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,
2023.
Three months ended
Nine months ended
Key Financial Metrics
September 30,
%
September 30,
%
(in millions, except per share
data)
2023
2022
Change
2023
2022
Change
GAAP:
Total revenue
$
316.8
$
306.7
3
%
$
928.0
$
946.9
(2
)%
Net income (loss) attributable to
Envestnet, Inc.
$
7.1
$
(7.3
)
*
$
(55.6
)
$
(44.4
)
(25
)%
Net income (loss) attributable to
Envestnet, Inc. per diluted share
$
0.13
$
(0.13
)
*
$
(1.02
)
$
(0.81
)
(26
)%
Non-GAAP:
Adjusted revenue(1)
$
316.8
$
306.7
3
%
$
928.1
$
947.1
(2
)%
Adjusted EBITDA(1)
$
67.2
$
53.5
26
%
$
180.5
$
166.3
8
%
Adjusted net income(1)
$
36.6
$
29.5
24
%
$
97.2
$
92.6
5
%
Adjusted net income per diluted
share(1)
$
0.56
$
0.45
24
%
$
1.47
$
1.41
4
%
*Not meaningful
“Envestnet delivers the modern, connected technology platform to
lead the industry, making us more embedded and essential to the
growth of our clients,” said Bill Crager, Chief Executive Officer.
“Our investment cycle is complete. We are now a structurally higher
margin company than we were before, have significantly extended our
competitive position and our long-term growth thesis is
intact.”
Financial Results for the Third Quarter of 2023
Asset-based recurring revenue increased 9% from the third
quarter of 2022, and represented 61% of total revenue for the third
quarter of 2023, compared to 58% for the third quarter of 2022.
Subscription-based recurring revenue decreased 7% from the third
quarter of 2022, and represented 36% of total revenue for the third
quarter of 2023, compared to 40% for the third quarter of 2022.
Professional services and other non-recurring revenue increased 38%
from the prior year period. Total revenue increased 3% to $316.8
million for the third quarter of 2023 from $306.7 million for the
third quarter of 2022.
Total operating expenses for the third quarter of 2023 increased
3% to $316.2 million from $307.7 million in the prior year period.
Direct expense increased to $119.5 million for the third quarter of
2023 from $110.1 million for the prior year period. Employee
compensation decreased 3% to $113.3 million for the third quarter
of 2023 from $116.8 million for the prior year period. Employee
compensation was 36% of total revenue for the third quarter of
2023, compared to 38% for the prior year period. General and
administrative expenses increased 4% to $49.1 million for the third
quarter of 2023 from $47.4 million for the prior year period.
General and administrative expenses remained consistent at 15% of
total revenue for both the third quarter of 2023 and the prior year
period.
Income from operations was $0.6 million for the third quarter of
2023 compared to a loss of $1.0 million for the third quarter of
2022. Net income attributable to Envestnet, Inc. was $7.1 million
for the third quarter of 2023 compared to a net loss attributable
to Envestnet, Inc. of $7.3 million for the third quarter of 2022.
Net income attributable to Envestnet, Inc. per diluted share was
$0.13 for the third quarter of 2023 compared to a net loss
attributable to Envestnet, Inc. per diluted share of $(0.13) for
the third quarter of 2022.
Adjusted revenue(1) for the third quarter of 2023 increased 3%
to $316.8 million from $306.7 million for the prior year period.
Adjusted EBITDA(1) for the third quarter of 2023 increased to $67.2
million from $53.5 million for the prior year period. Adjusted net
income(1) increased 24% for the third quarter of 2023 to $36.6
million from $29.5 million for the prior year period. Adjusted net
income per diluted share(1) for the third quarter of 2023 increased
24% to $0.56 from $0.45 in the third quarter of 2022.
Balance Sheet and Liquidity
As of September 30, 2023, Envestnet had $43.2 million in cash
and cash equivalents and $892.5 million in outstanding debt. Debt
as of September 30, 2023 consists of $317.5 million in convertible
notes maturing in 2025 and $575.0 million in convertible notes
maturing in 2027. Envestnet's $500.0 million revolving credit
facility was undrawn as of September 30, 2023.
Outlook
Envestnet provided the following outlook for the fourth quarter
and full year ending December 31, 2023. This outlook is based on
the market value of assets under management or administration as of
September 30, 2023. We caution that we cannot predict the market
value of these assets on any future date. See “Cautionary Statement
Regarding Forward-Looking Statements.”
In Millions, Except Adjusted
EPS
4Q 2023
FY 2023
GAAP:
Revenue:
Asset-based
$
183.5
-
$
186.5
$
740.1
-
$
743.1
Subscription-based
115.5
-
117.0
462.5
-
464.0
Total recurring revenue
299.0
-
303.5
1,202.6
-
1,207.1
Professional services and other
revenue
10.0
-
10.5
34.4
-
34.9
Total revenue
$
309.0
-
$
314.0
$
1,237.0
-
$
1,242.0
Asset-based direct expense
$
109.0
-
$
110.5
$
433.1
-
$
434.6
Total direct expense
$
117.5
-
$
119.0
$
469.5
-
$
471.0
Net income
(a)
(a)
Diluted shares outstanding
66.1
66.0
Net income per diluted share
(a)
(a)
Non-GAAP:
Adjusted revenue(1):
Asset-based
$
183.5
-
$
186.5
$
740.1
-
$
743.1
Subscription-based
115.5
-
117.0
462.6
-
464.1
Total recurring revenue
299.0
-
303.5
1,202.7
-
1,207.2
Professional services and other
revenue
10.0
-
10.5
34.4
-
34.9
Total revenue
$
309.0
-
$
314.0
$
1,237.1
-
$
1,242.1
Adjusted EBITDA(1)
$
64.5
-
$
68.5
$
245.0
-
$
249.0
Adjusted net income per diluted
share(1)
$
0.51
-
$
0.54
$
1.98
-
$
2.01
(a) Envestnet does not forecast net income and net income per
diluted share due to the unpredictable nature of various items
adjusted for non-GAAP disclosure purposes, including the periodic
GAAP income tax provision.
Conference Call
Envestnet will host a conference call to discuss third quarter
2023 financial results today at 5:00 p.m. ET. The live webcast and
accompanying presentation can be accessed from Envestnet’s investor
relations website at http://investor.envestnet.com/. A replay of
the webcast will be available on the investor relations website
following the call.
About Envestnet
Envestnet, Inc. (NYSE: ENV) is transforming the way financial
advice and wellness are delivered. Our mission is to empower
advisors and financial service providers with innovative
technology, solutions and intelligence to make financial wellness a
reality for everyone. Approximately 107,000 advisors and
approximately 6,900 companies including: 16 of the 20 largest U.S.
banks, 48 of the 50 largest wealth management and brokerage firms,
over 500 of the largest RIAs and hundreds of FinTech companies,
leverage Envestnet technology and services that help drive better
outcomes for enterprises, advisors and their clients.
For more information on Envestnet, please visit
www.envestnet.com and follow us on Twitter @ENVintel.
(1) Non-GAAP Financial Measures
“Adjusted revenue” excludes the effect of purchase accounting on
the fair value of acquired deferred revenue. On January 1, 2022,
the Company adopted ASU 2021-08 whereby it now accounts for
contract assets and contract liabilities obtained upon a business
combination in accordance with ASC 606. Prior to the adoption of
ASU 2021-08, we recorded at fair value the acquired deferred
revenue for contracts in effect at the time the entities were
acquired. Consequently, revenue related to acquired entities for
periods subsequent to the acquisition did not reflect the full
amount of revenue that would have been recorded by these entities
had they remained stand-alone entities. Adjusted revenue has
limitations as a financial measure, should be considered as
supplemental in nature and is not meant as a substitute for revenue
prepared in accordance with GAAP.
“Adjusted EBITDA” represents net income (loss) before deferred
revenue fair value adjustment, interest income, interest expense,
income tax provision (benefit), depreciation and amortization,
non-cash compensation expense, restructuring charges and
transaction costs, severance expense, litigation, regulatory and
other governance related expenses, foreign currency, non-income tax
expense adjustment, fair market value adjustment to investment in
private company, dilution gain on equity method investee share
issuance, loss allocations from equity method investments and
(income) loss attributable to non-controlling interest.
“Adjusted net income” represents net income (loss) before income
tax provision (benefit), deferred revenue fair value adjustment,
non-cash interest expense, cash interest on our convertible notes,
non-cash compensation expense, restructuring charges and
transaction costs, severance expense, amortization of acquired
intangibles, litigation, regulatory and other governance related
expenses, foreign currency, non-income tax expense adjustment, fair
market value adjustment to investment in private company, dilution
gain on equity method investee share issuance, loss allocations
from equity method investments and (income) loss attributable to
non-controlling interest. Reconciling items are presented gross of
tax, and a normalized tax rate is applied to the total of all
reconciling items to arrive at adjusted net income. The normalized
tax rate is based solely on the estimated blended statutory income
tax rates in the jurisdictions in which we operate. We monitor the
normalized tax rate based on events or trends that could materially
impact the rate, including tax legislation changes and changes in
the geographic mix of our operations.
“Adjusted net income per diluted share” represents adjusted net
income attributable to common stockholders divided by the diluted
number of weighted-average shares outstanding. For purposes of the
adjusted net income per share calculation, we assume all potential
shares to be issued in connection with our convertible notes are
dilutive.
For further information see reconciliations of Non-GAAP
Financial Measures on pages 9-14 of this press release, and the
section entitled "Non-GAAP Financial Measures" in the most recent
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed
with the Securities and Exchange Commission (“SEC”) which are
available on the SEC’s website at www.sec.gov or our Investor
Relations website at http://investor.envestnet.com/.
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 revenue, net
income (loss) or net income (loss) per share determined in
accordance with GAAP.
Cautionary Statement Regarding Forward-Looking
Statements
The forward-looking statements made in this press release and
its attachments concerning, among other things, Envestnet, Inc.’s
expected financial performance and outlook for the fourth quarter
and full year of 2023, its strategic and 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 our 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 concentration of our revenue 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 revenue; the renegotiation of fees by our
clients; changes in the estimates of fair value of reporting units
or of long-lived assets; the amount of our debt and our ability to
service our debt; limitations on our ability to access information
from third parties or charges for accessing such information; the
targeting of some of our sales efforts at large financial
institutions and large financial technology (“FinTech”) companies
which prolongs sales cycles, requires substantial upfront sales
costs and results in less predictability in completing some of our
sales; changes in investing patterns on the assets on which we
derive revenue and the freedom of investors to redeem or withdraw
investments generally at any time; the impact of fluctuations in
market conditions and interest rates on the demand for our products
and services and the value of assets under management or
administration; our ability to keep up with rapid technological
change, evolving industry standards or changing requirements of
clients; risks associated with our international operations; the
competitiveness of our solutions and services as compared to those
of others; liabilities associated with potential, perceived or
actual breaches of fiduciary duties and/or conflicts of interest;
harm to our reputation; our ability to successfully identify
potential acquisition candidates, complete acquisitions and
successfully integrate acquired companies; our ability to
successfully execute the conversion of clients’ assets from their
technology platform to our technology platforms in a timely and
accurate manner; the failure to protect our intellectual property
rights; our ability to introduce new solutions and services and
enhancements; our ability to maintain the security and integrity of
our systems and facilities and to maintain the privacy of personal
information and potential liabilities for data security breaches;
the effect of privacy laws and regulations, industry standards and
contractual obligations and changes to these laws, regulations,
standards and obligations on how we operate our business and the
negative effects of failure to comply with these requirements;
regulatory compliance failures; failure by our customers to obtain
proper permissions or waivers for our use of disclosure of
information; adverse judicial or regulatory proceedings against us;
failure of our solutions, services or systems, or those of third
parties on which we rely, to work properly; potential liability for
use of inaccurate information by third parties provided by us; the
occurrence of a deemed “change of control”; the uncertainty of the
application and interpretation of certain tax laws; issuances of
additional shares of common stock or issuances of shares of
preferred stock or convertible securities on our existing
stockholders; changes in the level of inflation; general economic,
political and regulatory conditions; changes in trade, monetary and
fiscal policies and laws; global events, natural disasters,
environmental disasters, terrorist attacks and pandemics or health
crises, including their impact on the economy and trading markets;
social, environmental and sustainability concerns that may arise,
including from our business activities; and management’s response
to these factors. More information regarding these and other risks,
uncertainties and factors is contained in our filings with the SEC
which are available on the SEC’s website at www.sec.gov or our
Investor Relations website at http://investor.envestnet.com/. You
are cautioned not to unduly rely on these forward-looking
statements, which speak only as of the date of this press release.
All information in this press release and its attachments is as of
November 8, 2023 and, unless required by law, we undertake no
obligation to publicly revise any forward-looking statement to
reflect circumstances or events after the date of this press
release or to report the occurrence of unanticipated events.
Envestnet, Inc.
Condensed Consolidated Balance
Sheets
(in thousands)
(unaudited)
September 30,
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
43,211
$
162,173
Fees receivable, net
110,643
101,696
Prepaid expenses and other current
assets
49,299
41,363
Total current assets
203,153
305,232
Property and equipment, net
65,785
62,443
Internally developed software, net
217,411
184,558
Intangible assets, net
346,211
379,995
Goodwill
998,381
998,414
Operating lease right-of-use assets,
net
72,929
81,596
Other assets
127,019
99,927
Total assets
$
2,030,889
$
2,112,165
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities
$
224,385
$
233,866
Operating lease liabilities
13,297
11,949
Deferred revenue
32,563
36,363
Current portion of debt
—
44,886
Total current liabilities
270,245
327,064
Debt
875,390
871,769
Operating lease liabilities, net of
current portion
102,717
110,652
Deferred tax liabilities, net
14,598
16,196
Other liabilities
16,138
18,880
Total liabilities
1,279,088
1,344,561
Equity:
Total stockholders’ equity, attributable
to Envestnet, Inc.
743,796
754,567
Non-controlling interest
8,005
13,037
Total liabilities and equity
$
2,030,889
$
2,112,165
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,
2023
2022
2023
2022
Revenue:
Asset-based
$
193,901
$
177,131
$
556,595
$
571,820
Subscription-based
114,939
123,747
346,977
356,601
Total recurring revenue
308,840
300,878
903,572
928,421
Professional services and other
revenue
8,007
5,817
24,416
18,489
Total revenue
316,847
306,695
927,988
946,910
Operating expenses:
Direct expense
119,538
110,108
352,024
361,872
Employee compensation
113,334
116,837
344,646
369,453
General and administrative
49,063
47,388
156,028
157,867
Depreciation and amortization
34,311
33,408
101,058
97,208
Total operating expenses
316,246
307,741
953,756
986,400
Income (loss) from operations
601
(1,046
)
(25,768
)
(39,490
)
Other expense, net
(4,369
)
(5,346
)
(19,706
)
(9,691
)
Loss before income tax provision
(benefit)
(3,768
)
(6,392
)
(45,474
)
(49,181
)
Income tax provision (benefit)
(8,824
)
2,271
15,363
(1,542
)
Net income (loss)
5,056
(8,663
)
(60,837
)
(47,639
)
Add: Net loss attributable to
non-controlling interest
2,035
1,373
5,284
3,205
Net income (loss) attributable to
Envestnet, Inc.
$
7,091
$
(7,290
)
$
(55,553
)
$
(44,434
)
Net income (loss) attributable to
Envestnet, Inc. per share:
Basic
$
0.13
$
(0.13
)
$
(1.02
)
$
(0.81
)
Diluted
$
0.13
$
(0.13
)
$
(1.02
)
$
(0.81
)
Weighted average common shares
outstanding:
Basic
54,562,270
55,226,777
54,380,231
55,109,387
Diluted
54,970,616
55,226,777
54,380,231
55,109,387
Envestnet, Inc.
Condensed Consolidated
Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
2023
2022
Cash flows from operating activities:
Net loss
$
(60,837
)
$
(47,639
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
101,058
97,208
Deferred income taxes
(1,458
)
(4,380
)
Release of uncertain tax positions
—
(3,095
)
Non-cash compensation expense
58,141
62,583
Non-cash interest expense
6,822
5,436
Loss allocations from equity method
investments
8,240
5,332
Fair market value adjustment to investment
in private company
(2,804
)
—
Dilution gain on equity method investee
share issuance
(546
)
(6,934
)
Lease related impairments
2,483
14,050
Loss on property and equipment disposals -
office closures
—
3,710
Other
1,155
(149
)
Changes in operating assets and
liabilities:
Fees receivable, net
(9,621
)
1,546
Prepaid expenses and other assets
(17,534
)
(12,524
)
Accounts payable, accrued expenses and
other liabilities
(1,848
)
(26,580
)
Deferred revenue
(3,974
)
(2,329
)
Net cash provided by operating
activities
79,277
86,235
Cash flows from investing activities:
Purchases of property and equipment
(18,275
)
(13,114
)
Capitalization of internally developed
software
(71,117
)
(67,755
)
Acquisitions of businesses, net of cash
acquired
—
(104,185
)
Investments in private companies
(4,175
)
(16,351
)
Acquisition of proprietary technology
(12,000
)
(19,000
)
Issuance of loan receivable to private
company
(20,000
)
—
Issuance of note receivable to equity
method investees
—
(6,350
)
Other
400
—
Net cash used in investing activities
(125,167
)
(226,755
)
Cash flows from financing activities:
Proceeds from borrowings on Revolving
Credit Facility
55,000
—
Payments related to Revolving Credit
Facility
(55,000
)
(1,872
)
Payments related to Convertible Notes
(45,000
)
—
Payments on finance lease obligations
(5,511
)
(14,544
)
Proceeds from exercise of stock
options
839
2,559
Payments related to tax withholdings for
stock-based compensation
(17,004
)
(20,613
)
Payments related to share repurchases
(9,289
)
(9,235
)
Purchase of non-controlling units from
third-party shareholders
(1,008
)
—
Payments of contingent consideration
—
(750
)
Other
4
5
Net cash used in financing activities
(76,969
)
(44,450
)
Effect of exchange rate on changes on
cash, cash equivalents and restricted cash
3,897
(3,128
)
Net change in cash, cash equivalents and
restricted cash
(118,962
)
(188,098
)
Cash, cash equivalents and restricted
cash, beginning of period
162,173
429,428
Cash, cash equivalents and restricted
cash, end of period
$
43,211
$
241,330
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
(in thousands)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Total revenue
$
316,847
$
306,695
$
927,988
$
946,910
Deferred revenue fair value adjustment
(a)
—
54
69
162
Adjusted revenue
$
316,847
$
306,749
$
928,057
$
947,072
Net income (loss)
$
5,056
$
(8,663
)
$
(60,837
)
$
(47,639
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
—
54
69
162
Interest income (b)
(1,553
)
(1,239
)
(4,567
)
(2,273
)
Interest expense (b)
6,202
4,242
19,053
13,307
Income tax provision (benefit)
(8,824
)
2,271
15,363
(1,542
)
Depreciation and amortization
34,311
33,408
101,058
97,208
Non-cash compensation expense (d)
17,298
17,265
58,141
62,583
Restructuring charges and transaction
costs (e)
1,695
3,895
12,366
27,267
Severance expense (d)
11,482
1,125
25,904
11,379
Litigation, regulatory and other
governance related expenses (c)
604
(2,050
)
5,823
5,333
Foreign currency (b)
223
308
330
613
Non-income tax expense adjustment (c)
(26
)
(325
)
(224
)
(112
)
Fair market value adjustment to investment
in private company (b)
(2,871
)
—
(2,804
)
—
Dilution gain on equity method investee
share issuance (b)
—
—
(546
)
(6,934
)
Loss allocations from equity method
investments (b)
2,368
2,387
8,240
5,332
Loss attributable to non-controlling
interest
1,277
820
3,082
1,637
Adjusted EBITDA
$
67,242
$
53,498
$
180,451
$
166,321
- Included within subscription-based revenue in the condensed
consolidated statements of operations.
- Included within other expense, net in the condensed
consolidated statements of operations.
- Included within general and administrative expense in the
condensed consolidated statements of operations.
- Included within employee compensation expense in the condensed
consolidated statements of operations.
- For the three months ended September 30, 2023 and 2022, $1.2
million and $4.1 million were included within general and
administrative expense, respectively, in the condensed consolidated
statements of operations. For the three months ended September 30,
2023 and 2022, $0.5 million and $0.2 million were included within
employee compensation expense, respectively, in the condensed
consolidated statements of operations. For the three months ended
September 30, 2023 and 2022, $0.0 million and $(0.4) million were
included within other expense, net, respectively, in the condensed
consolidated statements of operations. For the nine months ended
September 30, 2023 and 2022, $10.2 million and $27.5 million were
included within general and administrative expense, respectively,
in the condensed consolidated statements of operations. For the
nine months ended September 30, 2023 and 2022, $2.2 million and
$0.2 million were included within employee compensation expense,
respectively, in the condensed consolidated statements of
operations. For the nine months ended September 30, 2023 and 2022,
$0.0 million and $(0.4) million were included within other expense,
net, respectively, in the condensed consolidated statements of
operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
(in thousands, except share
and per share information)
(unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Net income (loss)
$
5,056
$
(8,663
)
$
(60,837
)
$
(47,639
)
Income tax provision (benefit) (a)
(8,824
)
2,271
15,363
(1,542
)
Loss before income tax provision
(benefit)
(3,768
)
(6,392
)
(45,474
)
(49,181
)
Add (deduct):
Deferred revenue fair value adjustment
(b)
—
54
69
162
Non-cash interest expense (d)
1,389
1,443
4,258
4,917
Cash interest - Convertible Notes (d)
4,368
2,479
13,476
7,439
Non-cash compensation expense (e)
17,298
17,265
58,141
62,583
Restructuring charges and transaction
costs (g)
1,695
3,895
12,366
27,267
Severance expense (e)
11,482
1,125
25,904
11,379
Amortization of acquired intangibles
(f)
15,124
18,649
47,784
53,814
Litigation, regulatory and other
governance related expenses (c)
604
(2,050
)
5,823
5,333
Foreign currency (d)
223
308
330
613
Non-income tax expense adjustment (c)
(26
)
(325
)
(224
)
(112
)
Fair market value adjustment to investment
in private company (d)
(2,871
)
—
(2,804
)
—
Dilution gain on equity method investee
share issuance (d)
—
—
(546
)
(6,934
)
Loss allocations from equity method
investments (d)
2,368
2,387
8,240
5,332
Loss attributable to non-controlling
interest
1,277
820
3,082
1,637
Adjusted net income before income tax
effect
49,163
39,658
130,425
124,249
Income tax effect (h)
(12,536
)
(10,112
)
(33,258
)
(31,683
)
Adjusted net income
$
36,627
$
29,546
$
97,167
$
92,566
Basic number of weighted-average shares
outstanding
54,562,270
55,226,777
54,380,231
55,109,387
Effect of dilutive shares:
Convertible Notes
10,811,884
9,898,549
11,176,254
9,898,549
Non-vested RSUs and PSUs
361,982
208,367
438,520
378,061
Options to purchase common stock
46,364
74,559
64,507
123,267
Diluted number of weighted-average shares
outstanding
65,782,500
65,408,252
66,059,512
65,509,264
Adjusted net income per diluted share
$
0.56
$
0.45
$
1.47
$
1.41
- For the three months ended September 30, 2023 and 2022, the
effective tax rate computed in accordance with GAAP equaled 234.2%
and (35.5)%, respectively. For the nine months ended September 30,
2023 and 2022, the effective tax rate computed in accordance with
GAAP equaled (33.8)% and 3.1%, respectively.
- Included within subscription-based revenue in the condensed
consolidated statements of operations.
- Included within general and administrative expense in the
condensed consolidated statements of operations.
- Included within other expense, net in the condensed
consolidated statements of operations.
- Included within employee compensation expense in the condensed
consolidated statements of operations.
- Included within depreciation and amortization expense in the
condensed consolidated statements of operations.
- For the three months ended September 30, 2023 and 2022, $1.2
million and $4.1 million were included within general and
administrative expense, respectively, in the condensed consolidated
statements of operations. For the three months ended September 30,
2023 and 2022, $0.5 million and $0.2 million were included within
employee compensation expense, respectively, in the condensed
consolidated statements of operations. For the three months ended
September 30, 2023 and 2022, $0.0 million and $(0.4) million were
included within other expense, net, respectively, in the condensed
consolidated statements of operations. For the nine months ended
September 30, 2023 and 2022, $10.2 million and $27.5 million were
included within general and administrative expense, respectively,
in the condensed consolidated statements of operations. For the
nine months ended September 30, 2023 and 2022, $2.2 million and
$0.2 million were included within employee compensation expense,
respectively, in the condensed consolidated statements of
operations. For the nine months ended September 30, 2023 and 2022,
$0.0 million and $(0.4) million were included within other expense,
net, respectively, in the condensed consolidated statements of
operations.
- An estimated normalized tax rate of 25.5% has been used to
compute adjusted net income for the three and nine months ended
September 30, 2023 and 2022.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(in thousands)
(unaudited)
Three Months Ended September
30, 2023
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
275,027
$
41,820
$
—
$
316,847
Deferred revenue fair value adjustment
(a)
—
—
—
—
Adjusted revenue
$
275,027
$
41,820
$
—
$
316,847
Revenue:
Asset-based
$
193,901
$
—
$
—
$
193,901
Subscription-based
76,813
38,126
—
114,939
Total recurring revenue
270,714
38,126
—
308,840
Professional services and other
revenue
4,313
3,694
—
8,007
Total revenue
$
275,027
$
41,820
$
—
$
316,847
Operating expenses:
Direct expense
Asset-based
$
112,938
$
—
$
—
$
112,938
Subscription-based
1,451
5,523
—
6,974
Professional services and other
(384
)
10
—
(374
)
Total direct expense
114,005
5,533
—
119,538
Employee compensation
76,449
22,819
14,066
113,334
General and administrative
28,646
12,807
7,610
49,063
Depreciation and amortization
24,535
9,776
—
34,311
Total operating expenses
$
243,635
$
50,935
$
21,676
$
316,246
Income (loss) from operations
$
31,392
$
(9,115
)
$
(21,676
)
$
601
Add (deduct):
Deferred revenue fair value adjustment
(a)
—
—
—
—
Depreciation and amortization
24,535
9,776
—
34,311
Non-cash compensation expense (c)
10,682
2,448
4,168
17,298
Restructuring charges and transaction
costs (d)
1,432
(98
)
361
1,695
Severance expense (c)
4,501
6,302
679
11,482
Litigation, regulatory and other
governance related expenses (b)
—
629
(25
)
604
Non-income tax expense adjustment (b)
(26
)
—
—
(26
)
Loss attributable to non-controlling
interest
1,277
—
—
1,277
Adjusted EBITDA
$
73,793
$
9,942
$
(16,493
)
$
67,242
- Included within subscription-based revenue in the condensed
consolidated statements of operations.
- Included within general and administrative expense in the
condensed consolidated statements of operations.
- Included within employee compensation expense in the condensed
consolidated statements of operations.
- $1.2 million was included within general and administrative
expense and $0.5 million was included within employee compensation
expense in the condensed consolidated statements of
operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(continued)
(in thousands)
(unaudited)
Nine Months Ended September
30, 2023
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
803,268
$
124,720
$
—
$
927,988
Deferred revenue fair value adjustment
(a)
69
—
—
69
Adjusted revenue
$
803,337
$
124,720
$
—
$
928,057
Revenue:
Asset-based
$
556,595
$
—
$
—
$
556,595
Subscription-based
228,807
118,170
—
346,977
Total recurring revenue
785,402
118,170
—
903,572
Professional services and other
revenue
17,866
6,550
—
24,416
Total revenue
$
803,268
$
124,720
$
—
$
927,988
Operating expenses:
Direct expense:
Asset-based
$
324,093
$
—
$
—
$
324,093
Subscription-based
4,328
15,941
—
20,269
Professional services and other
7,652
10
—
7,662
Total direct expense
336,073
15,951
—
352,024
Employee compensation
229,320
65,974
49,352
344,646
General and administrative
86,438
42,808
26,782
156,028
Depreciation and amortization
73,183
27,875
—
101,058
Total operating expenses
$
725,014
$
152,608
$
76,134
$
953,756
Income (loss) from operations
$
78,254
$
(27,888
)
$
(76,134
)
$
(25,768
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
69
—
—
69
Depreciation and amortization
73,183
27,875
—
101,058
Non-cash compensation expense (c)
33,967
7,837
16,337
58,141
Restructuring charges and transaction
costs (d)
7,984
215
4,167
12,366
Severance expense (c)
9,931
11,849
4,124
25,904
Litigation, regulatory and other
governance related expenses (b)
—
4,163
1,660
5,823
Non-income tax expense adjustment (b)
(153
)
(71
)
—
(224
)
Loss attributable to non-controlling
interest
3,082
—
—
3,082
Adjusted EBITDA
$
206,317
$
23,980
$
(49,846
)
$
180,451
- Included within subscription-based revenue in the condensed
consolidated statements of operations.
- Included within general and administrative expense in the
condensed consolidated statements of operations.
- Included within employee compensation expense in the condensed
consolidated statements of operations.
- $10.2 million was included within general and administrative
expense and $2.2 million was included within employee compensation
expense in the condensed consolidated statements of
operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(continued)
(in thousands)
(unaudited)
Three months ended September
30, 2022
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
257,335
$
49,360
$
—
$
306,695
Deferred revenue fair value adjustment
(a)
54
—
—
54
Adjusted revenue
$
257,389
$
49,360
$
—
$
306,749
Revenue:
Asset-based
$
177,131
$
—
$
—
$
177,131
Subscription-based
75,975
47,772
—
123,747
Total recurring revenue
253,106
47,772
—
300,878
Professional services and other
revenue
4,229
1,588
—
5,817
Total revenue
$
257,335
$
49,360
$
—
$
306,695
Operating expenses:
Direct expense:
Asset-based
$
102,409
$
—
$
—
$
102,409
Subscription-based
1,308
6,460
—
7,768
Professional services and other
(99
)
30
—
(69
)
Total direct expense
103,618
6,490
—
110,108
Employee compensation
77,010
26,174
13,653
116,837
General and administrative
31,463
7,851
8,074
47,388
Depreciation and amortization
24,637
8,771
—
33,408
Total operating expenses
$
236,728
$
49,286
$
21,727
$
307,741
Income (loss) from operations
$
20,607
$
74
$
(21,727
)
$
(1,046
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
54
—
—
54
Depreciation and amortization
24,637
8,771
—
33,408
Non-cash compensation expense (c)
11,235
2,991
3,039
17,265
Restructuring charges and transaction
costs (d)
928
1,264
1,703
3,895
Severance expense (c)
686
281
158
1,125
Litigation, regulatory and other
governance related expenses (b)
—
(2,050
)
—
(2,050
)
Non-income tax expense adjustment (b)
(343
)
18
—
(325
)
Loss attributable to non-controlling
interest
820
—
—
820
Other (e)
352
—
—
352
Adjusted EBITDA
$
58,976
$
11,349
$
(16,827
)
$
53,498
- Included within subscription-based revenue in the condensed
consolidated statements of operations.
- Included within general and administrative expense in the
condensed consolidated statements of operations.
- Included within employee compensation expense in the condensed
consolidated statements of operations.
- $4.1 million was included within general and administrative
expense, $0.2 million was included within employee compensation
expense and $(0.4) million was included in other expense, net, in
the condensed consolidated statements of operations.
- Included in other expense, net, in the condensed consolidated
statements of operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(continued)
(in thousands)
(unaudited)
Nine months ended September
30, 2022
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
802,903
$
144,007
$
—
$
946,910
Deferred revenue fair value adjustment
(a)
162
—
—
162
Adjusted revenue
$
803,065
$
144,007
$
—
$
947,072
Revenue:
Asset-based
$
571,820
$
—
$
—
$
571,820
Subscription-based
218,080
138,521
—
356,601
Total recurring revenue
789,900
138,521
—
928,421
Professional services and other
revenue
13,003
5,486
—
18,489
Total revenue
$
802,903
$
144,007
$
—
$
946,910
Operating expenses:
Direct expense:
Asset-based
$
332,138
$
—
$
—
$
332,138
Subscription-based
4,177
18,643
—
22,820
Professional services and other
6,833
81
—
6,914
Total direct expense
343,148
18,724
—
361,872
Employee compensation
234,413
80,334
54,706
369,453
General and administrative
103,824
28,633
25,410
157,867
Depreciation and amortization
71,674
25,534
—
97,208
Total operating expenses
$
753,059
$
153,225
$
80,116
$
986,400
Income (loss) from operations
$
49,844
$
(9,218
)
$
(80,116
)
$
(39,490
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
162
—
—
162
Depreciation and amortization
71,674
25,534
—
97,208
Non-cash compensation expense (c)
35,889
8,378
18,316
62,583
Restructuring charges and transaction
costs (d)
18,109
2,014
7,144
27,267
Severance expense (c)
4,909
1,492
4,978
11,379
Litigation, regulatory and other
governance related expenses (b)
—
5,333
—
5,333
Non-income tax expense adjustment (b)
(52
)
(60
)
—
(112
)
Loss attributable to non-controlling
interest
1,637
—
—
1,637
Other (e)
352
2
—
354
Adjusted EBITDA
$
182,524
$
33,475
$
(49,678
)
$
166,321
- Included within subscription-based revenue in the condensed
consolidated statements of operations.
- Included within general and administrative expense in the
condensed consolidated statements of operations.
- Included within employee compensation expense in the condensed
consolidated statements of operations.
- $27.5 million was included within general and administrative
expense, $0.2 million was included within employee compensation
expense and $(0.4) million was included in other expense, net, in
the condensed consolidated statements of operations.
- Included in other expense, net, in the condensed consolidated
statements of operations.
Envestnet, Inc. Key Metrics
(in millions, except accounts and advisors data)
(unaudited)
Envestnet Wealth Solutions Segment
The following table provides information regarding the amount of
assets utilizing our platforms, financial advisors and investor
accounts in the periods indicated:
As of
September 30,
December 31,
March 31,
June 30,
September 30,
2022
2022
2023
2023
2023
(in millions, except accounts and
advisors data)
Platform Assets
Assets under Management (“AUM”)
$
315,883
$
341,144
$
363,244
$
384,773
$
375,408
Assets under Administration (“AUA”)
350,576
367,412
379,843
394,078
398,082
Total AUM/A
666,459
708,556
743,087
778,851
773,490
Subscription
4,134,414
4,382,109
4,566,971
4,643,313
4,579,248
Total Platform Assets
$
4,800,873
$
5,090,665
$
5,310,058
$
5,422,164
$
5,352,738
Platform Accounts
AUM
1,522,968
1,547,009
1,571,862
1,609,677
1,614,873
AUA
1,135,302
1,135,026
1,142,166
1,144,375
1,257,094
Total AUM/A
2,658,270
2,682,035
2,714,028
2,754,052
2,871,967
Subscription
15,596,403
15,665,020
15,779,980
15,916,955
16,072,848
Total Platform Accounts
18,254,673
18,347,055
18,494,008
18,671,007
18,944,815
Advisors
AUM/A
38,417
38,025
38,611
38,809
38,078
Subscription
67,348
67,520
67,843
68,439
69,318
Total Advisors
105,765
105,545
106,454
107,248
107,396
The following table summarizes the changes in AUM and AUA for
the three months ended September 30, 2023:
Asset Rollforward - Three
Months Ended September 30, 2023
As of June 30,
Gross
Net
Market
Reclass to
As of September 30,
2023
Sales
Redemptions
Flows
Impact
Subscription
2023
(in millions, except account
data)
AUM
$
384,773
$
24,754
$
(19,846
)
$
4,908
$
(12,821
)
$
(1,452
)
$
375,408
AUA
394,078
39,624
(23,889
)
15,735
(11,731
)
—
398,082
Total AUM/A
$
778,851
$
64,378
$
(43,735
)
$
20,643
$
(24,552
)
$
(1,452
)
$
773,490
Fee-Based Accounts
2,754,052
128,548
(10,633
)
2,871,967
The above AUM/A gross sales figures for the three months ended
September 30, 2023 include $25.8 billion in new client conversions.
We onboarded an additional $28.5 billion in subscription
conversions during the three months ended September 30, 2023
bringing total conversions for the three months ended September 30,
2023 to $54.3 billion.
Envestnet, Inc. Key Metrics
(in millions, except accounts and advisors data)
(unaudited)
The following table summarizes the changes in AUM and AUA for
the nine months ended September 30, 2023:
Asset Rollforward - Nine
Months Ended September 30, 2023
As of December 31,
Gross
Net
Market
Reclass to
As of September 30,
2022
Sales
Redemptions
Flows
Impact
Subscription
2023
(in millions, except account
data)
AUM
$
341,144
$
74,693
$
(52,153
)
$
22,540
$
14,315
$
(2,591
)
$
375,408
AUA
367,412
97,564
(69,449
)
28,115
16,427
(13,872
)
398,082
Total AUM/A
$
708,556
$
172,257
$
(121,602
)
$
50,655
$
30,742
$
(16,463
)
$
773,490
Fee-Based Accounts
2,682,035
289,041
(99,109
)
2,871,967
The above AUM/A gross sales figures for the nine months ended
September 30, 2023 include $54.6 billion in new client conversions.
We onboarded an additional $96.6 billion in subscription
conversions during the nine months ended September 30, 2023
bringing total conversions for the nine months ended September 30,
2023 to $151.2 billion.
Asset and account figures in the “Reclass to Subscription”
columns for the three and nine months ended September 30, 2023
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.
Envestnet Data & Analytics Segment
The following table provides information regarding the amount of
paid-end users and firms using the Envestnet Data & Analytics
platform in the periods indicated:
As of
September 30,
December 31,
March 31,
June 30,
September 30
2022
2022
2023
2023
2023
(in millions, except number of
firms data)
Number of paying users
38.1
38.8
37.5
38.0
42.3
Number of firms
1,815
1,827
1,851
1,873
1,855
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231107301117/en/
Investor Relations investor.relations@envestnet.com (312)
827-3940
Media Relations mediarelations@envestnet.com
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