Envestnet Reports Fourth Quarter 2023 Financial Results

Rhea-AI Summary

Envestnet (ENV) reported financial results for the quarter and year ended December 31, 2023. Total revenue increased 8% to $317.6 million for the fourth quarter of 2023. Adjusted EBITDA rose 44% to $75.5 million. However, a net loss of $183.2 million was reported for the quarter. For the full year 2023, total revenue remained at $1.2 billion. Adjusted EBITDA increased 16% to $250.9 million.

Positive

• Total revenue increased by 8% to $317.6 million for the fourth quarter of 2023.
• Adjusted EBITDA surged by 44% to $75.5 million for the same period.
• Net loss of $183.2 million was reported for the fourth quarter of 2023.
• Total revenue remained at $1.2 billion for the full year 2023.
• Adjusted EBITDA increased by 16% to $250.9 million for the full year 2023.

Negative

• Net loss of $183.2 million was reported for the fourth quarter of 2023.
• A goodwill impairment charge of $191.8 million was recognized for both the fourth quarter of 2023 and the full year 2023.
• Loss from operations was $178.7 million for the fourth quarter of 2023 and $204.5 million for the full year 2023.

Insights

Financial Analyst

An increase of 8% in total revenue and a significant 44% rise in adjusted EBITDA for the fourth quarter of 2023 compared to the same period in the previous year indicates that Envestnet has effectively managed to grow its earnings before interest, taxes, depreciation and amortization, which is a key indicator of a company's financial performance. The substantial increase in professional services and other non-recurring revenue suggests a successful expansion in areas outside of the company's traditional recurring revenue streams. However, the goodwill impairment charge of $191.8 million is a red flag, as it suggests that the company may have overvalued certain assets in the past, leading to a correction that has significantly impacted the net loss figures.

From a balance sheet perspective, the company's liquidity position, with $91.4 million in cash and an undrawn $500 million revolving credit facility, provides financial flexibility. Nonetheless, the high level of outstanding debt, particularly the $892.5 million in convertible notes, is a concern as it could potentially dilute shareholder value when these debts are converted into equity.

Market Research Analyst

The shift in Envestnet's revenue composition, with asset-based recurring revenue increasing and subscription-based recurring revenue decreasing, may indicate changing dynamics in the wealth management industry. The increase in asset-based revenues could be attributed to a rise in market valuations or new asset inflows, while the decrease in subscription revenues might suggest a competitive market or a shift in customer preferences. Additionally, the reclassification of the Wealth Analytics business from one segment to another reflects internal strategic realignment, which could be aimed at better capitalizing on market opportunities or streamlining operations.

Envestnet's correction of an immaterial error related to cloud hosted virtual servers indicates a commitment to financial transparency and accuracy. Although deemed immaterial, such corrections can influence investor confidence and highlight the importance of robust financial controls.

Economist

The company's performance should be analyzed in the context of broader economic conditions. The increase in professional services and other non-recurring revenue could be a response to an evolving economic environment where clients seek specialized services. However, the static year-over-year total revenue indicates that the company is facing challenges in achieving top-line growth, which could be due to macroeconomic factors such as market saturation or economic slowdown that affects the wealth management industry.

The substantial net loss attributed to goodwill impairment suggests that the company may have overestimated the value of its acquisitions or faced unexpected market challenges that led to a reassessment of asset values. This could have broader implications for the industry, signaling a potential overvaluation of assets in the sector or a need for more conservative valuation approaches in uncertain economic climates.

BERWYN, Pa.--(BUSINESS WIRE)-- Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the quarter and year ended December 31, 2023.

		Three Months Ended											Year Ended
Key Financial Metrics		December 31,								%			December 31,								%
(in millions, except per share data) (unaudited)			2023				2022			Change				2023				2022			Change
GAAP:
Total revenue		$	317.6			$	292.9			8%			$	1,245.6			$	1,239.8			—%
Net loss attributable to Envestnet, Inc.		$	(183.2	)		$	(36.5	)		*			$	(238.7	)		$	(80.9	)		*
Net loss attributable to Envestnet, Inc., per diluted share		$	(3.35	)		$	(0.85	)		*			$	(4.38	)		$	(1.59	)		*
Non-GAAP:
Adjusted revenue(1)		$	317.6			$	292.9			8%			$	1,245.7			$	1,240.0			—%
Adjusted EBITDA(1)		$	75.5			$	52.4			44%			$	250.9			$	215.4			16%
Adjusted net income(1)		$	43.0			$	29.9			44%			$	140.2			$	122.5			14%
Adjusted net income per diluted share(1)		$	0.65			$	0.45			44%			$	2.12			$	1.86			14%
__________________________________________________________
*Not meaningful

“For 25 years it has been a privilege to be a part of and lead the amazing journey that is Envestnet — how foundational it is to the industry, our clients and the advisors who grow, serve and enrich the lives of millions of families,” said Bill Crager, Chief Executive Officer.

“The foundation of the business is strong and Envestnet has the right strategy and people to continue delivering for clients and the industry.”

Financial Results for the Fourth Quarter 2023 Compared to the Fourth Quarter 2022:

Total revenue increased 8% to $317.6 million for the fourth quarter of 2023 from $292.9 million for the fourth quarter of 2022. Asset-based recurring revenue increased 13% and represented 59% of total revenue for the fourth quarter of 2023, compared to 57% of total revenue for the fourth quarter of 2022. Subscription-based recurring revenue decreased 3% and represented 37% of total revenue for the fourth quarter of 2023, compared to 41% of total revenue for the fourth quarter of 2022. Professional services and other non-recurring revenue increased 115% for the fourth quarter of 2023 from the fourth quarter of 2022.

Total operating expenses increased 55% to $496.3 million for the fourth quarter of 2023 from $319.4 million for the fourth quarter of 2022. Direct expense increased 11% to $118.7 million for the fourth quarter of 2023 from $107.2 million for the fourth quarter of 2022. Employee compensation decreased 17% to $100.2 million for the fourth quarter of 2023 from $121.3 million for the fourth quarter of 2022. Employee compensation was 32% of total revenue for the fourth quarter of 2023, compared to 41% of total revenue for the fourth quarter of 2022. General and administrative expense decreased 13% to $51.3 million for the fourth quarter of 2023 from $59.0 million for the fourth quarter of 2022. General and administrative expense was 16% of total revenue for the fourth quarter of 2023, compared to 20% of total revenue for the fourth quarter of 2022. A goodwill impairment charge of $191.8 million was recognized for the fourth quarter of 2023.

Loss from operations was $178.7 million for the fourth quarter of 2023 compared to $26.5 million for the fourth quarter of 2022. Net loss attributable to Envestnet, Inc. was $183.2 million, or $3.35 per diluted share, for the fourth quarter of 2023 compared to $36.5 million, or $0.85 per diluted share, for the fourth quarter of 2022.

Adjusted revenue⁽¹⁾ increased 8% to $317.6 million for the fourth quarter of 2023 from $292.9 million for the fourth quarter of 2022. Adjusted EBITDA⁽¹⁾ increased 44% to $75.5 million for the fourth quarter of 2023 from $52.4 million for the fourth quarter of 2022. Adjusted net income⁽¹⁾ increased 44% to $43.0 million, or $0.65 per diluted share, for the fourth quarter of 2023 from $29.9 million, or $0.45 per diluted share, for the fourth quarter of 2022.

Financial Results for the Full Year 2023 Compared to the Full Year 2022:

Total revenue remained consistent at $1.2 billion for the years ended December 31, 2023 and 2022. Asset-based recurring revenue increased 1% and represented 60% of total revenue for the years ended December 31, 2023 and 2022. Subscription-based recurring revenue decreased 3% and represented 37% of total revenue for the year ended December 31, 2023 compared to 39% of total revenue for the year ended December 31, 2022. Professional services and other non-recurring revenue increased 50% for the year ended December 31, 2023 from the year ended December 31, 2022.

Total operating expenses increased 11% to $1.5 billion for the year ended December 31, 2023 from $1.3 billion for the year ended December 31, 2022. Direct expense increased 1% to $473.0 million for the year ended December 31, 2023 from $470.4 million for the year ended December 31, 2022. Employee compensation decreased 9% to $444.8 million for the year ended December 31, 2023 from $490.7 million for the year ended December 31, 2022. Employee compensation was 36% of total revenue for the year ended December 31, 2023, compared to 40% of total revenue for the year ended December 31, 2022. General and administrative expense decreased 4% to $210.1 million for the year ended December 31, 2023 from $218.8 million for the year ended December 31, 2022. General and administrative expense was 17% of total revenue for the year ended December 31, 2023, compared to 18% for the year ended December 31, 2022. A goodwill impairment charge of $191.8 million was recognized for the year ended December 31, 2023.

Loss from operations was $204.5 million for the year ended December 31, 2023 compared to $66.0 million for the year ended December 31, 2022. Net loss attributable to Envestnet, Inc. was $238.7 million, or $4.38 per diluted share, for the year ended December 31, 2023 compared to $80.9 million, or $1.59 per diluted share, for the year ended December 31, 2022.

Adjusted revenue⁽¹⁾ remained consistent at $1.2 billion for the years ended December 31, 2023 and 2022. Adjusted EBITDA⁽¹⁾ increased 16% to $250.9 million for the year ended December 31, 2023 from $215.4 million for the year ended December 31, 2022. Adjusted net income⁽¹⁾ increased 14% to $140.2 million, or $2.12 per diluted share, for the year ended December 31, 2023 from $122.5 million, or $1.86 per diluted share, for the year ended December 31, 2022.

Balance Sheet and Liquidity

As of December 31, 2023, Envestnet had $91.4 million in cash and cash equivalents and $892.5 million in outstanding debt. Debt as of December 31, 2023 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 December 31, 2023.

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. As a result, the advisor-focused Wealth Analytics business has been reclassified from the Envestnet Data & Analytics segment to the Envestnet Wealth Solutions segment. The segment change does not impact nonsegment results or the Company's consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows. All segment information presented within this Exhibit 99.1 for the quarter and full year ended December 31, 2023 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.

Correction of Immaterial Error

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 consolidated balance sheets should have been recognized as a prepayment included within prepaid expenses and other current assets and other assets in the 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 Exhibit 99.1.

Outlook

Envestnet provided the following outlook for the first quarter ending March 31, 2024. This outlook is based on the market value of assets under management or administration on December 31, 2023. We caution that we cannot predict the market value of these assets on any future date. See “Cautionary Statement Regarding Forward-Looking Statements.”

In Millions Except Adjusted EPS		1Q 2024
GAAP:
Revenue:
Asset-based		$	200.0		-		$	203.0
Subscription-based			117.0		-			119.0
Total recurring revenue			317.0		-			322.0
Professional services and other revenue			3.0		-			4.0
Total revenue		$	320.0		-		$	326.0
Asset-based direct expense		$	117.5		-		$	119.0
Total direct expense		$	125.5		-		$	127.0
Net income (loss)					(a)
Diluted shares outstanding					66.3
Net income (loss) per diluted share					(a)
Non-GAAP:
Adjusted EBITDA(1)		$	64.0		-		$	69.0
Adjusted net income per diluted share(1)		$	0.52		-		$	0.57

__________________________________________________________

(a) Envestnet does not forecast net income (loss) and net income (loss) 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 and full year 2023 financial results today at 5:00 p.m. ET. The live webcast and accompanying presentation can be accessed from Envestnet’s investor relations website at http://investor.envestnet.com/. A replay of the webcast will be available on the investor relations website following the call.

About Envestnet

Envestnet, Inc. (NYSE: ENV) is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet's clients include more than 108,000 advisors, 16 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 www.envestnet.com and follow us on Twitter @ENVintel.

(1) Non-GAAP Financial Measures

“Adjusted revenue” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. On January 1, 2022, the Company adopted ASU 2021-08 whereby it now accounts for contract assets and contract liabilities obtained upon a business combination in accordance with ASC 606. Prior to the adoption of ASU 2021-08, we recorded 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 did not reflect the full amount of revenue that would have been recorded by these entities had they remained stand-alone entities. Adjusted revenue has limitations as a financial measure, should be considered as supplemental in nature and is 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, income tax provision (benefit), depreciation and amortization, goodwill impairment, non-cash compensation expense, restructuring charges and transaction costs, severance expense, fair market value adjustment on investment in private company, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, dilution gain on equity method investee share issuance, loss allocations from equity method investments and (income) loss attributable to non-controlling interest.

“Adjusted net income” represents net income (loss) before income tax provision (benefit), deferred revenue fair value adjustment, non-cash interest expense, cash interest on our Convertible Notes, goodwill impairment, non-cash compensation expense, restructuring charges and transaction costs, severance expense, amortization of acquired intangibles, fair market value adjustment to investment in private company, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, dilution gain on equity method investee share issuance, loss allocations from equity method investments and (income) 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.

For further information see reconciliations of Non-GAAP Financial Measures on pages 11-16 of this press release, and the section entitled "Non-GAAP Financial Measures" in the most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at 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) 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 2024, its strategic and operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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, our ability to recruit and retain senior executive leadership and other key employees and to successfully manage transitions, including the transition of our chief executive officer; 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; 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 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 February 22, 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.

Envestnet, Inc. Consolidated Balance Sheets (in thousands) (unaudited)
		December 31,
		2023			2022
Assets
Current assets:
Cash and cash equivalents		$	91,378		$	162,173
Fees receivable, net			120,958			101,696
Prepaid expenses and other current assets			51,472			47,422
Total current assets			263,808			311,291
Property and equipment, net			48,223			48,481
Internally developed software, net			224,713			184,558
Intangible assets, net			338,068			379,995
Goodwill			806,563			998,414
Operating lease right-of-use assets, net			69,154			81,596
Other assets			126,723			107,830
Total assets		$	1,877,252		$	2,112,165
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities		$	241,424		$	233,866
Operating lease liabilities			12,909			11,949
Deferred revenue			38,201			36,363
Current portion of debt			—			44,886
Total current liabilities			292,534			327,064
Debt			876,612			871,769
Operating lease liabilities, net of current portion			100,830			110,652
Deferred tax liabilities, net			16,568			16,196
Other liabilities			16,202			18,880
Total liabilities			1,302,746			1,344,561
Equity:
Total stockholders’ equity, attributable to Envestnet, Inc.			568,191			754,567
Non-controlling interest			6,315			13,037
Total liabilities and equity		$	1,877,252		$	2,112,165

Envestnet, Inc. Consolidated Statements of Operations (in thousands, except share and per share information) (unaudited)
		Three Months Ended								Year Ended
		December 31,								December 31,
			2023				2022				2023				2022
Revenue:
Asset-based		$	188,643			$	166,408			$	745,238			$	738,228
Subscription-based			117,753				121,243				464,730				477,844
Total recurring revenue			306,396				287,651				1,209,968				1,216,072
Professional services and other revenue			11,236				5,223				35,652				23,712
Total revenue			317,632				292,874				1,245,620				1,239,784
Operating expenses:
Direct expense			118,729				107,179				473,038				470,424
Employee compensation			100,182				121,272				444,828				490,725
General and administrative			51,297				59,048				210,113				218,831
Depreciation and amortization			34,319				31,909				130,304				125,828
Goodwill impairment			191,818				—				191,818				—
Total operating expenses			496,345				319,408				1,450,101				1,305,808
Loss from operations			(178,713	)			(26,534	)			(204,481	)			(66,024	)
Other income (expense), net			(8,810	)			(2,704	)			(28,516	)			(12,395	)
Loss before income tax provision (benefit)			(187,523	)			(29,238	)			(232,997	)			(78,419	)
Income tax provision (benefit)			(2,586	)			8,603				12,777				7,061
Net loss			(184,937	)			(37,841	)			(245,774	)			(85,480	)
Add: Net loss attributable to non-controlling interest			1,766				1,336				7,050				4,541
Net loss attributable to Envestnet, Inc.		$	(183,171	)		$	(36,505	)		$	(238,724	)		$	(80,939	)
Net loss attributable to Envestnet, Inc., per share:
Basic		$	(3.35	)		$	(0.66	)		$	(4.38	)		$	(1.47	)
Diluted		$	(3.35	)		$	(0.85	)		$	(4.38	)		$	(1.59	)
Weighted average common shares outstanding:
Basic			54,689,559				55,119,075				54,457,365				55,199,482
Diluted			54,689,559				56,076,261				54,457,365				56,842,125

Envestnet, Inc. Consolidated Statements of Cash Flows (in thousands) (unaudited)
		Year Ended December 31,
			2023				2022
Cash flows from operating activities:
Net loss		$	(245,774	)		$	(85,480	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			130,304				125,828
Deferred income taxes			(1,479	)			(3,490	)
Goodwill impairment			191,818				—
Non-cash compensation expense			71,031				80,333
Non-cash interest expense			5,037				7,445
Fair market value adjustment to investment in private company			(804	)			(400	)
Dilution gain on equity method investee share issuance			(546	)			(9,517	)
Loss allocations from equity method investments			10,579				8,874
Lease related impairments			5,120				15,750
Loss on extinguishment of Convertible Notes due 2023			—				13,421
Gain on extinguishment of Convertible Notes due 2025			—				(15,089	)
Loss on property and equipment disposals			—				5,097
Other			1,781				1,266
Changes in operating assets and liabilities:
Fees receivable, net			(20,584	)			(5,031	)
Prepaid expenses and other assets			(11,573	)			(16,090	)
Accounts payable, accrued expenses and other liabilities			19,229				(24,257	)
Deferred revenue			729				(305	)
Net cash provided by operating activities			154,868				98,355
Cash flows from investing activities:
Purchases of property and equipment			(18,995	)			(16,172	)
Capitalization of internally developed software			(94,307	)			(89,153	)
Acquisitions of businesses, net of cash acquired			—				(104,100	)
Investments in private companies			(4,175	)			(16,351	)
Acquisition of proprietary technology			(17,000	)			(19,000	)
Issuance of loan receivable to private company			(20,000	)			—
Issuance of note receivable to equity method investees			—				(6,350	)
Other			414				—
Net cash used in investing activities			(154,063	)			(251,126	)

Envestnet, Inc. Consolidated Statements of Cash Flows (continued) (in thousands) (unaudited)
		Year Ended December 31,
			2023				2022
Cash flows from financing activities:
Proceeds from borrowings on Revolving Credit Facility			55,000				—
Payments related to Revolving Credit Facility			(55,000	)			—
Settlement of Convertible Notes due 2023			(45,000	)			—
Proceeds from issuance of Convertible Notes due 2027			—				575,000
Convertible Notes due 2027 issuance costs			—				(16,323	)
Repurchase of Convertible Notes due 2023			—				(312,422	)
Repurchase of Convertible Notes due 2025			—				(181,772	)
Payments related to Capped Call Transactions			—				(79,585	)
Proceeds from exercise of stock options			1,608				2,620
Payments related to tax withholdings for stock-based compensation			(19,022	)			(23,516	)
Payments related to share repurchases			(9,289	)			(85,750	)
Purchase of non-controlling units from third-party shareholders			(1,008	)			—
Proceeds from capital contributions of non-controlling shareholders			—				16,037
Payments of contingent consideration			—				(743	)
Other			5				(1,866	)
Net cash used in financing activities			(72,706	)			(108,320	)
Effect of exchange rate on changes on cash, cash equivalents and restricted cash			1,106				(6,164	)
Net change in cash, cash equivalents and restricted cash			(70,795	)			(267,255	)
Cash, cash equivalents and restricted cash, beginning of period			162,173				429,428
Cash, cash equivalents and restricted cash, end of period		$	91,378			$	162,173

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands) (unaudited)
		Three Months Ended								Year Ended
		December 31,								December 31,
			2023				2022				2023				2022
Total revenue		$	317,632			$	292,874			$	1,245,620			$	1,239,784
Deferred revenue fair value adjustment (a)			—				54				69				216
Adjusted revenue		$	317,632			$	292,928			$	1,245,689			$	1,240,000
Net loss		$	(184,937	)		$	(37,841	)		$	(245,774	)		$	(85,480	)
Add (deduct):
Deferred revenue fair value adjustment (a)			—				54				69				216
Interest income (b)			(1,721	)			(1,911	)			(6,288	)			(4,184	)
Interest expense (b)			6,085				3,536				25,138				16,843
Income tax provision (benefit)			(2,586	)			8,603				12,777				7,061
Depreciation and amortization			34,319				31,909				130,304				125,828
Goodwill impairment			191,818				—				191,818				—
Non-cash compensation expense (d)			12,890				17,750				71,031				80,333
Restructuring charges and transaction costs (e)			3,897				7,874				16,263				35,141
Severance expense (d)			9,495				18,738				35,399				30,117
Litigation, regulatory and other governance related expenses (c)			1,159				722				6,982				6,055
Foreign currency (b)			107				806				437				1,419
Non-income tax expense adjustment (c)			(168	)			914				(392	)			802
Fair market value adjustment to investment in private company (b)			2,000				(400	)			(804	)			(400	)
Dilution gain on equity method investee share issuance (b)			—				(2,583	)			(546	)			(9,517	)
Loss allocations from equity method investments (b)			2,339				3,542				10,579				8,874
Loss attributable to non-controlling interest			838				663				3,920				2,300
Adjusted EBITDA		$	75,535			$	52,376			$	250,913			$	215,408

__________________________________________________________
(a)		Included within subscription-based revenue in the consolidated statements of operations.
(b)		Included within other income (expense), net in the consolidated statements of operations.
(c)		Included within general and administrative expense in the consolidated statements of operations.
(d)		Included within employee compensation in the consolidated statements of operations.
(e)		For the three months ended December 31, 2023 and 2022, $3.3 million and $7.9 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the three months ended December 31, 2023 and 2022, $0.6 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $13.5 million and $35.1 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $2.8 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures (continued) (in thousands, except share and per share information) (unaudited)
		Three Months Ended								Year Ended
		December 31,								December 31,
			2023				2022				2023				2022
Net loss		$	(184,937	)		$	(37,841	)		$	(245,774	)		$	(85,480	)
Income tax provision (benefit) (a)			(2,586	)			8,603				12,777				7,061
Loss before income tax provision (benefit)			(187,523	)			(29,238	)			(232,997	)			(78,419	)
Add (deduct):
Deferred revenue fair value adjustment (b)			—				54				69				216
Non-cash interest expense (c)			1,397				(239	)			5,655				4,678
Cash interest - Convertible Notes (c)			4,369				3,458				17,845				10,897
Amortization of acquired intangibles (g)			15,143				18,087				62,927				71,901
Goodwill impairment			191,818				—				191,818				—
Non-cash compensation expense (f)			12,890				17,750				71,031				80,333
Restructuring charges and transaction costs (e)			3,897				7,874				16,263				35,141
Severance expense (f)			9,495				18,738				35,399				30,117
Litigation, regulatory and other governance related expenses (d)			1,159				722				6,982				6,055
Foreign currency (c)			107				806				437				1,419
Non-income tax expense adjustment (d)			(168	)			914				(392	)			802
Fair market value adjustment to investment in private company (c)			2,000				(400	)			(804	)			(400	)
Dilution gain on equity method investee share issuance (c)			—				(2,583	)			(546	)			(9,517	)
Loss allocations from equity method investments (c)			2,339				3,542				10,579				8,874
Loss attributable to non-controlling interest			838				663				3,920				2,300
Adjusted net income before income tax effect			57,761				40,148				188,186				164,397
Income tax effect (h)			(14,729	)			(10,238	)			(47,987	)			(41,921	)
Adjusted net income		$	43,032			$	29,910			$	140,199			$	122,476
Basic number of weighted-average shares outstanding			54,689,559				55,119,075				54,457,365				55,199,482
Effect of dilutive shares:
Convertible Notes			10,811,884				10,667,509				11,084,413				10,092,369
Non-vested RSUs and PSUs			252,597				265,187				413,734				390,270
Options to purchase common stock			19,509				70,947				47,388				111,327
Diluted number of weighted-average shares outstanding			65,773,549				66,122,718				66,002,900				65,793,448
Adjusted net income per share - diluted		$	0.65			$	0.45			$	2.12			$	1.86

__________________________________________________________
(a)		For the three months ended December 31, 2023 and 2022, the effective tax rate computed in accordance with GAAP equaled 1.4% and (29.4)%, respectively. For the years ended December 31, 2023 and 2022, the effective tax rate computed in accordance with GAAP equaled (5.5)% and (9.0)%, respectively.
(b)		Included within subscription-based revenue in the consolidated statements of operations.
(c)		Included within other income (expense), net in the consolidated statements of operations.
(d)		Included within general and administrative expense in the consolidated statements of operations.
(e)		For the three months ended December 31, 2023 and 2022, $3.3 million and $7.9 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the three months ended December 31, 2023 and 2022, $0.6 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $13.5 million and $35.1 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $2.8 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations.
(f)		Included within employee compensation in the consolidated statements of operations.
(g)		Included within depreciation and amortization in the consolidated statements of operations.
(h)		An estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income for the three months and years ended December 31, 2023 and 2022.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (in thousands) (unaudited)
		Three Months Ended December 31, 2023
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenue		$	278,988			$	38,644			$	—			$	317,632
Deferred revenue fair value adjustment (a)			—				—				—				—
Adjusted revenue		$	278,988			$	38,644			$	—			$	317,632
Revenue:
Asset-based		$	188,643			$	—			$	—			$	188,643
Subscription-based			84,184				33,569				—				117,753
Total recurring revenue			272,827				33,569				—				306,396
Professional services and other revenue			6,161				5,075				—				11,236
Total revenue		$	278,988			$	38,644			$	—			$	317,632
Operating expenses:
Direct expense:
Asset-based		$	110,030			$	—			$	—			$	110,030
Subscription-based			1,367				6,893				—				8,260
Professional services and other			439				—				—				439
Total direct expense			111,836				6,893				—				118,729
Employee compensation			77,520				9,938				12,724				100,182
General and administrative			29,822				13,641				7,834				51,297
Depreciation and amortization			26,631				7,688				—				34,319
Goodwill impairment			—				191,818				—				191,818
Total operating expenses		$	245,809			$	229,978			$	20,558			$	496,345
Income (loss) from operations		$	33,179			$	(191,334	)		$	(20,558	)		$	(178,713	)
Add:
Deferred revenue fair value adjustment (a)			—				—				—				—
Depreciation and amortization			26,631				7,688				—				34,319
Goodwill impairment			—				191,818				—				191,818
Non-cash compensation expense (c)			9,763				1,136				1,991				12,890
Restructuring charges and transaction costs (d)			2,883				1				1,013				3,897
Severance expense (c)			6,679				586				2,230				9,495
Litigation, regulatory and other governance related expenses (b)			—				1,159				—				1,159
Non-income tax expense adjustment (b)			(167	)			(1	)			—				(168	)
Loss attributable to non-controlling interest			838				—				—				838
Adjusted EBITDA		$	79,806			$	11,053			$	(15,324	)		$	75,535

__________________________________________________________
(a)		Included within subscription-based revenue in the consolidated statements of operations.
(b)		Included within general and administrative expense in the consolidated statements of operations.
(c)		Included within employee compensation in the consolidated statements of operations.
(d)		For the three months ended December 31, 2023, $3.3 million was included within general and administrative expense and $0.6 million was included within employee compensation in the consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Three Months Ended December 31, 2022
		Envestnet Wealth Solutions			Envestnet Data & Analytics				Nonsegment				Total
Revenue		$	251,101		$	41,773			$	—			$	292,874
Deferred revenue fair value adjustment (a)			54			—				—				54
Adjusted revenue		$	251,155		$	41,773			$	—			$	292,928
Revenue:
Asset-based		$	166,408		$	—			$	—			$	166,408
Subscription-based			81,026			40,217				—				121,243
Total recurring revenue			247,434			40,217				—				287,651
Professional services and other revenue			3,667			1,556				—				5,223
Total revenue		$	251,101		$	41,773			$	—			$	292,874
Operating expenses:
Direct expense:
Asset-based		$	98,207		$	—			$	—			$	98,207
Subscription-based			1,593			6,791				—				8,384
Professional services and other			588			—				—				588
Total direct expense			100,388			6,791				—				107,179
Employee compensation			80,796			27,034				13,442				121,272
General and administrative			37,693			13,787				7,568				59,048
Depreciation and amortization			25,511			6,398				—				31,909
Total operating expenses		$	244,388		$	54,010			$	21,010			$	319,408
Income (loss) from operations		$	6,713		$	(12,237	)		$	(21,010	)		$	(26,534	)
Add:
Deferred revenue fair value adjustment (a)			54			—				—				54
Depreciation and amortization			25,511			6,398				—				31,909
Non-cash compensation expense (c)			11,397			2,118				4,235				17,750
Restructuring charges and transaction costs (d)			4,762			1,717				1,395				7,874
Severance expense (c)			8,251			9,330				1,157				18,738
Litigation, regulatory and other governance related expenses (b)			—			722				—				722
Non-income tax expense adjustment (b)			930			(16	)			—				914
Loss attributable to non-controlling interest			663			—				—				663
Other			283			3				—				286
Adjusted EBITDA		$	58,564		$	8,035			$	(14,223	)		$	52,376

__________________________________________________________
(a)		Included within subscription-based revenue in the consolidated statements of operations.
(b)		Included within general and administrative expense in the consolidated statements of operations.
(c)		Included within employee compensation in the consolidated statements of operations.
(d)		For the three months ended December 31, 2022, $7.9 million was included within general and administrative expense and $0.0 million was included within employee compensation in the consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Year Ended December 31, 2023
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenue		$	1,094,704			$	150,916			$	—			$	1,245,620
Deferred revenue fair value adjustment (a)			69				—				—				69
Adjusted revenue		$	1,094,773			$	150,916			$	—			$	1,245,689
Revenue:
Asset-based		$	745,238			$	—			$	—			$	745,238
Subscription-based			325,398				139,332				—				464,730
Total recurring revenue			1,070,636				139,332				—				1,209,968
Professional services and other revenue			24,068				11,584				—				35,652
Total revenue		$	1,094,704			$	150,916			$	—			$	1,245,620
Operating expenses:
Direct expense:
Asset-based		$	434,123			$	—			$	—			$	434,123
Subscription-based			6,851				23,963				—				30,814
Professional services and other			8,091				10				—				8,101
Total direct expense			449,065				23,973				—				473,038
Employee compensation			313,338				69,414				62,076				444,828
General and administrative			120,247				55,250				34,616				210,113
Depreciation and amortization			103,301				27,003				—				130,304
Goodwill impairment			—				191,818				—				191,818
Total operating expenses		$	985,951			$	367,458			$	96,692			$	1,450,101
Income (loss) from operations		$	108,753			$	(216,542	)		$	(96,692	)		$	(204,481	)
Add (deduct):
Deferred revenue fair value adjustment (a)			69				—				—				69
Depreciation and amortization			103,301				27,003				—				130,304
Goodwill impairment			—				191,818				—				191,818
Non-cash compensation expense (c)			44,510				8,193				18,328				71,031
Restructuring charges and transaction costs (d)			10,868				215				5,180				16,263
Severance expense (c)			17,232				11,813				6,354				35,399
Litigation, regulatory and other governance related expenses (b)			—				5,322				1,660				6,982
Non-income tax expense adjustment (b)			(320	)			(72	)			—				(392	)
Loss attributable to non-controlling interest			3,920				—				—				3,920
Adjusted EBITDA		$	288,333			$	27,750			$	(65,170	)		$	250,913

__________________________________________________________
(a)		Included within subscription-based revenue in the consolidated statements of operations.
(b)		Included within general and administrative expense in the consolidated statements of operations.
(c)		Included within employee compensation in the consolidated statements of operations.
(d)		For the year ended December 31, 2023, $13.5 million was included within general and administrative expense and $2.8 million was included within employee compensation in the consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Year Ended December 31, 2022
		Envestnet Wealth Solutions			Envestnet Data & Analytics				Nonsegment				Total
Revenue		$	1,065,244		$	174,540			$	—			$	1,239,784
Deferred revenue fair value adjustment (a)			216			—				—				216
Adjusted revenue		$	1,065,460		$	174,540			$	—			$	1,240,000
Revenue:
Asset-based		$	738,228		$	—			$	—			$	738,228
Subscription-based			310,217			167,627				—				477,844
Total recurring revenue			1,048,445			167,627				—				1,216,072
Professional services and other revenue			16,799			6,913				—				23,712
Total revenue		$	1,065,244		$	174,540			$	—			$	1,239,784
Operating expenses:
Direct expense:
Asset-based		$	430,345		$	—			$	—			$	430,345
Subscription-based			6,681			25,896				—				32,577
Professional services and other			7,421			81				—				7,502
Total direct expense			444,447			25,977				—				470,424
Employee compensation			321,277			101,300				68,148				490,725
General and administrative			143,597			42,256				32,978				218,831
Depreciation and amortization			98,600			27,228				—				125,828
Total operating expenses		$	1,007,921		$	196,761			$	101,126			$	1,305,808
Income (loss) from operations		$	57,323		$	(22,221	)		$	(101,126	)		$	(66,024	)
Add (deduct):
Deferred revenue fair value adjustment (a)			216			—				—				216
Depreciation and amortization			98,600			27,228				—				125,828
Non-cash compensation expense (c)			47,891			9,891				22,551				80,333
Restructuring charges and transaction costs (d)			22,871			3,731				8,539				35,141
Severance expense (c)			13,237			10,745				6,135				30,117
Litigation, regulatory and other governance related expenses (b)			—			6,055				—				6,055
Non-income tax expense adjustment (b)			878			(76	)			—				802
Loss attributable to non-controlling interest			2,300			—				—				2,300
Other			635			5				—				640
Adjusted EBITDA		$	243,951		$	35,358			$	(63,901	)		$	215,408

__________________________________________________________
(a)		Included within subscription-based revenue in the consolidated statements of operations.
(b)		Included within general and administrative expense in the consolidated statements of operations.
(c)		Included within employee compensation in the consolidated statements of operations.
(d)		For the year ended December 31, 2022, $35.1 million was included within general and administrative expense and $0.0 million was included within employee compensation in the consolidated statements of operations.

Envestnet, Inc. Historical Assets, Accounts and Advisors (in millions, except accounts and advisors) (unaudited)
Envestnet Wealth Solutions Segment
		As of
		December 31,			March 31,			June 30,			September 30,			December 31,
		2022			2023			2023			2023			2023
		(in millions, except accounts and advisors data)
Platform Assets
Assets under management ("AUM")		$	341,144		$	363,244		$	384,773		$	375,408		$	416,001
Assets under administration ("AUA")			367,412			379,843			394,078			398,082			430,846
Total AUM/A			708,556			743,087			778,851			773,490			846,847
Subscription			4,382,109			4,566,971			4,643,313			4,579,248			4,959,514
Total platform assets		$	5,090,665		$	5,310,058		$	5,422,164		$	5,352,738		$	5,806,361
Platform Accounts
AUM			1,547,009			1,571,862			1,609,677			1,614,873			1,640,879
AUA			1,135,026			1,142,166			1,144,375			1,257,094			1,254,962
Total AUM/A			2,682,035			2,714,028			2,754,052			2,871,967			2,895,841
Subscription			15,665,020			15,779,980			15,916,955			16,072,848			16,248,598
Total platform accounts			18,347,055			18,494,008			18,671,007			18,944,815			19,144,439
Advisors
AUM/A			38,025			38,611			38,809			38,078			38,697
Subscription			67,520			67,843			68,439			69,318			69,973
Total advisors			105,545			106,454			107,248			107,396			108,670

The following table summarizes the changes in AUM and AUA for the three months ended December 31, 2023:

		Asset Rollforward - Three Months Ended December 31, 2023
		As of			Gross Sales			Redemptions				Net Flows			Market Impact			As of
		September 30, 2023																December 31, 2023
		(in millions, except account data)
AUM		$	375,408		$	26,612		$	(19,064	)		$	7,548		$	33,045		$	416,001
AUA			398,082			30,342			(30,019	)			323			32,441			430,846
Total AUM/A		$	773,490		$	56,954		$	(49,083	)		$	7,871		$	65,486		$	846,847
Fee-Based Accounts			2,871,967										23,874						2,895,841

The above AUM/A gross sales figures include $17.7 billion in new client conversions. The Company onboarded an additional $73.1 billion in subscription conversions during the fourth quarter, bringing total conversions for the quarter to $90.8 billion.

The following table summarizes the changes in AUM and AUA for the year ended December 31, 2023:

		Asset Rollforward - Year Ended December 31, 2023
		As of December 31, 2022			Gross Sales			Redemptions				Net Flows			Market Impact			Reclass to Subscription				As of December 31, 2023
		(in millions, except account data)
AUM		$	341,144		$	101,305		$	(71,217	)		$	30,088		$	47,360		$	(2,591	)		$	416,001
AUA			367,412			127,906			(99,468	)			28,438			48,868			(13,872	)			430,846
Total AUM/A		$	708,556		$	229,211		$	(170,685	)		$	58,526		$	96,228		$	(16,463	)		$	846,847
Fee-Based Accounts			2,682,035										312,915						(99,109	)			2,895,841

The above AUM/A gross sales figures include $72.3 billion in new client conversions. We onboarded an additional $169.7 billion in subscription conversions during 2023, bringing total conversions for the year to $242.0 billion.

Asset and account figures in the “Reclass to Subscription” columns for the three months and year ended December 31, 2023 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.

Envestnet Data & Analytics Segment

The following table provides information regarding the number of paid end-users and firms using the Envestnet Data & Analytics platform in the periods indicated:

		As of
		December 31,		March 31,		June 30,		September 30,		December 31,
		2022		2023		2023		2023		2023
		(in millions, except number of firms data)
Number of paid end-users		38.8		37.5		38.0		42.3		38.3
Number of firms		1,286		1,310		1,339		1,322		1,324

 

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Investors

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Media

mediarelations@envestnet.com

Source: Envestnet

FAQ

What was the total revenue for the fourth quarter of 2023?

Total revenue for the fourth quarter of 2023 was $317.6 million.

How much did Adjusted EBITDA increase by for the fourth quarter of 2023?

Adjusted EBITDA rose by 44% to $75.5 million for the fourth quarter of 2023.

What was the net loss reported for the fourth quarter of 2023?

A net loss of $183.2 million was reported for the fourth quarter of 2023.

What was the total revenue for the full year 2023?

Total revenue remained at $1.2 billion for the full year 2023.

How much did Adjusted EBITDA increase by for the full year 2023?

Adjusted EBITDA increased by 16% to $250.9 million for the full year 2023.