Envestnet Reports Third Quarter 2022 Financial Results

Rhea-AI Summary

Envestnet (NYSE: ENV) reported a modest 1% increase in total revenues for Q3 2022, reaching $306.7 million, compared to $303.1 million in Q3 2021. However, the company faced a net loss of $8.7 million, down from a net income of $11.4 million in the same period last year. Adjusted EBITDA dropped 19% to $53.5 million, and adjusted net income decreased 26% to $29.5 million. Envestnet reported increased operating expenses, primarily in compensation and general administration, which were 7% higher year-over-year.

Positive

• Total revenues increased by 1% year-over-year to $306.7 million.
• Subscription-based recurring revenues grew by 9%.
• Partnerships with Tata Consultancy Services (TCS) and FNZ could create additional revenue streams.

Negative

• Net loss of $8.7 million compared to a net income of $11.4 million in Q3 2021.
• Adjusted EBITDA decreased by 19% to $53.5 million.
• Total operating expenses increased by 7% to $307.7 million.

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 nine months ended September 30, 2022.

		Three months ended											Nine months ended
Key Financial Metrics		September 30,								%			September 30,								%
(in millions, except per share data)			2022				2021			Change				2022				2021			Change
GAAP:
Total revenues		$	306.7			$	303.1			1	%		$	946.9			$	866.9			9	%
Net income (loss)		$	(8.7	)		$	11.4			n/m			$	(47.6	)		$	18.0			n/m
Net income (loss) per diluted share attributable to Envestnet, Inc.		$	(0.13	)		$	0.21			n/m			$	(0.81	)		$	0.33			n/m
Non-GAAP:
Adjusted revenues(1)		$	306.7			$	303.1			1	%		$	947.1			$	867.1			9	%
Adjusted EBITDA(1)		$	53.5			$	66.2			(19	)%		$	166.3			$	205.5			(19	)%
Adjusted net income(1)		$	29.5			$	39.9			(26	)%		$	92.6			$	125.3			(26	)%
Adjusted net income per diluted share(1)		$	0.45			$	0.61			(26	)%		$	1.41			$	1.92			(27	)%
n/m - not meaningful

“Envestnet continued to successfully execute our strategy while driving positive net flows and accounts growth during the third quarter. We also built on our position as a leader in the digital engagement marketplace through strategic announcements with Tata Consultancy Services (TCS) and FNZ. Our partnership with TCS provides increased scale while simultaneously reducing our expenses, and by partnering with FNZ we will create real-time account opening and funding, as well as automating key servicing and maintenance for the life cycle of the client/account. These collaborations will ultimately create additional revenue streams as we continue to focus on driving better outcomes for enterprises, advisors, and their clients,” said Bill Crager, Chief Executive Officer.

“Our continued execution, combined with the strategic actions we’ve taken, strongly position Envestnet for future success. We are delivering newly modernized technology and solutions that strengthen the Envestnet ecosystem, laying the foundation for accelerated revenue growth into the future,” concluded Mr. Crager.

Financial Results for the Third Quarter of 2022

Asset-based recurring revenues decreased 4% from the third quarter of 2021, and represented 58% of total revenues for the third quarter of 2022 compared to 61% for the third quarter of 2021. Subscription-based recurring revenues increased 9% from the third quarter of 2021, and represented 40% of total revenues for the third quarter of 2022, compared to 37% for the third quarter of 2021. Professional services and other non-recurring revenues increased 6% from the prior year period. Total revenues increased 1% to $306.7 million for the third quarter of 2022 from $303.1 million for the third quarter of 2021.

Total operating expenses for the third quarter of 2022 increased 7% to $307.7 million from $288.9 million in the prior year period. Cost of revenues increased to $110.1 million for the third quarter of 2022 from $109.8 million for the prior year period. Compensation and benefits increased 6% to $116.8 million for the third quarter of 2022 from $109.8 million for the prior year period. Compensation and benefits were 38% of total revenues for the third quarter of 2022, compared to 36% for the prior year period. General and administration expenses increased 20% to $47.4 million for the third quarter of 2022 from $39.4 million for the prior year period. General and administration expenses were 15% of total revenues for the third quarter of 2022, compared to 13% for the prior year period.

Loss from operations was $1.0 million for the third quarter of 2022 compared to income of $14.1 million for the third quarter of 2021. Net loss was $8.7 million for the third quarter of 2022 compared to net income of $11.4 million for the third quarter of 2021. Net loss per diluted share attributable to Envestnet, Inc. was $(0.13) for the third quarter of 2022 compared to net income per diluted share attributable to Envestnet, Inc. of $0.21 for the third quarter of 2021.

Adjusted revenues⁽¹⁾ for the third quarter of 2022 increased 1% to $306.7 million from $303.1 million for the prior year period. Adjusted EBITDA⁽¹⁾ for the third quarter of 2022 decreased 19% to $53.5 million from $66.2 million for the prior year period. Adjusted net income⁽¹⁾ decreased 26% for the third quarter of 2022 to $29.5 million from $39.9 million for the prior year period. Adjusted net income per diluted share⁽¹⁾ for the third quarter of 2022 decreased 26% to $0.45 from $0.61 in the third quarter of 2021.

Balance Sheet and Liquidity

As of September 30, 2022, Envestnet had $241.3 million in cash and cash equivalents and $862.5 million in outstanding debt. The outstanding debt as of September 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 September 30, 2022.

Outlook

Envestnet provided the following outlook for the fourth quarter and full year ending December 31, 2022. This outlook is based on the market value of assets under management or administration as of September 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		4Q 2022								FY 2022
GAAP:
Revenues:
Asset-based		$	166.5		-		$	167.5
Subscription-based			122.5		-			123.0
Total recurring revenues		$	289.0		-		$	290.5
Professional services and other revenues			5.0		-			5.5
Total revenues		$	294.0		-		$	296.0		$	1,241.0		-		$	1,243.0
Asset-based cost of revenues		$	96.0		-		$	96.5
Total cost of revenues		$	104.6		-		$	105.1
Net income		(a)			-		(a)			(a)			-		(a)
Diluted shares outstanding					65.6								65.5
Net income per diluted share		(a)			-		(a)			(a)			-		(a)
Non-GAAP:
Adjusted revenues (1):
Asset-based		$	166.5		-		$	167.5
Subscription-based			122.5		-			123.0
Total recurring revenues		$	289.0		-		$	290.5
Professional services and other revenues			5.0		-			5.5
Total revenues		$	294.0		-		$	296.0		$	1,241.0		-		$	1,243.0
Adjusted EBITDA(1)		$	52.0		-		$	54.0		$	218.0		-		$	220.0
Adjusted net income per diluted share(1)		$	0.42		-		$	0.43		$	1.82		-		$	1.84

(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 third 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. Nearly 106,000 advisors and approximately 6,900 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, gain on settlement of liability, gain on insurance reimbursement, 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, gain on settlement of liability, gain on insurance reimbursement, 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 10-16 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 fourth 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 November 8, 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)
		September 30,				December 31,
			2022				2021
Assets
Current assets:
Cash and cash equivalents		$	241,330			$	429,279
Fees receivable, net			96,098				95,291
Prepaid expenses and other current assets			55,078				42,706
Total current assets			392,506				567,276
Property and equipment, net			60,061				50,215
Internally developed software, net			173,285				133,659
Intangible assets, net			398,082				400,396
Goodwill			996,267				925,154
Operating lease right-of-use-assets, net			83,472				90,714
Other non-current assets			99,548				73,768
Total assets		$	2,203,221			$	2,241,182
Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities		$	207,025			$	225,159
Accounts payable			19,447				19,092
Operating lease liabilities			12,133				10,999
Deferred revenue			34,082				33,473
Current portion of long-term debt			343,581				—
Total current liabilities			616,268				288,723
Long-term debt, net of current portion			509,006				848,862
Non-current operating lease liabilities			109,749				105,920
Deferred tax liabilities, net			14,976				21,021
Other non-current liabilities			12,938				17,114
Total liabilities			1,262,937				1,281,640
Equity:
Total stockholders’ equity			940,758				957,089
Non-controlling interest			(474	)			2,453
Total liabilities and equity		$	2,203,221			$	2,241,182

Envestnet, Inc. Condensed Consolidated Statements of Operations (in thousands, except share and per share information) (unaudited)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2022				2021				2022				2021
Revenues:
Asset-based		$	177,131			$	184,008			$	571,820			$	513,458
Subscription-based			123,747				113,572				356,601				335,905
Total recurring revenues			300,878				297,580				928,421				849,363
Professional services and other revenues			5,817				5,473				18,489				17,533
Total revenues			306,695				303,053				946,910				866,896
Operating expenses:
Cost of revenues			110,108				109,836				361,872				303,199
Compensation and benefits			116,837				109,839				369,453				316,101
General and administration			47,388				39,393				157,867				117,463
Depreciation and amortization			33,408				29,850				97,208				88,252
Total operating expenses			307,741				288,918				986,400				825,015
Income (loss) from operations			(1,046	)			14,135				(39,490	)			41,881
Other expense, net			(5,346	)			(3,551	)			(9,691	)			(14,803	)
Income (loss) before income tax provision (benefit)			(6,392	)			10,584				(49,181	)			27,078
Income tax provision (benefit)			2,271				(854	)			(1,542	)			9,074
Net income (loss)			(8,663	)			11,438				(47,639	)			18,004
Add: Net loss attributable to non-controlling interest			1,373				302				3,205				401
Net income (loss) attributable to Envestnet, Inc.		$	(7,290	)		$	11,740			$	(44,434	)		$	18,405
Net income (loss) per share attributable to Envestnet, Inc.:
Basic		$	(0.13	)		$	0.22			$	(0.81	)		$	0.34
Diluted		$	(0.13	)		$	0.21			$	(0.81	)		$	0.33
Weighted average common shares outstanding:
Basic			55,226,777				54,547,858				55,109,387				54,400,247
Diluted			55,226,777				55,388,627				55,109,387				55,287,972

Envestnet, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
		Nine Months Ended
		September 30,
			2022				2021
OPERATING ACTIVITIES:
Net income (loss)		$	(47,639	)		$	18,004
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			97,208				88,252
Provision for doubtful accounts			(468	)			2,051
Deferred income taxes			(4,380	)			7,078
Release of uncertain tax positions			(3,095	)			—
Non-cash compensation expense			62,583				50,307
Non-cash interest expense			5,436				4,889
Accretion on contingent consideration and purchase liability			—				656
Payments of contingent consideration			—				(2,360	)
Fair market value adjustment to contingent consideration liability			—				(1,067	)
Fair market value adjustment to investment in private company			—				(758	)
Gain on settlement of liability			—				(1,206	)
Loss allocations from equity method investments			5,332				5,553
Dilution gain on equity method investee share issuance			(6,934	)			—
Lease related impairments, including right of use assets			14,050				1,537
Loss on property and equipment disposals - office closures			3,710				—
Other			319				249
Changes in operating assets and liabilities, net of acquisitions:
Fees receivable, net			1,546				(38,030	)
Prepaid expenses and other current assets			(8,610	)			569
Other non-current assets			(3,914	)			4,854
Accrued expenses and other liabilities			(23,168	)			26,637
Accounts payable			(867	)			4,122
Deferred revenue			(2,329	)			(1,065	)
Other non-current liabilities			(2,545	)			(298	)
Net cash provided by operating activities			86,235				169,974
INVESTING ACTIVITIES:
Purchases of property and equipment			(13,114	)			(15,779	)
Capitalization of internally developed software			(67,755	)			(49,024	)
Acquisition of proprietary technology			(15,000	)			(25,517	)
Acquisitions of businesses, net of cash acquired			(104,185	)			(32,794	)
Investments in private companies			(16,351	)			(8,926	)
Advance for technology solutions			(4,000	)			(3,000	)
Issuance of notes receivable to equity method investees			(6,350	)			—
Net cash used in investing activities			(226,755	)			(135,040	)

-continued-

Envestnet, Inc. Condensed Consolidated Statements of Cash Flows (continued) (in thousands) (unaudited)
		Nine Months Ended
		September 30,
			2022				2021
FINANCING ACTIVITIES:
Proceeds from exercise of stock options			2,559				920
Capital contributions - non-controlling shareholders			—				3,201
Taxes paid in lieu of shares issued for stock-based compensation			(20,613	)			(17,314	)
Finance lease payments			(14,544	)			—
Share repurchases			(9,235	)			(2,097	)
Revolving credit facility issuance costs			(1,872	)			—
Payments of contingent consideration			(750	)			(9,200	)
Other			5				(666	)
Net cash used in financing activities			(44,450	)			(25,156	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(3,128	)			(544	)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH			(188,098	)			9,234
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD			429,428				384,714
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (a)		$	241,330			$	393,948

(a) The following table reconciles amounts from the condensed consolidated balance sheets to cash, cash equivalents and restricted cash reported within the condensed consolidated statements of cash flows:

		September 30,				September 30,
			2022				2021
Cash and cash equivalents		$	241,330			$	393,799
Restricted cash included in prepaid expenses and other current assets			—				149
Total cash, cash equivalents and restricted cash		$	241,330			$	393,948

Reconciliation of Non-GAAP Financial Measures (in thousands) (unaudited)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2022				2021				2022				2021
Total revenues		$	306,695			$	303,053			$	946,910			$	866,896
Deferred revenue fair value adjustment (a)			54				67				162				227
Adjusted revenues		$	306,749			$	303,120			$	947,072			$	867,123
Net income (loss)		$	(8,663	)		$	11,438			$	(47,639	)		$	18,004
Add (deduct):
Deferred revenue fair value adjustment (a)			54				67				162				227
Interest income (b)			(1,239	)			(202	)			(2,273	)			(569	)
Interest expense (b)			4,242				4,242				13,307				12,682
Income tax provision (benefit)			2,271				(854	)			(1,542	)			9,074
Depreciation and amortization			33,408				29,850				97,208				88,252
Non-cash compensation expense (d)			17,265				18,885				62,583				50,307
Restructuring charges and transaction costs (e)			3,895				3,403				27,267				11,215
Severance (d)			1,125				207				11,379				10,498
Accretion on contingent consideration and purchase liability (c)			—				81				—				656
Fair market value adjustment on contingent consideration liability (c)			—				(927	)			—				(1,067	)
Fair market value adjustment to investment in private company (b)			—				—				—				(758	)
Non-recurring litigation and regulatory related expenses (c)			(2,050	)			1,512				5,333				5,159
Foreign currency (b)			308				97				613				110
Gain on settlement of liability (b)			—				(1,206	)			—				(1,206	)
Gain on insurance reimbursement (b)			—				(968	)			—				(968	)
Non-income tax expense adjustment (c)			(325	)			(831	)			(112	)			(1,102	)
Dilution gain on equity method investee share issuance (b)			—				—				(6,934	)			—
Loss allocations from equity method investments (b)			2,387				1,508				5,332				5,553
(Income) loss attributable to non-controlling interest			820				(114	)			1,637				(554	)
Adjusted EBITDA		$	53,498			$	66,188			$	166,321			$	205,513

(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 September 30, 2022 and 2021, $4.1 million and $1.5 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $0.2 million and $1.9 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $27.5 million and $6.0 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $0.2 million and $5.2 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, 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								Nine Months Ended
		September 30,								September 30,
			2022				2021				2022				2021
Net income (loss)		$	(8,663	)		$	11,438			$	(47,639	)		$	18,004
Income tax provision (benefit) (a)			2,271				(854	)			(1,542	)			9,074
Income (loss) before income tax provision (benefit)			(6,392	)			10,584				(49,181	)			27,078
Add (deduct):
Deferred revenue fair value adjustment (b)			54				67				162				227
Non-cash interest expense (d)			1,443				1,443				4,917				4,295
Cash interest - Convertible Notes (d)			2,479				2,479				7,439				7,439
Non-cash compensation expense (e)			17,265				18,885				62,583				50,307
Restructuring charges and transaction costs (g)			3,895				3,403				27,267				11,215
Severance (e)			1,125				207				11,379				10,498
Accretion on contingent consideration and purchase liability (c)			—				81				—				656
Fair market value adjustment on contingent consideration liability (c)			—				(927	)			—				(1,067	)
Fair market value adjustment to investment in private company (d)			—				—				—				(758	)
Amortization of acquired intangibles (f)			18,649				17,390				53,814				51,370
Non-recurring litigation and regulatory related expenses (c)			(2,050	)			1,512				5,333				5,159
Foreign currency (d)			308				97				613				110
Gain on settlement of liability (d)			—				(1,206	)			—				(1,206	)
Gain on insurance reimbursement (d)			—				(968	)			—				(968	)
Non-income tax expense adjustment (c)			(325	)			(831	)			(112	)			(1,102	)
Dilution gain on equity method investee share issuance (d)			—				—				(6,934	)			—
Loss allocations from equity method investments (d)			2,387				1,508				5,332				5,553
(Income) loss attributable to non-controlling interest			820				(114	)			1,637				(554	)
Adjusted net income before income tax effect			39,658				53,610				124,249				168,252
Income tax effect (h)			(10,112	)			(13,670	)			(31,683	)			(42,904	)
Adjusted net income		$	29,546			$	39,940			$	92,566			$	125,348
Basic number of weighted-average shares outstanding			55,226,777				54,547,858				55,109,387				54,400,247
Effect of dilutive shares:
Options to purchase common stock			74,559				201,103				123,267				207,281
Unvested restricted stock units			208,367				570,515				378,061				614,005
Convertible notes			9,898,549				9,898,549				9,898,549				9,898,549
Warrants			—				69,151				—				66,439
Diluted number of weighted-average shares outstanding			65,408,252				65,287,176				65,509,264				65,186,521
Adjusted net income per share - diluted		$	0.45			$	0.61			$	1.41			$	1.92

(a)		For the three months ended September 30, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled (35.5)% and (8.1)%, respectively. For the nine months ended September 30, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled 3.1% and 33.5%, 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 September 30, 2022 and 2021, $4.1 million and $1.5 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $0.2 million and $1.9 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $27.5 million and $6.0 million were included within general and administration expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $0.2 million and $5.2 million were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2022 and 2021, $(0.4) million and zero were included within other expense, net, 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 nine months ended September 30, 2022 and 2021.

Reconciliation of Non-GAAP Financial Measures Segment Information (in thousands) (unaudited)
		Three Months Ended September 30, 2022
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenues		$	257,335			$	49,360			$	—			$	306,695
Deferred revenue fair value adjustment (a)			54				—				—				54
Adjusted revenues		$	257,389			$	49,360			$	—			$	306,749
Revenues:
Asset-based		$	177,131			$	—			$	—			$	177,131
Subscription-based			75,975				47,772				—				123,747
Total recurring revenues			253,106				47,772				—				300,878
Professional services and other revenues			4,229				1,588				—				5,817
Total revenues			257,335				49,360				—				306,695
Operating expenses:
Cost of revenues:
Asset-based			102,409				—				—				102,409
Subscription-based			1,308				6,460				—				7,768
Professional services and other			(99	)			30				—				(69	)
Total cost of revenues			103,618				6,490				—				110,108
Compensation and benefits			77,010				26,174				13,653				116,837
General and administration			31,463				7,851				8,074				47,388
Depreciation and amortization			24,637				8,771				—				33,408
Total operating expenses		$	236,728			$	49,286			$	21,727			$	307,741
Income (loss) from operations		$	20,607			$	74			$	(21,727	)		$	(1,046	)
Add (deduct):
Deferred revenue fair value adjustment (a)			54				—				—				54
Depreciation and amortization			24,637				8,771				—				33,408
Non-cash compensation expense (c)			11,235				2,991				3,039				17,265
Restructuring charges and transaction costs (d)			928				1,264				1,703				3,895
Severance (c)			686				281				158				1,125
Non-recurring litigation and regulatory related expenses (b)			—				(2,050	)			—				(2,050	)
Non-income tax expense adjustment (b)			(343	)			18				—				(325	)
Loss attributable to non-controlling interest			820				—				—				820
Other (e)			352				—				—				352
Adjusted EBITDA		$	58,976			$	11,349			$	(16,827	)		$	53,498

(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 September 30, 2022, $4.1 million was included within general and administration expenses, $0.2 million was included within compensation and benefits expenses, and $(0.4) million was included in other expense, net, in the condensed consolidated statements of operations.
(e)		For the three months ended September 30, 2022, $0.4 million was included within other expense, net, in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Nine Months Ended September 30, 2022
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenues		$	802,903			$	144,007			$	—			$	946,910
Deferred revenue fair value adjustment (a)			162				—				—				162
Adjusted revenues		$	803,065			$	144,007			$	—			$	947,072
Revenues:
Asset-based		$	571,820			$	—			$	—			$	571,820
Subscription-based			218,080				138,521				—				356,601
Total recurring revenues			789,900				138,521				—				928,421
Professional services and other revenues			13,003				5,486				—				18,489
Total revenues			802,903				144,007				—				946,910
Operating expenses:
Cost of revenues:
Asset-based			332,138				—				—				332,138
Subscription-based			4,177				18,643				—				22,820
Professional services and other			6,833				81				—				6,914
Total cost of revenues			343,148				18,724				—				361,872
Compensation and benefits			234,413				80,334				54,706				369,453
General and administration			103,824				28,633				25,410				157,867
Depreciation and amortization			71,674				25,534				—				97,208
Total operating expenses		$	753,059			$	153,225			$	80,116			$	986,400
Income (loss) from operations		$	49,844			$	(9,218	)		$	(80,116	)		$	(39,490	)
Add (deduct):
Deferred revenue fair value adjustment (a)			162				—				—				162
Depreciation and amortization			71,674				25,534				—				97,208
Non-cash compensation expense (c)			35,889				8,378				18,316				62,583
Restructuring charges and transaction costs (d)			18,109				2,014				7,144				27,267
Severance (c)			4,909				1,492				4,978				11,379
Non-recurring litigation and regulatory related expenses (b)			—				5,333				—				5,333
Non-income tax expense adjustment (b)			(52	)			(60	)			—				(112	)
Loss attributable to non-controlling interest			1,637				—				—				1,637
Other (e)			352				2				—				354
Adjusted EBITDA		$	182,524			$	33,475			$	(49,678	)		$	166,321

(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 nine months ended September 30, 2022, $27.5 million was included within general and administration expenses, $0.2 million was included within compensation and benefits expenses and $(0.4) million was included in other expense, net in the condensed consolidated statements of operations.
(e)		For the nine months ended September 30, 2022, $0.4 million was included within other expense, net, in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Three Months Ended September 30, 2021
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenues		$	254,734			$	48,319			$	—			$	303,053
Deferred revenue fair value adjustment (a)			67				—				—				67
Adjusted revenues		$	254,801			$	48,319			$	—			$	303,120
Revenues:
Asset-based		$	184,008			$	—			$	—			$	184,008
Subscription-based			66,988				46,584				—				113,572
Total recurring revenues			250,996				46,584				—				297,580
Professional services and other revenues			3,738				1,735				—				5,473
Total revenues			254,734				48,319				—				303,053
Operating expenses:
Cost of revenues:
Asset-based			102,298				—				—				102,298
Subscription-based			1,271				6,084				—				7,355
Professional services and other			173				10				—				183
Total cost of revenues			103,742				6,094				—				109,836
Compensation and benefits			67,592				26,468				15,779				109,839
General and administration			26,086				7,570				5,737				39,393
Depreciation and amortization			22,928				6,922				—				29,850
Total operating expenses		$	220,348			$	47,054			$	21,516			$	288,918
Income (loss) from operations		$	34,386			$	1,265			$	(21,516	)		$	14,135
Add (deduct):
Deferred revenue fair value adjustment (a)			67				—				—				67
Depreciation and amortization			22,928				6,922				—				29,850
Non-cash compensation expense (c)			9,661				3,667				5,557				18,885
Restructuring charges and transaction costs (d)			2,863				(55	)			595				3,403
Severance (c)			(49	)			227				29				207
Accretion on contingent consideration and purchase liability (b)			62				19				—				81
Fair market value adjustment on contingent consideration liability (b)			—				(927	)			—				(927	)
Non-recurring litigation and regulatory related expenses (b)			—				1,512				—				1,512
Non-income tax expense adjustment (b)			(905	)			74				—				(831	)
Income attributable to non-controlling interest			(114	)			—				—				(114	)
Other			(63	)			(9	)			(8	)			(80	)
Adjusted EBITDA		$	68,836			$	12,695			$	(15,343	)		$	66,188

(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 September 30, 2021, $1.5 million was included within general and administration expenses and $1.9 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)
		Nine Months Ended September 30, 2021
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenues		$	721,441			$	145,455			$	—			$	866,896
Deferred revenue fair value adjustment (a)			227				—				—				227
Adjusted revenues		$	721,668			$	145,455			$	—			$	867,123
Revenues:
Asset-based		$	513,458			$	—			$	—			$	513,458
Subscription-based			197,663				138,242				—				335,905
Total recurring revenues			711,121				138,242				—				849,363
Professional services and other revenues			10,320				7,213				—				17,533
Total revenues			721,441				145,455				—				866,896
Operating expenses:
Cost of revenues:
Asset-based			281,829				—				—				281,829
Subscription-based			3,778				17,208				—				20,986
Professional services and other			280				104				—				384
Total cost of revenues			285,887				17,312				—				303,199
Compensation and benefits			195,560				77,765				42,776				316,101
General and administration			71,669				25,513				20,281				117,463
Depreciation and amortization			67,283				20,969				—				88,252
Total operating expenses		$	620,399			$	141,559			$	63,057			$	825,015
Income (loss) from operations		$	101,042			$	3,896			$	(63,057	)		$	41,881
Add (deduct):
Deferred revenue fair value adjustment (a)			227				—				—				227
Depreciation and amortization			67,283				20,969				—				88,252
Non-cash compensation expense (c)			27,080				9,691				13,536				50,307
Restructuring charges and transaction costs (d)			8,049				119				3,047				11,215
Severance (c)			4,134				3,634				2,730				10,498
Accretion on contingent consideration and purchase liability (b)			572				84				—				656
Fair market value adjustment on contingent consideration liability (b)			—				(1,067	)			—				(1,067	)
Non-recurring litigation and regulatory related expenses (b)			—				5,159				—				5,159
Non-income tax expense adjustment (b)			(1,335	)			233				—				(1,102	)
Income attributable to non-controlling interest			(554	)			—				—				(554	)
Other			41				—				—				41
Adjusted EBITDA		$	206,539			$	42,718			$	(43,744	)		$	205,513

(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 nine months ended September 30, 2021, $6.0 million was included within general and administration expenses and $5.2 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
		September 30,			December 31,			March 31,			June 30,			September 30,
		2021			2021			2022(1)			2022			2022
		(in millions, except accounts and advisors data)
Platform Assets
Assets under Management (“AUM”)		$	327,279		$	362,038		$	361,251		$	325,209		$	315,883
Assets under Administration (“AUA”)			431,040			456,316			432,141			352,840			350,576
Total AUM/A			758,319			818,354			793,392			678,049			666,459
Subscription			4,670,827			4,901,662			4,736,537			4,312,114			4,134,414
Total Platform Assets		$	5,429,146		$	5,720,016		$	5,529,929		$	4,990,163		$	4,800,873
Platform Accounts
AUM			1,276,066			1,345,274			1,459,093			1,491,861			1,522,968
AUA			1,193,069			1,217,076			1,186,180			1,061,484			1,135,302
Total AUM/A			2,469,135			2,562,350			2,645,273			2,553,345			2,658,270
Subscription			14,810,664			14,986,531			15,151,569			15,312,144			15,596,403
Total Platform Accounts			17,279,799			17,548,881			17,796,842			17,865,489			18,254,673
Advisors
AUM/A			41,696			39,735			39,800			38,394			38,417
Subscription			66,489			68,808			67,168			66,838			67,348
Total Advisors			108,185			108,543			106,968			105,232			105,765

(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 September 30, 2022:

		6/30/2022				Gross Sales				Redemptions				Net Flows				Market Impact				Reclass to Subscription				9/30/2022
		(in millions, except account data)
AUM		$	325,209			$	24,912			$	(15,971	)		$	8,941			$	(17,762	)		$	(505	)		$	315,883
AUA			352,840				37,880				(19,986	)			17,894				(17,544	)			(2,614	)			350,576
Total AUM/A		$	678,049			$	62,792			$	(35,957	)		$	26,835			$	(35,306	)		$	(3,119	)		$	666,459
Fee-Based Accounts			2,553,345												114,147								(9,222	)			2,658,270

The above AUM/A gross sales figures include $23.6 billion in new client conversions. The Company onboarded an additional $35.8 billion in subscription conversions during the three months ended September 30, 2022, bringing total conversions for the quarter to $59.4 billion.

Asset and account figures in the “Reclass to Subscription” columns for the three months ended September 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/20221108006126/en/

Investor Relations

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Media Relations

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Source: Envestnet

FAQ

What are Envestnet's recent financial results for Q3 2022?

Envestnet reported total revenues of $306.7 million, a net loss of $8.7 million, and adjusted EBITDA of $53.5 million.

How did Envestnet's earnings compare to Q3 2021?

In Q3 2021, Envestnet had a net income of $11.4 million compared to a net loss in Q3 2022.

What were the significant changes in Envestnet's revenue streams?

Subscription-based recurring revenues rose by 9%, while asset-based recurring revenues decreased by 4%.

What is Envestnet's outlook for the future?

Envestnet's outlook suggests cautious optimism due to strategic partnerships aimed at enhancing revenue streams.