Envestnet Reports First Quarter 2011 Financial Results
CHICAGO--(BUSINESS WIRE)-- Envestnet (NYSE: ENV), a leading provider of technology-enabled wealth management solutions to financial advisors, today reported financial results for its first quarter ended March 31, 2011.
Financial results for the first quarter of 2011 compared to the first quarter of 2010:
-- Revenues from assets under management (AUM) or assets under
administration (AUA) increased 42% to $23.3 million for the first
quarter of 2011 from $16.4 million for the first quarter of 2010; total
revenues, which includes licensing and professional services fees,
increased 35% to $29.3 million for the first quarter of 2011 from $21.6
million for the first quarter of 2010
-- Adjusted EBITDA(1) increased 104% to $6.2 million for the first quarter
of 2011 from $3.1 million for the first quarter of 2010
-- Adjusted Net Income(1) increased to $2.8 million, or $0.09 per diluted
share, for the first quarter of 2011 from $1.2 million, or $0.04 per
diluted share, for the first quarter of 2010
-- Net income attributable to common stockholders was $1.4 million, or
$0.04 per diluted share, for the first quarter of 2011 compared to a net
loss attributable to common stockholders of $(2.7) million, or $(0.21)
per diluted share, for the first quarter of 2010
"Envestnet delivered strong sales and flows for the quarter as advisors increasingly look to our integrated wealth management offerings to empower them to better serve their clients," said Jud Bergman, founder and chief executive officer of Envestnet. "Demand for our innovative solutions remains high among registered investment advisors and financial advisors within broker-dealers. We are on track for continued growth in revenue and profitability in 2011."
Key Operating Metrics as of and for the quarter ended March 31, 2011:
-- AUM of $15.6 billion, up 43% from March 31, 2010
-- AUA of $53.1 billion, up 80% from March 31, 2010
-- Advisors (AUM/A only) of 14,140, up 67% from March 31, 2010
-- Gross sales of AUM/A of $8.2 billion, resulting in net flows of $3.0
billion
The following table summarizes the changes in AUM and AUA for the quarter ended March 31, 2011:
Gross Redemp- Net Market
In Millions
Except Account 12/31/10 Sales tions Flows Impact 3/31/11
Data
Assets under $ 14,486 $ 1,958 $ (1,353 ) $ 605 $ 544 $ 15,635
Management (AUM)
Assets under
Administration 49,202 6,210 (3,821 ) 2,389 1,524 53,115
(AUA)
Total AUM/A $ 63,688 $ 8,168 $ (5,174 ) $ 2,994 $ 2,068 $ 68,750
Fee-Based 306,825 32,373 (15,542 ) 16,831 323,656
Accounts
During the first quarter, the Company added $1.2 billion of conversions, which are included in the above AUM/A gross sales figures.
Review of Financial Results
Total revenues increased 35% to $29.3 million for the first quarter of 2011 from $21.6 million for the first quarter of 2010. The increase was primarily due to a 42% increase in revenues from assets under management or administration to $23.3 million from $16.4 million in the prior year period.
Total operating expenses in the first quarter of 2011 increased 10% to $26.7 million from $24.3 million in the prior year period. After certain non-GAAP adjustments(2) included in our Adjusted EBITDA reconciliation, total operating expenses increased 29% compared to the prior year. Cost of revenues increased 44% to $10.1 million in the first quarter of 2011 from $7.0 million in the first quarter of 2010 due to the increase in revenue from AUM and AUA. Compensation and benefits increased 25% to $10.1 million in the first quarter of 2011 from $8.1 million in the prior year period, primarily due to an increase in headcount between periods as the Company staffed to support the growth of the business.
Adjusted EBITDA(1) in the first quarter of 2011 was $6.2 million, up 104% from $3.1 million in the prior year period, reflecting expanding margins. Adjusted Operating Income(1) was $4.7 million, up 172% from $1.7 million in the prior year period. Adjusted Net Income(1) was $2.8 million, compared to $1.2 million in the first quarter of 2010. Adjusted Net Income Per Share(1) was $0.09 per diluted share, compared to $0.04 per diluted share in the first quarter of 2010.
Income from operations was $2.6 million for the first quarter of 2011 compared to a loss from operations of $(2.7) million for the first quarter of 2010. Net income attributable to common stockholders was $1.4 million, or $0.04 per diluted share, for the first quarter of 2011 compared to a net loss attributable to common stockholders of $(2.7) million, or $(0.21) per diluted share, for the first quarter of 2010.
Conference Call
The Company will host a conference call to discuss first quarter 2011 financial results today at 5:00 p.m. ET. The call will be webcast live from the Company's investor relations website at http://ir.envestnet.com/ and can also be accessed live over the phone by dialing (888) 300-2343, or (719) 457-2621 for international callers. A replay will be available beginning one hour after the call and can be accessed by dialing (877) 870-5176, or (858) 384-5517 for international callers; the conference ID is 2961711. The replay will be available until Thursday, May 12, 2011.
About Envestnet
Envestnet, Inc. is a leading provider of technology-enabled wealth management solutions to financial advisors. Envestnet's technology is focused on addressing financial advisors' front-, middle- and back-office needs. Envestnet is headquartered in Chicago with offices in Boston, Denver, New York, Silicon Valley and Trivandrum, India. For more information on Envestnet please go to www.envestnet.com.
(1) Non-GAAP Financial Measures
"Adjusted EBITDA" represents net income (loss) before interest income, interest expense, income tax provision (benefit), depreciation and amortization, non-cash stock-based compensation expense, unrealized gain (loss) on investments, impairment of investments, restructuring charges, severance, bad debt expense, customer inducement costs and litigation related expense.
"Adjusted operating income" represents income (loss) from operations before non-cash stock-based compensation expense, restructuring charges, severance, bad debt expense, customer inducement costs and litigation related expense.
"Adjusted net income" represents net income (loss) before non-cash stock-based compensation expense, impairment of investments, restructuring expense, severance, bad debt expense, customer inducement costs, imputed interest expense and litigation related expense. Reconciling items are tax effected using the income tax rates in effect on the applicable date.
"Adjusted net income per 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 at the end of this press release. These measures should not be viewed as a substitute for net income determined in accordance with United States generally accepted accounting principles (GAAP).
(2) Adjustments include stock-based compensation expense, restructuring charges, severance, bad debt expense and litigation related expense. See the Reconciliation of Non-GAAP Financial Measures - Adjusted EBITDA table for 2011 and 2010 amounts.
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 (the "Company") expected financial performance and outlook, 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, difficulty in sustaining rapid revenue growth, which may place significant demands on the Company's administrative, operational and financial resources, fluctuations in the Company's revenue, the concentration of nearly all of the Company's revenues from the delivery of investment solutions and services to clients in the financial advisory industry, the Company's reliance on a limited number of clients for a material portion of its revenue, the renegotiation of fee percentages or termination of the Company's services by its clients, the impact of market and economic conditions on the Company's revenues, compliance failures, regulatory actions against the Company, the failure to protect the Company's intellectual property rights, the Company's inability to successfully execute the conversion of its clients' assets from their technology platform to the Company's technology platform in a timely and accurate manner, general economic, political and regulatory conditions, as well as management's response to these factors. More information regarding these and other risks, uncertainties and factors is contained in the Company's filings with the Securities and Exchange Commission ("SEC") which are available on the SEC's website at www.sec.gov or the Company's 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 May 5, 2011 and, unless required by law, the Company undertakes 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, except share information)
(Unaudited)
March 31, December 31,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 71,815 $ 67,668
Fees receivable 8,568 9,135
Deferred tax assets, net - 107
Prepaid expenses and other current assets 2,506 2,026
Total current assets 82,889 78,936
Property and equipment, net 10,268 9,713
Internally developed software, net 3,654 3,621
Intangible assets, net 1,048 1,330
Goodwill 2,031 2,031
Deferred tax assets, net 13,103 13,649
Customer inducements 29,194 30,400
Other non-current assets 2,176 2,188
Total assets $ 144,363 $ 141,868
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 11,647 $ 12,859
Accounts payable 2,056 1,707
Customer inducements payable 1,000 1,000
Note payable 162 159
Deferred tax liabilities, net 122 -
Deferred revenue 68 232
Total current liabilities 15,055 15,957
Deferred rent and lease incentive liability 3,946 4,015
Customer inducements payable 19,011 18,806
Note payable 162 159
Other non-current liabilities 672 612
Total liabilities 38,846 39,549
Stockholders' equity
Preferred stock - -
Common stock, par value $0.005, 500,000,000 shares
authorized as of
March 31, 2011 and December 31, 2010, respectively;
43,327,681 and 43,068,371 shares issued as of March
31, 2011 and December 31, 2010, respectively; 216 215
31,622,508 and 31,368,822 shares outstanding as of
March 31, 2010 and December 31, 2010, respectively
Additional paid-in capital 159,665 157,778
Accumulated deficit (43,943 ) (45,347 )
Treasury stock at cost, 11,705,173 and 11,699,549
shares as of March 31, 2011 and December, 31, 2010, (10,421 ) (10,327 )
respectively
Total stockholders' equity 105,517 102,319
Total liabilities and stockholders' equity $ 144,363 $ 141,868
Envestnet, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
Three Months Ended
March 31,
2011 2010
Revenues:
Assets under management or administration $ 23,271 $ 16,396
Licensing and professional services 5,991 5,236
Total revenues 29,262 21,632
Operating expenses:
Cost of revenues 10,128 7,020
Compensation and benefits 10,146 8,090
General and administration 4,876 7,109
Depreciation and amortization 1,548 1,331
Restructuring charges 10 752
Total operating expenses 26,708 24,302
Income (loss) from operations 2,554 (2,670 )
Other income (expense):
Interest income 26 44
Interest expense (211 ) -
Unrealized gain on investments 3 3
Total other income (expense) (182 ) 47
Income (loss) before income tax provision 2,372 (2,623 )
Income tax provision (benefit) 968 (112 )
Net income (loss) 1,404 (2,511 )
Less preferred stock dividends - (178 )
Less net income allocated to participating - -
preferred stock
Net income (loss) attributable to common $ 1,404 $ (2,689 )
stockholders
Net income (loss) per share attributable to
common stockholders:
Basic $ 0.04 $ (0.21 )
Diluted $ 0.04 $ (0.21 )
Weighted average common shares outstanding:
Basic 31,433,964 12,966,820
Diluted 32,872,600 12,966,820
Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
Three Months Ended
March 31,
2011 2010
OPERATING ACTIVITIES:
Net income (loss) $ 1,404 $ (2,511 )
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,548 1,331
Amortization of customer inducements 1,206 15
Deferred rent and lease incentive (69 ) 64
Provision for doubtful accounts - 2,668
Unrealized gain on investments (3 ) (3 )
Deferred income taxes 775 (86 )
Stock-based compensation 816 232
Interest expense 211 -
Changes in operating assets and liabilities:
Fees receivable 567 (76 )
Prepaid expenses and other current assets (480 ) (1,161 )
Other non-current assets - (62 )
Accrued expenses (1,212 ) 266
Accounts payable 349 130
Deferred revenue (164 ) (1 )
Other non-current liabilities 60 34
Net cash provided by operating activities 5,008 840
INVESTING ACTIVITIES:
Purchase of property and equipment (1,419 ) (1,889 )
Capitalization of internally developed software (435 ) (295 )
Proceeds from repayment of notes receivable - 128
Increase in notes receivable - (40 )
Proceeds from investments 15 13
Net cash used in investing activities (1,839 ) (2,083 )
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 1,072 16
Proceeds from exercise of warrants - 1,505
Purchase of treasury stock (94 ) (399 )
Net cash provided by financing activities 978 1,122
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,147 (121 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 67,668 31,525
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 71,815 $ 31,404
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands, unaudited)
Three Months Ended
March 31,
2011 2010
Net income (loss) $ 1,404 $ (2,511 )
Add (deduct):
Interest income (26 ) (44 )
Interest expense 211 -
Income tax provision (benefit) 968 (112 )
Depreciation and amortization 1,548 1,331
Stock-based compensation expense 816 232
Unrealized gain on investments (3 ) (3 )
Restructuring charges (excluding severance) 10 656
Severance 57 96
Bad debt expense - 2,668
Customer inducement costs 1,206 15
Litigation related expense 33 724
Adjusted EBITDA $ 6,224 $ 3,052
Three Months Ended
March 31,
2011 2010
Income (loss) from operations $ 2,554 $ (2,670 )
Add:
Stock-based compensation expense 816 232
Restructuring charges (excluding severance) 10 656
Severance 57 96
Bad debt expense - 2,668
Customer inducement costs 1,206 15
Litigation related expense 33 724
Adjusted operating income $ 4,676 $ 1,721
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures (continued)
(In thousands, except share and per share information; unaudited)
Three Months Ended
March 31,
2011* 2010*
Net income (loss) $ 1,404 $ (2,511 )
Add:
Stock-based compensation expense 488 139
Restructuring charges (excluding severance) 6 392
Severance 34 58
Bad debt expense - 2,668
Customer inducement costs 721 9
Imputed interest expense 122 -
Litigation related expense 20 433
Adjusted net income 2,795 1,188
Less: Preferred stock dividends - (178 )
Less: Net income allocated to participating - (501 )
preferred stock
Adjusted net income attributable to common $ 2,795 $ 509
stockholders
Basic number of weighted-average shares 31,433,964 12,966,820
outstanding
Effect of dilutive shares:
Options to purchase common stock 1,137,492 924,307
Common warrants 301,144 235,805
Diluted number of weighted-average shares 32,872,600 14,126,932
outstanding
Adjusted net income per share $ 0.09 $ 0.04
* Adjustments, excluding bad debt expense, are tax effected using an income tax rate of 40.2% for 2011 and 2010.
Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except account and advisor data; unaudited)
As of
March 31, June 30, September 30, December 31, March 31,
2010 2010 2010 2010 2011
Platform Assets
Assets Under $ 10,916 $ 10,863 $ 12,352 $ 14,486 $ 15,635
Management (AUM)
Assets Under
Administration 29,580 42,555 46,655 49,202 53,115
(AUA)
Subtotal AUM/A 40,496 53,418 59,007 63,688 68,750
Licensing 54,135 53,199 67,343 75,668 83,538
Total Platform $ 94,631 $ 106,617 $ 126,350 $ 139,356 $ 152,288
Assets
Platform Accounts
AUM 49,020 52,477 56,094 65,663 71,396
AUA 136,335 222,482 229,154 241,162 252,260
Subtotal AUM/A 185,355 274,959 285,248 306,825 323,656
Licensing 545,299 550,651 574,903 603,950 601,512
Total Platform 730,654 825,610 860,151 910,775 925,168
Accounts
Advisors
AUM/A 8,465 12,871 13,011 13,833 14,140
Licensing 5,740 6,505 6,609 7,746 7,895
Total Advisors 14,205 19,376 19,620 21,579 22,035
Source: Envestnet, Inc.
Released May 5, 2011