env-20230331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 001-34835

Envestnet, Inc.

(Exact name of registrant as specified in its charter)


Delaware						20-1409613
(State or other jurisdiction of incorporation or organization)						(I.R.S Employer Identification No.)

1000 Chesterbrook Boulevard, Suite 250, Berwyn, Pennsylvania

19312

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(312) 827-2800

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of exchange on which registered
Common Stock, par value $0.005 per share	ENV	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of April 28, 2023, Envestnet, Inc. had 54,404,069 shares of common stock outstanding.

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (u naudited)
Condensed Consolidated Balance Sheets as of March 31 , 202 3 and December 31, 20 2 2			3
Condensed Consolidated Statements of Operations for the three months ended March 31 , 202 3 and 20 2 2			4
Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2023 and 20 2 2			5
Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2023 and 20 2 2			6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 20 2 2			7
Notes to Unaudited Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements			23
Overview			23
Results of Operations			27
Liquidity and Capital Resources			38

Item 3. Quantitative and Qualitative Disclosures About Market Risk			39

Item 4. Controls and Procedures			39

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			40

Item 1A. Risk Factors			40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40

Item 3. Defaults Upon Senior Securities			40

Item 4. Mine Safety Disclosures			40

Item 5. Other Information			40

Item 6. Exhibits			40

Index to Exhibits			41

Glossary of Terms			42

Signatures			43

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)


	March 31,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	52,664	$	162,173
Fees receivable, net	122,704		101,696
Prepaid expenses and other current assets	47,391		41,363
Total current assets	222,759		305,232
Property and equipment, net	64,144		62,443
Internally developed software, net	196,874		184,558
Intangible assets, net	377,055		379,995
Goodwill	998,428		998,414
Operating lease right-of-use assets, net	79,553		81,596
Other assets	117,644		99,927
Total assets	$	2,056,457	$	2,112,165
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities	$	195,983	$	233,866
Operating lease liabilities	12,270		11,949

Deferred revenue	44,445		36,363
Current portion of debt	44,954		44,886
Total current liabilities	297,652		327,064
Debt, net of current portion	872,968		871,769
Operating lease liabilities, net of current portion	108,568		110,652
Deferred tax liabilities, net	21,445		16,196
Other liabilities	18,644		18,880
Total liabilities	1,319,277		1,344,561
Commitments and contingencies (note 19)
Stockholders' equity
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Common stock, par value $0.005, 500,000,000 shares authorized; 70,587,503 and 70,025,733 shares issued as of March 31, 2023 and December 31, 2022, respectively; 54,401,984 and 54,013,826 shares outstanding as of March 31, 2023 and December 31, 2022, respectively	352		350
Treasury stock at cost, 16,185,519 and 16,011,907 shares as of March 31, 2023 and December 31, 2022, respectively	(264,283)		(253,551)
Additional paid-in capital	1,154,012		1,135,284
Accumulated deficit	(160,155)		(118,927)
Accumulated other comprehensive loss	(4,312)		(8,589)
Total stockholders’ equity, attributable to Envestnet, Inc.	725,614		754,567
Non-controlling interest	11,566		13,037
Total equity	737,180		767,604
Total liabilities and equity	$	2,056,457	$	2,112,165

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)


	Three Months Ended
	March 31,
		2023		2022
Revenue:
Asset-based		$	176,932	$	202,717
Subscription-based		117,079		114,734
Total recurring revenue		294,011		317,451
Professional services and other revenue		4,696		3,912
Total revenue		298,707		321,363
Operating expenses:
Direct expense		108,989		125,282
Employee compensation		114,215		126,849
General and administrative		53,619		44,335
Depreciation and amortization		32,941		31,618
Total operating expenses		309,764		328,084
Loss from operations		(11,057)		(6,721)
Other expense, net		(7,935)		(5,967)
Loss before income tax provision		(18,992)		(12,688)
Income tax provision		23,769		2,020
Net loss		(42,761)		(14,708)
Add: Net loss attributable to non-controlling interest		1,533		849
Net loss attributable to Envestnet, Inc.		$	(41,228)	$	(13,859)
Net loss attributable to Envestnet, Inc. per share:
Basic and diluted		$	(0.76)	$	(0.25)
Weighted average common shares outstanding:
Basic and diluted		54,143,259		54,903,677

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
		2023		2022
Net loss attributable to Envestnet, Inc.		$	(41,228)	$	(13,859)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		4,277		(1,478)
Total other comprehensive income (loss), net of tax		4,277		(1,478)
Comprehensive loss attributable to Envestnet, Inc.		$	(36,951)	$	(15,337)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share information)

(unaudited)


									Accumulated
							Additional		Other				Non-
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Accumulated		Controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, December 31, 2022	70,025,733	$	350	(16,011,907)	$	(253,551)	$	1,135,284	$	(8,589)	$	(118,927)	$	13,037	$	767,604
Net loss	—	—		—	—		—		—		(41,228)		(1,533)		(42,761)
Other comprehensive income, net of tax	—	—		—	—		—		4,277		—		—		4,277
Stock-based compensation expense	—	—		—	—		19,345		—		—		108		19,453
Issuance of common stock, vesting of RSUs and PSUs	524,316	2		—	—		—		—		—		—		2
Net cash paid related to tax withholding for stock-based compensation	—	—		(173,612)	(10,732)		—		—		—		—		(10,732)
Proceeds from the exercise of stock options	37,454	—		—	—		367		—		—		—		367

Purchase of non-controlling units from third-party shareholders	—	—		—	—		(984)		—		—		(24)		(1,008)
Other	—	—		—	—		—		—		—		(22)		(22)
Balance, March 31, 2023	70,587,503	$	352	(16,185,519)	$	(264,283)	$	1,154,012	$	(4,312)	$	(160,155)	$	11,566	$	737,180


									Accumulated
							Additional		Other				Non-
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Accumulated		Controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, December 31, 2021	68,879,152	$	344	(14,086,064)	$	(134,996)	$	1,131,628	$	(1,899)	$	(37,988)	$	2,453	$	959,542
Net loss	—	—		—	—		—		—		(13,859)		(849)		(14,708)
Other comprehensive loss, net of tax	—	—		—	—		—		(1,478)		—		—		(1,478)
Stock-based compensation expense	—	—		—	—		21,690		—		—		—		21,690
Issuance of common stock, vesting of RSUs and PSUs	514,319	3		—	—		—		—		—		—		3
Net cash paid related to tax withholding for stock-based compensation	—	—		(170,992)	(12,570)		—		—		—		—		(12,570)
Proceeds from the exercise of stock options	38,681	—		—	—		658		—		—		—		658
Other	—	—		—	—		(84)		—		—		102		18
Balance, March 31, 2022	69,432,152	$	347	(14,257,056)	$	(147,566)	$	1,153,892	$	(3,377)	$	(51,847)	$	1,706	$	953,155

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(42,761)	$	(14,708)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	32,941		31,618
Provision for doubtful accounts	571		(1,747)
Deferred income taxes	5,221		(18,955)
Non-cash compensation expense	19,453		21,814
Non-cash interest expense	4,498		2,599
Loss allocations from equity method investments	2,940		1,545
Other	(103)		(59)
Changes in operating assets and liabilities:
Fees receivable, net	(21,579)		8,661
Prepaid expenses and other assets	(9,858)		(9,491)
Accounts payable, accrued expenses and other liabilities	(32,917)		(29,113)
Deferred revenue	8,073		11,097
Net cash (used in) provided by operating activities	(33,521)		3,261
Cash flows from investing activities:
Purchases of property and equipment	(4,402)		(3,896)
Capitalization of internally developed software	(23,664)		(21,671)
Acquisition of proprietary technology	(10,000)		(15,000)
Investments in private companies	(950)		(3,000)
Issuance of loan receivable to private company	(20,000)		—

Other	260		(2,500)
Net cash used in investing activities	(58,756)		(46,067)
Cash flows from financing activities:
Proceeds from exercise of stock options	367		658
Payments related to tax withholdings for stock-based compensation	(10,732)		(12,570)
Payments on finance lease obligations	(152)		(12,454)
Payments related to revolving credit facility	—		(1,869)
Payments related to share repurchases	(9,289)		—
Purchase of non-controlling units from third-party shareholders	(1,008)		—
Other	2		3
Net cash used in financing activities	(20,812)		(26,232)
Effect of exchange rate on changes on cash, cash equivalents and restricted cash	3,580		(627)
Net change in cash, cash equivalents and restricted cash	(109,509)		(69,665)
Cash, cash equivalents and restricted cash, beginning of period	162,173		429,428
Cash, cash equivalents and restricted cash, end of period	$	52,664	$	359,763
Supplemental disclosures of cash flow information
Net cash paid for income taxes	$	1,110	$	716
Cash paid for interest	$	1,822	$	2,254
Supplemental disclosure of non-cash activities
Conversion of equity method investee loan to shares	$	4,129	$	—
Right-of-use assets obtained in exchange for lease liabilities, net	$	206	$	—
Property and equipment acquired through finance lease	$	152	$	12,454
Purchase of property and equipment included in accounts payable, accrued expenses and other liabilities	$	2,018	$	1,883
Internally developed software costs included in accrued expenses and other liabilities	$	—	$	178
Membership interest liabilities included in other non-current liabilities	$	—	$	124

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business

Envestnet, Inc. (“Envestnet”) through its subsidiaries (collectively, the “Company”) is transforming the way financial advice and insight are delivered. Its mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet has been a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness ecosystem so that our clients can deliver an intelligent financial life to their clients.

Envestnet is organized around two primary, complementary business segments. Financial information about each business segment is contained in “Note 18—Segment Information” to the condensed consolidated financial statements and is described in detail within the Company's Annual Report on Form 10-K.

For a summary of commonly used industry terms and abbreviations used in this quarterly report on Form 10-Q, see the

Glossary of Terms.

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 have not been audited by an independent registered public accounting firm. These unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2022 and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of March 31, 2023 and results of operations, equity, comprehensive income (loss) and cash flows for the periods presented herein. The unaudited condensed consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation. Accounts for the Envestnet Wealth Solutions segment that are denominated in a non-U.S. currency have been re-measured using the U.S. dollar as the functional currency. Certain accounts within the Envestnet Data & Analytics segment are recorded and measured in foreign currencies. The assets and liabilities for those subsidiaries with a functional currency other than the U.S. dollar are translated at exchange rates in effect at the balance sheet date, and revenue and expenses are translated at average exchange rates. Differences arising from these foreign currency translations are recorded in the unaudited condensed consolidated balance sheets as accumulated other comprehensive income (loss) within stockholders' equity. The Company is also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other expense, net in the condensed consolidated statements of operations.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results of operations to be expected for other interim periods or for the full fiscal year.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. References to GAAP in these notes are to the FASB ASC and ASUs. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions.

Reclassifications

Certain items on the condensed consolidated balance sheets as of December 31, 2022 and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 have been reclassified to conform to the current year

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

presentation. These reclassifications did not change the previously reported total assets, total liabilities and equity, or net change in cash and cash equivalents and did not affect the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss or condensed consolidated statements of stockholders' equity.

Cash, Cash Equivalents and Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash from the condensed consolidated balance sheets to amounts reported in the condensed consolidated statements of cash flows:


	March 31,		March 31,
	2023		2022

	(in thousands)
Cash and cash equivalents	$	52,664	$	359,614
Restricted cash included in prepaid expenses and other current assets	—		149

Total cash, cash equivalents and restricted cash	$	52,664	$	359,763

Related Party Transactions

The Company has an approximate 3.7% membership interest in a private services company that it accounts for using the equity method of accounting and is considered to be a related party. Revenue from the private services company totaled $3.6 million and $4.7 million in the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023 and December 31, 2022, the Company recorded a net receivable from the private services company of $3.9 million and $2.0 million, respectively.

Recent Accounting Pronouncements Not Yet Adopted

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements.” This update amends ASC 842 and the accounting for leasehold improvements associated with common control leases. This standard is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the standard is permitted. The Company is analyzing the impact of the adoption, but does not expect it to have a material impact on the consolidated financial statements.

3.Acquisitions

Acquisition of Redi2 Technologies

On July 1, 2022, Envestnet completed the acquisition of all of the issued and outstanding shares of Redi2 Technologies ("Redi2"). Redi2 provides revenue management and hosted fee-billing solutions. Its platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. Redi2 has been integrated into the Envestnet Wealth Solutions segment.

In connection with the Redi2 acquisition, the Company paid estimated consideration as follows:


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate

	(in thousands)
Cash consideration, net	$	69,406	$	—	$	69,406
Estimated working capital adjustment	(1,465)		932		(533)
Total	$	67,941	$	932	$	68,873

The Company funded the Redi2 acquisition with available cash resources. In addition, certain executives may earn up to $20.0 million in performance bonuses based upon the achievement of certain target financial and non-financial metrics.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

These performance bonuses will be recognized as compensation and benefits expense in the condensed consolidated statements of operations. The performance bonuses recognized during the three months ended March 31, 2023 were immaterial.

The following table summarizes the estimated fair values of the assets acquired at the date of acquisition:


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate

	(in thousands)
Total current assets	$	1,985	$	—	$	1,985
Other non-current assets	3,349		(28)		3,321
Identifiable intangible assets	26,500		—		26,500
Goodwill	44,236		2,231		46,467
Total assets acquired	76,070		2,203		78,273

Accounts payable and accrued expenses	(1,157)		(1,271)		(2,428)
Operating lease liabilities	(2,201)		—		(2,201)
Deferred revenue	(4,771)		—		(4,771)
Total liabilities assumed	(8,129)		(1,271)		(9,400)
Total net assets acquired, net of cash received	$	67,941	$	932	$	68,873

The goodwill arising from the acquisition represents the expected benefits of the transaction, primarily related to the enhancement of the Company's existing technologies and increase in future revenue as a result of potential cross selling opportunities. Estimated goodwill of $40.7 million is deductible for income tax purposes.

A summary of estimated intangible assets acquired, estimated useful lives and amortization method is as follows:


	Preliminary Estimate		Estimated Useful Life	Amortization Method

	(in thousands)		(in years)
Customer lists	$	14,000	14 - 16	Accelerated
Proprietary technologies	9,500		6	Straight-line
Trade names	3,000		6 - 7	Straight-line
Total intangible assets acquired	$	26,500

The estimated fair values of certain of the assets acquired and liabilities assumed are provisional and based on information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation procedures that are in progress and not yet at the point where there is sufficient information for a definitive measurement. The Company believes the preliminary information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize those fair values. Therefore, provisional measurements of fair values reflected herein are subject to change and such changes could be significant. No measurement period adjustments were made during the three months ended March 31, 2023. The Company expects to finalize the valuation of tangible assets acquired, liabilities assumed, identifiable intangible assets and goodwill balances and complete the acquisition accounting as soon as reasonably practicable, though no later than July 1, 2023.

The results of Redi2 are included in the condensed consolidated statements of operations beginning July 1, 2022 and are not considered material to the Company’s results of operations.

For the three months ended March 31, 2023, the Company’s acquisition related costs were not material, and are included in general and administrative expenses. The Company may incur additional acquisition related costs over the remainder of 2023.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

4.Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	March 31,		December 31,
	2023		2022

	(in thousands)
Prepaid technology	$	20,657	$	16,649
Elevate Summit prepayments and deposits	6,447		528
Non-income tax receivable	5,484		5,488
Prepaid insurance	2,817		2,881
Income tax prepayments and receivables	—		2,515

Other	11,986		13,302
Total prepaid expenses and other current assets	$	47,391	$	41,363

5.Internally Developed Software, net

Internally developed software, net consisted of the following:


		March 31,		December 31,
	Estimated Useful Life	2023		2022

		(in thousands)
Internally developed software	5 years	$	336,607	$	313,200
Less: accumulated amortization		(139,733)		(128,642)
Internally developed software, net		$	196,874	$	184,558

6.Geographical Information

The following table sets forth certain long-lived assets including property and equipment, net and internally developed software, net by geographic area:


	March 31,		December 31,
	2023		2022

	(in thousands)
United States	$	258,263	$	245,817
India	2,705		1,093
Other	50		91
Total long-lived assets, net	$	261,018	$	247,001

See “Note 14—Revenue and Direct Expense” for detail of revenue by geographic area.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

7.Intangible Assets, Net

Intangible assets, net consisted of the following:


			March 31, 2023						December 31, 2022
			Gross				Net		Gross				Net
			Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
			Amount		Amortization		Amount		Amount		Amortization		Amount

			(in thousands)
Customer lists			$	604,080	$	(295,976)	$	308,104	$	604,080	$	(285,288)	$	318,792
Proprietary technologies			109,057		(46,894)		62,163		113,224		(59,401)		53,823
Trade names			15,700		(8,912)		6,788		15,700		(8,320)		7,380
Total intangible assets	$	728,837	$	(351,782)	$	377,055	$	733,004	$	(353,009)	$	379,995

On April 1, 2022, the Company entered into a purchase agreement with a privately held company to acquire the technology solutions being developed by this privately held company for a purchase price of $9.0 million, including an advance of $4.0 million. The purchase agreement was amended in January 2023 to include additional functionality and features for additional consideration of $5.0 million. The Company closed the transaction and paid the remaining $10.0 million during the three months ended March 31, 2023. This proprietary technology asset has been integrated into the Envestnet Data & Analytics segment and is being amortized over an estimated useful life of five years.

During the three months ended March 31, 2023, the Company retired fully amortized proprietary technologies with a historical cost of $17.5 million. During the three months ended March 31, 2022, the Company had no material retirements of intangible assets.

Future amortization expense of the Company's intangible assets as of March 31, 2023, is expected to be as follows (in thousands):



Remainder of 2023	$	45,947
2024	56,040
2025	52,700
2026	44,797
2027	36,232
Thereafter	141,339
Total	$	377,055

8.Depreciation and Amortization Expense

Depreciation and amortization expense consisted of the following:


	Three Months Ended
	March 31,
	2023		2022

	(in thousands)
Intangible asset amortization	$	16,940	$	17,520
Internally developed software amortization	11,090		8,494
Property and equipment depreciation	4,911		5,604
Total depreciation and amortization	$	32,941	$	31,618

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

9.Goodwill

Changes in the carrying amount of goodwill by reportable segment were as follows:


	Envestnet Wealth Solutions		Envestnet Data & Analytics		Total

	(in thousands)
Balance as of December 31, 2022	$	679,739	$	318,675	$	998,414



Foreign currency translation	—		14		14
Balance as of March 31, 2023	$	679,739	$	318,689	$	998,428

10.Other Assets

On January 31, 2023, the Company entered into a Convertible Promissory Note with a customer of the Company's business, a privately held company, whereby the Company was issued a convertible promissory note with a principal amount of $20.0 million and a stated interest rate of 8.0% per annum. The Convertible Promissory Note has a maturity date of January 31, 2026 and is convertible into common stock or preferred stock of the privately held company upon qualified financing events or corporate transactions.

In connection with the Convertible Promissory Note, the Company concurrently entered into a call option agreement with the privately held company, which provides the Company an option to acquire the privately held company at a predetermined price as of the earlier of July 2024 or upon satisfaction of certain financial metrics.

The Company accounts for this loan receivable in accordance with ASC 310 - Receivables as it is not a security and includes it in other assets in the condensed consolidated balance sheets. Credit impairment is measured as the difference between this loan receivable’s amortized cost and its estimated recoverable value, which is the present value of its expected future cash flows discounted at the effective interest rate. There was no impairment for this investment for the three months ended March 31, 2023.

11.Accounts Payable, Accrued Expenses and Other Current Liabilities

Accounts payable, accrued expenses and other liabilities consisted of the following:


	March 31,		December 31,
	2023		2022

	(in thousands)
Accrued investment manager fees	$	98,419	$	99,851
Accrued compensation and related taxes	42,120		77,939
Accrued professional services	14,188		10,762
Accounts payable	9,605		11,271
Income tax payable	9,459		260
Accrued capital expenditures	6,359		4,783
Accrued interest	6,147		3,091
Accrued technology	5,179		6,393

Accrued treasury stock purchases	—		9,289

Other accrued expenses	4,507		10,227
Total accounts payable, accrued expenses and other current liabilities	$	195,983	$	233,866

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

12.Debt

The following tables set forth the carrying value and estimated fair value of the Company's debt obligations as of March 31, 2023 and December 31, 2022:


	March 31, 2023
	Issuance Amount		Unamortized Issuance Costs		Carrying Value		Fair Value (Level II)

	(in thousands)

Third Credit Agreement	$	—	$	—	$	—	$	—
Convertible Notes due 2023	45,000		(46)		44,954		44,168
Convertible Notes due 2025	317,500		(4,318)		313,182		284,220
Convertible Notes due 2027	575,000		(15,214)		559,786		598,270
Total debt	$	937,500	$	(19,578)	$	917,922	$	926,658


	December 31, 2022
	Issuance Amount		Unamortized Issuance Costs		Carrying Value		Fair Value (Level II)

	(in thousands)

Third Credit Agreement	$	—	$	—	$	—	$	—
Convertible Notes due 2023	45,000		(114)		44,886		46,058
Convertible Notes due 2025	317,500		(4,765)		312,735		293,688
Convertible Notes due 2027	575,000		(15,966)		559,034		606,119
Total debt	$	937,500	$	(20,845)	$	916,655	$	945,865

Credit Agreement

The Third Credit Agreement contains customary conditions, representations and warranties, affirmative and negative covenants, mandatory prepayment provisions and events of default. The covenants include certain financial covenants requiring the Company to maintain compliance with a maximum total leverage ratio and a minimum interest coverage ratio. The Company was in compliance with these financial covenants as of March 31, 2023.

As of March 31, 2023 and December 31, 2022, there were no amounts outstanding under the Revolving Credit Facility and as of March 31, 2023 all $500.0 million was available to borrow. As of March 31, 2023 and December 31, 2022, debt issuance costs related to the Third Credit Agreement included in prepaid expense and other current assets in the condensed consolidated balance sheets was $0.7 million and $0.7 million, respectively and included in other assets in the condensed consolidated balance sheets was $2.0 million and $2.2 million, respectively.

Interest Expense

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:


	Three Months Ended
	March 31,
		2023		2022

		(in thousands)
Coupon interest		$	4,565	$	2,480
Amortization of debt discount and issuance costs		1,442		2,060
Undrawn and other fees		313		313


Total interest expense		$	6,320	$	4,853

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The effective interest rate of the Notes was equal to the stated interest rate plus the amortization of the debt issuance costs and is set forth below:


	Three Months Ended
	March 31,
		2023		2022

Convertible Notes due 2023		2.4	%	2.4	%
Convertible Notes due 2025		1.3	%	1.3	%
Convertible Notes due 2027		3.2	%	N/A

13.Fair Value Measurements

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, based on the three-tier fair value hierarchy, as described in detail within the Company's Annual Report on Form 10-K:


	March 31, 2023
	Fair Value		Level I		Level II		Level III

	(in thousands)
Assets:
Money market funds	$	2,118	$	2,118	$	—	$	—

Assets to fund deferred compensation liability	10,380		—		—		10,380
Total assets	$	12,498	$	2,118	$	—	$	10,380
Liabilities:

Deferred compensation liability	8,667		8,667		—		—
Total liabilities	$	8,667	$	8,667	$	—	$	—


	December 31, 2022
	Fair Value		Level I		Level II		Level III

	(in thousands)
Assets:
Money market funds	$	2,628	$	2,628	$	—	$	—
Assets to fund deferred compensation liability	10,074		—		—		10,074
Total assets	$	12,702