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 Envestnet Reports Fourth Quarter 2019 Financial Results
   Thursday, February 20, 2020 4:05:00 PM ET

CHICAGO--(BUSINESS WIRE)--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
Solutions

 

Envestnet Data &
Analytics

 

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
Solutions

 

Envestnet Data &
Analytics

 

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
Solutions

 

Envestnet Data &
Analytics

 

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
Solutions

 

Envestnet Data &
Analytics

 

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.

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

Media Relations
mediarelations@envestnet.com

Source: Envestnet



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