Envestnet, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

Fair Value Measurements

12 Months Ended

Dec. 31, 2023

The following tables set forth the Company’s financial assets and liabilities measured at fair value on a recurring basis, based on the three-tier fair value hierarchy as described in detail in "Note 2—Summary of Significant Accounting Policies":


	December 31, 2023
	Fair Value		Level I		Level II		Level III
	(in thousands)
Assets:
Money market funds	$	51,653	$	51,653	$	—	$	—
Assets to fund deferred compensation liability	10,961		—		—		10,961
Total assets	$	62,614	$	51,653	$	—	$	10,961
Liabilities:

Deferred compensation liability	$	8,045	$	8,045	$	—	$	—
Total liabilities	$	8,045	$	8,045	$	—	$	—


	December 31, 2022
	Fair Value		Level I		Level II		Level III
	(in thousands)
Assets:
Money market funds	$	2,628	$	2,628	$	—	$	—
Assets to fund deferred compensation liability	10,074		—		—		10,074
Total assets	$	12,702	$	2,628	$	—	$	10,074
Liabilities:

Deferred compensation liability	$	8,088	$	8,088	$	—	$	—
Total liabilities	$	8,088	$	8,088	$	—	$	—

The Company assesses the categorization of assets and liabilities by level at each measurement date, and transfers between levels are recognized on the actual date of the event or when changes in circumstances cause the transfer, in accordance with the Company’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. There were no transfers between Levels I, II and III during the year ended December 31, 2023.

The table below presents a reconciliation of the contingent consideration liability and assets used to fund the Company's deferred compensation liability, which are measured at fair value on a recurring basis using significant unobservable inputs (Level III):


	Contingent Consideration Liability		Assets to Fund Deferred Compensation Liability
	(in thousands)
Balance at December 31, 2021	$	743	$	11,140
Payments	(743)		—
Contributions	—		649
Fair value adjustments and fees	—		(1,715)
Balance at December 31, 2022	—		10,074
Fair value adjustments and fees	—		887
Balance at December 31, 2023	$	—	$	10,961

The fair market value of the assets used to fund the Company's deferred compensation liability is measured using the cash surrender value of the Company's life insurance premiums and is included in other assets in the consolidated balance sheets. Changes in fair value, if any, are recognized in the Company's earnings and included in general and administrative expense in the consolidated statements of operations.

Fair Value of Debt Agreements

The Company considered its Convertible Notes to be Level II liabilities as of December 31, 2023 and 2022, and used a market approach to calculate their respective fair values. The estimated fair value for each convertible note was determined based on estimated or actual bids and offers in an over-the-counter market on December 31, 2023 and December 31, 2022, respectively (See “Note 14—Debt”).

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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