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.
Released November 4, 2010