Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for its quarter and year ended December 31, 2019.
Three Months Ended | Year Ended | |||||||||||||||||||
Key Financial Metrics | December 31, | % | December 31, | % | ||||||||||||||||
(in millions except per share data) | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||||
GAAP: | ||||||||||||||||||||
Total revenues | $ | 239.9 | $ | 210.1 | 14% | $ | 900.1 | $ | 812.4 | 11% | ||||||||||
Net income (loss) | $ | 3.4 | $ | (0.5 | ) | n/m | $ | (17.2 | ) | $ | 4.0 | n/m | ||||||||
Net income (loss) per diluted share attributable to Envestnet, Inc. | $ | 0.07 | $ | 0.00 | n/m | $ | (0.33 | ) | $ | 0.12 | n/m | |||||||||
Non-GAAP: | ||||||||||||||||||||
Adjusted revenues(1) | $ | 242.5 | $ | 210.1 | 15% | $ | 909.4 | $ | 812.5 | 12% | ||||||||||
Adjusted net revenues(1) | $ | 177.1 | $ | 150.2 | 18% | $ | 665.5 | $ | 580.3 | 15% | ||||||||||
Adjusted EBITDA(1) | $ | 61.5 | $ | 47.5 | 30% | $ | 193.3 | $ | 157.5 | 23% | ||||||||||
Adjusted net income(1) | $ | 37.1 | $ | 28.9 | 28% | $ | 113.4 | $ | 91.1 | 24% | ||||||||||
Adjusted net income per diluted share(1) | $ | 0.69 | $ | 0.61 | 13% | $ | 2.15 | $ | 1.92 | 12% | ||||||||||
n/m - Not meaningful | ||||||||||||||||||||
“Envestnet had an unprecedented year in 2019. We experienced a great tragedy. We stood up, moved forward and remained committed to the vision of building the operating system for financial wellness powered by our data infrastructure which enables financial advisors and their firms to help millions of American households achieve their financial goals and aspirations. In the fourth quarter, we grew revenue 14%, adjusted EBITDA 30%, and adjusted earnings per share 13% compared to the prior year,” said Bill Crager, Interim Chief Executive Officer.
“We are moving forward very purposefully with our vision and mission in mind. We are focused on expanding the definition of unified advice and continuing to launch services and tools that help advisors grow their businesses and serve more clients efficiently,” concluded Mr. Crager.
Financial Results for the Fourth Quarter of 2019 Compared to the Fourth Quarter of 2018:
Total revenues increased 14% to $239.9 million for the fourth quarter of 2019 from $210.1 million for the fourth quarter of 2018. The PortfolioCenter and PIEtech acquisitions contributed revenues of $2.3 million and $12.2 million, respectively, for the fourth quarter of 2019. Excluding these items, total revenues grew 7% for the fourth quarter of 2019 compared to the prior year period. Asset-based recurring revenues increased 5% from the prior year period, and represented 54% of total revenues for the fourth quarter of 2019, compared to 58% 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 for the fourth quarter of 2019, compared to 37% of total revenues for the same period in 2018. Professional services and other non-recurring revenues decreased 11% from the prior year period.
Total operating expenses for the fourth quarter of 2019 increased 14% to $226.9 million from $198.6 million in the prior year period. Cost of revenues increased 8% to $73.2 million for the fourth quarter of 2019 from $67.9 million for the fourth quarter of 2018. Compensation and benefits increased 34% to $98.0 million for the fourth quarter of 2019 from $73.0 million for the prior year period. Compensation and benefits were 41% of total revenues for the fourth quarter of 2019, compared to 35% in the prior year period. General and administration expenses decreased 28% to $27.6 million for the fourth quarter of 2019 from $38.4 million for the prior year period. General and administrative expenses were 12% of total revenues for the fourth quarter of 2019, compared to 18% in the prior year period. The acquisitions of PortfolioCenter and PIEtech were significant contributors to compensation and benefits, as well as general and administrative expenses for the fourth quarter of 2019. Excluding PortfolioCenter and PIEtech, operating expenses for the fourth quarter of 2019 increased 4% compared to the prior year period to $205.6 million.
Income from operations was $13.0 million for the fourth quarter of 2019 compared to income from operations of $11.5 million for the fourth quarter of 2018. Net income attributable to Envestnet, Inc. was $3.6 million, or $0.07 per diluted share, for the fourth quarter of 2019 compared to $0.2 million, or $0.00 per diluted share, for the fourth quarter of 2018.
Adjusted revenues(1) for the fourth quarter of 2019 increased 15% to $242.5 million from $210.1 million for the prior year period. Adjusted net revenues(1) for the fourth quarter of 2019 increased 18% to $177.1 million from $150.2 million for the prior year period. Adjusted EBITDA(1) for the fourth quarter of 2019 increased 30% to $61.5 million from $47.5 million for the prior year period. Adjusted Net Income(1) increased 28% for the fourth quarter of 2019 to $37.1 million from $28.9 million for the prior year period. Adjusted Net Income per Diluted Share(1) for the fourth quarter of 2019 increased 13% to $0.69 from $0.61 in the fourth quarter of 2018.
Financial Results for the Full Year of 2019 Compared to the Full Year of 2018:
Total revenues increased 11% to $900.1 million for the year ended December 31, 2019 from $812.4 million for the year ended December 31, 2018. The PortfolioCenter and PIEtech acquisition contributed revenues of $6.7 million and $30.3 million, respectively, for the year ended December 31, 2019. Excluding these items, total revenues grew 6% for the year ended December 31, 2019 compared to the prior year period. Asset-based recurring revenues increased 1% from the prior year period, and represented 54% of total revenues for the year ended December 31, 2019 compared to 59% of total revenues for the same period in 2018. Subscription-based revenues increased 28% from the prior year period, and represented 42% of total revenues for the year ended December 31, 2019 compared to 36% of total revenues for the same period in 2018. Professional services and other non-recurring revenues increased 4% from the prior year period.
Total operating expenses for the year ended December 31, 2019 increased 15% to $916.2 million from $798.2 million in the prior year period. Cost of revenues increased 6% to $278.8 million for the year ended December 31, 2019 from $263.4 million for the year ended December 31, 2018. Compensation and benefits increased 21% to $383.6 million for the year ended December 31, 2019 from $317.2 million for the prior year period. Compensation and benefits were 43% of total revenues for the year ended December 31, 2019, compared to 39% in the prior year period. General and administration expenses increased 9% to $152.6 million for the year ended December 31, 2019 from $140.0 million for the prior year period. General and administrative expenses were 17% of total revenues for the year ended December 31, 2019, consistent with the prior year period. The acquisitions of PortfolioCenter and PIEtech were significant contributors to the year-over-year increases in compensation and benefits, as well as general and administrative expenses for the year ended December 31, 2019. Excluding PortfolioCenter and PIEtech, operating expenses for the year ended December 31, 2019 increased 7% compared to the prior year period to $857.5 million.
Loss from operations was $16.1 million for the year ended December 31, 2019 compared to income from operations of $14.2 million or the year ended December 31, 2018. Net loss attributable to Envestnet, Inc. was $16.8 million, or $0.33 per diluted share, for the year ended December 31, 2019 compared to net income of $5.8 million, or $0.12 per diluted share, for the year ended December 31, 2018.
Adjusted revenues(1) for the year ended December 31, 2019 increased 12% to $909.4 million from $812.5 million for the prior year period. Adjusted net revenues (1) for the year ended December 31, 2019 increased 15% to $665.5 million from $580.3 million for the prior year period. Adjusted EBITDA(1) for the year ended December 31, 2019 increased 23% to $193.3 million from $157.5 million for the prior year period. Adjusted Net Income(1) increased 24% for the year ended December 31, 2019 to $113.4 million from $91.1 million for the prior year period. Adjusted Net Income per Diluted Share(1) for the year ended December 31, 2019 increased 12% to $2.15 from $1.92 in the year ended December 31, 2018.
Outlook
The Company provided the following outlook for the first quarter ending March 31, 2020 and full year ending December 31, 2020. This outlook is based on the market value of assets on December 31, 2019.
In Millions Except Adjusted EPS | 1Q 2020 | FY 2020 | ||||||||||||
GAAP: | ||||||||||||||
Revenues: | ||||||||||||||
Asset-based | $134.0 | - | $135.0 | |||||||||||
Subscription-based | $101.7 | - | $102.2 | |||||||||||
Total recurring revenues | $235.7 | - | $237.2 | |||||||||||
Professional services and other revenues | $6.0 | - | $6.5 | |||||||||||
Total revenues | $241.7 | - | $243.7 | $1,017.5 | - | $1,027.5 | ||||||||
Asset-based cost of revenues | $69.5 | - | $70.0 | $292.0 | - | $294.0 | ||||||||
Total cost of revenues | $76.5 | - | $77.0 | |||||||||||
Net income | (a) | - | (a) | (a) | - | (a) | ||||||||
Diluted shares outstanding | 55.6 | |||||||||||||
Net Income per diluted share | (a) | - | (a) | (a) | - | (a) | ||||||||
Non-GAAP: | ||||||||||||||
Adjusted revenues(1): | ||||||||||||||
Asset-based | $134.0 | - | $135.0 | |||||||||||
Subscription-based | $102.0 | - | $102.5 | |||||||||||
Total recurring revenues | $236.0 | - | $237.5 | |||||||||||
Professional services and other revenues | $6.0 | - | $6.5 | |||||||||||
Total revenues | $242.0 | - | $244.0 | $1,018.0 | - | $1,028.0 | ||||||||
Adjusted net revenues(1) | $172.0 | - | $174.5 | $724.0 | - | $736.0 | ||||||||
Adjusted EBITDA(1) | $46.0 | - | $47.0 | $220.0 | - | $224.0 | ||||||||
Adjusted net income per diluted share(1) | $0.45 | $2.22 | - | $2.27 | ||||||||||
(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 fourth 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 7137531. The replay will be available until Thursday, February 27, 2020.
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 investment advisors (“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 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 provision (benefit), depreciation and amortization, non‑cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration liability, litigation related expense, foreign currency, non-income tax expense adjustment, loss allocation from equity method investment and 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, fair market value adjustment on contingent consideration liability, 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 share” represents adjusted net income attributable to common stockholders divided by the diluted number of weighted‑average shares outstanding.
See reconciliation of Non-GAAP Financial Measures on pages 12-15 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 (loss) or net income (loss) per share determined in accordance with GAAP.
Cautionary Statement Regarding Forward-Looking Statements
The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.’s expected financial performance and outlook for the first quarter and full year of 2020, 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, PortfolioCenter and PIEtech 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 February 20, 2020 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) | ||||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 82,505 | $ | 289,345 | ||||
Fees receivable, net | 67,815 | 68,004 | ||||||
Prepaid expenses and other current assets | 32,183 | 23,557 | ||||||
Total current assets | 182,503 | 380,906 | ||||||
Property and equipment, net | 53,756 | 44,991 | ||||||
Internally developed software, net | 60,263 | 38,209 | ||||||
Intangible assets, net | 505,589 | 305,241 | ||||||
Goodwill | 879,850 | 519,102 | ||||||
Operating lease right-of-use assets, net | 82,796 | — | ||||||
Other non-current assets | 37,127 | 25,298 | ||||||
Total assets | $ | 1,801,884 | $ | 1,313,747 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Accrued expenses and other liabilities | $ | 137,944 | $ | 133,298 | ||||
Accounts payable | 17,277 | 19,567 | ||||||
Operating lease liabilities | 13,816 | — | ||||||
Convertible Notes due 2019 | — | 165,711 | ||||||
Contingent consideration | — | 732 | ||||||
Deferred revenue | 34,753 | 23,988 | ||||||
Total current liabilities | 203,790 | 343,296 | ||||||
Convertible Notes due 2023 | 305,513 | 294,725 | ||||||
Revolving credit facility | 260,000 | — | ||||||
Contingent consideration | 9,045 | — | ||||||
Deferred revenue | 5,754 | 6,910 | ||||||
Non-current operating lease liabilities | 88,365 | — | ||||||
Deferred rent and lease incentive | — | 17,569 | ||||||
Deferred tax liabilities, net | 29,481 | 640 | ||||||
Other non-current liabilities | 32,360 | 18,005 | ||||||
Total liabilities | 934,308 | 681,145 | ||||||
Equity: | ||||||||
Total stockholders’ equity | 869,094 | 633,700 | ||||||
Non-controlling interest | (1,518 | ) | (1,098 | ) | ||||
Total liabilities and equity | $ | 1,801,884 | $ | 1,313,747 | ||||
Envestnet, Inc. Condensed Consolidated Statements of Operations (in thousands, except share and per share information) (unaudited) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenues: | ||||||||||||||||
Asset-based | $ | 128,717 | $ | 122,872 | $ | 484,312 | $ | 481,233 | ||||||||
Subscription-based | 102,885 | 77,799 | 378,813 | 295,467 | ||||||||||||
Total recurring revenues | 231,602 | 200,671 | 863,125 | 776,700 | ||||||||||||
Professional services and other revenues | 8,334 | 9,409 | 37,002 | 35,663 | ||||||||||||
Total revenues | 239,936 | 210,080 | 900,127 | 812,363 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of revenues | 73,216 | 67,875 | 278,811 | 263,400 | ||||||||||||
Compensation and benefits | 97,964 | 73,014 | 383,554 | 317,188 | ||||||||||||
General and administration | 27,603 | 38,356 | 152,564 | 139,984 | ||||||||||||
Depreciation and amortization | 28,104 | 19,332 | 101,271 | 77,626 | ||||||||||||
Total operating expenses | 226,887 | 198,577 | 916,200 | 798,198 | ||||||||||||
Income (loss) from operations | 13,049 | 11,503 | (16,073 | ) | 14,165 | |||||||||||
Other expense, net | (8,934 | ) | (6,525 | ) | (32,022 | ) | (23,327 | ) | ||||||||
Income (loss) before income tax provision (benefit) | 4,115 | 4,978 | (48,095 | ) | (9,162 | ) | ||||||||||
Income tax provision (benefit) | 698 | 5,490 | (30,893 | ) | (13,172 | ) | ||||||||||
Net income (loss) | 3,417 | (512 | ) | (17,202 | ) | 4,010 | ||||||||||
Add: Net loss attributable to non-controlling interest | 173 | 735 | 420 | 1,745 | ||||||||||||
Net income (loss) attributable to Envestnet, Inc. | $ | 3,590 | $ | 223 | $ | (16,782 | ) | $ | 5,755 | |||||||
Net income (loss) per share attributable to Envestnet, Inc.: | ||||||||||||||||
Basic | $ | 0.07 | $ | — | $ | (0.33 | ) | $ | 0.13 | |||||||
Diluted | $ | 0.07 | $ | — | $ | (0.33 | ) | $ | 0.12 | |||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 52,574,128 | 45,985,791 | 50,937,919 | 45,268,002 | ||||||||||||
Diluted | 54,034,972 | 47,752,500 | 50,937,919 | 47,384,085 | ||||||||||||
Envestnet, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited) | ||||||||
Year Ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
OPERATING ACTIVITIES: | ||||||||
Net income (loss) | $ | (17,202 | ) | $ | 4,010 | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 101,271 | 77,626 | ||||||
Deferred rent and lease incentive amortization | — | 671 | ||||||
Provision for doubtful accounts | 2,855 | 1,618 | ||||||
Deferred income taxes | (39,630 | ) | (23,629 | ) | ||||
Non-cash compensation expense | 60,444 | 40,245 | ||||||
Non-cash interest expense | 19,246 | 14,534 | ||||||
Accretion on contingent consideration and purchase liability | 1,772 | 222 | ||||||
Payments of contingent consideration | (578 | ) | — | |||||
Fair market value adjustment to contingent consideration liability | (8,126 | ) | — | |||||
Loss allocation from equity method investment | 2,361 | 1,146 | ||||||
Gain on life insurance proceeds | (5,000 | ) | — | |||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||
Fees receivable, net | 1,139 | (12,890 | ) | |||||
Prepaid expenses and other current assets | (6,440 | ) | (887 | ) | ||||
Other non-current assets | (5,234 | ) | (3,336 | ) | ||||
Accrued expenses and other liabilities | (811 | ) | 12,939 | |||||
Accounts payable | (2,863 | ) | 1,743 | |||||
Deferred revenue | 727 | 345 | ||||||
Other non-current liabilities | 4,795 | 3,028 | ||||||
Net cash provided by operating activities | 108,726 | 117,385 | ||||||
INVESTING ACTIVITIES: | ||||||||
Purchases of property and equipment | (19,847 | ) | (20,524 | ) | ||||
Capitalization of internally developed software | (34,096 | ) | (24,068 | ) | ||||
Investment in private companies | (5,250 | ) | (1,200 | ) | ||||
Acquisitions of businesses, net of cash acquired | (320,915 | ) | (194,617 | ) | ||||
Proceeds from life insurance policy | 5,000 | — | ||||||
Other | (600 | ) | (1,270 | ) | ||||
Net cash used in investing activities | (375,708 | ) | (241,679 | ) | ||||
FINANCING ACTIVITIES: | ||||||||
Proceeds from issuance of Convertible Notes due 2023 | $ | — | $ | 345,000 | ||||
Convertible Notes due 2023 issuance costs | — | (9,982 | ) | |||||
Payment of Convertible Notes due 2019 | (184,751 | ) | — | |||||
Proceeds from borrowings on revolving credit facility | 345,000 | 195,000 | ||||||
Payments on revolving credit facility | (85,000 | ) | (276,168 | ) | ||||
Revolving credit facility issuance costs | (2,103 | ) | — | |||||
Payments of contingent consideration | (171 | ) | (2,193 | ) | ||||
Issuance of common stock and warrants - private placement, net of offering costs | — | 122,704 | ||||||
Proceeds from exercise of stock options | 10,592 | 5,305 | ||||||
Purchase of treasury stock for stock-based tax withholdings | (23,107 | ) | (20,816 | ) | ||||
Purchase of ERS units | — | (6,560 | ) | |||||
Issuance of restricted stock units | 5 | 4 | ||||||
Net cash provided by financing activities | 60,465 | 352,294 | ||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH | (399 | ) | (592 | ) | ||||
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (206,916 | ) | 227,408 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | 289,671 | 62,263 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | 82,755 | $ | 289,671 | ||||
(a) The following table reconciles cash, cash equivalents and restricted cash from the consolidated balance sheets to amounts reported in the consolidated statements of cash flows: | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
Cash and cash equivalents | $ | 82,505 | $ | 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 | $ | 82,755 | $ | 289,671 | ||||
Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands, except share and per share information) (unaudited) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Total revenues | $ | 239,936 | $ | 210,080 | $ | 900,127 | $ | 812,363 | ||||||||
Deferred revenue fair value adjustment | 2,601 | 26 | 9,271 | 118 | ||||||||||||
Adjusted revenues | 242,537 | 210,106 | 909,398 | 812,481 | ||||||||||||
Less: Asset-based cost of revenues | (65,439 | ) | (59,893 | ) | $ | (243,913 | ) | $ | (232,145 | ) | ||||||
Adjusted net revenues | $ | 177,098 | $ | 150,213 | $ | 665,485 | $ | 580,336 | ||||||||
Net income (loss) | $ | 3,417 | $ | (512 | ) | $ | (17,202 | ) | $ | 4,010 | ||||||
Add (deduct): | ||||||||||||||||
Deferred revenue fair value adjustment | 2,601 | 26 | 9,271 | 118 | ||||||||||||
Interest income | (488 | ) | (960 | ) | (3,347 | ) | (2,363 | ) | ||||||||
Interest expense | 8,175 | 7,055 | 32,520 | 25,203 | ||||||||||||
Accretion on contingent consideration and purchase liability | 532 | 13 | 1,772 | 222 | ||||||||||||
Income tax provision (benefit) | 698 | 5,490 | (30,893 | ) | (13,172 | ) | ||||||||||
Depreciation and amortization | 28,104 | 19,332 | 101,271 | 77,626 | ||||||||||||
Non-cash compensation expense | 17,203 | 10,671 | 60,444 | 40,245 | ||||||||||||
Restructuring charges and transaction costs | 1,833 | 5,547 | 26,558 | 15,580 | ||||||||||||
Severance | 7,220 | 49 | 15,367 | 8,318 | ||||||||||||
Fair market value adjustment on contingent consideration liability | (8,126 | ) | — | (8,126 | ) | — | ||||||||||
Litigation related expense | 814 | — | 2,879 | — | ||||||||||||
Foreign currency | (280 | ) | 413 | (72 | ) | (589 | ) | |||||||||
Non-income tax expense adjustment | (1,106 | ) | (466 | ) | 374 | (590 | ) | |||||||||
Loss allocation from equity method investment | 854 | 77 | 2,361 | 1,146 | ||||||||||||
Loss attributable to non-controlling interest | 79 | 719 | 110 | 1,791 | ||||||||||||
Adjusted EBITDA | $ | 61,530 | $ | 47,454 | $ | 193,287 | $ | 157,545 | ||||||||
Net income (loss) | $ | 3,417 | $ | (512 | ) | $ | (17,202 | ) | $ | 4,010 | ||||||
Income tax provision (benefit) (1) | 698 | 5,490 | (30,893 | ) | (13,172 | ) | ||||||||||
Loss before income tax provision (benefit) | 4,115 | 4,978 | (48,095 | ) | (9,162 | ) | ||||||||||
Add (deduct): | ||||||||||||||||
Deferred revenue fair value adjustment | 2,601 | 26 | 9,271 | 118 | ||||||||||||
Accretion on contingent consideration and purchase liability | 532 | 13 | 1,772 | 222 | ||||||||||||
Non-cash interest expense | 4,475 | 4,570 | 18,743 | 13,905 | ||||||||||||
Non-cash compensation expense | 17,203 | 10,671 | 60,444 | 40,245 | ||||||||||||
Restructuring charges and transaction costs | 1,833 | 5,547 | 26,558 | 15,580 | ||||||||||||
Severance | 7,220 | 49 | 15,367 | 8,318 | ||||||||||||
Amortization of acquired intangibles and fair value adjustment to property and equipment, net | 19,629 | 13,025 | 70,677 | 53,856 | ||||||||||||
Fair market value adjustment on contingent consideration liability | (8,126 | ) | — | (8,126 | ) | — | ||||||||||
Litigation related expense | 814 | — | 2,879 | — | ||||||||||||
Foreign currency | (280 | ) | 413 | (72 | ) | (589 | ) | |||||||||
Non-income tax expense adjustment | (1,106 | ) | (466 | ) | 374 | (590 | ) | |||||||||
Loss allocation from equity method investment | 854 | 77 | 2,361 | 1,146 | ||||||||||||
Loss attributable to non-controlling interest | 79 | 719 | 110 | 1,791 | ||||||||||||
Adjusted net income before income tax effect | 49,843 | 39,622 | 152,263 | 124,840 | ||||||||||||
Income tax effect (2) | (12,710 | ) | (10,697 | ) | (38,827 | ) | (33,705 | ) | ||||||||
Adjusted net income | $ | 37,133 | $ | 28,925 | $ | 113,436 | $ | 91,135 | ||||||||
Basic number of weighted-average shares outstanding | 52,574,128 | 45,985,791 | 50,937,919 | 45,268,002 | ||||||||||||
Effect of dilutive shares: | ||||||||||||||||
Options to purchase common stock | 784,361 | 1,173,064 | 1,015,164 | 1,304,493 | ||||||||||||
Unvested restricted stock units | 591,657 | 593,645 | 691,740 | 811,590 | ||||||||||||
Convertible Notes | 84,826 | — | 33,388 | — | ||||||||||||
Warrants | 951 | — | — | — | ||||||||||||
Diluted number of weighted-average shares outstanding | 54,035,923 | 47,752,500 | 52,678,211 | 47,384,085 | ||||||||||||
Adjusted net income per share - diluted | $ | 0.69 | $ | 0.61 | $ | 2.15 | $ | 1.92 | ||||||||
(1) For the three months ended December 31, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 17.0% and 110.3%, respectively. For the year ended December 31, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 64.2% and 143.8%, respectively. |
(2) For 2019, an estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income. For 2018, an estimated normalized effective tax rate of 27% has been used to compute adjusted net income. |
Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (in thousands) (unaudited) | ||||||||||||||||
Three Months Ended December 31, 2019 | ||||||||||||||||
Envestnet Wealth
| Envestnet Data &
| Nonsegment | Total | |||||||||||||
Revenues | $ | 191,639 | $ | 48,297 | $ | — | $ | 239,936 | ||||||||
Deferred revenue fair value adjustment | 2,601 | — | — | 2,601 | ||||||||||||
Adjusted revenues | 194,240 | 48,297 | — | 242,537 | ||||||||||||
Less: Asset-based cost of revenues | (65,439 | ) | — | — | (65,439 | ) | ||||||||||
Adjusted net revenues | 128,801 | 48,297 | — | 177,098 | ||||||||||||
Income (loss) from operations | $ | 20,744 | $ | (1,262 | ) | $ | (6,433 | ) | $ | 13,049 | ||||||
Add: | ||||||||||||||||
Deferred revenue fair value adjustment | 2,601 | — | — | 2,601 | ||||||||||||
Accretion on contingent consideration and purchase liability | 532 | — | — | 532 | ||||||||||||
Depreciation and amortization | 19,689 | 8,415 | — | 28,104 | ||||||||||||
Non-cash compensation expense | 10,382 | 3,164 | 3,657 | 17,203 | ||||||||||||
Restructuring charges and transaction costs | 702 | (758 | ) | 1,090 | 1,034 | |||||||||||
Severance | 4,071 | 1,498 | 1,651 | 7,220 | ||||||||||||
Fair market value adjustment on contingent consideration liability | — | — | (8,126 | ) | (8,126 | ) | ||||||||||
Litigation related expense | — | 814 | — | 814 | ||||||||||||
Other | 128 | — | (2 | ) | 126 | |||||||||||
Non-income tax expense adjustment | (907 | ) | (199 | ) | — | (1,106 | ) | |||||||||
Loss attributable to non-controlling interest | 79 | — | — | 79 | ||||||||||||
Adjusted EBITDA | $ | 58,021 | $ | 11,672 | $ | (8,163 | ) | $ | 61,530 | |||||||
Three Months Ended December 31, 2018 | ||||||||||||||||
Envestnet Wealth
| Envestnet Data &
| Nonsegment | Total | |||||||||||||
Revenues | $ | 162,222 | $ | 47,858 | $ | — | $ | 210,080 | ||||||||
Deferred revenue fair value adjustment | 26 | — | — | 26 | ||||||||||||
Adjusted revenues | 162,248 | 47,858 | — | 210,106 | ||||||||||||
Less: Asset-based cost of revenues | (59,893 | ) | — | — | (59,893 | ) | ||||||||||
Adjusted net revenues | 102,355 | 47,858 | — | 150,213 | ||||||||||||
Income (loss) from operations | $ | 26,722 | $ | (1,205 | ) | $ | (14,014 | ) | $ | 11,503 | ||||||
Add: | ||||||||||||||||
Deferred revenue fair value adjustment | 26 | — | — | 26 | ||||||||||||
Accretion on contingent consideration and purchase liability | 13 | — | — | 13 | ||||||||||||
Depreciation and amortization | 11,218 | 8,114 | — | 19,332 | ||||||||||||
Non-cash compensation expense | 5,198 | 2,987 | 2,486 | 10,671 | ||||||||||||
Restructuring charges and transaction costs | 720 | 822 | 4,005 | 5,547 | ||||||||||||
Severance | (49 | ) | 97 | 1 | 49 | |||||||||||
Other | 67 | 4 | (11 | ) | 60 | |||||||||||
Non-income tax expense adjustment | (1,053 | ) | 587 | — | (466 | ) | ||||||||||
Loss attributable to non-controlling interest | 719 | — | — | 719 | ||||||||||||
Adjusted EBITDA | $ | 43,581 | $ | 11,406 | $ | (7,533 | ) | $ | 47,454 | |||||||
Year Ended December 31, 2019 | ||||||||||||||||
Envestnet Wealth
| Envestnet Data &
| Nonsegment | Total | |||||||||||||
Revenues | $ | 709,458 | $ | 190,669 | $ | — | $ | 900,127 | ||||||||
Deferred revenue fair value adjustment | 9,271 | — | — | 9,271 | ||||||||||||
Adjusted revenues | 718,729 | 190,669 | — | 909,398 | ||||||||||||
Less: Asset-based cost of revenues | (243,913 | ) | — | — | (243,913 | ) | ||||||||||
Adjusted net revenues | 474,816 | 190,669 | — | 665,485 | ||||||||||||
Income (loss) from operations | $ | 67,713 | $ | (25,262 | ) | $ | (58,524 | ) | $ | (16,073 | ) | |||||
Add (deduct): | ||||||||||||||||
Deferred revenue fair value adjustment | 9,271 | — | — | 9,271 | ||||||||||||
Accretion on contingent consideration and purchase liability | 1,772 | — | — | 1,772 | ||||||||||||
Depreciation and amortization | 65,746 | 35,525 | — | 101,271 | ||||||||||||
Non-cash compensation expense | 33,968 | 14,963 | 11,513 | 60,444 | ||||||||||||
Restructuring charges and transaction costs | 2,491 | 635 | 22,633 | 25,759 | ||||||||||||
Severance | 6,315 | 7,212 | 1,840 | 15,367 | ||||||||||||
Fair market value adjustment on contingent consideration liability | — | — | (8,126 | ) | (8,126 | ) | ||||||||||
Litigation related expense | — | 2,879 | — | 2,879 | ||||||||||||
Other | 239 | — | — | 239 | ||||||||||||
Non-income tax expense adjustment | 500 | (126 | ) | — | 374 | |||||||||||
Loss attributable to non-controlling interest | 110 | — | — | 110 | ||||||||||||
Adjusted EBITDA | $ | 188,125 | $ | 35,826 | $ | (30,664 | ) | $ | 193,287 | |||||||
Year Ended December 31, 2018 | ||||||||||||||||
Envestnet Wealth
| Envestnet Data &
| Nonsegment | Total | |||||||||||||
Revenues | $ | 632,605 | $ | 179,758 | $ | — | $ | 812,363 | ||||||||
Deferred revenue fair value adjustment | 110 | 8 | — | 118 | ||||||||||||
Adjusted revenues | 632,715 | 179,766 | — | 812,481 | ||||||||||||
Less: Asset-based cost of revenues | (232,145 | ) | — | — | (232,145 | ) | ||||||||||
Adjusted net revenues | 400,570 | 179,766 | — | 580,336 | ||||||||||||
Income (loss) from operations | $ | 75,491 | $ | (10,013 | ) | $ | (51,313 | ) | $ | 14,165 | ||||||
Add: | ||||||||||||||||
Deferred revenue fair value adjustment | 110 | 8 | — | 118 | ||||||||||||
Accretion on contingent consideration and purchase liability | 222 | — | — | 222 | ||||||||||||
Depreciation and amortization | 45,139 | 32,487 | — | 77,626 | ||||||||||||
Non-cash compensation expense | 19,342 | 11,552 | 9,351 | 40,245 | ||||||||||||
Restructuring charges and transaction costs | 3,143 | 1,735 | 10,702 | 15,580 | ||||||||||||
Severance | 7,810 | 480 | 28 | 8,318 | ||||||||||||
Other | 66 | 4 | — | 70 | ||||||||||||
Non-income tax expense adjustment | (1,177 | ) | 587 | — | (590 | ) | ||||||||||
Loss attributable to non-controlling interest | 1,791 | — | — | 1,791 | ||||||||||||
Adjusted EBITDA | $ | 151,937 | $ | 36,840 | $ | (31,232 | ) | $ | 157,545 | |||||||
Envestnet, Inc. Historical Assets, Accounts and Advisors (in millions, except accounts and advisors) (unaudited) | ||||||||||||||||||||
As of | ||||||||||||||||||||
December 31, | March 31, | June 30, | September 30, | December 31, | ||||||||||||||||
2018 | 2019 | 2019 | 2019 | 2019 | ||||||||||||||||
(in millions except accounts and advisors data) | ||||||||||||||||||||
Platform Assets | ||||||||||||||||||||
Assets under Management ("AUM") | $ | 150,591 | $ | 176,144 | $ | 182,143 | $ | 188,739 | $ | 207,083 | ||||||||||
Assets under Administration ("AUA") | 291,934 | 319,129 | 330,226 | 316,742 | 343,505 | |||||||||||||||
Total AUM/A | 442,525 | 495,273 | 512,369 | 505,481 | 550,588 | |||||||||||||||
Subscription | 2,314,253 | 2,546,483 | 2,835,780 | 2,947,582 | 3,205,281 | |||||||||||||||
Total Platform Assets | $ | 2,756,778 | $ | 3,041,756 | $ | 3,348,149 | $ | 3,453,063 | $ | 3,755,869 | ||||||||||
Platform Accounts | ||||||||||||||||||||
AUM | 816,354 | 874,574 | 907,034 | 934,811 | 935,039 | |||||||||||||||
AUA | 1,182,764 | 1,187,589 | 1,196,114 | 1,136,430 | 1,193,882 | |||||||||||||||
Total AUM/A | 1,999,118 | 2,062,163 | 2,103,148 | 2,071,241 | 2,128,921 | |||||||||||||||
Subscription | 8,865,435 | 8,909,581 | 9,492,653 | 9,692,714 | 9,793,175 | |||||||||||||||
Total Platform Accounts | 10,864,553 | 10,971,744 | 11,595,801 | 11,763,955 | 11,922,096 | |||||||||||||||
Advisors | ||||||||||||||||||||
AUM/A | 40,103 | 39,035 | 39,727 | 39,735 | 40,563 | |||||||||||||||
Subscription | 56,237 | 57,594 | 59,292 | 60,319 | 61,180 | |||||||||||||||
Total Advisors | 96,340 | 96,629 | 99,019 | 100,054 | 101,743 | |||||||||||||||
The following table summarizes the changes in AUM and AUA for the three months ended December 31, 2019:
As of | Gross | Net | Market | As of | ||||||||||||||||||||
9/30/2019 | Sales | Redemptions | Flows | Impact | 12/31/2019 | |||||||||||||||||||
(in millions except account data) | ||||||||||||||||||||||||
AUM | $ | 188,739 | $ | 17,267 | $ | (8,584 | ) | $ | 8,683 | $ | 9,661 | $ | 207,083 | |||||||||||
AUA | 316,742 | 25,377 | (14,654 | ) | 10,723 | 16,040 | 343,505 | |||||||||||||||||
Total AUM/A | $ | 505,481 | $ | 42,644 | $ | (23,238 | ) | $ | 19,406 | $ | 25,701 | $ | 550,588 | |||||||||||
Fee-Based Accounts | 2,071,241 | 57,680 | 2,128,921 | |||||||||||||||||||||
The above AUM/A gross sales figures include $8.3 billion in new client conversions. We onboarded an additional $32.0 billion in subscription conversions during the fourth quarter, bringing total conversions for the quarter to $40.3 billion.
The following table summarizes the changes in AUM and AUA for the year ended December 31, 2019:
As of | Gross | Net | Market | Reclass to | As of | |||||||||||||||||||||||
12/31/2018 | Sales | Redemptions | Flows | Impact | Subscription | 12/31/2019 | ||||||||||||||||||||||
(in millions, except account data) | ||||||||||||||||||||||||||||
AUM | $ | 150,591 | $ | 68,652 | $ | (33,980 | ) | $ | 34,672 | $ | 28,382 | $ | (6,562 | ) | $ | 207,083 | ||||||||||||
AUA | 291,934 | 93,901 | (68,534 | ) | 25,367 | 48,899 | (22,695 | ) | 343,505 | |||||||||||||||||||
Total AUM/A | $ | 442,525 | $ | 162,553 | $ | (102,514 | ) | $ | 60,039 | $ | 77,281 | $ | (29,257 | ) | $ | 550,588 | ||||||||||||
Fee-Based Accounts | 1,999,118 | 228,759 | (98,956 | ) | 2,128,921 | |||||||||||||||||||||||
The above AUM/A gross sales figures include $31.5 billion in new client conversions. We onboarded an additional $297.9 billion in subscription conversions during 2019, bringing total conversions for the year to $329.4 billion.
Asset and account figures in the “Reclass to Subscription” column for the year ended December 31, 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20200220005914/en/
Contacts:
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