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Envestnet Reports Fourth Quarter 2022 Financial Results

Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for its quarter and year ended December 31, 2022.

 

 

Three Months Ended

 

 

 

Year Ended

 

 

Key Financial Metrics

 

December 31,

 

%

 

December 31,

 

%

(in millions, except per share data)

 

 

2022

 

 

 

2021

 

 

Change

 

 

2022

 

 

 

2021

 

Change

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

292.9

 

 

$

319.6

 

 

(8

)%

 

$

1,239.8

 

 

$

1,186.5

 

4

%

Net income (loss)

 

$

(37.8

)

 

$

(5.3

)

 

n/m

 

 

$

(85.5

)

 

$

12.7

 

n/m

 

Net income (loss) per diluted share attributable to Envestnet, Inc.

 

$

(0.85

)

 

$

(0.09

)

 

n/m

 

 

$

(1.59

)

 

$

0.24

 

n/m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues(1)

 

$

292.9

 

 

$

319.7

 

 

(8

)%

 

$

1,240.0

 

 

$

1,186.8

 

4

%

Adjusted EBITDA(1)

 

$

53.8

 

 

$

56.2

 

 

(4

)%

 

$

220.1

 

 

$

261.7

 

(16

)%

Adjusted net income(1)

 

$

29.9

 

 

$

32.7

 

 

(9

)%

 

$

122.5

 

 

$

158.0

 

(22

)%

Adjusted net income per diluted share(1)

 

$

0.45

 

 

$

0.50

 

 

(10

)%

 

$

1.86

 

 

$

2.42

 

(23

)%

  1. 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.

n/m - not meaningful

“Envestnet finished the year on a strong note and has turned the corner. The company delivered solid financial results, including margin expansion beginning in the fourth quarter despite the challenging environment,” said Bill Crager, Chief Executive Officer.

“We’ve invested in the business delivering new connected capabilities powered by our data, and have created operating leverage positioning Envestnet to drive both sustainable long term revenue growth and increased profitability,” remarked Mr. Crager.

Financial Results for the Fourth Quarter of 2022 Compared to the Fourth Quarter of 2021:

Total revenues decreased 8% to $292.9 million for the fourth quarter of 2022 from $319.6 million for the fourth quarter of 2021. Asset-based recurring revenues decreased 15% from the prior year period, and represented 57% of total revenues for the fourth quarter of 2022, compared to 61% of total revenues for the same period in 2021. Subscription-based recurring revenues increased 3% from the prior year period, and represented 41% of total revenues for the fourth quarter of 2022, compared to 37% of total revenues for the same period in 2021. Professional services and other non-recurring revenues decreased 7% from the prior year period.

Total operating expenses for the fourth quarter of 2022 decreased to $319.4 million compared to $321.0 million in the prior year period. Cost of revenues decreased 12% to $106.6 million for the fourth quarter of 2022 from $120.5 million for the fourth quarter of 2021. Compensation and benefits increased 4% to $121.3 million for the fourth quarter of 2022 from $116.7 million for the prior year period. Compensation and benefits were 41% of total revenues for the fourth quarter of 2022, compared to 37% for the prior year period. General and administration expenses increased 7% to $58.2 million for the fourth quarter of 2022 from $54.2 million for the prior year period. General and administration expenses were 20% of total revenues for the fourth quarter of 2022, compared to 17% in the prior year period.

Loss from operations was $26.5 million for the fourth quarter of 2022 compared to loss from operations of $1.3 million for the fourth quarter of 2021. Net loss attributable to Envestnet, Inc. was $36.5 million, or $0.85 per diluted share, for the fourth quarter of 2022 compared to net loss of $5.1 million, or $0.09 per diluted share, for the fourth quarter of 2021.

Adjusted revenues(1) for the fourth quarter of 2022 decreased 8% to $292.9 million from $319.6 million for the prior year period. Adjusted EBITDA(1) for the fourth quarter of 2022 decreased 4% to $53.8 million from $56.2 million for the prior year period. Adjusted Net Income(1) for the fourth quarter of 2022 decreased 8% to $29.9 million from $32.7 million for the prior year period. Adjusted Net Income per Diluted Share(1) for the fourth quarter of 2022 was $0.45, compared to $0.50 in the fourth quarter of 2021.

Financial Results for the Full Year of 2022 Compared to the Full Year of 2021:

Total revenues increased 4% to $1.2 billion for the year ended December 31, 2022 from $1.2 billion for the year ended December 31, 2021. Asset-based recurring revenues increased 4% from the prior year period, and represented 60% of total revenues for the years ended December 31, 2022 and 2021. Subscription-based revenues increased 5% from the prior year period, and represented 39% of total revenues for the year ended December 31, 2022 compared to 38% of total revenues for the same period in 2021. Professional services and other non-recurring revenues increased 2% from the prior year period.

Total operating expenses for the year ended December 31, 2022 increased 14% to $1.3 billion from $1.1 billion in the prior year period. Cost of revenues increased 11% to $468.5 million for the year ended December 31, 2022 from $423.7 million for the year ended December 31, 2021. Compensation and benefits increased 13% to $490.7 million for the year ended December 31, 2022 from $432.8 million for the prior year period. Compensation and benefits were 40% of total revenues for the year ended December 31, 2022, compared to 36% in the prior year period. General and administration expenses increased 26% to $216.1 million for the year ended December 31, 2022 from $171.7 million for the prior year period. General and administration expenses were 17% of total revenues for the year ended December 31, 2022, compared to 14% in the prior year period.

Loss from operations was $66.0 million for the year ended December 31, 2022 compared to income from operations of $40.5 million for the year ended December 31, 2021. Net loss attributable to Envestnet, Inc. was $80.9 million, or $1.59 per diluted share, for the year ended December 31, 2022 compared to net income of $13.3 million, or $0.24 per diluted share, for the year ended December 31, 2021.

Adjusted revenues(1) for the year ended December 31, 2022 increased 4% to $1.24 billion from $1.19 billion for the prior year period. Adjusted EBITDA(1) for the year ended December 31, 2022 decreased 16% to $220.1 million from $261.7 million for the prior year period. Adjusted Net Income(1) decreased 22% for the year ended December 31, 2022 to $122.5 million from $158.0 million for the prior year period. Adjusted Net Income per Diluted Share(1) for the year ended December 31, 2022 decreased 23% to $1.86 from $2.42 in the year ended December 31, 2021.

Outlook

Envestnet provided the following outlook for the first quarter ending March 31, 2023 and full year ending December 31, 2023. This outlook is based on the market value of assets under management or administration on December 31, 2022. We caution that we cannot predict the market value of these assets on any future date. See “Cautionary Statement Regarding Forward-Looking Statements.”

Highlights:

  • Envestnet reported full-year adjusted revenues of $1.2 billion, a 4% year-over-year increase from 2021.
  • Adjusted EBITDA decreased by 16% in 2022 to $220.1 million and Adjusted Net Income per Diluted Share was $1.86.

In Millions Except Adjusted EPS

 

1Q 2023

 

FY 2023

GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$176.5

 

-

 

$178.4

 

 

 

 

 

 

Subscription-based

 

$117.5

 

-

 

$118.0

 

 

 

 

 

 

Total recurring revenues

 

$294.0

 

-

 

$296.4

 

 

 

 

 

 

Professional services and other revenues

 

$5.0

 

-

 

$5.6

 

 

 

 

 

 

Total revenues

 

$299.0

 

-

 

$302.0

 

$1,239.8

 

-

 

$1,259.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based cost of revenues

 

$103.0

 

 

 

$103.5

 

 

 

 

 

 

Total cost of revenues

 

$110.2

 

-

 

$110.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 

66.5

 

 

 

 

 

66.3

 

 

Net income per diluted share

 

(a)

 

-

 

(a)

 

(a)

 

-

 

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted revenues(1):

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$176.5

 

-

 

$178.4

 

 

 

 

 

 

Subscription-based

 

$117.5

 

-

 

$118.0

 

 

 

 

 

 

Total recurring revenues

 

$294.0

 

-

 

$296.4

 

 

 

 

 

 

Professional services and other revenues

 

$5.0

 

-

 

$5.6

 

 

 

 

 

 

Total revenues

 

$299.0

 

-

 

$302.0

 

$1,240.0

 

-

 

$1,260.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$53.0

 

-

 

$55.0

 

$242.0

 

-

 

$252.0

Adjusted net income per diluted share(1)

 

 

 

$0.45

 

 

 

$1.95

 

-

 

$2.05

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) 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 fourth 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. Approximately 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 on investment in private company, non-recurring litigation and regulatory related expenses, foreign currency, gain on settlement of liability, gain on insurance reimbursement, dilution gain on equity method investee share issuance, non-income tax expense adjustment, 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 (subsequent to the adoption of ASU 2020-06 on January 1, 2021), non-cash compensation expense, restructuring charges and transaction costs, severance, accretion on contingent consideration and purchase liability, fair market value adjustment to contingent consideration liability, fair market value adjustment to investment in private company, amortization of acquired intangibles, non-recurring 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, 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. Beginning January 1, 2021, the dilutive effect of our Convertible Notes are calculated using the if-converted method in accordance with the adoption of ASU 2020-06 (See “Note 2—Summary of Significant Accounting Policies”). As a result, 9.9 million potential shares to be issued in connection with our Convertible Notes are assumed to be dilutive for purposes of the adjusted net income per share calculation beginning January 1, 2021.

See reconciliations of Non-GAAP Financial Measures on pages 11-17 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 first quarter and full year of 2022, its strategic and operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and 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, the concentration 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 revenue; the renegotiation of fees by our clients; changes in the estimates of fair value of reporting units or of long-lived assets; the amount of our debt and our ability to service 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 ("FinTech") 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; 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; 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; the failure to protect our intellectual property rights; our ability to introduce new solutions and services and enhancements; 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 data security 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; regulatory compliance failures; 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; changes in the level of inflation; general economic, political and regulatory conditions; changes in trade, monetary and fiscal policies and laws;

global events, natural disasters, environmental disasters, terrorist attacks and pandemics or health crises, including their impact on the economy and trading markets; social, environmental and sustainability concerns that may arise, including from our business activities; 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 February 23, 2023 and, unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

Envestnet, Inc.

Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

December 31,

 

December 31,

 

 

 

2022

 

 

2021

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

162,173

 

$

429,279

Fees receivable, net

 

 

101,696

 

 

95,291

Prepaid expenses and other current assets

 

 

41,363

 

 

42,706

Total current assets

 

 

305,232

 

 

567,276

 

 

 

 

 

Property and equipment, net

 

 

62,443

 

 

50,215

Internally developed software, net

 

 

184,558

 

 

133,659

Intangible assets, net

 

 

379,995

 

 

400,396

Goodwill

 

 

998,414

 

 

925,154

Operating lease right-of-use assets, net

 

 

81,596

 

 

90,714

Other non-current assets

 

 

99,927

 

 

73,768

Total assets

 

$

2,112,165

 

$

2,241,182

 

 

 

 

 

Liabilities and Equity

 

 

 

 

Current liabilities:

 

 

 

 

Accrued expenses and other liabilities

 

$

216,532

 

$

225,159

Accounts payable

 

 

17,334

 

 

19,092

Operating lease liabilities

 

 

11,949

 

 

10,999

Deferred revenue

 

 

36,363

 

 

33,473

Current portion of long-term debt

 

 

44,886

 

 

Total current liabilities

 

 

327,064

 

 

288,723

 

 

 

 

 

Long-term debt

 

 

871,769

 

 

848,862

Non-current operating lease liabilities

 

 

110,652

 

 

105,920

Deferred tax liabilities, net

 

 

16,196

 

 

21,021

Other non-current liabilities

 

 

18,880

 

 

17,114

Total liabilities

 

 

1,344,561

 

 

1,281,640

 

 

 

 

 

Equity:

 

 

 

 

Total stockholders’ equity

 

 

754,567

 

 

957,089

Non-controlling interest

 

 

13,037

 

 

2,453

Total liabilities and equity

 

$

2,112,165

 

$

2,241,182

Envestnet, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

166,408

 

 

$

195,918

 

 

$

738,228

 

 

$

709,376

 

Subscription-based

 

 

121,243

 

 

 

118,084

 

 

 

477,844

 

 

 

453,989

 

Total recurring revenues

 

 

287,651

 

 

 

314,002

 

 

 

1,216,072

 

 

 

1,163,365

 

Professional services and other revenues

 

 

5,223

 

 

 

5,619

 

 

 

23,712

 

 

 

23,152

 

Total revenues

 

 

292,874

 

 

 

319,621

 

 

 

1,239,784

 

 

 

1,186,517

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues

 

 

106,588

 

 

 

120,524

 

 

 

468,460

 

 

 

423,723

 

Compensation and benefits

 

 

121,272

 

 

 

116,728

 

 

 

490,725

 

 

 

432,829

 

General and administration

 

 

58,208

 

 

 

54,194

 

 

 

216,075

 

 

 

171,657

 

Depreciation and amortization

 

 

33,340

 

 

 

29,515

 

 

 

130,548

 

 

 

117,767

 

Total operating expenses

 

 

319,408

 

 

 

320,961

 

 

 

1,305,808

 

 

 

1,145,976

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(26,534

)

 

 

(1,340

)

 

 

(66,024

)

 

 

40,541

 

Other expense, net

 

 

(2,704

)

 

 

(5,377

)

 

 

(12,395

)

 

 

(20,180

)

Income (loss) before income tax provision (benefit)

 

 

(29,238

)

 

 

(6,717

)

 

 

(78,419

)

 

 

20,361

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

8,603

 

 

 

(1,407

)

 

 

7,061

 

 

 

7,667

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(37,841

)

 

 

(5,310

)

 

 

(85,480

)

 

 

12,694

 

Add: Net (income) loss attributable to non-controlling interest

 

 

1,336

 

 

 

201

 

 

 

4,541

 

 

 

602

 

Net income (loss) attributable to Envestnet, Inc.

 

$

(36,505

)

 

$

(5,109

)

 

$

(80,939

)

 

$

13,296

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to Envestnet, Inc.:

 

 

 

 

 

 

 

 

Basic

 

$

(0.66

)

 

$

(0.09

)

 

$

(1.47

)

 

$

0.24

 

 

 

 

 

 

 

 

 

 

Diluted*

 

$

(0.85

)

 

$

(0.09

)

 

$

(1.59

)

 

$

0.24

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

55,119,075

 

 

 

54,678,195

 

 

 

55,199,482

 

 

 

54,470,975

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

56,076,261

 

 

 

54,678,195

 

 

 

56,842,125

 

 

 

55,384,096

 

* Net loss per share for 2022 periods were diluted primarily due to the inclusion of interest and gain on settlement of repurchased convertible notes due 2025 in net loss attributable to Envestnet, Inc. in accordance with the if-converted method.

Envestnet, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

Year Ended

 

 

December 31,

 

 

 

2022

 

 

 

2021

 

OPERATING ACTIVITIES:

 

 

 

 

Net income (loss)

 

$

            (85,480

)

 

$

             12,694

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

              130,548

 

 

 

              117,767

 

Provision for doubtful accounts

 

 

                     511

 

 

 

                  1,598

 

Deferred income taxes

 

 

                (3,490

)

 

 

                   (320

)

Non-cash compensation expense

 

 

                80,333

 

 

 

                68,020

 

Non-cash interest expense

 

 

                  7,445

 

 

 

                  5,799

 

Accretion on contingent consideration and purchase liability

 

 

                        —

 

 

 

                     730

 

Loss on extinguishment of Convertible Notes due 2023

 

 

                13,421

 

 

 

                        —

 

Gain on extinguishment of Convertible Notes due 2025

 

 

              (15,089

)

 

 

                        —

 

Payments of contingent consideration

 

 

                        —

 

 

 

                (2,360

)

Fair market value adjustment to contingent consideration liability

 

 

                        —

 

 

 

                (1,067

)

Gain on settlement of liability

 

 

                        —

 

 

 

                (1,206

)

Loss allocations from equity method investments

 

 

                  8,874

 

 

 

                  7,093

 

Gain on equity method investments

 

 

                (9,517

)

 

 

                        —

 

Loss on property and equipment disposals

 

 

                  5,097

 

 

 

                        —

 

Lease related impairments, including right-of-use assets

 

 

                15,750

 

 

 

                  1,537

 

Other

 

 

                     355

 

 

 

                   (293

)

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

Fees receivable, net

 

 

                (5,031

)

 

 

              (16,731

)

Prepaid expenses and other current assets

 

 

                  2,864

 

 

 

                     399

 

Other non-current assets

 

 

                (4,992

)

 

 

                  2,741

 

Accrued expenses and other liabilities

 

 

              (24,711

)

 

 

                53,265

 

Accounts payable

 

 

                (3,724

)

 

 

                  1,290

 

Deferred revenue

 

 

                   (305

)

 

 

                (2,080

)

Other non-current liabilities

 

 

                  4,178

 

 

 

                  1,701

 

Net cash provided by operating activities

 

 

              117,037

 

 

 

              250,577

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

Purchases of property and equipment

 

 

              (16,172

)

 

 

              (23,731

)

Capitalization of internally developed software

 

 

              (89,153

)

 

 

              (65,170

)

Investments in private companies

 

 

              (16,351

)

 

 

              (25,926

)

Acquisition of proprietary technology

 

 

              (15,000

)

 

 

              (25,517

)

Acquisitions of businesses, net of cash acquired

 

 

            (104,100

)

 

 

              (32,794

)

Advance for technology solutions

 

 

                (4,000

)

 

 

                (3,000

)

Issuance of notes receivable to equity method investees

 

 

                (6,350

)

 

 

                        —

 

Net cash used in investing activities

 

 

            (251,126

)

 

 

            (176,138

)

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

Proceeds from issuance of Convertible Notes due 2027

 

 

              575,000

 

 

 

                        —

 

Convertible Notes due 2027 issuance costs

 

 

              (16,323

)

 

 

                        —

 

Repurchase of Convertible Notes due 2023

 

 

            (312,422

)

 

 

                        —

 

Repurchase of Convertible Notes due 2025

 

 

            (181,772

)

 

 

                        —

 

Capital contributions - non-controlling shareholders

 

 

                16,037

 

 

 

                  3,201

 

Payments of contingent consideration

 

 

                   (743

)

 

 

                (9,276

)

Purchase of capped calls

 

 

              (79,585

)

 

 

                        —

 

Proceeds from exercise of stock options

 

 

                  2,620

 

 

 

                  2,090

 

Taxes paid in lieu of shares issued for stock-based compensation

 

 

              (23,516

)

 

 

              (20,529

)

Share repurchases

 

 

              (85,750

)

 

 

                (4,001

)

Finance lease payments

 

 

              (18,682

)

 

 

                        —

 

Other

 

 

                (1,866

)

 

 

                   (655

)

Net cash used in financing activities

 

 

            (127,002

)

 

 

              (29,170

)

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

 

                (6,164

)

 

 

                   (555

)

 

 

 

 

 

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

            (267,255

)

 

 

                44,714

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

 

              429,428

 

 

 

              384,714

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

 

$

           162,173

 

 

$

           429,428

 

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

 

 

December 31,

 

 

 

2022

 

 

2021

Cash and cash equivalents

 

$

162,173

 

$

429,279

Restricted cash included in prepaid expenses and other current assets

 

 

 

 

149

Total cash, cash equivalents and restricted cash

 

$

162,173

 

$

429,428

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Total revenues

 

$

292,874

 

 

$

319,621

 

 

$

1,239,784

 

 

$

1,186,517

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

57

 

 

 

216

 

 

 

284

 

Adjusted revenues

 

$

292,928

 

 

$

319,678

 

 

$

1,240,000

 

 

$

1,186,801

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(37,841

)

 

$

(5,310

)

 

$

(85,480

)

 

$

12,694

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

57

 

 

 

216

 

 

 

284

 

Interest income (b)

 

 

(1,911

)

 

 

(258

)

 

 

(4,184

)

 

 

(827

)

Interest expense (b)

 

 

3,536

 

 

 

4,249

 

 

 

16,843

 

 

 

16,931

 

Income tax provision (benefit)

 

 

8,603

 

 

 

(1,407

)

 

 

7,061

 

 

 

7,667

 

Depreciation and amortization

 

 

33,340

 

 

 

29,515

 

 

 

130,548

 

 

 

117,767

 

Non-cash compensation expense (d)

 

 

17,750

 

 

 

17,713

 

 

 

80,333

 

 

 

68,020

 

Restructuring charges and transaction costs (e)

 

 

7,874

 

 

 

7,275

 

 

 

35,141

 

 

 

18,490

 

Severance (d)

 

 

18,738

 

 

 

849

 

 

 

30,117

 

 

 

11,347

 

Accretion on contingent consideration and purchase

liability (c)

 

 

 

 

 

74

 

 

 

 

 

 

730

 

Fair market value adjustment to contingent consideration liability (c)

 

 

 

 

 

 

 

 

 

 

 

(1,067

)

Fair market value adjustment on investment in private company (b)

 

 

(400

)

 

 

 

 

 

(400

)

 

 

(758

)

Non-recurring litigation and regulatory related expenses (c)

 

 

722

 

 

 

2,432

 

 

 

6,055

 

 

 

7,591

 

Foreign currency (b)

 

 

806

 

 

 

(117

)

 

 

1,419

 

 

 

(7

)

Gain on settlement of liability (b)

 

 

 

 

 

 

 

 

 

 

 

(1,206

)

Gain on insurance reimbursement (b)

 

 

 

 

 

 

 

 

 

 

 

(968

)

Dilution gain on equity method investee share issuance (b)

 

 

(2,583

)

 

 

 

 

 

(9,517

)

 

 

 

Non-income tax expense adjustment (c)

 

 

914

 

 

 

(245

)

 

 

802

 

 

 

(1,347

)

Loss allocations from equity method investments (b)

 

 

3,542

 

 

 

1,540

 

 

 

8,874

 

 

 

7,093

 

(Income) loss attributable to non-controlling interest

 

 

663

 

 

 

(150

)

 

 

2,300

 

 

 

(704

)

Adjusted EBITDA

 

$

53,807

 

 

$

56,217

 

 

$

220,128

 

 

$

261,730

  1. Included within subscription-based revenues in the consolidated statements of operations.
  2. Included within other expense, net in the consolidated statements of operations.
  3. Included within general and administration expenses in the consolidated statements of operations.
  4. Included within compensation and benefits in the consolidated statements of operations.
  5. For the three months ended December 31, 2022 and 2021, $7.9 million and $1.7 million, respectively, were included within general and administration expenses in the consolidated statements of operations. For the three months ended December 31, 2022 and 2021, $0 and $5.6 million, respectively, were included within compensation and benefits in the consolidated statements of operations. For the year ended December 31, 2022 and 2021, $35.1 million and $7.7 million, respectively, were included within general and administration expenses in the consolidated statements of operations. For the year ended December 31, 2022 and 2021, $0 and $10.7 million, respectively, were included within compensation and benefits in the consolidated statements of operations. .

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures (continued)

(in thousands, except share and per share information)

(unaudited)

 

 

Three Months Ended

 

Year Ended

 

 

December 31,

 

December 31,

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Net income (loss)

 

$

(37,841

)

 

$

(5,310

)

 

$

(85,480

)

 

$

12,694

 

Income tax provision (benefit) (a)

 

 

8,603

 

 

 

(1,407

)

 

 

7,061

 

 

 

7,667

 

Income (loss) before income tax provision (benefit)

 

 

(29,238

)

 

 

(6,717

)

 

 

(78,419

)

 

 

20,361

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (b)

 

 

54

 

 

 

57

 

 

 

216

 

 

 

284

 

Non-cash interest expense (c)

 

 

(239

)

 

 

1,450

 

 

 

4,678

 

 

 

5,745

 

Cash interest - Convertible Notes (c)

 

 

3,458

 

 

 

2,480

 

 

 

10,897

 

 

 

9,919

 

Non-cash compensation expense (f)

 

 

17,750

 

 

 

17,713

 

 

 

80,333

 

 

 

68,020

 

Restructuring charges and transaction costs (e)

 

 

7,874

 

 

 

7,275

 

 

 

35,141

 

 

 

18,490

 

Severance (f)

 

 

18,738

 

 

 

849

 

 

 

30,117

 

 

 

11,347

 

Accretion on contingent consideration and purchase

liability (d)

 

 

 

 

 

74

 

 

 

 

 

 

730

 

Fair market value adjustment to contingent consideration liability (d)

 

 

 

 

 

 

 

 

 

 

 

(1,067

)

Fair market value adjustment to investment in private company (c)

 

 

(400

)

 

 

 

 

 

(400

)

 

 

(758

)

Amortization of acquired intangibles (g)

 

 

18,087

 

 

 

17,217

 

 

 

71,901

 

 

 

68,587

 

Non-recurring litigation and regulatory related expenses (d)

 

 

722

 

 

 

2,432

 

 

 

6,055

 

 

 

7,591

 

Foreign currency (c)

 

 

806

 

 

 

(117

)

 

 

1,419

 

 

 

(7

)

Gain on settlement of liability (c)

 

 

 

 

 

 

 

 

 

 

 

(1,206

)

Gain on insurance reimbursement (c)

 

 

 

 

 

 

 

 

 

 

 

(968

)

Non-income tax expense adjustment (d)

 

 

914

 

 

 

(245

)

 

 

802

 

 

 

(1,347

)

Dilution gain on equity method investee share issuance (c)

 

 

(2,583

)

 

 

 

 

 

(9,517

)

 

 

 

Loss allocations from equity method investments (c)

 

 

3,542

 

 

 

1,540

 

 

 

8,874

 

 

 

7,093

 

(Income) loss attributable to non-controlling interest

 

 

663

 

 

 

(150

)

 

 

2,300

 

 

 

(704

)

Adjusted net income before income tax effect

 

 

40,148

 

 

 

43,858

 

 

 

164,397

 

 

 

212,110

 

Income tax effect (h)

 

 

(10,238

)

 

 

(11,184

)

 

 

(41,921

)

 

 

(54,088

)

Adjusted net income

 

$

29,910

 

 

$

32,674

 

 

$

122,476

 

 

$

158,022

 

 

 

 

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

 

55,119,075

 

 

 

54,678,195

 

 

 

55,199,482

 

 

 

54,470,975

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

Options to purchase common stock

 

 

70,947

 

 

 

201,300

 

 

 

111,327

 

 

 

206,022

 

Unvested restricted stock units

 

 

265,187

 

 

 

665,222

 

 

 

390,270

 

 

 

633,384

 

Convertible Notes

 

 

10,667,509

 

 

 

9,898,549

 

 

 

10,092,369

 

 

 

9,898,549

 

Warrants

 

 

 

 

 

93,947

 

 

 

 

 

 

73,715

 

Diluted number of weighted-average shares outstanding

 

 

66,122,718

 

 

 

65,537,213

 

 

 

65,793,448

 

 

 

65,282,645

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share - diluted

 

$

0.45

 

 

$

0.50

 

 

$

1.86

 

 

$

2.42

 

  1. For the three months ended December 31, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled (29.4)% and 20.9%, respectively. For the years ended December 31, 2022 and 2021, the effective tax rate computed in accordance with GAAP equaled (9.0)% and 37.7%, respectively.
  2. Included within subscription-based revenues in the consolidated statements of operations.
  3. Included within other expense, net in the consolidated statements of operations.
  4. Included within general and administration expenses in the consolidated statements of operations.
  5. For the three months ended December 31, 2022 and 2021, $7.9 million and $1.7 million, respectively, were included within general and administration expenses in the consolidated statements of operations. For the three months ended December 31, 2022 and 2021, $0 and $5.6 million, respectively, were included within compensation and benefits in the consolidated statements of operations. For the years ended December 31, 2022 and 2021, $35.1 million and $7.7 million, respectively, were included within general and administration expenses in the consolidated statements of operations. For the years ended December 31, 2022 and 2021, $0 and $10.7 million, respectively, were included within compensation and benefits in the consolidated statements of operations.
  6. Included within compensation and benefits in the consolidated statements of operations.
  7. Included within depreciation and amortization in the consolidated statements of operations.
  8. An estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income for the three months and year ended December 31, 2022 and 2021.

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 

 

Three Months Ended December 31, 2022

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

246,890

 

$

45,984

 

 

$

 

 

$

292,874

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

 

 

 

 

 

54

 

Adjusted revenues

 

$

246,944

 

$

45,984

 

 

$

 

 

$

292,928

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

166,408

 

$

 

 

$

 

 

$

166,408

 

Subscription-based

 

 

76,917

 

 

44,326

 

 

 

 

 

 

121,243

 

Total recurring revenues

 

 

243,325

 

 

44,326

 

 

 

 

 

 

287,651

 

Professional services and other revenues

 

 

3,565

 

 

1,658

 

 

 

 

 

 

5,223

 

Total revenues

 

 

246,890

 

 

45,984

 

 

 

 

 

 

292,874

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

98,207

 

 

 

 

 

 

 

 

98,207

 

Subscription-based

 

 

1,528

 

 

6,265

 

 

 

 

 

 

7,793

 

Professional services and other

 

 

588

 

 

 

 

 

 

 

 

588

 

Total cost of revenues

 

 

100,323

 

 

6,265

 

 

 

 

 

 

106,588

 

Compensation and benefits

 

 

78,497

 

 

29,333

 

 

 

13,442

 

 

 

121,272

 

General and administration

 

 

36,958

 

 

13,682

 

 

 

7,568

 

 

 

58,208

 

Depreciation and amortization

 

 

24,984

 

 

8,356

 

 

 

 

 

 

33,340

 

Total operating expenses

 

$

240,762

 

$

57,636

 

 

$

21,010

 

 

$

319,408

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

6,128

 

$

(11,652

)

 

$

(21,010

)

 

$

(26,534

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

54

 

 

 

 

 

 

 

 

54

 

Depreciation and amortization

 

 

24,984

 

 

8,356

 

 

 

 

 

 

33,340

 

Non-cash compensation expense (c)

 

 

11,154

 

 

2,361

 

 

 

4,235

 

 

 

17,750

 

Restructuring charges and transaction costs (d)

 

 

4,759

 

 

1,720

 

 

 

1,395

 

 

 

7,874

 

Severance (c)

 

 

7,506

 

 

10,075

 

 

 

1,157

 

 

 

18,738

 

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

722

 

 

 

 

 

 

722

 

Non-income tax expense adjustment (b)

 

 

930

 

 

(16

)

 

 

 

 

 

914

 

Loss attributable to non-controlling interest

 

 

663

 

 

��

 

 

 

 

 

663

 

Other

 

 

283

 

 

3

 

 

 

 

 

 

286

 

Adjusted EBITDA

 

$

56,461

 

$

11,569

 

 

$

(14,223

)

 

$

53,807

  1. Included within subscription-based revenues in the consolidated statements of operations.
  2. Included within general and administration expenses in the consolidated statements of operations.
  3. Included within compensation and benefits in the consolidated statements of operations.
  4. For the three months ended December 31, 2022, $7.9 million was included within general and administration expenses and $0 was included within compensation and benefits in the consolidated statements of operations.

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

 

 

Three Months Ended December 31, 2021

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

269,725

 

 

$

49,896

 

 

$

 

 

$

319,621

 

Deferred revenue fair value adjustment (a)

 

 

57

 

 

 

 

 

 

 

 

 

57

 

Adjusted revenues

 

$

269,782

 

 

$

49,896

 

 

$

 

 

$

319,678

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

195,918

 

 

$

 

 

$

 

 

$

195,918

 

Subscription-based

 

 

70,057

 

 

 

48,027

 

 

 

 

 

 

118,084

 

Total recurring revenues

 

 

265,975

 

 

 

48,027

 

 

 

 

 

 

314,002

 

Professional services and other revenues

 

 

3,750

 

 

 

1,869

 

 

 

 

 

 

5,619

 

Total revenues

 

 

269,725

 

 

 

49,896

 

 

 

 

 

 

319,621

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

111,888

 

 

 

 

 

 

 

 

 

111,888

 

Subscription-based

 

 

1,376

 

 

 

7,083

 

 

 

 

 

 

8,459

 

Professional services and other

 

 

162

 

 

 

15

 

 

 

 

 

 

177

 

Total cost of revenues

 

 

113,426

 

 

 

7,098

 

 

 

 

 

 

120,524

 

Compensation and benefits

 

 

73,593

 

 

 

27,651

 

 

 

15,484

 

 

 

116,728

 

General and administration

 

 

36,307

 

 

 

10,285

 

 

 

7,602

 

 

 

54,194

 

Depreciation and amortization

 

 

22,790

 

 

 

6,725

 

 

 

 

 

 

29,515

 

Total operating expenses

 

$

246,116

 

 

$

51,759

 

 

$

23,086

 

 

$

320,961

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

23,609

 

 

$

(1,863

)

 

$

(23,086

)

 

$

(1,340

)

Add:

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

57

 

 

 

 

 

 

 

 

 

57

 

Depreciation and amortization

 

 

22,790

 

 

 

6,725

 

 

 

 

 

 

29,515

 

Non-cash compensation expense (c)

 

 

9,707

 

 

 

2,943

 

 

 

5,063

 

 

 

17,713

 

Restructuring charges and transaction costs (d)

 

 

5,746

 

 

 

123

 

 

 

1,406

 

 

 

7,275

 

Severance (c)

 

 

480

 

 

 

382

 

 

 

(13

)

 

 

849

 

Accretion on contingent consideration and purchase liability (b)

 

 

60

 

 

 

14

 

 

 

 

 

 

74

 

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

 

2,432

 

 

 

 

 

 

2,432

 

Non-income tax expense adjustment (b)

 

 

(172

)

 

 

(73

)

 

 

 

 

 

(245

)

Income attributable to non-controlling interest

 

 

(150

)

 

 

 

 

 

 

 

 

(150

)

Other

 

 

37

 

 

 

 

 

 

 

 

 

37

 

Adjusted EBITDA

 

$

62,164

 

 

$

10,683

 

 

$

(16,630

)

 

$

56,217

 

  1. Included within subscription-based revenues in the consolidated statements of operations.
  2. Included within general and administration expenses in the consolidated statements of operations.
  3. Included within compensation and benefits in the consolidated statements of operations.
  4. For the three months ended December 31, 2021, $1.7 million was included within general and administration expenses and $5.6 million was included within compensation and benefits in the consolidated statements of operations.

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

 

 

Year Ended December 31, 2022

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

1,049,793

 

$

189,991

 

 

$

 

 

$

1,239,784

 

Deferred revenue fair value adjustment (a)

 

 

216

 

 

 

 

 

 

 

 

216

 

Adjusted revenues

 

$

1,050,009

 

$

189,991

 

 

$

 

 

$

1,240,000

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

738,228

 

$

 

 

$

 

 

$

738,228

 

Subscription-based

 

 

294,997

 

 

182,847

 

 

 

 

 

 

477,844

 

Total recurring revenues

 

 

1,033,225

 

 

182,847

 

 

 

 

 

 

1,216,072

 

Professional services and other revenues

 

 

16,568

 

 

7,144

 

 

 

 

 

 

23,712

 

Total revenues

 

 

1,049,793

 

 

189,991

 

 

 

 

 

 

1,239,784

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

430,345

 

 

 

 

 

 

 

 

430,345

 

Subscription-based

 

 

5,705

 

 

24,908

 

 

 

 

 

 

30,613

 

Professional services and other

 

 

7,421

 

 

81

 

 

 

 

 

 

7,502

 

Total cost of revenues

 

 

443,471

 

 

24,989

 

 

 

 

 

 

468,460

 

Compensation and benefits

 

 

312,910

 

 

109,667

 

 

 

68,148

 

 

 

490,725

 

General and administration

 

 

140,782

 

 

42,315

 

 

 

32,978

 

 

 

216,075

 

Depreciation and amortization

 

 

96,658

 

 

33,890

 

 

 

 

 

 

130,548

 

Total operating expenses

 

$

993,821

 

$

210,861

 

 

$

101,126

 

 

$

1,305,808

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

55,972

 

$

(20,870

)

 

$

(101,126

)

 

$

(66,024

)

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

216

 

 

 

 

 

 

 

 

216

 

Depreciation and amortization

 

 

96,658

 

 

33,890

 

 

 

 

 

 

130,548

 

Non-cash compensation expense (c)

 

 

47,043

 

 

10,739

 

 

 

22,551

 

 

 

80,333

 

Restructuring charges and transaction costs (d)

 

 

22,868

 

 

3,734

 

 

 

8,539

 

 

 

35,141

 

Severance (c)

 

 

12,415

 

 

11,567

 

 

 

6,135

 

 

 

30,117

 

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

6,055

 

 

 

 

 

 

6,055

 

Non-income tax expense adjustment (b)

 

 

878

 

 

(76

)

 

 

 

 

 

802

 

Loss attributable to non-controlling interest

 

 

2,300

 

 

 

 

 

 

 

 

2,300

 

Other

 

 

635

 

 

5

 

 

 

 

 

 

640

 

Adjusted EBITDA

 

$

238,985

 

$

45,044

 

 

$

(63,901

)

 

$

220,128

 

  1. Included within subscription-based revenues in the consolidated statements of operations.
  2. Included within general and administration expenses in the consolidated statements of operations.
  3. Included within compensation and benefits in the consolidated statements of operations.
  4. For the year ended December 31, 2022, $35.1 million was included within general and administration expenses in the consolidated statements of operations.

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

 

 

Year Ended December 31, 2021

 

 

Envestnet Wealth Solutions

 

Envestnet Data & Analytics

 

Nonsegment

 

Total

Revenues

 

$

991,166

 

 

$

195,351

 

 

$

 

 

$

1,186,517

 

Deferred revenue fair value adjustment (a)

 

 

284

 

 

 

 

 

 

 

 

 

284

 

Adjusted revenues

 

$

991,450

 

 

$

195,351

 

 

$

 

 

$

1,186,801

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$

709,376

 

 

$

 

 

$

 

 

$

709,376

 

Subscription-based

 

 

267,720

 

 

 

186,269

 

 

 

 

 

 

453,989

 

Total recurring revenues

 

 

977,096

 

 

 

186,269

 

 

 

 

 

 

1,163,365

 

Professional services and other revenues

 

 

14,070

 

 

 

9,082

 

 

 

 

 

 

23,152

 

Total revenues

 

$

991,166

 

 

 

195,351

 

 

 

 

 

 

1,186,517

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

 

Asset-based

 

 

393,717

 

 

 

 

 

 

 

 

 

393,717

 

Subscription-based

 

 

5,154

 

 

 

24,291

 

 

 

 

 

 

29,445

 

Professional services and other

 

 

442

 

 

 

119

 

 

 

 

 

 

561

 

Total cost of revenues

 

 

399,313

 

 

 

24,410

 

 

 

 

 

 

423,723

 

Compensation and benefits

 

 

269,153

 

 

 

105,416

 

 

 

58,260

 

 

 

432,829

 

General and administration

 

 

107,976

 

 

 

35,798

 

 

 

27,883

 

 

 

171,657

 

Depreciation and amortization

 

 

90,073

 

 

 

27,694

 

 

 

 

 

 

117,767

 

Total operating expenses

 

$

866,515

 

 

$

193,318

 

 

$

86,143

 

 

$

1,145,976

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

124,651

 

 

$

2,033

 

 

$

(86,143

)

 

$

40,541

 

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

284

 

 

 

 

 

 

 

 

 

284

 

Accretion on contingent consideration and purchase liability (b)

 

 

632

 

 

 

98

 

 

 

 

 

 

730

 

Depreciation and amortization

 

 

90,073

 

 

 

27,694

 

 

 

 

 

 

117,767

 

Non-cash compensation expense (c)

 

 

36,787

 

 

 

12,634

 

 

 

18,599

 

 

 

68,020

 

Restructuring charges and transaction costs (d)

 

 

13,795

 

 

 

242

 

 

 

4,453

 

 

 

18,490

 

Non-income tax expense adjustment (b)

 

 

(1,507

)

 

 

160

 

 

 

 

 

 

(1,347

)

Severance (c)

 

 

4,614

 

 

 

4,016

 

 

 

2,717

 

 

 

11,347

 

Fair market value adjustment to contingent consideration liability (b)

 

 

 

 

 

(1,067

)

 

 

 

 

 

(1,067

)

Non-recurring litigation and regulatory related expenses (b)

 

 

 

 

 

7,591

 

 

 

 

 

 

7,591

 

Income attributable to non-controlling interest

 

 

(704

)

 

 

 

 

 

 

 

 

(704

)

Other

 

 

78

 

 

 

 

 

 

 

 

 

78

 

Adjusted EBITDA

 

$

268,703

 

 

$

53,401

 

 

$

(60,374

)

 

$

261,730

 

  1. Included within subscription-based revenues in the consolidated statements of operations.
  2. Included within general and administration expenses in the consolidated statements of operations.
  3. Included within compensation and benefits in the consolidated statements of operations.
  4. For the year ended December 31, 2021, $7.7 million was included within general and administration expenses and $10.7 million was included within compensation and benefits in the consolidated statements of operations.

 Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

 

 

As of

 

 

December 31,

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

 

 

2021

 

 

2022(1)

 

 

2022

 

 

2022

 

 

2022

 

 

(in millions, except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

Assets Under Management (AUM)

 

$

362,038

 

$

361,251

 

$

325,209

 

$

315,883

 

$

341,144

Assets Under Administration (AUA)

 

 

456,316

 

 

432,141

 

 

352,840

 

 

350,576

 

 

367,412

Total AUM/A

 

 

818,354

 

 

793,392

 

 

678,049

 

 

666,459

 

 

708,556

Subscription

 

 

4,901,662

 

 

4,736,537

 

 

4,312,114

 

 

4,134,414

 

 

4,382,109

Total Platform Assets

 

$

5,720,016

 

$

5,529,929

 

$

4,990,163

 

$

4,800,873

 

$

5,090,665

Platform Accounts

 

 

 

 

 

 

 

 

 

 

AUM

 

 

1,345,274

 

 

1,459,093

 

 

1,491,861

 

 

1,522,968

 

 

1,547,009

AUA

 

 

1,217,076

 

 

1,186,180

 

 

1,061,484

 

 

1,135,302

 

 

1,135,026

Total AUM/A

 

 

2,562,350

 

 

2,645,273

 

 

2,553,345

 

 

2,658,270

 

 

2,682,035

Subscription

 

 

14,986,531

 

 

15,151,569

 

 

15,312,144

 

 

15,596,403

 

 

15,665,020

Total Platform Accounts

 

 

17,548,881

 

 

17,796,842

 

 

17,865,489

 

 

18,254,673

 

 

18,347,055

Advisors

 

 

 

 

 

 

 

 

 

 

AUM/A

 

 

39,735

 

 

39,800

 

 

38,394

 

 

38,417

 

 

38,025

Subscription

 

 

68,808

 

 

67,168

 

 

66,838

 

 

67,348

 

 

67,520

Total Advisors

 

 

108,543

 

 

106,968

 

 

105,232

 

 

105,765

 

 

105,545

(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 December 31, 2022:

 

 

As of

 

Gross

 

 

 

Net

 

Market

 

Reclass to

 

As of

 

 

9/30/2022

 

Sales

 

Redemptions

 

Flows

 

Impact

 

Subscription

 

12/31/2022

 

 

(in millions, except account data)

 

 

 

AUM

 

$

315,883

 

$

21,658

 

$

(17,281

)

 

$

4,377

 

 

$

20,963

 

$

(79

)

 

$

341,144

AUA

 

 

350,576

 

 

26,865

 

 

(27,456

)

 

 

(591

)

 

 

18,077

 

 

(650

)

 

 

367,412

Total AUM/A

 

$

666,459

 

$

48,523

 

$

(44,737

)

 

$

3,786

 

 

$

39,040

 

$

(729

)

 

$

708,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

 

2,658,270

 

 

 

 

 

 

26,756

 

 

 

 

 

(2,991

)

 

 

2,682,035

The above AUM/A gross sales figures include $11.0 billion in new client conversions. The Company onboarded an additional $37.8 billion in subscription conversions during the fourth quarter, bringing total conversions for the quarter to $48.8 billion.

The following table summarizes the changes in AUM and AUA for the year ended December 31, 2022:

 

 

As of 12/31/2021

 

Gross Sales

 

 

 

 

 

 

 

Reclass to Subscription(1)

 

Reclassification(1)

 

 

 

 

 

 

Redemptions

 

Net Flows

 

Market Impact

 

 

 

As of 12/31/2022

 

 

(in millions except account data)

AUM

 

$

362,038

 

$

100,098

 

$

(68,181

)

 

$

31,917

 

$

(60,948

)

 

$

(584

)

 

$

8,721

 

 

$

341,144

AUA

 

 

456,316

 

 

120,409

 

 

(95,016

)

 

 

25,393

 

 

(73,849

)

 

 

(31,727

)

 

 

(8,721

)

 

 

367,412

Total AUM/A

 

$

818,354

 

$

220,507

 

$

(163,197

)

 

$

57,310

 

$

(134,797

)

 

$

(32,311

)

 

$

 

 

$

708,556

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

 

2,562,350

 

 

 

 

 

 

243,320

 

 

 

 

(123,635

)

 

 

 

 

 

2,682,035

(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 above AUM/A gross sales figures include $52.9 billion in new client conversions. We onboarded an additional $132.3 billion in subscription conversions during 2022, bringing total conversions for the year to $185.2 billion.

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

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