quarter of 2019 include PortfolioCenter® and PIEtech®, Inc., which were acquired on April 1, 2019 and May 1, 2019, respectively.

Asset-based recurring revenues increased 2% from the prior year period, and represented 53% of total revenues for the second quarter of 2019, compared to 59% of total revenues for the same period in 2018. Subscription-based recurring revenues increased 29% from the prior year period, and represented 41% of total revenues the second quarter of 2019 compared to 36% for the same period in 2018. Professional services and other non-recurring revenues increased 8% from the prior year period. Total revenues increased 12% to $224.4 million for the second quarter of 2019 from $201.1 million for the second quarter of 2018. The PortfolioCenter acquisition and the PIEtech acquisition contributed revenues of $2.0 million and $6.6 million, respectively, to total revenues in the three months ended June 30, 2019. Excluding these items total revenue grew 7% the three months ended June 30, 2019, compared to the prior year period.

Total operating expenses for the second quarter of 2019 increased 22% to $244.7 million from $201.1 million in the prior year period. Cost of revenues increased 7% to $72.1 million for the second quarter of 2019 from $67.6 million for the prior year period. Compensation and benefits increased 29% to $103.3 million for the second quarter of 2019 from $80.2 million for the prior year period. Compensation and benefits were 46% of total revenues for the second quarter of 2019, compared to 40% in the prior year period. General and administration expenses increased 24% to $42.4 million for the second quarter of 2019 from $34.1 million for the prior year period. General and administrative expenses were 19% of total revenues for the second quarter of 2019, compared to 17% in the prior year period.

Loss from operations was $20.3 million for the second quarter of 2019 compared to income of $5 thousand for the second quarter of 2018. Net income was $0.6 million for the second quarter of 2019 compared to net loss of $6.0 million for the second quarter of 2018. Net income per diluted share attributable to Envestnet, Inc. was $0.02 for the second quarter of 2019 compared to net loss per diluted share attributable to Envestnet, Inc. of $0.12 for the second quarter of 2018.

Adjusted net revenues(1) for the second quarter of 2019 increased 16% to $167.6 million from $144.4 million for the prior year period. Adjusted EBITDA(1) for the second quarter of 2019 increased 24% to $43.2 million from $34.8 million for the prior year period. Adjusted net income(1) increased 27% for the second quarter of 2019 to $24.5 million from $19.3 million for the prior year period. Adjusted net income per diluted share(1) for the second quarter of 2019 increased 12% to $0.46 from $0.41 in the second quarter of 2018.

Outlook

The Company provided the following outlook for the third quarter ending September 30, 2019 and full year ending December 31, 2019. This outlook is based on the market value of assets on June 30, 2019.

 

In Millions Except Adjusted EPS

 

3Q 2019

 

FY 2019

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

124.0

 

 

-

 

$

125.0

 

 

 

 

 

 

 

Subscription-based

 

98.0

 

 

-

 

99.0

 

 

 

 

 

 

 

Total recurring revenues

 

$

222.0

 

 

-

 

$

224.0

 

 

 

 

 

 

 

Professional services and other revenues

 

7.5

 

 

-

 

8.5

 

 

 

 

 

 

 

Total revenues

 

$

229.5

 

 

-

 

$

232.5

 

 

$

888.5

 

 

-

 

$

894.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based cost of revenues

 

$

62.5

 

 

-

 

$

63.5

 

 

$

240.0

 

 

-

 

$

241.0

 

Total cost of revenues

 

$

69.5

 

 

-

 

$

70.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 

54.2

 

 

 

 

 

 

 

 

Net income per diluted share

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues (1):

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

124.0

 

 

-

 

$

125.0

 

 

 

 

 

 

 

Subscription-based

 

101.0

 

 

-

 

102.0

 

 

 

 

 

 

 

Total recurring revenues

 

$

225.0

 

 

-

 

$

227.0

 

 

 

 

 

 

 

Professional services and other revenues

 

7.5

 

 

-

 

8.5

 

 

 

 

 

 

 

Total revenues

 

$

232.5

 

 

-

 

$

235.5

 

 

$

897.0

 

 

-

 

$

903.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net revenues (1)

 

$

169.0

 

 

-

 

$

173.0

 

 

$

656.0

 

 

-

 

$

663.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

54.0

 

 

-

 

$

54.5

 

 

$

191.5

 

 

-

 

$

193.0

 

Adjusted net income per diluted share(1)

 

 

 

$

0.58

 

 

 

 

$

2.10

 

 

-

 

$

2.12

 

 

(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 second quarter 2019 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 for international callers (412) 317-6671; the conference ID is 1017651. The replay will be available until Wednesday, August 14, 2019.

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 advisors ("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 99,000 advisors and more than 4,100 companies including: 17 of the 20 largest U.S. banks, 43 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 cost of revenues. Under GAAP, we are required to recognize as revenue certain fees paid to investment managers and other third parties needed for implementation of investment solutions included in our assets under management. Those same 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 EBITDA” represents net income before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, litigation related expense, foreign currency, non-income tax expense adjustment, loss allocation from equity method investment and loss attributable to non-controlling interest.

“Adjusted net income” represents net income before deferred revenue fair value adjustment, accretion on contingent consideration and purchase liability, non-cash interest expense, non-cash compensation expense, restructuring charges and transaction costs, severance, amortization of acquired intangibles and fair value adjustment to property and equipment, net, litigation related expense, foreign currency, non-income tax expense adjustment, 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 9-12 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 third quarter and full year of 2019, 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 acquisitions of FolioDynamix and PIEtech, Inc. will not be realized to the extent or when expected, difficulty in sustaining rapid revenue growth, which may place significant demands on the Company’s 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 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 August 7, 2019 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)

 

 

 

June 30,

 

December 31,

 

 

2019

 

2018

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

77,717

 

 

$

289,345

 

Fees receivable, net

 

71,632

 

 

68,004

 

Prepaid expenses and other current assets

 

40,046

 

 

23,557

 

Total current assets

 

189,395

 

 

380,906

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

51,016

 

 

44,991

 

Internally developed software, net

 

48,059

 

 

38,209

 

Intangible assets, net

 

509,159

 

 

305,241

 

Goodwill

 

908,686

 

 

519,102

 

Operating lease right-of-use-assets, net

 

72,191

 

 

 

Other non-current assets

 

33,834

 

 

25,298

 

Total assets

 

$

1,812,340

 

 

$

1,313,747

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accrued expenses and other liabilities

 

$

118,608

 

 

$

133,298

 

Accounts payable

 

15,165

 

 

19,567

 

Operating lease liabilities

 

12,918

 

 

 

Convertible Notes due 2019

 

169,182

 

 

165,711

 

Contingent consideration

 

 

 

732

 

Deferred revenue

 

37,601

 

 

23,988

 

Total current liabilities

 

353,474

 

 

343,296

 

 

 

 

 

 

Convertible Notes due 2023

 

300,078

 

 

294,725

 

Revolving credit facility

 

145,000

 

 

 

Contingent consideration

 

16,423

 

 

 

Deferred revenue

 

6,659

 

 

6,910

 

Non-current lease liabilities

 

77,431

 

 

 

Deferred rent and lease incentive

 

 

 

17,569

 

Deferred tax liabilities, net

 

31,292

 

 

640

 

Other non-current liabilities

 

28,193

 

 

18,005

 

Total liabilities

 

958,550

 

 

681,145

 

 

 

 

 

 

Equity:

 

 

 

 

Stockholders’ equity

 

855,251

 

 

633,700

 

Non-controlling interest

 

(1,461

)

 

(1,098

)

Total liabilities and equity

 

$

1,812,340

 

 

$

1,313,747

 

 

Envestnet, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

120,070

 

 

$

118,111

 

 

$

229,004

 

 

$

239,264

 

Subscription-based

 

92,258

 

 

71,779

 

 

175,345

 

 

141,474

 

Total recurring revenues

 

212,328

 

 

189,890

 

 

404,349

 

 

380,738

 

Professional services and other revenues

 

12,117

 

 

11,226

 

 

19,762

 

 

18,389

 

Total revenues

 

224,445

 

 

201,116

 

 

424,111

 

 

399,127

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues

 

72,080

 

 

67,627

 

 

133,725

 

 

130,561

 

Compensation and benefits

 

103,286

 

 

80,210

 

 

190,003

 

 

163,750

 

General and administration

 

42,421

 

 

34,089

 

 

82,945

 

 

66,818

 

Depreciation and amortization

 

26,915

 

 

19,185

 

 

46,432

 

 

38,731

 

Total operating expenses

 

244,702

 

 

201,111

 

 

453,105

 

 

399,860

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(20,257

)

 

5

 

 

(28,994

)

 

(733

)

Other expense, net

 

(7,512

)

 

(5,430

)

 

(13,275

)

 

(10,684

)

Loss before income tax provision (benefit)

 

(27,769

)

 

(5,425

)

 

(42,269

)

 

(11,417

)

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

(28,382

)

 

566

 

 

(24,614

)

 

(13,428

)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

613

 

 

(5,991

)

 

(17,655

)

 

2,011

 

Add: Net loss attributable to non-controlling interest

 

280

 

 

465

 

 

363

 

 

567

 

Net income (loss) attributable to Envestnet, Inc.

 

$

893

 

 

$

(5,526

)

 

$

(17,292

)

 

$

2,578

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

(0.12

)

 

$

(0.35

)

 

$

0.06

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

0.02

 

 

$

(0.12

)

 

$

(0.35

)

 

$

0.05

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

50,870,296

 

 

45,247,331

 

 

49,526,774

 

 

44,963,735

 

 

 

 

 

 

 

 

 

 

Diluted

 

52,982,688

 

 

45,247,331

 

 

49,526,774

 

 

47,156,205

 

 

Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 

 

Six Months Ended

 

 

June 30,

 

 

2019

 

2018

OPERATING ACTIVITIES:

 

 

 

 

Net income (loss)

 

$

(17,655

)

 

$

2,011

 

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

Depreciation and amortization

 

46,432

 

 

38,731

 

Deferred rent and lease incentive amortization

 

 

 

1,069

 

Provision for doubtful accounts

 

713

 

 

924

 

Deferred income taxes

 

(28,991

)

 

(17,093

)

Stock-based compensation expense

 

27,852

 

 

18,971

 

Non-cash interest expense

 

9,896

 

 

5,630

 

Accretion on contingent consideration and purchase liability

 

742

 

 

196

 

Payments of contingent consideration

 

(578

)

 

 

Loss allocation from equity method investment

 

550

 

 

811

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Fees receivables, net

 

(536

)

 

(8,204

)

Prepaid expenses and other current assets

 

(15,507

)

 

(3,426

)

Other non-current assets

 

(3,241

)

 

(2,450

)

Accrued expenses and other liabilities

 

(19,060

)

 

(5,438

)

Accounts payable

 

(4,768

)

 

4,166

 

Deferred revenue

 

3,940

 

 

3,478

 

Other non-current liabilities

 

2,602

 

 

1,578

 

Net cash provided by operating activities

 

2,391

 

 

40,954

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchase of property and equipment

 

(8,815

)

 

(9,569

)

Capitalization of internally developed software

 

(15,583

)

 

(10,622

)

Acquisition of business

 

(321,571

)

 

(188,345

)

Other

 

(2,000

)

 

 

Net cash used in investing activities

 

(347,969

)

 

(208,536

)

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from issuance of Convertible Notes due 2023

 

 

 

345,000

 

Convertible Notes due 2023 issuance costs

 

 

 

(9,488

)

Proceeds from borrowings on revolving credit facility

 

175,000

 

 

195,000

 

Payments on revolving credit facility

 

(30,000

)

 

(276,168

)

Payments of contingent consideration

 

(171

)

 

(2,193

)

Proceeds from exercise of stock options

 

4,914

 

 

2,540

 

Purchase of treasury stock for stock-based tax withholdings

 

(15,962

)

 

(14,395

)

Issuance of restricted stock units

 

3

 

 

3

 

Net cash provided by financing activities

 

133,784

 

 

240,299

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

166

 

 

(572

)

 

 

 

 

 

DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

(211,628

)

 

72,145

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

289,671

 

 

62,115

 

 

 

 

 

 

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

 

$

78,043

 

 

$

134,260

 

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

 
 

 

 

June 30,

 

December 31,

 

 

2019

 

2018

Cash and cash equivalents

 

$

77,717

 

 

$

289,345

 

Restricted cash included in prepaid expenses and other current assets

 

158

 

 

158

 

Restricted cash included in other non-current assets

 

168

 

 

168

 

Total cash, cash equivalents and restricted cash

 

$

78,043

 

 

$

289,671

 

 

Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Total revenues

 

$

224,445

 

 

$

201,116

 

 

$

424,111

 

 

$

399,127

 

Deferred revenue fair value adjustment

 

3,414

 

 

62

 

 

3,420

 

 

66

 

Adjusted revenues

 

227,859

 

 

201,178

 

 

427,531

 

 

399,193

 

Asset-based cost of revenues

 

(60,293

)

 

(56,748

)

 

(114,135

)

 

(114,320

)

Adjusted net revenues

 

$

167,566

 

 

$

144,430

 

 

$

313,396

 

 

$

284,873

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

613

 

 

$

(5,991

)

 

$

(17,655

)

 

$

2,011

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

3,414

 

 

62

 

 

3,420

 

 

66

 

Interest income

 

(901

)

 

(374

)

 

(2,411

)

 

(784

)

Interest expense

 

8,263

 

 

5,992

 

 

15,359

 

 

11,228

 

Accretion on contingent consideration and purchase liability

 

502

 

 

95

 

 

742

 

 

196

 

Income tax provision (benefit)

 

(28,382

)

 

566

 

 

(24,614

)

 

(13,428

)

Depreciation and amortization

 

26,915

 

 

19,185

 

 

46,432

 

 

38,731

 

Non-cash compensation expense

 

14,988

 

 

10,476

 

 

27,852

 

 

18,971

 

Restructuring charges and transaction costs

 

13,208

 

 

3,345

 

 

20,574

 

 

5,937

 

Severance

 

3,280

 

 

1,049

 

 

5,760

 

 

3,861

 

Foreign currency

 

(154

)

 

(339

)

 

(155

)

 

(571

)

Non-income tax expense adjustment

 

908

 

 

27

 

 

1,118

 

 

(101

)

Loss allocation from equity method investment

 

347

 

 

151

 

 

550

 

 

811

 

Loss attributable to non-controlling interest

 

210

 

 

515

 

 

241

 

 

584

 

Adjusted EBITDA

 

$

43,211

 

 

$

34,759

 

 

$

77,213

 

 

$

67,512

 

 

Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands, except share and per share information)
(unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

 

2019

 

2018

 

2019

 

2018

Net income (loss)

 

$

613

 

 

$

(5,991

)

 

$

(17,655

)

 

$

2,011

 

Income tax provision (benefit) (1)

 

(28,382

)

 

566

 

 

(24,614

)

 

(13,428

)

Loss before income tax provision (benefit)

 

(27,769

)

 

(5,425

)

 

(42,269

)

 

(11,417

)

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

3,414

 

 

62

 

 

3,420

 

 

66

 

Accretion on contingent consideration and purchase liability

 

502

 

 

95

 

 

742

 

 

196

 

Non-cash interest expense

 

4,646

 

 

3,032

 

 

9,262

 

 

4,900

 

Non-cash compensation expense

 

14,988

 

 

10,476

 

 

27,852

 

 

18,971

 

Restructuring charges and transaction costs

 

13,208

 

 

3,345

 

 

20,574

 

 

5,937

 

Severance

 

3,280

 

 

1,049

 

 

5,760

 

 

3,861

 

Amortization of acquired intangibles and fair value adjustment to property and equipment, net

 

19,278

 

 

13,419

 

 

31,806

 

 

27,354

 

Foreign currency

 

(154

)

 

(339

)

 

(155

)

 

(571

)

Non-income tax expense adjustment

 

908

 

 

27

 

 

1,118

 

 

(101

)

Loss allocation from equity method investment

 

347

 

 

151

 

 

550

 

 

811

 

Loss attributable to non-controlling interest

 

210

 

 

515

 

 

241

 

 

584

 

Adjusted net income before income tax effect

 

32,858

 

 

26,407

 

 

58,901

 

 

50,591

 

Income tax effect (2)

 

(8,388

)

 

(7,130

)

 

(15,020

)

 

(13,660

)

Adjusted net income

 

$

24,470

 

 

$

19,277

 

 

$

43,881

 

 

$

36,931

 

 

 

 

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

50,870,296

 

 

45,247,331

 

 

49,526,774

 

 

44,963,735

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

Options to purchase common stock

 

1,164,246

 

 

1,325,947

 

 

1,185,480

 

 

1,360,300

 

Unvested restricted stock units

 

662,853

 

 

643,319

 

 

666,116

 

 

832,170

 

Convertible notes

 

261,075

 

 

 

 

12,532

 

 

 

Warrants

 

24,218

 

 

 

 

 

 

 

Diluted number of weighted-average shares outstanding

 

52,982,688

 

 

47,216,597

 

 

51,390,902

 

 

47,156,205

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share - diluted

 

$

0.46

 

 

$

0.41

 

 

$

0.85

 

 

$

0.78

 

 

(1) For the three months ended June 30, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 102.2% and (10.4)%, respectively. For the six months ended June 30, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 58.2% and 117.6%, respectively.

(2) Estimated normalized effective tax rates of 25.5% and 27.0% have been used to compute adjusted net income for the three and six months ended June 30, 2019 and 2018, respectively.

 

Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)

 

 

 

Three months ended June 30, 2019

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

176,890

 

 

$

47,555

 

 

$

 

 

$

224,445

 

Deferred revenue fair value adjustment

 

3,414

 

 

 

 

 

 

3,414

 

Adjusted revenues

 

180,304

 

 

47,555

 

 

 

 

227,859

 

Less: Asset-based cost of revenues

 

(60,293

)

 

 

 

 

 

(60,293

)

Adjusted net revenues

 

$

120,011

 

 

$

47,555

 

 

$

 

 

$

167,566

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

12,379

 

 

$

(8,960

)

 

$

(23,676

)

 

$

(20,257

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

3,414

 

 

 

 

 

 

3,414

 

Accretion on contingent consideration and purchase liability

 

502

 

 

 

 

 

 

502

 

Depreciation and amortization

 

16,376

 

 

10,539

 

 

 

 

26,915

 

Non-cash compensation expense

 

8,592

 

 

3,767

 

 

2,629

 

 

14,988

 

Restructuring charges and transaction costs

 

794

 

 

(196

)

 

12,610

 

 

13,208

 

Non-income tax expense adjustment

 

908

 

 

 

 

 

 

908

 

Severance

 

818

 

 

2,448

 

 

14

 

 

3,280

 

Other

 

43

 

 

 

 

 

 

43

 

Loss attributable to non-controlling interest

 

210

 

 

 

 

 

 

210

 

Adjusted EBITDA

 

$

44,036

 

 

$

7,598

 

 

$

(8,423

)

 

$

43,211

 

 
 

 

 

Three Months Ended June 30, 2018

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

156,928

 

 

$

44,188

 

 

$

 

 

$

201,116

 

Deferred revenue fair value adjustment

 

60

 

 

2

 

 

 

 

62

 

Adjusted revenues

 

156,988

 

 

44,190

 

 

 

 

201,178

 

Less: Asset-based cost of revenues

 

(56,748

)

 

 

 

 

 

(56,748

)

Adjusted net revenues

 

$

100,240

 

 

$

44,190

 

 

$

 

 

$

144,430

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

16,359

 

 

$

(3,296

)

 

$

(13,058

)

 

$

5

 

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

60

 

 

2

 

 

 

 

62

 

Accretion on contingent consideration and purchase liability

 

95

 

 

 

 

 

 

95

 

Depreciation and amortization

 

11,026

 

 

8,159

 

 

 

 

19,185

 

Non-cash compensation expense

 

5,080

 

 

2,936

 

 

2,460

 

 

10,476

 

Restructuring charges and transaction costs

 

188

 

 

403

 

 

2,754

 

 

3,345

 

Non-income tax expense adjustment

 

27

 

 

 

 

 

 

27

 

Severance

 

1,049

 

 

 

 

 

 

1,049

 

Loss attributable to non-controlling interest

 

515

 

 

 

 

 

 

515

 

Adjusted EBITDA

 

$

34,399

 

 

$

8,204

 

 

$

(7,844

)

 

$

34,759

 

 
 

 

 

Six months ended June 30, 2019

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

329,595

 

 

$

94,516

 

 

$

 

 

$

424,111

 

Deferred revenue fair value adjustment

 

3,420

 

 

 

 

 

 

3,420

 

Adjusted revenues

 

333,015

 

 

94,516

 

 

 

 

427,531

 

Less: Asset-based cost of revenues

 

(114,135

)

 

 

 

 

 

(114,135

)

Adjusted net revenues

 

$

218,880

 

 

$

94,516

 

 

$

 

 

$

313,396

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

29,223

 

 

$

(16,888

)

 

$

(41,329

)

 

$

(28,994

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

3,420

 

 

 

 

 

 

3,420

 

Accretion on contingent consideration and purchase liability

 

742

 

 

 

 

 

 

742

 

Depreciation and amortization

 

27,643

 

 

18,789

 

 

 

 

46,432

 

Non-cash compensation expense

 

14,269

 

 

7,955

 

 

5,628

 

 

27,852

 

Restructuring charges and transaction costs

 

1,056

 

 

769

 

 

18,749

 

 

20,574

 

Non-income tax expense adjustment

 

1,108

 

 

10

 

 

 

 

1,118

 

Severance

 

1,168

 

 

4,496

 

 

96

 

 

5,760

 

Other

 

65

 

 

1

 

 

2

 

 

68

 

Loss attributable to non-controlling interest

 

241

 

 

 

 

 

 

241

 

Adjusted EBITDA

 

$

78,935

 

 

$

15,132

 

 

$

(16,854

)

 

$

77,213

 

 
 

 

 

Six Months Ended June 30, 2018

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

312,916

 

 

$

86,211

 

 

$

 

 

$

399,127

 

Deferred revenue fair value adjustment

 

58

 

 

8

 

 

 

 

66

 

Adjusted revenues

 

312,974

 

 

86,219

 

 

 

 

399,193

 

Less: Asset-based cost of revenues

 

(114,320

)

 

 

 

 

 

(114,320

)

Adjusted net revenues

 

$

198,654

 

 

$

86,219

 

 

$

 

 

$

284,873

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

32,220

 

 

$

(7,705

)

 

$

(25,248

)

 

$

(733

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

58

 

 

8

 

 

 

 

66

 

Accretion on contingent consideration and purchase liability

 

196

 

 

 

 

 

 

196

 

Depreciation and amortization

 

22,499

 

 

16,232

 

 

 

 

38,731

 

Non-cash compensation expense

 

9,134

 

 

5,400

 

 

4,437

 

 

18,971

 

Restructuring charges and transaction costs

 

225

 

 

603

 

 

5,109

 

 

5,937

 

Non-income tax expense adjustment

 

(101

)

 

 

 

 

 

(101

)

Severance

 

3,478

 

 

383

 

 

 

 

3,861

 

Loss attributable to non-controlling interest

 

584

 

 

 

 

 

 

584

 

Adjusted EBITDA

 

$

68,293

 

 

$

14,921

 

 

$

(15,702

)

 

$

67,512

 

 

Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except accounts and advisors)
(unaudited)

 

 

As of

 

 

June 30,

 

September 30,

 

December 31,

 

March 31,

 

June 30,

 

 

2018

 

2018

 

2018

 

2019

 

2019

 

 

(in millions, except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

Assets under Management ("AUM")

 

$

148,537

 

 

$

153,862

 

 

$

150,591

 

 

$

176,144

 

 

$

182,143

 

Assets under Administration ("AUA")

 

360,850

 

 

388,066

 

 

291,934

 

 

319,129

 

 

330,226

 

Total AUM/A

 

509,387

 

 

541,928

 

 

442,525

 

 

495,273

 

 

512,369

 

Subscription

 

2,167,084

 

 

2,297,593

 

 

2,314,253

 

 

2,546,483

 

 

2,835,780

 

Total Platform Assets

 

$

2,676,471

 

 

$

2,839,521

 

 

$

2,756,778

 

 

$

3,041,756

 

 

$

3,348,149

 

Platform Accounts

 

 

 

 

 

 

 

 

 

 

AUM

 

759,926

 

 

776,705

 

 

816,354

 

 

874,574

 

 

907,034

 

AUA

 

1,417,795

 

 

1,517,297

 

 

1,182,764

 

 

1,187,589

 

 

1,196,114

 

Total AUM/A

 

2,177,721

 

 

2,294,002

 

 

1,999,118

 

 

2,062,163

 

 

2,103,148

 

Subscription

 

8,042,900

 

 

8,185,667

 

 

8,865,435

 

 

8,909,581

 

 

9,492,653

 

Total Platform Accounts

 

10,220,621

 

 

10,479,669

 

 

10,864,553

 

 

10,971,744

 

 

11,595,801

 

Advisors

 

 

 

 

 

 

 

 

 

 

AUM/A

 

44,900

 

 

47,292

 

 

40,103

 

 

39,035

 

 

39,727

 

Subscription

 

43,700

 

 

45,619

 

 

56,237

 

 

57,594

 

 

59,292

 

Total Advisors

 

88,600

 

 

92,911

 

 

96,340

 

 

96,629

 

 

99,019

 

 

The following table summarizes the changes in AUM and AUA for the three months ended June 30, 2019:

 

 

 

3/31/2019

 

Gross
Sales

 

Redemp-
tions

 

Net
Flows

 

Market
Impact

 

Reclass to
Subscription

 

6/30/2019

 

 

(in millions except account data)

AUM

 

$

176,144

 

 

$

15,130

 

 

$

(7,415

)

 

$

7,715

 

 

$

4,846

 

 

$

(6,562

)

 

$

182,143

 

AUA

 

319,129

 

 

21,203

 

 

(17,611

)

 

3,592

 

 

7,862

 

 

(357

)

 

330,226

 

Total AUM/A

 

$

495,273

 

 

$

36,333

 

 

$

(25,026

)

 

$

11,307

 

 

$

12,708

 

 

$

(6,919

)

 

$

512,369

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

2,062,163

 

 

 

 

 

 

45,714

 

 

 

 

(4,729

)

 

2,103,148

 

 

The above AUM/A gross sales figures include $2.3 billion in new client conversions. The Company onboarded an additional $169.4 billion in subscription conversions during the three months ended June 30, 2019, bringing total conversions for the quarter to $171.7 billion.

Source: Envestnet

Investor Relations
investor.relations@envestnet.com
(312) 827-3940

Media Relations
mediarelations@envestnet.com

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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.

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