Envestnet Reports Third Quarter 2019 Financial Results

Envestnet (NYSE:ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the three and nine months ended September 30, 2019.

Three months ended

Nine months ended

Key Financial Metrics

September 30,

%

September 30,

%

(in millions except per share data)

2019

2018

Change

2019

2018

Change

GAAP:

Total revenues

$

236.1

$

203.2

16%

$

660.2

$

602.3

10%

Net income (loss)

$

(3.0

)

$

2.5

n/m

$

(20.6

)

$

4.5

n/m

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

$

(0.06

)

$

0.06

n/m

$

(0.40

)

$

0.12

n/m

Non-GAAP:

Adjusted revenues(1)

$

239.3

$

203.2

18%

$

666.9

$

602.4

11%

Adjusted net revenues(1)

$

175.0

$

145.3

20%

$

488.4

$

430.1

14%

Adjusted EBITDA(1)

$

54.5

$

42.6

28%

$

131.8

$

110.1

20%

Adjusted net income(1)

$

32.4

$

25.3

28%

$

76.3

$

62.2

23%

Adjusted net income per diluted share(1)

$

0.60

$

0.53

13%

$

1.46

$

1.32

11%

n/m - not meaningful

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

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

Financial Results for the Third Quarter of 2019:

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

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

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

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

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

In Millions Except Adjusted EPS

4Q 2019

FY 2019

GAAP:

Revenues:

Asset-based

$

128.0

-

$

128.5

Subscription-based

102.0

-

102.5

Total recurring revenues

$

230.0

-

$

231.0

Professional services and other revenues

6.5

-

7.0

Total revenues

$

236.5

-

$

238.0

$

896.5

-

$

898.0

Asset-based cost of revenues

$

65.0

-

$

65.5

$

243.5

-

$

244.0

Total cost of revenues

$

73.0

-

$

73.5

Net income

(a)

-

(a)

(a)

-

(a)

Diluted shares outstanding

54.0

Net income per diluted share

(a)

-

(a)

(a)

-

(a)

Non-GAAP:

Adjusted revenues (1):

Asset-based

$

128.0

-

$

128.5

Subscription-based

104.0

-

104.5

Total recurring revenues

$

232.0

-

$

233.0

Professional services and other revenues

6.5

-

7.0

Total revenues

$

238.5

-

$

240.0

$

905.5

-

$

907.0

Adjusted net revenues (1)

$

173.0

-

$

175.0

$

661.5

-

$

663.5

Adjusted EBITDA(1)

$

60.0

-

$

61.0

$

192.0

-

$

193.0

Adjusted net income per diluted share(1)

$

0.68

$

2.14

(a) The Company does not forecast net income and net income per diluted share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

Conference Call

Envestnet will host a conference call to discuss third quarter 2019 financial results today at 5:00 p.m. ET. The live webcast can be accessed from Envestnet’s investor relations website at http://ir.envestnet.com/. The call can also be accessed live over the phone by dialing (866) 548-4713, or for international callers (323) 794-2093. A replay will be available two hours after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 7618031. The replay will be available until Thursday, November 14, 2019.

About Envestnet

Envestnet, Inc. (NYSE: ENV) is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet's unified technology empowers enterprises and advisors to more fully understand their clients and deliver actionable intelligence that drives better outcomes and improves lives.

Envestnet Wealth Solutions enables enterprises and advisors to better manage client outcomes and strengthen their practices through its leading Wealth Management Operating System and advanced portfolio solutions. Envestnet | Tamarac provides portfolio management, reporting, trading, rebalancing and client portal solutions for registered independent advisers ("RIAs"). Envestnet | MoneyGuide provides goals-based financial planning applications. Envestnet Data & Analytics enables innovation and insights through its Envestnet | Yodlee data aggregation platform.

More than 100,000 advisors and more than 4,700 companies including: 16 of the 20 largest U.S. banks, 43 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of internet services companies, leverage Envestnet technology and services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences and help drive better outcomes for enterprises, advisors and their clients.

For more information on Envestnet, please visit www.envestnet.com and follow us on twitter @ENVintel.

(1) Non-GAAP Financial Measures

“Adjusted revenues” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. Under GAAP, we record at fair value the acquired deferred revenue for contracts in effect at the time the entities were acquired. Consequently, revenue related to acquired entities for periods subsequent to the acquisition does not reflect the full amount of revenue that would have been recorded by these entities had they remained stand‑alone entities.

“Adjusted net revenues” represents adjusted revenues less asset-based cost of revenues. Under GAAP, we are required to recognize as revenue certain fees paid to investment managers and other third parties needed for implementation of investment solutions included in our assets under management. Those same fees also are required to be recorded as cost of revenues. This non-GAAP metric presents adjusted revenues without such fees included, as they have no impact on our profitability.

Adjusted revenues and Adjusted net revenues have limitations as financial measures, should be considered as supplemental in nature and are not meant as a substitute for revenue prepared in accordance with GAAP.

“Adjusted EBITDA” represents net income (loss) before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax benefit, depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, litigation related expense, foreign currency, non-income tax expense adjustment, loss allocation from equity method investment and (income) loss attributable to non-controlling interest.

“Adjusted net income” represents net income (loss) before deferred revenue fair value adjustment, accretion on contingent consideration and purchase liability, non-cash interest expense, non-cash compensation expense, restructuring charges and transaction costs, severance, amortization of acquired intangibles and fair value adjustment to property and equipment, net, litigation related expense, foreign currency, non-income tax expense adjustment, loss allocation from equity method investment and loss attributable to non-controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income. The normalized tax rate is based solely on the estimated blended statutory income tax rates in the jurisdictions in which we operate. We monitor the normalized tax rate based on events or trends that could materially impact the rate, including tax legislation changes and changes in the geographic mix of our operations.

“Adjusted net income per diluted share” represents adjusted net income divided by the diluted number of weighted-average shares outstanding.

See reconciliation of Non-GAAP Financial Measures on pages 9-12 of this press release. Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company’s Non-GAAP Financial Measures should not be viewed as a substitute for revenues, net income or net income per share determined in accordance with GAAP.

Cautionary Statement Regarding Forward-Looking Statements

The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.’s expected financial performance and outlook for the fourth quarter and full year of 2019, its strategic operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and the Company’s actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, the possibility that the anticipated benefits of the Company’s acquisitions of FolioDynamix and PIEtech, Inc. will not be realized to the extent or when expected, difficulty in sustaining rapid revenue growth, which may place significant demands on the Company’s administrative, operational and financial resources, the concentration of nearly all of our revenues from the delivery of our solutions and services to clients in the financial services industry, our reliance on a limited number of clients for a material portion of our revenues, the renegotiation of fee percentages or termination of our services by our clients, our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, the impact of market and economic conditions on revenues, our inability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner, our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium financial applications, compliance failures, adverse judicial or regulatory proceedings against us, liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest, changes in laws and regulations, including tax laws and regulations, general economic conditions, political and regulatory conditions, the impact of fluctuations in market condition and interest rates on the demand for our products and services and the value of assets under management or administration, the impact of market conditions on our ability to issue debt and equity, the impact of fluctuations in interest rates on our cost of borrowing, our financial performance, the results of our investments in research and development, our data center and other infrastructure, our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information, failure of our systems to work properly, our ability to realize operating efficiencies, the advantages of our solutions as compared to those of others, the failure to protect our intellectual property rights, our ability to establish and maintain intellectual property rights, our ability to retain and hire necessary employees and appropriately staff our operations and management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in the Company’s filings with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at www.sec.gov or the Company’s Investor Relations website at http://ir.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of November 7, 2019 and, unless required by law, the Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

September 30,

December 31,

2019

2018

Assets

Current assets:

Cash and cash equivalents

$

71,632

$

289,345

Fees receivable, net

64,402

68,004

Prepaid expenses and other current assets

30,976

23,557

Total current assets

167,010

380,906

Property and equipment, net

53,565

44,991

Internally developed software, net

53,325

38,209

Intangible assets, net

489,918

305,241

Goodwill

907,995

519,102

Operating lease right-of-use-assets, net

78,515

Other non-current assets

36,808

25,298

Total assets

$

1,787,136

$

1,313,747

Liabilities and Equity

Current liabilities:

Accrued expenses and other liabilities

$

133,170

$

133,298

Accounts payable

13,231

19,567

Operating lease liabilities

12,961

Convertible Notes due 2019

170,966

165,711

Contingent consideration

732

Deferred revenue

35,989

23,988

Total current liabilities

366,317

343,296

Convertible Notes due 2023

302,785

294,725

Revolving credit facility

100,000

Contingent consideration

16,830

Deferred revenue

5,562

6,910

Non-current lease liabilities

83,319

Deferred rent and lease incentive

17,569

Deferred tax liabilities, net

22,657

640

Other non-current liabilities

28,748

18,005

Total liabilities

926,218

681,145

Equity:

Stockholders’ equity

862,263

633,700

Non-controlling interest

(1,345

)

(1,098

)

Total liabilities and equity

$

1,787,136

$

1,313,747

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Revenues:

Asset-based

$

126,591

$

119,097

$

355,595

$

358,361

Subscription-based

100,583

76,194

275,928

217,668

Total recurring revenues

227,174

195,291

631,523

576,029

Professional services and other revenues

8,906

7,865

28,668

26,254

Total revenues

236,080

203,156

660,191

602,283

Operating expenses:

Cost of revenues

71,870

64,964

205,595

195,525

Compensation and benefits

95,587

80,424

285,590

244,174

General and administration

42,016

34,810

124,961

101,628

Depreciation and amortization

26,735

19,563

73,167

58,294

Total operating expenses

236,208

199,761

689,313

599,621

Income (loss) from operations

(128

)

3,395

(29,122

)

2,662

Other expense, net

(9,813

)

(6,118

)

(23,088

)

(16,802

)

Loss before income tax benefit

(9,941

)

(2,723

)

(52,210

)

(14,140

)

Income tax benefit

(6,977

)

(5,234

)

(31,591

)

(18,662

)

Net income (loss)

(2,964

)

2,511

(20,619

)

4,522

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

(116

)

443

247

1,010

Net income (loss) attributable to Envestnet, Inc.

$

(3,080

)

$

2,954

$

(20,372

)

$

5,532

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

Basic

$

(0.06

)

$

0.06

$

(0.40

)

$

0.12

Diluted

$

(0.06

)

$

0.06

$

(0.40

)

$

0.12

Weighted average common shares outstanding:

Basic

52,215,469

45,475,884

50,414,427

45,087,932

Diluted

52,215,469

47,519,160

50,414,427

47,269,479

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Nine Months Ended

September 30,

2019

2018

OPERATING ACTIVITIES:

Net income (loss)

$

(20,619

)

$

4,522

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

Depreciation and amortization

73,167

58,294

Deferred rent and lease incentive amortization

408

Provision for doubtful accounts

1,243

1,228

Deferred income taxes

(37,626

)

(21,854

)

Non-cash compensation expense

43,167

29,574

Non-cash interest expense

17,195

12,337

Accretion on contingent consideration and purchase liability

1,240

209

Payments of contingent consideration

(578

)

Loss allocation from equity method investment

1,507

1,069

Changes in operating assets and liabilities, net of acquisitions:

Fees receivables, net

6,164

(9,131

)

Prepaid expenses and other current assets

(4,784

)

(4,739

)

Other non-current assets

(6,113

)

(2,888

)

Accrued expenses and other liabilities

(9,732

)

6,710

Accounts payable

(6,859

)

4,100

Deferred revenue

1,231

1,147

Other non-current liabilities

3,242

2,328

Net cash provided by operating activities

61,845

83,314

INVESTING ACTIVITIES:

Purchase of property and equipment

(16,098

)

(17,088

)

Capitalization of internally developed software

(23,649

)

(17,611

)

Acquisitions of businesses, net of cash acquired

(321,571

)

(194,959

)

Other

(3,200

)

Net cash used in investing activities

(364,518

)

(229,658

)

FINANCING ACTIVITIES:

Proceeds from issuance of Convertible Notes due 2023

345,000

Convertible Notes due 2023 issuance costs

(9,982

)

Proceeds from borrowings on revolving credit facility

175,000

195,000

Payments on revolving credit facility

(75,000

)

(276,168

)

Revolving credit facility issuance costs

(2,103

)

Payments of contingent consideration

(171

)

(2,193

)

Proceeds from exercise of stock options

7,029

5,199

Purchase of treasury stock for stock-based tax withholdings

(19,697

)

(17,884

)

Issuance of restricted stock units

4

4

Net cash provided by financing activities

85,062

238,976

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(178

)

(1,047

)

DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(217,789

)

91,585

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

289,671

62,115

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

$

71,882

$

153,700

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

September 30,

December 31,

2019

2018

Cash and cash equivalents

$

71,632

$

289,345

Restricted cash included in prepaid expenses and other current assets

82

158

Restricted cash included in other non-current assets

168

168

Total cash, cash equivalents and restricted cash

$

71,882

$

289,671

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Total revenues

$

236,080

$

203,156

$

660,191

$

602,283

Deferred revenue fair value adjustment

3,250

26

6,670

92

Adjusted revenues

239,330

203,182

666,861

602,375

Asset-based cost of revenues

(64,339

)

(57,932

)

(178,474

)

(172,252

)

Adjusted net revenues

$

174,991

$

145,250

$

488,387

$

430,123

Net income (loss)

$

(2,964

)

$

2,511

$

(20,619

)

$

4,522

Add (deduct):

Deferred revenue fair value adjustment

3,250

26

6,670

92

Interest income

(448

)

(619

)

(2,859

)

(1,403

)

Interest expense

8,986

6,920

24,345

18,148

Accretion on contingent consideration and purchase liability

498

13

1,240

209

Income tax benefit

(6,977

)

(5,234

)

(31,591

)

(18,662

)

Depreciation and amortization

26,735

19,563

73,167

58,294

Non-cash compensation expense

15,389

10,603

43,241

29,574

Restructuring charges and transaction costs

4,151

4,096

24,725

10,033

Severance

2,387

4,408

8,147

8,269

Litigation related expense

2,065

2,065

Foreign currency

363

(431

)

208

(1,002

)

Non-income tax expense adjustment

362

(23

)

1,480

(124

)

Loss allocation from equity method investment

957

258

1,507

1,069

Loss attributable to non-controlling interest

(210

)

488

31

1,072

Adjusted EBITDA

$

54,544

$

42,580

$

131,757

$

110,092

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

Net income (loss)

$

(2,964

)

$

2,511

$

(20,619

)

$

4,522

Income tax provision (benefit) (1)

(6,977

)

(5,234

)

(31,591

)

(18,662

)

Loss before income tax provision (benefit)

(9,941

)

(2,723

)

(52,210

)

(14,140

)

Add (deduct):

Deferred revenue fair value adjustment

3,250

26

6,670

92

Accretion on contingent consideration and purchase liability

498

13

1,240

209

Non-cash interest expense

5,006

4,435

14,268

9,335

Non-cash compensation expense

15,389

10,603

43,241

29,574

Restructuring charges and transaction costs

4,151

4,096

24,725

10,033

Severance

2,387

4,408

8,147

8,269

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

19,242

13,477

51,048

40,831

Litigation related expense

2,065

2,065

Foreign currency

363

(431

)

208

(1,002

)

Non-income tax expense adjustment

362

(23

)

1,480

(124

)

Loss allocation from equity method investment

957

258

1,507

1,069

Loss attributable to non-controlling interest

(210

)

488

31

1,072

Adjusted net income before income tax effect

43,519

34,627

102,420

85,218

Income tax effect (2)

(11,097

)

(9,348

)

(26,117

)

(23,008

)

Adjusted net income

$

32,422

$

25,279

$

76,303

$

62,210

Basic number of weighted-average shares outstanding

52,215,469

45,475,884

50,414,427

45,087,932

Effect of dilutive shares:

Options to purchase common stock

953,184

1,323,712

1,107,995

1,348,699

Unvested restricted stock units

548,057

719,564

662,364

832,848

Convertible notes

9,875

11,637

Warrants

Diluted number of weighted-average shares outstanding

53,726,585

47,519,160

52,196,423

47,269,479

Adjusted net income per share - diluted

$

0.60

$

0.53

$

1.46

$

1.32

_________________________________________________

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

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

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 

Three months ended September 30, 2019

Envestnet
Wealth
Solutions

Envestnet Data
& Analytics

Nonsegment

Total

Revenues

$

188,224

$

47,856

$

$

236,080

Deferred revenue fair value adjustment

3,250

3,250

Adjusted revenues

191,474

47,856

239,330

Less: Asset-based cost of revenues

(64,339

)

(64,339

)

Adjusted net revenues

$

127,135

$

47,856

$

$

174,991

Income (loss) from operations

$

17,746

$

(7,112

)

$

(10,762

)

$

(128

)

Add:

Deferred revenue fair value adjustment

3,250

3,250

Accretion on contingent consideration and purchase liability

498

498

Depreciation and amortization

18,414

8,321

26,735

Non-cash compensation expense

9,317

3,844

2,228

15,389

Restructuring charges and transaction costs

733

624

2,794

4,151

Non-income tax expense adjustment

299

63

362

Severance

1,076

1,218

93

2,387

Litigation related expense

2,065

2,065

Other

46

(1

)

45

(Income) loss attributable to non-controlling interest

(210

)

(210

)

Adjusted EBITDA

$

51,169

$

9,022

$

(5,647

)

$

54,544

Three Months Ended September 30, 2018

Envestnet
Wealth
Solutions

Envestnet Data
& Analytics

Nonsegment

Total

Revenues

$

157,467

$

45,689

$

$

203,156

Deferred revenue fair value adjustment

26

26

Adjusted revenues

157,493

45,689

203,182

Less: Asset-based cost of revenues

(57,932

)

(57,932

)

Adjusted net revenues

$

99,561

$

45,689

$

$

145,250

Income (loss) from operations

$

16,549

$

(1,103

)

$

(12,051

)

$

3,395

Add:

Deferred revenue fair value adjustment

26

26

Accretion on contingent consideration and purchase liability

13

13

Depreciation and amortization

11,422

8,141

19,563

Non-cash compensation expense

5,010

3,165

2,428

10,603

Restructuring charges and transaction costs

2,198

310

1,588

4,096

Non-income tax expense adjustment

(147

)

(147

)

Severance

4,381

27

4,408

Other

135

135

(Income) loss attributable to non-controlling interest

488

488

Adjusted EBITDA

$

39,940

$

10,513

$

(7,873

)

$

42,580

Nine months ended September 30, 2019

Envestnet
Wealth
Solutions

Envestnet Data
& Analytics

Nonsegment

Total

Revenues

$

517,819

$

142,372

$

$

660,191

Deferred revenue fair value adjustment

6,670

6,670

Adjusted revenues

524,489

142,372

666,861

Less: Asset-based cost of revenues

(178,474

)

(178,474

)

Adjusted net revenues

$

346,015

$

142,372

$

$

488,387

Income (loss) from operations

$

46,969

$

(24,000

)

$

(52,091

)

$

(29,122

)

Add:

Deferred revenue fair value adjustment

6,670

6,670

Accretion on contingent consideration and purchase liability

1,240

1,240

Depreciation and amortization

46,057

27,110

73,167

Non-cash compensation expense

23,586

11,799

7,856

43,241

Restructuring charges and transaction costs

1,789

1,393

21,543

24,725

Non-income tax expense adjustment

1,407

73

1,480

Severance

2,244

5,714

189

8,147

Litigation related expense

2,065

2,065

Other

111

2

113

(Income) loss attributable to non-controlling interest

31

31

Adjusted EBITDA

$

130,104

$

24,154

$

(22,501

)

$

131,757

Nine Months Ended September 30, 2018

Envestnet
Wealth
Solutions

Envestnet Data
& Analytics

Nonsegment

Total

Revenues

$

470,383

$

131,900

$

$

602,283

Deferred revenue fair value adjustment

84

8

92

Adjusted revenues

470,467

131,908

602,375

Less: Asset-based cost of revenues

(172,252

)

(172,252

)

Adjusted net revenues

$

298,215

$

131,908

$

$

430,123

Income (loss) from operations

$

48,769

$

(8,808

)

$

(37,299

)

$

2,662

Add:

Deferred revenue fair value adjustment

84

8

92

Accretion on contingent consideration and purchase liability

209

209

Depreciation and amortization

33,921

24,373

58,294

Non-cash compensation expense

14,144

8,565

6,865

29,574

Restructuring charges and transaction costs

2,423

913

6,697

10,033

Non-income tax expense adjustment

(124

)

(124

)

Severance

7,859

383

27

8,269

Other

11

11

 

(Income) loss attributable to non-controlling interest

1,072

1,072

Adjusted EBITDA

$

108,357

$

25,434

$

(23,699

)

$

110,092

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

As of

September 30,
2018

December 31,
2018

March 31,
2019

June 30,
2019

September 30,
2019

(in millions, except accounts and advisors data)

Platform Assets

Assets under Management ("AUM")

$

153,862

$

150,591

$

176,144

$

182,143

$

188,739

Assets under Administration ("AUA")

388,066

291,934

319,129

330,226

316,742

Total AUM/A

541,928

442,525

495,273

512,369

505,481

Subscription

2,297,593

2,314,253

2,546,483

2,835,780

2,947,582

Total Platform Assets

$

2,839,521

$

2,756,778

$

3,041,756

$

3,348,149

$

3,453,063

Platform Accounts

AUM

776,705

816,354

874,574

907,034

934,811

AUA

1,517,297

1,182,764

1,187,589

1,196,114

1,136,430

Total AUM/A

2,294,002

1,999,118

2,062,163

2,103,148

2,071,241

Subscription

8,185,667

8,865,435

8,909,581

9,492,653

9,692,714

Total Platform Accounts

10,479,669

10,864,553

10,971,744

11,595,801

11,763,955

Advisors

AUM/A

47,292

40,103

39,035

39,727

39,735

Subscription

45,619

56,237

57,594

59,292

60,319

Total Advisors

92,911

96,340

96,629

99,019

100,054

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

6/30/2019

Gross
Sales

Redemp-
tions

Net
Flows

Market
Impact

Reclass to
Subscription

9/30/2019

(in millions except account data)

AUM

$

182,143

$

14,569

$

(8,827

)

$

5,742

$

854

$

$

188,739

AUA

330,226

19,330

(15,348

)

3,982

1,378

(18,844

)

316,742

Total AUM/A

$

512,369

$

33,899

$

(24,175

)

$

9,724

$

2,232

$

(18,844

)

$

505,481

Fee-Based Accounts

2,103,148

45,188

(77,095

)

2,071,241

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

Asset and account figures in the “Reclass to Subscription” column for the three months ended September 30, 2019 represent enterprise customers whose billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, with no impact on total platform assets or accounts.

Contacts:

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

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