Envestnet Reports Fourth Quarter and Full Year 2010 Financial Results
CHICAGO--(BUSINESS WIRE)-- Envestnet (NYSE: ENV), a leading provider of wealth management solutions to financial advisors, today reported financial results for its fourth quarter and full year ended December 31, 2010.
Financial results for the fourth quarter of 2010 compared to the fourth quarter of 2009:
-- Revenues from assets under management (AUM) or assets under
administration (AUA) increased 33% to $21.8 million for the fourth
quarter of 2010 from $16.4 million for the fourth quarter of 2009; total
revenues, which includes licensing and professional services fees,
increased 27% to $27.6 million for the fourth quarter of 2010 from $21.8
million for the fourth quarter of 2009
-- Adjusted EBITDA(1) increased 56% to $5.5 million for the fourth quarter
of 2010 from $3.6 million for the fourth quarter of 2009
-- Adjusted Net Income(1) increased to $2.3 million, or $0.07 per diluted
share, for the fourth quarter of 2010 from an adjusted net loss of $
(0.02) million, or $(0.02) per diluted share, for the fourth quarter of
2009
-- Net income attributable to common stockholders was $0.9 million, or
$0.03 per diluted share, for the fourth quarter of 2010 compared to a
net loss attributable to common stockholders of $(3.2) million, or $
(0.25) per diluted share, for the fourth quarter of 2009
Financial results for full year 2010 compared to 2009:
-- Revenues from AUM or AUA increased 34% to $76.0 million for 2010 from
$56.9 million for 2009; total revenues increased 26% to $98.1 million
for 2010 from $77.9 million for 2009
-- Adjusted EBITDA(1) increased 71% to $18.1 million for 2010 from $10.6
million for 2009
-- Adjusted Net Income(1) increased 212% to $7.6 million, or $0.24 per
diluted share, for 2010 from $2.4 million, or $0.06 per diluted share,
for 2009
-- Net loss attributable to common stockholders was $(1.0) million, or $
(0.05) per diluted share, for 2010 compared to $(1.6) million, or $
(0.12) per diluted share, for 2009
"Strong industry trends are supporting our growth. More advisors are turning independent, more investors are seeking a trusted advisor, and because of regulatory and other changes, a fiduciary standard of care is emerging as the industry standard. As a result, more advisors are turning to Envestnet to help them better serve their high net worth and affluent clients," said Jud Bergman, founder and chief executive officer of Envestnet. "Our recent asset flows and a strong pipeline of new business opportunities position Envestnet for continued growth in revenue and profitability in 2011."
Key Operating Metrics as of and for the quarter ended December 31, 2010:
-- AUM of $14.5 billion, up 41% from December 31, 2009
-- AUA of $49.2 billion, up 80% from December 31, 2009
-- Accounts (AUM/A only) of 306,825, up 75% from December 31, 2009
-- Advisors (AUM/A only) of 13,833, up 65% from December 31, 2009
-- Gross sales of AUM/A of $9.0 billion, resulting in net flows of $1.7
billion
The following table summarizes the changes in AUM and AUA for the quarter ended December 31, 2010:
Amounts in Millions Actual Gross Redemp- Net Market Actual Except Account Data 9/30/10 Sales tions Flows Impact 12/31/10 Assets under $ 12,352 $ 2,665 $ 1,223 $ 1,442 $ 692 $ 14,486 Management (AUM) Assets under 46,655 $ 6,367 $ 6,100 267 2,280 49,202 Administration (AUA) Total AUM/A $ 59,007 $ 9,032 $ 7,323 $ 1,709 $ 2,972 $ 63,688 Fee-Based Accounts 285,248 306,825
During the fourth quarter, the Company added $5.7 billion of enterprise conversions, $2.3 billion of which is included in the above AUM/A gross sales figures. The remaining $3.4 billion of conversions were established under new licensing agreements. Also during the quarter, there were approximately $2 billion of AUA redemptions related to the departure of a client that was acquired by another firm earlier in 2010.
Review of Financial Results
Total revenues increased 27% to $27.6 million for the fourth quarter of 2010 from $21.8 million for the fourth quarter of 2009. The increase was primarily due to a 33% increase in revenues from assets under management or administration to $21.8 million from $16.4 million in the prior year period.
Cost of revenues increased 35% to $9.3 million in the fourth quarter of 2010 from $6.9 million in the fourth quarter of 2009 due to the increase in revenue from AUM and AUA. Compensation and benefits increased 29% to $9.8 million in the fourth quarter of 2010 from $7.6 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 fourth quarter of 2010 was $5.5 million, up 56% from $3.6 million in the prior year period. Adjusted Operating Income(1) was $4.1 million, up 72% from $2.4 million in the prior year period. Adjusted Net Income(1) was $2.3 million, compared to an adjusted net loss of $(0.02) million in the fourth quarter of 2009. Adjusted Net Income Per Share(1) was $0.07 per diluted share, compared to $(0.02) per diluted share in the fourth quarter of 2009.
Income from operations was $1.9 million for the fourth quarter of 2010 compared to $1.1 million for the fourth quarter of 2009. Net income attributable to common stockholders was $0.9 million, or $0.03 per diluted share, for the fourth quarter of 2010 compared to a net loss attributable to common stockholders of $(3.2) million, or $(0.25) per diluted share, for the fourth quarter of 2009.
Conference Call
The Company will host a conference call to discuss fourth quarter and full year 2010 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) 455-2238, or (719) 325-2442 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 9424218. The replay will be available until Thursday, February 17, 2011.
About Envestnet
Envestnet, Inc. is a leading provider of wealth management solutions to financial advisors who are independent, as well as those who are associated with small or mid-sized financial advisory firms and larger financial institutions. Envestnet's technology is focused on addressing financial advisors' front-, middle- and back-office needs. Envestnet is headquartered in Chicago. 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).
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 February 10, 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)
December 31,
2009 2010
Assets
Current assets:
Cash and cash equivalents $ 31,525 $ 67,668
Fees receivable, net of allowance for doubtful 5,800 9,135
accounts of $76 and $0, respectively
Deferred tax assets - current 134 107
Notes receivable including affiliate - current, net of 714 -
allowance of $103 and $0, respectively
Prepaid expenses and other current assets 1,427 2,026
Total current assets 39,600 78,936
Notes receivable including affiliate and officer, net 2,322 -
of allowance of $206 and $0, respectively
Property and equipment, net 8,560 9,713
Internally developed software, net 3,887 3,621
Intangible assets, net 2,238 1,330
Goodwill 1,023 2,031
Deferred tax assets 13,998 13,649
Customer inducements 282 30,400
Other non-current assets 2,154 2,188
Total assets $ 74,064 $ 141,868
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 10,272 $ 12,859
Accounts payable 1,892 1,707
Customer inducements payable - current 150 1,000
Note payable - current - 159
Deferred revenue 24 232
Total current liabilities 12,338 15,957
Deferred rent and lease incentive liability 3,999 4,015
Customer inducements payable - 18,806
Note payable - 159
Other non-current liabilities 475 612
Total liabilities 16,812 39,549
Stockholders' equity
Preferred stock (total liquidation preference of
$81,779 and $0 as of December 31, 2009 and 2010, - -
respectively)
Common stock, par value $0.005, 60,000,000 shares and
500,000,000 shares authorized as of December 31, 2009
and 2010, respectively; 13,524,276 and 43,068,371
shares issued as of December 31, 2009 and 2010, 68 189
respectively; 12,910,676 and 31,368,822 shares
outstanding as of December 31, 2009 and 2010,
respectively
Additional paid-in capital 106,893 157,804
Accumulated deficit (43,375 ) (45,347 )
Treasury stock at cost, 613,600 shares and 11,699,549 (6,334 ) (10,327 )
shares as of December, 31, 2009 and 2010, respectively
Total stockholders' equity 57,252 102,319
Total liabilities and stockholders' equity $ 74,064 $ 141,868
Envestnet, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2009 2010 2009 2010
Revenues:
Assets under
management or $ 16,427 $ 21,839 $ 56,857 $ 75,951
administration
Licensing and
professional 5,368 5,764 21,067 22,101
services
Total revenues 21,795 27,603 77,924 98,052
Operating
expenses:
Cost of revenues 6,930 9,321 24,624 31,444
Compensation and 7,645 9,837 28,763 37,027
benefits
General and 4,872 4,962 15,726 21,607
administration
Depreciation and 1,209 1,493 4,499 5,703
amortization
Restructuring - 46 - 961
charges
Total operating 20,656 25,659 73,612 96,742
expenses
Income from 1,139 1,944 4,312 1,310
operations
Other income
(expense):
Interest income 49 30 221 149
Interest expense - (243 ) - (564 )
Unrealized gain 2 5 19 12
on investments
Impairment of (3,590 ) - (3,608 ) -
investments
Total other (3,539 ) (208 ) (3,368 ) (403 )
income (expense)
Income (loss)
before income (2,400 ) 1,736 944 907
tax provision
Income tax 583 869 1,816 1,533
provision
Net income (2,983 ) 867 (872 ) (626 )
(loss)
Less preferred (181 ) - (720 ) (422 )
stock dividends
Less net income
allocated to - - - -
participating
preferred stock
Net income
(loss)
attributable to $ (3,164 ) $ 867 $ (1,592 ) $ (1,048 )
common
stockholders
Net income
(loss) per share
attributable to
common
stockholders:
Basic $ (0.25 ) $ 0.03 $ (0.12 ) $ (0.05 )
Diluted $ (0.25 ) $ 0.03 $ (0.12 ) $ (0.05 )
Weighted average
common shares
outstanding:
Basic 12,910,676 31,366,044 12,910,998 20,805,911
Diluted 12,910,676 32,979,172 12,910,998 20,805,911
Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
Year Ended
December 31,
2009 2010
OPERATING ACTIVITIES:
Net loss $ (872 ) $ (626 )
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 4,499 5,703
Amortization of customer inducements 18 3,238
Amortization of deferred rent and lease incentive 544 58
Provision for doubtful accounts 385 2,668
Unrealized gain on investments (19 ) (12 )
Impairment of investments 3,608 -
Deferred income taxes 1,572 1,215
Stock-based compensation 780 1,731
Interest expense - 564
Changes in operating assets and liabilities:
Fees receivable (1,338 ) (3,718 )
Prepaid expenses and other current assets (148 ) (599 )
Other non-current assets 42 (52 )
Customer inducements (150 ) (11,300 )
Accrued expenses 38 2,437
Accounts payable (475 ) (185 )
Deferred revenue (187 ) 208
Other non-current liabilities 68 137
Net cash provided by operating activities 8,365 1,467
INVESTING ACTIVITIES:
Purchase of property and equipment (3,078 ) (4,169 )
Capitalization of internally developed software (1,306 ) (1,340 )
Proceeds from repayment of notes receivable - 985
Increase in notes receivable (54 ) (90 )
Investments in non-marketable securities (812 ) -
Proceeds from investments 210 30
Acquisition of businesses, net - (917 )
Net cash used in investing activities (5,040 ) (5,501 )
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 3 1,925
Proceeds from exercise of warrants - 1,525
Net proceeds from issuance of common stock - 42,066
Purchase of treasury stock (248 ) (3,993 )
Preferred stock dividends - (1,346 )
Net cash provided by (used in) financing activities (245 ) 40,177
INCREASE IN CASH AND CASH EQUIVALENTS 3,080 36,143
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,445 31,525
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 31,525 $ 67,668
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands, unaudited)
Three Months Ended Year Ended
December 31, December 31,
2009 2010 2009 2010
Net income (loss) $ (2,983 ) $ 867 $ (872 ) $ (626 )
Add (deduct):
Interest income (49 ) (30 ) (221 ) (149 )
Interest expense - 243 - 564
Income tax provision 583 869 1,816 1,533
Depreciation and amortization 1,209 1,493 4,499 5,703
Stock-based compensation expense 212 623 780 1,731
Unrealized gain on investments (2 ) (5 ) (19 ) (12 )
Impairment of investments 3,590 - 3,608 -
Restructuring charges (excluding - 46 - 864
severance)
Severance - 133 - 667
Bad debt expense 385 - 385 2,668
Customer inducement costs 18 1,308 18 3,239
Litigation related expense 601 - 601 1,933
Adjusted EBITDA $ 3,564 $ 5,547 $ 10,595 $ 18,115
Three Months Ended Year Ended
December 31, December 31,
2009 2010 2009 2010
Income from operations $ 1,139 $ 1,944 $ 4,312 $ 1,310
Add:
Stock-based compensation expense 212 623 780 1,731
Restructuring charges (excluding - 46 - 864
severance)
Severance - 133 - 667
Bad debt expense 385 - 385 2,668
Customer inducement costs 18 1,308 18 3,239
Litigation related expense 601 - 601 1,933
Adjusted operating income $ 2,355 $ 4,054 $ 6,096 $ 12,412
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures (continued)
(In thousands, except share and per share information; unaudited)
Three Months Ended Year Ended
December 31, December 31,
2009 2010 2009 2010
Net income (loss) $ (2,983 ) $ 867 $ (872 ) $ (626 )
Add:
Stock-based
compensation 131 388 480 1,077
expense
Impairment of 2,211 - 2,223 -
investments
Restructuring
charges (excluding - 29 - 538
severance)
Severance - 82 - 415
Bad debt expense 237 - 237 2,668
Customer 11 814 11 2,015
inducement costs
Imputed interest - 158 - 340
expense
Litigation related 370 - 370 1,202
expense
Adjusted net (23 ) 2,338 2,449 7,629
income (loss)
Less: Preferred (181 ) - (720 ) (422 )
stock dividends
Less: Net income
allocated to - - (857 ) (1,887 )
participating
preferred stock
Adjusted net
income (loss)
attributable to $ (204 ) $ 2,338 $ 872 $ 5,320
common
stockholders
Basic number of
weighted-average 12,910,676 31,366,044 12,910,998 20,805,911
shares outstanding
Effect of dilutive
shares:
Options to
purchase common - 1,269,535 416,291 992,753
stock
Common warrants - 343,593 284,562 154,364
Diluted number of
weighted-average 12,910,676 32,979,172 13,611,851 21,953,028
shares outstanding
Adjusted net
income (loss) per $ (0.02 ) $ 0.07 $ 0.06 $ 0.24
share
Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except account and advisor data; unaudited)
As of
December 31, March 31, June 30, September 30, December 31,
2009 2010 2010 2010 2010
Platform Assets
Assets Under
Management $ 10,269 $ 10,916 $ 10,863 $ 12,352 $ 14,486
(AUM)
Assets Under
Administration 27,322 29,580 42,555 46,655 49,202
(AUA)
Subtotal AUM/A 37,591 40,496 53,418 59,007 63,688
Licensing 51,450 54,135 53,199 67,343 75,668
Total Platform $ 89,041 $ 94,631 $ 106,617 $ 126,350 $ 139,356
Assets
Platform
Accounts
AUM 48,541 49,020 52,477 56,094 65,663
AUA 126,634 136,335 222,482 229,154 241,162
Subtotal AUM/A 175,175 185,355 274,959 285,248 306,825
Licensing 510,865 545,299 550,651 574,903 603,950
Total Platform 686,040 730,654 825,610 860,151 910,775
Accounts
Advisors
AUM/A 8,408 8,465 12,871 13,011 13,833
Licensing 5,542 5,740 6,505 6,609 7,746
Total Advisors 13,950 14,205 19,376 19,620 21,579
Note: certain 2009 data have been reclassified between AUM and AUA to conform to current presentation format.
Source: Envestnet, Inc.
Released February 10, 2011