Envestnet Reports Third Quarter 2024 Financial Results

Rhea-AI Summary

Envestnet (NYSE: ENV) reported its financial results for Q3 2024, showing a 9% increase in total revenue to $345.9 million compared to Q3 2023. For the nine months ended September 30, 2024, revenue rose by 10% to $1,019.2 million. Despite these gains, the company posted a net loss of $1.7 million for Q3 2024, a significant decline from the $7.1 million net income in Q3 2023. Adjusted EBITDA increased by 23% to $80.5 million, and adjusted net income rose by 27% to $46.5 million ($0.70 per diluted share). Free cash flow surged to $76.2 million from $9.4 million in Q3 2023. Operating expenses also increased by 7% to $338.9 million. As of September 30, 2024, Envestnet held $193.4 million in cash and $892.5 million in outstanding debt. The company corrected minor errors in prior financial statements regarding debt classification and cloud server arrangements.

Positive

• Total revenue increased by 9% to $345.9 million in Q3 2024.
• Adjusted EBITDA rose 23% to $80.5 million.
• Adjusted net income increased by 27% to $46.5 million.
• Free cash flow surged to $76.2 million from $9.4 million in Q3 2023.

Negative

• Net loss of $1.7 million in Q3 2024, compared to a net income of $7.1 million in Q3 2023.
• Operating expenses increased by 7% to $338.9 million.
• General and administrative expenses increased by 27%.

11/07/2024 - 04:05 PM

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, 2024.

		Three months ended									Nine months ended
Key Financial Metrics		September 30,							%		September 30,								%
(in millions, except per share data)			2024			2023			Change			2024				2023			Change
GAAP:
Total revenue		$	345.9			$	316.8		9%		$	1,019.2			$	928.0			10%
Net income (loss) attributable to Envestnet, Inc.		$	(1.7	)		$	7.1		(123)%		$	(78.3	)		$	(55.6	)		(41)%
Net income (loss) attributable to Envestnet, Inc. per diluted share		$	(0.03	)		$	0.13		(123)%		$	(1.42	)		$	(1.02	)		(39)%
Non-GAAP:
Adjusted EBITDA(1)		$	80.5			$	65.3		23%		$	228.7			$	175.4			30%
Adjusted net income(1)		$	46.5			$	36.6		27%		$	122.3			$	97.2			26%
Adjusted net income per diluted share(1)		$	0.70			$	0.56		25%		$	1.84			$	1.47			25%
Free cash flow(1)		$	76.2			$	9.4		*		$	123.3			$	(15.6	)		*
__________________________________________________ *Not meaningful

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

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

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

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

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

Balance Sheet and Liquidity

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

Segment Reporting

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

Correction of Immaterial Errors

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

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

About Envestnet

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

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

(1) Non-GAAP Financial Measures

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

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

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

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

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

Cautionary Statement Regarding Forward-Looking Statements

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

Envestnet, Inc. Condensed Consolidated Balance Sheets (in thousands) (unaudited)
		September 30,			December 31,
		2024			2023
Assets
Current assets:
Cash and cash equivalents		$	193,356		$	91,378
Fees receivable, net			110,098			120,958
Prepaid expenses and other current assets			59,570			51,472
Total current assets			363,024			263,808
Property and equipment, net			41,632			48,223
Internally developed software, net			207,311			224,713
Intangible assets, net			301,426			338,068
Goodwill			690,885			806,563
Operating lease right-of-use assets, net			63,600			69,154
Investments in unconsolidated entities			93,378			56,292
Other assets			67,448			70,431
Total assets		$	1,828,704		$	1,877,252
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities		$	261,464		$	241,424
Operating lease liabilities			11,768			12,909
Deferred revenue			28,732			38,201
Current portion of debt			315,896			314,532
Total current liabilities			617,860			607,066
Debt, net of current portion			564,429			562,080
Operating lease liabilities, net of current portion			93,115			100,830
Deferred tax liabilities, net			15,169			16,568
Other liabilities			11,518			16,202
Total liabilities			1,302,091			1,302,746
Equity:
Total stockholders’ equity attributable to Envestnet, Inc.			526,613			568,191
Non-controlling interest			—			6,315
Total liabilities and equity		$	1,828,704		$	1,877,252

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,
			2024				2023				2024				2023
Revenue:
Asset-based		$	224,980			$	193,901			$	647,081			$	556,595
Subscription-based			115,402				114,939				350,852				346,977
Total recurring revenue			340,382				308,840				997,933				903,572
Professional services and other revenue			5,567				8,007				21,239				24,416
Total revenue			345,949				316,847				1,019,172				927,988
Operating expenses:
Direct expense			136,488				120,421				407,472				354,309
Employee compensation			103,487				113,334				311,205				344,646
General and administrative			63,438				50,091				168,427				158,816
Depreciation and amortization			35,530				32,400				115,155				95,985
Goodwill impairment			—				—				96,269				—
Gain on deconsolidation			—				—				(19,523	)			—
Total operating expenses			338,943				316,246				1,079,005				953,756
Income (loss) from operations			7,006				601				(59,833	)			(25,768	)
Other expense, net			(4,277	)			(2,001	)			(13,446	)			(12,012	)
Income (loss) before income tax provision (benefit) and equity method investments			2,729				(1,400	)			(73,279	)			(37,780	)
Income tax provision (benefit)			2,864				(8,824	)			3,717				15,363
Loss from equity method investments			(1,526	)			(2,368	)			(3,327	)			(7,694	)
Net income (loss)			(1,661	)			5,056				(80,323	)			(60,837	)
Add: Net loss attributable to non-controlling interest			—				2,035				1,974				5,284
Net income (loss) attributable to Envestnet, Inc.		$	(1,661	)		$	7,091			$	(78,349	)		$	(55,553	)
Net income (loss) attributable to Envestnet, Inc. per share:
Basic		$	(0.03	)		$	0.13			$	(1.42	)		$	(1.02	)
Diluted		$	(0.03	)		$	0.13			$	(1.42	)		$	(1.02	)
Weighted average common shares outstanding:
Basic			55,273,324				54,562,270				55,100,239				54,380,231
Diluted			55,273,324				54,970,616				55,100,239				54,380,231

Envestnet, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (unaudited)
		Nine Months Ended
		September 30,
			2024				2023
Cash flows from operating activities:
Net loss		$	(80,323	)		$	(60,837	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			115,155				95,985
Non-cash compensation expense			53,204				58,141
Non-cash interest expense			4,237				4,258
Non-cash goodwill impairment			96,269				—
Non-cash gain on deconsolidation			(19,523	)			—
Non-cash Convertible Promissory Note impairment			3,700				—
Loss from equity method investments			3,327				7,694
Fair market value adjustments to investments in private companies			1,508				(2,804	)
Lease related impairments			689				2,483
Other			(1,173	)			(303	)
Changes in operating assets and liabilities:
Fees receivable, net			6,578				(9,621	)
Prepaid expenses and other assets			(7,944	)			(17,534	)
Accounts payable, accrued expenses and other liabilities			14,218				278
Deferred revenue			(3,513	)			(3,974	)
Net cash provided by operating activities			186,409				73,766
Cash flows from investing activities:
Purchases of property and equipment			(5,939	)			(18,275	)
Capitalization of internally developed software			(57,127	)			(71,117	)
Deconsolidation of non-controlling interest			(11,073	)			—
Investments in private companies			(3,055	)			(4,175	)
Acquisition of proprietary technology			(4,481	)			(12,000	)
Issuance of loan receivable to private company			—				(20,000	)
Other			—				400
Net cash used in investing activities			(81,675	)			(125,167	)
Cash flows from financing activities:
Proceeds from borrowings on Revolving Credit Facility			—				55,000
Payments related to Revolving Credit Facility			—				(55,000	)
Payments related to Convertible Notes			—				(45,000	)
Proceeds from exercise of stock options			1,081				839
Payments related to tax withholdings for stock-based compensation			(15,847	)			(17,004	)
Payments related to share repurchases			—				(9,289	)
Proceeds from capital contributions received by non-controlling interest			12,012				—
Purchase of non-controlling units from third-party shareholders			—				(1,008	)
Other			4				4
Net cash used in financing activities			(2,750	)			(71,458	)
Effect of exchange rate on changes on cash and cash equivalents			(6	)			3,897
Net change in cash and cash equivalents			101,978				(118,962	)
Cash and cash equivalents, beginning of period			91,378				162,173
Cash and cash equivalents, end of period		$	193,356			$	43,211

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands) (unaudited)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2024				2023				2024				2023
Net income (loss)		$	(1,661	)		$	5,056			$	(80,323	)		$	(60,837	)
Add (deduct):
Deferred revenue fair value adjustment (a)			—				—				—				69
Interest income (b)			(3,243	)			(1,553	)			(7,814	)			(4,567	)
Interest expense (b)			7,404				6,202				19,590				19,053
Income tax provision (benefit)			2,864				(8,824	)			3,717				15,363
Depreciation and amortization			35,530				32,400				115,155				95,985
Goodwill impairment			—				—				96,269				—
Gain on deconsolidation			—				—				(19,523	)			—
Non-cash compensation expense (d)			16,484				17,298				53,204				58,141
Restructuring charges and transaction costs (e)			4,002				1,695				9,368				12,366
Merger related costs (c)			9,021				—				14,116				—
Convertible Promissory Note impairment (c)			3,700				—				3,700				—
Severance expense (d)			3,508				11,482				7,602				25,904
Litigation, regulatory and other governance related expenses (c)			1,253				604				7,561				5,823
Foreign currency (b)			116				223				162				330
Non-income tax expense adjustment (c)			37				(26	)			(51	)			(224	)
Fair market value adjustments to investments in private companies (b)			—				(2,871	)			1,508				(2,804	)
Loss from equity method investments			1,526				2,368				3,327				7,694
Loss attributable to non-controlling interest			—				1,277				1,160				3,082
Adjusted EBITDA		$	80,541			$	65,331			$	228,728			$	175,378

__________________________________________________________
(a)		Included within subscription-based revenue in the condensed consolidated statements of operations.
(b)		Included within other expense, net in the condensed consolidated statements of operations.
(c)		Included within general and administrative expense in the condensed consolidated statements of operations.
(d)		Included within employee compensation expense in the condensed consolidated statements of operations.
(e)		For the three months ended September 30, 2024 and 2023, $2.2 million and $1.2 million, respectively, were included within general and administrative expense and $1.8 million and $0.5 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations. For the nine months ended September 30, 2024 and 2023, $6.3 million and $10.2 million, respectively, were included within general and administrative expense and $3.1 million and $2.2 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations.

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,
			2024				2023				2024				2023
Net income (loss)		$	(1,661	)		$	5,056			$	(80,323	)		$	(60,837	)
Income tax provision (benefit) (a)			2,864				(8,824	)			3,717				15,363
Loss from equity method investments			(1,526	)			(2,368	)			(3,327	)			(7,694	)
Income (loss) before income tax provision (benefit) and equity method investments			2,729				(1,400	)			(73,279	)			(37,780	)
Add (deduct):
Deferred revenue fair value adjustment (b)			—				—				—				69
Non-cash interest expense (d)			1,420				1,389				4,237				4,258
Cash interest - Convertible Notes (d)			5,664				4,368				14,402				13,476
Amortization of acquired intangibles (e)			14,542				15,124				43,741				47,784
Goodwill impairment			—				—				96,269				—
Gain on deconsolidation			—				—				(19,523	)			—
Non-cash compensation expense (f)			16,484				17,298				53,204				58,141
Restructuring charges and transaction costs (g)			4,002				1,695				9,368				12,366
Merger related costs (c)			9,021				—				14,116				—
Convertible Promissory Note impairment (c)			3,700				—				3,700				—
Severance expense (f)			3,508				11,482				7,602				25,904
Litigation, regulatory and other governance related expenses (c)			1,253				604				7,561				5,823
Foreign currency (d)			116				223				162				330
Non-income tax expense adjustment (c)			37				(26	)			(51	)			(224	)
Fair market value adjustments to investments in private companies (d)			—				(2,871	)			1,508				(2,804	)
Loss attributable to non-controlling interest			—				1,277				1,160				3,082
Adjusted net income before income tax effect			62,476				49,163				164,177				130,425
Income tax effect (h)			(15,931	)			(12,536	)			(41,865	)			(33,258	)
Adjusted net income		$	46,545			$	36,627			$	122,312			$	97,167
Basic number of weighted average shares outstanding			55,273,324				54,562,270				55,100,239				54,380,231
Effect of dilutive shares:
Convertible Notes			10,811,884				10,811,884				10,811,884				11,176,254
Non-vested RSUs and PSUs			660,528				361,982				607,653				438,520
Options to purchase common stock			41,701				46,364				40,127				64,507
Diluted number of weighted average shares outstanding			66,787,437				65,782,500				66,559,903				66,059,512
Adjusted net income per diluted share		$	0.70			$	0.56			$	1.84			$	1.47

__________________________________________________________
(a)		For the three months ended September 30, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled 238.1% and 234.2%, respectively. For the nine months ended September 30, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled (4.9)% and (33.8)%, respectively.
(b)		Included within subscription-based revenue in the condensed consolidated statements of operations.
(c)		Included within general and administrative expense in the condensed consolidated statements of operations.
(d)		Included within other expense, net in the condensed consolidated statements of operations.
(e)		Included within depreciation and amortization expense in the condensed consolidated statements of operations.
(f)		Included within employee compensation expense in the condensed consolidated statements of operations.
(g)		For the three months ended September 30, 2024 and 2023, $2.2 million and $1.2 million, respectively, were included within general and administrative expense and $1.8 million and $0.5 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations. For the nine months ended September 30, 2024 and 2023, $6.3 million and $10.2 million, respectively, were included within general and administrative expense and $3.1 million and $2.2 million, respectively, were included within employee compensation expense in the condensed consolidated statements of operations.
(h)		An estimated normalized tax rate of 25.5% has been used to compute adjusted net income for the three and nine months ended September 30, 2024 and 2023.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures (in thousands) (unaudited)
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
			2024				2023				2024				2023
Net cash provided by operating activities		$	95,355			$	35,290			$	186,409			$	73,766
Less: Purchases of property and equipment			(767	)			(1,540	)			(5,939	)			(18,275	)
Less: Capitalization of internally developed software			(18,376	)			(24,316	)			(57,127	)			(71,117	)
Free cash flow		$	76,212			$	9,434			$	123,343			$	(15,626	)

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (in thousands) (unaudited)
		Three Months Ended September 30, 2024
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenue:
Asset-based		$	224,980			$	—			$	—			$	224,980
Subscription-based			82,717				32,685				—				115,402
Total recurring revenue			307,697				32,685				—				340,382
Professional services and other revenue			3,826				1,741				—				5,567
Total revenue			311,523				34,426				—				345,949
Operating expenses:
Direct expense
Asset-based			127,979				—				—				127,979
Subscription-based			1,513				7,084				—				8,597
Professional services and other			(88	)			—				—				(88	)
Total direct expense			129,404				7,084				—				136,488
Employee compensation			76,350				11,468				15,669				103,487
General and administrative			28,034				15,275				20,129				63,438
Depreciation and amortization			27,425				8,105				—				35,530
Total operating expenses			261,213				41,932				35,798				338,943
Income (loss) from operations			50,310				(7,506	)			(35,798	)			7,006
Add (deduct):
Depreciation and amortization			27,425				8,105				—				35,530
Non-cash compensation expense (b)			11,048				1,823				3,613				16,484
Restructuring charges and transaction costs (c)			2,738				17				1,247				4,002
Merger related costs (a)			—				—				9,021				9,021
Convertible Promissory Note impairment (a)			—				3,700				—				3,700
Severance expense (b)			725				—				2,783				3,508
Litigation, regulatory and other governance related expenses (a)			—				1,253				—				1,253
Non-income tax expense adjustment (a)			37				—				—				37
Adjusted EBITDA		$	92,283			$	7,392			$	(19,134	)		$	80,541

__________________________________________________________
(a)		Included within general and administrative expense in the condensed consolidated statements of operations.
(b)		Included within employee compensation expense in the condensed consolidated statements of operations.
(c)		$2.2 million was included within general and administrative expense and $1.8 million was included within employee compensation expense in the condensed consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (in thousands) (unaudited)
		Nine Months Ended September 30, 2024
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenue:
Asset-based		$	647,081			$	—			$	—			$	647,081
Subscription-based			251,619				99,233				—				350,852
Total recurring revenue			898,700				99,233				—				997,933
Professional services and other revenue			14,741				6,498				—				21,239
Total revenue			913,441				105,731				—				1,019,172
Operating expenses:
Direct expense:
Asset-based			376,498				—				—				376,498
Subscription-based			4,418				21,057				—				25,475
Professional services and other			5,499				—				—				5,499
Total direct expense			386,415				21,057				—				407,472
Employee compensation			228,756				35,032				47,417				311,205
General and administrative			82,764				45,859				39,804				168,427
Depreciation and amortization			92,618				22,537				—				115,155
Goodwill impairment			—				96,269				—				96,269
Gain on deconsolidation			(19,523	)			—				—				(19,523	)
Total operating expenses			771,030				220,754				87,221				1,079,005
Income (loss) from operations			142,411				(115,023	)			(87,221	)			(59,833	)
Add (deduct):
Depreciation and amortization			92,618				22,537				—				115,155
Goodwill impairment			—				96,269				—				96,269
Gain on deconsolidation			(19,523	)			—				—				(19,523	)
Non-cash compensation expense (b)			33,795				5,591				13,818				53,204
Restructuring charges and transaction costs (c)			4,844				756				3,768				9,368
Merger related costs (a)			—				—				14,116				14,116
Convertible Promissory Note impairment (a)			—				3,700				—				3,700
Severance expense (b)			3,161				13				4,428				7,602
Litigation, regulatory and other governance related expenses (a)			—				7,561				—				7,561
Non-income tax expense adjustment (a)			(51	)			—				—				(51	)
Loss attributable to non-controlling interest			1,160				—				—				1,160
Adjusted EBITDA		$	258,415			$	21,404			$	(51,091	)		$	228,728

__________________________________________________________
(a)		Included within general and administrative expense in the condensed consolidated statements of operations.
(b)		Included within employee compensation expense in the condensed consolidated statements of operations.
(c)		$6.3 million was included within general and administrative expense and $3.1 million was included within employee compensation expense in the condensed consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (continued) (in thousands) (unaudited)
		Three Months Ended September 30, 2023
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenue:
Asset-based		$	193,901			$	—			$	—			$	193,901
Subscription-based			81,000				33,939				—				114,939
Total recurring revenue			274,901				33,939				—				308,840
Professional services and other revenue			4,342				3,665				—				8,007
Total revenue			279,243				37,604				—				316,847
Operating expenses:
Direct expense:
Asset-based			112,938				—				—				112,938
Subscription-based			1,839				6,018				—				7,857
Professional services and other			(374	)			—				—				(374	)
Total direct expense			114,403				6,018				—				120,421
Employee compensation			78,873				20,395				14,066				113,334
General and administrative			30,093				12,388				7,610				50,091
Depreciation and amortization			25,603				6,797				—				32,400
Total operating expenses			248,972				45,598				21,676				316,246
Income (loss) from operations			30,271				(7,994	)			(21,676	)			601
Add (deduct):
Depreciation and amortization			25,603				6,797				—				32,400
Non-cash compensation expense (b)			10,955				2,175				4,168				17,298
Restructuring charges and transaction costs (c)			1,432				(98	)			361				1,695
Severance expense (b)			4,901				5,902				679				11,482
Litigation, regulatory and other governance related expenses (a)			—				629				(25	)			604
Non-income tax expense adjustment (a)			(26	)			—				—				(26	)
Loss attributable to non-controlling interest			1,277				—				—				1,277
Adjusted EBITDA		$	74,413			$	7,411			$	(16,493	)		$	65,331

__________________________________________________________
(a)		Included within general and administrative expense in the condensed consolidated statements of operations.
(b)		Included within employee compensation expense in the condensed consolidated statements of operations.
(c)		$1.2 million was included within general and administrative expense and $0.5 million was included within employee compensation expense in the condensed consolidated statements of operations.

Envestnet, Inc. Reconciliation of Non-GAAP Financial Measures Segment Information (in thousands) (unaudited)
		Nine Months Ended September 30, 2023
		Envestnet Wealth Solutions				Envestnet Data & Analytics				Nonsegment				Total
Revenue:
Asset-based		$	556,595			$	—			$	—			$	556,595
Subscription-based			241,214				105,763				—				346,977
Total recurring revenue			797,809				105,763				—				903,572
Professional services and other revenue			17,907				6,509				—				24,416
Total revenue			815,716				112,272				—				927,988
Operating expenses:
Direct expense:
Asset-based			324,093				—				—				324,093
Subscription-based			5,474				17,080				—				22,554
Professional services and other			7,662				—				—				7,662
Total direct expense			337,229				17,080				—				354,309
Employee compensation			235,818				59,476				49,352				344,646
General and administrative			90,425				41,609				26,782				158,816
Depreciation and amortization			76,670				19,315				—				95,985
Total operating expenses			740,142				137,480				76,134				953,756
Income (loss) from operations			75,574				(25,208	)			(76,134	)			(25,768	)
Add (deduct):
Deferred revenue fair value adjustment (a)			69				—				—				69
Depreciation and amortization			76,670				19,315				—				95,985
Non-cash compensation expense (c)			34,747				7,057				16,337				58,141
Restructuring charges and transaction costs (d)			7,985				214				4,167				12,366
Severance expense (c)			10,553				11,227				4,124				25,904
Litigation, regulatory and other governance related expenses (b)			—				4,163				1,660				5,823
Non-income tax expense adjustment (b)			(153	)			(71	)			—				(224	)
Loss attributable to non-controlling interest			3,082				—				—				3,082
Adjusted EBITDA		$	208,527			$	16,697			$	(49,846	)		$	175,378

__________________________________________________________
(a)		Included within subscription-based revenue in the condensed consolidated statements of operations.
(b)		Included within general and administrative expense in the condensed consolidated statements of operations.
(c)		Included within employee compensation expense in the condensed consolidated statements of operations.
(d)		$10.2 million was included within general and administrative expense and $2.2 million was included within employee compensation expense in the condensed consolidated statements of operations.

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

Envestnet Wealth Solutions Segment

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

		As of
		September 30,			December 31,			March 31,			June 30,			September 30,
		2023			2023			2024			2024			2024
Platform Assets
Assets under Management (“AUM”)		$	375,408		$	416,001		$	452,464		$	471,978		$	510,453
Assets under Administration (“AUA”)			398,082			430,846			471,401			471,479			495,995
Total AUM/A			773,490			846,847			923,865			943,457			1,006,448
Subscription			4,579,248			4,959,514			5,158,180			5,327,939			5,534,404
Total Platform Assets		$	5,352,738		$	5,806,361		$	6,082,045		$	6,271,396		$	6,540,852
Platform Accounts
AUM			1,614,873			1,640,879			1,688,044			1,752,768			1,802,895
AUA			1,257,094			1,254,962			1,315,442			1,325,370			1,347,685
Total AUM/A			2,871,967			2,895,841			3,003,486			3,078,138			3,150,580
Subscription			16,072,848			16,248,598			16,641,631			16,364,088			16,705,082
Total Platform Accounts			18,944,815			19,144,439			19,645,117			19,442,226			19,855,662
Advisors
AUM/A			38,078			38,697			38,814			38,484			38,809
Subscription			69,318			69,973			70,262			71,568			72,527
Total Advisors			107,396			108,670			109,076			110,052			111,336

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

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

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

		Asset Rollforward - Nine Months Ended September 30, 2024
		As of December 31,			Gross							Net			Market							As of September 30,
		2023			Sales			Redemptions				Flows			Impact			Reclassifications				2024
AUM		$	416,001		$	97,426		$	(57,740	)		$	39,686		$	51,763		$	3,003			$	510,453
AUA			430,846			109,825			(90,904	)			18,921			51,561			(5,333	)			495,995
Total AUM/A		$	846,847		$	207,251		$	(148,644	)		$	58,607		$	103,324		$	(2,330	)		$	1,006,448
Fee-Based Accounts			2,895,841										267,305						(12,566	)			3,150,580

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

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

Envestnet Data & Analytics Segment

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

		As of
		September 30,		December 31,		March 31,		June 30,		September 30,
		2023		2023		2024		2024		2024
Number of paid end-users		42.3		38.3		43.8		44.3		45.2
Number of firms		1,322		1,324		1,323		1,182		1,166

 

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Investor Relations

investor.relations@envestnet.com

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Media Relations

media@envestnet.com

Source: Envestnet

FAQ

What were Envestnet's Q3 2024 total revenues?

Envestnet's Q3 2024 total revenues were $345.9 million, a 9% increase from Q3 2023.

What was Envestnet's net income for Q3 2024?

Envestnet reported a net loss of $1.7 million for Q3 2024.

How did Envestnet's adjusted EBITDA perform in Q3 2024?

Envestnet's adjusted EBITDA increased by 23% to $80.5 million in Q3 2024.

What is Envestnet's adjusted net income per diluted share for Q3 2024?

Envestnet's adjusted net income per diluted share for Q3 2024 was $0.70.

How much free cash flow did Envestnet generate in Q3 2024?

Envestnet generated $76.2 million in free cash flow in Q3 2024.

What is Envestnet's outstanding debt as of September 30, 2024?

As of September 30, 2024, Envestnet had $892.5 million in outstanding debt.