Envestnet Reports Second Quarter 2010 Financial Results
CHICAGO--(BUSINESS WIRE)-- Envestnet, Inc. (NYSE: ENV), a leading independent provider of technology-enabled investment and practice management solutions to financial advisors, today reported financial results for its second quarter ended June 30, 2010.
Financial results for the second quarter of 2010 compared to the second quarter of 2009:
-- Revenue increased 37% to $24.3 million for the second quarter of 2010
from $17.7 million for the second quarter of 2009
-- Net income attributable to common stockholders was $0.1 million, or
$0.01 per diluted share, for the second quarter of 2010 compared to $0.2
million, or $0.01 per diluted share, for the second quarter of 2009
-- Adjusted EBITDA(1) increased 122% to $4.5 million for the second quarter
of 2010 from $2.0 million for the second quarter of 2009
-- Adjusted Net Income(1) increased 190% to $1.8 million for the second
quarter of 2010 from $0.6 million for the second quarter of 2009
"We are very pleased with our second quarter results and the recent completion of our IPO," said Jud Bergman, founder and chief executive officer of Envestnet. "Our performance reflects Envestnet empowering a growing number of advisors to better serve their clients with an integrated wealth management platform that enables the fiduciary process."
Key Operating Metrics as of June 30, 2010:
-- Assets under Management (AUM) of $10.9 billion
-- Assets under Administration (AUA) of $42.6 billion
-- Accounts (AUM/A only) of 274,959
-- Advisors (AUM/A only) of 12,871
The following table summarizes the changes in AUM and AUA for the quarter ended June 30, 2010:
Amounts in Millions Actual Gross Redemp- Net Market Actual Except Account Data 3/31/10 Sales tions Flows Impact 6/30/10 Assets under Management $ 10,916 $ 1,181 $ (524 ) $ 657 $ (710 ) $ 10,863 (AUM) Assets under Administration 29,580 $ 17,873 $ (1,738 ) 16,135 (3,160 ) 42,555 (AUA) Total AUM/A $ 40,496 $ 19,054 $ (2,262 ) $ 16,792 $ (3,870 ) $ 53,418 Fee-Based 185,355 101,085 (11,481 ) 89,604 274,959 Accounts
The number of financial advisors with AUM or AUA that had client accounts on our technology platform increased to 12,871 at June 30, 2010 from 8,465 at March 31, 2010. The increase in advisors and accounts, as well as the positive net flows during the quarter were a result of the implementation of the FundQuest business and continued success in adding advisors and accounts to the platform from existing and new relationships. At June 30, FundQuest represented more than $13.6 billion in AUA, approximately 80,000 accounts and 4,000 advisors on Envestnet's platform.
Review of Financial Results
Total revenue increased 37% to $24.3 million for the second quarter of 2010 from $17.7 million for the second quarter of 2009. The increase was primarily due to an increase in revenues from assets under management or administration, which grew 49% versus the prior year period as a result of increased levels of AUM and AUA.
Cost of revenues increased 40% to $7.7 million in the second quarter of 2010 from $5.5 million from the second quarter of 2009 due to the increase in revenue from AUM and AUA. Compensation and benefits increased 34% to $9.2 million in the second quarter of 2010 from $6.8 million in the prior year period, primarily due to an increase in headcount between periods as the Company staffed to support the anticipated growth of the business.
Income from operations was $0.8 million for the second quarter of 2010 compared to $0.7 million for the second quarter of 2009. Net income attributable to common stockholders was $0.1 million, or $0.01 per diluted share, for the second quarter of 2010 compared to $0.2 million, or $0.01 per diluted share, for the second quarter of 2009. Included in the above amounts for the second quarter of 2010 was $1.1 million ($0.7 million after-tax) in litigation-related expense in connection with a lawsuit that was settled in the third quarter of 2010.
On a non-GAAP basis, Adjusted EBITDA(1) in the second quarter of 2010 was $4.5 million, up 122% from $2.0 million in the prior year period. Adjusted Operating Income(1) was $3.1 million, up 224% from $0.9 million in the prior year period. Adjusted Net Income(1) was $1.8 million, up 190% from $0.6 million in the second quarter of 2009.
Recent Events
On July 28, 2010, the Company completed its initial public offering in which the Company sold 4,705,500 shares of common stock for a price of $9.00 per share, resulting in net proceeds after underwriter's discounts and commissions of approximately $39.4 million. After the offering, underwriters exercised their overallotment option in full, purchasing an additional 705,825 shares from the Company for net proceeds of approximately $5.9 million. Including shares sold in the overallotment, selling stockholders sold a total of 2,638,675 shares.
Conference Call
The Company will host a conference call to discuss second 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 (877) 941-2068, or (480) 629-9712 for international callers. A replay will be available beginning one hour after the call and can be accessed by dialing (800) 406-7325, or (303) 590-3030 for international callers; the conference ID is 4352315. The replay will be available until Tuesday, September 7, 2010.
About Envestnet
Envestnet, Inc. is a leading independent 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 and litigation related expense. Reconciling items are tax effected using the income tax rates in effect on the applicable date.
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 the Company's 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 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 Prospectus dated July 28, 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 August 31, 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, June 30,
2009 2010
Assets
Current assets:
Cash and cash equivalents $ 31,525 $ 22,830
Fees receivable, net of allowance for doubtful
accounts
of $76 and $603, respectively 5,800 5,613
Deferred tax assets - current 134 16
Notes receivable including affiliate - current, net
of
allowance of $103 and $817, respectively 714 849
Prepaid expenses and other current assets 1,427 3,895
Total current assets 39,600 33,203
Notes receivable including affiliate and officer,
net of
allowance of $206 and $1,633, respectively 2,322 -
Property and equipment, net 8,560 9,830
Internally developed software, net 3,887 3,724
Intangible assets, net 2,238 1,944
Goodwill 1,023 1,399
Deferred tax assets 14,992 14,952
Customer inducements 282 31,162
Other non-current assets 2,154 2,113
Total assets $ 75,058 $ 98,327
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 10,272 $ 12,959
Accounts payable 1,892 2,141
Customer inducements payable - current 150 3,946
Note payable - current - 153
Deferred revenue 24 197
Total current liabilities 12,338 19,396
Deferred rent and lease incentive liability 3,999 4,153
Customer inducements payable - 16,691
Note payable - 153
Other non-current liabilities 475 542
Total liabilities 16,812 40,935
Stockholders' equity
Preferred stock (total liquidation preference of
$81,779 and
$83,154 as of December 31, 2009 and June 30, 2010, - -
respectively)
Common stock, par value $0.005, 60,000,000 shares
authorized as of
December 31, 2009 and June 30, 2010; 13,524,276 and
13,863,282 shares issued as of December 31, 2009
and June 30, 2010, respectively; 12,910,676 and 68 69
13,112,052 shares outstanding as of December 31,
2009 and June 30, 2010, respectively
Additional paid-in capital 106,893 110,171
Accumulated deficit (42,381 ) (44,499 )
Treasury stock at cost, 613,600 shares of common
and no preferred stock as of
December, 31, 2009; 751,230 shares of common stock
and 122 shares of preferred stock as of June 30,
2010
(6,334 ) (8,349 )
Total stockholders' equity 58,246 57,392
Total liabilities and stockholders' equity $ 75,058 $ 98,327
Envestnet, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2009 2010 2009 2010
Revenues:
Assets under
management or $ 12,589 $ 18,715 $ 25,923 $ 35,111
administration
Licensing and
professional 5,131 5,532 10,478 10,768
services
Total revenues 17,720 24,247 36,401 45,879
Operating
expenses:
Cost of 5,510 7,698 11,430 14,718
revenues
Compensation 6,830 9,183 13,834 17,273
and benefits
General and 3,558 5,082 7,187 12,191
administration
Depreciation
and 1,076 1,428 2,123 2,759
amortization
Restructuring - 67 - 819
charges
Total
operating 16,974 23,458 34,574 47,760
expenses
Income (loss)
from 746 789 1,827 (1,881 )
operations
Other income
(expense):
Interest 64 41 118 85
income
Interest - (128 ) - (128 )
expense
Unrealized
gain (loss) on 8 (3 ) 8 -
investments
Impairment of (1 ) - (18 ) -
investments
Total other
income 71 (90 ) 108 (43 )
(expense)
Income (loss)
before income 817 699 1,935 (1,924 )
tax provision
Income tax 336 306 670 194
provision
Net income 481 393 1,265 (2,118 )
(loss)
Less preferred
stock (179 ) (179 ) (357 ) (357 )
dividends
Less net
income
allocated to (150 ) (107 ) (450 ) -
participating
preferred
stock
Net income
(loss)
attributable $ 152 $ 107 $ 458 $ (2,475 )
to common
stockholders
Net income
(loss) per
share
attributable
to common
stockholders:
Basic $ 0.01 $ 0.01 $ 0.04 $ (0.19 )
Diluted $ 0.01 $ 0.01 $ 0.03 $ (0.19 )
Weighted
average common
shares
outstanding:
Basic 12,907,676 13,068,492 12,912,624 13,017,943
Diluted 13,389,900 14,081,578 13,508,237 13,017,943
Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended
June 30,
2009 2010
OPERATING ACTIVITIES:
Net income (loss) $ 1,265 $ (2,118 )
Adjustments to reconcile net income (loss) to net
cash
provided by (used in) operating activities:
Depreciation and amortization 2,123 2,759
Amortization of customer inducements - 785
Amortization of deferred rent and lease incentive 288 196
Provision for doubtful accounts - 2,668
Unrealized (gain) on investments (8 ) -
Impairment of investments 18 -
Deferred income taxes 649 158
Stock-based compensation 359 524
Interest expense - 128
Changes in operating assets and liabilities:
(Increase) in fees receivable (579 ) (226 )
(Increase) in prepaid expenses and other current (450 ) (2,468 )
assets
(Increase) in other non-current assets 174 20
(Increase) in customer inducements - (11,300 )
Increase (decrease) in accrued expenses (3,178 ) 2,537
Increase (decrease) in accounts payable (368 ) 249
Increase (decrease) in deferred revenue (119 ) 173
Increase (decrease) in other non-current liabilities - 67
Net cash provided by (used in) operating activities 174 (5,848 )
INVESTING ACTIVITIES:
Purchase of property and equipment (1,580 ) (2,714 )
Capitalization of internally developed software (692 ) (640 )
Proceeds from repayment of notes receivable - 128
Increase in notes receivable (18 ) (82 )
Investments in non-marketable securities (489 ) -
Proceeds from investments 173 21
Acquisition of business, net - (300 )
Net cash (used in) investing activities (2,606 ) (3,587 )
FINANCING ACTIVITIES:
Proceeds from exercise of warrants - 1,505
Proceeds from exercise of stock options - 1,250
Purchase of treasury stock (248 ) (2,015 )
Net cash provided by (used in) financing activities (248 ) 740
DECREASE IN CASH AND CASH EQUIVALENTS (2,680 ) (8,695 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 28,445 31,525
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,765 $ 22,830
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Three Months Ended Six Months Ended
June 30, June 30,
2009 2010 2009 2010
(in thousands, unaudited)
Net income (loss) $ 481 $ 393 $ 1,265 $ (2,118 )
Add (deduct):
Interest income (64 ) (41 ) (118 ) (85 )
Interest expense - 128 - 128
Income tax provision 336 306 670 194
Depreciation and amortization 1,076 1,428 2,123 2,759
Stock-based compensation expense 201 292 359 524
Unrealized (gain) loss on (8 ) 3 (8 ) -
investments
Impairment of investments 1 - 18 -
Restructuring charges (excluding - 67 - 723
severance)
Severance - 28 - 124
Bad debt expense - - - 2,668
Customer inducement costs - 770 - 785
Litigation related expense - 1,124 - 1,848
Adjusted EBITDA $ 2,023 $ 4,498 $ 4,309 $ 7,550
Three Months Ended Six Months Ended
June 30, June 30,
2009 2010 2009 2010
(in thousands, unaudited)
Income (loss) from operations $ 746 $ 789 $ 1,827 $ (1,881 )
Add (deduct):
Stock-based compensation expense 201 292 359 524
Restructuring charges (excluding - 67 - 723
severance)
Severance - 28 - 124
Bad debt expense - - - 2,668
Customer inducement costs - 770 - 785
Litigation related expense - 1,124 - 1,848
Adjusted operating income $ 947 $ 3,070 $ 2,186 $ 4,791
Three Months Ended Six Months Ended
June 30, June 30,
2009 2010 2009 2010
(in thousands, unaudited)
Net income (loss) $ 481 $ 393 $ 1,265 $ (2,118 )
Add (deduct):
Stock-based compensation expense 124 175 221 313
Impairment of investments 1 - 11 -
Restructuring charges (excluding - 40 - 432
severance)
Severance - 16 - 74
Bad debt expense - - - 2,668
Customer inducement costs - 460 - 469
Litigation related expense - 672 - 1,105
Adjusted net income $ 606 $ 1,756 $ 1,497 $ 2,943
Envestnet, Inc.
Historical Assets, Accounts and Advisors
As of
June 30, September 30, December 31, March 31, June 30,
2009 2009 2009 2010 2010
(in millions, except accounts and advisors data)
Platform Assets
Assets Under $ 7,800 $ 9,178 $ 9,660 $ 10,916 $ 10,863
Management (AUM)
Assets Under
Administration 23,565 26,859 27,931 29,580 42,555
(AUA)
Subtotal AUM/A 31,365 36,037 37,591 40,496 53,418
Licensing 43,730 49,161 51,450 54,135 53,199
Total Platform $ 75,095 $ 85,198 $ 89,041 $ 94,631 $ 106,617
Assets
Platform
Accounts
AUM 38,594 40,646 45,645 49,020 52,477
AUA 124,795 129,106 129,530 136,335 222,482
Subtotal AUM/A 163,389 169,752 175,175 185,355 274,959
Licensing 510,576 506,663 510,865 545,299 550,651
Total Platform 673,965 676,415 686,040 730,654 825,610
Accounts
Advisors
AUM/A 7,834 8,041 8,408 8,465 12,871
Licensing 5,373 5,501 5,542 5,740 6,505
Total Advisors 13,207 13,542 13,950 14,205 19,376
Source: Envestnet, Inc.
Released August 31, 2010