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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 9, 2024
Date of Earliest Event Reported: August 9, 2024
ENVESTNET, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | |
| Delaware | | 001-34835 | | 20-1409613 |
(State or Other Jurisdiction
of Incorporation) | | (Commission
File Number) | | (I.R.S. Employer
Identification Number) |
| | | | | | | | | | | | | | |
1000 Chesterbrook Boulevard, Suite 250, Berwyn, Pennsylvania | | 19312 |
| (Address of principal executive offices) | | (Zip Code) |
(312) 827-2800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| | | | | |
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| | | | | |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| | | | | |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| | | | | |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
| Title of each class | Trading symbol(s) | Name of exchange on which registered |
| Common Stock, par value $0.005 per share | ENV | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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| Item 2.02. | Results of Operations and Financial Condition |
On August 9, 2024, Envestnet, Inc. (“Envestnet”) issued a press release regarding Envestnet’s financial results for its second quarter ended June 30, 2024 and its second quarter 2024 supplemental presentation. The full text of Envestnet’s press release and supplemental presentation are furnished herewith as Exhibit 99.1 and Exhibit 99.2, respectively.
The information in this Item 2.02 and the attached exhibits are being furnished to the Securities and Exchange Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing of Envestnet under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| | | | | |
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits
| | | | | | | | |
| Exhibit No. | | Description |
| 99.1 | | |
| 99.2 | | |
| 104 | | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: August 9, 2024
| | | | | |
| ENVESTNET, INC. |
|
| By: | /s/ Joshua B. Warren |
| Name: | Joshua B. Warren |
| Title: | Chief Financial Officer |
Exhibit 99.1
Envestnet Reports Second Quarter 2024 Financial Results
Berwyn, PA — August 9, 2024 — Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the three and six months ended June 30, 2024.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | | Six months ended | | |
| Key Financial Metrics | | June 30, | | % | | June 30, | | % |
| (in millions, except per share data) | | 2024 | | 2023 | | Change | | 2024 | | 2023 | | Change |
| GAAP: | | | | | | | | | | | | |
| Total revenue | | $ | 348.3 | | | $ | 312.4 | | | 11 | % | | $ | 673.2 | | | $ | 611.1 | | | 10 | % |
| Net loss attributable to Envestnet, Inc. | | $ | (79.2) | | | $ | (21.4) | | | * | | $ | (76.7) | | | $ | (62.6) | | | (22) | % |
| Net loss attributable to Envestnet, Inc. per diluted share | | $ | (1.44) | | | $ | (0.39) | | | * | | $ | (1.39) | | | $ | (1.15) | | | (21) | % |
| | | | | | | | | | | | |
| Non-GAAP: | | | | | | | | | | | | |
Adjusted EBITDA(1) | | $ | 77.8 | | | $ | 56.0 | | | 39 | % | | $ | 148.2 | | | $ | 110.0 | | | 35 | % |
Adjusted net income(1) | | $ | 36.4 | | | $ | 30.4 | | | 20 | % | | $ | 75.8 | | | $ | 60.5 | | | 25 | % |
Adjusted net income per diluted share(1) | | $ | 0.55 | | | $ | 0.46 | | | 20 | % | | $ | 1.14 | | | $ | 0.91 | | | 25 | % |
Free cash flow(1) | | $ | 67.0 | | | $ | 36.7 | | | 83 | % | | $ | 47.1 | | | $ | (25.1) | | | * |
__________________________________________________
*Not meaningful
Jim Fox, Board Chair and Interim CEO, said: "We look forward to the successful completion of our pending transaction with Bain Capital and the value it will deliver to our shareholders. We remain committed to maintaining our leading position, which is based on executing on what our clients need and deepening our relationships with them."
Financial Results for the Second Quarter 2024 Compared to the Second Quarter 2023
Total revenue increased 11% to $348.3 million for the second quarter of 2024 from $312.4 million for the second quarter of 2023. Asset-based recurring revenue increased 18% and represented 63% of total revenue for the second quarter of 2024, compared to 59% of total revenue for the second quarter of 2023. Subscription-based recurring revenue increased 3% and represented 34% of total revenue for the second quarter of 2024, compared to 37% of total revenue for the second quarter of 2023. Professional services and other non-recurring revenue decreased 8% for the second quarter of 2024 from the second quarter of 2023.
Total operating expenses increased 29% to $423.8 million for the second quarter of 2024 from $327.7 million for the second quarter of 2023. Direct expense increased 16% to $144.4 million for the second quarter of 2024 from $124.2 million for the second quarter of 2023. Employee compensation decreased 11% to $104.1 million for the second quarter of 2024 from $117.1 million for the second quarter of 2023. Employee compensation was 30% of total revenue for the second quarter of 2024, compared to 37% of total revenue for the second quarter of 2023. General and administrative expense decreased 3% to $52.9 million for the second quarter of 2024 from $54.4 million for the second quarter of 2023. General and administrative expense was 15% of total revenue for the second quarter of 2024, compared to 17% of total revenue for the second quarter of 2023. A non-cash goodwill impairment charge of $96.3 million and a non-cash gain on deconsolidation of non-controlling interest of $19.5 million were recognized during the second quarter of 2024.
Loss from operations was $75.5 million for the second quarter of 2024 compared to a loss from operations of $15.3 million for the second quarter of 2023. Net loss attributable to Envestnet, Inc. was $79.2 million, or $1.44 per diluted share, for the second quarter of 2024 compared to a net loss attributable to Envestnet, Inc. of $21.4 million, or $0.39 per diluted share, for the second quarter of 2023.
Adjusted EBITDA(1) increased 39% to $77.8 million for the second quarter of 2024 from $56.0 million for the second quarter of 2023. Adjusted net income(1) increased 20% to $36.4 million, or $0.55 per diluted share, for the second quarter of 2024 from $30.4 million, or $0.46 per diluted share, for the second quarter of 2023. Free cash flow(1) increased 83%, to $67.0 for the second quarter of 2024 from $36.7 for the second quarter of 2023.
Balance Sheet and Liquidity
As of June 30, 2024, Envestnet had $122.0 million in cash and cash equivalents and $892.5 million in outstanding debt. Debt as of June 30, 2024 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 June 30, 2024.
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. All segment information presented within this Exhibit 99.1 for the three and six months ended June 30, 2024 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.
Correction of Immaterial Errors
In July 2024, the Company identified that as a result of a clerical error an event of default had occurred pursuant to the indenture under which the Convertible Notes due 2025 had been issued, and therefore the Convertible Notes due 2025 should have been classified as current debt instead of as non-current debt as previously recorded in the condensed consolidated balance sheets. Upon identification, the Company promptly cured the technical default. Upon analysis, the Company concluded that the classification error was immaterial in prior period financial statements as the event of default was caused by a clerical error and was not reflective of noncompliance with any factors impacting the Company’s liquidity or financial covenants. If the Company had identified the technical default in the prior period and classified the debt as current, the matter would have been disclosed and promptly resolved. Therefore, amendment of previously filed reports was not required. However, the Company corrected this immaterial error in the prior year reported within this press release.
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 condensed consolidated balance sheets should have been recognized as a prepayment included within prepaid expenses and other current assets and other assets in the condensed 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 press release.
Conference Call
Envestnet will host a conference call to discuss second quarter 2024 financial results on August 12, 2024 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 110,000 advisors, 17 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 http://www.envestnet.com and follow us on Twitter @ENVintel.
(1) Non-GAAP Financial Measures
“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, gain on deconsolidation, 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 adjustments to investments in private companies, (gain) loss from equity method investments and loss attributable to non‑controlling interest.
“Adjusted net income” represents net income (loss) before income tax provision (benefit), gain (loss) from equity method investments, deferred revenue fair value adjustment, non‑cash interest expense, cash interest on our Convertible Notes, amortization of acquired intangibles, goodwill impairment, gain on deconsolidation, 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 adjustments to investments in private companies 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 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.
"Free cash flow" represents net cash provided by (used in) operating activities less purchases of property and equipment and capitalization of internally developed software.
For further information see reconciliations of Non-GAAP Financial Measures on pages 9-15 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 http://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), net income (loss) per share or net cash provided by (used in) operating activities determined in accordance with GAAP.
Cautionary Statement Regarding Forward-Looking Statements
The forward-looking statements made in this press release and its attachments concerning 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. In addition, any statements that refer to our pending merger with affiliates of vehicles managed or advised by Bain Capital Private
Equity, LP. (the "Merger"), projections of our future financial performance, our anticipated growth and trends in our business and other characteristics of future events or circumstances are forward-looking statements. 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 risk that the Merger may not be completed on the anticipated terms in a timely manner or at all, which may adversely affect our business and the price of our common stock; the failure to satisfy any of the conditions to the consummation of the Merger, including the receipt of certain regulatory approvals and the approval of the holders in a majority of the voting power of our common stock; the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the merger agreement, including in circumstances requiring us to pay a termination fee; the effect of the announcement or pendency of the Merger on our business relationships, operating results and business relationships, operating results and business generally; risks that the Merger disrupts our current plans and operations (including the ability of certain customers to terminate or amend contracts upon a change of control); our ability to retain, hire and integrate skilled personnel, including our senior management team and maintain relationships with key business partners and customers, and others with whom we do business, in light of the Merger; risks related to diverting management's attention from our ongoing business operations; unexpected costs, charges or expenses resulting from the Merger; the ability to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Merger; potential litigation relating to the Merger that could be instituted against the parties to the merger agreement or their respective directors, managers or officers; the effects of any outcomes related thereto; certain restrictions during the pendency of the Merger that may impact our ability to pursue certain business opportunities or strategic transactions; uncertainty as to timing of completion of the Merger; risks that the benefits of the Merger are not realized when and as expected; 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; 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 http://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 August 9, 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.
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| Contacts | | |
| Investor Relations | | Media Relations |
| investor.relations@envestnet.com | | media@envestnet.com |
| (312) 827-3940 | | |
Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
| | | | | | | | | | | | | | |
| | June 30, | | December 31, |
| | 2024 | | 2023 |
| Assets | | | | |
| Current assets: | | | | |
| Cash and cash equivalents | | $ | 121,967 | | | $ | 91,378 | |
| Fees receivable, net | | 129,252 | | | 120,958 | |
| Prepaid expenses and other current assets | | 57,899 | | | 51,472 | |
| | | | |
| Total current assets | | 309,118 | | | 263,808 | |
| Property and equipment, net | | 45,641 | | | 48,223 | |
| Internally developed software, net | | 205,090 | | | 224,713 | |
| Intangible assets, net | | 311,868 | | | 338,068 | |
| Goodwill | | 690,885 | | | 806,563 | |
| Operating lease right-of-use assets, net | | 65,257 | | | 69,154 | |
| Investments in unconsolidated entities | | 96,755 | | | 56,292 | |
| Other assets | | 70,358 | | | 70,431 | |
| Total assets | | $ | 1,794,972 | | | $ | 1,877,252 | |
| | | | |
| Liabilities and equity | | | | |
| Current liabilities: | | | | |
| Accounts payable, accrued expenses and other current liabilities | | $ | 225,508 | | | $ | 241,424 | |
| Operating lease liabilities | | 12,149 | | | 12,909 | |
| Deferred revenue | | 34,567 | | | 38,201 | |
| Current portion of debt | | — | | | 314,532 | |
| | | | |
| Total current liabilities | | 272,224 | | | 607,066 | |
| Debt, net of current portion | | 879,079 | | | 562,080 | |
| Operating lease liabilities, net of current portion | | 95,294 | | | 100,830 | |
| Deferred tax liabilities, net | | 15,208 | | | 16,568 | |
| Other liabilities | | 16,820 | | | 16,202 | |
| Total liabilities | | 1,278,625 | | | 1,302,746 | |
| | | | |
| Equity: | | | | |
Total stockholders’ equity attributable to Envestnet, Inc. | | 516,347 | | | 568,191 | |
| Non-controlling interest | | — | | | 6,315 | |
| Total liabilities and equity | | $ | 1,794,972 | | | $ | 1,877,252 | |
Envestnet, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| Revenue: | | | | | | | | |
| Asset-based | | $ | 219,485 | | | $ | 185,762 | | | $ | 422,101 | | | $ | 362,694 | |
| Subscription-based | | 117,988 | | | 114,959 | | | 235,450 | | | 232,038 | |
| Total recurring revenue | | 337,473 | | | 300,721 | | | 657,551 | | | 594,732 | |
| Professional services and other revenue | | 10,800 | | | 11,713 | | | 15,672 | | | 16,409 | |
| Total revenue | | 348,273 | | | 312,434 | | | 673,223 | | | 611,141 | |
| | | | | | | | |
| Operating expenses: | | | | | | | | |
| Direct expense | | 144,351 | | | 124,209 | | | 270,984 | | | 233,888 | |
| Employee compensation | | 104,066 | | | 117,097 | | | 207,718 | | | 231,312 | |
| General and administrative | | 52,924 | | | 54,375 | | | 104,989 | | | 108,725 | |
| Depreciation and amortization | | 45,733 | | | 32,065 | | | 79,625 | | | 63,585 | |
| Goodwill impairment | | 96,269 | | | — | | | 96,269 | | | — | |
| Gain on deconsolidation | | (19,523) | | | — | | | (19,523) | | | — | |
| Total operating expenses | | 423,820 | | | 327,746 | | | 740,062 | | | 637,510 | |
| | | | | | | | |
| Loss from operations | | (75,547) | | | (15,312) | | | (66,839) | | | (26,369) | |
| Other expense, net | | (4,788) | | | (5,016) | | | (9,169) | | | (10,011) | |
| Loss before income tax provision (benefit) and equity method investments | | (80,335) | | | (20,328) | | | (76,008) | | | (36,380) | |
| | | | | | | | |
| Income tax provision (benefit) | | (652) | | | 418 | | | 853 | | | 24,187 | |
| Gain (loss) from equity method investments | | 482 | | | (2,386) | | | (1,801) | | | (5,326) | |
| | | | | | | | |
| Net loss | | (79,201) | | | (23,132) | | | (78,662) | | | (65,893) | |
| Add: Net loss attributable to non-controlling interest | | — | | | 1,716 | | | 1,974 | | | 3,249 | |
| Net loss attributable to Envestnet, Inc. | | $ | (79,201) | | | $ | (21,416) | | | $ | (76,688) | | | $ | (62,644) | |
| | | | | | | | |
| Net loss attributable to Envestnet, Inc. per share: | | | | | | | | |
| Basic and diluted | | $ | (1.44) | | | $ | (0.39) | | | $ | (1.39) | | | $ | (1.15) | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | |
| Basic and diluted | | 55,143,013 | | | 54,439,733 | | | 55,013,544 | | | 54,289,443 | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| | | | | | | | | | | | | | |
| | Six Months Ended |
| | June 30, |
| | 2024 | | 2023 |
| Cash flows from operating activities: | | | | |
| Net loss | | $ | (78,662) | | | $ | (65,893) | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | |
| Depreciation and amortization | | 79,625 | | | 63,585 | |
| | | | |
| | | | |
| Non-cash compensation expense | | 36,720 | | | 40,843 | |
| Non-cash interest expense | | 2,817 | | | 2,251 | |
| Non-cash goodwill impairment | | 96,269 | | | — | |
| Non-cash gain on deconsolidation | | (19,523) | | | — | |
| Loss from equity method investments | | 1,801 | | | 5,326 | |
| | | | |
| | | | |
| Lease related impairments | | — | | | 2,483 | |
| | | | |
| Other | | 2,120 | | | (218) | |
| Changes in operating assets and liabilities: | | | | |
| Fees receivable, net | | (12,813) | | | (22,357) | |
| Prepaid expenses and other assets | | (5,745) | | | (6,762) | |
| Accounts payable, accrued expenses and other liabilities | | (14,049) | | | 20,070 | |
| Deferred revenue | | 2,494 | | | (852) | |
| Net cash provided by operating activities | | 91,054 | | | 38,476 | |
| Cash flows from investing activities: | | | | |
| Purchases of property and equipment | | (5,172) | | | (16,735) | |
| Capitalization of internally developed software | | (38,751) | | | (46,801) | |
| | | | |
| Deconsolidation of non-controlling interest | | (11,073) | | | — | |
| Investments in private companies | | (3,055) | | | (1,450) | |
| Acquisition of proprietary technology | | (3,000) | | | (12,000) | |
| Issuance of loan receivable to private company | | — | | | (20,000) | |
| | | | |
| Other | | — | | | 319 | |
| Net cash used in investing activities | | (61,051) | | | (96,667) | |
| Cash flows from financing activities: | | | | |
| Proceeds from borrowings on Revolving Credit Facility | | — | | | 40,000 | |
| Payments related to Revolving Credit Facility | | — | | | (20,000) | |
| Payments related to Convertible Notes | | — | | | (45,000) | |
| Proceeds from exercise of stock options | | 724 | | | 472 | |
| Payments related to tax withholdings for stock-based compensation | | (12,155) | | | (13,774) | |
| Payments related to share repurchases | | — | | | (9,289) | |
| Proceeds from capital contributions received by non-controlling interest | | 12,012 | | | — | |
| Purchase of non-controlling units from third-party shareholders | | — | | | (1,008) | |
| | | | |
| Other | | 3 | | | 3 | |
| Net cash provided by (used in) financing activities | | 584 | | | (48,596) | |
| Effect of exchange rate on changes on cash and cash equivalents | | 2 | | | 3,633 | |
| | | | |
| Net change in cash and cash equivalents | | 30,589 | | | (103,154) | |
| Cash and cash equivalents, beginning of period | | 91,378 | | | 162,173 | |
| Cash and cash equivalents, end of period | | $ | 121,967 | | | $ | 59,019 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| Net loss | | $ | (79,201) | | | $ | (23,132) | | | $ | (78,662) | | | $ | (65,893) | |
| Add (deduct): | | | | | | | | |
Deferred revenue fair value adjustment (a) | | — | | | 17 | | | — | | | 69 | |
Interest income (b) | | (2,588) | | | (1,656) | | | (4,571) | | | (3,014) | |
Interest expense (b) | | 6,097 | | | 6,531 | | | 12,186 | | | 12,851 | |
| Income tax provision (benefit) | | (652) | | | 418 | | | 853 | | | 24,187 | |
| Depreciation and amortization | | 45,733 | | | 32,065 | | | 79,625 | | | 63,585 | |
| Goodwill impairment | | 96,269 | | | — | | | 96,269 | | | — | |
| Gain on deconsolidation | | (19,523) | | | — | | | (19,523) | | | — | |
Non-cash compensation expense (d) | | 17,822 | | | 21,390 | | | 36,720 | | | 40,843 | |
Restructuring charges and transaction costs (e) | | 8,405 | | | 6,508 | | | 10,461 | | | 10,671 | |
Severance expense (d) | | 669 | | | 8,234 | | | 4,094 | | | 14,422 | |
Litigation, regulatory and other governance related expenses (c) | | 4,020 | | | 2,145 | | | 6,308 | | | 5,219 | |
Foreign currency (b) | | (229) | | | 74 | | | 46 | | | 107 | |
Non-income tax expense adjustment (c) | | (39) | | | (30) | | | (88) | | | (198) | |
Fair market value adjustments to investments in private companies (b) | | 1,508 | | | 67 | | | 1,508 | | | 67 | |
| | | | | | | | |
| (Gain) loss from equity method investments | | (482) | | | 2,386 | | | 1,801 | | | 5,326 | |
| Loss attributable to non-controlling interest | | — | | | 1,027 | | | 1,160 | | | 1,805 | |
| Adjusted EBITDA | | $ | 77,809 | | | $ | 56,044 | | | $ | 148,187 | | | $ | 110,047 | |
__________________________________________________________
(a)Included within subscription-based revenue in the condensed consolidated statements of operations.
(b)Included within other expense, net in the condensed consolidated statements of operations.
(c)Included within general and administrative expense in the condensed consolidated statements of operations.
(d)Included within employee compensation expense in the condensed consolidated statements of operations.
(e)For the three months ended June 30, 2024 and 2023, $6.7 million and $5.0 million, respectively, were included within general and administrative expense and $1.7 million and $1.5 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations. For the six months ended June 30, 2024 and 2023, $9.2 million and $9.1 million, respectively, were included within general and administrative expense and $1.3 million and $1.6 million, respectively, were included within employee compensation expense 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 | | Six Months Ended |
| | June 30, | | June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| Net loss | | $ | (79,201) | | | $ | (23,132) | | | $ | (78,662) | | | $ | (65,893) | |
Income tax provision (benefit) (a) | | (652) | | | 418 | | | 853 | | | 24,187 | |
| Gain (loss) from equity method investments | | 482 | | | (2,386) | | | (1,801) | | | (5,326) | |
| Loss before income tax provision (benefit) and equity method investments | | (80,335) | | | (20,328) | | | (76,008) | | | (36,380) | |
| Add (deduct): | | | | | | | | |
Deferred revenue fair value adjustment (b) | | — | | | 17 | | | — | | | 69 | |
Non-cash interest expense (d) | | 1,412 | | | 1,427 | | | 2,817 | | | 2,869 | |
Cash interest - Convertible Notes (d) | | 4,369 | | | 4,543 | | | 8,738 | | | 9,108 | |
Amortization of acquired intangibles (e) | | 14,457 | | | 15,720 | | | 29,199 | | | 32,660 | |
| Goodwill impairment | | 96,269 | | | — | | | 96,269 | | | — | |
| Gain on deconsolidation | | (19,523) | | | — | | | (19,523) | | | — | |
Non-cash compensation expense (f) | | 17,822 | | | 21,390 | | | 36,720 | | | 40,843 | |
Restructuring charges and transaction costs (g) | | 8,405 | | | 6,508 | | | 10,461 | | | 10,671 | |
Severance expense (f) | | 669 | | | 8,234 | | | 4,094 | | | 14,422 | |
Litigation, regulatory and other governance related expenses (c) | | 4,020 | | | 2,145 | | | 6,308 | | | 5,219 | |
Foreign currency (d) | | (229) | | | 74 | | | 46 | | | 107 | |
Non-income tax expense adjustment (c) | | (39) | | | (30) | | | (88) | | | (198) | |
Fair market value adjustments to investments in private companies (d) | | 1,508 | | | 67 | | | 1,508 | | | 67 | |
| | | | | | | | |
| | | | | | | | |
| Loss attributable to non-controlling interest | | — | | | 1,027 | | | 1,160 | | | 1,805 | |
| Adjusted net income before income tax effect | | 48,805 | | | 40,794 | | | 101,701 | | | 81,262 | |
Income tax effect (h) | | (12,445) | | | (10,403) | | | (25,934) | | | (20,722) | |
| Adjusted net income | | $ | 36,360 | | | $ | 30,391 | | | $ | 75,767 | | | $ | 60,540 | |
| | | | | | | | |
| Basic number of weighted average shares outstanding | | 55,143,013 | | | 54,439,733 | | | 55,013,544 | | | 54,289,443 | |
| Effect of dilutive shares: | | | | | | | | |
| Convertible Notes | | 10,811,884 | | | 11,253,471 | | | 10,811,884 | | | 11,361,458 | |
| Non-vested RSUs and PSUs | | 590,918 | | | 316,758 | | | 527,360 | | | 445,323 | |
| Options to purchase common stock | | 49,692 | | | 57,902 | | | 38,996 | | | 73,271 | |
| | | | | | | | |
| Diluted number of weighted average shares outstanding | | 66,595,507 | | | 66,067,864 | | | 66,391,784 | | | 66,169,495 | |
| | | | | | | | |
| Adjusted net income per diluted share | | $ | 0.55 | | | $ | 0.46 | | | $ | 1.14 | | | $ | 0.91 | |
__________________________________________________________
(a)For the three months ended June 30, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled 0.8% and (1.8)%, respectively. For the six months ended June 30, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled (1.1)% and (58.0)%, respectively.
(b)Included within subscription-based revenue in the condensed consolidated statements of operations.
(c)Included within general and administrative expense in the condensed consolidated statements of operations.
(d)Included within other expense, net in the condensed consolidated statements of operations.
(e)Included within depreciation and amortization expense in the condensed consolidated statements of operations.
(f)Included within employee compensation expense in the condensed consolidated statements of operations.
(g)For the three months ended June 30, 2024 and 2023, $6.7 million and $5.0 million, respectively, were included within general and administrative expense and $1.7 million and $1.5 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations. For the six months ended June 30, 2024 and 2023, $9.2 million and $9.1 million, respectively, were included within general and administrative expense and $1.3 million and $1.6 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations.
(h)An estimated normalized tax rate of 25.5% has been used to compute adjusted net income for the three and six months ended June 30, 2024 and 2023.
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| | June 30, | | June 30, |
| | 2024 | | 2023 | | 2024 | | 2023 |
| Net cash provided by operating activities | | $ | 89,110 | | | $ | 72,149 | | | $ | 91,054 | | | $ | 38,476 | |
| Less: Purchases of property and equipment | | (3,272) | | | (12,333) | | | (5,172) | | | (16,735) | |
Less: Capitalization of internally developed software | | (18,798) | | | (23,137) | | | (38,751) | | | (46,801) | |
| Free cash flow | | $ | 67,040 | | | $ | 36,679 | | | $ | 47,131 | | | $ | (25,060) | |
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2024 |
| | Envestnet Wealth Solutions | | Envestnet Data & Analytics | | Nonsegment | | Total |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Revenue: | | | | | | | | |
| Asset-based | | $ | 219,485 | | | $ | — | | | $ | — | | | $ | 219,485 | |
| Subscription-based | | 84,734 | | | 33,254 | | | — | | | 117,988 | |
| Total recurring revenue | | 304,219 | | | 33,254 | | | — | | | 337,473 | |
| Professional services and other revenue | | 7,889 | | | 2,911 | | | — | | | 10,800 | |
| Total revenue | | 312,108 | | | 36,165 | | | — | | | 348,273 | |
| | | | | | | | |
| Operating expenses: | | | | | | | | |
| Direct expense | | | | | | | | |
| Asset-based | | 130,116 | | | — | | | — | | | 130,116 | |
| Subscription-based | | 1,474 | | | 7,174 | | | — | | | 8,648 | |
| Professional services and other | | 5,587 | | | — | | | — | | | 5,587 | |
| Total direct expense | | 137,177 | | | 7,174 | | | — | | | 144,351 | |
| Employee compensation | | 77,210 | | | 11,872 | | | 14,984 | | | 104,066 | |
| General and administrative | | 25,698 | | | 15,270 | | | 11,956 | | | 52,924 | |
| Depreciation and amortization | | 38,375 | | | 7,358 | | | — | | | 45,733 | |
| Goodwill impairment | | — | | | 96,269 | | | — | | | 96,269 | |
| Gain on deconsolidation | | (19,523) | | | — | | | — | | | (19,523) | |
| Total operating expenses | | 258,937 | | | 137,943 | | | 26,940 | | | 423,820 | |
| | | | | | | | |
| Income (loss) from operations | | 53,171 | | | (101,778) | | | (26,940) | | | (75,547) | |
| Add (deduct): | | | | | | | | |
| | | | | | | | |
| Depreciation and amortization | | 38,375 | | | 7,358 | | | — | | | 45,733 | |
| Goodwill impairment | | — | | | 96,269 | | | — | | | 96,269 | |
| Gain on deconsolidation | | (19,523) | | | — | | | — | | | (19,523) | |
Non-cash compensation expense (b) | | 11,360 | | | 1,904 | | | 4,558 | | | 17,822 | |
Restructuring charges and transaction costs (c) | | 2,063 | | | 60 | | | 6,282 | | | 8,405 | |
Severance expense (b) | | 632 | | | — | | | 37 | | | 669 | |
Litigation, regulatory and other governance related expenses (a) | | — | | | 4,020 | | | — | | | 4,020 | |
Non-income tax expense adjustment (a) | | (39) | | | — | | | — | | | (39) | |
| | | | | | | | |
| | | | | | | | |
| Adjusted EBITDA | | $ | 86,039 | | | $ | 7,833 | | | $ | (16,063) | | | $ | 77,809 | |
__________________________________________________________
(a)Included within general and administrative expense in the condensed consolidated statements of operations.
(b)Included within employee compensation expense in the condensed consolidated statements of operations.
(c)$6.7 million was included within general and administrative expense and $1.7 million was included within employee compensation expense in the condensed consolidated statements of operations.
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2024 |
| | Envestnet Wealth Solutions | | Envestnet Data & Analytics | | Nonsegment | | Total |
| Revenue: | | | | | | | | |
| Asset-based | | $ | 422,101 | | | $ | — | | | $ | — | | | $ | 422,101 | |
| Subscription-based | | 168,902 | | | 66,548 | | | — | | | 235,450 | |
| Total recurring revenue | | 591,003 | | | 66,548 | | | — | | | 657,551 | |
| Professional services and other revenue | | 10,915 | | | 4,757 | | | — | | | 15,672 | |
| Total revenue | | 601,918 | | | 71,305 | | | — | | | 673,223 | |
| | | | | | | | |
| Operating expenses: | | | | | | | | |
| Direct expense: | | | | | | | | |
| Asset-based | | 248,519 | | | — | | | — | | | 248,519 | |
| Subscription-based | | 2,905 | | | 13,973 | | | — | | | 16,878 | |
| Professional services and other | | 5,587 | | | — | | | — | | | 5,587 | |
| Total direct expense | | 257,011 | | | 13,973 | | | — | | | 270,984 | |
| Employee compensation | | 152,406 | | | 23,564 | | | 31,748 | | | 207,718 | |
| General and administrative | | 54,730 | | | 30,584 | | | 19,675 | | | 104,989 | |
| Depreciation and amortization | | 65,193 | | | 14,432 | | | — | | | 79,625 | |
| Goodwill impairment | | — | | | 96,269 | | | — | | | 96,269 | |
| Gain on deconsolidation | | (19,523) | | | — | | | — | | | (19,523) | |
| Total operating expenses | | 509,817 | | | 178,822 | | | 51,423 | | | 740,062 | |
| | | | | | | | |
| Income (loss) from operations | | 92,101 | | | (107,517) | | | (51,423) | | | (66,839) | |
| Add (deduct): | | | | | | | | |
| | | | | | | | |
| Depreciation and amortization | | 65,193 | | | 14,432 | | | — | | | 79,625 | |
| Goodwill impairment | | — | | | 96,269 | | | — | | | 96,269 | |
| Gain on deconsolidation | | (19,523) | | | — | | | — | | | (19,523) | |
Non-cash compensation expense (b) | | 22,747 | | | 3,768 | | | 10,205 | | | 36,720 | |
Restructuring charges and transaction costs (c) | | 2,106 | | | 739 | | | 7,616 | | | 10,461 | |
Severance expense (b) | | 2,436 | | | 13 | | | 1,645 | | | 4,094 | |
Litigation, regulatory and other governance related expenses (a) | | — | | | 6,308 | | | — | | | 6,308 | |
Non-income tax expense adjustment (a) | | (88) | | | — | | | — | | | (88) | |
| Loss attributable to non-controlling interest | | 1,160 | | | — | | | — | | | 1,160 | |
| | | | | | | | |
| Adjusted EBITDA | | $ | 166,132 | | | $ | 14,012 | | | $ | (31,957) | | | $ | 148,187 | |
__________________________________________________________
(a)Included within general and administrative expense in the condensed consolidated statements of operations.
(b)Included within employee compensation expense in the condensed consolidated statements of operations.
(c)$9.2 million was included within general and administrative expense and $1.3 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 June 30, 2023 |
| | Envestnet Wealth Solutions | | Envestnet Data & Analytics | | Nonsegment | | Total |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Revenue: | | | | | | | | |
| Asset-based | | $ | 185,762 | | | $ | — | | | $ | — | | | $ | 185,762 | |
| Subscription-based | | 79,744 | | | 35,215 | | | — | | | 114,959 | |
| Total recurring revenue | | 265,506 | | | 35,215 | | | — | | | 300,721 | |
| Professional services and other revenue | | 10,318 | | | 1,395 | | | — | | | 11,713 | |
| Total revenue | | 275,824 | | | 36,610 | | | — | | | 312,434 | |
| | | | | | | | |
| Operating expenses: | | | | | | | | |
| Direct expense: | | | | | | | | |
| Asset-based | | 108,532 | | | — | | | — | | | 108,532 | |
| Subscription-based | | 1,857 | | | 5,788 | | | — | | | 7,645 | |
| Professional services and other | | 8,032 | | | — | | | — | | | 8,032 | |
| Total direct expense | | 118,421 | | | 5,788 | | | — | | | 124,209 | |
| Employee compensation | | 77,898 | | | 19,839 | | | 19,360 | | | 117,097 | |
| General and administrative | | 31,225 | | | 14,792 | | | 8,358 | | | 54,375 | |
| Depreciation and amortization | | 25,575 | | | 6,490 | | | — | | | 32,065 | |
| Total operating expenses | | 253,119 | | | 46,909 | | | 27,718 | | | 327,746 | |
| | | | | | | | |
| Income (loss) from operations | | 22,705 | | | (10,299) | | | (27,718) | | | (15,312) | |
| Add (deduct): | | | | | | | | |
Deferred revenue fair value adjustment (a) | | 17 | | | — | | | — | | | 17 | |
| Depreciation and amortization | | 25,575 | | | 6,490 | | | — | | | 32,065 | |
Non-cash compensation expense (c) | | 12,325 | | | 2,445 | | | 6,620 | | | 21,390 | |
Restructuring charges and transaction costs (d) | | 5,414 | | | 69 | | | 1,025 | | | 6,508 | |
Severance expense (c) | | 1,853 | | | 3,120 | | | 3,261 | | | 8,234 | |
Litigation, regulatory and other governance related expenses (b) | | — | | | 2,210 | | | (65) | | | 2,145 | |
Non-income tax expense adjustment (b) | | (25) | | | (5) | | | — | | | (30) | |
| Loss attributable to non-controlling interest | | 1,027 | | | — | | | — | | | 1,027 | |
| | | | | | | | |
| Adjusted EBITDA | | $ | 68,891 | | | $ | 4,030 | | | $ | (16,877) | | | $ | 56,044 | |
__________________________________________________________
(a)Included within subscription-based revenue in the condensed consolidated statements of operations.
(b)Included within general and administrative expense in the condensed consolidated statements of operations.
(c)Included within employee compensation expense in the condensed consolidated statements of operations.
(d)$5.0 million was included within general and administrative expense and $1.5 million was included within employee compensation expense in the condensed consolidated statements of operations.
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, 2023 |
| | Envestnet Wealth Solutions | | Envestnet Data & Analytics | | Nonsegment | | Total |
| Revenue: | | | | | | | | |
| Asset-based | | $ | 362,694 | | | $ | — | | | $ | — | | | $ | 362,694 | |
| Subscription-based | | 160,214 | | | 71,824 | | | — | | | 232,038 | |
| Total recurring revenue | | 522,908 | | | 71,824 | | | — | | | 594,732 | |
| Professional services and other revenue | | 13,565 | | | 2,844 | | | — | | | 16,409 | |
| Total revenue | | 536,473 | | | 74,668 | | | — | | | 611,141 | |
| | | | | | | | |
| Operating expenses: | | | | | | | | |
| Direct expense: | | | | | | | | |
| Asset-based | | 211,155 | | | — | | | — | | | 211,155 | |
| Subscription-based | | 3,635 | | | 11,062 | | | — | | | 14,697 | |
| Professional services and other | | 8,036 | | | — | | | — | | | 8,036 | |
| Total direct expense | | 222,826 | | | 11,062 | | | — | | | 233,888 | |
| Employee compensation | | 156,945 | | | 39,081 | | | 35,286 | | | 231,312 | |
| General and administrative | | 60,332 | | | 29,221 | | | 19,172 | | | 108,725 | |
| Depreciation and amortization | | 51,067 | | | 12,518 | | | — | | | 63,585 | |
| Total operating expenses | | 491,170 | | | 91,882 | | | 54,458 | | | 637,510 | |
| | | | | | | | |
| Income (loss) from operations | | 45,303 | | | (17,214) | | | (54,458) | | | (26,369) | |
| Add (deduct): | | | | | | | | |
Deferred revenue fair value adjustment (a) | | 69 | | | — | | | — | | | 69 | |
| Depreciation and amortization | | 51,067 | | | 12,518 | | | — | | | 63,585 | |
Non-cash compensation expense (c) | | 23,792 | | | 4,882 | | | 12,169 | | | 40,843 | |
Restructuring charges and transaction costs (d) | | 6,553 | | | 312 | | | 3,806 | | | 10,671 | |
Severance expense (c) | | 5,652 | | | 5,325 | | | 3,445 | | | 14,422 | |
Litigation, regulatory and other governance related expenses (b) | | — | | | 3,534 | | | 1,685 | | | 5,219 | |
Non-income tax expense adjustment (b) | | (127) | | | (71) | | | — | | | (198) | |
| Loss attributable to non-controlling interest | | 1,805 | | | — | | | — | | | 1,805 | |
| | | | | | | | |
| Adjusted EBITDA | | $ | 134,114 | | | $ | 9,286 | | | $ | (33,353) | | | $ | 110,047 | |
__________________________________________________________
(a)Included within subscription-based revenue in the condensed consolidated statements of operations.
(b)Included within general and administrative expense in the condensed consolidated statements of operations.
(c)Included within employee compensation expense in the condensed consolidated statements of operations.
(d)$9.1 million was included within general and administrative expense and $1.6 million was included within employee compensation expense in the condensed consolidated statements of operations.
Envestnet, Inc.
Key Metrics
(in millions, except accounts, advisors and firms data)
(unaudited)
Envestnet Wealth Solutions Segment
The following table provides information regarding the amount of assets and number of accounts and advisors supported by the Envestnet Wealth Solutions platform:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | June 30, | | September 30, | | December 31, | | March 31, | | June 30, |
| | 2023 | | 2023 | | 2023 | | 2024 | | 2024 |
| Platform Assets | | | | | | | | | | |
| Assets under Management (“AUM”) | | $ | 384,773 | | | $ | 375,408 | | | $ | 416,001 | | | $ | 452,464 | | | $ | 471,978 | |
| Assets under Administration (“AUA”) | | 394,078 | | | 398,082 | | | 430,846 | | | 471,401 | | | 471,479 | |
| Total AUM/A | | 778,851 | | | 773,490 | | | 846,847 | | | 923,865 | | | 943,457 | |
| Subscription | | 4,643,313 | | | 4,579,248 | | | 4,959,514 | | | 5,158,180 | | | 5,327,939 | |
| Total Platform Assets | | $ | 5,422,164 | | | $ | 5,352,738 | | | $ | 5,806,361 | | | $ | 6,082,045 | | | $ | 6,271,396 | |
| Platform Accounts | | | | | | | | | | |
| AUM | | 1,609,677 | | 1,614,873 | | 1,640,879 | | 1,688,044 | | 1,752,768 |
| AUA | | 1,144,375 | | 1,257,094 | | 1,254,962 | | 1,315,442 | | 1,325,370 |
| Total AUM/A | | 2,754,052 | | 2,871,967 | | 2,895,841 | | 3,003,486 | | 3,078,138 |
| Subscription | | 15,916,955 | | 16,072,848 | | 16,248,598 | | 16,641,631 | | 16,364,088 |
| Total Platform Accounts | | 18,671,007 | | 18,944,815 | | 19,144,439 | | 19,645,117 | | 19,442,226 |
| Advisors | | | | | | | | | | |
| AUM/A | | 38,809 | | 38,078 | | 38,697 | | 38,814 | | 38,484 |
| Subscription | | 68,439 | | 69,318 | | 69,973 | | 70,262 | | 71,568 |
| Total Advisors | | 107,248 | | 107,396 | | 108,670 | | 109,076 | | 110,052 |
The following tables summarize the changes in the amount of AUM/A assets and number of AUM/A accounts:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Asset Rollforward - Three Months Ended June 30, 2024 |
| | As of
March 31, | | Gross | | | | Net | | Market | | | | | | As of June 30, |
| | 2024 | | Sales | | Redemptions | | Flows | | Impact | | Reclassifications | | | | 2024 |
| | (in millions, except account data) |
| AUM | | $ | 452,464 | | | $ | 32,468 | | | $ | (18,900) | | | $ | 13,568 | | | $ | 4,186 | | | $ | 1,760 | | | | | $ | 471,978 | |
| AUA | | 471,401 | | | 32,847 | | | (35,790) | | | (2,943) | | | 6,032 | | | (3,011) | | | | | 471,479 | |
| Total AUM/A | | $ | 923,865 | | | $ | 65,315 | | | $ | (54,690) | | | $ | 10,625 | | | $ | 10,218 | | | $ | (1,251) | | | | | $ | 943,457 | |
| Fee-Based Accounts | | 3,003,486 | | | | | | | 82,230 | | | | | (7,578) | | | | | 3,078,138 | |
The above AUM/A gross sales figures for the three months ended June 30, 2024 include $18.2 billion in new client conversions. We onboarded an additional $149.6 billion in subscription conversions during the three months ended June 30, 2024 bringing total conversions for the three months ended June 30, 2024 to $167.8 billion.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Asset Rollforward - Six Months Ended June 30, 2024 |
| | | As of
December 31, | | Gross | | | | Net | | Market | | | | | | As of June 30, |
| | | 2023 | | Sales | | Redemptions | | Flows | | Impact | | Reclassifications | | | | 2024 |
| | (in millions, except account data) |
| AUM | | $ | 416,001 | | | $ | 64,595 | | | $ | (38,501) | | | $ | 26,094 | | | $ | 26,880 | | | $ | 3,003 | | | | | $ | 471,978 | |
| AUA | | 430,846 | | | 78,443 | | | (61,192) | | | 17,251 | | | 28,715 | | | (5,333) | | | | | 471,479 | |
| Total AUM/A | | $ | 846,847 | | | $ | 143,038 | | | $ | (99,693) | | | $ | 43,345 | | | $ | 55,595 | | | $ | (2,330) | | | | | $ | 943,457 | |
| Fee-Based Accounts | | 2,895,841 | | | | | | | 194,863 | | | | | (12,566) | | | | | 3,078,138 | |
The above AUM/A gross sales figures for the six months ended June 30, 2024 include $48.0 billion in new client conversions. We onboarded an additional $180.7 billion in subscription conversions during the six months ended June 30, 2024 bringing total conversions for the six months ended June 30, 2024 to $228.7 billion.
Asset and account figures in the “Reclassifications” column for the three and six months ended June 30, 2024 represent immaterial amounts that were reclassified between AUM, AUA and subscription to reflect updated customer billing arrangements. These reclassifications have 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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of |
| | June 30, | | September 30, | | December 31, | | March 31, | | June 30, |
| | 2023 | | 2023 | | 2023 | | 2024 | | 2024 |
| Number of paid end-users | | 38.0 | | | 42.3 | | | 38.3 | | | 43.8 | | | 44.3 | |
| Number of firms | | 1,339 | | | 1,322 | | | 1,324 | | | 1,323 | | | 1,182 | |
Envestnet Q2 2024 Earnings August 9, 2024
2 Disclaimers Cautionary Statement Regarding Forward-Looking Statements The forward-looking statements made in this presentation concerning 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. In addition, any statements that refer to our pending merger with affiliates of vehicles managed or advised by Bain Capital Private Equity, LP. (the "Merger"), projections of our future financial performance, our anticipated growth and trends in our business and other characteristics of future events or circumstances are forward-looking statements. 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 presentation include, but are not limited to, the risk that the Merger may not be completed on the anticipated terms in a timely manner or at all, which may adversely affect our business and the price of our common stock; the failure to satisfy any of the conditions to the consummation of the Merger, including the receipt of certain regulatory approvals and the approval of the holders in a majority of the voting power of our common stock; the occurrence of any event, change or other circumstance or condition that could give rise to the termination of the merger agreement, including in circumstances requiring us to pay a termination fee; the effect of the announcement or pendency of the Merger on our business relationships, operating results and business relationships, operating results and business generally; risks that the Merger disrupts our current plans and operations (including the ability of certain customers to terminate or amend contracts upon a change of control); our ability to retain, hire and integrate skilled personnel, including our senior management team and maintain relationships with key business partners and customers, and others with whom we do business, in light of the Merger; risks related to diverting management's attention from our ongoing business operations; unexpected costs, charges or expenses resulting from the Merger; the ability to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Merger; potential litigation relating to the Merger that could be instituted against the parties to the merger agreement or their respective directors, managers or officers; the effects of any outcomes related thereto; certain restrictions during the pendency of the Merger that may impact our ability to pursue certain business opportunities or strategic transactions; uncertainty as to timing of completion of the Merger; risks that the benefits of the Merger are not realized when and as expected; 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; 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 http://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 presentation. All information in this presentation is as of August 9, 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 presentation or to report the occurrence of unanticipated events. © 2024 Envestnet, Inc. All rights reserved.
3 Disclaimers Non-GAAP Financial Disclosure Statement This presentation contains the non-GAAP financial measures, “adjusted EBITDA”, “adjusted net income,” “adjusted net income per diluted share” and “free cash flow.” • “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, gain on deconsolidation, 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 adjustments to investments in private companies, (gain) loss from equity method investments and loss attributable to non-controlling interest. • “Adjusted net income” represents net income (loss) before income tax provision (benefit), gain (loss) from equity method investments, deferred revenue fair value adjustment, non-cash interest expense, cash interest on our Convertible Notes, amortization of acquired intangibles, goodwill impairment, gain on deconsolidation, 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 adjustments to investments in private companies 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 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. • "Free cash flow" represents net cash provided by (used in) operating activities less purchases of property and equipment and capitalization of internally developed software. • These measures are not calculated in accordance with GAAP and may be calculated differently than similar non-GAAP measures for other companies. Quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP information appear in the appendix to this presentation and more information 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 https://investor.envestnet.com/. Reconciliations are not provided for guidance on such measures as we are unable to predict the amounts to be adjusted, such as the GAAP tax provision. Our non-GAAP financial measures should not be viewed as a substitute for revenue, net income (loss), net income (loss) per share or net cash provided by (used in) operating activities determined in accordance with GAAP. Accounting Presentation Certain prior period amounts have been adjusted to conform to the current period presentation, for a change in the composition of the Company’s reportable segments and to correct immaterial errors. See “Note 2 – Summary of Significant Accounting Policies” to our consolidated financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024. © 2024 Envestnet, Inc. All rights reserved.
4 Envestnet at-a-Glance © 2024 Envestnet, Inc. All rights reserved. 2Q24 2Q23 YoY Change(1) Revenue (in $millions) $348.3 $312.4 11% Adjusted EBITDA(2) (in $millions) $77.8 $56.0 39% Adjusted Net Income per Diluted Share(2) $0.55 $0.46 20% Free Cash Flow(2) $67.0 $36.7 83% 1. YoY change represents 2Q24 results vs. 2Q23 results for Adjusted Results. 2. Non-GAAP financial measure. See Non-GAAP Disclosure Statement and Appendix for definitions and reconciliations of non-GAAP measures. KEY FINANCIAL METRICS KEY BUSINESS METRICS $6.2 trillion+ client assets 110,000+ number of advisors 19.4 million+ number of accounts 44 million+ total number of paying users 1,100+ total firms on Data & Analytics platforms MISSION Our mission is to empower advisors and financial service providers with innovative technology, solutions and intelligence to power the growth of their business. STRATEGY • Deliver the industry leading wealth management platform powered by data and insights • Leverage our scale and maximize efficiency to serve our clients’ needs comprehensively • Provide more holistic solutions and a more connected environment
5© 2024 Envestnet, Inc. All rights reserved. Market Scale with Industry Leading Solutions 44 million+ paid users 110,000+ advisors 17 of 20 of the largest U.S. Banks 400 million+ linked consumer accounts 500+ of the largest RIAs 700+ fintech companies 48 of 50 of the largest wealth management and brokerage firms 19.4 million+ investor accounts 19,000+ data sources $6.2 trillion+ in assets Metrics as of June 30, 2024. © 2024 Envestnet, Inc. All rights reserved.
6 Enabling our Clients’ Growth © 2024 Envestnet, Inc. All rights reserved. Industry data was sourced from Cerulli U.S. Broker/Dealer Marketplace 2023 and Cerulli Lodestar. (1) Represents an Envestnet estimate, given 2023 and Q2 2024 industry fee-based asset data are not available. (2) Calculated as Envestnet AUM divided by total managed account industry assets, excluding the wirehouse and direct channels; (3) In Q3 2023, Cerulli included certain assets in its industry managed account figures for the first time, which reduced Envestnet’s calculated market share by 0.08%; (4) Represents a market share figure as of Q1 2024. Total Assets on Envestnet’s Platform vs. Advice Industry Fee-Based Assets Excluding Wirehouses ($T) AUM/A Net Flows ($B) Platform Accounts (M) Envestnet Metrics Managed Acct Market Share(2) 5.6% 5.7% 6.2% 6.5% 7.1% 7.4% 7.3%(3) 7.5%(4) $59 $68 $60 $64 $89 $57 $59 $43.3 7.0 10.9 11.9 13.4 17.5 18.3 19.1 19.4 $6.4 $6.5 $7.9 $9.3 $11.9 $10.6 $12.1(1) $12.9(1) $1.7 $2.8 $3.8 $4.6 $5.7 $5.1 $5.8 $6.3 2017 2018 2019 2020 2021 2022 2023 YTD Q2 2024 Industry Envestnet
7 Well Positioned for Industry Trends © 2024 Envestnet, Inc. All rights reserved. *2024 T3 Advisor Software Survey Industry trends Envestnet as an industry leader Proof points The push to achieve greater scale • Unmatched breadth & depth of capabilities • Multi-channel leader across B-D and RIA • Ultra-configurable with scaled support and compliance • $6.2T+ of assets • 19.4M+ accounts • Top 3 in 13 different industry categories* The demand for personalization • Modern UMA chassis • Direct indexing 10-year track record • Variety of capabilities including tax overlay, high-net-worth consulting, and more Technology integration & consolidation • Stronger platform connectivity, from financial planning through execution • Next-gen proposal and new client portal • Custodial integrations Evolving practice management • Vast array of analytics to strengthen business intelligence • Pioneer in holistic wealth management • AUM net inflows in 2022- 2023 were 4x that of #2 and #3 TAMPs combined • Planning to execution, insights to proposal • Envestnet | Tamarac to managed account opening • Envestnet | MoneyGuide 17th consecutive year ranked #1 financial planning software*
8 Envestnet Key Metrics © 2024 Envestnet, Inc. All rights reserved. $ $ $ $ $ $ $ $ 75,000 80,000 85,000 90,000 95,000 100,000 105,000 110,000 115,000 120,000 125,000 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1.0T 2.0T 3.0T 4.0T 5.0T 6.0T 7.0T 8.0T 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0 $8.0 ENDING ASSETS OVER TIME ($T) 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 20,000,000 Q121 Q221 Q321 Q421 Q122 Q222 Q322 Q422 Q123 Q223 Q323 Q423 Q124 Q224 ENDING ACCOUNTS OVER TIME 85,000 90,000 95,000 100,000 105,000 110,000 115,000 120,000 ADVISOR COUNT OVER TIME
9 159.4 170.1 184.0 195.9 202.7 192.0 177.1 166.4 176.9 185.8 193.9 188.6 202.6 219.5 66.8 69.6 70.1 73.5 72.0 77.1 80.1 81.0 80.5 79.7 81.0 84.2 84.2 84.7 3.0 3.6 3.7 3.9 2.4 6.5 4.2 3.7 3.2 10.3 4.3 6.2 3.0 7.9 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 Wealth: Asset-based Revenue Wealth: Subscription Revenue Wealth: Professional Services © 2024 Envestnet, Inc. All rights reserved. (in $millions) Wealth Solutions Revenue Trend KEY DRIVERS • Market Performance • AUM/A Net Flows • Net New Logos • Account & Advisor growth 13% YoY $229.2 $243.2 $257.9 $273.3 $277.1 $275.6 $261.4 $251.1 $260.6 $275.8 $279.2 $279.0 $289.8 01 02 03 04 $312.1
10 43.0 42.9 43.4 44.6 42.7 41.0 43.7 40.2 36.6 35.2 33.9 33.6 33.3 33.3 2.9 2.6 1.7 1.8 1.5 2.3 1.6 1.6 1.4 1.4 3.7 5.1 1.8 2.9 $0.0 $10.0 $20.0 $30.0 $40.0 $50.0 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 D&A: Subscription Revenue D&A: Professional Services © 2024 Envestnet, Inc. All rights reserved. Data & Analytics Revenue Trend KEY DRIVERS • Market Environment • Bookings • Open Banking Pipeline (1)% YoY (in $millions) $45.9 $45.5 $45.2 $46.3 $44.3 $43.2 $45.3 $41.8 $38.1 $36.6 $37.6 $38.6 $35.1 01 02 03 $36.2
11 159.4 170.1 184.0 195.9 202.7 192.0 177.1 166.4 176.9 185.8 193.9 188.6 202.6 219.5 66.8 69.6 70.1 73.5 72.0 77.1 80.1 81.0 80.5 79.7 81.0 84.2 84.2 84.7 43.0 42.9 43.4 44.6 42.7 41.0 43.7 40.2 36.6 35.2 33.9 33.6 33.3 33.3 5.9 6.2 5.5 5.6 3.9 8.8 5.8 5.2 4.7 11.7 8.0 11.2 4.9 10.8 $0.0 $50.0 $100.0 $150.0 $200.0 $250.0 $300.0 $350.0 $400.0 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 Wealth: Asset-based Revenue Wealth: Subscription Revenue D&A: Subscription Revenue Consolidated: Professional Services Total Company Revenue Trend 11% YoY 97% of Envestnet’s LTM Revenue is Recurring (in $millions) $275.1 $288.7 $303.1 $319.6 $321.4 $318.9 $306.7 $292.9 $298.7 $312.4 $316.8 $317.6 $325.0 $348.3 © 2024 Envestnet, Inc. All rights reserved.
12 Total Platform Assets and Accounts Accounts (M) Q1 2024 YoY Growth 1st Party Managed(1) 0.2 3% AUM(1) 1.7 9% AUA 1.3 16% Subscription 16.4 3% Total 19.4 4% Assets ($B) Q1 2024 YoY Growth 1st Party Managed(1) $42 27% AUM(1) $472 23% AUA $471 20% Subscription $5,328 15% Total $6,271 16% 1. 1st party managed represents assets directly managed, and overlay services provided, by Envestnet Asset Management. These accounts and assets are a component of AUM. 1% 7% 7% 85% Assets ($B) Q2’24 1% 8% 7% 84% Accounts (M) Q2’24 18 Total Platform Assets and Accounts © 2024 Envestnet, Inc. All rights reserved.
13 2024 Second Quarter Results © 2024 Envestnet, Inc. All rights reserved. 2Q24 GAAP Results 2Q24 Adjusted Results(1) 2Q23 Adjusted Results(1) YoY Change %(2) Revenue $348.3 $348.3 $312.4 11% Adjusted EBITDA(1) -- $77.8 $56.0 39% Net income (loss) per diluted share $(1.44) $0.55 $0.46 20% Free cash flow(1) -- $67.0 $36.7 83% (in $millions except for per share amounts) 1. Non-GAAP financial measure. See Non-GAAP Disclosure Statement and Appendix for definitions and reconciliations of non-GAAP measures. 2. YoY change represents 2Q24 results vs. 2Q23 results for Adjusted Results.
14 Adjusted EBITDA* INVESTMENT CYCLE (in $millions) 20 Adjusted EBITDA* ADDITIONAL OPPORTUNITIES Custody UMA Enhancements Scale from Revenue Growth and Operational Efficiency Creating Efficiency & Expense Reduction Opportunities • Organization • Outsourcing • Real Estate • Automation • Integration • Platform Modernization Organic Revenue Growth + Accelerants AUM/A • RIA Managed Accounts • Retirement • Insurance • High Net Worth • Brokerage to Managed • Personalized Inv Solutions Subscription • Wealth Data Platform • Retirement • Agg & Verification • Asset Mgr. Partnerships © 2024 Envestnet, Inc. All rights reserved. *Non-GAAP financial measure. See Non-GAAP Disclosure Statement and Appendix for definitions and reconciliations of non-GAAP measures. 01 02 03 275.2 $288.8 $303.1 $319.7 $321.4 $318.9 $306.7 $292.9 $298.8 $312.5 $316.8 $317.6 $325.0 $348.3 68.3 $71.1 $66.2 $56.2 $54.8 $56.0 $52.3 $52.4 $54.0 $56.0 $65.3 $75.5 $70.4 $77.8 25% 25% 22% 18% 17% 18% 17% 18% 18% 18% 21% 24% 22% 22% 0% 5% 10% 15% 20% 25% 30% $- $50 $100 $150 $200 $250 $300 $350 $400 Q121 Q221 Q321 Q421 Q122 Q222 Q322 Q422 Q123 Q223 Q323 Q423 Q124 Q224 Revenue Adjusted EBITDA Adjusted EBITDA* Margin
15 Balance Sheet and Liquidity CAPITAL POSITION AS OF JUNE 30, 2024 (in $millions) Cash and Cash Equivalents $122.0 Annual Cash Interest Expense $18.7 (1) Debt Outstanding on Revolving Line of Credit ($500) $0.0 Revolving Line of Credit SOFR + spread(2) Convertible Debt Maturing 2025 $317.5 Convertible Debt 2025 0.75% coupon Convertible Debt Maturing 2027 $575.0 Convertible Debt 2027 2.625% coupon Net Leverage Ratio 2.7x(3) 1. Annual Cash Interest Expense reflects 2024 forecast based on current debt and includes bank facility fees 2. We estimate the spread to be Adjusted SOFR + 200 bps based on our current leverage ratio 3. Net Leverage Ratio is calculated as of the end of the quarter as Net Debt (Total Debt less Cash)/TTM Adj EBITDA. Net leverage ratio is provided for illustrative purposes only. NET LEVERAGE RATIO 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 0.0x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 3.5x 4.0x 4.5x 1Q21 2Q21 3 1 4 1Q2 2Q2 3Q 2 4Q22 1Q23 Q23 3Q23 4Q23 1Q24 2 24 NET LEVERAGE RATIO © 2024 Envestnet, Inc. All rights reserved.
Appendix
17 Committed to Corporate Social Responsibility © 2024 Envestnet, Inc. All rights reserved. Social & Human Rights Envestnet conducts our business in a responsible manner for our communities, our employees, our advisors and their clients. We fully support the basic rights of all individuals, follow fair and ethical labor practices and provide meaningful opportunities for development for our employees, promote giving back to the communities where we live and work and offer access to responsible investing. Commitment to the Environment We recognize that a healthy, sustainable future requires environmental stewardship, and we are committed to being mindful of the resources we consume. We continue to explore ways to further improve operational effectiveness and decrease our energy usage and carbon emissions. Strong Corporate Governance We are committed to the long-term success of Envestnet, as well as our shareholders, customers and employees, through strong corporate governance and ethical business practices. Envestnet is committed to empowering Financial Wellness for our communities, our employees, our advisors, and their clients
18 Key factors to our success © 2024 Envestnet, Inc. All rights reserved. 01 Leading competitive market position – WealthTech, Solutions, and Data & Analytics 02 Secular tailwinds and opportunities to seize growth 03 Vast market opportunity with organic growth potential 04 Our investments deepen client engagement and expand addressable market 05 Compelling business model with recurring revenue and operating leverage 06 Integrated offering with partnership and acquisition opportunity
19 Illustrative Market Impact on Annualized Financials • Assuming +/-5% market change(1) (in $millions) Asset-based revenue ~$42 Direct expense ~$25 Adjusted EBITDA(2) unmitigated ~$17 Management has visibility into expected performance allowing operating decisions that may impact hiring plans, variable compensation and other spending initiatives. 1. Amounts represent annualized impact applicable to a 5% change in asset values on 2Q24 Annualized Revenue 2. Non-GAAP financial measure. See Non-GAAP Disclosure Statement and Appendix for definitions and reconciliations of non-GAAP measures. © 2024 Envestnet, Inc. All rights reserved.
20 Illustrative Market Impact Calculations • Approximately 75% of our asset-based revenue is billed quarterly, in advance. As such, the majority of any market impact would be seen in future quarters. • More than half of our asset-based revenue is paid to third party managers and strategists. This naturally reduces the impact on our profit from a market decline. • This represents the unmitigated impact. Depending on the severity of the impact, management may choose to offset a portion of this impact through lower variable compensation and changing its discretionary hiring and spending plans. (a) Blended Market Change refers to the weighted performance of an equity/bond portfolio. The above calculation assumes a 60/40 portfolio in a situation where both markets decline 5%. *Non-GAAP financial measure. See Non-GAAP Disclosure Statement and Appendix for definitions and reconciliations of non-GAAP measures. © 2024 Envestnet, Inc. All rights reserved. Illustrative Market Impact Model Assumptions ($ in millions) Total Revenue 2Q24 revenue, annualized $1,393 x % asset-based ~60% of total revenue 60% x % Blended Market Change (a) See below calculation -5% = Revenue impact ($42) - Impact on asset-based direct expenses ~60% of asset-based revenue ($25) = Impact on Adjusted EBITDA(*) Unmitigated impact ($17) (a)Blended Market Change % exposure to equity 60% equity allocation 60% x % equity market performance Assuming 5% equity market decline -5% + % exposure to bond market 40% bond allocation 40% x % bond market performance Assuming 5% bond market decline -5% = Blended Market Change -5%
21 Q2 Revenue Mix © 2024 Envestnet, Inc. All rights reserved. Three Months Ended June 30, 2024 2023 Envestnet Wealth Solutions Envestnet Data & Analytics Total Envestnet Wealth Solutions Envestnet Data & Analytics Total (in thousands) Revenue: Asset-based $ 219,485 $ — $ 219,485 $ 185,762 $ — $ 185,762 Subscription-based 84,734 33,254 117,988 79,744 35,215 114,959 Total recurring revenue 304,219 33,254 337,473 265,506 35,215 300,721 Professional services and other revenue 7,889 2,911 10,800 10,318 1,395 11,713 Total Revenue $ 312,108 $ 36,165 $ 348,273 $ 275,824 $ 36,610 $ 312,434 YoY % Growth 13% (1)% 11% —% (15)% (2)%
22© 2024 Envestnet, Inc. All rights reserved. Three Months Ended Six Months Ended June 30, June 30, (in thousands) (unaudited) 2024 2023 2024 2023 Net loss $ (79,201) $ (23,132) $ (78,662) $ (65,893) Add (deduct): Deferred revenue fair value adjustment — 17 — 69 Interest income (2,588) (1,656) (4,571) (3,014) Interest expense 6,097 6,531 12,186 12,851 Income tax provision (benefit) (652) 418 853 24,187 Depreciation and amortization 45,733 32,065 79,625 63,585 Goodwill impairment 96,269 — 96,269 — Gain on deconsolidation (19,523) — (19,523) — Non-cash compensation expense 17,822 21,390 36,720 40,843 Restructuring charges and transaction costs 8,405 6,508 10,461 10,671 Severance expense 669 8,234 4,094 14,422 Litigation, regulatory and other governance related expenses 4,020 2,145 6,308 5,219 Foreign currency (229) 74 46 107 Non-income tax expense adjustment (39) (30) (88) (198) Fair market value adjustments to investments in private companies 1,508 67 1,508 67 (Gain) loss from equity method investments (482) 2,386 1,801 5,326 Loss attributable to non-controlling interest — 1,027 1,160 1,805 Adjusted EBITDA $ 77,809 $ 56,044 $ 148,187 $ 110,047 Reconciliation of Non-GAAP Financial Measures
23 Reconciliation of Non-GAAP Financial Measures Three Months Ended Six Months Ended June 30, June 30, (In thousands, except share and per share information) (unaudited) 2024 2023 2024 2023 Net loss $ (79,201) $ (23,132) $ (78,662) $ (65,893) Income tax provision (benefit) (652) 418 853 24,187 Gain (loss) from equity method investments 482 (2,386) (1,801) (5,326) Loss before income tax provision and equity method investments (80,335) (20,328) (76,008) (36,380) Add (deduct): Deferred revenue fair value adjustment — 17 — 69 Non-cash interest expense 1,412 1,427 2,817 2,869 Cash interest – Convertible Notes 4,369 4,543 8,738 9,108 Amortization of acquired intangibles 14,457 15,720 29,199 32,660 Goodwill impairment 96,269 — 96,269 — Gain on deconsolidation (19,523) — (19,523) — Non-cash compensation expense 17,822 21,390 36,720 40,843 Restructuring charges and transaction costs 8,405 6,508 10,461 10,671 Severance expense 669 8,234 4,094 14,422 Litigation, regulatory and other governance related expenses 4,020 2,145 6,308 5,219 Foreign currency (229) 74 46 107 Non-income tax expense adjustment (39) (30) (88) (198) Fair market value adjustments to investments in private companies 1,508 67 1,508 67 Loss attributable to non-controlling interest — 1,027 1,160 1,805 Adjusted net income before income tax effect 48,805 40,794 101,701 81,262 Income tax effect (12,445) (10,403) (25,934) (20,722) Adjusted net income $ 36,360 $ 30,391 $ 75,767 $ 60,540 Basic number of weighted-average shares outstanding 55,143,013 54,439,733 55,013,544 54,289,443 Effect of dilutive shares: Convertible Notes 10,811,884 11,253,471 10,811,884 11,361,458 Non-vested RSUs and PSUs 590,918 316,758 527,360 445,323 Options to purchase common stock 49,692 57,902 38,996 73,271 Diluted number of weighted-average shares outstanding 66,595,507 66,067,864 66,391,784 66,169,495 Adjusted net income per diluted share $ 0.55 $ 0.46 $ 1.14 $ 0.91 © 2024 Envestnet, Inc. All rights reserved.
24 Reconciliation of Non-GAAP Financial Measures © 2024 Envestnet, Inc. All rights reserved. Three Months Ended Six Months Ended June 30, June 30, (in thousands) (unaudited) 2024 2023 2024 2023 Net cash provided by operating activities $ 89,110 $ 72,149 $ 91,054 $ 38,476 Less: Purchases of property and equipment (3,272) (12,333) (5,172) (16,735) Less: Capitalization of internally developed software (18,798) (23,137) (38,751) (46,801) Free cash flow $ 67,040 $ 36,679 $ 47,131 $ (25,060)
v3.24.2.u1
Cover Page
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Aug. 09, 2024 |
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8-K
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Aug. 09, 2024
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ENVESTNET, INC.
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DE
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001-34835
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20-1409613
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1000 Chesterbrook Boulevard
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Suite 250
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Berwyn
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PA
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19312
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312
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ENV
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