Envestnet Reports Third Quarter 2010 Financial Results

CHICAGO--(BUSINESS WIRE)-- Envestnet, Inc. (NYSE: ENV), a leading provider of technology-enabled investment and practice management solutions to financial advisors, today reported financial results for its third quarter ended September 30, 2010.

Financial results for the third quarter of 2010 compared to the third quarter of 2009:

    --  Revenue increased 25% to $24.6 million for the third quarter of 2010
        from $19.7 million for the third quarter of 2009; revenue from assets
        under management or administration increased 31% to $19.0 million for
        the third quarter of 2010 from $14.5 million for the third quarter of
        2009
    --  Net income attributable to common stockholders was $0.5 million, or
        $0.02 per diluted share, for the third quarter of 2010 compared to $0.3
        million, or $0.02 per diluted share, for the third quarter of 2009
    --  Adjusted EBITDA(1) increased 84% to $5.0 million for the third quarter
        of 2010 from $2.7 million for the third quarter of 2009
    --  Adjusted Net Income(1) increased 118% to $2.1 million, or $0.07 per
        diluted share, for the third quarter of 2010 from $1.0 million, or $0.03
        per diluted share, for the third quarter of 2009

"We are pleased with our third quarter results and the momentum in our overall business, as reflected in our increase in advisors and accounts, as well as our gross sales and net flows," said Jud Bergman, founder and chief executive officer of Envestnet. "As investors seek a higher standard for advice, we believe more advisors will turn to Envestnet for a comprehensive, integrated wealth management solution for their clients."

Key Operating Metrics as of and for the quarter ended September 30, 2010:

    --  Assets under Management (AUM) of $12.4 billion
    --  Assets under Administration (AUA) of $46.7 billion
    --  Accounts (AUM/A only) of 285,248
    --  Advisors (AUM/A only) of 13,011
    --  Gross sales of AUM/A of $5.7 billion, resulting in net flows of $2.0
        billion

The following table summarizes the changes in AUM and AUA for the quarter ended September 30, 2010:



Amounts in
Millions         Actual      Gross      Redemp-       Net        Market    Actual
Except Account   6/30/10     Sales      tions         Flows      Impact    9/30/10
Data

Assets under
Management       $ 10,863    $ 1,323    $ (797    )   $ 526      $ 963     $ 12,352
(AUM)

Assets under
Administration     42,555    $ 4,376    $ (2,875  )     1,501      2,599     46,655
(AUA)

Total AUM/A      $ 53,418    $ 5,699    $ (3,672  )   $ 2,027    $ 3,562   $ 59,007

Fee-Based          274,959     25,137     (14,848 )     10,289               285,248
Accounts



Review of Financial Results

Total revenue increased 25% to $24.6 million for the third quarter of 2010 from $19.7 million for the third quarter of 2009. The increase was primarily due to a 31% increase in revenues from assets under management or administration to $19.0 million from $14.5 million in the prior year period.

Cost of revenues increased 18% to $7.4 million in the third quarter of 2010 from $6.3 million from the third quarter of 2009 due to the increase in revenue from AUM and AUA. Compensation and benefits increased 36% to $9.9 million in the third quarter of 2010 from $7.3 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.

Income from operations was $1.2 million for the third quarter of 2010 compared to $1.3 million for the third quarter of 2009. Net income attributable to common stockholders was $0.5 million, or $0.02 per diluted share, for the third quarter of 2010 compared to $0.3 million, or $0.02 per diluted share, for the third quarter of 2009.

On a non-GAAP basis, Adjusted EBITDA(1) in the third quarter of 2010 was $5.0 million, up 84% from $2.7 million in the prior year period. Adjusted Operating Income(1) was $3.6 million, up 129% from $1.6 million in the prior year period. Adjusted Net Income(1) was $2.1 million, up 118% from $1.0 million in the third quarter of 2009. Adjusted Net Income Per Share(1) was $0.07 per diluted share, up 133% from $0.03 per diluted share in the third quarter of 2009.

Conference Call

The Company will host a conference call to discuss third quarter 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) 300-2336, or (719) 325-2389 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 9674857. The replay will be available until Thursday, November 11, 2010.

About Envestnet

Envestnet, Inc. is a leading provider of technology-enabled investment and practice 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, Inc. please go to www.envestnet.com.

(1) Non-GAAP Financial Measures

"Adjusted EBITDA" represents net income (loss) before interest income, interest expense, net 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).

Forward-Looking Statements

This press release and its attachments contain forward-looking statements that involve risks, uncertainties and other factors concerning, among other things, Envestnet, Inc.'s (the "Company") expected financial performance and outlook, its strategic operational plans and growth strategy. The Company's actual results could differ materially from the results expressed or implied by such forward-looking statements, and 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 us, the failure to protect the Company's intellectual property rights and its 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. More information regarding these and other risks, uncertainties and factors is contained in the section entitled "Risk Factors" in the Company's Form 10-Q dated September 3, 2010, which is on file with the Securities and Exchange Commission ("SEC") and 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 November 4, 2010 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,   September 30,

                                                    2009           2010

Assets

Current assets:

Cash and cash equivalents                           $ 31,525       $ 63,565

Fees receivable, net of allowance for doubtful        5,800          7,762
accounts of $76 and $0, respectively

Deferred tax assets - current                         134            -

Notes receivable including affiliate - current,       714            -
net of allowance of $103 and $0, respectively

Prepaid expenses and other current assets             1,427          2,597

Total current assets                                  39,600         73,924

Notes receivable including affiliate and officer,     2,322          -
net of allowance of $206 and $0, respectively

Property and equipment, net                           8,560          9,730

Internally developed software, net                    3,887          3,645

Intangible assets, net                                2,238          1,661

Goodwill                                              1,023          1,983

Deferred tax assets                                   13,998         14,370

Customer inducements                                  282            30,016

Other non-current assets                              2,154          2,053

Total assets                                        $ 74,064       $ 137,382

Liabilities and Stockholders' Equity

Current liabilities:

Accrued expenses                                    $ 10,272       $ 11,573

Accounts payable                                      1,892          1,760

Customer inducements payable - current                150            1,000

Note payable - current                                -              156

Deferred tax liabilities - current                    -              108

Deferred revenue                                      24             81

Total current liabilities                             12,338         14,678

Deferred rent and lease incentive liability           3,999          4,085

Customer inducements payable                          -              16,878

Note payable                                          -              156

Other non-current liabilities                         475            576

Total liabilities                                     16,812         36,373

Stockholders' equity

Preferred stock (total liquidation preference of
$81,779 and $0 as of December 31, 2009 and            -              -
September 30, 2010, respectively)

Common stock, par value $0.005, 60,000,000 shares
authorized as of December 31, 2009 and September
30, 2010; 13,524,276 and 42,976,973 shares issued
as of December 31, 2009 and September 30, 2010,       68             189
respectively; 12,910,676 and 31,342,043 shares
outstanding as of December 31, 2009 and September
30, 2010, respectively

Additional paid-in capital                            106,893        156,599

Accumulated deficit                                   (43,375 )      (46,214 )

Treasury stock at cost, 613,600 shares and
11,634,930 shares as of December, 31, 2009 and        (6,334  )      (9,565  )
September 30, 2010, respectively

Total stockholders' equity                            57,252         101,009

Total liabilities and stockholders' equity          $ 74,064       $ 137,382




Envestnet, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share information)

(Unaudited)

                 Three Months Ended               Nine Months Ended

                 September 30,                    September 30,

                 2009            2010             2009            2010

Revenues:

Assets under
management or    $ 14,507        $ 19,001         $ 40,430        $ 54,112
administration

Licensing and
professional       5,221           5,569            15,699          16,337
services

Total revenues     19,728          24,570           56,129          70,449

Operating
expenses:

Cost of            6,264           7,405            17,694          22,123
revenues

Compensation       7,284           9,917            21,118          27,190
and benefits

General and        3,667           4,454            10,854          16,645
administration

Depreciation
and                1,167           1,451            3,290           4,210
amortization

Restructuring      -               96               -               915
charges

Total
operating          18,382          23,323           52,956          71,083
expenses

Income (loss)
from               1,346           1,247            3,173           (634       )
operations

Other income
(expense):

Interest           54              34               172             119
income

Interest           -               (193       )     -               (321       )
expense

Unrealized
gain on            9               7                17              7
investments

Impairment of      -               -                (18        )    -
investments

Total other
income             63              (152       )     171             (195       )
(expense)

Income (loss)
before income      1,409           1,095            3,344           (829       )
tax provision

Income tax         563             470              1,233           664
provision

Net income         846             625              2,111           (1,493     )
(loss)

Less preferred
stock              (181       )    (65        )     (539       )    (422       )
dividends

Less net
income
allocated to       (330       )    (75        )     (780       )    -
participating
preferred
stock

Net income
(loss)
attributable     $ 335           $ 485            $ 792           $ (1,915     )
to common
stockholders

Net income
(loss) per
share
attributable
to common
stockholders:

Basic            $ 0.03          $ 0.02           $ 0.06          $ (0.11      )

Diluted          $ 0.02          $ 0.02           $ 0.06          $ (0.11      )

Weighted
average common
shares
outstanding:

Basic              12,908,068      25,567,700       12,911,089      17,247,149

Diluted            13,558,871      26,348,651       13,522,791      17,247,149




Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, unaudited)

                                                      Nine Months Ended

                                                      September 30,

                                                      2009         2010

OPERATING ACTIVITIES:

Net income (loss)                                     $ 2,111      $ (1,493  )

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

Depreciation and amortization                           3,290        4,210

Amortization of customer inducements                    -            1,931

Amortization of deferred rent and lease incentive       408          128

Provision for doubtful accounts                         -            2,668

Unrealized (gain) on investments                        (17    )     (7      )

Impairment of investments                               18           -

Deferred income taxes                                   1,122        709

Stock-based compensation                                568          1,108

Interest expense                                        -            321

Changes in operating assets and liabilities:

Fees receivable                                         (788   )     (2,345  )

Prepaid expenses and other current assets               (351   )     (1,170  )

Other non-current assets                                106          82

Customer inducements                                    -            (11,300 )

Accrued expenses                                        (1,697 )     1,151

Accounts payable                                        (743   )     (132    )

Deferred revenue                                        (147   )     57

Other non-current liabilities                           -            101

Net cash provided by (used in) operating activities     3,880        (3,981  )

INVESTING ACTIVITIES:

Purchase of property and equipment                      (2,473 )     (3,378  )

Capitalization of internally developed software         (1,005 )     (962    )

Proceeds from repayment of notes receivable             -            985

Increase in notes receivable                            (53    )     (90     )

Investments in non-marketable securities                (489   )     -

Proceeds from investments                               195          26

Acquisition of businesses, net                          -            (917    )

Net cash (used in) investing activities                 (3,825 )     (4,336  )

FINANCING ACTIVITIES:

Proceeds from exercise of warrants                      -            1,525

Proceeds from exercise of stock options                 3            1,343

Net proceeds from issuance of common stock              -            42,066

Purchase of treasury stock                              (248   )     (3,231  )

Preferred stock dividends                               -            (1,346  )

Net cash provided by (used in) financing activities     (245   )     40,357

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS        (190   )     32,040

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD          28,445       31,525

CASH AND CASH EQUIVALENTS, END OF PERIOD              $ 28,255     $ 63,565




Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, unaudited)

                                   Three Months Ended     Nine Months Ended

                                   September 30,          September 30,

                                   2009       2010        2009       2010

Net income (loss)                  $ 846      $ 625       $ 2,111    $ (1,493 )

Add (deduct):

Interest income                      (54   )    (34   )     (172  )    (119   )

Interest expense                     -          193         -          321

Income tax provision                 563        470         1,233      664

Depreciation and amortization        1,167      1,451       3,290      4,210

Stock-based compensation expense     209        584         568        1,108

Unrealized (gain) loss on            (9    )    (7    )     (17   )    (7     )
investments

Impairment of investments            -          -           18         -

Restructuring charges (excluding     -          96          -          819
severance)

Severance                            -          409         -          533

Bad debt expense                     -          -           -          2,668

Customer inducement costs            -          1,146       -          1,931

Litigation related expense           -          85          -          1,933

Adjusted EBITDA                    $ 2,722    $ 5,018     $ 7,031    $ 12,568

                                   Three Months Ended     Nine Months Ended

                                   September 30,          September 30,

                                   2009       2010        2009       2010

Income (loss) from operations      $ 1,346    $ 1,247     $ 3,173    $ (634   )

Add:

Stock-based compensation expense     209        584         568        1,108

Restructuring charges (excluding     -          96          -          819
severance)

Severance                            -          409         -          533

Bad debt expense                     -          -           -          2,668

Customer inducement costs            -          1,146       -          1,931

Litigation related expense           -          85          -          1,933

Adjusted operating income          $ 1,555    $ 3,567     $ 3,741    $ 8,358





Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures (continued)

(In thousands, except share and per share information; unaudited)

                   Three Months Ended               Nine Months Ended

                   September 30,                    September 30,

                   2009            2010             2009            2010

Net income         $ 846           $ 625            $ 2,111         $ (1,493     )
(loss)

Add:

Stock-based
compensation         129             350              350             663
expense

Impairment of        -               -                11              -
investments

Restructuring
charges              -               58               -               490
(excluding
severance)

Severance            -               245              -               319

Bad debt expense     -               -                -               2,668

Customer             -               686              -               1,155
inducement costs

Imputed interest     -               111              -               185
expense

Litigation           -               51               -               1,156
related expense

Adjusted net         975             2,126            2,472           5,143
income

Less: Preferred      (181       )    (65        )     (539       )    (422       )
stock dividends

Less: Net income
allocated to         (394       )    (276       )     (959       )    (1,718     )
participating
preferred stock

Adjusted net
income
attributable to    $ 400           $ 1,785          $ 974           $ 3,003
common
stockholders

Basic number of
weighted-average     12,908,068      25,567,700       12,911,089      17,247,149
shares
outstanding

Effect of
dilutive shares:

Options to
purchase common      372,846         768,393          340,145         921,838
stock

Common warrants      277,957         12,558           271,557         119,511

Diluted number
of
weighted-average     13,558,871      26,348,651       13,522,791      18,288,498
shares
outstanding

Adjusted net       $ 0.03          $ 0.07           $ 0.07          $ 0.16
income per share




Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except account and advisor data)

                 As of

                 September  December 31,  March 31,  June 30,   September 30,
                 30,        2009          2010       2010       2010
                 2009

Platform
Assets

Assets Under
Management       $ 9,754    $ 10,269      $ 10,916   $ 10,863   $ 12,352
(AUM)

Assets Under
Administration     26,283     27,322        29,580     42,555     46,655
(AUA)

Subtotal AUM/A     36,037     37,591        40,496     53,418     59,007

Licensing          49,161     51,450        54,135     53,199     67,343

Total Platform   $ 85,198   $ 89,041      $ 94,631   $ 106,617  $ 126,350
Assets

Platform
Accounts

AUM                43,441     48,541        49,020     52,477     56,094

AUA                126,311    126,634       136,335    222,482    229,154

Subtotal AUM/A     169,752    175,175       185,355    274,959    285,248

Licensing          506,663    510,865       545,299    550,651    574,903

Total Platform     676,415    686,040       730,654    825,610    860,151
Accounts

Advisors

AUM/A              8,041      8,408         8,465      12,871     13,011

Licensing          5,501      5,542         5,740      6,505      6,609

Total Advisors     13,542     13,950        14,205     19,376     19,620

Note: certain 2009 data have been reclassified between AUM and AUA to conform
to current presentation format.




    Source: Envestnet, Inc.