Envestnet (NYSE: ENV), a leading provider of intelligent systems
for wealth management and financial wellness, today reported
financial results for the quarter and year ended December 31,
2023.
Three Months Ended
Year Ended
Key Financial Metrics
December 31,
%
December 31,
%
(in millions, except per share data)
(unaudited)
2023
2022
Change
2023
2022
Change
GAAP:
Total revenue
$
317.6
$
292.9
8%
$
1,245.6
$
1,239.8
—%
Net loss attributable to Envestnet,
Inc.
$
(183.2
)
$
(36.5
)
*
$
(238.7
)
$
(80.9
)
*
Net loss attributable to Envestnet, Inc.,
per diluted share
$
(3.35
)
$
(0.85
)
*
$
(4.38
)
$
(1.59
)
*
Non-GAAP:
Adjusted revenue(1)
$
317.6
$
292.9
8%
$
1,245.7
$
1,240.0
—%
Adjusted EBITDA(1)
$
75.5
$
52.4
44%
$
250.9
$
215.4
16%
Adjusted net income(1)
$
43.0
$
29.9
44%
$
140.2
$
122.5
14%
Adjusted net income per diluted
share(1)
$
0.65
$
0.45
44%
$
2.12
$
1.86
14%
__________________________________________________________
*Not meaningful
“For 25 years it has been a privilege to be a part of and lead
the amazing journey that is Envestnet — how foundational it is to
the industry, our clients and the advisors who grow, serve and
enrich the lives of millions of families,” said Bill Crager, Chief
Executive Officer.
“The foundation of the business is strong and Envestnet has the
right strategy and people to continue delivering for clients and
the industry.”
Financial Results for the Fourth Quarter 2023 Compared to the
Fourth Quarter 2022:
Total revenue increased 8% to $317.6 million for the fourth
quarter of 2023 from $292.9 million for the fourth quarter of 2022.
Asset-based recurring revenue increased 13% and represented 59% of
total revenue for the fourth quarter of 2023, compared to 57% of
total revenue for the fourth quarter of 2022. Subscription-based
recurring revenue decreased 3% and represented 37% of total revenue
for the fourth quarter of 2023, compared to 41% of total revenue
for the fourth quarter of 2022. Professional services and other
non-recurring revenue increased 115% for the fourth quarter of 2023
from the fourth quarter of 2022.
Total operating expenses increased 55% to $496.3 million for the
fourth quarter of 2023 from $319.4 million for the fourth quarter
of 2022. Direct expense increased 11% to $118.7 million for the
fourth quarter of 2023 from $107.2 million for the fourth quarter
of 2022. Employee compensation decreased 17% to $100.2 million for
the fourth quarter of 2023 from $121.3 million for the fourth
quarter of 2022. Employee compensation was 32% of total revenue for
the fourth quarter of 2023, compared to 41% of total revenue for
the fourth quarter of 2022. General and administrative expense
decreased 13% to $51.3 million for the fourth quarter of 2023 from
$59.0 million for the fourth quarter of 2022. General and
administrative expense was 16% of total revenue for the fourth
quarter of 2023, compared to 20% of total revenue for the fourth
quarter of 2022. A goodwill impairment charge of $191.8 million was
recognized for the fourth quarter of 2023.
Loss from operations was $178.7 million for the fourth quarter
of 2023 compared to $26.5 million for the fourth quarter of 2022.
Net loss attributable to Envestnet, Inc. was $183.2 million, or
$3.35 per diluted share, for the fourth quarter of 2023 compared to
$36.5 million, or $0.85 per diluted share, for the fourth quarter
of 2022.
Adjusted revenue(1) increased 8% to $317.6 million for the
fourth quarter of 2023 from $292.9 million for the fourth quarter
of 2022. Adjusted EBITDA(1) increased 44% to $75.5 million for the
fourth quarter of 2023 from $52.4 million for the fourth quarter of
2022. Adjusted net income(1) increased 44% to $43.0 million, or
$0.65 per diluted share, for the fourth quarter of 2023 from $29.9
million, or $0.45 per diluted share, for the fourth quarter of
2022.
Financial Results for the Full Year 2023 Compared to the Full
Year 2022:
Total revenue remained consistent at $1.2 billion for the years
ended December 31, 2023 and 2022. Asset-based recurring revenue
increased 1% and represented 60% of total revenue for the years
ended December 31, 2023 and 2022. Subscription-based recurring
revenue decreased 3% and represented 37% of total revenue for the
year ended December 31, 2023 compared to 39% of total revenue for
the year ended December 31, 2022. Professional services and other
non-recurring revenue increased 50% for the year ended December 31,
2023 from the year ended December 31, 2022.
Total operating expenses increased 11% to $1.5 billion for the
year ended December 31, 2023 from $1.3 billion for the year ended
December 31, 2022. Direct expense increased 1% to $473.0 million
for the year ended December 31, 2023 from $470.4 million for the
year ended December 31, 2022. Employee compensation decreased 9% to
$444.8 million for the year ended December 31, 2023 from $490.7
million for the year ended December 31, 2022. Employee compensation
was 36% of total revenue for the year ended December 31, 2023,
compared to 40% of total revenue for the year ended December 31,
2022. General and administrative expense decreased 4% to $210.1
million for the year ended December 31, 2023 from $218.8 million
for the year ended December 31, 2022. General and administrative
expense was 17% of total revenue for the year ended December 31,
2023, compared to 18% for the year ended December 31, 2022. A
goodwill impairment charge of $191.8 million was recognized for the
year ended December 31, 2023.
Loss from operations was $204.5 million for the year ended
December 31, 2023 compared to $66.0 million for the year ended
December 31, 2022. Net loss attributable to Envestnet, Inc. was
$238.7 million, or $4.38 per diluted share, for the year ended
December 31, 2023 compared to $80.9 million, or $1.59 per diluted
share, for the year ended December 31, 2022.
Adjusted revenue(1) remained consistent at $1.2 billion for the
years ended December 31, 2023 and 2022. Adjusted EBITDA(1)
increased 16% to $250.9 million for the year ended December 31,
2023 from $215.4 million for the year ended December 31, 2022.
Adjusted net income(1) increased 14% to $140.2 million, or $2.12
per diluted share, for the year ended December 31, 2023 from $122.5
million, or $1.86 per diluted share, for the year ended December
31, 2022.
Balance Sheet and Liquidity
As of December 31, 2023, Envestnet had $91.4 million in cash and
cash equivalents and $892.5 million in outstanding debt. Debt as of
December 31, 2023 consisted 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 December 31, 2023.
Segment Reporting
On October 1, 2023, the Company changed the composition of its
reportable segments to reflect the way that the Company's chief
operating decision maker reviews the operating results, assesses
performance and allocates resources. As a result, the
advisor-focused Wealth Analytics business has been reclassified
from the Envestnet Data & Analytics segment to the Envestnet
Wealth Solutions segment. The segment change does not impact
nonsegment results or the Company's consolidated balance sheets,
consolidated statements of operations or consolidated statements of
cash flows. All segment information presented within this Exhibit
99.1 for the quarter and full year ended December 31, 2023 is
presented in conjunction with the current organizational structure,
with prior periods adjusted accordingly.
Correction of Immaterial Error
During the fourth quarter of 2023, the Company identified that
the arrangement with a third-party for the use of cloud hosted
virtual servers which was previously accounted for as a finance
lease transaction and included as a component of property and
equipment, net in the consolidated balance sheets should have been
recognized as a prepayment included within prepaid expenses and
other current assets and other assets in the consolidated balance
sheets. The Company concluded that the classification of these
transactions was immaterial in prior period financial statements
and that amendment of previously filed reports was not required.
However, the Company corrected this immaterial error in the prior
periods reported within this Exhibit 99.1.
Outlook
Envestnet provided the following outlook for the first quarter
ending March 31, 2024. This outlook is based on the market value of
assets under management or administration on December 31, 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
1Q 2024
GAAP:
Revenue:
Asset-based
$
200.0
-
$
203.0
Subscription-based
117.0
-
119.0
Total recurring revenue
317.0
-
322.0
Professional services and other
revenue
3.0
-
4.0
Total revenue
$
320.0
-
$
326.0
Asset-based direct expense
$
117.5
-
$
119.0
Total direct expense
$
125.5
-
$
127.0
Net income (loss)
(a)
Diluted shares outstanding
66.3
Net income (loss) per diluted share
(a)
Non-GAAP:
Adjusted EBITDA(1)
$
64.0
-
$
69.0
Adjusted net income per diluted
share(1)
$
0.52
-
$
0.57
__________________________________________________________ (a)
Envestnet does not forecast net income (loss) and net income (loss)
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 fourth quarter
and full year 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 insight are delivered. Our mission is to empower
financial advisors and service providers with innovative
technology, solutions and intelligence. Envestnet's clients include
more than 108,000 advisors, 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, all of which
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,
goodwill impairment, non-cash compensation expense, restructuring
charges and transaction costs, severance expense, fair market value
adjustment on investment in private company, litigation, regulatory
and other governance related expenses, foreign currency, non-income
tax expense adjustment, 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,
goodwill impairment, non-cash compensation expense, restructuring
charges and transaction costs, severance expense, amortization of
acquired intangibles, fair market value adjustment to investment in
private company, litigation, regulatory and other governance
related expenses, foreign currency, non-income tax expense
adjustment, 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 11-16 of this press release, and the
section entitled "Non-GAAP Financial Measures" in the most recent
Annual Report on Form 10-K 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 first quarter
and full year of 2024, 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, our ability to recruit and retain senior executive
leadership and other key employees and to successfully manage
transitions, including the transition of our chief executive
officer; adverse economic or global market conditions, including
periods of rising inflation and market interest rates, and
governmental responses to such conditions; the conflicts in the
Middle East and between Russia and Ukraine, including related
sanctions and their impact on the global economy and capital
markets; 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, particularly goodwill and intangible
assets; the amount of our debt, our ability to service our debt and
risks associated with derivative transactions associated with 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 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; increased
geopolitical unrest and other events outside of our control that
could adversely affect the global economy or specific
international, regional and domestic markets; 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; the failure
to protect our intellectual property rights; our reliance on
outsourcing arrangements; activist shareholders hindering the
execution of our business strategy, diverting board and management
attention and resources and causing us to incur substantial
expenses; public health crises, pandemics or similar events; 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; our ability to introduce
new solutions and services and enhancements; regulatory compliance
failures; 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 cybersecurity 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;
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; general
economic, political and regulatory conditions; global events,
natural disasters, environmental disasters, terrorist attacks and
pandemics, including their impact on the economy and trading
markets; 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 February 22, 2024 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.
Consolidated Balance
Sheets
(in thousands)
(unaudited)
December 31,
2023
2022
Assets
Current assets:
Cash and cash equivalents
$
91,378
$
162,173
Fees receivable, net
120,958
101,696
Prepaid expenses and other current
assets
51,472
47,422
Total current assets
263,808
311,291
Property and equipment, net
48,223
48,481
Internally developed software, net
224,713
184,558
Intangible assets, net
338,068
379,995
Goodwill
806,563
998,414
Operating lease right-of-use assets,
net
69,154
81,596
Other assets
126,723
107,830
Total assets
$
1,877,252
$
2,112,165
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and
other current liabilities
$
241,424
$
233,866
Operating lease liabilities
12,909
11,949
Deferred revenue
38,201
36,363
Current portion of debt
—
44,886
Total current liabilities
292,534
327,064
Debt
876,612
871,769
Operating lease liabilities, net of
current portion
100,830
110,652
Deferred tax liabilities, net
16,568
16,196
Other liabilities
16,202
18,880
Total liabilities
1,302,746
1,344,561
Equity:
Total stockholders’ equity, attributable
to Envestnet, Inc.
568,191
754,567
Non-controlling interest
6,315
13,037
Total liabilities and equity
$
1,877,252
$
2,112,165
Envestnet, Inc.
Consolidated Statements of
Operations
(in thousands, except share
and per share information)
(unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Revenue:
Asset-based
$
188,643
$
166,408
$
745,238
$
738,228
Subscription-based
117,753
121,243
464,730
477,844
Total recurring revenue
306,396
287,651
1,209,968
1,216,072
Professional services and other
revenue
11,236
5,223
35,652
23,712
Total revenue
317,632
292,874
1,245,620
1,239,784
Operating expenses:
Direct expense
118,729
107,179
473,038
470,424
Employee compensation
100,182
121,272
444,828
490,725
General and administrative
51,297
59,048
210,113
218,831
Depreciation and amortization
34,319
31,909
130,304
125,828
Goodwill impairment
191,818
—
191,818
—
Total operating expenses
496,345
319,408
1,450,101
1,305,808
Loss from operations
(178,713
)
(26,534
)
(204,481
)
(66,024
)
Other income (expense), net
(8,810
)
(2,704
)
(28,516
)
(12,395
)
Loss before income tax provision
(benefit)
(187,523
)
(29,238
)
(232,997
)
(78,419
)
Income tax provision (benefit)
(2,586
)
8,603
12,777
7,061
Net loss
(184,937
)
(37,841
)
(245,774
)
(85,480
)
Add: Net loss attributable to
non-controlling interest
1,766
1,336
7,050
4,541
Net loss attributable to Envestnet,
Inc.
$
(183,171
)
$
(36,505
)
$
(238,724
)
$
(80,939
)
Net loss attributable to Envestnet, Inc.,
per share:
Basic
$
(3.35
)
$
(0.66
)
$
(4.38
)
$
(1.47
)
Diluted
$
(3.35
)
$
(0.85
)
$
(4.38
)
$
(1.59
)
Weighted average common shares
outstanding:
Basic
54,689,559
55,119,075
54,457,365
55,199,482
Diluted
54,689,559
56,076,261
54,457,365
56,842,125
Envestnet, Inc.
Consolidated Statements of
Cash Flows
(in thousands)
(unaudited)
Year Ended December
31,
2023
2022
Cash flows from operating activities:
Net loss
$
(245,774
)
$
(85,480
)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization
130,304
125,828
Deferred income taxes
(1,479
)
(3,490
)
Goodwill impairment
191,818
—
Non-cash compensation expense
71,031
80,333
Non-cash interest expense
5,037
7,445
Fair market value adjustment to investment
in private company
(804
)
(400
)
Dilution gain on equity method investee
share issuance
(546
)
(9,517
)
Loss allocations from equity method
investments
10,579
8,874
Lease related impairments
5,120
15,750
Loss on extinguishment of Convertible
Notes due 2023
—
13,421
Gain on extinguishment of Convertible
Notes due 2025
—
(15,089
)
Loss on property and equipment
disposals
—
5,097
Other
1,781
1,266
Changes in operating assets and
liabilities:
Fees receivable, net
(20,584
)
(5,031
)
Prepaid expenses and other assets
(11,573
)
(16,090
)
Accounts payable, accrued expenses and
other liabilities
19,229
(24,257
)
Deferred revenue
729
(305
)
Net cash provided by operating
activities
154,868
98,355
Cash flows from investing activities:
Purchases of property and equipment
(18,995
)
(16,172
)
Capitalization of internally developed
software
(94,307
)
(89,153
)
Acquisitions of businesses, net of cash
acquired
—
(104,100
)
Investments in private companies
(4,175
)
(16,351
)
Acquisition of proprietary technology
(17,000
)
(19,000
)
Issuance of loan receivable to private
company
(20,000
)
—
Issuance of note receivable to equity
method investees
—
(6,350
)
Other
414
—
Net cash used in investing activities
(154,063
)
(251,126
)
Envestnet, Inc.
Consolidated Statements of
Cash Flows (continued)
(in thousands)
(unaudited)
Year Ended December
31,
2023
2022
Cash flows from financing activities:
Proceeds from borrowings on Revolving
Credit Facility
55,000
—
Payments related to Revolving Credit
Facility
(55,000
)
—
Settlement of Convertible Notes due
2023
(45,000
)
—
Proceeds from issuance of Convertible
Notes due 2027
—
575,000
Convertible Notes due 2027 issuance
costs
—
(16,323
)
Repurchase of Convertible Notes due
2023
—
(312,422
)
Repurchase of Convertible Notes due
2025
—
(181,772
)
Payments related to Capped Call
Transactions
—
(79,585
)
Proceeds from exercise of stock
options
1,608
2,620
Payments related to tax withholdings for
stock-based compensation
(19,022
)
(23,516
)
Payments related to share repurchases
(9,289
)
(85,750
)
Purchase of non-controlling units from
third-party shareholders
(1,008
)
—
Proceeds from capital contributions of
non-controlling shareholders
—
16,037
Payments of contingent consideration
—
(743
)
Other
5
(1,866
)
Net cash used in financing activities
(72,706
)
(108,320
)
Effect of exchange rate on changes on
cash, cash equivalents and restricted cash
1,106
(6,164
)
Net change in cash, cash equivalents and
restricted cash
(70,795
)
(267,255
)
Cash, cash equivalents and restricted
cash, beginning of period
162,173
429,428
Cash, cash equivalents and restricted
cash, end of period
$
91,378
$
162,173
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
(in thousands)
(unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Total revenue
$
317,632
$
292,874
$
1,245,620
$
1,239,784
Deferred revenue fair value adjustment
(a)
—
54
69
216
Adjusted revenue
$
317,632
$
292,928
$
1,245,689
$
1,240,000
Net loss
$
(184,937
)
$
(37,841
)
$
(245,774
)
$
(85,480
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
—
54
69
216
Interest income (b)
(1,721
)
(1,911
)
(6,288
)
(4,184
)
Interest expense (b)
6,085
3,536
25,138
16,843
Income tax provision (benefit)
(2,586
)
8,603
12,777
7,061
Depreciation and amortization
34,319
31,909
130,304
125,828
Goodwill impairment
191,818
—
191,818
—
Non-cash compensation expense (d)
12,890
17,750
71,031
80,333
Restructuring charges and transaction
costs (e)
3,897
7,874
16,263
35,141
Severance expense (d)
9,495
18,738
35,399
30,117
Litigation, regulatory and other
governance related expenses (c)
1,159
722
6,982
6,055
Foreign currency (b)
107
806
437
1,419
Non-income tax expense adjustment (c)
(168
)
914
(392
)
802
Fair market value adjustment to investment
in private company (b)
2,000
(400
)
(804
)
(400
)
Dilution gain on equity method investee
share issuance (b)
—
(2,583
)
(546
)
(9,517
)
Loss allocations from equity method
investments (b)
2,339
3,542
10,579
8,874
Loss attributable to non-controlling
interest
838
663
3,920
2,300
Adjusted EBITDA
$
75,535
$
52,376
$
250,913
$
215,408
__________________________________________________________
(a)
Included within subscription-based revenue in the consolidated
statements of operations.
(b)
Included within other income (expense), net in the consolidated
statements of operations.
(c)
Included within general and administrative expense in the
consolidated statements of operations.
(d)
Included within employee compensation in the consolidated
statements of operations.
(e)
For the three months ended December 31, 2023 and 2022, $3.3 million
and $7.9 million, respectively, were included within general and
administrative expense in the consolidated statements of
operations. For the three months ended December 31, 2023 and 2022,
$0.6 million and $0.0 million, respectively, were included within
employee compensation in the consolidated statements of operations.
For the years ended December 31, 2023 and 2022, $13.5 million and
$35.1 million, respectively, were included within general and
administrative expense in the consolidated statements of
operations. For the years ended December 31, 2023 and 2022, $2.8
million and $0.0 million, respectively, were included within
employee compensation in the consolidated statements of operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures (continued)
(in thousands, except share
and per share information)
(unaudited)
Three Months Ended
Year Ended
December 31,
December 31,
2023
2022
2023
2022
Net loss
$
(184,937
)
$
(37,841
)
$
(245,774
)
$
(85,480
)
Income tax provision (benefit) (a)
(2,586
)
8,603
12,777
7,061
Loss before income tax provision
(benefit)
(187,523
)
(29,238
)
(232,997
)
(78,419
)
Add (deduct):
Deferred revenue fair value adjustment
(b)
—
54
69
216
Non-cash interest expense (c)
1,397
(239
)
5,655
4,678
Cash interest - Convertible Notes (c)
4,369
3,458
17,845
10,897
Amortization of acquired intangibles
(g)
15,143
18,087
62,927
71,901
Goodwill impairment
191,818
—
191,818
—
Non-cash compensation expense (f)
12,890
17,750
71,031
80,333
Restructuring charges and transaction
costs (e)
3,897
7,874
16,263
35,141
Severance expense (f)
9,495
18,738
35,399
30,117
Litigation, regulatory and other
governance related expenses (d)
1,159
722
6,982
6,055
Foreign currency (c)
107
806
437
1,419
Non-income tax expense adjustment (d)
(168
)
914
(392
)
802
Fair market value adjustment to investment
in private company (c)
2,000
(400
)
(804
)
(400
)
Dilution gain on equity method investee
share issuance (c)
—
(2,583
)
(546
)
(9,517
)
Loss allocations from equity method
investments (c)
2,339
3,542
10,579
8,874
Loss attributable to non-controlling
interest
838
663
3,920
2,300
Adjusted net income before income tax
effect
57,761
40,148
188,186
164,397
Income tax effect (h)
(14,729
)
(10,238
)
(47,987
)
(41,921
)
Adjusted net income
$
43,032
$
29,910
$
140,199
$
122,476
Basic number of weighted-average shares
outstanding
54,689,559
55,119,075
54,457,365
55,199,482
Effect of dilutive shares:
Convertible Notes
10,811,884
10,667,509
11,084,413
10,092,369
Non-vested RSUs and PSUs
252,597
265,187
413,734
390,270
Options to purchase common stock
19,509
70,947
47,388
111,327
Diluted number of weighted-average shares
outstanding
65,773,549
66,122,718
66,002,900
65,793,448
Adjusted net income per share -
diluted
$
0.65
$
0.45
$
2.12
$
1.86
__________________________________________________________
(a)
For the three months ended December 31, 2023 and 2022, the
effective tax rate computed in accordance with GAAP equaled 1.4%
and (29.4)%, respectively. For the years ended December 31, 2023
and 2022, the effective tax rate computed in accordance with GAAP
equaled (5.5)% and (9.0)%, respectively.
(b)
Included within subscription-based revenue in the consolidated
statements of operations.
(c)
Included within other income (expense), net in the consolidated
statements of operations.
(d)
Included within general and administrative expense in the
consolidated statements of operations.
(e)
For the three months ended December 31, 2023 and 2022, $3.3 million
and $7.9 million, respectively, were included within general and
administrative expense in the consolidated statements of
operations. For the three months ended December 31, 2023 and 2022,
$0.6 million and $0.0 million, respectively, were included within
employee compensation in the consolidated statements of operations.
For the years ended December 31, 2023 and 2022, $13.5 million and
$35.1 million, respectively, were included within general and
administrative expense in the consolidated statements of
operations. For the years ended December 31, 2023 and 2022, $2.8
million and $0.0 million, respectively, were included within
employee compensation in the consolidated statements of operations.
(f)
Included within employee compensation in the consolidated
statements of operations.
(g)
Included within depreciation and amortization in the consolidated
statements of operations.
(h)
An estimated normalized effective tax rate of 25.5% has been used
to compute adjusted net income for the three months and years ended
December 31, 2023 and 2022.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(in thousands)
(unaudited)
Three Months Ended December
31, 2023
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
278,988
$
38,644
$
—
$
317,632
Deferred revenue fair value adjustment
(a)
—
—
—
—
Adjusted revenue
$
278,988
$
38,644
$
—
$
317,632
Revenue:
Asset-based
$
188,643
$
—
$
—
$
188,643
Subscription-based
84,184
33,569
—
117,753
Total recurring revenue
272,827
33,569
—
306,396
Professional services and other
revenue
6,161
5,075
—
11,236
Total revenue
$
278,988
$
38,644
$
—
$
317,632
Operating expenses:
Direct expense:
Asset-based
$
110,030
$
—
$
—
$
110,030
Subscription-based
1,367
6,893
—
8,260
Professional services and other
439
—
—
439
Total direct expense
111,836
6,893
—
118,729
Employee compensation
77,520
9,938
12,724
100,182
General and administrative
29,822
13,641
7,834
51,297
Depreciation and amortization
26,631
7,688
—
34,319
Goodwill impairment
—
191,818
—
191,818
Total operating expenses
$
245,809
$
229,978
$
20,558
$
496,345
Income (loss) from operations
$
33,179
$
(191,334
)
$
(20,558
)
$
(178,713
)
Add:
Deferred revenue fair value adjustment
(a)
—
—
—
—
Depreciation and amortization
26,631
7,688
—
34,319
Goodwill impairment
—
191,818
—
191,818
Non-cash compensation expense (c)
9,763
1,136
1,991
12,890
Restructuring charges and transaction
costs (d)
2,883
1
1,013
3,897
Severance expense (c)
6,679
586
2,230
9,495
Litigation, regulatory and other
governance related expenses (b)
—
1,159
—
1,159
Non-income tax expense adjustment (b)
(167
)
(1
)
—
(168
)
Loss attributable to non-controlling
interest
838
—
—
838
Adjusted EBITDA
$
79,806
$
11,053
$
(15,324
)
$
75,535
__________________________________________________________
(a)
Included within subscription-based revenue in the consolidated
statements of operations.
(b)
Included within general and administrative expense in the
consolidated statements of operations.
(c)
Included within employee compensation in the consolidated
statements of operations.
(d)
For the three months ended December 31, 2023, $3.3 million was
included within general and administrative expense and $0.6 million
was included within employee compensation in the consolidated
statements of operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(continued)
(in thousands)
(unaudited)
Three Months Ended December
31, 2022
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
251,101
$
41,773
$
—
$
292,874
Deferred revenue fair value adjustment
(a)
54
—
—
54
Adjusted revenue
$
251,155
$
41,773
$
—
$
292,928
Revenue:
Asset-based
$
166,408
$
—
$
—
$
166,408
Subscription-based
81,026
40,217
—
121,243
Total recurring revenue
247,434
40,217
—
287,651
Professional services and other
revenue
3,667
1,556
—
5,223
Total revenue
$
251,101
$
41,773
$
—
$
292,874
Operating expenses:
Direct expense:
Asset-based
$
98,207
$
—
$
—
$
98,207
Subscription-based
1,593
6,791
—
8,384
Professional services and other
588
—
—
588
Total direct expense
100,388
6,791
—
107,179
Employee compensation
80,796
27,034
13,442
121,272
General and administrative
37,693
13,787
7,568
59,048
Depreciation and amortization
25,511
6,398
—
31,909
Total operating expenses
$
244,388
$
54,010
$
21,010
$
319,408
Income (loss) from operations
$
6,713
$
(12,237
)
$
(21,010
)
$
(26,534
)
Add:
Deferred revenue fair value adjustment
(a)
54
—
—
54
Depreciation and amortization
25,511
6,398
—
31,909
Non-cash compensation expense (c)
11,397
2,118
4,235
17,750
Restructuring charges and transaction
costs (d)
4,762
1,717
1,395
7,874
Severance expense (c)
8,251
9,330
1,157
18,738
Litigation, regulatory and other
governance related expenses (b)
—
722
—
722
Non-income tax expense adjustment (b)
930
(16
)
—
914
Loss attributable to non-controlling
interest
663
—
—
663
Other
283
3
—
286
Adjusted EBITDA
$
58,564
$
8,035
$
(14,223
)
$
52,376
__________________________________________________________
(a)
Included within subscription-based revenue in the consolidated
statements of operations.
(b)
Included within general and administrative expense in the
consolidated statements of operations.
(c)
Included within employee compensation in the consolidated
statements of operations.
(d)
For the three months ended December 31, 2022, $7.9 million was
included within general and administrative expense and $0.0 million
was included within employee compensation in the consolidated
statements of operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(continued)
(in thousands)
(unaudited)
Year Ended December 31,
2023
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
1,094,704
$
150,916
$
—
$
1,245,620
Deferred revenue fair value adjustment
(a)
69
—
—
69
Adjusted revenue
$
1,094,773
$
150,916
$
—
$
1,245,689
Revenue:
Asset-based
$
745,238
$
—
$
—
$
745,238
Subscription-based
325,398
139,332
—
464,730
Total recurring revenue
1,070,636
139,332
—
1,209,968
Professional services and other
revenue
24,068
11,584
—
35,652
Total revenue
$
1,094,704
$
150,916
$
—
$
1,245,620
Operating expenses:
Direct expense:
Asset-based
$
434,123
$
—
$
—
$
434,123
Subscription-based
6,851
23,963
—
30,814
Professional services and other
8,091
10
—
8,101
Total direct expense
449,065
23,973
—
473,038
Employee compensation
313,338
69,414
62,076
444,828
General and administrative
120,247
55,250
34,616
210,113
Depreciation and amortization
103,301
27,003
—
130,304
Goodwill impairment
—
191,818
—
191,818
Total operating expenses
$
985,951
$
367,458
$
96,692
$
1,450,101
Income (loss) from operations
$
108,753
$
(216,542
)
$
(96,692
)
$
(204,481
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
69
—
—
69
Depreciation and amortization
103,301
27,003
—
130,304
Goodwill impairment
—
191,818
—
191,818
Non-cash compensation expense (c)
44,510
8,193
18,328
71,031
Restructuring charges and transaction
costs (d)
10,868
215
5,180
16,263
Severance expense (c)
17,232
11,813
6,354
35,399
Litigation, regulatory and other
governance related expenses (b)
—
5,322
1,660
6,982
Non-income tax expense adjustment (b)
(320
)
(72
)
—
(392
)
Loss attributable to non-controlling
interest
3,920
—
—
3,920
Adjusted EBITDA
$
288,333
$
27,750
$
(65,170
)
$
250,913
__________________________________________________________
(a)
Included within subscription-based revenue in the consolidated
statements of operations.
(b)
Included within general and administrative expense in the
consolidated statements of operations.
(c)
Included within employee compensation in the consolidated
statements of operations.
(d)
For the year ended December 31, 2023, $13.5 million was included
within general and administrative expense and $2.8 million was
included within employee compensation in the consolidated
statements of operations.
Envestnet, Inc.
Reconciliation of Non-GAAP
Financial Measures
Segment Information
(continued)
(in thousands)
(unaudited)
Year Ended December 31,
2022
Envestnet Wealth
Solutions
Envestnet Data &
Analytics
Nonsegment
Total
Revenue
$
1,065,244
$
174,540
$
—
$
1,239,784
Deferred revenue fair value adjustment
(a)
216
—
—
216
Adjusted revenue
$
1,065,460
$
174,540
$
—
$
1,240,000
Revenue:
Asset-based
$
738,228
$
—
$
—
$
738,228
Subscription-based
310,217
167,627
—
477,844
Total recurring revenue
1,048,445
167,627
—
1,216,072
Professional services and other
revenue
16,799
6,913
—
23,712
Total revenue
$
1,065,244
$
174,540
$
—
$
1,239,784
Operating expenses:
Direct expense:
Asset-based
$
430,345
$
—
$
—
$
430,345
Subscription-based
6,681
25,896
—
32,577
Professional services and other
7,421
81
—
7,502
Total direct expense
444,447
25,977
—
470,424
Employee compensation
321,277
101,300
68,148
490,725
General and administrative
143,597
42,256
32,978
218,831
Depreciation and amortization
98,600
27,228
—
125,828
Total operating expenses
$
1,007,921
$
196,761
$
101,126
$
1,305,808
Income (loss) from operations
$
57,323
$
(22,221
)
$
(101,126
)
$
(66,024
)
Add (deduct):
Deferred revenue fair value adjustment
(a)
216
—
—
216
Depreciation and amortization
98,600
27,228
—
125,828
Non-cash compensation expense (c)
47,891
9,891
22,551
80,333
Restructuring charges and transaction
costs (d)
22,871
3,731
8,539
35,141
Severance expense (c)
13,237
10,745
6,135
30,117
Litigation, regulatory and other
governance related expenses (b)
—
6,055
—
6,055
Non-income tax expense adjustment (b)
878
(76
)
—
802
Loss attributable to non-controlling
interest
2,300
—
—
2,300
Other
635
5
—
640
Adjusted EBITDA
$
243,951
$
35,358
$
(63,901
)
$
215,408
__________________________________________________________
(a)
Included within subscription-based revenue in the consolidated
statements of operations.
(b)
Included within general and administrative expense in the
consolidated statements of operations.
(c)
Included within employee compensation in the consolidated
statements of operations.
(d)
For the year ended December 31, 2022, $35.1 million was included
within general and administrative expense and $0.0 million was
included within employee compensation in the consolidated
statements of operations.
Envestnet, Inc.
Historical Assets, Accounts
and Advisors
(in millions, except accounts
and advisors)
(unaudited)
Envestnet Wealth Solutions
Segment
As of
December 31,
March 31,
June 30,
September 30,
December 31,
2022
2023
2023
2023
2023
(in millions, except accounts and
advisors data)
Platform Assets
Assets under management ("AUM")
$
341,144
$
363,244
$
384,773
$
375,408
$
416,001
Assets under administration ("AUA")
367,412
379,843
394,078
398,082
430,846
Total AUM/A
708,556
743,087
778,851
773,490
846,847
Subscription
4,382,109
4,566,971
4,643,313
4,579,248
4,959,514
Total platform assets
$
5,090,665
$
5,310,058
$
5,422,164
$
5,352,738
$
5,806,361
Platform Accounts
AUM
1,547,009
1,571,862
1,609,677
1,614,873
1,640,879
AUA
1,135,026
1,142,166
1,144,375
1,257,094
1,254,962
Total AUM/A
2,682,035
2,714,028
2,754,052
2,871,967
2,895,841
Subscription
15,665,020
15,779,980
15,916,955
16,072,848
16,248,598
Total platform accounts
18,347,055
18,494,008
18,671,007
18,944,815
19,144,439
Advisors
AUM/A
38,025
38,611
38,809
38,078
38,697
Subscription
67,520
67,843
68,439
69,318
69,973
Total advisors
105,545
106,454
107,248
107,396
108,670
The following table summarizes the changes in AUM and AUA for
the three months ended December 31, 2023:
Asset Rollforward - Three
Months Ended December 31, 2023
As of
Gross Sales
Redemptions
Net Flows
Market Impact
As of
September 30, 2023
December 31, 2023
(in millions, except account
data)
AUM
$
375,408
$
26,612
$
(19,064
)
$
7,548
$
33,045
$
416,001
AUA
398,082
30,342
(30,019
)
323
32,441
430,846
Total AUM/A
$
773,490
$
56,954
$
(49,083
)
$
7,871
$
65,486
$
846,847
Fee-Based Accounts
2,871,967
23,874
2,895,841
The above AUM/A gross sales figures include $17.7 billion in new
client conversions. The Company onboarded an additional $73.1
billion in subscription conversions during the fourth quarter,
bringing total conversions for the quarter to $90.8 billion.
The following table summarizes the changes in AUM and AUA for
the year ended December 31, 2023:
Asset Rollforward - Year Ended
December 31, 2023
As of December 31,
2022
Gross Sales
Redemptions
Net Flows
Market Impact
Reclass to
Subscription
As of December 31,
2023
(in millions, except account
data)
AUM
$
341,144
$
101,305
$
(71,217
)
$
30,088
$
47,360
$
(2,591
)
$
416,001
AUA
367,412
127,906
(99,468
)
28,438
48,868
(13,872
)
430,846
Total AUM/A
$
708,556
$
229,211
$
(170,685
)
$
58,526
$
96,228
$
(16,463
)
$
846,847
Fee-Based Accounts
2,682,035
312,915
(99,109
)
2,895,841
The above AUM/A gross sales figures include $72.3 billion in new
client conversions. We onboarded an additional $169.7 billion in
subscription conversions during 2023, bringing total conversions
for the year to $242.0 billion.
Asset and account figures in the “Reclass to Subscription”
columns for the three months and year ended December 31, 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 number of
paid end-users and firms using the Envestnet Data & Analytics
platform in the periods indicated:
As of
December 31,
March 31,
June 30,
September 30,
December 31,
2022
2023
2023
2023
2023
(in millions, except number of
firms data)
Number of paid end-users
38.8
37.5
38.0
42.3
38.3
Number of firms
1,286
1,310
1,339
1,322
1,324
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240222139281/en/
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