0001337619false00013376192024-11-072024-11-07

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: November 7, 2024
Date of Earliest Event Reported: November 7, 2024
env-logo.jpg
ENVESTNET, INC.
(Exact name of registrant as specified in its charter)
Delaware001-3483520-1409613
(State or Other Jurisdiction
of Incorporation)		(Commission
File Number)		(I.R.S. Employer
Identification Number)
 
1000 Chesterbrook Boulevard, Suite 250, Berwyn, Pennsylvania
19312
(Address of principal executive offices)(Zip Code)
(312) 827-2800
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of exchange on which registered
Common Stock, par value $0.005 per shareENVNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company  ☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨


Item 2.02.Results of Operations and Financial Condition
On November 7, 2024, Envestnet, Inc. (“Envestnet”) issued a press release regarding Envestnet’s financial results for its third quarter ended September 30, 2024. The full text of Envestnet’s press release is furnished herewith as Exhibit 99.1.

The information in this Item 2.02 and the attached exhibit is being furnished to the Securities and Exchange Commission and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference into any filing of Envestnet under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01.Financial Statements and Exhibits
 
(d) Exhibits

Exhibit No.Description
99.1
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document

SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 7, 2024
 
ENVESTNET, INC.
By:/s/ Joshua B. Warren
Name:Joshua B. Warren
Title:Chief Financial Officer


Exhibit 99.1

Envestnet Reports Third Quarter 2024 Financial Results

Berwyn, PA — November 7, 2024 — 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, 2024.

Three months endedNine months ended
Key Financial MetricsSeptember 30,%September 30,%
(in millions, except per share data)20242023Change20242023Change
GAAP:
Total revenue$345.9 $316.8 9 %$1,019.2 $928.0 10 %
Net income (loss) attributable to Envestnet, Inc.$(1.7)$7.1 (123)%$(78.3)$(55.6)(41)%
Net income (loss) attributable to Envestnet, Inc. per diluted share$(0.03)$0.13 (123)%$(1.42)$(1.02)(39)%
Non-GAAP:
Adjusted EBITDA(1)
$80.5 $65.3 23 %$228.7 $175.4 30 %
Adjusted net income(1)
$46.5 $36.6 27 %$122.3 $97.2 26 %
Adjusted net income per diluted share(1)
$0.70 $0.56 25 %$1.84 $1.47 25 %
Free cash flow(1)
$76.2 $9.4 *$123.3 $(15.6)*
__________________________________________________
*Not meaningful




Financial Results for the Third Quarter 2024 Compared to the Third Quarter 2023

Total revenue increased 9% to $345.9 million for the third quarter of 2024 from $316.8 million for the third quarter of 2023. Asset-based recurring revenue increased 16% and represented 65% of total revenue for the third quarter of 2024, compared to 61% of total revenue for the third quarter of 2023. Subscription-based recurring revenue remained consistent and represented 33% of total revenue for the third quarter of 2024, compared to 36% of total revenue for the third quarter of 2023. Professional services and other non-recurring revenue decreased 30% for the third quarter of 2024 from the third quarter of 2023.

Total operating expenses increased 7% to $338.9 million for the third quarter of 2024 from $316.2 million for the third quarter of 2023. Direct expense increased 13% to $136.5 million for the third quarter of 2024 from $120.4 million for the third quarter of 2023. Employee compensation decreased 9% to $103.5 million for the third quarter of 2024 from $113.3 million for the third quarter of 2023. Employee compensation was 30% of total revenue for the third quarter of 2024, compared to 36% of total revenue for the third quarter of 2023. General and administrative expense increased 27% to $63.4 million for the third quarter of 2024 from $50.1 million for the third quarter of 2023. General and administrative expense was 18% of total revenue for the third quarter of 2024, compared to 16% of total revenue for the third quarter of 2023.

Income from operations was $7.0 million for the third quarter of 2024 compared to income from operations of $0.6 million for the third quarter of 2023. Net loss attributable to Envestnet, Inc. was $1.7 million, or $(0.03) per diluted share, for the third quarter of 2024 compared to net income attributable to Envestnet, Inc. of $7.1 million, or $0.13 per diluted share, for the third quarter of 2023.

Adjusted EBITDA(1) increased 23% to $80.5 million for the third quarter of 2024 from $65.3 million for the third quarter of 2023. Adjusted net income(1) increased 27% to $46.5 million, or $0.70 per diluted share, for the third quarter of 2024 from $36.6 million, or $0.56 per diluted share, for the third quarter of 2023. Free cash flow(1) increased to $76.2 million for the third quarter of 2024 from $9.4 million for the third quarter of 2023.

Balance Sheet and Liquidity

As of September 30, 2024, Envestnet had $193.4 million in cash and cash equivalents and $892.5 million in outstanding debt. Debt as of September 30, 2024 consisted of $317.5 million in convertible notes maturing in 2025 and $575.0 million in convertible notes maturing in 2027. Envestnet's $500.0 million revolving credit facility was undrawn as of September 30, 2024.

Segment Reporting

On October 1, 2023, the Company changed the composition of its reportable segments to reflect the way that the Company's chief operating decision maker reviews the operating results, assesses performance and allocates resources. All segment information presented within this Exhibit 99.1 for the three and nine months ended September 30, 2024 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.

Correction of Immaterial Errors

In July 2024, the Company identified that as a result of a clerical error an event of default had occurred pursuant to the indenture under which the Convertible Notes due 2025 had been issued, and therefore the Convertible Notes due 2025 should have been classified as current debt instead of as non-current debt as previously recorded in the condensed consolidated balance sheets. Upon identification, the Company promptly cured the technical default. Upon analysis, the Company concluded that the classification error was immaterial in prior period financial statements as the event of default was caused by a clerical error and was not reflective of noncompliance with any factors impacting the Company’s liquidity or financial covenants. If the Company had identified the technical default in the prior period and classified the debt as current, the matter would have been disclosed and promptly resolved. Therefore, amendment of previously filed reports was not required. However, the Company corrected this immaterial error in the prior year reported within this press release.

During the fourth quarter of 2023, the Company identified that the arrangement with a third-party for the use of cloud hosted virtual servers which was previously accounted for as a finance lease transaction and included as a component of property and equipment, net in the condensed consolidated balance sheets should have been recognized as a prepayment included within prepaid expenses and other current assets and other assets in the condensed consolidated balance sheets. The Company concluded that the classification of these transactions was immaterial in prior period financial statements and that amendment of previously filed reports was not required. However, the Company corrected this immaterial error in the prior periods reported within this press release.
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About Envestnet

Envestnet, Inc. (NYSE: ENV) is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet's clients include more than 111,000 advisors, 17 of the 20 largest U.S. banks, 48 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, all of which leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.

For more information on Envestnet, please visit http://www.envestnet.com and follow us on Twitter @ENVintel.

(1) Non-GAAP Financial Measures

“Adjusted EBITDA” represents net income (loss) before deferred revenue fair value adjustment, interest income, interest expense, income tax provision (benefit), depreciation and amortization, goodwill impairment, gain on deconsolidation, non‑cash compensation expense, restructuring charges and transaction costs, merger related costs, Convertible Promissory Note impairment, severance expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, fair market value adjustments to investments in private companies, (gain) loss from equity method investments and loss attributable to non‑controlling interest.

“Adjusted net income” represents net income (loss) before income tax provision (benefit), gain (loss) from equity method investments, deferred revenue fair value adjustment, non‑cash interest expense, cash interest on our Convertible Notes, amortization of acquired intangibles, goodwill impairment, gain on deconsolidation, non‑cash compensation expense, restructuring charges and transaction costs, merger related costs, Convertible Promissory Note impairment, severance expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, fair market value adjustments to investments in private companies and loss attributable to non‑controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income. The normalized tax rate is based solely on the estimated blended statutory income tax rates in the jurisdictions in which we operate. We monitor the normalized tax rate based on events or trends that could materially impact the rate, including tax legislation changes and changes in the geographic mix of our operations.

“Adjusted net income per diluted share” represents adjusted net income attributable to common stockholders divided by the diluted number of weighted average shares outstanding. For purposes of the adjusted net income per share calculation, we assume all potential shares to be issued in connection with our convertible notes are dilutive.

"Free cash flow" represents net cash provided by (used in) operating activities less purchases of property and equipment and capitalization of internally developed software.

For further information see reconciliations of Non-GAAP Financial Measures on pages 8-14 of this press release, and the section entitled "Non-GAAP Financial Measures" in the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at http://www.sec.gov or our Investor Relations website at http://investor.envestnet.com/. Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company’s Non-GAAP Financial Measures should not be viewed as a substitute for revenue, net income (loss), net income (loss) per share or net cash provided by (used in) operating activities determined in accordance with GAAP.

Cautionary Statement Regarding Forward-Looking Statements

The forward-looking statements made in this press release and its attachments concerning our strategic and operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, any statements that refer to our pending merger with affiliates of vehicles managed or advised by Bain Capital Private Equity, LP. (the "Merger"), projections of our future financial performance, our anticipated growth and trends in our business and other characteristics of future events or circumstances are forward-looking statements. These statements involve risks and uncertainties and our actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, the risk that the Merger may not be completed on the anticipated terms in a timely manner or at all, which may adversely affect our business and the price of our common stock; the failure to satisfy any of the conditions to the consummation of the Merger; the occurrence of any event, change or other circumstance or condition that
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could give rise to the termination of the merger agreement, including in circumstances requiring us to pay a termination fee; the effect of the announcement or pendency of the Merger on our business relationships, operating results and business relationships, operating results and business generally; risks that the Merger disrupts our current plans and operations (including the ability of certain customers to terminate or amend contracts upon a change of control); our ability to retain, hire and integrate skilled personnel, including our senior management team and maintain relationships with key business partners and customers, and others with whom we do business, in light of the Merger; risks related to diverting management's attention from our ongoing business operations; unexpected costs, charges or expenses resulting from the Merger; the ability to obtain the necessary financing arrangements set forth in the commitment letters received in connection with the Merger; potential litigation relating to the Merger that could be instituted against the parties to the merger agreement or their respective directors, managers or officers; the effects of any outcomes related thereto; certain restrictions during the pendency of the Merger that may impact our ability to pursue certain business opportunities or strategic transactions; uncertainty as to timing of completion of the Merger; risks that the benefits of the Merger are not realized when and as expected; adverse economic or global market conditions, including periods of rising inflation and market interest rates, and governmental responses to such conditions; the conflicts in the Middle East and between Russia and Ukraine, including related sanctions and their impact on the global economy and capital markets; the concentration of our revenue from the delivery of our solutions and services to clients in the financial services industry; our reliance on a limited number of clients for a material portion of our revenue; the renegotiation of fees by our clients; changes in the estimates of fair value of reporting units or of long-lived assets, particularly goodwill and intangible assets; the amount of our debt, our ability to service our debt and risks associated with derivative transactions associated with our debt; limitations on our ability to access information from third parties or charges for accessing such information; the targeting of some of our sales efforts at large financial institutions and large financial technology companies which prolongs sales cycles, requires substantial upfront sales costs and results in less predictability in completing some of our sales; changes in investing patterns on the assets on which we derive revenue and the freedom of investors to redeem or withdraw investments generally at any time; the impact of fluctuations in market conditions and interest rates on the demand for our products and services and the value of assets under management or administration; increased geopolitical unrest and other events outside of our control that could adversely affect the global economy or specific international, regional and domestic markets; our ability to keep up with rapid technological change, evolving industry standards or changing requirements of clients; risks associated with our international operations; the competitiveness of our solutions and services as compared to those of others; liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest; harm to our reputation; the failure to protect our intellectual property rights; our reliance on outsourcing arrangements; activist shareholders hindering the execution of our business strategy, diverting board and management attention and resources and causing us to incur substantial expenses; public health crises, pandemics or similar events; our ability to successfully identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; our ability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner; our ability to introduce new solutions and services and enhancements; regulatory compliance failures; our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information and potential liabilities for cybersecurity breaches; the effect of privacy laws and regulations, industry standards and contractual obligations and changes to these laws, regulations, standards and obligations on how we operate our business and the negative effects of failure to comply with these requirements; failure by our customers to obtain proper permissions or waivers for our use of disclosure of information; adverse judicial or regulatory proceedings against us; failure of our solutions, services or systems, or those of third parties on which we rely, to work properly; potential liability for use of inaccurate information by third parties provided by us; the occurrence of a deemed “change of control”; the uncertainty of the application and interpretation of certain tax laws; issuances of additional shares of common stock or issuances of shares of preferred stock or convertible securities on our existing stockholders; general economic, political and regulatory conditions; global events, natural disasters, environmental disasters, terrorist attacks and pandemics, including their impact on the economy and trading markets; and management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in our filings with the SEC which are available on the SEC’s website at http://www.sec.gov or our Investor Relations website at http://investor.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of November 7, 2024 and, unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

Contacts
Investor RelationsMedia Relations
investor.relations@envestnet.commedia@envestnet.com
(312) 827-3940
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Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
 
September 30,December 31,
20242023
Assets
Current assets:
Cash and cash equivalents$193,356 $91,378 
Fees receivable, net110,098 120,958 
Prepaid expenses and other current assets59,570 51,472 
Total current assets363,024 263,808 
Property and equipment, net41,632 48,223 
Internally developed software, net207,311 224,713 
Intangible assets, net301,426 338,068 
Goodwill690,885 806,563 
Operating lease right-of-use assets, net63,600 69,154 
Investments in unconsolidated entities93,378 56,292 
Other assets67,448 70,431 
Total assets$1,828,704 $1,877,252 
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities$261,464 $241,424 
Operating lease liabilities11,768 12,909 
Deferred revenue28,732 38,201 
Current portion of debt315,896 314,532 
Total current liabilities617,860 607,066 
Debt, net of current portion564,429 562,080 
Operating lease liabilities, net of current portion93,115 100,830 
Deferred tax liabilities, net15,169 16,568 
Other liabilities11,518 16,202 
Total liabilities1,302,091 1,302,746 
Equity:
Total stockholders’ equity attributable to Envestnet, Inc.
526,613 568,191 
Non-controlling interest— 6,315 
Total liabilities and equity$1,828,704 $1,877,252 
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Envestnet, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)
 
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Revenue:
Asset-based$224,980 $193,901 $647,081 $556,595 
Subscription-based115,402 114,939 350,852 346,977 
Total recurring revenue340,382 308,840 997,933 903,572 
Professional services and other revenue5,567 8,007 21,239 24,416 
Total revenue345,949 316,847 1,019,172 927,988 
Operating expenses:
Direct expense136,488 120,421 407,472 354,309 
Employee compensation103,487 113,334 311,205 344,646 
General and administrative63,438 50,091 168,427 158,816 
Depreciation and amortization35,530 32,400 115,155 95,985 
Goodwill impairment— — 96,269 — 
Gain on deconsolidation— — (19,523)— 
Total operating expenses338,943 316,246 1,079,005 953,756 
Income (loss) from operations7,006 601 (59,833)(25,768)
Other expense, net(4,277)(2,001)(13,446)(12,012)
Income (loss) before income tax provision (benefit) and equity method investments2,729 (1,400)(73,279)(37,780)
Income tax provision (benefit)2,864 (8,824)3,717 15,363 
Loss from equity method investments(1,526)(2,368)(3,327)(7,694)
Net income (loss)(1,661)5,056 (80,323)(60,837)
Add: Net loss attributable to non-controlling interest— 2,035 1,974 5,284 
Net income (loss) attributable to Envestnet, Inc.$(1,661)$7,091 $(78,349)$(55,553)
Net income (loss) attributable to Envestnet, Inc. per share:
Basic$(0.03)$0.13 $(1.42)$(1.02)
Diluted
$(0.03)$0.13 $(1.42)$(1.02)
Weighted average common shares outstanding:
Basic55,273,324 54,562,270 55,100,239 54,380,231 
Diluted
55,273,324 54,970,616 55,100,239 54,380,231 
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Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Nine Months Ended
September 30,
20242023
Cash flows from operating activities:
Net loss
$(80,323)$(60,837)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization115,155 95,985 
Non-cash compensation expense53,204 58,141 
Non-cash interest expense4,237 4,258 
Non-cash goodwill impairment
96,269 — 
Non-cash gain on deconsolidation
(19,523)— 
Non-cash Convertible Promissory Note impairment3,700 — 
Loss from equity method investments3,327 7,694 
Fair market value adjustments to investments in private companies1,508 (2,804)
Lease related impairments689 2,483 
Other(1,173)(303)
Changes in operating assets and liabilities:
Fees receivable, net6,578 (9,621)
Prepaid expenses and other assets(7,944)(17,534)
Accounts payable, accrued expenses and other liabilities14,218 278 
Deferred revenue(3,513)(3,974)
Net cash provided by operating activities186,409 73,766 
Cash flows from investing activities:
Purchases of property and equipment(5,939)(18,275)
Capitalization of internally developed software(57,127)(71,117)
Deconsolidation of non-controlling interest
(11,073)— 
Investments in private companies(3,055)(4,175)
Acquisition of proprietary technology(4,481)(12,000)
Issuance of loan receivable to private company— (20,000)
Other— 400 
Net cash used in investing activities(81,675)(125,167)
Cash flows from financing activities:
Proceeds from borrowings on Revolving Credit Facility— 55,000 
Payments related to Revolving Credit Facility— (55,000)
Payments related to Convertible Notes— (45,000)
Proceeds from exercise of stock options1,081 839 
Payments related to tax withholdings for stock-based compensation(15,847)(17,004)
Payments related to share repurchases— (9,289)
Proceeds from capital contributions received by non-controlling interest
12,012 — 
Purchase of non-controlling units from third-party shareholders— (1,008)
Other4 4 
Net cash used in financing activities(2,750)(71,458)
Effect of exchange rate on changes on cash and cash equivalents
(6)3,897 
Net change in cash and cash equivalents
101,978 (118,962)
Cash and cash equivalents, beginning of period
91,378 162,173 
Cash and cash equivalents, end of period
$193,356 $43,211 

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Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited) 

Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Net income (loss)$(1,661)$5,056 $(80,323)$(60,837)
Add (deduct):
Deferred revenue fair value adjustment (a)
— — — 69 
Interest income (b)
(3,243)(1,553)(7,814)(4,567)
Interest expense (b)
7,404 6,202 19,590 19,053 
Income tax provision (benefit)2,864 (8,824)3,717 15,363 
Depreciation and amortization35,530 32,400 115,155 95,985 
Goodwill impairment— — 96,269 — 
Gain on deconsolidation— — (19,523)— 
Non-cash compensation expense (d)
16,484 17,298 53,204 58,141 
Restructuring charges and transaction costs (e)
4,002 1,695 9,368 12,366 
Merger related costs (c)
9,021 — 14,116 — 
Convertible Promissory Note impairment (c)
3,700 — 3,700 — 
Severance expense (d)
3,508 11,482 7,602 25,904 
Litigation, regulatory and other governance related expenses (c)
1,253 604 7,561 5,823 
Foreign currency (b)
116 223 162 330 
Non-income tax expense adjustment (c)
37 (26)(51)(224)
Fair market value adjustments to investments in private companies (b)
— (2,871)1,508 (2,804)
Loss from equity method investments1,526 2,368 3,327 7,694 
Loss attributable to non-controlling interest— 1,277 1,160 3,082 
Adjusted EBITDA$80,541 $65,331 $228,728 $175,378 
__________________________________________________________
(a)Included within subscription-based revenue in the condensed consolidated statements of operations.
(b)Included within other expense, net in the condensed consolidated statements of operations.
(c)Included within general and administrative expense in the condensed consolidated statements of operations.
(d)Included within employee compensation expense in the condensed consolidated statements of operations.
(e)For the three months ended September 30, 2024 and 2023, $2.2 million and $1.2 million, respectively, were included within general and administrative expense and $1.8 million and $0.5 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations. For the nine months ended September 30, 2024 and 2023, $6.3 million and $10.2 million, respectively, were included within general and administrative expense and $3.1 million and $2.2 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations.
8

Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands, except share and per share information)
(unaudited) 

Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Net income (loss)$(1,661)$5,056 $(80,323)$(60,837)
Income tax provision (benefit) (a)
2,864 (8,824)3,717 15,363 
Loss from equity method investments(1,526)(2,368)(3,327)(7,694)
Income (loss) before income tax provision (benefit) and equity method investments2,729 (1,400)(73,279)(37,780)
Add (deduct):
Deferred revenue fair value adjustment (b)
— — — 69 
Non-cash interest expense (d)
1,420 1,389 4,237 4,258 
Cash interest - Convertible Notes (d)
5,664 4,368 14,402 13,476 
Amortization of acquired intangibles (e)
14,542 15,124 43,741 47,784 
Goodwill impairment— — 96,269 — 
Gain on deconsolidation— — (19,523)— 
Non-cash compensation expense (f)
16,484 17,298 53,204 58,141 
Restructuring charges and transaction costs (g)
4,002 1,695 9,368 12,366 
Merger related costs (c)
9,021 — 14,116 — 
Convertible Promissory Note impairment (c)
3,700 — 3,700 — 
Severance expense (f)
3,508 11,482 7,602 25,904 
Litigation, regulatory and other governance related expenses (c)
1,253 604 7,561 5,823 
Foreign currency (d)
116 223 162 330 
Non-income tax expense adjustment (c)
37 (26)(51)(224)
Fair market value adjustments to investments in private companies (d)
— (2,871)1,508 (2,804)
Loss attributable to non-controlling interest— 1,277 1,160 3,082 
Adjusted net income before income tax effect62,476 49,163 164,177 130,425 
Income tax effect (h)
(15,931)(12,536)(41,865)(33,258)
Adjusted net income$46,545 $36,627 $122,312 $97,167 
Basic number of weighted average shares outstanding55,273,324 54,562,270 55,100,239 54,380,231 
Effect of dilutive shares:
Convertible Notes10,811,884 10,811,884 10,811,884 11,176,254 
Non-vested RSUs and PSUs660,528 361,982 607,653 438,520 
Options to purchase common stock41,701 46,364 40,127 64,507 
Diluted number of weighted average shares outstanding66,787,437 65,782,500 66,559,903 66,059,512 
Adjusted net income per diluted share$0.70 $0.56 $1.84 $1.47 
__________________________________________________________
(a)For the three months ended September 30, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled 238.1% and 234.2%, respectively. For the nine months ended September 30, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled (4.9)% and (33.8)%, respectively.
(b)Included within subscription-based revenue in the condensed consolidated statements of operations.
(c)Included within general and administrative expense in the condensed consolidated statements of operations.
(d)Included within other expense, net in the condensed consolidated statements of operations.
(e)Included within depreciation and amortization expense in the condensed consolidated statements of operations.
(f)Included within employee compensation expense in the condensed consolidated statements of operations.
(g)For the three months ended September 30, 2024 and 2023, $2.2 million and $1.2 million, respectively, were included within general and administrative expense and $1.8 million and $0.5 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations. For the nine months ended September 30, 2024 and 2023, $6.3 million and $10.2 million, respectively, were included within general and administrative expense and $3.1 million and $2.2 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations.
(h)An estimated normalized tax rate of 25.5% has been used to compute adjusted net income for the three and nine months ended September 30, 2024 and 2023.
9

Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited) 

Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Net cash provided by operating activities$95,355 $35,290 $186,409 $73,766 
Less: Purchases of property and equipment(767)(1,540)(5,939)(18,275)
Less: Capitalization of internally developed software
(18,376)(24,316)(57,127)(71,117)
Free cash flow$76,212 $9,434 $123,343 $(15,626)
10

Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)

Three Months Ended September 30, 2024
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue:
Asset-based$224,980 $— $— $224,980 
Subscription-based82,717 32,685 — 115,402 
Total recurring revenue307,697 32,685 — 340,382 
Professional services and other revenue3,826 1,741 — 5,567 
Total revenue311,523 34,426 — 345,949 
Operating expenses:
Direct expense
Asset-based127,979 — — 127,979 
Subscription-based1,513 7,084 — 8,597 
Professional services and other(88)— — (88)
Total direct expense129,404 7,084 — 136,488 
Employee compensation76,350 11,468 15,669 103,487 
General and administrative28,034 15,275 20,129 63,438 
Depreciation and amortization27,425 8,105 — 35,530 
Total operating expenses261,213 41,932 35,798 338,943 
Income (loss) from operations50,310 (7,506)(35,798)7,006 
Add (deduct):
Depreciation and amortization27,425 8,105 — 35,530 
Non-cash compensation expense (b)
11,048 1,823 3,613 16,484 
Restructuring charges and transaction costs (c)
2,738 17 1,247 4,002 
Merger related costs (a)
— — 9,021 9,021 
Convertible Promissory Note impairment (a)
— 3,700 — 3,700 
Severance expense (b)
725 — 2,783 3,508 
Litigation, regulatory and other governance related expenses (a)
— 1,253 — 1,253 
Non-income tax expense adjustment (a)
37 — — 37 
Adjusted EBITDA$92,283 $7,392 $(19,134)$80,541 
__________________________________________________________
(a)Included within general and administrative expense in the condensed consolidated statements of operations.
(b)Included within employee compensation expense in the condensed consolidated statements of operations.
(c)$2.2 million was included within general and administrative expense and $1.8 million was included within employee compensation expense in the condensed consolidated statements of operations.













11


Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)

Nine Months Ended September 30, 2024
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue:
Asset-based$647,081 $— $— $647,081 
Subscription-based251,619 99,233 — 350,852 
Total recurring revenue898,700 99,233 — 997,933 
Professional services and other revenue14,741 6,498 — 21,239 
Total revenue913,441 105,731 — 1,019,172 
Operating expenses:
Direct expense:
Asset-based376,498 — — 376,498 
Subscription-based4,418 21,057 — 25,475 
Professional services and other5,499 — — 5,499 
Total direct expense386,415 21,057 — 407,472 
Employee compensation228,756 35,032 47,417 311,205 
General and administrative82,764 45,859 39,804 168,427 
Depreciation and amortization92,618 22,537 — 115,155 
Goodwill impairment— 96,269 — 96,269 
Gain on deconsolidation(19,523)— — (19,523)
Total operating expenses771,030 220,754 87,221 1,079,005 
Income (loss) from operations142,411 (115,023)(87,221)(59,833)
Add (deduct):
Depreciation and amortization92,618 22,537 — 115,155 
Goodwill impairment— 96,269 — 96,269 
Gain on deconsolidation(19,523)— — (19,523)
Non-cash compensation expense (b)
33,795 5,591 13,818 53,204 
Restructuring charges and transaction costs (c)
4,844 756 3,768 9,368 
Merger related costs (a)
— — 14,116 14,116 
Convertible Promissory Note impairment (a)
— 3,700 — 3,700 
Severance expense (b)
3,161 13 4,428 7,602 
Litigation, regulatory and other governance related expenses (a)
— 7,561 — 7,561 
Non-income tax expense adjustment (a)
(51)— — (51)
Loss attributable to non-controlling interest1,160 — — 1,160 
Adjusted EBITDA$258,415 $21,404 $(51,091)$228,728 
__________________________________________________________
(a)Included within general and administrative expense in the condensed consolidated statements of operations.
(b)Included within employee compensation expense in the condensed consolidated statements of operations.
(c)$6.3 million was included within general and administrative expense and $3.1 million was included within employee compensation expense in the condensed consolidated statements of operations.







12



Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)

Three Months Ended September 30, 2023
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue:
Asset-based$193,901 $— $— $193,901 
Subscription-based81,000 33,939 — 114,939 
Total recurring revenue274,901 33,939 — 308,840 
Professional services and other revenue4,342 3,665 — 8,007 
Total revenue279,243 37,604 — 316,847 
Operating expenses:
Direct expense:
Asset-based112,938 — — 112,938 
Subscription-based1,839 6,018 — 7,857 
Professional services and other(374)— — (374)
Total direct expense114,403 6,018 — 120,421 
Employee compensation78,873 20,395 14,066 113,334 
General and administrative30,093 12,388 7,610 50,091 
Depreciation and amortization25,603 6,797 — 32,400 
Total operating expenses248,972 45,598 21,676 316,246 
Income (loss) from operations30,271 (7,994)(21,676)601 
Add (deduct):
Depreciation and amortization25,603 6,797 — 32,400 
Non-cash compensation expense (b)
10,955 2,175 4,168 17,298 
Restructuring charges and transaction costs (c)
1,432 (98)361 1,695 
Severance expense (b)
4,901 5,902 679 11,482 
Litigation, regulatory and other governance related expenses (a)
— 629 (25)604 
Non-income tax expense adjustment (a)
(26)— — (26)
Loss attributable to non-controlling interest1,277 — — 1,277 
Adjusted EBITDA$74,413 $7,411 $(16,493)$65,331 
__________________________________________________________
(a)Included within general and administrative expense in the condensed consolidated statements of operations.
(b)Included within employee compensation expense in the condensed consolidated statements of operations.
(c)$1.2 million was included within general and administrative expense and $0.5 million was included within employee compensation expense in the condensed consolidated statements of operations.

13

Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)

Nine Months Ended September 30, 2023
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue:
Asset-based$556,595 $— $— $556,595 
Subscription-based241,214 105,763 — 346,977 
Total recurring revenue797,809 105,763 — 903,572 
Professional services and other revenue17,907 6,509 — 24,416 
Total revenue815,716 112,272 — 927,988 
Operating expenses:
Direct expense:
Asset-based324,093 — — 324,093 
Subscription-based5,474 17,080 — 22,554 
Professional services and other7,662 — — 7,662 
Total direct expense337,229 17,080 — 354,309 
Employee compensation235,818 59,476 49,352 344,646 
General and administrative90,425 41,609 26,782 158,816 
Depreciation and amortization76,670 19,315 — 95,985 
Total operating expenses740,142 137,480 76,134 953,756 
Income (loss) from operations75,574 (25,208)(76,134)(25,768)
Add (deduct):
Deferred revenue fair value adjustment (a)
69 — — 69 
Depreciation and amortization76,670 19,315 — 95,985 
Non-cash compensation expense (c)
34,747 7,057 16,337 58,141 
Restructuring charges and transaction costs (d)
7,985 214 4,167 12,366 
Severance expense (c)
10,553 11,227 4,124 25,904 
Litigation, regulatory and other governance related expenses (b)
— 4,163 1,660 5,823 
Non-income tax expense adjustment (b)
(153)(71)— (224)
Loss attributable to non-controlling interest3,082 — — 3,082 
Adjusted EBITDA$208,527 $16,697 $(49,846)$175,378 
__________________________________________________________
(a)Included within subscription-based revenue in the condensed consolidated statements of operations.
(b)Included within general and administrative expense in the condensed consolidated statements of operations.
(c)Included within employee compensation expense in the condensed consolidated statements of operations.
(d)$10.2 million was included within general and administrative expense and $2.2 million was included within employee compensation expense in the condensed consolidated statements of operations.



14

Envestnet, Inc.
Key Metrics
(in millions, except accounts, advisors and firms data)
(unaudited)

Envestnet Wealth Solutions Segment

The following table provides information regarding the amount of assets and number of accounts and advisors supported by the Envestnet Wealth Solutions platform:

As of
September 30,December 31,March 31,June 30,September 30,
20232023202420242024
Platform Assets
Assets under Management (“AUM”)$375,408 $416,001 $452,464 $471,978 $510,453 
Assets under Administration (“AUA”)398,082 430,846 471,401 471,479 495,995 
Total AUM/A773,490 846,847 923,865 943,457 1,006,448 
Subscription4,579,248 4,959,514 5,158,180 5,327,939 5,534,404 
Total Platform Assets$5,352,738 $5,806,361 $6,082,045 $6,271,396 $6,540,852 
Platform Accounts
AUM1,614,8731,640,8791,688,0441,752,7681,802,895
AUA1,257,0941,254,9621,315,4421,325,3701,347,685
Total AUM/A2,871,9672,895,8413,003,4863,078,1383,150,580
Subscription16,072,84816,248,59816,641,63116,364,08816,705,082
Total Platform Accounts18,944,81519,144,43919,645,11719,442,22619,855,662
Advisors
AUM/A38,07838,69738,81438,48438,809
Subscription69,31869,97370,26271,56872,527
Total Advisors107,396108,670109,076110,052111,336

The following tables summarize the changes in the amount of AUM/A assets and number of AUM/A accounts:

Asset Rollforward - Three Months Ended September 30, 2024
As of June 30,GrossNetMarketAs of September 30,
2024SalesRedemptionsFlowsImpact2024
AUM$471,978 $32,831 $(19,239)$13,592 $24,883 $510,453 
AUA471,479 31,382 (29,712)1,670 22,846 495,995 
Total AUM/A$943,457 $64,213 $(48,951)$15,262 $47,729 $1,006,448 
Fee-Based Accounts3,078,138 72,442 3,150,580 

The above AUM/A gross sales figures for the three months ended September 30, 2024 include $13.6 billion in new client conversions. We onboarded an additional $62.6 billion in subscription conversions during the three months ended September 30, 2024 bringing total conversions for the three months ended September 30, 2024 to $76.2 billion.


15


 Asset Rollforward - Nine Months Ended September 30, 2024
 As of
 December 31,		GrossNetMarketAs of September 30,
 2023SalesRedemptionsFlowsImpactReclassifications2024
AUM$416,001 $97,426 $(57,740)$39,686 $51,763 $3,003 $510,453 
AUA430,846 109,825 (90,904)18,921 51,561 (5,333)495,995 
Total AUM/A$846,847 $207,251 $(148,644)$58,607 $103,324 $(2,330)$1,006,448 
Fee-Based Accounts2,895,841 267,305 (12,566)3,150,580 

The above AUM/A gross sales figures for the nine months ended September 30, 2024 include $61.6 billion in new client conversions. We onboarded an additional $243.3 billion in subscription conversions during the nine months ended September 30, 2024 bringing total conversions for the nine months ended September 30, 2024 to $304.9 billion.

Asset and account figures in the “Reclassifications” column for the three and nine months ended September 30, 2024 represent immaterial amounts that were reclassified between AUM, AUA and subscription to reflect updated customer billing arrangements. These reclassifications have no impact on total platform assets or accounts.

Envestnet Data & Analytics Segment
 
The following table provides information regarding the number of paid end-users and firms using the Envestnet Data & Analytics platform:
As of
September 30,December 31,March 31,June 30,September 30,
20232023202420242024
Number of paid end-users42.3 38.3 43.8 44.3 45.2 
Number of firms1,322 1,324 1,323 1,182 1,166 
16
v3.24.3
Cover Page
Nov. 07, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Nov. 07, 2024
Entity Registrant Name ENVESTNET, INC.
Entity Incorporation, State or Country Code DE
Entity File Number 001-34835
Entity Tax Identification Number 20-1409613
Entity Address, Address Line One 1000 Chesterbrook Boulevard
Entity Address, Address Line Two Suite 250
Entity Address, City or Town Berwyn
Entity Address, State or Province PA
Entity Address, Postal Zip Code 19312
City Area Code 312
Local Phone Number 827-2800
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common Stock, par value $0.005 per share
Trading Symbol ENV
Security Exchange Name NYSE
Entity Emerging Growth Company false
Entity Central Index Key 0001337619
Amendment Flag false
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