Envestnet Reports Second Quarter 2022 Financial Results

Rhea-AI Summary

Envestnet (NYSE: ENV) reported Q2 2022 financial results, showing total revenues of $318.9 million, a 10% increase from the prior year. However, the company faced a net loss of $24.3 million, compared to a loss of $8.4 million in Q2 2021. Adjusted EBITDA fell 20% to $57.1 million, while adjusted net income decreased 26% to $32.0 million. The outlook for Q3 and FY 2022 remains cautious due to market volatility.

Positive

• Total revenues increased 10% YoY to $318.9 million.
• Asset-based recurring revenues rose 13%, constituting 60% of total revenues.
• Professional services and other non-recurring revenues surged 42%.

Negative

• Net loss of $24.3 million, up from a loss of $8.4 million YoY.
• Adjusted EBITDA decreased 20% to $57.1 million.
• Total operating expenses jumped 26%, exceeding revenue growth.

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 three and six months ended June 30, 2022.

		Three months ended											Six months ended
Key Financial Metrics		June 30,								%			June 30,							%
(in millions, except per share data)			2022				2021			Change				2022				2021		Change
GAAP:
Total revenues		$	318.9			$	288.7			10	%		$	640.2			$	563.8		14	%
Net income (loss)		$	(24.3	)		$	(8.4	)		n/m			$	(39.0	)		$	6.6		n/m
Net income (loss) per diluted share attributable to Envestnet, Inc.		$	(0.42	)		$	(0.15	)		n/m			$	(0.67	)		$	0.12		n/m
Non-GAAP:
Adjusted revenues(1)		$	318.9			$	288.8			10	%		$	640.3			$	564.0		14	%
Adjusted EBITDA(1)		$	57.1			$	71.1			(20	)%		$	112.8			$	139.3		(19	)%
Adjusted net income(1)		$	32.0			$	43.5			(26	)%		$	63.0			$	85.4		(26	)%
Adjusted net income per diluted share(1)		$	0.49			$	0.67			(27	)%		$	0.96			$	1.31		(27	)%
n/m - not meaningful

“We continue to execute on our strategy – aligning our organization to deliver industry leading solutions, technology and intelligence that can do more for more people – and positioning Envestnet for accelerated revenue growth in the coming years,” said Bill Crager, Co-Founder and Chief Executive Officer.

“During the second quarter, we grew revenues, we went deeper with our client base and we drove positive net flows despite the challenging market conditions,” concluded Mr. Crager.

Financial Results for the Second Quarter of 2022

Asset-based recurring revenues increased 13% from the second quarter of 2021, and represented 60% of total revenues for the second quarter of 2022 compared to 59% for the second quarter of 2021. Subscription-based recurring revenues increased 5% from the second quarter of 2021, and represented 37% of total revenues for the second quarter of 2022, compared to 39% for the second quarter of 2021. Professional services and other non-recurring revenues increased 42% from the prior year period. Total revenues increased 10% to $318.9 million for the second quarter of 2022 from $288.7 million for the second quarter of 2021.

Total operating expenses for the second quarter of 2022 increased 26% to $350.6 million from $277.8 million in the prior year period. Cost of revenues increased 26% to $126.5 million for the second quarter of 2022 from $100.5 million for the prior year period. Compensation and benefits increased 19% to $125.8 million for the second quarter of 2022 from $105.5 million for the prior year period. Compensation and benefits were 39% of total revenues for the second quarter of 2022, compared to 37% for the prior year period. General and administration expenses increased 58% to $66.1 million for the second quarter of 2022 from $41.8 million for the prior year period. General and administration expenses were 21% of total revenues for the second quarter of 2022, compared to 14% for the prior year period.

Loss from operations was $31.7 million for the second quarter of 2022 compared to income of $10.9 million for the second quarter of 2021. Net loss was $24.3 million for the second quarter of 2022 compared to net loss of $8.4 million for the second quarter of 2021. Net loss per diluted share attributable to Envestnet, Inc. was $0.42 for the second quarter of 2022 compared to net loss per diluted share attributable to Envestnet, Inc. of $0.15 for the second quarter of 2021.

Adjusted revenues⁽¹⁾ for the second quarter of 2022 increased 10% to $318.9 million from $288.8 million for the prior year period. Adjusted EBITDA⁽¹⁾ for the second quarter of 2022 decreased 20% to $57.1 million from $71.1 million for the prior year period. Adjusted net income⁽¹⁾ decreased 26% for the second quarter of 2022 to $32.0 million from $43.5 million for the prior year period. Adjusted net income per diluted share⁽¹⁾ for the second quarter of 2022 decreased 27% to $0.49 from $0.67 in the second quarter of 2021.

Balance Sheet and Liquidity

As of June 30, 2022, Envestnet had $338.1 million in cash and cash equivalents and $862.5 million in outstanding debt. The outstanding debt as of June 30, 2022 included $345 million in convertible notes maturing in 2023 and $517.5 million in convertible notes maturing in 2025. Envestnet's $500 million revolving credit facility was undrawn as of June 30, 2022.

Outlook

Envestnet provided the following outlook for the third quarter ending September 30, 2022 and full year ending December 31, 2022. This outlook is based on the market value of assets under management or administration as of June 30, 2022. 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		3Q 2022								FY 2022
GAAP:
Revenues:
Asset-based		$	176.0		-		$	177.0
Subscription-based			120.5		-			121.0
Total recurring revenues		$	296.5		-		$	298.0
Professional services and other revenues			5.0		-			5.5
Total revenues		$	301.5		-		$	303.5		$	1,255.0		-		$	1,260.0
Asset-based cost of revenues		$	103.0		-		$	103.5
Total cost of revenues		$	110.5		-		$	111.0
Net income		(a)			-		(a)			(a)			-		(a)
Diluted shares outstanding					65.5								65.5
Net income per diluted share		(a)			-		(a)			(a)			-		(a)
Non-GAAP:
Adjusted revenues (1):
Asset-based		$	176.0		-		$	177.0
Subscription-based			120.5		-			121.0
Total recurring revenues		$	296.5		-		$	298.0
Professional services and other revenues			5.0		-			5.5
Total revenues		$	301.5		-		$	303.5		$	1,255.0		-		$	1,260.0
Adjusted EBITDA(1)		$	51.0		-		$	53.0		$	223.0		-		$	227.0
Adjusted net income per diluted share(1)		$	0.40		-		$	0.42		$	1.84		-		$	1.89

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

Conference Call

Envestnet will host a conference call to discuss second quarter 2022 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 wellness are delivered. Our mission is to empower advisors and financial service providers with innovative technology, solutions and intelligence to make financial wellness a reality for everyone. More than 105,000 advisors and over 6,500 companies including: 16 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, 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 revenues” 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 revenues 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, non-cash compensation expense, restructuring charges and transaction costs, severance, accretion on contingent consideration and purchase liability, fair market value adjustment on contingent consideration liability, fair market value adjustment to investment in private company, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, dilution gain on equity method investee share issuance, income or loss allocations from equity method investments and (income) loss attributable to non-controlling interest.

“Adjusted net income” represents net income before deferred revenue fair value adjustment, non-cash interest expense, cash interest on our convertible notes, non-cash compensation expense, restructuring charges and transaction costs, severance, accretion on contingent consideration and purchase liability, fair market value adjustment on contingent consideration liability, fair market value adjustment to investment in private company, amortization of acquired intangibles, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, dilution gain on equity method investee share issuance, income or 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.

See reconciliations of Non-GAAP Financial Measures on pages 9-15 of this press release. Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company’s Non-GAAP Financial Measures should not be viewed as a substitute for revenues, net income (loss) or net income (loss) per share determined in accordance with GAAP.

Cautionary Statement Regarding Forward-Looking Statements

The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.’s expected financial performance and outlook for the third quarter and full year of 2022, its strategic operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and the Company’s actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, a pandemic or health crisis, including the COVID-19 pandemic; changes and volatility in financial and capital markets, including as a result of the current conflict between Russia and Ukraine, which could result in changes in demand for our products or services or in the value of assets on which we earn revenue; the possibility that the anticipated benefits of any of our acquisitions will not be realized to the extent or when expected; difficulty in sustaining rapid revenue growth, which may place significant demands on our administrative, operational and financial resources; the concentration of nearly all of our revenues from the delivery of our solutions and services to clients in the financial services industry; our reliance on a limited number of clients for a material portion of our revenues; the renegotiation of fee percentages or termination of our services by our clients; our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; the impact of market and economic conditions on revenues; our inability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner; our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium financial applications; compliance failures; adverse judicial or regulatory proceedings against us; liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest; changes in laws and regulations, including tax laws and regulations; general economic, political and regulatory conditions; 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; the impact of market conditions on our ability to issue debt and equity; the impact of fluctuations in interest rates on our cost of borrowing and our financial performance; the results of our investments in research and development, our data center and other infrastructure; our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information; failure of our systems to work properly; our ability to realize operating efficiencies; the advantages of our solutions as compared to those of others; the failure to protect our intellectual property rights; our ability to establish and maintain intellectual property rights; our ability to retain and hire necessary employees and appropriately staff our operations, and management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in our filings 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/. 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 August 4, 2022 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. Condensed Consolidated Balance Sheets (in thousands) (unaudited)
		June 30,			December 31,
		2022			2021
Assets
Current assets:
Cash and cash equivalents		$	338,115		$	429,279
Fees receivable, net			82,878			95,291
Prepaid expenses and other current assets			46,627			42,706
Total current assets			467,620			567,276
Property and equipment, net			61,392			50,215
Internally developed software, net			159,751			133,659
Intangible assets, net			386,231			400,396
Goodwill			936,054			925,154
Operating lease right-of-use-assets, net			83,494			90,714
Other non-current assets			92,858			73,768
Total assets		$	2,187,400		$	2,241,182
Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities		$	198,230		$	225,159
Accounts payable			20,444			19,092
Operating lease liabilities			10,852			10,999
Deferred revenue			37,453			33,473
Current portion of long-term debt			343,057			—
Total current liabilities			610,036			288,723
Long-term debt, net of current portion			508,282			848,862
Non-current operating lease liabilities			110,623			105,920
Deferred tax liabilities, net			12,912			21,021
Other non-current liabilities			11,555			17,114
Total liabilities			1,253,408			1,281,640
Equity:
Total stockholders’ equity			933,165			957,089
Non-controlling interest			827			2,453
Total liabilities and equity		$	2,187,400		$	2,241,182

Envestnet, Inc. Condensed Consolidated Statements of Operations (in thousands, except share and per share information) (unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2022				2021				2022				2021
Revenues:
Asset-based		$	191,972			$	170,075			$	394,689			$	329,450
Subscription-based			118,120				112,504				232,854				222,333
Total recurring revenues			310,092				282,579				627,543				551,783
Professional services and other revenues			8,760				6,159				12,672				12,060
Total revenues			318,852				288,738				640,215				563,843
Operating expenses:
Cost of revenues			126,482				100,494				251,764				193,363
Compensation and benefits			125,767				105,548				252,616				206,262
General and administration			66,144				41,755				110,479				78,070
Depreciation and amortization			32,182				30,010				63,800				58,402
Total operating expenses			350,575				277,807				678,659				536,097
Income (loss) from operations			(31,723	)			10,931				(38,444	)			27,746
Other income (expense), net			1,622				(3,784	)			(4,345	)			(11,252	)
Income (loss) before income tax provision (benefit)			(30,101	)			7,147				(42,789	)			16,494
Income tax provision (benefit)			(5,833	)			15,516				(3,813	)			9,928
Net income (loss)			(24,268	)			(8,369	)			(38,976	)			6,566
Add: Net loss attributable to non-controlling interest			983				88				1,832				99
Net income (loss) attributable to Envestnet, Inc.		$	(23,285	)		$	(8,281	)		$	(37,144	)		$	6,665
Net income (loss) per share attributable to Envestnet, Inc.:
Basic		$	(0.42	)		$	(0.15	)		$	(0.67	)		$	0.12
Diluted		$	(0.42	)		$	(0.15	)		$	(0.67	)		$	0.12
Weighted average common shares outstanding:
Basic			55,203,120				54,440,388				55,054,272				54,325,353
Diluted			55,203,120				54,440,388				55,054,272				55,136,946

Envestnet, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
		Six Months Ended
		June 30,
			2022				2021
OPERATING ACTIVITIES:
Net income (loss)		$	(38,976	)		$	6,566
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			63,800				58,402
Provision for doubtful accounts			(1,230	)			455
Deferred income taxes			(8,222	)			8,137
Release of uncertain tax positions			(3,095	)			—
Non-cash compensation expense			45,318				31,422
Non-cash interest expense			3,474				2,906
Accretion on contingent consideration and purchase liability			—				575
Payments of contingent consideration			—				(2,360	)
Fair market value adjustment to contingent consideration liability			—				(140	)
Fair market value adjustment to investment in private company			—				(758	)
Loss allocations from equity method investments			2,945				4,045
Dilution gain on equity method investee share issuance			(6,934	)			—
Impairment of right of use assets			12,961				1,110
Loss on property and equipment disposals - office closures			3,710				—
Other			167				282
Changes in operating assets and liabilities:
Fees receivable, net			13,694				(1,334	)
Prepaid expenses and other current assets			(2,721	)			(155	)
Other non-current assets			(3,638	)			3,665
Accrued expenses and other liabilities			(31,962	)			527
Accounts payable			1,368				2,333
Deferred revenue			4,277				2,789
Other non-current liabilities			(2,294	)			692
Net cash provided by operating activities			52,642				119,159
INVESTING ACTIVITIES:
Purchases of property and equipment			(9,141	)			(11,357	)
Capitalization of internally developed software			(43,045	)			(31,802	)
Acquisition of proprietary technology			(15,000	)			(25,517	)
Acquisitions of businesses, net of cash acquired			(14,472	)			(33,143	)
Investments in private companies			(8,000	)			(4,549	)
Advance for technology solutions			(4,000	)			(3,000	)
Issuance of notes receivable to equity method investees			(4,350	)			—
Net cash used in investing activities			(98,008	)			(109,368	)

Envestnet, Inc. Condensed Consolidated Statements of Cash Flows (continued) (in thousands) (unaudited)
		Six Months Ended
		June 30,
			2022				2021
FINANCING ACTIVITIES:
Proceeds from exercise of stock options			742				573
Capital contributions - non-controlling shareholders			—				23
Taxes paid in lieu of shares issued for stock-based compensation			(18,113	)			(13,020	)
Finance lease payments			(14,517	)			—
Share repurchases			(9,235	)			(2,097	)
Revolving credit facility issuance costs			(1,872	)			—
Payments of contingent consideration			(750	)			(9,200	)
Other			4				(587	)
Net cash used in financing activities			(43,741	)			(24,308	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(2,057	)			(524	)
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(91,164	)			(15,041	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD			429,428				384,714
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (a)		$	338,264			$	369,673

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

		June 30,			June 30,
		2022			2021
Cash and cash equivalents		$	338,115		$	369,524
Restricted cash included in prepaid expenses and other current assets			149			149
Total cash, cash equivalents and restricted cash		$	338,264		$	369,673

Reconciliation of Non-GAAP Financial Measures (in thousands) (unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2022				2021				2022				2021
Total revenues		$	318,852			$	288,738			$	640,215			$	563,843
Deferred revenue fair value adjustment (a)			54				80				108				160
Adjusted revenues		$	318,906			$	288,818			$	640,323			$	564,003
Net income (loss)		$	(24,268	)		$	(8,369	)		$	(38,976	)		$	6,566
Add (deduct):
Deferred revenue fair value adjustment (a)			54				80				108				160
Interest income (b)			(713	)			(197	)			(1,034	)			(367	)
Interest expense (b)			4,212				4,225				9,065				8,440
Income tax provision (benefit)			(5,833	)			15,516				(3,813	)			9,928
Depreciation and amortization			32,182				30,010				63,800				58,402
Non-cash compensation expense (d)			23,504				17,285				45,318				31,422
Restructuring charges and transaction costs (e)			21,026				5,028				23,372				7,812
Severance (d)			7,148				5,377				10,254				10,291
Accretion on contingent consideration and purchase liability (c)			—				187				—				575
Fair market value adjustment on contingent consideration liability (c)			—				—				—				(140	)
Fair market value adjustment to investment in private company (b)			—				(758	)			—				(758	)
Non-recurring litigation and regulatory related expenses (c)			4,306				1,938				7,383				3,647
Foreign currency (b)			413				(138	)			305				13
Non-income tax expense adjustment (c)			189				295				213				(271	)
Dilution gain on equity method investee share issuance (b)			(6,934	)			—				(6,934	)			—
Loss allocations from equity method investments (b)			1,400				757				2,945				4,045
(Income) loss attributable to non-controlling interest			440				(175	)			817				(440	)
Adjusted EBITDA		$	57,126			$	71,061			$	112,823			$	139,325

(a)		Included within subscription-based revenues 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 administration expenses in the condensed consolidated statements of operations.
(d)		Included within compensation and benefits in the condensed consolidated statements of operations.
(e)		For the three months ended June 30, 2022 and 2021, $20.9 million and $2.7 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended June 30, 2022 and 2021, $0.1 million and $2.3 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the six months ended June 30, 2022 and 2021, $23.5 million and $4.5 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the six months ended June 30, 2022 and 2021, $(0.1) million and $3.3 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands, except share and per share information) (unaudited)
		Three Months Ended								Six Months Ended
		June 30,								June 30,
			2022				2021				2022				2021
Net income (loss)		$	(24,268	)		$	(8,369	)		$	(38,976	)		$	6,566
Income tax provision (benefit) (a)			(5,833	)			15,516				(3,813	)			9,928
Income (loss) before income tax provision (benefit)			(30,101	)			7,147				(42,789	)			16,494
Add (deduct):
Deferred revenue fair value adjustment (b)			54				80				108				160
Non-cash interest expense (d)			1,415				1,429				3,474				2,852
Cash interest - Convertible Notes (d)			2,480				2,480				4,960				4,960
Non-cash compensation expense (e)			23,504				17,285				45,318				31,422
Restructuring charges and transaction costs (g)			21,026				5,028				23,372				7,812
Severance (e)			7,148				5,377				10,254				10,291
Accretion on contingent consideration and purchase liability (c)			—				187				—				575
Fair market value adjustment on contingent consideration liability (c)			—				—				—				(140	)
Fair market value adjustment to investment in private company (d)			—				(758	)			—				(758	)
Amortization of acquired intangibles (f)			17,645				17,502				35,165				33,980
Non-recurring litigation and regulatory related expenses (c)			4,306				1,938				7,383				3,647
Foreign currency (d)			413				(138	)			305				13
Non-income tax expense adjustment (c)			189				295				213				(271	)
Dilution gain on equity method investee share issuance (d)			(6,934	)			—				(6,934	)			—
Loss allocations from equity method investments (d)			1,400				757				2,945				4,045
Loss (income) attributable to non-controlling interest			440				(175	)			817				(440	)
Adjusted net income before income tax effect			42,985				58,434				84,591				114,642
Income tax effect (h)			(10,961	)			(14,901	)			(21,571	)			(29,234	)
Adjusted net income		$	32,024			$	43,533			$	63,020			$	85,408
Basic number of weighted-average shares outstanding			55,203,120				54,440,388				55,054,272				54,325,353
Effect of dilutive shares:
Options to purchase common stock			129,217				198,277				142,510				210,381
Unvested restricted stock units			199,853				435,023				381,397				536,186
Convertible Notes			9,898,549				9,898,549				9,898,549				9,898,549
Warrants			22,170				53,648				37,473				65,026
Diluted number of weighted-average shares outstanding			65,452,909				65,025,885				65,514,201				65,035,495
Adjusted net income per share - diluted		$	0.49			$	0.67			$	0.96			$	1.31

(a)		For the three months ended June 30, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled 19.4% and 217.1%, respectively. For the six months ended June 30, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled 8.9% and 60.2%, respectively.
(b)		Included within subscription-based revenues in the condensed consolidated statements of operations.
(c)		Included within general and administration expenses in the condensed consolidated statements of operations.
(d)		Included within other expense, net in the condensed consolidated statements of operations.
(e)		Included within compensation and benefits in the condensed consolidated statements of operations.
(f)		Included within depreciation and amortization in the condensed consolidated statements of operations.
(g)		For the three months ended June 30, 2022 and 2021, $20.9 million and $2.7 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended June 30, 2022 and 2021, $0.1 million and $2.3 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the six months ended June 30, 2022 and 2021, $23.5 million and $4.5 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the six months ended June 30, 2022 and 2021, $(0.1) million and $3.3 million were included within compensation and benefits, respectively, in the condensed 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 and six months ended June 30, 2022 and 2021.

Reconciliation of Non-GAAP Financial Measures Segment Information (in thousands) (unaudited)
		Three Months Ended June 30, 2022
		Envestnet Wealth Solutions			Envestnet Data & Analytics				Nonsegment				Total
Revenues		$	272,000		$	46,852			$	—			$	318,852
Deferred revenue fair value adjustment (a)			54			—				—				54
Adjusted revenues		$	272,054		$	46,852			$	—			$	318,906
Revenues:
Asset-based		$	191,972		$	—			$	—			$	191,972
Subscription-based			73,568			44,552				—				118,120
Total recurring revenues			265,540			44,552				—				310,092
Professional services and other revenues			6,460			2,300				—				8,760
Total revenues			272,000			46,852				—				318,852
Operating expenses:
Cost of revenues:
Asset-based			112,301			—				—				112,301
Subscription-based			1,504			5,737				—				7,241
Professional services and other			6,917			23				—				6,940
Total cost of revenues			120,722			5,760				—				126,482
Compensation and benefits			78,759			23,994				23,014				125,767
General and administration			45,001			12,171				8,972				66,144
Depreciation and amortization			23,550			8,632				—				32,182
Total operating expenses		$	268,032		$	50,557			$	31,986			$	350,575
Income (loss) from operations		$	3,968		$	(3,705	)		$	(31,986	)		$	(31,723	)
Add (deduct):
Deferred revenue fair value adjustment (a)			54			—				—				54
Depreciation and amortization			23,550			8,632				—				32,182
Non-cash compensation expense (c)			13,364			1,852				8,288				23,504
Restructuring charges and transaction costs (d)			16,897			753				3,376				21,026
Severance (c)			2,813			(431	)			4,766				7,148
Non-recurring litigation and regulatory related expenses (b)			—			4,306				—				4,306
Non-income tax expense adjustment (b)			184			5				—				189
Loss attributable to non-controlling interest			440			—				—				440
Adjusted EBITDA		$	61,270		$	11,412			$	(15,556	)		$	57,126

(a)		Included within subscription-based revenues in the condensed consolidated statements of operations.
(b)		Included within general and administration expenses in the condensed consolidated statements of operations.
(c)		Included within compensation and benefits in the condensed consolidated statements of operations.
(d)		For the three months ended June 30, 2022, $20.9 million was included within general and administration expenses and $0.1 million was included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Six Months Ended June 30, 2022
		Envestnet Wealth Solutions			Envestnet Data & Analytics				Nonsegment				Total
Revenues		$	545,568		$	94,647			$	—			$	640,215
Deferred revenue fair value adjustment (a)			108			—				—				108
Adjusted revenues		$	545,676		$	94,647			$	—			$	640,323
Revenues:
Asset-based		$	394,689		$	—			$	—			$	394,689
Subscription-based			142,105			90,749				—				232,854
Total recurring revenues			536,794			90,749				—				627,543
Professional services and other revenues			8,774			3,898				—				12,672
Total revenues			545,568			94,647				—				640,215
Operating expenses:
Cost of revenues:
Asset-based			229,729			—				—				229,729
Subscription-based			2,869			12,183				—				15,052
Professional services and other			6,932			51				—				6,983
Total cost of revenues			239,530			12,234				—				251,764
Compensation and benefits			157,403			54,160				41,053				252,616
General and administration			72,361			20,782				17,336				110,479
Depreciation and amortization			47,037			16,763				—				63,800
Total operating expenses		$	516,331		$	103,939			$	58,389			$	678,659
Income (loss) from operations		$	29,237		$	(9,292	)		$	(58,389	)		$	(38,444	)
Add (deduct):
Deferred revenue fair value adjustment (a)			108			—				—				108
Depreciation and amortization			47,037			16,763				—				63,800
Non-cash compensation expense (c)			24,654			5,387				15,277				45,318
Restructuring charges and transaction costs (d)			17,181			750				5,441				23,372
Severance (c)			4,223			1,211				4,820				10,254
Non-recurring litigation and regulatory related expenses (b)			—			7,383				—				7,383
Non-income tax expense adjustment (b)			291			(78	)			—				213
Loss attributable to non-controlling interest			817			—				—				817
Other			—			2				—				2
Adjusted EBITDA		$	123,548		$	22,126			$	(32,851	)		$	112,823

(a)		Included within subscription-based revenues in the condensed consolidated statements of operations.
(b)		Included within general and administration expenses in the condensed consolidated statements of operations.
(c)		Included within compensation and benefits in the condensed consolidated statements of operations.
(d)		For the six months ended June 30, 2022, $23.5 million was included within general and administration expenses and $(0.1) million was included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Three Months Ended June 30, 2021
		Envestnet Wealth Solutions				Envestnet Data & Analytics			Nonsegment				Total
Revenues		$	240,297			$	48,441		$	—			$	288,738
Deferred revenue fair value adjustment (a)			80				—			—				80
Adjusted revenues		$	240,377			$	48,441		$	—			$	288,818
Revenues:
Asset-based		$	170,075			$	—		$	—			$	170,075
Subscription-based			66,663				45,841			—				112,504
Total recurring revenues			236,738				45,841			—				282,579
Professional services and other revenues			3,559				2,600			—				6,159
Total revenues			240,297				48,441			—				288,738
Operating expenses:
Cost of revenues:
Asset-based			93,341				—			—				93,341
Subscription-based			1,294				5,733			—				7,027
Professional services and other			78				48			—				126
Total cost of revenues			94,713				5,781			—				100,494
Compensation and benefits			65,114				25,008			15,426				105,548
General and administration			24,884				9,427			7,444				41,755
Depreciation and amortization			23,127				6,883			—				30,010
Total operating expenses		$	207,838			$	47,099		$	22,870			$	277,807
Income (loss) from operations		$	32,459			$	1,342		$	(22,870	)		$	10,931
Add (deduct):
Deferred revenue fair value adjustment (a)			80				—			—				80
Depreciation and amortization			23,127				6,883			—				30,010
Non-cash compensation expense (c)			9,590				3,183			4,512				17,285
Restructuring charges and transaction costs (d)			3,821				27			1,180				5,028
Severance (c)			1,096				1,687			2,594				5,377
Accretion on contingent consideration and purchase liability (b)			168				19			—				187
Non-recurring litigation and regulatory related expenses (b)			—				1,938			—				1,938
Non-income tax expense adjustment (b)			105				190			—				295
Income attributable to non-controlling interest			(175	)			—			—				(175	)
Other			88				9			8				105
Adjusted EBITDA		$	70,359			$	15,278		$	(14,576	)		$	71,061

(a)		Included within subscription-based revenues in the condensed consolidated statements of operations.
(b)		Included within general and administration expenses in the condensed consolidated statements of operations.
(c)		Included within compensation and benefits in the condensed consolidated statements of operations.
(d)		For the three months ended June 30, 2021, $2.7 million was included within general and administration expenses and $2.3 million was included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Six Months Ended June 30, 2021
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenues		$	466,707			$	97,136			$	—			$	563,843
Deferred revenue fair value adjustment (a)			160				—				—				160
Adjusted revenues		$	466,867			$	97,136			$	—			$	564,003
Revenues:
Asset-based		$	329,450			$	—			$	—			$	329,450
Subscription-based			130,675				91,658				—				222,333
Total recurring revenues			460,125				91,658				—				551,783
Professional services and other revenues			6,582				5,478				—				12,060
Total revenues			466,707				97,136				—				563,843
Operating expenses:
Cost of revenues:
Asset-based			179,531				—				—				179,531
Subscription-based			2,507				11,124				—				13,631
Professional services and other			107				94				—				201
Total cost of revenues			182,145				11,218				—				193,363
Compensation and benefits			127,968				51,297				26,997				206,262
General and administration			45,583				17,943				14,544				78,070
Depreciation and amortization			44,355				14,047				—				58,402
Total operating expenses		$	400,051			$	94,505			$	41,541			$	536,097
Income (loss) from operations		$	66,656			$	2,631			$	(41,541	)		$	27,746
Add (deduct):
Deferred revenue fair value adjustment (a)			160				—				—				160
Depreciation and amortization			44,355				14,047				—				58,402
Non-cash compensation expense (c)			17,419				6,024				7,979				31,422
Restructuring charges and transaction costs (d)			5,186				174				2,452				7,812
Severance (c)			4,183				3,407				2,701				10,291
Accretion on contingent consideration and purchase liability (b)			510				65				—				575
Fair market value adjustment on contingent consideration liability (b)			—				(140	)			—				(140	)
Non-recurring litigation and regulatory related expenses (b)			—				3,647				—				3,647
Non-income tax expense adjustment (b)			(430	)			159				—				(271	)
Income attributable to non-controlling interest			(440	)			—				—				(440	)
Other			104				9				8				121
Adjusted EBITDA		$	137,703			$	30,023			$	(28,401	)		$	139,325

(a)		Included within subscription-based revenues in the condensed consolidated statements of operations.
(b)		Included within general and administration expenses in the condensed consolidated statements of operations.
(c)		Included within compensation and benefits in the condensed consolidated statements of operations.
(d)		For the six months ended June 30, 2021, $4.5 million was included within general and administration expenses and $3.3 million was included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc. Historical Assets, Accounts and Advisors (in millions, except accounts and advisors) (unaudited)
		As of
		June 30,			September 30,			December 31,			March 31,				June 30,
		2021			2021			2021			2022(1)				2022
		(in millions, except accounts and advisors data)
Platform Assets
Assets under Management (“AUM”)		$	315,422		$	327,279		$	362,038		$	361,251			$	325,209
Assets under Administration (“AUA”)			426,416			431,040			456,316			432,141				352,840
Total AUM/A			741,838			758,319			818,354			793,392				678,049
Subscription			4,447,733			4,670,827			4,901,662			4,736,537				4,312,114
Total Platform Assets		$	5,189,571		$	5,429,146		$	5,720,016		$	5,529,929			$	4,990,163
Platform Accounts
AUM			1,209,761			1,276,066			1,345,274			1,459,093				1,491,861
AUA			1,163,991			1,193,069			1,217,076			1,186,180				1,061,484
Total AUM/A			2,373,752			2,469,135			2,562,350			2,645,273				2,553,345
Subscription			11,712,573			14,810,664			14,986,531			15,151,569				15,312,144
Total Platform Accounts			14,086,325			17,279,799			17,548,881			17,796,842				17,865,489
Advisors
AUM/A			41,259			41,696			39,735			39,800				38,394
Subscription			66,597			66,489			68,808			67,168				66,838
Total Advisors			107,856			108,185			108,543			106,968				105,232

⁽¹⁾ Certain assets and accounts have been reclassified from AUA to AUM to better reflect the nature of the services provided to certain customers.

The following table summarizes the changes in AUM and AUA for the three months ended June 30, 2022:

		3/31/2022			Gross Sales			Redemptions				Net Flows				Market Impact				Reclass to Subscription				6/30/2022
		(in millions, except account data)
AUM		$	361,251		$	24,829		$	(18,962	)		$	5,867			$	(41,909	)		$	—			$	325,209
AUA			432,141			27,323			(27,662	)			(339	)			(50,499	)			(28,463	)			352,840
Total AUM/A		$	793,392		$	52,152		$	(46,624	)		$	5,528			$	(92,408	)		$	(28,463	)		$	678,049
Fee-Based Accounts			2,645,273										19,494								(111,422	)			2,553,345

The above AUM/A gross sales figures include $9.2 billion in new client conversions. The Company onboarded an additional $24.4 billion in subscription conversions during the three months ended June 30, 2022, bringing total conversions for the quarter to $33.6 billion.

Asset and account figures in the “Reclass to Subscription” columns for the three months ended June 30, 2022 represent enterprise customers whose billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, with no impact on total platform assets or accounts.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220804005893/en/

Investor Relations

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Source: Envestnet

FAQ

What were Envestnet's Q2 2022 revenues?

Envestnet reported total revenues of $318.9 million for Q2 2022, a 10% increase year-over-year.

How much did Envestnet lose in Q2 2022?

Envestnet recorded a net loss of $24.3 million in Q2 2022, compared to a loss of $8.4 million in the same period in 2021.

What is Envestnet's outlook for the remainder of 2022?

Envestnet's outlook for Q3 and the full year 2022 is cautious due to unpredictable market conditions.

How did adjusted net income change for Envestnet in Q2 2022?

Adjusted net income for Envestnet decreased 26% to $32.0 million in Q2 2022.

What is the significance of asset-based recurring revenues for Envestnet?

Asset-based recurring revenues increased 13% in Q2 2022, making up 60% of total revenues, indicating strong client retention.