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Envestnet Reports First Quarter 2024 Financial Results

Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the three months ended March 31, 2024.

 

 

Three months ended

 

 

Key Financial Metrics

 

March 31,

 

%

(in millions, except per share data)

 

 

2024

 

 

 

2023

 

 

Change

GAAP:

 

 

 

 

 

 

Total revenue

 

$

325.0

 

 

$

298.7

 

 

9%

Net income (loss) attributable to Envestnet, Inc.

 

$

2.5

 

 

$

(41.2

)

 

106%

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

 

$

0.05

 

 

$

(0.76

)

 

107%

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

70.4

 

 

$

54.0

 

 

30%

Adjusted net income(1)

 

$

39.4

 

 

$

30.1

 

 

31%

Adjusted net income per diluted share(1)

 

$

0.60

 

 

$

0.46

 

 

30%

Free cash flow(1)

 

$

(19.9

)

 

$

(61.7

)

 

68%

"Envestnet continues to be in its leading position because we are executing on what our clients need and we're deepening our relationships with them," said Jim Fox, Board Chair and Interim CEO. "Our first quarter results are a testament to our differentiated products, deepening relationships, and inherent operating leverage in our business. We see tremendous runway for continued growth and margin expansion."

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

Total revenue increased 9% to $325.0 million for the first quarter of 2024 from $298.7 million for the first quarter of 2023. Asset-based recurring revenue increased 15% and represented 62% of total revenue for the first quarter of 2024, compared to 59% of total revenue for the first quarter of 2023. Subscription-based recurring revenue remained consistent and represented 36% of total revenue for the first quarter of 2024, compared to 39% of total revenue for the first quarter of 2023. Professional services and other non-recurring revenue increased 4% for the first quarter of 2024 from the first quarter of 2023.

Total operating expenses increased 2% to $316.2 million for the first quarter of 2024 from $309.8 million for the first quarter of 2023. Direct expense increased 15% to $126.6 million for the first quarter of 2024 from $109.7 million for the first quarter of 2023. Employee compensation decreased 9% to $103.7 million for the first quarter of 2024 from $114.2 million for the first quarter of 2023. Employee compensation was 32% of total revenue for the first quarter of 2024, compared to 38% of total revenue for the first quarter of 2023. General and administrative expense decreased 4% to $52.1 million for the first quarter of 2024 from $54.4 million for the first quarter of 2023. General and administrative expense was 16% of total revenue for the first quarter of 2024, compared to 18% of total revenue for the first quarter of 2023.

Income from operations was $8.7 million for the first quarter of 2024 compared to a loss from operations of $11.1 million for the first quarter of 2023. Net income attributable to Envestnet, Inc. was $2.5 million, or $0.05 per diluted share, for the first quarter of 2024 compared to a net loss attributable to Envestnet, Inc. of $41.2 million, or $0.76 per diluted share, for the first quarter of 2023.

Adjusted EBITDA(1) increased 30% to $70.4 million for the first quarter of 2024 from $54.0 million for the first quarter of 2023. Adjusted net income(1) increased 31% to $39.4 million, or $0.60 per diluted share, for the first quarter of 2024 from $30.1 million, or $0.46 per diluted share, for the first quarter of 2023. Free cash flow(1) increased 68%, to negative $19.9 million for the first quarter of 2024 from negative $61.7 million for the first quarter of 2023.

Balance Sheet and Liquidity

As of March 31, 2024, Envestnet had $61.2 million in cash and cash equivalents and $892.5 million in outstanding debt. Debt as of March 31, 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 March 31, 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 quarter ended March 31, 2024 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.

Correction of Immaterial Error

During the fourth quarter of 2023, the Company identified that the arrangement with a third-party for the use of cloud hosted virtual servers which was previously accounted for as a finance lease transaction and included as a component of property and equipment, net in the 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 period reported within this press release.

Outlook

Envestnet provided the following outlook for the second quarter ending June 30, 2024. This outlook is based on the market value of assets under management or administration as of March 31, 2024. We caution that we cannot predict the market value of these assets on any future date. See “Cautionary Statement Regarding Forward-Looking Statements.”

In Millions, Except Adjusted EPS

 

2Q 2024

GAAP:

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

Asset-based

 

$

211.5

 

-

 

$

214.5

Subscription-based

 

 

115.0

 

-

 

 

118.0

Total recurring revenue

 

 

326.5

 

-

 

 

332.5

Professional services and other revenue

 

 

10.5

 

-

 

 

12.5

Total revenue

 

$

337.0

 

-

 

$

345.0

 

 

 

 

 

 

 

Asset-based direct expense

 

$

125.0

 

-

 

$

126.5

Total direct expense

 

$

139.5

 

-

 

$

141.0

 

 

 

 

 

 

 

Net income (loss)

 

 

 

(a)

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

 

66.5

 

 

Net income (loss) per diluted share

 

 

 

(a)

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$

71.0

 

-

 

$

75.0

Adjusted net income per diluted share(1)

 

$

0.60

 

-

 

$

0.65

_______________________________________________________

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

Conference Call

Envestnet will host a conference call to discuss first quarter 2024 financial results today at 5:00 p.m. ET. The live webcast and accompanying presentation can be accessed from Envestnet’s investor relations website at http://investor.envestnet.com/. A replay of the webcast will be available on the investor relations website following the call.

About Envestnet

Envestnet, Inc. (NYSE: ENV) is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet's clients include more than 109,000 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 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, depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, loss allocations from equity method investments and loss attributable to non-controlling interest.

“Adjusted net income” represents net income (loss) before income tax provision, deferred revenue fair value adjustment, non-cash interest expense, cash interest on our Convertible Notes, amortization of acquired intangibles, non-cash compensation expense, restructuring charges and transaction costs, severance expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, loss allocations from equity method investments 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 10-14 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 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, among other things, Envestnet, Inc.’s expected financial performance and outlook for the second quarter of 2024, its strategic and operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and our actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, our ability to recruit and retain senior executive leadership and other key employees and to successfully manage transitions, including the transition of our chief executive officer; adverse economic or global market conditions, including periods of rising inflation and market interest rates, and governmental responses to such conditions; the conflicts in the Middle East and between Russia and Ukraine, including related sanctions and their impact on the global economy and capital markets; the concentration of our revenue from the delivery of our solutions and services to clients in the financial services industry; our reliance on a limited number of clients for a material portion of our revenue; the renegotiation of fees by our clients; changes in the estimates of fair value of reporting units or of long-lived assets, particularly goodwill and intangible assets; the amount of our debt, our ability to service our debt and risks associated with derivative transactions associated with our debt; limitations on our ability to access information from third parties or charges for accessing such information; the targeting of some of our sales efforts at large financial institutions and large financial technology companies which prolongs sales cycles, requires substantial upfront sales costs and results in less predictability in completing some of our sales; changes in investing patterns on the assets on which we derive revenue and the freedom of investors to redeem or withdraw investments generally at any time; the impact of fluctuations in market conditions and interest rates on the demand for our products and services and the value of assets under management or administration; increased geopolitical unrest and other events outside of our control that could adversely affect the global economy or specific international, regional and domestic markets; our ability to keep up with rapid technological change, evolving industry standards or changing requirements of clients; risks associated with our international operations; the competitiveness of our solutions and services as compared to those of others; liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest; harm to our reputation; the failure to protect our intellectual property rights; our reliance on outsourcing arrangements; activist shareholders hindering the execution of our business strategy, diverting board and management attention and resources and causing us to incur substantial expenses; public health crises, pandemics or similar events; our ability to successfully identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; our ability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner; our ability to introduce new solutions and services and enhancements; regulatory compliance failures; our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information and potential liabilities for cybersecurity breaches; the effect of privacy laws and regulations, industry standards and contractual obligations and changes to these laws, regulations, standards and obligations on how we operate our business and the negative effects of failure to comply with these requirements; failure by our customers to obtain proper permissions or waivers for our use of disclosure of information; adverse judicial or regulatory proceedings against us; failure of our solutions, services or systems, or those of third parties on which we rely, to work properly; potential liability for use of inaccurate information by third parties provided by us; the occurrence of a deemed “change of control”; the uncertainty of the application and interpretation of certain tax laws; issuances of additional shares of common stock or issuances of shares of preferred stock or convertible securities on our existing stockholders; general economic, political and regulatory conditions; global events, natural disasters, environmental disasters, terrorist attacks and pandemics, including their impact on the economy and trading markets; management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in our filings with the SEC which are available on the SEC’s website at www.sec.gov or our Investor Relations website at http://investor.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of May 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)

 
 

 

 

March 31,

 

December 31,

 

 

2024

 

2023

Assets

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

61,226

��

$

91,378

Fees receivable, net

 

 

135,630

 

 

120,958

Prepaid expenses and other current assets

 

 

53,330

 

 

51,472

Assets held for deconsolidation

 

 

55,016

 

 

Total current assets

 

 

305,202

 

 

263,808

Property and equipment, net

 

 

46,856

 

 

48,223

Internally developed software, net

 

 

214,507

 

 

224,713

Intangible assets, net

 

 

323,326

 

 

338,068

Goodwill

 

 

779,916

 

 

806,563

Operating lease right-of-use assets, net

 

 

67,127

 

 

69,154

Other assets

 

 

127,111

 

 

126,723

Total assets

 

$

1,864,045

 

$

1,877,252

 

 

 

 

 

Liabilities and equity

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable, accrued expenses and other current liabilities

 

$

201,126

 

$

241,424

Operating lease liabilities

 

 

12,479

 

 

12,909

Deferred revenue

 

 

34,584

 

 

38,201

Liabilities held for deconsolidation

 

 

8,998

 

 

Total current liabilities

 

 

257,187

 

 

292,534

Debt

 

 

877,842

 

 

876,612

Operating lease liabilities, net of current portion

 

 

98,085

 

 

100,830

Deferred tax liabilities, net

 

 

15,716

 

 

16,568

Other liabilities

 

 

17,897

 

 

16,202

Total liabilities

 

 

1,266,727

 

 

1,302,746

 

 

 

 

 

Equity:

 

 

 

 

Total stockholders’ equity, attributable to Envestnet, Inc.

 

 

580,897

 

 

568,191

Non-controlling interest

 

 

16,421

 

 

6,315

Total liabilities and equity

 

$

1,864,045

 

$

1,877,252

 

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 
 

 

 

Three Months Ended

 

 

March 31,

 

 

 

2024

 

 

 

2023

 

Revenue:

 

 

 

 

Asset-based

 

$

202,616

 

 

$

176,932

 

Subscription-based

 

 

117,462

 

 

 

117,079

 

Total recurring revenue

 

 

320,078

 

 

 

294,011

 

Professional services and other revenue

 

 

4,872

 

 

 

4,696

 

Total revenue

 

 

324,950

 

 

 

298,707

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Direct expense

 

 

126,633

 

 

 

109,679

 

Employee compensation

 

 

103,652

 

 

 

114,215

 

General and administrative

 

 

52,065

 

 

 

54,350

 

Depreciation and amortization

 

 

33,892

 

 

 

31,520

 

Total operating expenses

 

 

316,242

 

 

 

309,764

 

 

 

 

 

 

Income (loss) from operations

 

 

8,708

 

 

 

(11,057

)

Other expense, net

 

 

(6,664

)

 

 

(7,935

)

Income (loss) before income tax provision

 

 

2,044

 

 

 

(18,992

)

 

 

 

 

 

Income tax provision

 

 

1,505

 

 

 

23,769

 

 

 

 

 

 

Net income (loss)

 

 

539

 

 

 

(42,761

)

Add: Net loss attributable to non-controlling interest

 

 

1,974

 

 

 

1,533

 

Net income (loss) attributable to Envestnet, Inc.

 

$

2,513

 

 

$

(41,228

)

 

 

 

 

 

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

 

 

 

 

Basic

 

$

0.05

 

 

$

(0.76

)

Diluted

 

$

0.05

 

 

$

(0.76

)

Weighted average common shares outstanding:

 

 

 

 

Basic

 

 

54,884,074

 

 

 

54,143,259

 

Diluted

 

 

55,385,066

 

 

 

54,143,259

 

 

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 
 

 

 

Three Months Ended

 

 

March 31,

 

 

 

2024

 

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

Net income (loss)

 

$

539

 

 

$

(42,761

)

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

 

 

 

 

Depreciation and amortization

 

 

33,892

 

 

 

31,520

 

Deferred income taxes

 

 

(855

)

 

 

5,221

 

Non-cash compensation expense

 

 

18,898

 

 

 

19,453

 

Non-cash interest expense

 

 

4,580

 

 

 

4,498

 

Loss allocations from equity method investments

 

 

2,283

 

 

 

2,940

 

Other

 

 

2,078

 

 

 

468

 

Changes in operating assets and liabilities:

 

 

 

 

Fees receivable, net

 

 

(18,841

)

 

 

(21,579

)

Prepaid expenses and other assets

 

 

(2,371

)

 

 

(9,858

)

Accounts payable, accrued expenses and other liabilities

 

 

(40,659

)

 

 

(31,648

)

Deferred revenue

 

 

2,400

 

 

 

8,073

 

Net cash provided by (used in) operating activities

 

 

1,944

 

 

 

(33,673

)

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

 

(1,900

)

 

 

(4,402

)

Capitalization of internally developed software

 

 

(19,953

)

 

 

(23,664

)

Investments in private companies

 

 

(2,805

)

 

 

(950

)

Acquisition of proprietary technology

 

 

 

 

 

(10,000

)

Issuance of loan receivable to private company

 

 

 

 

 

(20,000

)

Other

 

 

 

 

 

260

 

Net cash used in investing activities

 

 

(24,658

)

 

 

(58,756

)

Cash flows from financing activities:

 

 

 

 

Proceeds from exercise of stock options

 

 

71

 

 

 

367

 

Payments related to tax withholdings for stock-based compensation

 

 

(8,449

)

 

 

(10,732

)

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

 

 

3

 

 

 

2

 

Net cash provided by (used in) financing activities

 

 

3,637

 

 

 

(20,660

)

Effect of exchange rate on changes on cash and cash equivalents

 

 

(2

)

 

 

3,580

 

Net change in cash and cash equivalents due to cash reclassified to assets held for deconsolidation

 

 

(11,073

)

 

 

 

Net change in cash and cash equivalents

 

 

(30,152

)

 

 

(109,509

)

Cash and cash equivalents, beginning of period

 

 

91,378

 

 

 

162,173

 

Cash and cash equivalents, end of period

 

$

61,226

 

 

$

52,664

 

 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 
 

 

 

Three Months Ended

 

 

March 31,

 

 

 

2024

 

 

 

2023

 

Net income (loss)

 

$

539

 

 

$

(42,761

)

Add (deduct):

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

 

 

 

52

 

Interest income (b)

 

 

(1,983

)

 

 

(1,358

)

Interest expense (b)

 

 

6,089

 

 

 

6,320

 

Income tax provision

 

 

1,505

 

 

 

23,769

 

Depreciation and amortization

 

 

33,892

 

 

 

31,520

 

Non-cash compensation expense (d)

 

 

18,898

 

 

 

19,453

 

Restructuring charges and transaction costs (e)

 

 

2,056

 

 

 

4,163

 

Severance expense (d)

 

 

3,425

 

 

 

6,188

 

Litigation, regulatory and other governance related expenses (c)

 

 

2,288

 

 

 

3,074

 

Foreign currency (b)

 

 

275

 

 

 

33

 

Non-income tax expense adjustment (c)

 

 

(49

)

 

 

(168

)

Loss allocations from equity method investments (b)

 

 

2,283

 

 

 

2,940

 

Loss attributable to non-controlling interest

 

 

1,160

 

 

 

778

 

Adjusted EBITDA

 

$

70,378

 

 

$

54,003

 

(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 March 31, 2024 and 2023, $2.4 million and $4.1 million, respectively, were included within general and administrative expense and $(0.4) million and $0.1 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

 

 

March 31,

 

 

 

2024

 

 

 

2023

 

Net income (loss)

 

$

539

 

 

$

(42,761

)

Income tax provision (a)

 

 

1,505

 

 

 

23,769

 

Income (loss) before income tax provision

 

 

2,044

 

 

 

(18,992

)

Add (deduct):

 

 

 

 

Deferred revenue fair value adjustment (b)

 

 

 

 

 

52

 

Non-cash interest expense (d)

 

 

1,405

 

 

 

1,442

 

Cash interest - Convertible Notes (d)

 

 

4,369

 

 

 

4,565

 

Amortization of acquired intangibles (e)

 

 

14,742

 

 

 

16,940

 

Non-cash compensation expense (f)

 

 

18,898

 

 

 

19,453

 

Restructuring charges and transaction costs (g)

 

 

2,056

 

 

 

4,163

 

Severance expense (e)

 

 

3,425

 

 

 

6,188

 

Litigation, regulatory and other governance related expenses (c)

 

 

2,288

 

 

 

3,074

 

Foreign currency (d)

 

 

275

 

 

 

33

 

Non-income tax expense adjustment (c)

 

 

(49

)

 

 

(168

)

Loss allocations from equity method investments (d)

 

 

2,283

 

 

 

2,940

 

Loss attributable to non-controlling interest

 

 

1,160

 

 

 

778

 

Adjusted net income before income tax effect

 

 

52,896

 

 

 

40,468

 

Income tax effect (h)

 

 

(13,489

)

 

 

(10,319

)

Adjusted net income

 

$

39,407

 

 

$

30,149

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

 

54,884,074

 

 

 

54,143,259

 

Effect of dilutive shares:

 

 

 

 

Convertible Notes

 

 

10,811,884

 

 

 

11,470,645

 

Non-vested RSUs and PSUs

 

 

473,738

 

 

 

463,719

 

Options to purchase common stock

 

 

27,254

 

 

 

88,323

 

Diluted number of weighted-average shares outstanding

 

 

66,196,950

 

 

 

66,165,946

 

 

 

 

 

 

Adjusted net income per diluted share

 

$

0.60

 

 

$

0.46

 

(a)

For the three months ended March 31, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled 73.6% and (125.2)%, 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 March 31, 2024 and 2023, $2.4 million and $4.1 million, respectively, were included within general and administrative expense and $(0.4) million and $0.1 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 months ended March 31, 2024 and 2023.

 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

 
 

 

 

Three Months Ended

 

 

March 31,

 

 

 

2024

 

 

 

2023

 

Net cash provided by (used in) operating activities

 

$

1,944

 

 

$

(33,673

)

Less: Purchases of property and equipment

 

 

(1,900

)

 

 

(4,402

)

Less: Capitalization of internally developed software

 

 

(19,953

)

 

 

(23,664

)

Free cash flow

 

$

(19,909

)

 

$

(61,739

)

 

Envestnet, Inc.

R
econciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

 
 

 

 

Three Months Ended March 31, 2024

 

 

Envestnet

Wealth Solutions

 

Envestnet Data

& Analytics

 

Nonsegment

 

Total

Revenue:

 

 

 

 

 

 

 

 

Asset-based

 

$

202,616

 

 

$

 

 

$

 

 

$

202,616

 

Subscription-based

 

 

84,168

 

 

 

33,294

 

 

 

 

 

 

117,462

 

Total recurring revenue

 

 

286,784

 

 

 

33,294

 

 

 

 

 

 

320,078

 

Professional services and other revenue

 

 

3,026

 

 

 

1,846

 

 

 

 

 

 

4,872

 

Total revenue

 

$

289,810

 

 

$

35,140

 

 

$

 

 

$

324,950

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Direct expense:

 

 

 

 

 

 

 

 

Asset-based

 

$

118,403

 

 

$

 

 

$

 

 

$

118,403

 

Subscription-based

 

 

1,431

 

 

 

6,799

 

 

 

 

 

 

8,230

 

Total direct expense

 

 

119,834

 

 

 

6,799

 

 

 

 

 

 

126,633

 

Employee compensation

 

 

75,196

 

 

 

11,692

 

 

 

16,764

 

 

 

103,652

 

General and administrative

 

 

29,032

 

 

 

15,314

 

 

 

7,719

 

 

 

52,065

 

Depreciation and amortization

 

 

26,818

 

 

 

7,074

 

 

 

 

 

 

33,892

 

Total operating expenses

 

$

250,880

 

 

$

40,879

 

 

$

24,483

 

 

$

316,242

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

38,930

 

 

$

(5,739

)

 

$

(24,483

)

 

$

8,708

 

Add (deduct):

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

26,818

 

 

 

7,074

 

 

 

 

 

 

33,892

 

Non-cash compensation expense (b)

 

 

11,387

 

 

 

1,864

 

 

 

5,647

 

 

 

18,898

 

Restructuring charges and transaction costs (c)

 

 

43

 

 

 

679

 

 

 

1,334

 

 

 

2,056

 

Severance expense (b)

 

 

1,804

 

 

 

13

 

 

 

1,608

 

 

 

3,425

 

Litigation, regulatory and other governance related expenses (a)

 

 

 

 

 

2,288

 

 

 

 

 

 

2,288

 

Non-income tax expense adjustment (a)

 

 

(49

)

 

 

 

 

 

 

 

 

(49

)

Loss attributable to non-controlling interest

 

 

1,160

 

 

 

 

 

 

 

 

 

1,160

 

Adjusted EBITDA

 

$

80,093

 

 

$

6,179

 

 

$

(15,894

)

 

$

70,378

 

(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)

$2.4 million was included within general and administrative expense and $(0.4) 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 March 31, 2023

 

 

Envestnet

Wealth Solutions

 

Envestnet Data

& Analytics

 

Nonsegment

 

Total

Revenue:

 

 

 

 

 

 

 

 

Asset-based

 

$

176,932

 

 

$

 

 

$

 

 

$

176,932

 

Subscription-based

 

 

80,470

 

 

 

36,609

 

 

 

 

 

 

117,079

 

Total recurring revenue

 

 

257,402

 

 

 

36,609

 

 

 

 

 

 

294,011

 

Professional services and other revenue

 

 

3,247

 

 

 

1,449

 

 

 

 

 

 

4,696

 

Total revenue

 

$

260,649

 

 

$

38,058

 

 

$

 

 

$

298,707

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Direct expense:

 

 

 

 

 

 

 

 

Asset-based

 

$

102,623

 

 

$

 

 

$

 

 

$

102,623

 

Subscription-based

 

 

1,778

 

 

 

5,274

 

 

 

 

 

 

7,052

 

Professional services and other

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Total direct expense

 

 

104,405

 

 

 

5,274

 

 

 

 

 

 

109,679

 

Employee compensation

 

 

79,047

 

 

 

19,242

 

 

 

15,926

 

 

 

114,215

 

General and administrative

 

 

29,107

 

 

 

14,429

 

 

 

10,814

 

 

 

54,350

 

Depreciation and amortization

 

 

25,492

 

 

 

6,028

 

 

 

 

 

 

31,520

 

Total operating expenses

 

$

238,051

 

 

$

44,973

 

 

$

26,740

 

 

$

309,764

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$

22,598

 

 

$

(6,915

)

 

$

(26,740

)

 

$

(11,057

)

Add (deduct):

 

 

 

 

 

 

 

 

Deferred revenue fair value adjustment (a)

 

 

52

 

 

 

 

 

 

 

 

 

52

 

Depreciation and amortization

 

 

25,492

 

 

 

6,028

 

 

 

 

 

 

31,520

 

Non-cash compensation expense (c)

 

 

11,467

 

 

 

2,437

 

 

 

5,549

 

 

 

19,453

 

Restructuring charges and transaction costs (d)

 

 

1,139

 

 

 

243

 

 

 

2,781

 

 

 

4,163

 

Severance expense (c)

 

 

3,799

 

 

 

2,205

 

 

 

184

 

 

 

6,188

 

Litigation, regulatory and other governance related expenses (b)

 

 

 

 

 

1,324

 

 

 

1,750

 

 

 

3,074

 

Non-income tax expense adjustment (b)

 

 

(102

)

 

 

(66

)

 

 

 

 

 

(168

)

Loss attributable to non-controlling interest

 

 

778

 

 

 

 

 

 

 

 

 

778

 

Adjusted EBITDA

 

$

65,223

 

 

$

5,256

 

 

$

(16,476

)

 

$

54,003

 

(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)

$4.1 million was included within general and administrative expense and $0.1 million was included within employee compensation expense in the condensed consolidated statements of operations.

 

Envestnet, Inc.

Key Metrics

(in millions, except accounts and advisors data)

(unaudited)

Envestnet Wealth Solutions Segment

The following table provides information regarding the amount of assets utilizing our platforms, financial advisors and investor accounts in the periods indicated:

 

 

As of

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

March 31,

 

 

2023

 

2023

 

2023

 

2023

 

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions, except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

Assets under Management (“AUM”)

 

$

363,244

 

$

384,773

 

$

375,408

 

$

416,001

 

$

452,464

Assets under Administration (“AUA”)

 

 

379,843

 

 

394,078

 

 

398,082

 

 

430,846

 

 

471,401

Total AUM/A

 

 

743,087

 

 

778,851

 

 

773,490

 

 

846,847

 

 

923,865

Subscription

 

 

4,566,971

 

 

4,643,313

 

 

4,579,248

 

 

4,959,514

 

 

5,158,180

Total Platform Assets

 

$

5,310,058

 

$

5,422,164

 

$

5,352,738

 

$

5,806,361

 

$

6,082,045

Platform Accounts

 

 

 

 

 

 

 

 

 

 

AUM

 

 

1,571,862

 

 

1,609,677

 

 

1,614,873

 

 

1,640,879

 

 

1,688,044

AUA

 

 

1,142,166

 

 

1,144,375

 

 

1,257,094

 

 

1,254,962

 

 

1,315,442

Total AUM/A

 

 

2,714,028

 

 

2,754,052

 

 

2,871,967

 

 

2,895,841

 

 

3,003,486

Subscription

 

 

15,779,980

 

 

15,916,955

 

 

16,072,848

 

 

16,248,598

 

 

16,641,631

Total Platform Accounts

 

 

18,494,008

 

 

18,671,007

 

 

18,944,815

 

 

19,144,439

 

 

19,645,117

Advisors

 

 

 

 

 

 

 

 

 

 

AUM/A

 

 

38,611

 

 

38,809

 

 

38,078

 

 

38,697

 

 

38,814

Subscription

 

 

67,843

 

 

68,439

 

 

69,318

 

 

69,973

 

 

70,262

Total Advisors

 

 

106,454

 

 

107,248

 

 

107,396

 

 

108,670

 

 

109,076

 

The following table summarizes the changes in AUM and AUA for the three months ended March 31, 2024:

 

 

Asset Rollforward - Three Months Ended March 31, 2024

 

 

As of

December 31,

 

Gross

 

 

 

Net

 

Market

 

 

 

As of

March 31,

 

 

2023

 

Sales

 

Redemptions

 

Flows

 

Impact

 

Reclassifications

 

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions, except account data)

AUM

 

$

416,001

 

$

32,127

 

$

(19,601

)

 

$

12,526

 

$

22,694

 

$

1,243

 

 

$

452,464

AUA

 

 

430,846

 

 

45,596

 

 

(25,402

)

 

 

20,194

 

 

22,683

 

 

(2,322

)

 

 

471,401

Total AUM/A

 

$

846,847

 

$

77,723

 

$

(45,003

)

 

$

32,720

 

$

45,377

 

$

(1,079

)

 

$

923,865

Fee-Based Accounts

 

 

2,895,841

 

 

 

 

 

 

112,633

 

 

 

 

(4,988

)

 

 

3,003,486

The above AUM/A gross sales figures for the three months ended March 31, 2024 include $29.8 billion in new client conversions. We onboarded an additional $31.1 billion in subscription conversions during the three months ended March 31, 2024 bringing total conversions for the three months ended March 31, 2024 to $60.9 billion.

Asset and account figures in the “Reclassifications” column for the three months ended March 31, 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 amount of paid-end users and firms using the Envestnet Data & Analytics platform in the periods indicated:

 

 

As of

 

 

March 31,

 

June 30,

 

September 30,

 

December 31,

 

March 31,

 

 

2023

 

2023

 

2023

 

2023

 

2024

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions, except number of firms data)

Number of paying users

 

37.5

 

38.0

 

42.3

 

38.3

 

43.8

Number of firms

 

1,310

 

1,339

 

1,322

 

1,324

 

1,323

 

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