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Envestnet Reports Second Quarter 2020 Financial Results

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Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the three and six months ended June 30, 2020.

Three months ended

Six months ended

Key Financial Metrics

June 30,

%

June 30,

%

(in millions except per share data)

2020

2019

Change

2020

2019

Change

GAAP:

Total revenues

$

235.3

$

224.4

5%

$

481.9

$

424.1

14%

Net income (loss)

$

(5.5)

$

0.6

n/m

$

(12.7)

$

(17.7)

(28)%

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

$

(0.09)

$

0.02

n/m

$

(0.23)

$

(0.35)

(34)%

Non-GAAP:

Adjusted revenues(1)

$

235.4

$

227.9

3%

$

482.4

$

427.5

13%

Adjusted net revenues(1)

$

173.5

$

167.6

4%

$

351.9

$

313.4

12%

Adjusted EBITDA(1)

$

55.8

$

43.2

29%

$

110.4

$

77.2

43%

Adjusted net income(1)

$

31.8

$

24.5

30%

$

63.0

$

43.9

44%

Adjusted net income per diluted share(1)

$

0.59

$

0.46

28%

$

1.16

$

0.85

36%

n/m - not meaningful

"Envestnet continues to execute, delivering strong second quarter results, supporting our clients during these challenging times, and focusing on our strategic roadmap," said Bill Crager, Chief Executive Officer.

"We are on our way to establishing the ecosystem that can make financial wellness a reality for everyone. A new standard for personal financial services is emerging, and we are helping to drive it," concluded Mr. Crager.

Financial Results for the Second Quarter of 2020

Asset-based recurring revenues increased 2% from the second quarter of 2019, and represented 52% of total revenues for the second quarter of 2020 compared to 53% for the second quarter 2019. Subscription-based recurring revenues increased 14% from the second quarter of 2019, and represented 45% of total revenues for the second quarter of 2020 compared to 41% for the second quarter 2019. Professional services and other non-recurring revenues decreased 33% from the prior year period. Total revenues increased 5% to $235.3 million for the second quarter of 2020 from $224.4 million for the second quarter of 2019.

Total operating expenses for the second quarter of 2020 decreased 5% to $231.3 million from $244.7 million in the prior year period. Cost of revenues decreased 4% to $68.8 million for the second quarter of 2020 from $72.1 million for the prior year period. Compensation and benefits decreased 7% to $95.6 million for the second quarter of 2020 from $103.3 million for the prior year period. Compensation and benefits were 41% of total revenues for the second quarter of 2020, compared to 46% in the prior year period. General and administration expenses decreased 9% to $38.4 million for the second quarter of 2020 from $42.4 million for the prior year period. General and administrative expenses were 16% of total revenues for the second quarter of 2020, compared to 19% in the prior year period.

Income from operations was $4.0 million for the second quarter of 2020 compared to loss of $20.3 million for the second quarter of 2019. Net loss was $5.5 million for the second quarter of 2020 compared to net income of $0.6 million for the second quarter of 2019. Net loss per diluted share attributable to Envestnet, Inc. was $0.09 for the second quarter of 2020 compared to net income per diluted share attributable to Envestnet, Inc. of $0.02 for the second quarter of 2019.

Adjusted revenues(1) for the second quarter of 2020 increased 3% to $235.4 million from $227.9 million for the prior year period. Adjusted net revenues(1) for the second quarter of 2020 increased 4% to $173.5 million from $167.6 million for the prior year period. Adjusted EBITDA(1) for the second quarter of 2020 increased 29% to $55.8 million from $43.2 million for the prior year period. Adjusted net income(1) increased 30% for the second quarter of 2020 to $31.8 million from $24.5 million for the prior year period. Adjusted net income per diluted share(1) for the second quarter of 2020 increased 28% to $0.59 for the second quarter of 2020 from $0.46 in the second quarter of 2019.

Balance Sheet and Liquidity

As of June 30, 2020, the Company had $92.2 million in cash and cash equivalents and $620.0 million in outstanding debt. The outstanding debt as of June 30, 2020 included $275.0 million in borrowings under the Company's $500.0 million revolving credit facility and $345.0 million in convertible notes maturing in 2023.

Outlook

The Company provided the following outlook for the third quarter ending September 30, 2020 and full year ending December 31, 2020. This outlook is based on the market value of assets on September 30, 2020. We caution that we cannot predict the market value of our assets on any future date and, in particular, in light of recent market volatility. See “Cautionary Statement Regarding Forward-Looking Statements.”

In Millions Except Adjusted EPS

3Q 2020

FY 2020

GAAP:

Revenues:

Asset-based

$

134.0

-

$

134.5

Subscription-based

104.5

-

105.0

Total recurring revenues

$

238.5

-

$

239.5

Professional services and other revenues

6.0

-

6.5

Total revenues

$

244.5

-

$

246.0

$

976.3

-

$

979.3

Asset-based cost of revenues

$

69.5

-

$

70.0

$

271.5

-

$

272.5

Total cost of revenues

$

77.0

-

$

77.5

Net income

(a)

-

(a)

(a)

-

(a)

Diluted shares outstanding

55.0

55.0

Net income per diluted share

(a)

-

(a)

(a)

-

(a)

Non-GAAP:

Adjusted revenues (1):

Asset-based

$

134.0

-

$

134.5

Subscription-based

104.5

-

105.0

Total recurring revenues

$

238.5

-

$

239.5

Professional services and other revenues

6.0

-

6.5

Total revenues

$

244.5

-

$

246.0

$

977.0

-

$

980.0

Adjusted net revenues (1)

$

174.5

-

$

176.5

$

704.5

-

$

708.5

Adjusted EBITDA(1)

$

56.0

-

$

57.0

$

221.0

-

$

223.0

Adjusted net income per diluted share(1)

$

0.59

$

2.28

-

$

2.31

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

Conference Call

Envestnet will host a conference call to discuss second quarter 2020 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://ir.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. Over 103,000 advisors and more than 4,900 companies including: 16 of the 20 largest U.S. banks, 46 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, leverage the Envestnet platform to grow their business and client relationships.

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. Under GAAP, we record 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 does not reflect the full amount of revenue that would have been recorded by these entities had they remained stand‑alone entities.

“Adjusted net revenues” represents adjusted revenues less asset-based cost of revenues. Under GAAP, we are required to recognize as revenue certain fees paid to investment managers and other third parties needed for implementation of investment solutions included in our assets under management. Those fees also are required to be recorded as cost of revenues. This non-GAAP metric presents adjusted revenues without such fees included, as they have no impact on our profitability.

Adjusted revenues and Adjusted net revenues have limitations as financial measures, should be considered as supplemental in nature and are not meant as a substitute for revenue prepared in accordance with GAAP.

“Adjusted EBITDA” represents net income before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration liability, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, gain on acquisition of equity method investment, loss allocation from equity method investments and (income) loss attributable to non-controlling interest.

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

“Adjusted net income per diluted share” represents adjusted net income attributable to common stockholders divided by the diluted number of weighted-average shares outstanding.

See reconciliation of Non-GAAP Financial Measures on pages 9-14 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 or net income per share determined in accordance with GAAP.

Cautionary Statement Regarding Forward-Looking Statements

The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.’s expected financial performance and outlook for the third quarter and full year of 2020, its strategic operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and the Company’s actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, a pandemic or health crisis, including the COVID-19 pandemic, and its impact on financial institutions, the global economy or capital markets, as well as our products, clients, vendors and employees, and our results of operations, the full extent of which is currently unknown; changes and volatility in financial and capital markets, which could result in changes in demand for our products or services or in the value of assets on which we earn revenue; the possibility that the anticipated benefits of any of our acquisitions will not be realized to the extent or when expected, difficulty in sustaining rapid revenue growth, which may place significant demands on our administrative, operational and financial resources, the concentration of nearly all of our revenues from the delivery of our solutions and services to clients in the financial services industry, our reliance on a limited number of clients for a material portion of our revenues, the renegotiation of fee percentages or termination of our services by our clients, our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, the impact of market and economic conditions on revenues, our inability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner, our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium financial applications, compliance failures, adverse judicial or regulatory proceedings against us, liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest, changes in laws and regulations, including tax laws and regulations, general economic conditions, political and regulatory conditions, the impact of fluctuations in market condition and interest rates on the demand for our products and services and the value of assets under management or administration, the impact of market conditions on our ability to issue debt and equity, the impact of fluctuations in interest rates on our cost of borrowing, our financial performance, the results of our investments in research and development, our data center and other infrastructure, our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information, failure of our systems to work properly, our ability to realize operating efficiencies, the advantages of our solutions as compared to those of others, the failure to protect our intellectual property rights, our ability to establish and maintain intellectual property rights, our ability to retain and hire necessary employees and appropriately staff our operations and management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in our filings with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at www.sec.gov or the our Investor Relations website at http://ir.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of August 6, 2020 and, unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

June 30,

December 31,

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

92,244

$

82,505

Fees receivable, net

74,871

67,815

Prepaid expenses and other current assets

38,665

32,183

Total current assets

205,780

182,503

Property and equipment, net

49,752

53,756

Internally developed software, net

78,024

60,263

Intangible assets, net

471,091

505,589

Goodwill

906,499

879,850

Operating lease right-of-use-assets, net

73,537

82,796

Other non-current assets

46,722

37,127

Total assets

$

1,831,405

$

1,801,884

Liabilities and Equity

Current liabilities:

Accrued expenses and other liabilities

$

134,763

$

137,944

Accounts payable

16,132

17,277

Operating lease liabilities

13,926

13,816

Contingent consideration

1,603

Deferred revenue

42,861

34,753

Total current liabilities

209,285

203,790

Convertible Notes due 2023

311,031

305,513

Revolving credit facility

275,000

260,000

Contingent consideration

11,422

9,045

Deferred revenue

5,231

5,754

Non-current operating lease liabilities

81,600

88,365

Deferred tax liabilities, net

27,106

29,481

Other non-current liabilities

36,993

32,360

Total liabilities

957,668

934,308

Equity:

Total stockholders’ equity

875,795

869,094

Non-controlling interest

(2,058)

(1,518)

Total liabilities and equity

$

1,831,405

$

1,801,884

Envestnet, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Revenues:

Asset-based

$

122,246

$

120,070

$

257,057

$

229,004

Subscription-based

104,979

92,258

209,530

175,345

Total recurring revenues

227,225

212,328

466,587

404,349

Professional services and other revenues

8,088

12,117

15,265

19,762

Total revenues

235,313

224,445

481,852

424,111

Operating expenses:

Cost of revenues

68,849

72,080

143,782

133,725

Compensation and benefits

95,565

103,286

205,995

190,003

General and administration

38,448

42,421

79,558

82,945

Depreciation and amortization

28,443

26,915

56,126

46,432

Total operating expenses

231,305

244,702

485,461

453,105

Income (loss) from operations

4,008

(20,257)

(3,609)

(28,994)

Other expense, net

(8,173)

(7,512)

(9,710)

(13,275)

Loss before income tax provision (benefit)

(4,165)

(27,769)

(13,319)

(42,269)

Income tax provision (benefit)

1,306

(28,382)

(658)

(24,614)

Net income (loss)

(5,471)

613

(12,661)

(17,655)

Add: Net loss attributable to non-controlling interest

547

280

401

363

Net income (loss) attributable to Envestnet, Inc.

$

(4,924)

$

893

$

(12,260)

$

(17,292)

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

Basic

$

(0.09)

$

0.02

$

(0.23)

$

(0.35)

Diluted

$

(0.09)

$

0.02

$

(0.23)

$

(0.35)

Weighted average common shares outstanding:

Basic

53,562,850

50,870,296

53,288,741

49,526,774

Diluted

53,562,850

52,982,688

53,288,741

49,526,774

Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six Months Ended

June 30,

2020

2019

OPERATING ACTIVITIES:

Net loss

$

(12,661)

$

(17,655)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

56,126

46,432

Provision for doubtful accounts

1,515

713

Deferred income taxes

(1,598)

(28,991)

Non-cash compensation expense

29,869

27,852

Non-cash interest expense

5,907

9,896

Accretion on contingent consideration and purchase liability

910

742

Payments of contingent consideration

(578)

Fair market value adjustment to contingent consideration liability

(1,982)

Gain on acquisition of equity method investment

(4,230)

Loss allocation from equity method investment

3,286

550

Impairment of right of use assets

1,426

Other

556

Changes in operating assets and liabilities, net of acquisitions:

Fees receivables, net

(8,560)

(536)

Prepaid expenses and other current assets

(7,756)

(15,507)

Other non-current assets

(353)

(3,241)

Accrued expenses and other liabilities

(4,484)

(19,060)

Accounts payable

(2,130)

(4,768)

Deferred revenue

7,236

3,940

Other non-current liabilities

1,946

2,602

Net cash provided by operating activities

65,023

2,391

INVESTING ACTIVITIES:

Purchases of property and equipment

(4,329)

(8,815)

Capitalization of internally developed software

(25,703)

(15,583)

Investments in private companies

(12,625)

(2,000)

Acquisitions of businesses, net of cash acquired

(20,257)

(321,571)

Net cash used in investing activities

(62,914)

(347,969)

FINANCING ACTIVITIES:

Proceeds from borrowings on revolving credit facility

45,000

175,000

Payments on revolving credit facility

(30,000)

(30,000)

Payments of contingent consideration

(171)

Proceeds from exercise of stock options

6,683

4,914

Purchase of treasury stock for stock-based tax withholdings

(12,816)

(15,962)

Issuance of restricted stock units

3

3

Net cash provided by financing activities

8,870

133,784

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(1,342)

166

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

9,637

(211,628)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

82,755

289,671

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (a)

$

92,392

$

78,043

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

June 30,

June 30,

2020

2019

Cash and cash equivalents

$

92,244

$

77,717

Restricted cash included in prepaid expenses and other current assets

158

Restricted cash included in other non-current assets

148

168

Total cash, cash equivalents and restricted cash

$

92,392

$

78,043

Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Total revenues

$

235,313

$

224,445

$

481,852

$

424,111

Deferred revenue fair value adjustment (a)

77

3,414

516

3,420

Adjusted revenues

235,390

227,859

482,368

427,531

Asset-based cost of revenues

(61,875)

(60,293)

(130,467)

(114,135)

Adjusted net revenues

$

173,515

$

167,566

$

351,901

$

313,396

Net income (loss)

$

(5,471)

$

613

$

(12,661)

$

(17,655)

Add (deduct):

Deferred revenue fair value adjustment (a)

77

3,414

516

3,420

Interest income (b)

(197)

(901)

(588)

(2,411)

Interest expense (b)

6,634

8,263

13,768

15,359

Accretion on contingent consideration and purchase

liability (c)

311

502

910

742

Income tax provision (benefit)

1,306

(28,382)

(658)

(24,614)

Depreciation and amortization

28,443

26,915

56,126

46,432

Non-cash compensation expense (d)

13,875

14,988

27,345

27,852

Restructuring charges and transaction costs (c)

6,648

13,208

9,468

20,574

Severance (e)

1,869

3,280

15,851

5,760

Fair market value adjustment on contingent consideration liability (c)

(1,982)

(1,982)

Non-recurring litigation and regulatory related expenses (c)

3,517

4,220

Foreign currency (b)

463

(154)

(31)

(155)

Non-income tax expense adjustment (c)

(642)

908

(454)

1,118

Non-recurring gain (b)

(4,230)

Loss allocation from equity method investments (b)

1,256

347

3,286

550

(Income) loss attributable to non-controlling interest

(299)

210

(500)

241

Adjusted EBITDA

$

55,808

$

43,211

$

110,386

$

77,213

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within other expense, net in the condensed consolidated statements of operations.

(c)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(d)

For the 2020 period, $29,869 included in compensation and benefits, and a fair value adjustment of $(2,524) included in other expense, net in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

(e)

Included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands, except share and per share information)
(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Net income (loss)

$

(5,471)

$

613

$

(12,661)

$

(17,655)

Income tax provision (benefit) (a)

1,306

(28,382)

(658)

(24,614)

Loss before income tax provision (benefit)

(4,165)

(27,769)

(13,319)

(42,269)

Add (deduct):

Deferred revenue fair value adjustment (b)

77

3,414

516

3,420

Accretion on contingent consideration and purchase

liability (d)

311

502

910

742

Non-cash interest expense (c)

2,983

4,646

5,945

9,262

Non-cash compensation expense (e)

13,875

14,988

27,345

27,852

Restructuring charges and transaction costs (d)

6,648

13,208

9,468

20,574

Severance (f)

1,869

3,280

15,851

5,760

Fair market value adjustment on contingent consideration liability (d)

(1,982)

(1,982)

Amortization of acquired intangibles (g)

18,746

19,278

37,504

31,806

Non-recurring litigation and regulatory related expenses (d)

3,517

4,220

Foreign currency (c)

463

(154)

(31)

(155)

Non-income tax expense adjustment (d)

(642)

908

(454)

1,118

Non-recurring gain (c)

(4,230)

Loss allocation from equity method investments (c)

1,256

347

3,286

550

(Income) loss attributable to non-controlling interest

(299)

210

(500)

241

Adjusted net income before income tax effect

42,657

32,858

84,529

58,901

Income tax effect (h)

(10,884)

(8,388)

(21,554)

(15,020)

Adjusted net income

$

31,773

$

24,470

$

62,975

$

43,881

Basic number of weighted-average shares outstanding

53,562,850

50,870,296

53,288,741

49,526,774

Effect of dilutive shares:

Options to purchase common stock

374,070

1,164,246

519,886

1,185,480

Unvested restricted stock units

322,140

662,853

475,990

666,116

Convertible notes

261,075

11,719

12,532

Warrants

24,218

22,714

Diluted number of weighted-average shares outstanding

54,259,060

52,982,688

54,319,050

51,390,902

Adjusted net income per share - diluted

$

0.59

$

0.46

$

1.16

$

0.85

(a)

For the three months ended June 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled (31.4)% and 102.2%, respectively. For the six months ended June 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled 4.9% and 58.2%, respectively.

(b)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(c)

Included within other expense, net in the condensed consolidated statements of operations.

(d)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(e)

For the 2020 period, $29,869 included in compensation and benefits, and a fair value adjustment of $(2,524) included in other expense, net in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

(f)

Included within compensation and benefits in the condensed consolidated statements of operations.

(g)

Included within depreciation and amortization in the condensed consolidated statements of operations.

(h)

An estimated normalized effective tax rate of 25.5% have been used to compute adjusted net income for the three and six months ended June 30, 2020 and 2019.

Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)

Three months ended June 30, 2020

Envestnet
Wealth
Solutions

Envestnet
Data &
Analytics

Nonsegment

Total

Total Revenues

$

187,685

$

47,628

$

$

235,313

Deferred revenue fair value adjustment (a)

77

77

Adjusted revenues

187,762

47,628

235,390

Less: Asset-based cost of revenues

(61,875)

(61,875)

Adjusted net revenues

$

125,887

$

47,628

$

$

173,515

Revenues:

Asset-based

$

122,246

$

$

$

122,246

Subscription-based

61,410

43,569

104,979

Total recurring revenues

183,656

43,569

227,225

Professional services and other revenues

4,029

4,059

8,088

Total revenues

187,685

47,628

235,313

Operating expenses:

Cost of revenues:

Asset-based

61,875

61,875

Subscription-based

1,227

5,580

6,807

Professional services and other

9

158

167

Total cost of revenues

63,111

5,738

68,849

Compensation and benefits

62,796

25,802

6,967

95,565

General and administration

21,830

8,667

7,951

38,448

Depreciation and amortization

20,081

8,362

28,443

Total operating expenses

$

167,818

$

48,569

$

14,918

$

231,305

Income (loss) from operations

$

19,867

$

(941)

$

(14,918)

$

4,008

Add:

Deferred revenue fair value adjustment (a)

77

77

Accretion on contingent consideration and purchase liability (b)

373

(62)

311

Depreciation and amortization

20,081

8,362

28,443

Non-cash compensation expense (c)

9,055

2,981

1,839

13,875

Restructuring charges and transaction costs (b)

3,731

271

2,646

6,648

Non-income tax expense adjustment (b)

(578)

(64)

(642)

Severance (c)

1,437

432

1,869

Fair market value adjustment on contingent consideration liability (b)

(1,982)

(1,982)

Non-recurring litigation and regulatory related expenses (b)

3,517

3,517

Income attributable to non-controlling interest

(299)

(299)

Other

(17)

(17)

Adjusted EBITDA

$

53,727

$

12,514

$

(10,433)

$

55,808

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)

Six months ended June 30, 2020

Envestnet
Wealth
Solutions

Envestnet
Data &
Analytics

Nonsegment

Total

Total Revenues

$

386,105

$

95,747

$

$

481,852

Deferred revenue fair value adjustment (a)

516

516

Adjusted revenues

386,621

95,747

482,368

Less: Asset-based cost of revenues

(130,467)

(130,467)

Adjusted net revenues

$

256,154

$

95,747

$

$

351,901

Revenues:

Asset-based

$

257,057

$

$

$

257,057

Subscription-based

121,733

87,797

209,530

Total recurring revenues

378,790

87,797

466,587

Professional services and other revenues

7,315

7,950

15,265

Total revenues

386,105

95,747

481,852

Operating expenses:

Cost of revenues:

Asset-based

130,467

130,467

Subscription-based

2,419

10,665

13,084

Professional services and other

17

214

231

Total cost of revenues

132,903

10,879

143,782

Compensation and benefits

135,384

55,915

14,696

205,995

General and administration

47,110

17,854

14,594

79,558

Depreciation and amortization

39,501

16,625

56,126

Total operating expenses

$

354,898

$

101,273

$

29,290

$

485,461

Income (loss) from operations

$

31,207

$

(5,526)

$

(29,290)

$

(3,609)

Add:

Deferred revenue fair value adjustment (a)

516

516

Accretion on contingent consideration and purchase liability (b)

746

164

910

Depreciation and amortization

39,501

16,625

56,126

Non-cash compensation expense (c)

18,752

7,207

3,910

29,869

Restructuring charges and transaction costs (b)

4,920

456

4,092

9,468

Non-income tax expense adjustment (b)

(328)

(126)

(454)

Severance (c)

12,439

2,092

1,320

15,851

Fair market value adjustment on contingent consideration liability (b)

(1,982)

(1,982)

Non-recurring litigation and regulatory related expenses (b)

4,220

4,220

Income attributable to non-controlling interest

(500)

(500)

Other

(29)

(29)

Adjusted EBITDA

$

107,224

$

23,130

$

(19,968)

$

110,386

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)

Three months ended June 30, 2019

Envestnet
Wealth Solutions

Envestnet Data
& Analytics

Nonsegment

Total

Revenues

$

176,890

$

47,555

$

$

224,445

Deferred revenue fair value adjustment (a)

3,414

3,414

Adjusted revenues

180,304

47,555

227,859

Less: Asset-based cost of revenues

(60,293)

(60,293)

Adjusted net revenues

$

120,011

$

47,555

$

$

167,566

Revenues:

Asset-based

$

120,070

$

$

$

120,070

Subscription-based

50,078

42,180

92,258

Total recurring revenues

170,148

42,180

212,328

Professional services and other revenues

6,742

5,375

12,117

Total revenues

176,890

47,555

224,445

Operating expenses:

Cost of revenues:

Asset-based

60,293

60,293

Subscription-based

1,115

5,582

6,697

Professional services and other

4,842

248

5,090

Total cost of revenues

66,250

5,830

72,080

Compensation and benefits

56,219

31,593

15,474

103,286

General and administration

25,666

8,553

8,202

42,421

Depreciation and amortization

16,376

10,539

26,915

Total operating expenses

$

164,511

$

56,515

$

23,676

$

244,702

Income (loss) from operations

$

12,379

$

(8,960)

$

(23,676)

$

(20,257)

Add:

Deferred revenue fair value adjustment (a)

3,414

3,414

Accretion on contingent consideration and purchase liability (b)

502

502

Depreciation and amortization

16,376

10,539

26,915

Non-cash compensation expense (c)

8,592

3,767

2,629

14,988

Restructuring charges and transaction costs (b)

794

(196)

12,610

13,208

Non-income tax expense adjustment (b)

908

908

Severance (c)

818

2,448

14

3,280

Loss attributable to non-controlling interest

210

210

Other

43

43

Adjusted EBITDA

$

44,036

$

7,598

$

(8,423)

$

43,211

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)

Six Months Ended June 30, 2019

Envestnet
Wealth Solutions

Envestnet
Data & Analytics

Nonsegment

Total

Revenues

$

329,595

$

94,516

$

$

424,111

Deferred revenue fair value adjustment (a)

3,420

3,420

Adjusted revenues

333,015

94,516

427,531

Less: Asset-based cost of revenues

(114,135)

(114,135)

Adjusted net revenues

$

218,880

$

94,516

$

$

313,396

Revenues:

Asset-based

$

229,004

$

$

$

229,004

Subscription-based

91,104

84,241

175,345

Total recurring revenues

320,108

84,241

404,349

Professional services and other revenues

9,487

10,275

19,762

Total revenues

329,595

94,516

424,111

Operating expenses:

Cost of revenues:

Asset-based

114,135

114,135

Subscription-based

3,123

11,251

14,374

Professional services and other

4,847

369

5,216

Total cost of revenues

122,105

11,620

133,725

Compensation and benefits

104,774

62,957

22,272

190,003

General and administration

45,850

18,038

19,057

82,945

Depreciation and amortization

27,643

18,789

46,432

Total operating expenses

$

300,372

$

111,404

$

41,329

$

453,105

Income (loss) from operations

$

29,223

$

(16,888)

$

(41,329)

$

(28,994)

Add:

Deferred revenue fair value adjustment (a)

3,420

3,420

Accretion on contingent consideration and purchase liability (b)

742

742

Depreciation and amortization

27,643

18,789

46,432

Non-cash compensation expense (c)

14,269

7,955

5,628

27,852

Restructuring charges and transaction costs (b)

1,056

769

18,749

20,574

Non-income tax expense adjustment (b)

1,108

10

1,118

Severance (c)

1,168

4,496

96

5,760

Loss attributable to non-controlling interest

241

241

Other

65

1

2

68

Adjusted EBITDA

$

78,935

$

15,132

$

(16,854)

$

77,213

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except accounts and advisors)
(unaudited)

As of

June 30,

September 30,

December 31,

March 31,

June 30,

2019

2019

2019

2020

2020

(in millions, except accounts and advisors data)

Platform Assets

Assets under Management (“AUM”)

$

182,143

$

188,739

$

207,083

$

185,065

$

215,994

Assets under Administration (“AUA”)

330,226

316,742

343,505

312,472

344,957

Total AUM/A

512,369

505,481

550,588

497,537

560,951

Subscription

2,835,780

2,947,582

3,205,281

2,875,394

3,247,400

Total Platform Assets

$

3,348,149

$

3,453,063

$

3,755,869

$

3,372,931

$

3,808,351

Platform Accounts

AUM

907,034

934,811

935,039

970,896

1,007,386

AUA

1,196,114

1,136,430

1,193,882

1,254,856

1,252,247

Total AUM/A

2,103,148

2,071,241

2,128,921

2,225,752

2,259,633

Subscription

9,492,653

9,692,714

9,793,175

10,090,172

10,003,156

Total Platform Accounts

11,595,801

11,763,955

11,922,096

12,315,924

12,262,789

Advisors

AUM/A

39,727

39,735

40,563

40,971

41,206

Subscription

59,292

60,319

61,180

62,077

62,404

Total Advisors

99,019

100,054

101,743

103,048

103,610

The following table summarizes the changes in AUM and AUA for the three months ended June 30, 2020:

3/31/2020

Gross
Sales

Redemptions

Net
Flows

Market
Impact

6/30/2020

(in millions except account data)

AUM

$

185,065

$

16,843

$

(9,860)

$

6,983

$

23,946

$

215,994

AUA

312,472

16,526

(23,025)

(6,499)

38,984

344,957

Total AUM/A

$

497,537

$

33,369

$

(32,885)

$

484

$

62,930

$

560,951

Fee-Based Accounts

2,225,752

33,881

2,259,633

The above AUM/A gross sales figures include $1.6 billion in new client conversions. The Company onboarded an additional $24.1 billion in subscription conversions during the three months ended June 30, 2020, bringing total conversions for the quarter to $25.7 billion.

Contacts

Investor Relations
investor.relations@envestnet.com
(312) 827-3940

Media Relations
mediarelations@envestnet.com

(658)

(24,614)

Net income (loss)

(5,471)

613

(12,661)

(17,655)

Add: Net loss attributable to non-controlling interest

547

280

401

363

Net income (loss) attributable to Envestnet, Inc.

$

(4,924)

$

893

$

(12,260)

$

(17,292)

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

Basic

$

(0.09)

$

0.02

$

(0.23)

$

(0.35)

Diluted

$

(0.09)

$

0.02

$

(0.23)

$

(0.35)

Weighted average common shares outstanding:

Basic

53,562,850

50,870,296

53,288,741

49,526,774

Diluted

53,562,850

52,982,688

53,288,741

49,526,774

Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

Six Months Ended

June 30,

2020

2019

OPERATING ACTIVITIES:

Net loss

$

(12,661)

$

(17,655)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

56,126

46,432

Provision for doubtful accounts

1,515

713

Deferred income taxes

(1,598)

(28,991)

Non-cash compensation expense

29,869

27,852

Non-cash interest expense

5,907

9,896

Accretion on contingent consideration and purchase liability

910

742

Payments of contingent consideration

(578)

Fair market value adjustment to contingent consideration liability

(1,982)

Gain on acquisition of equity method investment

(4,230)

Loss allocation from equity method investment

3,286

550

Impairment of right of use assets

1,426

Other

556

Changes in operating assets and liabilities, net of acquisitions:

Fees receivables, net

(8,560)

(536)

Prepaid expenses and other current assets

(7,756)

(15,507)

Other non-current assets

(353)

(3,241)

Accrued expenses and other liabilities

(4,484)

(19,060)

Accounts payable

(2,130)

(4,768)

Deferred revenue

7,236

3,940

Other non-current liabilities

1,946

2,602

Net cash provided by operating activities

65,023

2,391

INVESTING ACTIVITIES:

Purchases of property and equipment

(4,329)

(8,815)

Capitalization of internally developed software

(25,703)

(15,583)

Investments in private companies

(12,625)

(2,000)

Acquisitions of businesses, net of cash acquired

(20,257)

(321,571)

Net cash used in investing activities

(62,914)

(347,969)

FINANCING ACTIVITIES:

Proceeds from borrowings on revolving credit facility

45,000

175,000

Payments on revolving credit facility

(30,000)

(30,000)

Payments of contingent consideration

(171)

Proceeds from exercise of stock options

6,683

4,914

Purchase of treasury stock for stock-based tax withholdings

(12,816)

(15,962)

Issuance of restricted stock units

3

3

Net cash provided by financing activities

8,870

133,784

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(1,342)

166

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

9,637

(211,628)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

82,755

289,671

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (a)

$

92,392

$

78,043

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

June 30,

June 30,

2020

2019

Cash and cash equivalents

$

92,244

$

77,717

Restricted cash included in prepaid expenses and other current assets

158

Restricted cash included in other non-current assets

148

168

Total cash, cash equivalents and restricted cash

$

92,392

$

78,043

Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Total revenues

$

235,313

$

224,445

$

481,852

$

424,111

Deferred revenue fair value adjustment (a)

77

3,414

516

3,420

Adjusted revenues

235,390

227,859

482,368

427,531

Asset-based cost of revenues

(61,875)

(60,293)

(130,467)

(114,135)

Adjusted net revenues

$

173,515

$

167,566

$

351,901

$

313,396

Net income (loss)

$

(5,471)

$

613

$

(12,661)

$

(17,655)

Add (deduct):

Deferred revenue fair value adjustment (a)

77

3,414

516

3,420

Interest income (b)

(197)

(901)

(588)

(2,411)

Interest expense (b)

6,634

8,263

13,768

15,359

Accretion on contingent consideration and purchase

liability (c)

311

502

910

742

Income tax provision (benefit)

1,306

(28,382)

(658)

(24,614)

Depreciation and amortization

28,443

26,915

56,126

46,432

Non-cash compensation expense (d)

13,875

14,988

27,345

27,852

Restructuring charges and transaction costs (c)

6,648

13,208

9,468

20,574

Severance (e)

1,869

3,280

15,851

5,760

Fair market value adjustment on contingent consideration liability (c)

(1,982)

(1,982)

Non-recurring litigation and regulatory related expenses (c)

3,517

4,220

Foreign currency (b)

463

(154)

(31)

(155)

Non-income tax expense adjustment (c)

(642)

908

(454)

1,118

Non-recurring gain (b)

(4,230)

Loss allocation from equity method investments (b)

1,256

347

3,286

550

(Income) loss attributable to non-controlling interest

(299)

210

(500)

241

Adjusted EBITDA

$

55,808

$

43,211

$

110,386

$

77,213

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within other expense, net in the condensed consolidated statements of operations.

(c)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(d)

For the 2020 period, $29,869 included in compensation and benefits, and a fair value adjustment of $(2,524) included in other expense, net in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

(e)

Included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands, except share and per share information)
(unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Net income (loss)

$

(5,471)

$

613

$

(12,661)

$

(17,655)

Income tax provision (benefit) (a)

1,306

(28,382)

(658)

(24,614)

Loss before income tax provision (benefit)

(4,165)

(27,769)

(13,319)

(42,269)

Add (deduct):

Deferred revenue fair value adjustment (b)

77

3,414

516

3,420

Accretion on contingent consideration and purchase

liability (d)

311

502

910

742

Non-cash interest expense (c)

2,983

4,646

5,945

9,262

Non-cash compensation expense (e)

13,875

14,988

27,345

27,852

Restructuring charges and transaction costs (d)

6,648

13,208

9,468

20,574

Severance (f)

1,869

3,280

15,851

5,760

Fair market value adjustment on contingent consideration liability (d)

(1,982)

(1,982)

Amortization of acquired intangibles (g)

18,746

19,278

37,504

31,806

Non-recurring litigation and regulatory related expenses (d)

3,517

4,220

Foreign currency (c)

463

(154)

(31)

(155)

Non-income tax expense adjustment (d)

(642)

908

(454)

1,118

Non-recurring gain (c)

(4,230)

Loss allocation from equity method investments (c)

1,256

347

3,286

550

(Income) loss attributable to non-controlling interest

(299)

210

(500)

241

Adjusted net income before income tax effect

42,657

32,858

84,529

58,901

Income tax effect (h)

(10,884)

(8,388)

(21,554)

(15,020)

Adjusted net income

$

31,773

$

24,470

$

62,975

$

43,881

Basic number of weighted-average shares outstanding

53,562,850

50,870,296

53,288,741

49,526,774

Effect of dilutive shares:

Options to purchase common stock

374,070

1,164,246

519,886

1,185,480

Unvested restricted stock units

322,140

662,853

475,990

666,116

Convertible notes

261,075

11,719

12,532

Warrants

24,218

22,714

Diluted number of weighted-average shares outstanding

54,259,060

52,982,688

54,319,050

51,390,902

Adjusted net income per share - diluted

$

0.59

$

0.46

$

1.16

$

0.85

(a)

For the three months ended June 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled (31.4)% and 102.2%, respectively. For the six months ended June 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled 4.9% and 58.2%, respectively.

(b)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(c)

Included within other expense, net in the condensed consolidated statements of operations.

(d)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(e)

For the 2020 period, $29,869 included in compensation and benefits, and a fair value adjustment of $(2,524) included in other expense, net in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

(f)

Included within compensation and benefits in the condensed consolidated statements of operations.

(g)

Included within depreciation and amortization in the condensed consolidated statements of operations.

(h)

An estimated normalized effective tax rate of 25.5% have been used to compute adjusted net income for the three and six months ended June 30, 2020 and 2019.

Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)

Three months ended June 30, 2020

Envestnet
Wealth
Solutions

Envestnet
Data &
Analytics

Nonsegment

Total

Total Revenues

$

187,685

$

47,628

$

$

235,313

Deferred revenue fair value adjustment (a)

77

77

Adjusted revenues

187,762

47,628

235,390

Less: Asset-based cost of revenues

(61,875)

(61,875)

Adjusted net revenues

$

125,887

$

47,628

$

$

173,515

Revenues:

Asset-based

$

122,246

$

$

$

122,246

Subscription-based

61,410

43,569

104,979

Total recurring revenues

183,656

43,569

227,225

Professional services and other revenues

4,029

4,059

8,088

Total revenues

187,685

47,628

235,313

Operating expenses:

Cost of revenues:

Asset-based

61,875

61,875

Subscription-based

1,227

5,580

6,807

Professional services and other

9

158

167

Total cost of revenues

63,111

5,738

68,849

Compensation and benefits

62,796

25,802

6,967

95,565

General and administration

21,830

8,667

7,951

38,448

Depreciation and amortization

20,081

8,362

28,443

Total operating expenses

$

167,818

$

48,569

$

14,918

$

231,305

Income (loss) from operations

$

19,867

$

(941)

$

(14,918)

$

4,008

Add:

Deferred revenue fair value adjustment (a)

77

77

Accretion on contingent consideration and purchase liability (b)

373

(62)

311

Depreciation and amortization

20,081

8,362

28,443

Non-cash compensation expense (c)

9,055

2,981

1,839

13,875

Restructuring charges and transaction costs (b)

3,731

271

2,646

6,648

Non-income tax expense adjustment (b)

(578)

(64)

(642)

Severance (c)

1,437

432

1,869

Fair market value adjustment on contingent consideration liability (b)

(1,982)

(1,982)

Non-recurring litigation and regulatory related expenses (b)

3,517

3,517

Income attributable to non-controlling interest

(299)

(299)

Other

(17)

(17)

Adjusted EBITDA

$

53,727

$

12,514

$

(10,433)

$

55,808

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)

Six months ended June 30, 2020

Envestnet
Wealth
Solutions

Envestnet
Data &
Analytics

Nonsegment

Total

Total Revenues

$

386,105

$

95,747

$

$

481,852

Deferred revenue fair value adjustment (a)

516

516

Adjusted revenues

386,621

95,747

482,368

Less: Asset-based cost of revenues

(130,467)

(130,467)

Adjusted net revenues

$

256,154

$

95,747

$

$

351,901

Revenues:

Asset-based

$

257,057

$

$

$

257,057

Subscription-based

121,733

87,797

209,530

Total recurring revenues

378,790

87,797

466,587

Professional services and other revenues

7,315

7,950

15,265

Total revenues

386,105

95,747

481,852

Operating expenses:

Cost of revenues:

Asset-based

130,467

130,467

Subscription-based

2,419

10,665

13,084

Professional services and other

17

214

231

Total cost of revenues

132,903

10,879

143,782

Compensation and benefits

135,384

55,915

14,696

205,995

General and administration

47,110

17,854

14,594

79,558

Depreciation and amortization

39,501

16,625

56,126

Total operating expenses

$

354,898

$

101,273

$

29,290

$

485,461

Income (loss) from operations

$

31,207

$

(5,526)

$

(29,290)

$

(3,609)

Add:

Deferred revenue fair value adjustment (a)

516

516

Accretion on contingent consideration and purchase liability (b)

746

164

910

Depreciation and amortization

39,501

16,625

56,126

Non-cash compensation expense (c)

18,752

7,207

3,910

29,869

Restructuring charges and transaction costs (b)

4,920

456

4,092

9,468

Non-income tax expense adjustment (b)

(328)

(126)

(454)

Severance (c)

12,439

2,092

1,320

15,851

Fair market value adjustment on contingent consideration liability (b)

(1,982)

(1,982)

Non-recurring litigation and regulatory related expenses (b)

4,220

4,220

Income attributable to non-controlling interest

(500)

(500)

Other

(29)

(29)

Adjusted EBITDA

$

107,224

$

23,130

$

(19,968)

$

110,386

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)

Three months ended June 30, 2019

Envestnet
Wealth Solutions

Envestnet Data
& Analytics

Nonsegment

Total

Revenues

$

176,890

$

47,555

$

$

224,445

Deferred revenue fair value adjustment (a)

3,414

3,414

Adjusted revenues

180,304

47,555

227,859

Less: Asset-based cost of revenues

(60,293)

(60,293)

Adjusted net revenues

$

120,011

$

47,555

$

$

167,566

Revenues:

Asset-based

$

120,070

$

$

$

120,070

Subscription-based

50,078

42,180

92,258

Total recurring revenues

170,148

42,180

212,328

Professional services and other revenues

6,742

5,375

12,117

Total revenues

176,890

47,555

224,445

Operating expenses:

Cost of revenues:

Asset-based

60,293

60,293

Subscription-based

1,115

5,582

6,697

Professional services and other

4,842

248

5,090

Total cost of revenues

66,250

5,830

72,080

Compensation and benefits

56,219

31,593

15,474

103,286

General and administration

25,666

8,553

8,202

42,421

Depreciation and amortization

16,376

10,539

26,915

Total operating expenses

$

164,511

$

56,515

$

23,676

$

244,702

Income (loss) from operations

$

12,379

$

(8,960)

$

(23,676)

$

(20,257)

Add:

Deferred revenue fair value adjustment (a)

3,414

3,414

Accretion on contingent consideration and purchase liability (b)

502

502

Depreciation and amortization

16,376

10,539

26,915

Non-cash compensation expense (c)

8,592

3,767

2,629

14,988

Restructuring charges and transaction costs (b)

794

(196)

12,610

13,208

Non-income tax expense adjustment (b)

908

908

Severance (c)

818

2,448

14

3,280

Loss attributable to non-controlling interest

210

210

Other

43

43

Adjusted EBITDA

$

44,036

$

7,598

$

(8,423)

$

43,211

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)

Six Months Ended June 30, 2019

Envestnet
Wealth Solutions

Envestnet
Data & Analytics

Nonsegment

Total

Revenues

$

329,595

$

94,516

$

$

424,111

Deferred revenue fair value adjustment (a)

3,420

3,420

Adjusted revenues

333,015

94,516

427,531

Less: Asset-based cost of revenues

(114,135)

(114,135)

Adjusted net revenues

$

218,880

$

94,516

$

$

313,396

Revenues:

Asset-based

$

229,004

$

$

$

229,004

Subscription-based

91,104

84,241

175,345

Total recurring revenues

320,108

84,241

404,349

Professional services and other revenues

9,487

10,275

19,762

Total revenues

329,595

94,516

424,111

Operating expenses:

Cost of revenues:

Asset-based

114,135

114,135

Subscription-based

3,123

11,251

14,374

Professional services and other

4,847

369

5,216

Total cost of revenues

122,105

11,620

133,725

Compensation and benefits

104,774

62,957

22,272

190,003

General and administration

45,850

18,038

19,057

82,945

Depreciation and amortization

27,643

18,789

46,432

Total operating expenses

$

300,372

$

111,404

$

41,329

$

453,105

Income (loss) from operations

$

29,223

$

(16,888)

$

(41,329)

$

(28,994)

Add:

Deferred revenue fair value adjustment (a)

3,420

3,420

Accretion on contingent consideration and purchase liability (b)

742

742

Depreciation and amortization

27,643

18,789

46,432

Non-cash compensation expense (c)

14,269

7,955

5,628

27,852

Restructuring charges and transaction costs (b)

1,056

769

18,749

20,574

Non-income tax expense adjustment (b)

1,108

10

1,118

Severance (c)

1,168

4,496

96

5,760

Loss attributable to non-controlling interest

241

241

Other

65

1

2

68

Adjusted EBITDA

$

78,935

$

15,132

$

(16,854)

$

77,213

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except accounts and advisors)
(unaudited)

As of

June 30,

September 30,

December 31,

March 31,

June 30,

2019

2019

2019

2020

2020

(in millions, except accounts and advisors data)

Platform Assets

Assets under Management ("AUM")

$

182,143

$

188,739

$

207,083

$

185,065

$

215,994

Assets under Administration ("AUA")

330,226

316,742

343,505

312,472

344,957

Total AUM/A

512,369

505,481

550,588

497,537

560,951

Subscription

2,835,780

2,947,582

3,205,281

2,875,394

3,247,400

Total Platform Assets

$

3,348,149

$

3,453,063

$

3,755,869

$

3,372,931

$

3,808,351

Platform Accounts

AUM

907,034

934,811

935,039

970,896

1,007,386

AUA

1,196,114

1,136,430

1,193,882

1,254,856

1,252,247

Total AUM/A

2,103,148

2,071,241

2,128,921

2,225,752

2,259,633

Subscription

9,492,653

9,692,714

9,793,175

10,090,172

10,003,156

Total Platform Accounts

11,595,801

11,763,955

11,922,096

12,315,924

12,262,789

Advisors

AUM/A

39,727

39,735

40,563

40,971

41,206

Subscription

59,292

60,319

61,180

62,077

62,404

Total Advisors

99,019

100,054

101,743

103,048

103,610

The following table summarizes the changes in AUM and AUA for the three months ended June 30, 2020:

3/31/2020

Gross
Sales

Redemptions

Net
Flows

Market
Impact

6/30/2020

(in millions except account data)

AUM

$

185,065

$

16,843

$

(9,860)

$

6,983

$

23,946

$

215,994

AUA

312,472

16,526

(23,025)

(6,499)

38,984

344,957

Total AUM/A

$

497,537

$

33,369

$

(32,885)

$

484

$

62,930

$

560,951

Fee-Based Accounts

2,225,752

33,881

2,259,633

The above AUM/A gross sales figures include $1.6 billion in new client conversions. The Company onboarded an additional $24.1 billion in subscription conversions during the three months ended June 30, 2020, bringing total conversions for the quarter to $25.7 billion.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200806005971/en/

Contacts

Investor Relations
investor.relations@envestnet.com
(312) 827-3940

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