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Envestnet Reports Third Quarter 2019 Financial Results

11/07/19 4:05 pm EST

CHICAGO--(BUSINESS WIRE)--Nov. 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 nine months ended September 30, 2019.

 

 

Three months ended

 

 

 

Nine months ended

 

 

Key Financial Metrics

 

September 30,

 

%

 

September 30,

 

%

(in millions except per share data)

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

236.1

 

 

$

203.2

 

 

16%

 

$

660.2

 

 

$

602.3

 

 

10%

Net income (loss)

 

$

(3.0

)

 

$

2.5

 

 

n/m

 

$

(20.6

)

 

$

4.5

 

 

n/m

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

 

$

(0.06

)

 

$

0.06

 

 

n/m

 

$

(0.40

)

 

$

0.12

 

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues(1)

 

$

239.3

 

 

$

203.2

 

 

18%

 

$

666.9

 

 

$

602.4

 

 

11%

Adjusted net revenues(1)

 

$

175.0

 

 

$

145.3

 

 

20%

 

$

488.4

 

 

$

430.1

 

 

14%

Adjusted EBITDA(1)

 

$

54.5

 

 

$

42.6

 

 

28%

 

$

131.8

 

 

$

110.1

 

 

20%

Adjusted net income(1)

 

$

32.4

 

 

$

25.3

 

 

28%

 

$

76.3

 

 

$

62.2

 

 

23%

Adjusted net income per diluted share(1)

 

$

0.60

 

 

$

0.53

 

 

13%

 

$

1.46

 

 

$

1.32

 

 

11%

n/m - not meaningful

“The tragic and sudden loss of our founder and dear friend, Jud Bergman, overshadows the business results we posted in the third quarter. As we honor Jud's massive impact on the Wealth Management industry and the people fortunate to work with him, we remain committed to the vision we have been pursuing since we started the company. During the third quarter, Envestnet delivered solid growth in adjusted revenues, adjusted EBITDA and adjusted earnings per share. We also achieved an important milestone - today, more than 100,000 advisors benefit from Envestnet’s wealth management platform, data and solutions as they help their clients achieve their financial goals and aspirations,” said Bill Crager, Interim Chief Executive Officer.

“Jud’s visionary leadership has put us on solid footing to deliver on our mission to make Financial Wellness a reality. There is much work to do, and our resolve has never been greater. As we look to the fourth quarter, and into 2020 and beyond, we have a tremendous opportunity to empower how advice is rendered to millions of consumers,” concluded Mr. Crager.

Financial Results for the Third Quarter of 2019:

Asset-based recurring revenues increased 6% from the prior year period, and represented 54% of total revenues for the third quarter of 2019, compared to 59% of total revenues for the same period in 2018. Subscription-based recurring revenues increased 32% from the prior year period, and represented 43% of total revenues the third quarter of 2019 compared to 38% for the same period in 2018. Professional services and other non-recurring revenues increased 13% from the prior year period. Total revenues increased 16% to $236.1 million for the third quarter of 2019 from $203.2 million for the third quarter of 2018. The PortfolioCenter acquisition and the PIEtech acquisition contributed revenues of $2.4 million and $11.5 million, respectively, to total revenues in the three months ended September 30, 2019. Excluding these items total revenue grew 9% for the three months ended September 30, 2019, compared to the prior year period.

Total operating expenses for the third quarter of 2019 increased 18% to $236.2 million from $199.8 million in the prior year period. Cost of revenues increased 11% to $71.9 million for the third quarter of 2019 from $65.0 million for the prior year period. Compensation and benefits increased 19% to $95.6 million for the third quarter of 2019 from $80.4 million for the prior year period. Compensation and benefits were 40% of total revenues for the third quarter of 2019, consistent with the prior year period. General and administration expenses increased 21% to $42.0 million for the third quarter of 2019 from $34.8 million for the prior year period. General and administrative expenses were 18% of total revenues for the third quarter of 2019, compared to 17% in the prior year period.

Loss from operations was $0.1 million for the third quarter of 2019 compared to income of $3.4 million for the third quarter of 2018. Net loss was $3.0 million for the third quarter of 2019 compared to net income of $2.5 million for the third quarter of 2018. Net loss per diluted share attributable to Envestnet, Inc. was $0.06 for the third quarter of 2019 compared to net income per diluted share attributable to Envestnet, Inc. of $0.06 for the third quarter of 2018.

Adjusted net revenues(1) for the third quarter of 2019 increased 20% to $175.0 million from $145.3 million for the prior year period. Adjusted EBITDA(1) for the third quarter of 2019 increased 28% to $54.5 million from $42.6 million for the prior year period. Adjusted net income(1) increased 28% for the third quarter of 2019 to $32.4 million from $25.3 million for the prior year period. Adjusted net income per diluted share(1) for the third quarter of 2019 increased 13% to $0.60 from $0.53 in the third quarter of 2018.

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

In Millions Except Adjusted EPS

 

4Q 2019

 

FY 2019

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

128.0

 

 

-

 

$

128.5

 

 

 

 

 

 

 

Subscription-based

 

102.0

 

 

-

 

102.5

 

 

 

 

 

 

 

Total recurring revenues

 

$

230.0

 

 

-

 

$

231.0

 

 

 

 

 

 

 

Professional services and other revenues

 

6.5

 

 

-

 

7.0

 

 

 

 

 

 

 

Total revenues

 

$

236.5

 

 

-

 

$

238.0

 

 

$

896.5

 

 

-

 

$

898.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based cost of revenues

 

$

65.0

 

 

-

 

$

65.5

 

 

$

243.5

 

 

-

 

$

244.0

 

Total cost of revenues

 

$

73.0

 

 

-

 

$

73.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 

54.0

 

 

 

 

 

 

 

 

Net income per diluted share

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues (1):

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

128.0

 

 

-

 

$

128.5

 

 

 

 

 

 

 

Subscription-based

 

104.0

 

 

-

 

104.5

 

 

 

 

 

 

 

Total recurring revenues

 

$

232.0

 

 

-

 

$

233.0

 

 

 

 

 

 

 

Professional services and other revenues

 

6.5

 

 

-

 

7.0

 

 

 

 

 

 

 

Total revenues

 

$

238.5

 

 

-

 

$

240.0

 

 

$

905.5

 

 

-

 

$

907.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net revenues (1)

 

$

173.0

 

 

-

 

$

175.0

 

 

$

661.5

 

 

-

 

$

663.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

60.0

 

 

-

 

$

61.0

 

 

$

192.0

 

 

-

 

$

193.0

 

Adjusted net income per diluted share(1)

 

 

 

$

0.68

 

 

 

 

 

 

$

2.14

 

 

 

(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 third 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 (412) 317-6671 for international callers; the conference ID is 7618031. The replay will be available until Thursday, November 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 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 100,000 advisors and more than 4,700 companies including: 16 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 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 income (loss) before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax 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 (income) 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 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. 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 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 fourth 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 November 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)

 

 

September 30,

 

December 31,

 

 

2019

 

2018

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

71,632

 

 

$

289,345

 

Fees receivable, net

 

64,402

 

 

68,004

 

Prepaid expenses and other current assets

 

30,976

 

 

23,557

 

Total current assets

 

167,010

 

 

380,906

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

53,565

 

 

44,991

 

Internally developed software, net

 

53,325

 

 

38,209

 

Intangible assets, net

 

489,918

 

 

305,241

 

Goodwill

 

907,995

 

 

519,102

 

Operating lease right-of-use-assets, net

 

78,515

 

 

 

Other non-current assets

 

36,808

 

 

25,298

 

Total assets

 

$

1,787,136

 

 

$

1,313,747

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accrued expenses and other liabilities

 

$

133,170

 

 

$

133,298

 

Accounts payable

 

13,231

 

 

19,567

 

Operating lease liabilities

 

12,961

 

 

 

Convertible Notes due 2019

 

170,966

 

 

165,711

 

Contingent consideration

 

 

 

732

 

Deferred revenue

 

35,989

 

 

23,988

 

Total current liabilities

 

366,317

 

 

343,296

 

 

 

 

 

 

Convertible Notes due 2023

 

302,785

 

 

294,725

 

Revolving credit facility

 

100,000

 

 

 

Contingent consideration

 

16,830

 

 

 

Deferred revenue

 

5,562

 

 

6,910

 

Non-current lease liabilities

 

83,319

 

 

 

Deferred rent and lease incentive

 

 

 

17,569

 

Deferred tax liabilities, net

 

22,657

 

 

640

 

Other non-current liabilities

 

28,748

 

 

18,005

 

Total liabilities

 

926,218

 

 

681,145

 

 

 

 

 

 

Equity:

 

 

 

 

Stockholders’ equity

 

862,263

 

 

633,700

 

Non-controlling interest

 

(1,345

)

 

(1,098

)

Total liabilities and equity

 

$

1,787,136

 

 

$

1,313,747

 

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

126,591

 

 

$

119,097

 

 

$

355,595

 

 

$

358,361

 

Subscription-based

 

100,583

 

 

76,194

 

 

275,928

 

 

217,668

 

Total recurring revenues

 

227,174

 

 

195,291

 

 

631,523

 

 

576,029

 

Professional services and other revenues

 

8,906

 

 

7,865

 

 

28,668

 

 

26,254

 

Total revenues

 

236,080

 

 

203,156

 

 

660,191

 

 

602,283

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues

 

71,870

 

 

64,964

 

 

205,595

 

 

195,525

 

Compensation and benefits

 

95,587

 

 

80,424

 

 

285,590

 

 

244,174

 

General and administration

 

42,016

 

 

34,810

 

 

124,961

 

 

101,628

 

Depreciation and amortization

 

26,735

 

 

19,563

 

 

73,167

 

 

58,294

 

Total operating expenses

 

236,208

 

 

199,761

 

 

689,313

 

 

599,621

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

(128

)

 

3,395

 

 

(29,122

)

 

2,662

 

Other expense, net

 

(9,813

)

 

(6,118

)

 

(23,088

)

 

(16,802

)

Loss before income tax benefit

 

(9,941

)

 

(2,723

)

 

(52,210

)

 

(14,140

)

 

 

 

 

 

 

 

 

 

Income tax benefit

 

(6,977

)

 

(5,234

)

 

(31,591

)

 

(18,662

)

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(2,964

)

 

2,511

 

 

(20,619

)

 

4,522

 

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

 

(116

)

 

443

 

 

247

 

 

1,010

 

Net income (loss) attributable to Envestnet, Inc.

 

$

(3,080

)

 

$

2,954

 

 

$

(20,372

)

 

$

5,532

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

Basic

 

$

(0.06

)

 

$

0.06

 

 

$

(0.40

)

 

$

0.12

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

(0.06

)

 

$

0.06

 

 

$

(0.40

)

 

$

0.12

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

52,215,469

 

 

45,475,884

 

 

50,414,427

 

 

45,087,932

 

 

 

 

 

 

 

 

 

 

Diluted

 

52,215,469

 

 

47,519,160

 

 

50,414,427

 

 

47,269,479

 

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Nine Months Ended

 

 

September 30,

 

 

2019

 

2018

OPERATING ACTIVITIES:

 

 

 

 

Net income (loss)

 

$

(20,619

)

 

$

4,522

 

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

 

 

 

 

Depreciation and amortization

 

73,167

 

 

58,294

 

Deferred rent and lease incentive amortization

 

 

 

408

 

Provision for doubtful accounts

 

1,243

 

 

1,228

 

Deferred income taxes

 

(37,626

)

 

(21,854

)

Non-cash compensation expense

 

43,167

 

 

29,574

 

Non-cash interest expense

 

17,195

 

 

12,337

 

Accretion on contingent consideration and purchase liability

 

1,240

 

 

209

 

Payments of contingent consideration

 

(578

)

 

 

Loss allocation from equity method investment

 

1,507

 

 

1,069

 

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Fees receivables, net

 

6,164

 

 

(9,131

)

Prepaid expenses and other current assets

 

(4,784

)

 

(4,739

)

Other non-current assets

 

(6,113

)

 

(2,888

)

Accrued expenses and other liabilities

 

(9,732

)

 

6,710

 

Accounts payable

 

(6,859

)

 

4,100

 

Deferred revenue

 

1,231

 

 

1,147

 

Other non-current liabilities

 

3,242

 

 

2,328

 

Net cash provided by operating activities

 

61,845

 

 

83,314

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchase of property and equipment

 

(16,098

)

 

(17,088

)

Capitalization of internally developed software

 

(23,649

)

 

(17,611

)

Acquisitions of businesses, net of cash acquired

 

(321,571

)

 

(194,959

)

Other

 

(3,200

)

 

 

Net cash used in investing activities

 

(364,518

)

 

(229,658

)

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from issuance of Convertible Notes due 2023

 

 

 

345,000

 

Convertible Notes due 2023 issuance costs

 

 

 

(9,982

)

Proceeds from borrowings on revolving credit facility

 

175,000

 

 

195,000

 

Payments on revolving credit facility

 

(75,000

)

 

(276,168

)

Revolving credit facility issuance costs

 

(2,103

)

 

 

Payments of contingent consideration

 

(171

)

 

(2,193

)

Proceeds from exercise of stock options

 

7,029

 

 

5,199

 

Purchase of treasury stock for stock-based tax withholdings

 

(19,697

)

 

(17,884

)

Issuance of restricted stock units

 

4

 

 

4

 

Net cash provided by financing activities

 

85,062

 

 

238,976

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

(178

)

 

(1,047

)

 

 

 

 

 

DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

(217,789

)

 

91,585

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

289,671

 

 

62,115

 

 

 

 

 

 

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

 

$

71,882

 

 

$

153,700

 

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

 

September 30,

 

December 31,

 

 

2019

 

2018

Cash and cash equivalents

 

$

71,632

 

 

$

289,345

 

Restricted cash included in prepaid expenses and other current assets

 

82

 

 

158

 

Restricted cash included in other non-current assets

 

168

 

 

168

 

Total cash, cash equivalents and restricted cash

 

$

71,882

 

 

$

289,671

 

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

Total revenues

 

$

236,080

 

 

$

203,156

 

 

$

660,191

 

 

$

602,283

 

Deferred revenue fair value adjustment

 

3,250

 

 

26

 

 

6,670

 

 

92

 

Adjusted revenues

 

239,330

 

 

203,182

 

 

666,861

 

 

602,375

 

Asset-based cost of revenues

 

(64,339

)

 

(57,932

)

 

(178,474

)

 

(172,252

)

Adjusted net revenues

 

$

174,991

 

 

$

145,250

 

 

$

488,387

 

 

$

430,123

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(2,964

)

 

$

2,511

 

 

$

(20,619

)

 

$

4,522

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

3,250

 

 

26

 

 

6,670

 

 

92

 

Interest income

 

(448

)

 

(619

)

 

(2,859

)

 

(1,403

)

Interest expense

 

8,986

 

 

6,920

 

 

24,345

 

 

18,148

 

Accretion on contingent consideration and purchase liability

 

498

 

 

13

 

 

1,240

 

 

209

 

Income tax benefit

 

(6,977

)

 

(5,234

)

 

(31,591

)

 

(18,662

)

Depreciation and amortization

 

26,735

 

 

19,563

 

 

73,167

 

 

58,294

 

Non-cash compensation expense

 

15,389

 

 

10,603

 

 

43,241

 

 

29,574

 

Restructuring charges and transaction costs

 

4,151

 

 

4,096

 

 

24,725

 

 

10,033

 

Severance

 

2,387

 

 

4,408

 

 

8,147

 

 

8,269

 

Litigation related expense

 

2,065

 

 

 

 

2,065

 

 

 

Foreign currency

 

363

 

 

(431

)

 

208

 

 

(1,002

)

Non-income tax expense adjustment

 

362

 

 

(23

)

 

1,480

 

 

(124

)

Loss allocation from equity method investment

 

957

 

 

258

 

 

1,507

 

 

1,069

 

Loss attributable to non-controlling interest

 

(210

)

 

488

 

 

31

 

 

1,072

 

Adjusted EBITDA

 

$

54,544

 

 

$

42,580

 

 

$

131,757

 

 

$

110,092

 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2019

 

2018

 

2019

 

2018

Net income (loss)

 

$

(2,964

)

 

$

2,511

 

 

$

(20,619

)

 

$

4,522

 

Income tax provision (benefit) (1)

 

(6,977

)

 

(5,234

)

 

(31,591

)

 

(18,662

)

Loss before income tax provision (benefit)

 

(9,941

)

 

(2,723

)

 

(52,210

)

 

(14,140

)

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

3,250

 

 

26

 

 

6,670

 

 

92

 

Accretion on contingent consideration and purchase liability

 

498

 

 

13

 

 

1,240

 

 

209

 

Non-cash interest expense

 

5,006

 

 

4,435

 

 

14,268

 

 

9,335

 

Non-cash compensation expense

 

15,389

 

 

10,603

 

 

43,241

 

 

29,574

 

Restructuring charges and transaction costs

 

4,151

 

 

4,096

 

 

24,725

 

 

10,033

 

Severance

 

2,387

 

 

4,408

 

 

8,147

 

 

8,269

 

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

 

19,242

 

 

13,477

 

 

51,048

 

 

40,831

 

Litigation related expense

 

2,065

 

 

 

 

2,065

 

 

 

Foreign currency

 

363

 

 

(431

)

 

208

 

 

(1,002

)

Non-income tax expense adjustment

 

362

 

 

(23

)

 

1,480

 

 

(124

)

Loss allocation from equity method investment

 

957

 

 

258

 

 

1,507

 

 

1,069

 

Loss attributable to non-controlling interest

 

(210

)

 

488

 

 

31

 

 

1,072

 

Adjusted net income before income tax effect

 

43,519

 

 

34,627

 

 

102,420

 

 

85,218

 

Income tax effect (2)

 

(11,097

)

 

(9,348

)

 

(26,117

)

 

(23,008

)

Adjusted net income

 

$

32,422

 

 

$

25,279

 

 

$

76,303

 

 

$

62,210

 

 

 

 

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

52,215,469

 

 

45,475,884

 

 

50,414,427

 

 

45,087,932

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

Options to purchase common stock

 

953,184

 

 

1,323,712

 

 

1,107,995

 

 

1,348,699

 

Unvested restricted stock units

 

548,057

 

 

719,564

 

 

662,364

 

 

832,848

 

Convertible notes

 

9,875

 

 

 

 

11,637

 

 

 

Warrants

 

 

 

 

 

 

 

 

Diluted number of weighted-average shares outstanding

 

53,726,585

 

 

47,519,160

 

 

52,196,423

 

 

47,269,479

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share - diluted

 

$

0.60

 

 

$

0.53

 

 

$

1.46

 

 

$

1.32

 

_________________________________________________

(1) For the three months ended September 30, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 70.2% and 192.2%, respectively. For the nine months ended September 30, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 60.5% and 132.0%, 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 nine months ended September 30, 2019 and 2018, respectively.

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 

 

 

Three months ended September 30, 2019

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

188,224

 

 

$

47,856

 

 

$

 

 

$

236,080

 

Deferred revenue fair value adjustment

 

3,250

 

 

 

 

 

 

3,250

 

Adjusted revenues

 

191,474

 

 

47,856

 

 

 

 

239,330

 

Less: Asset-based cost of revenues

 

(64,339

)

 

 

 

 

 

(64,339

)

Adjusted net revenues

 

$

127,135

 

 

$

47,856

 

 

$

 

 

$

174,991

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

17,746

 

 

$

(7,112

)

 

$

(10,762

)

 

$

(128

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

3,250

 

 

 

 

 

 

3,250

 

Accretion on contingent consideration and purchase liability

 

498

 

 

 

 

 

 

498

 

Depreciation and amortization

 

18,414

 

 

8,321

 

 

 

 

26,735

 

Non-cash compensation expense

 

9,317

 

 

3,844

 

 

2,228

 

 

15,389

 

Restructuring charges and transaction costs

 

733

 

 

624

 

 

2,794

 

 

4,151

 

Non-income tax expense adjustment

 

299

 

 

63

 

 

 

 

362

 

Severance

 

1,076

 

 

1,218

 

 

93

 

 

2,387

 

Litigation related expense

 

 

 

2,065

 

 

 

 

2,065

 

Other

 

46

 

 

(1

)

 

 

 

45

 

(Income) loss attributable to non-controlling interest

 

(210

)

 

 

 

 

 

(210

)

Adjusted EBITDA

 

$

51,169

 

 

$

9,022

 

 

$

(5,647

)

 

$

54,544

 

 

 

Three Months Ended September 30, 2018

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

157,467

 

 

$

45,689

 

 

$

 

 

$

203,156

 

Deferred revenue fair value adjustment

 

26

 

 

 

 

 

 

26

 

Adjusted revenues

 

157,493

 

 

45,689

 

 

 

 

203,182

 

Less: Asset-based cost of revenues

 

(57,932

)

 

 

 

 

 

(57,932

)

Adjusted net revenues

 

$

99,561

 

 

$

45,689

 

 

$

 

 

$

145,250

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

16,549

 

 

$

(1,103

)

 

$

(12,051

)

 

$

3,395

 

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

26

 

 

 

 

 

 

26

 

Accretion on contingent consideration and purchase liability

 

13

 

 

 

 

 

 

13

 

Depreciation and amortization

 

11,422

 

 

8,141

 

 

 

 

19,563

 

Non-cash compensation expense

 

5,010

 

 

3,165

 

 

2,428

 

 

10,603

 

Restructuring charges and transaction costs

 

2,198

 

 

310

 

 

1,588

 

 

4,096

 

Non-income tax expense adjustment

 

(147

)

 

 

 

 

 

(147

)

Severance

 

4,381

 

 

 

 

27

 

 

4,408

 

Other

 

 

 

 

 

135

 

 

135

 

(Income) loss attributable to non-controlling interest

 

488

 

 

 

 

 

 

488

 

Adjusted EBITDA

 

$

39,940

 

 

$

10,513

 

 

$

(7,873

)

 

$

42,580

 

 

 

Nine months ended September 30, 2019

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

517,819

 

 

$

142,372

 

 

$

 

 

$

660,191

 

Deferred revenue fair value adjustment

 

6,670

 

 

 

 

 

 

6,670

 

Adjusted revenues

 

524,489

 

 

142,372

 

 

 

 

666,861

 

Less: Asset-based cost of revenues

 

(178,474

)

 

 

 

 

 

(178,474

)

Adjusted net revenues

 

$

346,015

 

 

$

142,372

 

 

$

 

 

$

488,387

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

46,969

 

 

$

(24,000

)

 

$

(52,091

)

 

$

(29,122

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

6,670

 

 

 

 

 

 

6,670

 

Accretion on contingent consideration and purchase liability

 

1,240

 

 

 

 

 

 

1,240

 

Depreciation and amortization

 

46,057

 

 

27,110

 

 

 

 

73,167

 

Non-cash compensation expense

 

23,586

 

 

11,799

 

 

7,856

 

 

43,241

 

Restructuring charges and transaction costs

 

1,789

 

 

1,393

 

 

21,543

 

 

24,725

 

Non-income tax expense adjustment

 

1,407

 

 

73

 

 

 

 

1,480

 

Severance

 

2,244

 

 

5,714

 

 

189

 

 

8,147

 

Litigation related expense

 

 

 

2,065

 

 

 

 

2,065

 

Other

 

111

 

 

 

 

2

 

 

113

 

(Income) loss attributable to non-controlling interest

 

31

 

 

 

 

 

 

31

 

Adjusted EBITDA

 

$

130,104

 

 

$

24,154

 

 

$

(22,501

)

 

$

131,757

 

 

 

Nine Months Ended September 30, 2018

 

 

Envestnet
Wealth
Solutions

 

Envestnet Data
& Analytics

 

Nonsegment

 

Total

Revenues

 

$

470,383

 

 

$

131,900

 

 

$

 

 

$

602,283

 

Deferred revenue fair value adjustment

 

84

 

 

8

 

 

 

 

92

 

Adjusted revenues

 

470,467

 

 

131,908

 

 

 

 

602,375

 

Less: Asset-based cost of revenues

 

(172,252

)

 

 

 

 

 

(172,252

)

Adjusted net revenues

 

$

298,215

 

 

$

131,908

 

 

$

 

 

$

430,123

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

48,769

 

 

$

(8,808

)

 

$

(37,299

)

 

$

2,662

 

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment

 

84

 

 

8

 

 

 

 

92

 

Accretion on contingent consideration and purchase liability

 

209

 

 

 

 

 

 

209

 

Depreciation and amortization

 

33,921

 

 

24,373

 

 

 

 

58,294

 

Non-cash compensation expense

 

14,144

 

 

8,565

 

 

6,865

 

 

29,574

 

Restructuring charges and transaction costs

 

2,423

 

 

913

 

 

6,697

 

 

10,033

 

Non-income tax expense adjustment

 

(124

)

 

 

 

 

 

(124

)

Severance

 

7,859

 

 

383

 

 

27

 

 

8,269

 

Other

11

11

 

(Income) loss attributable to non-controlling interest

 

1,072

 

 

 

 

 

 

1,072

 

Adjusted EBITDA

 

$

108,357

 

 

$

25,434

 

 

$

(23,699

)

 

$

110,092

 

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

 

 

As of

 

 

September 30,
2018

 

December 31,
2018

 

March 31,
2019

 

June 30,
2019

 

September 30,
2019

 

 

 

 

 

 

 

 

(in millions, except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

Assets under Management ("AUM")

 

$

153,862

 

 

$

150,591

 

 

$

176,144

 

 

$

182,143

 

 

$

188,739

 

Assets under Administration ("AUA")

 

388,066

 

 

291,934

 

 

319,129

 

 

330,226

 

 

316,742

 

Total AUM/A

 

541,928

 

 

442,525

 

 

495,273

 

 

512,369

 

 

505,481

 

Subscription

 

2,297,593

 

 

2,314,253

 

 

2,546,483

 

 

2,835,780

 

 

2,947,582

 

Total Platform Assets

 

$

2,839,521

 

 

$

2,756,778

 

 

$

3,041,756

 

 

$

3,348,149

 

 

$

3,453,063

 

Platform Accounts

 

 

 

 

 

 

 

 

 

 

AUM

 

776,705

 

 

816,354

 

 

874,574

 

 

907,034

 

 

934,811

 

AUA

 

1,517,297

 

 

1,182,764

 

 

1,187,589

 

 

1,196,114

 

 

1,136,430

 

Total AUM/A

 

2,294,002

 

 

1,999,118

 

 

2,062,163

 

 

2,103,148

 

 

2,071,241

 

Subscription

 

8,185,667

 

 

8,865,435

 

 

8,909,581

 

 

9,492,653

 

 

9,692,714

 

Total Platform Accounts

 

10,479,669

 

 

10,864,553

 

 

10,971,744

 

 

11,595,801

 

 

11,763,955

 

Advisors

 

 

 

 

 

 

 

 

 

 

AUM/A

 

47,292

 

 

40,103

 

 

39,035

 

 

39,727

 

 

39,735

 

Subscription

 

45,619

 

 

56,237

 

 

57,594

 

 

59,292

 

 

60,319

 

Total Advisors

 

92,911

 

 

96,340

 

 

96,629

 

 

99,019

 

 

100,054

 

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

 

 

6/30/2019

 

Gross
Sales

 

Redemp-
tions

 

Net
Flows

 

Market
Impact

 

Reclass to
Subscription

 

9/30/2019

 

 

(in millions except account data)

AUM

 

$

182,143

 

 

$

14,569

 

 

$

(8,827

)

 

$

5,742

 

 

$

854

 

 

$

 

 

$

188,739

 

AUA

 

330,226

 

 

19,330

 

 

(15,348

)

 

3,982

 

 

1,378

 

 

(18,844

)

 

316,742

 

Total AUM/A

 

$

512,369

 

 

$

33,899

 

 

$

(24,175

)

 

$

9,724

 

 

$

2,232

 

 

$

(18,844

)

 

$

505,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

2,103,148

 

 

 

 

 

 

45,188

 

 

 

 

(77,095

)

 

2,071,241

 

The above AUM/A gross sales figures include $0.8 billion in new client conversions. The Company onboarded an additional $68.9 billion in subscription conversions during the three months ended September 30, 2019, bringing total conversions for the quarter to $69.7 billion.

Asset and account figures in the “Reclass to Subscription” column for the three months ended September 30, 2019 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.

Source: Envestnet

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

Media Relations
mediarelations@envestnet.com

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.