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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
FORM 10-K
_________________________________________

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-34835
_________________________________________
env-logo.jpg
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 each exchange on which registered:
Common Stock, par value $0.005 per shareENVNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   No 

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes   No 

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   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 filerAccelerated filer
Non-accelerated filerSmaller 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No 

Aggregate market value of registrant’s common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant’s common stock on June 30, 2023 as reported on The New York Stock Exchange on that date: $2.0 billion. For purposes of this calculation, shares of common stock held by (i) persons holding more than 5% of the outstanding shares of stock and (ii) officers and directors of the registrant, as of June 30, 2023, are excluded in that such persons may be deemed to be affiliates. This determination is not necessarily conclusive of affiliate status.
As of February 23, 2024, 54,788,793 shares of the common stock with a par value of $0.005 per share were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Part III incorporates by reference portions of the registrant’s definitive proxy statement for the annual meeting of stockholders, which will be filed within 120 days after the close of the 2023 fiscal year.
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Forward‑Looking Statements
Unless otherwise indicated, the terms “Envestnet,” “the Company,” “we,” “us” and “our” refer to Envestnet, Inc. and its subsidiaries as a whole.
This annual report on Form 10‑K for the year ended December 31, 2023 contains forward‑looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. These forward‑looking statements include, in particular, statements about our plans, strategies and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These statements are based on our current expectations and projections about future events and are identified by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “expected,” “intend,” “will,” “may,” or “should” or the negative of those terms or variations of such words, and similar expressions are intended to identify such forward‑looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business and other characteristics of future events or circumstances are forward‑looking statements. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this Annual Report include, but are not limited to,
our ability to recruit and retain senior executive leadership and other key employees and to successfully manage transitions, including the transition of our chief executive officer;
adverse economic or global market conditions, including periods of rising inflation and market interest rates, and governmental responses to such conditions;
the conflicts in the Middle East and between Russia and Ukraine, including related sanctions and their impact on the global economy and capital markets;
the concentration of our revenue from the delivery of our solutions and services to clients in the financial services industry;
our reliance on a limited number of clients for a material portion of our revenue;
the renegotiation of fees by our clients;
changes in the estimates of fair value of reporting units or of long-lived assets, particularly goodwill and intangible assets;
the amount of our debt, our ability to service our debt and risks associated with derivative transactions associated with our debt;
limitations on our ability to access information from third parties or charges for accessing such information;
the targeting of some of our sales efforts at large financial institutions and large financial technology companies which prolongs sales cycles, requires substantial upfront sales costs and results in less predictability in completing some of our sales;
changes in investing patterns on the assets on which we derive revenue and the freedom of investors to redeem or withdraw investments generally at any time;
the impact of fluctuations in market conditions and interest rates on the demand for our products and services and the value of assets under management or administration;
increased geopolitical unrest and other events outside of our control that could adversely affect the global economy or specific international, regional and domestic markets;
our ability to keep up with rapid technological change, evolving industry standards or changing requirements of clients;
risks associated with our international operations;
the competitiveness of our solutions and services as compared to those of others;
liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest;
harm to our reputation;
the failure to protect our intellectual property rights;
our reliance on outsourcing arrangements;
activist shareholders hindering the execution of our business strategy, diverting board and management attention and resources and causing us to incur substantial expenses;
public health crises, pandemics or similar events;
our ability to successfully identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies;
our ability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner;
our ability to introduce new solutions and services and enhancements;
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regulatory compliance failures;
our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information and potential liabilities for cybersecurity breaches;
the effect of privacy laws and regulations, industry standards and contractual obligations and changes to these laws, regulations, standards and obligations on how we operate our business and the negative effects of failure to comply with these requirements;
failure by our customers to obtain proper permissions or waivers for our use of disclosure of information;
adverse judicial or regulatory proceedings against us;
failure of our solutions, services or systems, or those of third parties on which we rely, to work properly;
potential liability for use of inaccurate information by third parties provided by us;
the occurrence of a deemed “change of control”;
the uncertainty of the application and interpretation of certain tax laws;
issuances of additional shares of common stock or issuances of shares of preferred stock or convertible securities on our existing stockholders;
general economic, political and regulatory conditions;
global events, natural disasters, environmental disasters, terrorist attacks and pandemics, including their impact on the economy and trading markets;
management’s response to these factors.

More information on these important factors that could cause actual results to differ materially from the forward‑looking statements we make in this Annual Report are set forth in Part I, Item 1A under Risk Factors”. In addition, there may be other factors of which we are presently unaware or that we currently deem immaterial that could cause our actual results to be materially different from the results referenced in the forward‑looking statements. All forward‑looking statements contained in this Annual Report and documents incorporated herein by reference are qualified in their entirety by this cautionary statement. Forward‑looking statements speak only as of the date they are made, and we do not intend to update or otherwise revise the forward‑looking statements to reflect events or circumstances after the date of this Annual Report or to reflect the occurrence of unanticipated events, except as required by applicable law. If we do update one or more forward‑looking statements, no inference should be made that we will make additional updates with respect to those or other forward‑looking statements.

You should read this Annual Report completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material. We qualify all of our forward‑looking statements by these cautionary statements.

The following discussion and analysis should also be read along with our consolidated financial statements and the related notes included elsewhere in this Annual Report. Except for the historical information contained herein, this discussion contains forward‑looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed below.
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Item 1. Business
For a summary of commonly used industry terms and abbreviations used in this annual report on Form 10-K, see the Glossary of Terms.
General
Envestnet, through its subsidiaries, is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet is a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness ecosystem so that our clients can better serve their clients.

Envestnet's clients include more than 108,000 advisors, 16 of the 20 largest U.S. banks, 48 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, all of which leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.

Through a combination of platform enhancements, partnerships and acquisitions, Envestnet uniquely provides a financial network connecting technology, solutions and data, delivering better intelligence and enabling its customers to drive better outcomes.
Envestnet, a Delaware corporation originally founded in 1999, serves clients from its headquarters in Berwyn, Pennsylvania, as well as other locations throughout the United States, India and other international locations.
Segments
Envestnet is organized around two business segments based on clients served and products provided to meet those needs. Financial information about each business segment is contained in Part II, Item 8, “Note 23—Segment Information”. Our business segments are as follows:
Envestnet Wealth Solutions – a leading provider of comprehensive and unified wealth management software, services and solutions to empower financial advisors and institutions to enable them to deliver holistic advice to their clients.

Envestnet Data & Analytics – a leading provider of financial data aggregation, analytics and digital experiences to meet the needs of financial institutions, enterprise FinTech firms and market investment research firms worldwide.
Envestnet Wealth Solutions Segment
Envestnet Wealth Solutions empowers financial advisors at broker-dealers, banks and RIAs with all the tools they require to deliver holistic wealth management to their end clients. In addition, the firm provides advisors with practice management support so that they can grow their practices and operate more efficiently. At the end of 2023, Envestnet Wealth Solutions’ platform assets were approximately $5.8 trillion in over 19.1 million accounts overseen by more than 108,000 advisors.
Services provided to advisors include: financial planning, risk assessment tools, investment strategies and solutions, asset allocation models, research, portfolio construction, proposal generation and paperwork preparation, model management and account rebalancing, account monitoring, customized fee billing, overlay services covering asset allocation, tax management and socially responsible investing, aggregated multi‑custodian performance reporting and communication tools and data analytics. We also have access to a wide range of leading third‑party asset managers.
Envestnet Wealth Solutions serves its clients principally through the following product and service suites:
Envestnet | Enterprise provides an end-to-end open architecture wealth management platform, through which advisors can construct portfolios for clients. It begins with aggregated household data which then leads to the creation of a financial plan, asset allocation, investment strategy, portfolio management, rebalancing and performance reporting. Advisors have access to approximately 23,000 investment products. Envestnet | Enterprise also sells data aggregation and reporting, data analytics and digital advice capabilities to customers.

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Envestnet | Wealth Analytics delivers an end-to-end platform experience that transforms data into actionable intelligence that informs our client's next best course of action. The insights foster the acceleration of data-driven strategy with enterprise-level analytics including clients, fees, opportunities, attrition, benchmarking and firm valuation.

Envestnet | Tamarac provides leading trading, rebalancing, portfolio accounting, performance reporting and client relationship management software, principally to high‑end RIAs.

Envestnet | MoneyGuide provides leading goal-based financial planning solutions to the financial services industry. The highly adaptable software helps financial advisors add significant value for their clients using best-in-class technology with enhanced integrations to generate financial plans.

Envestnet | Workplace Solutions offers a comprehensive suite of services for advisor-sold retirement plans. Our retirement solutions address the regulatory, data, and investment needs of retirement plans and delivers the information holistically. Workplace Solutions includes a digital 401(k) retirement plan marketplace that streamlines retirement plan distribution and due diligence among financial advisors and third-party administrators. With Envestnet's retirement solutions marketplace, advisors can employ Envestnet's outsourced fiduciary services for investment selection and monitoring in retirement plan portfolios and can access essential information to make investment recommendations and understand the impact of fund changes to the total cost of their plans.

Envestnet | PMC®, or Portfolio Management Consultants provides research and consulting services to assist advisors in creating investment solutions for their clients. These solutions include over 5,000 vetted third-party managed account products, multi-manager portfolios and fund strategist portfolios, as well as approximately 850 proprietary products, such as quantitative portfolios and fund strategist portfolios. PMC also offers portfolio overlay and tax optimization services.
Envestnet | Billing Solutions (Redi2) offers revenue management and hosted fee-billing solutions in the global financial services industry. Redi2's platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. Redi2 solutions caters to different segments of the market with three different product lines: Revenue Manager which provides client revenue accounting and billing services for asset managers; Wealth Manager which delivers multi-party billing and payouts for broker-dealers and turnkey asset management programs and BillFin™ which offers advisory billing and invoicing for financial advisors.
As the tables below indicate, Envestnet Wealth Solutions has experienced steady and significant growth over the last several years. We believe this growth is attributable to secular trends in the wealth management industry, the uniqueness and comprehensiveness of our products, as well as acquisitions. Periodically, clients choose to change the way they pay for our solution, whereby they switch from an asset-based pricing model to a subscription-based model.










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The following charts show growth in assets, number of accounts and advisors supported by Envestnet Wealth Solutions, distinguishing those metrics between AUM/A and subscription.
AUM/A & Subscription
($ in billions)
AUM Total.jpg
AUM/A & Subscription Accounts
(in thousands)
AUM Accounts.jpg
AUM/A & Subscription Advisors
AUM Advisors.jpg

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Envestnet Data & Analytics Segment
Envestnet Data & Analytics is a leading data aggregation, analytics and digital experiences platform. Envestnet Data & Analytics provides clients and their account holders with data connectivity via open APIs, data enrichment, AI-based analytics and digital experiences.
Over 1,300 clients, including financial institutions, financial technology innovators and financial advisory firms, including 16 of the 20 largest U.S. banks, subscribe to the Envestnet Data & Analytics platform to underpin personalized financial apps and services for more than 38 million paid end-users.
Envestnet Data & Analytics serves two primary markets:
Open Banking provides personal financial management, wealth management, payments, credit/lending, business financial management and enterprise business intelligence solutions for retail and commercial banks, credit unions, credit card providers, wealth management firms, FinTech firms, E-commerce and payment solution providers.
Alternative Data provides de-identified consumer spending insights for investment research and corporate and marketing research clients.
We believe that our brand recognition, innovative technology and intellectual property, large client base, and unique data gathering and enrichment capabilities provide us with competitive advantages that have enabled us to grow.
Market Opportunity
Envestnet Wealth Solutions Segment
The wealth management industry has experienced significant growth in terms of assets invested by retail investors over the past several years. According to the Federal Reserve, U.S. household financial assets totaled approximately $112 trillion as of September 30, 2023, representing a sizeable wealth management opportunity. According to Boston Consulting Group's Global Wealth Report 2023, total net wealth in North America is expected to grow by 5% annually between 2022 and 2027 to exceed $200 trillion. Based on data from Cerulli Associates, invested assets comprised an estimated 52% of overall U.S. household financial assets in 2022, advisor-directed assets totaled $26.9 trillion in 2022 and advisors had discretion over 57% of managed account assets as of September 30, 2023.

In the next 5-10 years, we believe the wealth management industry will continue to consolidate with fewer firms and fewer advisors managing more assets, making scale and operational efficiency increasingly important. This will require firms to integrate technology into all areas of their business.

The following trends are impacting our business and creating a large and growing market opportunity for data, technology and wealth solutions and services like ours:

Scale and convergence: Scale is a defining theme across the financial services landscape, including wealth management. For example, in the independent broker-dealer channel, the number of firms with $10 billion in assets or more rose 19% between 2017 and 2022, just as the total number of firms decreased 14% over the same period. In the RIA channel, firms with at least $1 billion of assets represented 71% of assets in 2022. We expect consolidation of firms and assets to continue, driven by factors including advisor succession needs, private capital attracted to the space, and the growing expectations of end-investors for modern digital experiences and holistic advice relationships. Moreover, we believe wealth channels are converging. Broker-dealers are becoming more RIA-like in their approach as they embrace planning and grow fee-based assets, while RIAs are becoming more enterprise-like as they consolidate, scale, and unify brands, technology, and services. The digital client experience and ability to serve the specialized needs of high-net-worth investors are increasingly paramount to success. Envestnet is well positioned for this future. More specifically, as of December 31, 2023, we served more than 108,000 advisors, including those at 48 of the top 50 wealth management and brokerage firms and thousands of RIAs. Envestnet | MoneyGuide is the leading financial planning software provider, according to the 2024 T3/Inside Information Advisor Software Survey, and 2.4 million plans were created or updated using the software in 2023. Envestnet Data & Analytics has over 400 million linked accounts and more than 38 million paid end-users. From an operations standpoint, we handled over 200 million trades in 2023 across more than 30 trading and custody partners.
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Personalization: Consumers are increasingly demanding personalization in both their technology and their investments. On the technology front, Envestnet is delivering over 24 million insights per day to financial advisors, home offices and financial institutions. By surfacing actionable opportunities, we are enabling our customers to create a better client experience and drive business efficiency and growth. We also began the phased rollout of the new Envestnet platform user interface and enhanced our financial planning software through a generational technology release. On the investment side, direct indexing, tax overlay and sustainable investing enable advisors to tailor portfolios to meet specific client needs. We have invested in each of these capabilities for years and continue to enhance our offerings. For instance, over the last two years we have enhanced our tax overlay capabilities to include additional account types, and we are now able to tax manage third-party model portfolios, both on a stand-alone basis and when they are offered within a UMA account. Also, our longest-tenured direct indexing strategy achieved a 10-year, GIPS-compliant track record at year-end 2023.

Integrated technology: Financial advisors and enterprises are looking for integrated, seamless WealthTech workflows; as such, spending on technology continues to climb. According to the Celent's North American IT spending report, North American wealth management firms expected to increase their technology budgets by 4.6% in 2023, with the largest level of investment being made in the front office. We are delivering a cloud-based, open architecture, end-to-end technology stack to the marketplace. Our technology platform is broad and integrated, encompassing portfolio management capabilities from proposal to planning to reporting and billing. We have invested in and connected our core technology offerings to the Envestnet Insurance Exchange, the Envestnet Credit Exchange, and the Envestnet Trust Exchange, among other offerings, to create a comprehensive digital ecosystem for advisors and their clients. In 2023, we rolled out our new proposal engine to 99% of client firms; the tool provides enhanced features, streamlined workflows, and seamless access to managed accounts. We enhanced integrations across the Envestnet ecosystem and with third-party software providers; for example, we fully integrated the Envestnet proposal tool into Envestnet | Tamarac, including new proposals and strategy modifications. We also expanded integrations with external CRM tools and simplified the account opening process with Docupace via our next generation proposal tool. We plan to continue to invest in software, APIs, developer tools, and integration points.

Holistic advice: Consumers are increasingly demanding a wider range of services from their financial services providers, leading more firms to embrace holistic advice. In fact, a 2023 McKinsey survey found that 47% of wealth clients preferred an investment professional that can holistically address financial needs across investments, taxes, banking, and life insurance—up from 29% in 2018. In addition, we believe the movement toward holistic advice reflects a natural maturation of the industry and is being driven by competition from scaled wealth management firms and innovation from self-directed fintech companies which are adding more services. Financial planning tools—which are foundational to providing holistic advice—have, in tandem, become more widely used by advisors. 86% of advisors in the 2024 T3/Inside Information Advisor Software Survey have adopted financial planning software, up from 79% in the 2021 survey. Envestnet’s mission is to make financial wellness a reality for everyone and as such we continue to expand our ecosystem of technology, solutions and intelligence for advisors. In 2023, we launched Envestnet Retire Complete, providing wealth advisors access to a range of retirement savings resources to help their clients meet their retirement objectives.

Leveraging data: Enterprises, advisors, and financial institutions need to leverage in-house and third-party data to make better, more timely decisions. According to Wavestone's 2024 Data and AI Leadership Executive Survey, 82% of senior executive respondents stated their organizations were increasing investments in data and analytics. We offer a variety of wealth data solutions. Our Insights Engine surfaces over 100 different types of insights for advisors and enterprises to enable them to grow and manage more efficient practices. Our enterprise data management capability gathers and ingests advisor client accounts, classifying them using a uniform process across account types and sources. Data comes from our portfolio accounting system, a client-permissioned source via account aggregation, or an account assigned to a firm within an institutional feed from a custodian, recordkeeper, trust accounting system, or data provider. All accounts are fully reconciled and packaged at the enterprise level, providing our customers with a single source of truth for wealth data. We also provide enterprise, advisor, and asset manager analytics which enable benchmarking and deeper business understanding. Finally, we use prescriptive and predictive analytics to create insights for next-best-actions, helping advisors grow and create more efficient practices.

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Independent and fee-based advice: We are a driver and beneficiary of the growth of financial advice, movement to independent channels, fee-based pricing and managed accounts. The financial advice industry is growing. According to an annual survey by MarketCast and Cerulli Associates, the percentage of affluent investors saying they are willing to pay for advice has increased from 53% in 2018 to 64% in 2023. Within the advice industry, Cerulli forecasts independent advice channels (where Envestnet has its largest market presence) to expand from 39% of advisor-mediated assets in 2022 to 44% in 2027, driven by growth in the RIA and hybrid RIA channels. Advice delivered with fee-based pricing—as opposed to commission-based pricing—also continues to take share, growing from 47% of industry assets in 2017 to 55% in 2022, according to Cerulli. Lastly, also per Cerulli, industrywide managed account assets have grown organically (excluding market appreciation) at an 8% annualized rate from December 31, 2017 through September 30, 2023. Envestnet’s managed account annualized organic asset growth rate, as measured by organic AUM growth, has been approximately double that of the industry over the same time period.

Envestnet Data & Analytics Segment
Envestnet Data & Analytics sits at the center of several important trends, including the movement toward Open Banking, personalization and insights and growth of alternative data.

Open Banking: Generally, Open Banking is defined as the structured exchange of data by consumers with and between their financial providers, taking into account those consumers’ needs and informed consent. In 2023, the value of the Open Banking market was estimated to be $25 billion, according to Grand View Research, and is projected to grow at a 27% CAGR to reach $135 billion in 2030. Regulations are a key driver behind the growth of active Open Banking participation worldwide. For example, in the United States, the Consumer Financial Protection Bureau released its proposed rulemaking on personal financial data rights to implement Section 1033 of the Consumer Financial Protection Act of 2010 and, in Canada, Open Banking regulation is expected to go into effect in 2025. Accordingly, the percentage of financial institutions considering Open Banking a ‘must have’ has increased from 51% in 2021 to 61% in 2022, according to a global survey by Finastra. Today, Envestnet Data & Analytics works with clients and data providers across 37 different countries and, specifically in the United States, over 50% of our consumer-permissioned traffic now flows through Open Banking connections. As a leader in the space, we—along with our clients and end-consumers—benefit from improved data sharing success rates, higher connection resiliency and availability and faster access through APIs. Improved connectivity drives business growth for Envestnet by increasing usage and user engagement, while also potentially opening access to new providers and domains. Additionally, as Open Banking use cases expand beyond connectivity, we expect greater adoption of Envestnet Data & Analytics’ full offering of solutions, which already cover major use cases across retail wellness, wealth management, payment enablement, small to medium business, enterprise business intelligence, credit decisioning, fraud monitoring and others.

Personalization and insights: Consumers expect more personalized experiences from their financial services providers, yet only 56% of consumers feel their bank is delivering in this area, per a Capgemini survey. As a result, an overwhelming majority of banks are planning to intensify their hyper-personalization programs, according to FICO, and 88% plan to support their personalization goals via analytics and machine learning to collect insights. Further, in the credit space, a Nova Credit study found that 75% of lenders think traditional credit data and scores aren't providing a complete picture of consumers' creditworthiness, and 59% of those lenders have incorporated some type of alternative data into their underwriting process. Through our insights, Envestnet Data & Analytics helps firms understand patterns of behavior and user segments, which provides valuable information on how to best serve their clientele, while also helping those firms build and scale hyper-personalized financial wellness experiences for their customers. In addition, firms use our insights to better understand their businesses. The Envestnet Bank Deposit Index, for example, delivers cash flow transparency with daily views and insights into bank deposits, enabling a bank to compare deposit flows at their institution to other regional and national banks and see other benchmark data for greater context.

Alternative data: The alternative data market is forecast to reach $136 billion in 2030, up from $7 billion in 2023 and implying a 52% CAGR, according to Grand View Research. Envestnet Data & Analytics offers comprehensive data from hundreds of data sources which helps organizations generate insights and broad market research based on consumer spending from alternative data and make better business decisions. Additionally, alternative data adoption will be fueled, in part, by the growing popularity of AI technologies, as the data can be employed to train and enhance AI models. Our data practices around natural language processing and machine learning leverage several deep learning AI models to accurately identify signals and provide enriched dimensions from the data, helping organizations extract the full potential of AI and fine-tune its predictive power.
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Revenue Model
Our business model lends itself to a high degree of recurring and predictable revenue.
Within the Envestnet Wealth Solutions segment, we provide asset-based, subscription-based and professional services on a business-to-business-to-consumer basis to financial services clients, whereby customers offer solutions to their end users based on our platform. Clients select the business model that works best for them based on their regulatory status and revenue model.
Within the Envestnet Data & Analytics segment, we provide, on a business-to-business basis, an open platform to customers and third-party developers through an open API framework.
We believe that a number of characteristics contribute to the success of our business model, including:

Favorable trends with respect to growth in fee-based assets and need for advanced technology; 
Recurring and resilient revenue base;
Strong customer retention/ enterprise relationships;
Pricing model that captures industry growth; and
Ability to operate and deliver at scale.

Our revenue is generated in the following manners:

Asset-based Recurring Revenue
In our Envestnet Wealth Solutions segment, asset-based recurring revenue primarily consists of fees for providing customers continuous access to platform services through the Company’s uniquely customized platforms. These platform services include investment manager research, portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing and back office and middle-office operations and administration and are made available to customers throughout the contractual term from the date the customized platform is launched. 

Asset-based fees that the Company earns are generally based upon variable percentages of assets managed or administered on our platforms. The fee percentage varies based on the level and type of services the Company provides to its customers, as well as the values of existing customer accounts. The values of the customer accounts are affected by inflows or outflows of customer funds and market fluctuations.

For approximately 75% of our asset‑based fee arrangements, customers are billed at the beginning of each quarter based on the market value of customer assets on our wealth management platforms as of the end of the prior quarter, providing for a high degree of revenue visibility in the current quarter. Revenue may fluctuate from quarter-to-quarter based on changes in asset values, asset flows and mix of holdings within the portfolio.
Subscription-based Recurring Revenue
In both our Envestnet Wealth Solutions and Envestnet Data & Analytics segments, subscription-based recurring revenue primarily consist of fees for providing customers continuous access to the Company’s technology platforms for wealth management and financial wellness. The subscription-based fees generally include fixed fees and/or usage-based fees.

Subscription fees vary based on the scope of technology solutions and services being used, and are priced in a variety of constructs based on the size of the business, number of users or number of accounts, and in many cases can increase over time based on the growth of these factors.
Despite this potential variance, we believe that our subscription fees are also highly predictable because they are generally established in multi‑year contracts providing longer‑term visibility regarding that portion of total revenue.
Professional Services and Other
In both our Envestnet Wealth Solutions and Envestnet Data & Analytics segments, we also generate revenue from professional services for client onboarding, technology development and other project related work as well as revenue resulting from our annual Advisor Summits.
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Growth Strategy

We intend to increase revenue and profitability in both the Envestnet Wealth Solutions and Envestnet Data & Analytics segments by leveraging the strategies described below.

Envestnet Wealth Solutions Segment
As discussed above, several industry trends underpin and align with Envestnet’s growth opportunity. These trends include scale and convergence of the wealth management ecosystem, personalization of both technology and investments, integrated workflows, holistic advice, data and analytics, and the movement to independent and fee-based advice. Our growth strategy in the Wealth market seeks to capitalize on these themes and has three primary components:

Drive and benefit from the growth of our established customer base. Growth of our configurable, open architecture managed accounts platform is aligned with a number of core industry trends. First, the wealth industry continues to shift toward planning-led and fee-based business models; as referenced earlier, fee-based assets as a percentage of total advisor industry assets rose substantially between 2017 and 2022. Second, advisors are gradually migrating away from packaged products and are emphasizing customization, tax optimization, and operational efficiency. Our personalization solutions such as direct indexing, tax overlay, sustainable investing, and high-net-worth consulting support these objectives. And third, enterprises and advisors are increasingly looking to outsource components of investment management, leveraging managed accounts to free up time for prospecting and servicing and to expand their value proposition beyond investments.

Expand relationships with existing customers. As of December 31, 2023, Envestnet served more than 108,000 advisors in over 19.1 million accounts with approximately $5.8 trillion of assets, making us one of the most scaled wealth management technology, solutions, and data companies in North America. Foundational to our ability to sell more of Envestnet’s capabilities to our clients is providing excellent customer service; from the fourth quarter of 2022 to the fourth quarter of 2023, we increased our Net Promoter Score from 50 to 63. We intend to continue to bring the components of our ecosystem even closer together, integrating workflows and optimizing our customers’ technology experience. According to a January 2024 report from McKinsey & Company, there is growing consumer demand for one-stop-shop access to wealth management and adjacent financial services, and our internal research has shown that many advisors also prefer to partner with “all-in-one” wealth software firms. Enterprises and advisors can purchase our products either piecemeal or as packages, providing significant room to grow wallet share—including managed accounts, financial planning software, client and advisor portals, performance reporting, billing, trading and rebalancing, CRM, data management and insights, asset manager and advisor analytics, workplace solutions, Envestnet Insurance Exchange, and others.

Add new capabilities and enhance revenue streams. Our broad set of customers and partners—including broker-dealers, RIAs, asset managers, insurance carriers, banks and fintech companies—provides us with significant opportunities to introduce and package new products and capabilities. For example, through our 2022 acquisition of Redi2 Technologies, we are modernizing our core billing engine, opening up the ability to sell revenue management software to our asset management partners and introducing new capabilities such as Envestnet Payments. In 2022, we acquired 401kplans.com, which, when combined with our Envestnet Retirement Solutions business, creates a compelling opportunity for generalist wealth advisors to offer 401(k) plans to their small business customers. We also announced our partnership with the FNZ Group in 2022 to integrate custody and clearing capabilities with our wealth platform, with the goal of providing a streamlined and real-time experience for the advisor while at the same time generating revenue for Envestnet.

Envestnet Data & Analytics Segment
Expand our relationships with existing customers: Our business currently serves a footprint of over 1,300 clients and more than 38 million paid end-users across the financial ecosystem. Additionally, we have an entrenched, blue-chip customer base—our top 50 customers have an average tenure of 10 years—which provides us with a significant opportunity to cross-sell existing products and solutions. Our initiatives around product bundling enable customers to tap into the full power of our platform, ranging across corporate, consumer, small and midsize business and research applications. For enterprise users specifically, we look to monetize new product categories like enterprise business intelligence, product and marketing insights, and audience modelling.

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Add new capabilities and enhance revenue streams. The Envestnet Data & Analytics team has been focused on modernizing existing products and launching new solutions into our unified platform. In 2023, we expanded into new markets including subscription management and alternative lending by rolling out our Subscription & Bill Tracker and Credit Accelerator capabilities, respectively. Initiatives like these have, in part, yielded an increase in our Open Banking pipeline, as customers learn how our platform can benefit them in more ways. We expect future product launches will allow for additional cross-sell opportunities and customer acquisitions. Furthermore, as we expand our data supply, and as our Open Banking products achieve greater adoption, the value of our alternative data products increases as the additional data can be leveraged in existing and adjacent research markets. For example, we recently launched our SpendSignals product, which gives corporate and market research professionals access to insights on consumer spending and peer purchasing behavior.

Technology Platforms
Our technology platforms are primarily multi-tenant SaaS-based hybrid cloud offerings that afford us the flexibility to offer a highly scalable consolidated workflow via a web-based user interface that is complemented by an API led open strategy that enables us to offer an integrated omnichannel flexibility and collaboration ecosystem. This open ecosystem strategy has enabled us to abstract, integrate and modernize our offerings at a rapid pace while also enabling our customers and partners to add incremental value on top of our platform via a fit for a purpose managed open ecosystem model.

We are committed to our operational and information security capabilities as strategic differentiators. We undergo annual SSAE 16 SOC 2 Type II audits to validate the continued operation of our internal controls for our flagship offerings within the ecosystem; the Unified Managed platform, Envestnet Data & Analytics platform and Envestnet | Tamarac platform. The SOC reports confirm design and operating effectiveness of internal controls. We maintain multiple redundancies, back up our databases and safeguard technologies and proprietary information consistent with industry best practices. We also maintain a comprehensive business continuity plan and company‑wide risk assessment program that is consistent with industry best practices and that complies with applicable regulatory requirements.

Our proprietary ecosystem provides Enterprise clients in wealth management, financial advisors that are working alone or as part of financial advisory firms, financial institutions, and FinTech firms along with their respective customers, access to investment solutions and services, enriched financial data, analytics, and workflows that enable the foundational orchestration to deliver holistic wealth management to their end clients via one unified experience, with the widest range of front‑, middle‑ and back‑office needs. The “open architecture” design of our ecosystem and platforms provide our customers and their customers with flexibility in terms of the investment solutions, services they access, data they leverage, and configurability to meet their unique needs. The multi‑tenant platform architecture ensures that this level of flexibility and customization is achieved without requiring us to create unique applications for each client, thereby enabling improved efficacy and efficiency vs other offerings. In addition, though our technology platforms are designed to deliver a breadth of functions, our customers can select from the various investment solutions, services, data, and analytics we offer; without being required to subscribe to or purchase more than what they believe is necessary.

An integral part of our strategy is an open architecture approach to integration via our OpenENV integration platform. This strategy allows for robust integrations with 3rd party technology platforms and service providers and enables client firms to create unique client and advisor experiences powered by the Envestnet ecosystem.

Our Envestnet Data & Analytics platform is structured into three main layers:

Connectivity: data aggregation layer of the platform;
Analytics: artificial intelligence and machine learning engine layer of the platform; and
Experiences: the digital services layer of the platform.

The connectivity layer of the platform collects a wide range of end user-permissioned transaction-level data from approximately 19,000 sources, including banking, investment, loan, and credit card information, with the ability to expand access to new data sources. Over 80% of this data is collected through structured feeds from our customers. These structured feeds, which consist of either open banking API’s or batch files, provide this critical data efficiently and at scale. Where we do not have direct connections, we capture data using our proprietary information-gathering techniques. As data is ingested, it goes through data quality control and anonymization engine e.g., financial transaction categorization, merchant identification, geographical location as well as investment transaction security identification, classification and normalization.

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The analytics layer of the platform is comprised of real-time analytics and batch processing pipelines. A series of highly composable proprietary AI and machine learning models deployed and consumed by different workloads as required for each business functional use cases e.g., credit decisioning, marketing segmentation, product planning and research.

The experiences layer of the platform serves as the front-end services layer for the connectivity analytics layers into three core experiences – consumer, small business and corporate to include a shared experiences sub-layer e.g., conversational AI. API gateway is the common delivery mechanism of all real-time experiences to include embeddable financial applications and widgets. All APIs, applications and widgets are configurable, scalable and secure allowing our customers to accelerate their systems integration and deliver value to end their end users through their engagement layers.

In order to provide further details of our operation, we have revised our definition of technology development costs to include costs related to the design, development and deployment of our software and data science platforms. The below information is presented in conjunction with the current definition, with prior periods adjusted accordingly.
In the years ended December 31, 2023, 2022 and 2021, we incurred technology development costs for all our technology platforms totaling approximately $234 million, $239 million and $192 million, respectively. Of these costs, we capitalized approximately $94 million, $89 million and $65 million, respectively, as internally developed software.
Sales and Marketing
Envestnet's integrated sales and marketing capabilities exemplify our distinctive industry leadership. We are at the forefront of fostering the growth and productivity of wealth managers and integrated advice through our interconnected technology, advanced insights, comprehensive solutions and industry-leading service and support. Our efforts revolve around achieving three core objectives:

Maintain Envestnet's position as the preferred platform of the industry: We engage with key decision-makers in the wealth management industry, positioning Envestnet as the advisors’ platform of choice.

Drive advisor activation: Our focus is on increasing advisor adoption of Envestnet's new and enhanced platform features and solutions. This is achieved through cross-selling opportunities identified through data and insights, with a strategic emphasis on addressing advisor needs while maximizing revenue.

Drive advisor organic growth: Leveraging marketing tools such as lead generation, practice management support, and advisor tools, we empower advisors and asset managers to achieve organic business growth, accelerating the expansion of assets on the Envestnet platform.

We have enhanced the use of technology and sales enablement tools to facilitate more predictive and effective conversations with our advisor client-base and prospective customers, optimizing the efficiency of our marketing spend. Our advisor-facing sales teams, comprising field sales and internal consultants, adopt a high-touch approach focused on consultancy, product demonstrations, and service and operational support.
For instance, our platform consulting group and business development directors assist advisors in utilizing our wealth management platform efficiently. Envestnet | PMC’s consulting team of investment professionals offers various portfolio and investment management consulting services to advisors.
Our sales teams are organized regionally or by firm segmentation, delivering a high-touch approach through consultancy, product demonstrations, and support to help advisors understand and access our investment solutions. The teams include enterprise consultants, who serve as the primary point of contact for Envestnet's enterprise clients, and direct advisor sales and pre-sales teams, which focus on servicing global financial institutions.
Client partner teams specialize in working closely with our existing advisor client-base to deepen relationships, identify cross-selling opportunities, and expand the use of our products and services.
Furthermore, our direct advisor sales and technical pre-sales teams cover financial technology providers in each region, supported by a client success and developer relations team specializing in API integration and account management. Together, these teams are responsible for the growth and expansion of Envestnet's client base.
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Competition
Our competitors offer a variety of products and services that compete with one or more of the investment solutions and services provided through our ecosystem of technology platforms; although, based on our industry experience, we believe that none offers a more comprehensive set of products and services than we do.
Within our Envestnet Wealth Solutions segment, we compete on the basis of several factors, including:
The breadth and quality of investment solutions and services to which we provide access through our technology platform;
The number of custodians that are connected through our technology platforms;
The price of our investment solutions and services;
The ease of use of our technology platforms; and
The nature and scope of investment solutions and services that each wealth management provider believes are necessary to address their needs.
Our Envestnet Data & Analytics group competes with other financial technology companies, credit bureaus and data, analytics and digital providers. Based on our global and multi-industry experience, we do not believe any other single company in the data aggregation, analytics and digital experiences space offers a diverse, comprehensive set of platforms with features such as ours.
Within our Envestnet Data & Analytics segment, we compete on the basis of several factors, including:
Reputation;
Global and multi-market and segments reach;
Cloud-based delivery model;
Data aggregation capability;
Access to data through direct structured data feeds;
Scale (size of customer base and level of user adoption);
Security and open banking infrastructure;
Time to market;
Unique analytics capability;
Breadth and depth of application functionality user experience;
Access and integration to/with third-party applications;
Ease of use, ease of integration, flexibility and configurability; and
Competitive pricing.
We believe that we compete favorably with respect to all of these factors. 
Regulation
The financial services industry is among the most extensively regulated industries in the United States. We operate investment advisory, broker dealer and fund advisory businesses, each of which is subject to a specific regulatory scheme, including regulation at the federal and state level, as well as regulation by self-regulatory organizations and non-U.S. regulatory authorities. In addition, we are subject to numerous laws and regulations of general application.
Our subsidiaries EAM, EPS, FDX Advisors, Inc., QRG, Envestnet Embedded Advisory, Inc., and Envestnet Retirement Solutions, LLC operate investment advisory businesses. These subsidiaries are registered with the SEC as “investment advisers” under the Advisers Act, and are regulated thereunder. They may also provide fiduciary services as defined in Section 3(21)(A)(ii) of ERISA, including acting as an “investment manager” (as defined in Section 3(38) of ERISA). As described further below, many of our investment advisory programs are conducted pursuant to the non-exclusive safe harbor from the definition of an “investment company” provided for under Rule 3a-4 of the Investment Company Act. EAM serves as the investment adviser to two mutual funds and four exchange-traded funds. The funds are registered as “investment companies” under the Investment Company Act. The Advisers Act, Investment Company Act and ERISA, together with related regulations and interpretations of the SEC and the DOL, impose numerous obligations and restrictions on investment advisers and funds, including recordkeeping requirements, limitations on advertising, disclosure and reporting obligations, prohibitions on fraudulent activities and the requirement that conflicts of interest be monitored, mitigated, and disclosed. The fiduciary obligations of investment advisers to their clients require advisers to, among other things, consider the suitability of the investment products and advice they provide, seek “best execution” for their clients’ securities transactions, conduct due
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diligence on third-party products offered to clients, consider the appropriateness of the adviser’s fees and provide extensive and ongoing disclosure to clients. The SEC is authorized to institute proceedings and impose fines and sanctions for violations of the Advisers Act and the Investment Company Act and has the power to restrict or prohibit an investment adviser from carrying on its business in the event that it fails to comply with applicable laws and regulations. We believe we are in compliance in all material respects with the requirements of the Advisers Act, ERISA and the Investment Company Act and the rules and interpretations promulgated thereunder.

ESI and FIDx Markets are registered as a broker-dealers with the SEC under the Exchange Act and select state securities regulators. In addition, ESI and FIDx Markets are members of FINRA, the securities industry self-regulatory organization that supervises and regulates the conduct and activities of broker-dealers. Broker-dealers are subject to regulations that cover all aspects of their business, including sales practices, market making and trading among broker-dealers, use and safekeeping of customers’ funds and securities, capital structure, record-keeping and the conduct of directors, officers, employees, representatives and associated persons. FINRA and the SEC conduct periodic examinations of the operations of its members, including ESI and FIDx Markets. Violation of applicable regulations can result in the suspension or revocation of a broker-dealer’s registration, the imposition of censures or fines and the suspension or expulsion of the broker-dealer from FINRA. ESI and FIDx Markets are subject to minimum net capital requirements under the Exchange Act, SEC and FINRA rules.

Envestnet Data & Analytics is examined on a periodic basis by various regulatory agencies. For example, as a third-party technology service provider to financial institutions, Envestnet Data & Analytics is subject to multi-agency supervisory examinations based on published guidance by the Federal Financial Institutions Examination Council. These examinations include reviews of Envestnet Data & Analytics’ management, acquisition and development activities, support and delivery, IT and disaster preparedness and business recovery planning. The Office of the Comptroller of the Currency is the agency in charge of these examinations.
Either as a result of direct regulation or obligations under customer agreements, our subsidiaries are required to comply with certain provisions of the Gramm-Leach-Bliley Act, related to the privacy of consumer information and are subject to other privacy and cybersecurity laws because of the solutions we provide. In addition, numerous regulations continue to be proposed and promulgated that necessitate the implementation of additional controls of companies like ours.

Many of the laws and regulations to which our subsidiaries are subject are evolving, unclear and inconsistent across various jurisdictions, and ensuring compliance with them is difficult and costly. We continually develop improvements to our existing products and services as well as new products and services.
Investment Advisory Program Conducted Under Rule 3a-4
Under the Investment Company Act, an issuer that is engaged in the business of investing, reinvesting or trading in securities may be deemed an “investment company,” in which case the issuer may be subject to registration requirements and regulation as an investment company under the Investment Company Act. In order to provide assurance that certain discretionary investment advisory programs would not be considered investment companies, the SEC adopted Rule 3a-4 under the Investment Company Act, which provides a non-exclusive safe harbor from the definition of an investment company for programs that meet the requirements of the rule. We conduct and support the following programs pursuant to the Rule 3a-4 safe harbor:
Separately managed accounts;
Unified managed account portfolios;
Fund portfolios and exchange-traded fund portfolios; and
Advisor as portfolio manager.
Human Capital Resources
As of December 31, 2023, we had a total global workforce of approximately 3,100 employees, of which 99% are full-time employees and 54% are located in the United States and 46% are located outside of the United States, primarily in India. Envestnet’s global headcount has been reduced by approximately 10% since December 31, 2022. The reduced headcount is the result of terminations (both voluntary and involuntary) and a reduction in force initiative. The global voluntary turnover rate for the company is approximately 11%. In connection with the reduction in force initiative that began in the first quarter of 2023, as well as the fourth quarter 2022 organizational realignment, we incurred $35.4 million in total severance expense for the year ended December 31, 2023.

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Diversity, Equity & Inclusion

We recognize that our workforce is made up of people of different backgrounds, cultures and beliefs. We welcome and encourage this diversity and inclusion. Respecting each person as an individual and welcoming the richness of ideas that come from such diversity help us meet our objective of being a great place to work. As of December 31, 2023, our global workforce was comprised of approximately 55% Asians, 34% Whites and the remaining 11% were Black or African American, Hispanic or Latino or other. Approximately 37% of our global workforce self-identified as female, 63% male and less than 1% as other. In addition, over 50% of our Board of Directors were women.

Professional Development

In 2023, employees had access to over 12,000 courses in our learning management system and registered and completed approximately 3,000 unique courses for a total learning and development time of approximately 30,000 hours. This includes mandatory training for compliance, audit, business ethics, data security, sexual harassment, diversity and inclusion as well as situational awareness and safety classes.

The Delegates Program is a nine-month professional development program for high-performing employees with diverse backgrounds and skill sets. This program is intended to develop and retain future leaders, strengthen soft skills, enhance self-awareness and further develop business competencies of its participants. This is an annual program and in 2023, 13 employees completed the program.

Total Rewards

Envestnet offers comprehensive total reward packages designed to incent achievement of performance goals and reward top performers. We ensure a competitive base pay for all employees by utilizing current survey data, and based on performance, employees may also be eligible for annual incentive cash bonus and long-term incentive awards. Employees are offered employer subsidized health, dental and vision insurance. Employees based in the U.S. are offered an employer match for retirement savings, group term life and disability insurance, college tuition and scholarships, paid parental leave for the birth or adoption of a child, parental stipend for children under six, military leave with pay differential, student loan payment assistance, 13 paid holidays and floating holidays, at least three weeks paid time off, paid sick leave, paid volunteer time off and an internet or cell phone reimbursement. Employees based in India receive standard health and welfare benefits, as well as additional family medical coverage, an internet stipend and free transportation home from late shifts. We support our employees’ mental and physical well-being with a confidential Employee Assistance Program and an opt-in Wellness program that rewards healthy choices and behaviors.

In Our Community

The Envestnet Cares program empowers our employees to engage in their local communities with paid time off for volunteer activities, charitable donation matching and partnerships with several non-profit organizations. In 2023, Envestnet employees used approximately 4,000 employer paid volunteer hours to support local charity initiatives.

Engagement

Employee feedback is important to us and we regularly conduct a global employee survey. In 2023, we conducted a global employee engagement survey with an 82% response rate. In addition, our CEO and senior leadership team regularly host live, online question and answer sessions and discussion panels that are available to all employees. We believe the calls demonstrate our commitment to authentic engagement and empower our employees to ask questions about our industry, products and services and overall direction as a company.

Information about our Executive Officers
The following table summarizes information about each one of our executive officers as of December 31, 2023.
NameAgePosition(s)
William Crager59Chief Executive Officer, Director
Joshua Warren43Chief Financial Officer
Shelly O’Brien58Chief Legal Officer, General Counsel and Corporate Secretary

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William Crager— Mr. Crager serves as our Chief Executive Officer and has served as a member of our Board since March 2020. Previously, Mr. Crager served as our Interim Chief Executive Officer between October 2019 and March 2020, Chief Executive of Envestnet Wealth Solutions since January 2019, and President of Envestnet since 2002. Prior to joining us, Mr. Crager served as Managing Director of Marketing and Client Services for Rittenhouse Financial Services, Inc., an investment management firm affiliated with Nuveen. Mr. Crager received a BA from Fairfield University where he majored in economics and now serves on the Board of Trustees. On January 7, 2024, the Company entered into a separation and release agreement with Mr. Crager in which it was agreed that Mr. Crager will step down as chief executive officer on March 31, 2024 and as a member of the Company’s Board of Directors promptly following Envestnet’s 2024 Annual Meeting. Beginning April 2024, Mr. Crager will serve as a senior advisor, focusing on client and partner relationships.

Joshua Warren—Mr. Warren has served as Chief Financial Officer since November 2023. Prior to joining us, Mr. Warren served BlackRock, Inc. as Managing Director and Global Head of Business Strategy for iShares and Index Investments, Managing Director in BlackRock's Corporate Strategy and Development team, and other roles. He also served on the Board of Directors and Audit and Risk Committee of iCapital, an alternative investments marketplace, from 2019 until 2023. Mr. Warren earned a JD from the New York University School of Law and a BA from Dartmouth College.

Shelly O’Brien—Ms. O’Brien has served as Chief Legal Officer, General Counsel and Corporate Secretary since 2002. Prior to joining us, Ms. O’Brien was General Counsel and Director of Legal and Compliance for ING (U.S.) Securities, Futures & Options Inc., a broker‑dealer, and futures commission merchant. Ms. O’Brien received a degree in political science from Northwestern University, a JD from Hamline University School of Law, and an LLM in taxation from John Marshall Law School.
Beginning April 1, 2024, James Fox will begin serving as our Interim Chief Executive Officer until our Board of Directors has appointed a new chief executive officer. Mr. Fox has served as a member of our Board of Directors since February 2015 and Chair of the Board of Directors since March 2020. Mr. Fox retired as Non-Executive Chairman of FundQuest, Inc., upon its acquisition by the Company, effective December 2011 after serving in that role since September 2010 and, prior to that, as President and Chief Executive Officer starting in October 2005. Mr. Fox has over 30 years of senior executive experience with the BISYS Group, Inc., First Data Corporation, eOne Global, and PFPC. He serves as a director of Madison CF (UK) Limited, The Ultimus Group LLC and Yukon YC Holdings LLC. He also served as a director of Brinker Capital Holdings, Inc. from July 2015 until September 2020. Mr. Fox participated in the Advanced Management Program at the Wharton School of the University of Pennsylvania. He earned an M.B.A. in Finance from Suffolk University and a B.A. in Economics from the State University of New York at Oswego.

Available Information
The Company maintains a website at the following address: http://www.envestnet.com. The information on the Company's website is not incorporated by reference in this Annual Report.
We make available on or through our website reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Exchange Act, as amended. These include our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to these reports. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information available with, or furnish it to, the SEC. The SEC also maintains a website at the following address, through which this information is available: http://www.sec.gov.

Item 1A.  Risk Factors
An investment in any security involves risk. An investor or potential investor should consider the risks summarized in this section when making investment decisions regarding our securities. These risks and uncertainties include, but are not limited to, the risk factors set forth below. The risks and uncertainties described in this section are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also affect our business. If any of these known or unknown risks or uncertainties actually occurs, our business, financial condition and results of operations could be materially adversely affected.
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Risks Related to Our Results of Operations and Financial Condition
We derive a substantial portion of our revenue from the delivery of investment solutions and services to clients in the financial services industry and our revenue could suffer if that industry experiences a downturn.
A substantial portion of our revenue is derived from clients in the financial services industry, particularly in financial advisory services. A decline or lack of growth in demand for financial services would adversely affect our clients and, in turn, our results of operations, financial condition and business. For example, the availability of free or low‑cost investment information and resources, including research and information relating to publicly traded companies and funds available on the internet or on company websites, could lead to lower demand by investors for the services provided by financial advisors. In addition, demand for our investment solutions and services could decline for many reasons. Negative public perception and reputation of the financial services industry could reduce demand for our broader services and investment advisory solutions. Consolidation or limited growth in the financial services and advisory industry could reduce the number of our clients and potential clients. Events that adversely affect our clients’ businesses, rates of growth or the numbers of customers they serve, including decreased demand for our clients’ products and services, adverse conditions in our clients’ markets or adverse economic conditions generally, could in turn decrease demand for our investment solutions and services and thereby decrease our revenue. Any of the foregoing could have a material adverse effect on our results of operations, financial condition or business.

A limited number of clients account for a material portion of our revenue. Renegotiation or termination of our contracts with any of these clients could have a material adverse effect on our results of operations, financial condition or business.
For the years ended December 31, 2023, 2022 and 2021, revenue associated with one major client, Fidelity, accounted for approximately 16%, 16% and 17%, respectively, of our total revenue and our ten largest clients accounted for approximately 37%, 34% and 33%, respectively, of our total revenue. Our license agreements with large financial institutions are generally multi-year contracts that may be terminated upon the expiration of the contract term or prior to such time for cause, which may include breach of contract, bankruptcy, insolvency and other reasons. A majority of our agreements with financial advisors generally provide for termination at any time.
A substantial majority of our revenue associated with Fidelity is derived from ongoing asset-based platform service fees paid by firms, advisors or advisors’ clients obtained through the Fidelity relationship. If Fidelity or a significant number of our most important clients were to renegotiate or terminate their contracts with us, our results of operations, financial condition or business could be materially adversely affected. 
Changes in the estimates of fair value of reporting units or of long-lived assets, particularly goodwill and intangible assets, may result in future impairment charges, which could have a material adverse effect on our results of operations, financial condition, cash flows or business.
Over time, the fair values of long-lived assets change. At December 31, 2023, we had $806.6 million of goodwill and $338.1 million of intangible assets, net, collectively representing 61% of our total assets. 
Goodwill is reviewed for impairment each year using a qualitative or quantitative process that is performed at least annually or whenever events or circumstances indicate that impairment may have occurred. We perform the annual impairment analysis on October 31 in order to provide management time to complete the analysis prior to year-end. Prior to performing the quantitative evaluation, an assessment of qualitative factors may be performed to determine whether it is more likely than not that the fair value of a reporting unit exceeds the carrying value. If it is determined that it is unlikely that the carrying value exceeds the fair value, we are not required to complete the quantitative goodwill impairment evaluation. If it is determined that the carrying value may exceed fair value when considering qualitative factors, a quantitative goodwill impairment evaluation is performed. When performing the quantitative evaluation, if the carrying value of the reporting unit exceeds its fair value, an impairment loss equal to the difference will be recorded. The identification of reporting units and consideration of aggregation criteria requires management’s judgment. Based on the relevant GAAP authoritative guidance, we aggregate components of a single operating segment into a reporting unit, if appropriate. Future goodwill impairment charges may occur if estimates of fair values decrease, which would reduce future earnings. 
As part of the annual goodwill impairment analysis, we performed a quantitative goodwill impairment evaluation for each reporting unit in the fourth quarter of 2023. As a result of this impairment analysis, the carrying value of the Envestnet Data & Analytics reporting unit exceeded its fair value, which resulted in the recognition of a non-cash impairment charge to goodwill of $191.8 million during the fourth quarter of 2023. Although the Company recorded this impairment charge in the fourth quarter of 2023, future goodwill impairment charges may occur if certain estimates and assumptions used to estimate the
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fair value of the Envestnet Data & Analytics reporting unit in the fourth quarter of 2023 fall below those estimates and assumptions and such impairment charges could be material.
We test our indefinite lived intangible assets on an annual basis and more often if an event occurs or circumstances change that would more likely than not reduce the fair value of the indefinite lived intangible asset below its carrying amount. We also test property and equipment and other long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Future asset impairment charges may occur if asset utilization declines, if customer demand decreases, or for a number of other reasons, which would reduce future earnings. Any such impairment charges could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Impairment charges would also reduce our consolidated stockholders’ equity and increase our debt-to-total-capitalization ratio, which could negatively impact our access to the debt and equity markets.
As part of our ongoing monitoring efforts, we will continue to consider capital markets and other economic factors and its potential impact on our businesses, as well as other factors, in assessing goodwill and other long-lived assets for possible indications of impairment.
We have a significant amount of debt and servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to service our debt.
As of December 31, 2023, we had $317.5 million of outstanding 0.75% Convertible Notes due 2025, and $575.0 million of outstanding 2.625% Convertible Notes due 2027. As of December 31, 2023, we had an additional $500.0 million available to us to borrow under our Revolving Credit Facility. This indebtedness could, among other things:
make it difficult for us to pay other obligations;
make it difficult to obtain favorable terms for any necessary future financing for working capital, capital expenditures, debt service requirements or other purposes;
require us to dedicate a substantial portion of our cash flow from operations to service the indebtedness, reducing the amount of cash flow available for other purposes; and
limit our flexibility in planning for and reacting to changes in our business.

The conditional conversion features of our Convertible Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion features of our outstanding Convertible Notes are triggered, holders of the Convertible Notes will be entitled to convert their Convertible Notes at any time during specified periods at their option. We may elect to satisfy our conversion obligation in cash, in shares of our common stock or in a combination of cash and shares of our common stock. If one or more holders elect to convert their Convertible Notes, unless we satisfy our conversion obligation by delivering solely shares of our common stock (other than cash in lieu of any fractional share), we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity. Furthermore, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long‑term liability, which would result in a material reduction of our net working capital.
We may not have the ability to raise the funds necessary to settle conversions of our Convertible Notes or purchase the Convertible Notes as required upon a fundamental change, and our existing debt contains, and our future debt may contain, limitations on our ability to pay cash upon conversion or purchase of our Convertible Notes.
Following a fundamental change, Convertible Notes holders will have the right to require us to purchase their Convertible Notes for cash. A fundamental change may also constitute an event of default or prepayment under, and result in the acceleration of the maturity of, our then‑existing indebtedness. In addition, upon conversion of the Convertible Notes, unless we settle our conversion obligation solely in shares of our common stock (other than cash in lieu of any fractional share), we will be required to make cash payments in respect of the Convertible Notes being surrendered for conversion. We may not have sufficient financial resources, or may not be able to arrange financing, to pay the fundamental change purchase price in cash with respect to the Convertible Notes surrendered by holders for purchase upon a fundamental change or make cash payments upon conversions. In addition, restrictions in our Third Credit Agreement (as described herein) or future credit facilities or other indebtedness, if any, may not allow us to purchase the Convertible Notes upon a fundamental change or make cash payments upon conversions of the Convertible Notes. Our failure to purchase the Convertible Notes upon a fundamental change or make cash payments upon conversions thereof when required would result in an event of default with respect to the Convertible Notes which could, in turn, constitute a default under the terms of our other indebtedness, if any. If the repayment
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of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and purchase the Convertible Notes or make cash payments upon conversions thereof. For a description of the Company’s Revolving Credit Facility, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Recent Developments, Revolving Credit Facility” and Part II, Item 8, “Note 14—Debt”.

The capped call transactions entered into in connection with the issuance of our 2.625% Convertible Notes due 2027 may affect the value of such notes and our common stock.

In connection with the issuance of our 2.625% Convertible Notes due 2027 we entered into privately negotiated Capped Call Transactions with the Capped Call Counterparties. The Capped Call Transactions were entered into to reduce the potential dilutive effect on our common stock upon any conversion of the Convertible Notes due 2027 and/or offset any potential cash payments we are required to make in excess of the principal amount of converted notes, as the case may be, with such reduction and/or offset subject to cap.
In connection with establishing their initial hedges of the capped call transactions, the Capped Call Counterparties or their respective affiliates entered into various derivative transactions with respect to our common stock and/or purchased shares of our common stock concurrently with or shortly after the pricing of the Convertible Notes due 2027. The Capped Call Counterparties and/or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions from time to time prior to the maturity of the Convertible Notes due 2027 (and are likely to do so following any conversion of the Convertible Notes due 2027 or any retirement by us of the Convertible Notes due 2027, in each case if we exercise the relevant election to terminate the corresponding portion of the capped call transactions). This activity could cause or avoid an increase or decrease in the market price of our common stock or the Convertible Notes due 2027. The potential effect, if any, of these transactions and activities on the market price of our common stock or the Convertible Notes due 2027 will depend, in part, on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common stock.
We are subject to counterparty risk with respect to the capped call transactions, and the capped call transactions may not operate as planned.

The Capped Call Counterparties are financial institutions or affiliates of financial institutions, and we will be subject to the risk that any or all of them might default under the capped call transactions. Our exposure to the credit risk of the Capped Call Counterparties will not be secured by any collateral. Global economic conditions have, from time to time, resulted in the actual or perceived failure or financial difficulties of many financial institutions. If a Capped Call Counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that Capped Call Counterparty. Our exposure will depend on many factors, but generally an increase in our exposure will be correlated with increase in the market price of the volatility of our common stock. In addition, upon a default by a Capped Call Counterparty, we may suffer more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of any Capped Call Counterparty.
In addition, the capped call transactions are complex, and they may not operate as planned. For example, the terms of the called call transactions may be subject to adjustment, modification or, in some cases, renegotiation if certain corporate or other transactions occur. Accordingly, these may not operate as we intend if we are required to adjust their terms as a result of transactions in the future or upon unanticipated developments that may adversely affect the functioning of the capped call transactions.
Risks Related to our Operations
Our future success depends on our ability to recruit and retain senior executive leadership and other key employees and to successfully manage transitions. If we fail to retain talented, highly qualified senior management and other key employees, attract them when needed or successfully manage transitions, such failure could negatively impact our business and financial condition.
Our future success depends on our ability to attract and retain senior executive leadership and other key employees and to successfully manage through transitions in senior executive leadership. Our current chief executive officer, William Crager, will step down as chief executive officer on March 31, 2024, and commencing on April 1, 2024, James Fox, who currently serves as chair of our Board of Directors, will serve as the interim chief executive officer. Our Board of Directors has initiated a search for a successor with assistance from an independent executive search firm. Although our Board of Directors is confident in the interim leadership of Mr. Fox, our success will depend, in part, on the effectiveness of our new chief executive officer.
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Finding a suitable new chief executive officer can be difficult, and we can provide no assurance as to the length or success of the search process. In addition, on November 15, 2023, we transitioned to a new chief financial officer. Leadership transitions are inherently difficult to manage and may cause uncertainty or disruption within the Company and with external relationships. The failure to adequately manage the transitions of senior executive leaders could negatively impact our financial performance and ability to meet operational goals and strategic plans. This may also impact our ability to retain and hire other key members of management.

In addition, our ability to provide our services and maintain and develop relationships with clients depends largely on our ability to attract, train, motivate and retain highly skilled professionals, particularly professionals with backgrounds in sales, marketing, technology and financial and investment services. Consequently, we must hire and retain employees with the technical expertise and industry knowledge necessary to continue to develop our services and effectively manage our sales and marketing organization to assist the growth of our operations. We believe there is significant competition for professionals with the skills necessary to perform the services we offer. We experience competition for these professionals from competitors, other technology companies and financial services organizations, many of which have greater resources than we do and therefore may be able to offer higher compensation packages. Competition for these employees is intense, and we may not have sufficient human resources programs, practices and benefits to be able to retain our existing employees or be able to recruit and retain other highly skilled personnel. The inability to attract and retain qualified personnel could negatively impact our financial performance and ability to meet operational goals and strategic plans.

If sources from which we obtain information limit our access to such information or charge us fees for accessing such information, our business could be materially and adversely harmed.
Our Envestnet Data & Analytics data aggregation solutions require certain data that we obtain from thousands of sources, including banks, other financial institutions, retail businesses and other organizations, some of which are not our current customers. As of December 31, 2023, we receive over 80% of this data through structured data feeds that are provided under the terms of our contracts with most of our customers. Although all of the information we currently gather is end user-permissioned, non-identified data and, currently, we generally have free, unrestricted access to, or ability to use, such information, one or more of our current customers could decide to limit or block our access to the data feeds we currently have in place with these customers due to factors outside of our control, such as more burdensome regulation of our or our customers’ industry, increased compliance requirements or changes in business strategy. If the sources from which we obtain information that is important to our solutions limit or restrict our ability to access or use such information, we may be required to attempt to obtain the information, if at all, through end user-permissioned data scraping or other means that could be more costly and time-consuming, and less effective or efficient. In the past, a limited number of third parties, primarily airline and international sites, have either blocked our access to their websites or requested that we cease employing data scraping of their websites to gather information, and we could receive similar, additional requests in the future. Any such limitation or restriction may also preclude us from providing our solutions on a timely basis, if at all. In addition, if in the future one or more third parties challenge our right to access information from these sources, we may be required to negotiate with these sources for access to their information or to discontinue certain services currently provided by our solutions. The legal environment surrounding data scraping and similar means of obtaining access to information on third-party websites is not completely clear and is evolving, and one or more third parties could assert claims against us seeking damages or to prevent us from accessing information in that manner. In the event sources from which we obtain this information begin to charge us fees for accessing such information, we may be forced to increase the fees that we charge our customers, which could make our solutions less attractive, or our gross margins and other financial results could suffer.
Because some of our sales efforts are targeted at large financial institutions and large FinTech companies, we face prolonged sales cycles, substantial upfront sales costs and less predictability in completing some of our sales. If our sales cycle lengthens, or if our upfront sales investments do not result in sufficient revenue, our operating results may be harmed.
We target a portion of our sales efforts at large financial institutions and large FinTech companies, which presents challenges that are different from those we encounter with smaller customers. Because our large customers are often making an enterprise-wide decision to deploy our solutions, we face longer sales cycles, complex customer requirements, substantial upfront sales costs, significant contract negotiations and less predictability in completing sales with these customers. Our sales cycle can often last one year or more with our largest customers, who often undertake an extended evaluation process, but is variable and difficult to predict. We anticipate that we will experience even longer sales cycles, more complex customer needs, higher upfront sales costs and less predictability in completing sales with customers located outside of the United States. If our sales cycle lengthens or our upfront sales investments do not generate sufficient revenue to justify our investments in our sales efforts, our operating results may be harmed.
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Investors’ decisions regarding their investment assets are affected by many factors and investors may redeem or withdraw their investment assets generally at any time. Significant changes in investing patterns or large‑scale withdrawal of investment funds could have a material adverse effect on our results of operations, financial condition or business.
The clients of our financial advisors are generally free to change financial advisors, forgo the advice and other services provided by financial advisors or withdraw the funds they have invested with financial advisors. These clients of financial advisors may elect to change their investment strategies, by moving their assets away from equity securities to fixed income or other investment options, or by withdrawing all or a portion of their assets from their accounts to avoid all securities markets‑related risks. These actions by investors are outside of our control and could materially adversely affect the market value of the investment assets that our clients manage, which could materially adversely affect the asset‑based fees we receive from our clients.
A substantial portion of our revenue is based on fees earned on the value of assets under management or administration. Changes in market and economic conditions could lower the value of assets on which we earn revenue and could decrease the demand for our investment solutions and services.
Asset‑based fees make up a significant portion of our revenue. Asset‑based fees represented approximately 60% of our total revenue for the years ended December 31, 2023, 2022 and 2021. We expect that asset‑based fees will continue to represent a significant percentage of our total revenue in the future. Significant fluctuations in securities prices may materially affect the market value of the assets managed by our clients and may also influence financial advisor and investor decisions regarding whether to invest in, or maintain an investment in, a particular investment or strategy. If such market fluctuation led to less investment in the securities markets, our revenue and earnings derived from asset‑based fees could be materially adversely affected. Our asset-based fees are generally calculated quarterly using the value of assets at the end of each calendar quarter. Our methodology may result in lower fees if the financial markets are down when fees are calculated, even if the market had performed well earlier in the quarter.
We provide our investment solutions and services to the financial services industry. The financial markets, and in turn the financial services industry, are affected by many factors, such as U.S. and foreign economic conditions and general trends in business and finance that are beyond our control. In the event that the U.S. or international financial markets suffer a severe or prolonged downturn, investors may choose to withdraw assets from financial advisors, which we refer to as “redemptions”, and transfer them to investments that are perceived to be more secure, such as bank deposits and Treasury securities, and on which we might not earn fees. For example, in early 2022 continuing through the fourth quarter of 2022, the financial markets experienced a broad downturn, our redemption rates were higher than our historical average, and our results of operations, financial condition and business were materially adversely affected. A continued downturn in financial markets or increased levels of asset withdrawals could have a material adverse effect on our results of operations, financial condition or business. Historically, redemption rates have typically increased during periods where there has been a significant downturn in financial markets. Any potential decline in assets on which we earn fees would not necessarily be proportional to, and in total, could be greater than the overall market decline.
Increased geopolitical unrest and other events outside of our control could adversely affect the global economy or specific international, regional and domestic markets, which could cause the assets on which we earn revenue to decrease and adversely affect our revenue and earnings.

Geopolitical risks, including those arising from trade tension and/or the imposition of trade tariffs, terrorist activity or acts of civil or international hostility, are increasing. For instance, the conflicts in the Middle East and between Russia and Ukraine have and may continue to result in geopolitical instability and adversely affect the global economy, supply chains and specific markets. Similarly, other events outside of the Company’s control, including natural disasters, climate-related events, pandemics or health crises may arise from time to time and be accompanied by governmental actions that may increase international tension. Any such events and responses, may cause significant volatility and declines in the global markets, disproportionate impacts to certain industries or sectors, disruptions to commerce (including to economic activity, travel and supply chains), loss of life and property damage, and may adversely affect the global economy or capital markets, as well as the Company’s products, operations, clients, vendors and employees, which may cause the assets on which we earn revenue to decrease thus causing our revenue and earnings to decline.

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We must continue to introduce new investment solutions and services and technological enhancements to address our clients’ changing needs, market changes, regulations, and technological developments and failure to do so could have a material adverse effect on our results of operations, financial condition or business.
The market for our investment solutions and services is characterized by shifting client demands, evolving market practices, new and evolving regulations, and for some of our investment solutions and services, rapid technological change, including the use of AI by Envestnet or our clients. Changing client demands, new market rules and practices, or new technologies can render existing investment solutions and services obsolete and unmarketable. As a result, our future success will continue to depend upon our ability to develop new investment solutions and services, and service and technological enhancements that address the future needs of our target markets and respond to technological and market changes. We incurred technology development costs of approximately $234 million, $239 million and $192 million in the years ended December 31, 2023, 2022 and 2021, respectively. We expect that our technology development costs will reduce in 2024 as we have completed our investment cycle but may increase in the future. We may not be able to accurately estimate the impact of new investment solutions and services on our business or how their benefits will be perceived by our clients. Further, we may not be successful in developing, introducing, marketing and licensing our new investment solutions or services or investment solution or service enhancements on a timely and cost effective basis, or at all, and our new investment solutions and services and enhancements may not adequately meet the requirements of the marketplace or achieve market acceptance. In addition, clients may delay purchases in anticipation of new investment solutions or services or enhancements. Any of these factors could materially adversely affect our results of operations, financial condition or business.
As a global organization, our business is susceptible to risks associated with our international operations.
We currently maintain international operations in India, the United Kingdom, Canada and Australia, engage with other jurisdictions outside of the United States for the purpose of gathering data, and have customers located around the globe. Managing a global organization outside of the United States is difficult and time-consuming and introduces risks that we may not face with our operations and sales in the United States. These risks include:

the burdens of complying with a wide variety of foreign regulations, laws and legal standards, including financial services, privacy, cybersecurity, tax and employment, some of which may be materially different or more stringent than those of the United States;
regional data privacy laws that apply to the transmission of data across international borders;
lack of familiarity with, and unexpected changes in, foreign regulatory requirements;
customers’ unfamiliarity with and concerns regarding laws and regulations of the United States that may impact our business operations in their jurisdictions;
negative, local perception of industries and customers that we may pursue;
laws and business practices favoring local competitors;
localization of our solutions, including unanticipated costs related to translation into foreign languages and adaptation for local practices and regulatory requirements;
different pricing environments;
difficulties in managing and staffing international operations;
reduced or varied protection for intellectual property rights in some countries;
compliance with laws and regulations for foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our solutions in certain foreign markets, and the risks and costs of compliance;
fluctuations in currency exchange rates;
potentially adverse tax consequences, including the complexities of foreign value added tax systems, difficulty in interpreting international tax laws and restrictions on the repatriation of earnings;
increased financial accounting and reporting burdens and complexities; and
political, social and economic instability abroad, terrorist attacks and security concerns in general.

Operating in international markets also requires significant management attention and financial resources. A component of our growth strategy involves the further expansion of our operations and the development of new customer relationships internationally. In order to potentially expand internationally, we will need to develop relationships with additional partners and add internal capabilities to effectively manage the operational, financial, legal and regulatory requirements and risks associated with our international operations. The investment we make and additional resources we use to expand our operations, target new international customers, expand our presence globally within our existing customers and manage operational and sales growth in other countries may not produce desired levels of revenue or profitability, which could adversely affect our business and operating results.
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If we are unable to effectively manage certain risks and challenges related to our India operations, our business could be harmed.
Our India operations are a key factor to our success. We believe that our significant presence in India provides certain important advantages for our business, such as direct access to a large pool of skilled professionals and assistance in growing our business internationally. However, it also creates certain risks that we must effectively manage. As of December 31, 2023, 46% of our approximately 3,100 employees were based in India. Wage costs in India for skilled professionals are currently lower than in the United States for comparably skilled professionals. However, wages in India are increasing at a faster rate than in the United States, which could result in us incurring increased costs for technical professionals and reduced margins. There is intense competition in India for skilled technical professionals, and we expect such competition to increase. As a result, we may be unable to retain our current employee base in India or hire additional new talent or do so cost-effectively. In addition, India has experienced significant inflation, low growth in gross domestic product and shortages of foreign exchange. India also has experienced civil unrest and terrorism and, in the past, has been involved in conflicts with neighboring countries. The occurrence of any of these circumstances could result in disruptions to our India operations, which, if continued for an extended period of time, could have a material adverse effect on our business. If we are unable to effectively manage any of the foregoing risks related to our India operations, our development efforts could be impaired, our growth could be slowed, and our operating results could be negatively impacted.
We operate in highly competitive industries, with many firms competing for business from financial advisors and financial institutions on the basis of a number of factors, including the quality and breadth of investment solutions and services, ability to innovate, reputation and the prices of services and this competition could hurt our financial performance.
We compete with many different types of companies that vary in size and scope, including custodians, turnkey asset management platforms, data and analytics providers, and other financial technology companies. Representative competitors include Pershing LLC (a subsidiary of BNY Mellon Corporation), InvestCloud, Advent Software (a subsidiary of SS&C Technologies Holdings, Inc.) and Orion Advisor Services in our Envestnet Wealth Solutions business and Intuit, Inc., Plaid Inc., Finicity Corporation (a subsidiary of Mastercard International Inc.) and Fiserv, Inc in our Envestnet Data & Analytics business. Competition is discussed in greater detail under “Business—Competition” included in this Annual Report. In addition, some of our clients have developed or may develop the in‑house capability to provide the technology and/or investment advisory services they have retained us to perform. These clients may also offer internally developed services to their financial advisors, obviating the need to hire us, and they may offer these services to third‑party financial advisors or financial institutions, thereby competing directly with us for that business.

Many of our competitors in this business have significantly greater resources than we do. These resources may allow our competitors to respond more quickly to changes in demand for investment solutions and services, to devote greater resources to developing and promoting their services and to make more attractive offers to potential clients and strategic partners, which could hurt our financial performance.
We may lose clients as a result of the sale or merger of a client, a change in a client’s senior management, competition from other financial advisors and financial institutions and for other reasons. We also face increased competition due to the current trend of industry consolidation. If large financial institutions that are not our clients are able to attract assets from our clients, our ability to grow revenue and earnings may be adversely affected.
We compete with many companies that have greater name recognition, substantially greater financial, technical, marketing and other resources, the ability to devote greater resources to the promotion, sale and support of their solutions, more extensive customer bases and broader customer relationships, and longer operating histories than we have.
We expect competition to increase as other companies continue to evolve their offerings and as new companies enter our market. New companies entering our market may choose to offer internally-developed solutions at little or no additional cost to their end users by bundling them with their existing applications and solutions. Increased competition is likely to result in pricing pressures, which could negatively impact our gross margins.
Our failure to successfully compete in any of the above‑mentioned areas could result in reduced revenue or lack of market share which could have a material adverse effect on our results of operations, financial condition or business. Competition could also affect the revenue mix of services we provide, resulting in decreased revenue in lines of business with higher profit margins.
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We are subject to liability for losses that result from potential, perceived or actual conflicts of interest.
Potential, perceived and actual conflicts of interest are inherent in our existing and future business activities and could give rise to client dissatisfaction, litigation or regulatory enforcement actions. In particular, we pay and/or charge varying fees to third‑party asset managers and custodians and our financial advisor customers, or their clients, could accuse us of directing them toward those asset managers or custodians that charge us lower fees or pay us higher fees and therefore provide us with a greater financial advantage. In addition, we offer proprietary funds and proprietary investment strategies through our internal investment management and portfolio consulting group, and financial advisors or their clients could conclude that we favor our proprietary investment products because of their belief that we earn higher fees when our proprietary investment products are used. Conflict may also be introduced through revenue sharing arrangements from third parties, including custodians, issuers and/or asset managers, and clients or regulators could assert that Envestnet’s decisions are being made not in the best interest of the client(s), but to increase the amount of revenue paid to Envestnet through these revenue sharing arrangements. Adequately addressing conflicts of interest is complex and difficult. If we fail, or appear to fail, to adequately address or disclose potential, perceived or actual conflicts of interest, the resulting negative public perception and reputational harm could materially adversely affect our client relations or ability to enter into contracts with new clients and, consequently, our results of operations, financial condition and business.

We are substantially dependent on our intellectual property rights, and a failure to protect these rights could adversely affect our results of operations, financial condition or business.
We have made substantial investments in software and other intellectual property on which our business is highly dependent. As of December 31, 2023, notwithstanding expiration of some of our oldest patents, we had over 50 issued patents in the U.S. and foreign jurisdictions as well as additional pending patent applications in the U.S. and foreign jurisdictions. Many of our key technologies, investment solutions or services are not covered by any copyright registration, issued patent or patent application. We are the owner of certain patent rights, registered trademarks in the United States, including “ENVESTNET,” and we claim common law rights in other trademarks that are not registered. We rely on a combination of patent, trade secret, trademark and copyright laws, confidentiality and nondisclosure agreements and other contractual and technical security measures to protect our proprietary technology, all of which provide only limited protection. Despite our efforts, unauthorized copying or other misappropriation of our proprietary technologies could enable third parties to benefit from our intellectual property rights without paying us for doing so, which could harm our business. Policing unauthorized use of proprietary technology is difficult and expensive and our monitoring and litigation may be necessary to protect and enforce our intellectual property rights. If litigation is necessary to protect and enforce our intellectual property rights, any such litigation could be very costly and could divert management attention and resources. If we are unable to protect our intellectual property rights or if third parties independently develop or gain access to our or similar technologies, investment solutions or services, our results of operations, financial condition and business could be materially adversely affected.
We cannot guarantee that:
our intellectual property rights will provide competitive advantages to us;
our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties;
our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak;
any of the trademarks, copyrights, trade secrets or other intellectual property rights that we presently employ in our business will not lapse or be invalidated, circumvented, challenged or abandoned;
our trademark applications will lead to registered trademarks;

We are dependent upon third-party service providers in our technology development and operations.

Envestnet utilizes third-party service providers to provide support and development in connection with our technology and operations. A failure by a third-party service provider could expose us to an inability to provide services to our clients on a timely basis. Additionally, if a third-party service provider is unable to provide these services, we may incur significant costs to develop these services internally or find a replacement provider.
Our reliance on outsourcing arrangements subjects us to risk and may disrupt or adversely affect our operations.

We have entered into an agreement with TCS pursuant to which we have outsourced certain development, engineering and back-office functions of the Envestnet Data & Analytics business located in Bangalore, India to increase operations scale
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and business agility. Although we have service-level arrangements with TCS and a variety of contractual obligations and options designed to (a) monitor TCS’s performance and (b) incentivize a high level of performance by TCS, because we do not ultimately control its performance, our reliance on a third-party vendor could subject us to additional risks, including the loss of valuable intellectual property, cybersecurity issues and non-compliance with data protection and privacy laws. If TCS fails to perform as required or terminates our arrangements, we might not realize the expected financial and operational benefits of the outsourcing arrangement and may be required to pursue new third-party relationships, which could significantly disrupt our operations and adversely affect our business, financial condition, and results of operations. We may also be unable to establish comparable new vendor relationships on as favorable terms or at all. Even if we are able to obtain replacement services in these scenarios, there may be a disruption or delay in our ability to operate our business, and the replacement services might be more expensive than those we have currently. The process of transitioning services and data from one provider to another can be complicated, time-consuming, expensive and may lead to significant disruptions in our business and could adversely affect our business, financial condition, and results of operations.
One of our senior officers has ownership interests in certain of our “exchange” joint ventures and thus may have interests different from our and our stockholders’ interests.

Thomas Sipp, our EVP, Envestnet Business Lines, is a co-founder and managing director of Magis Capital Partners LLC. Envestnet and Magis are jointly invested in four ventures: Fiduciary Exchange, LLC (FIDx), Advisor Credit Exchange, LLC (ACE), HealthPilot, LLC, and Trucendent, LLC. In addition to our investment in each of the Exchanges, we also have various commercial arrangements with the Exchanges and Magis. Each of the Exchanges was formed, and our initial investments in each of the Exchanges was made, prior to Mr. Sipp becoming an employee in April 2021. To date, our total investment in the Exchanges is $45.4 million, the Exchanges contributed $8.7 million of our revenue for the year ended December 31, 2023 and we made payments of $2.1 million to the Exchanges in the year ended December 31, 2023. As a co-founder of Magis and investor in Magis private funds invested in the Exchanges, Mr. Sipp has a financial interest in the Exchanges which may create, or appear to create, a conflict of interest when we face decisions that could have different implications for us and the Exchanges. When Mr. Sipp joined us, we established procedures to minimize any such actual or potential conflicts of interest. Compliance with these procedures are monitored by our Chief Compliance Officer and reported on to our Audit Committee. Notwithstanding these procedures, Mr. Sipp’s personal and financial interests in Magis and the Exchanges may give him interests regarding the Exchanges different from those of us and our stockholders and may influence certain of his business decisions that directly or indirectly affect the Exchanges.

Activist shareholders could hinder execution of our business strategy, divert board and management’s attention and resources and cause us to incur substantial expense and impact and create volatility in our stock price.

Shareholders may from time to time indicate disagreement with our strategic direction or capital allocation, advance shareholder proposals or engage in proxy solicitations. Any of these activities could (i) divert the attention of our Board of Directors, management, and employees, and may disrupt the momentum in our business and operations, as well as our ability to execute our strategic plan, (ii) create perceived uncertainties as to the future direction of our business or strategy, which may result in the loss of customers and potential business opportunities, make it more difficult to attract and retain qualified personnel, and impact our relationship with investors, vendors, and other third parties and (iii) result in us incurring substantial costs, including legal, proxy solicitation and public relations fees. Any of these impacts could materially and adversely affect our business and operating results. Further, the market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties described above.

Public health crises, pandemics or similar events, such as the COVID-19 pandemic, have and may continue to adversely affect our business, including our operations and financial condition.

The effects of public health crises, pandemics and similar events, such as the COVID-19 pandemic, including responses and restrictions related thereto have had, and may continue to have, a significant impact on global economic and market conditions. Such effects could have adverse impacts on our clients, vendors and other third-parties with whom we do business. Additionally, our business operations may be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions or other restrictions in connection with any ongoing effects of the pandemic. Further, remote working and other modified business practices, if required, could pose additional operational risks, including resiliency, cybersecurity, and execution risks. Any failure to manage these additional risks effectively may result in inefficiencies or delays, and may affect our ability to, or the manner in which we, conduct our business activities. To the extent a public health crisis, pandemic or similar event adversely affects our business or the global economic conditions more generally, it may also have the effect of heightening many of the other risks described in this section entitled “Risk Factors” and any subsequent filings with the SEC.

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Risks Related to our Acquisitions and Investments
Our growth strategy includes growing through acquisitions and investments which involve a number of risks.

We expect to grow our business by, among other things, making acquisitions and investments. Acquisitions and investments involve a number of risks. They can be time‑consuming and may divert management’s attention from day‑to‑day operations. Financing an acquisition or investment could result in dilution from issuing equity securities or a weaker balance sheet from using cash or incurring debt. Acquisitions and investments might also result in losing key employees. In addition, we may fail to successfully integrate acquisitions and investments. We may also fail to generate enough revenue or profits from an acquisition or investment to earn a return on the associated purchase price.
To the extent we grow our business through acquisitions and investments, any such future acquisition or investment could present a number of other risks, including:
incorrect assumptions regarding the future results of acquired or invested in operations or assets or expected cost reductions or other synergies expected to be realized as a result of acquiring or investing in operations or assets;
failure to integrate the operations or management of any acquired or invested in operations or assets successfully and on a timely and cost effective basis;
insufficient knowledge of the operations and markets of acquired or invested in businesses;
loss of key personnel;
failure to obtain necessary customer consents or retain key customers;
diversion of management’s attention from existing operations or other priorities;
increased costs or liabilities as a result of historical, undetected or undisclosed legal, regulatory or financial issues related to acquired or invested in operations or assets; and
inability to secure, on terms we find acceptable, sufficient financing that may be required for any such acquisition or investment.

In addition, if we are unsuccessful in completing acquisitions or investments of other businesses, operations or assets or if such opportunities for expansion do not arise, our results of operations, financial condition or business could be materially adversely affected.
Risks Related to our Information Technology and Data
Our failure to successfully execute the conversion of our clients’ assets from their technology platform to our platforms in a timely and accurate manner could have a material adverse effect on our results of operations, financial condition or business.
When we begin working with a new client, or acquire new client assets through an acquisition or other transaction, we are often required to convert all or a significant portion of assets from the clients’ technology platform to our technology platforms. These conversions present significant technological and operational challenges that can be time‑consuming and may divert management’s attention from other operational activities. If we fail to successfully complete our conversions in a timely and accurate manner, we may be required to expend more time and resources than anticipated, which could erode the profitability of the client relationship. In addition, any such failure may harm our reputation and may make it less likely that prospective clients will commit to working with us. Any of these risks could materially adversely affect our results of operations, financial condition or business.
Our hosting, collection, use and storage of customer information and data require the implementation of effective security controls, and a cybersecurity breach could disrupt our business, result in the disclosure of confidential information, expose us to liability and protracted and costly litigation, adversely affect our reputation and revenue and cause losses.
We, and our customers through which our solutions are made available to end users, collect, use, transmit and store confidential financial information, such as bank account numbers, social security numbers, non-public personally identifiable information, portfolio holdings, credit card data and outstanding debts and bills. The measures we take to provide security for collection, use, storage, processing and transmission of confidential end user information may not be effective to protect against cybersecurity breaches by third parties. We use commercially available security technologies, including hardware and software data encryption techniques and multi-layer network security measures, to protect transactions and information. Although we encrypt data fields that typically include sensitive, confidential information, other unencrypted data fields may include similar information that could be accessible in the event of a security breach. We use security and business controls to limit access and use of confidential end user information. The technologies and practices of our customers and third-party suppliers may not
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meet our standards and we may not have the ability to effectively monitor the implementation of security measures of our customers and third-party suppliers. In a number of cases, our customers build and host their own web applications and access our solutions through our APIs. In these cases, additional risks reside in the customer’s system with respect to security and preventive controls. As a result, inadequacies of our customers’ and third-party suppliers’ security technologies and practices may only be detected after a security breach has occurred. Errors in the collection, use, storage or transmission of confidential end user information may result in a breach of privacy or theft of assets.
The risk of unauthorized circumvention of our security measures has been heightened by advances in computer capabilities and the increasing sophistication of hackers. Criminals are using increasingly sophisticated techniques to engage in illegal activities involving solutions such as ours or involving end user information, such as counterfeiting, fraudulent payment and identity theft. Because the techniques used by hackers change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventive measures. In addition to hackers, it is possible that a customer could gain unauthorized access to our database through the use of our solutions. Improper access to our systems or databases by hackers or customers intending to commit criminal activities could result in the theft, publication, deletion or modification of confidential end user information. An actual or perceived breach of our security may require notification under applicable cybersecurity regulations.
A cybersecurity breach of the systems on which sensitive user data and account information are stored could lead to private claims or regulatory actions, including fines, against us. Many of our agreements with clients do not limit our potential liability for breaches of confidentiality, and consequential damages. If any person, including any of our employees, contractors, or consultants, penetrates our network security, misappropriates or mishandles sensitive data, inadvertently or otherwise, we could be involved in protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages and/or change our business practices or pricing structure, any of which could have a material adverse effect on our revenue and profitability. In addition, our customer contracts typically require us to meet specified minimum system security and privacy standards. If a cybersecurity breach occurs and we have not been in compliance with these standards, we could be liable for breach of contract claims brought by our customers.
We could also be required to indemnify our customers for third-party claims, fines, penalties and/or other assessments imposed on our customers as a result of any cybersecurity breach and our liability could exceed our insurance coverage or ability to pay. Our registered investment adviser and broker-dealer subsidiaries may face SEC, FINRA and state enforcement actions, including monetary fines, if it is determined that we had inadequate cybersecurity measures in place to prevent such theft.
Our security procedures and technologies are regularly audited by independent security auditors engaged by us, and many of our prospective and current customers conduct their own audits or review the results of such independent security audits as part of their evaluation of our solutions. We are also periodically audited by regulatory agencies to which our operations or our customers are subject. Adverse findings in these audits or examinations, even if not accompanied by any cybersecurity breach, could adversely affect our ability to maintain our existing customer relationships and establish new customer relationships.
Cybersecurity breaches, acts of fraud involving our solutions, or adverse findings in security audits or examinations, could result in reputational damage to us, which could reduce the use and acceptance of our solutions, cause our customers to cease doing business with us and/or have a significant adverse impact on our revenue and future growth prospects. Further, any of these events could lead to additional regulation and oversight by federal and state agencies, which could impose new and costly compliance obligations and may lead to the loss of our ability to make our solutions available.
Risks Related to Laws and Regulations
Our operations are subject to extensive government regulation, and compliance failures or regulatory action against us could adversely affect our results of operations, financial condition or business.
The financial services industry is among the most extensively regulated industries in the United States. We operate investment advisory, broker‑dealer, and funds lines of business, each of which is subject to a specific and extensive regulatory scheme. In addition, we are subject to numerous laws and regulations of general application. It is very difficult to predict the future impact of the legislative and regulatory requirements affecting our business and our clients’ businesses.
Certain of our subsidiaries are registered as “investment advisers” with the SEC under the Advisers Act and are regulated thereunder. In addition, many of our investment advisory services are conducted pursuant to the non‑exclusive safe harbor from the definition of an “investment company” provided under Rule 3a‑4 under the Investment Company Act. If
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Rule 3a‑4 were to cease to be available, or if the SEC were to modify the rule or its interpretation of how the rule is applied, our business could be adversely affected. Certain of our registered investment adviser subsidiaries provide advice to funds clients.Funds are registered as “investment companies” under the Investment Company Act. Our advisory subsidiaries provide advice on assets subject to the ERISA. The Advisers Act, Investment Company Act and ERISA, together with related regulations and interpretations of the SEC and the Department of Labor, impose numerous obligations and restrictions on investment advisers and funds, including requirements relating to the safekeeping of client funds and securities, limitations on advertising, disclosure and reporting obligations, prohibitions on fraudulent activities, restrictions on transactions between an adviser and its clients, and between a fund and its advisers and affiliates, and other detailed operating requirements, as well as general fiduciary obligations.
In addition, ESI and FIDx Markets are registered as broker‑dealers with the SEC, select state securities regulators and are members of FINRA, a securities industry self‑regulatory organization that supervises and regulates the conduct and activities of its members. Broker‑dealers are subject to regulations that cover all aspects of their business, including sales practices, market making and trading among broker‑dealers, use and safekeeping of customer funds and securities, capital structure, recordkeeping and the conduct of directors, officers, employees, representatives and associated persons. FINRA conducts periodic examinations of the operations of its members, including ESI and FIDx Markets. As broker‑dealers, ESI and FIDx Markets are also subject to certain minimum net capital requirements under SEC and FINRA rules. Compliance with the net capital rules may limit our ability to withdraw capital from these companies.

Envestnet Data & Analytics is examined on a periodic basis by various regulatory agencies. For example, it is a supervised third-party technology service provider subject to multi-agency supervisory examinations in a wide variety of areas based on published guidance by the Federal Financial Institutions Examination Council and other potential future regulatory agencies. These examinations include examinations of our management, acquisition and development activities, support and delivery, IT, and disaster preparedness and business recovery planning. The Office of the Comptroller of the Currency is the agency in charge of these examinations. If deficiencies are identified, customers may choose to terminate or reduce their relationships with us.
Either as a result of direct regulation or obligations under customer agreements, many of our subsidiaries are required to comply with certain provisions of the Gramm-Leach-Bliley Act, related to the privacy of consumer information and may be subject to other privacy and cybersecurity laws because of the solutions we provide. In addition, numerous regulations have been proposed and are still being written to implement the Dodd-Frank Act for enhanced due diligence of the internal systems and processes of companies like ours by their regulated customers. If we are required to make changes to our internal processes and solutions as result of this heightened scrutiny, we could be required to invest substantial additional time and funds and divert time and resources from other corporate purposes to remedy any identified deficiency.
All of the foregoing laws and regulations are complex, evolving, unclear and inconsistent across various jurisdictions and we are required to expend significant resources in order to maintain our monitoring of, and compliance with, such laws and regulations. We continually develop improvements to our existing products and services as well as new products and services. Many of these improvements or new products and services may implicate regulations to which we may not already be subject or with which we may not have experience. Any failure on our part to comply with these and other applicable laws and regulations could result in decreasing the demand for these products and services, increasing our potential liability or increase or costs, regulatory fines, suspensions of personnel or other sanctions, including revocation of our subsidiaries as an investment adviser or broker‑dealer, as the case may be, which could, among other things, require changes to our business practices and scope of operations or harm our reputation. Any of the foregoing could have a material adverse effect on our results of operations, financial condition or business.
We regularly rely on exemptions from various requirements of the Exchange Act, the Advisers Act, the Investment Company Act and ERISA in conducting our activities. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we could become subject to regulatory action or third‑party claims and our business could be materially and adversely affected.
Privacy laws and regulations, industry standards and contractual obligations, and changes in these laws, regulations, standards and obligations, can affect the way in which we do business and cause us to incur significant costs and failure to comply with these requirements could negatively affect our business.
As part of our business, we de-identify and then provide consumer transaction data panels to customers to support data analytics and market research. We collect the underlying transaction data when requested by each applicable consumer. In addition, we provide analytics on the use of investment strategies to third-party investment managers, exchange traded funds,
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mutual funds and similar investment vehicles by financial professional users of our technology. These activities are subject to numerous laws, regulations, industry standards and contractual obligations. We have incurred, and will continue to incur, significant expenses to comply with these requirements. New laws have been passed by several jurisdictions regulating the use of personal data and setting requirements for the de-identification of data. Other jurisdictions are considering imposing additional requirements. As our business continues to expand to new industry segments that may be more highly regulated for privacy and cybersecurity, and to countries outside the United States that have more strict data protection laws, we may be subject to increased compliance requirements and costs which could have a material adverse effect on our results of operations, financial condition or business. Industry practices relating to this business activity may change. We are in the process of negotiating new agreements with certain financial institutions governing our access to consumer transaction data when requested by the consumer. These agreements may contain additional requirements relating to our processing and provision of de-identified data. Additionally, our data panel customers might demand that the data that they purchase meet additional data sourcing standards, which we may not satisfy in all cases in the future. Failure to comply with existing or new laws, regulations, standards and obligations could result in loss of rights to use source data for data panels, loss of data panel subscriptions, fines, sanctions or other penalties, which could have a material adverse effect on our results of operations, financial condition or business.

State or federal legislation, regulatory requirements, or regulatory enforcement applicable to this business activity may also change. Privacy groups, governmental agencies and individuals also may seek to restrict or prevent, or may advocate for greater regulation of, our provision of data panels to data panel customers. For example, in January 2020, three members of Congress wrote to the FTC to request a review of these business practices. In February 2020, we received a civil investigative demand from the FTC for documents and information relating to our data collection, assembly, evaluation, sharing, correction and deletion practices, with which demand we fully complied. In November 2020, we were informed by the FTC that it had closed the matter with no further action.
Our use of data panels is subject to the agreement of our business customers from which we obtain the underlying data or for which we source their underlying data. Although our arrangements with these customers generally permit us to use non-identified transaction level data, some customers decline to permit the use of this data. The inability to use data may limit the usefulness of our solutions and services which could adversely affect our business. For some of our solutions, we contractually require our customers to provide necessary notices and to obtain necessary permissions and waivers for use and disclosure of information through our solutions. A failure by our customers to comply with these contractual requirements could limit our use of the related data and therefore the usefulness of our solutions and services which could adversely affect our business. Furthermore, a failure by our customers to comply with these contractual requirements could subject us to claims or liability for unauthorized use or disclosure of information. These claims or liabilities could subject us to unexpected costs and have a material adverse effect on our results of operations, financial condition or business.
Our investment advisory services may subject us to liability for losses that result from potential, perceived or actual breaches of our fiduciary duties.
Our investment advisory services involve fiduciary obligations that require us to act in the best interests of our clients, and we may be sued and face liabilities for actual or claimed breaches of our fiduciary duties. Because we provide investment advisory services, both directly and indirectly, with respect to substantial assets we could face substantial liability if it is determined that we have breached our fiduciary duties. In certain circumstances, which generally depend on the types of investment solutions and services we are providing, we may enter into client agreements jointly with advisors and retain third‑party investment money managers on behalf of clients. As a result, we may be included as a defendant in lawsuits against financial advisors and third‑party investment money managers that involve claims of breaches of the duties of such persons, and we may face liabilities for the improper actions and/or omissions of such advisors and third‑party investment money managers. In addition, we may face claims based on the results of our investment advisory recommendations, even in the absence of a breach of our fiduciary duty. This risk may be heightened during periods when equity or other financial markets are declining in value or are particularly volatile, or when clients or investors with financial advisory clients are experiencing losses. Such claims and liabilities could have a material adverse effect on our results of operations, financial condition or business.
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We may become subject to liability based on the use of our investment solutions and services by our clients.
Our investment solutions and services support the investment processes of our clients, which, in the aggregate, manage billions of dollars of assets. Our client agreements have provisions designed to limit our exposure to potential liability claims brought by our clients or third parties based on the use of our investment solutions and services. However, these provisions have certain exceptions and could be invalidated by unfavorable judicial decisions or by federal, state, foreign or local laws. Use of our products as part of the investment process creates the risk that clients, or the parties whose assets are managed by our clients, may pursue claims against us for very significant dollar amounts. Any such claim, even if the outcome were to be ultimately favorable to us, would involve a significant commitment of our management, personnel, financial and other resources and could have a negative impact on our reputation. Such claims and lawsuits could therefore have a material adverse effect on our results of operations, financial condition or business.
Furthermore, our clients may use our investment solutions and services together with software, data or products from other companies. As a result, when problems occur, it might be difficult to identify the source of the problem. Even when our investment solutions and services do not cause these problems, the existence of these errors might cause us to incur significant costs and divert the attention of our management and technical personnel, any of which could materially adversely affect our results of operations, financial condition or business.
If our investment solutions and services fail to perform properly due to undetected errors or similar problems, our results of operations, financial condition and business could be materially adversely affected.
Investment solutions and services we develop or license may contain undetected errors or defects despite testing. Such errors can exist at any point in the life cycle of our investment solutions or services, but are frequently found after introduction of new investment solutions and services or enhancements to existing investment solutions or services. We continually introduce new investment solutions and services and new versions of our investment solutions and services. Despite internal testing and testing by current and potential clients, our current and future investment solutions and services may contain serious defects or malfunctions. If we detect any errors before release, we might be required to delay the release of the investment solution or service for an extended period of time while we address the problem. We might not discover errors that affect our new or current investment solutions, services or enhancements until after they are deployed, and we may need to provide enhancements to correct such errors. Errors may occur that could have a material adverse effect on our results of operations, financial condition or business and could result in harm to our reputation, lost sales, delays in commercial release, third‑party claims, regulatory actions, contractual disputes, contract terminations or renegotiations, or unexpected expenses and diversion of management and other resources to remedy errors. In addition, negative public perception and reputational damage caused by such claims would adversely affect our client relationships and our ability to enter into new contracts. Any of these problems could have a material adverse effect on our results of operations, financial condition and business.
We could face liability for certain information we provide, including information based on data we obtain from other parties.
We may be subject to claims for securities law violations, negligence, breach of fiduciary duties or other claims relating to the information we provide. For example, individuals may take legal action against us if they rely on information we have provided and it contains an error. In addition, we could be subject to claims based upon the content that is accessible from our website through links to other websites. Moreover, we could face liability based on inaccurate information provided to us by others. Defending any such claims could be expensive and time‑consuming, and any such claim could materially adversely affect our results of operations, financial condition or business.
Our charter provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain legal actions between us and our stockholders, which could increase costs to bring a claim, discourage claims or limit the ability of our stockholders to bring a claim in a judicial forum viewed by the stockholders as more favorable for disputes with us or our directors, officers or other employees.
Our charter provides that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any (i) derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim governed by the internal affairs doctrine. Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, this choice of forum provision may increase costs to bring a claim, discourage claims or limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other
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employees, which may discourage such lawsuits against us or our directors, officers and other employees. The exclusive forum provision in our charter will not preclude or contract the scope of exclusive federal or concurrent jurisdiction for actions brought under the federal securities laws including the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the respective rules and regulations promulgated thereunder.

A deemed “change of control” of our company could require us to obtain the consent of our clients and a failure to do so properly could adversely affect our results of operations, financial condition or business.
Under the Advisers Act, the investment advisory agreements entered into by our investment adviser subsidiaries may not be assigned without the client’s consent. Under the Investment Company Act, advisory agreements with registered funds terminate automatically upon assignment and, any assignment of an advisory agreement must be approved by the board of directors and the shareholders of the registered fund. Under the Advisers Act and the Investment Company Act, such an assignment may be deemed to occur upon a change of control of the Company. A change of control includes either gaining or losing a “controlling person”. Whether someone is a controlling person for these purposes depends significantly on the specific facts and circumstances. There can be no assurance that if we undergo a change of control, we would be successful in obtaining all necessary consents or that the method by which we obtain such consents could not be challenged at a later time. If we are unable to obtain all necessary consents or if such a challenge were to be successful it could have a material adverse effect on our results of operations, financial condition or business.
Risks Related to our Common Stock
Holders of our common stock may be diluted by future issuances of common or preferred stock or convertible securities in connection with our incentive plans, acquisitions or otherwise; and future sales of such shares in the public market, or the expectations that such sales may occur, could lower our stock price.
Our charter authorizes us to issue shares of our common stock and options, rights, warrants and appreciation rights relating to our common stock for the consideration and on the terms and conditions established by our Board of Directors in its sole discretion. We could issue a significant number of shares of common stock, or securities convertible into shares of our common stock, in the future in connection with investments or acquisitions. Any of these issuances could dilute our existing stockholders, and such dilution could be significant. Moreover, such dilution could have a material adverse effect on the market price for the shares of our common stock.
The future issuance of shares of preferred stock with voting rights may adversely affect the voting power of the holders of shares of our common stock, either by diluting the voting power of our common stock if the preferred stock votes together with the common stock as a single class, or by giving the holders of any such preferred stock the right to block an action on which they have a separate class vote, even if the action were approved by the holders of our shares of our common stock. The future issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive.
We do not currently intend to pay dividends on our common stock for the foreseeable future and any share repurchases will be subject to our discretion; consequently, your ability to achieve a return on your investment may depend only on appreciation in the price of our common stock.
We do not anticipate paying any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any gains on their investment. Investors seeking cash dividends should not purchase our common stock.
Additionally, in 2016, we announced that our Board of Directors authorized a share repurchase program under which we may repurchase up to 2.0 million shares of our outstanding common stock. As of December 31, 2023, 0.3 million shares could still be purchased under this program. We retain the ability to repurchase when circumstances warrant and may suspend or discontinue such program at any time. The Inflation Reduction Act of 2022, which was signed into law in August 2022, imposes a 1% excise tax on the fair market value of stock repurchases after December 31, 2022, which may impact our future decisions on how to return value to stockholders in the most tax efficient manner.
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Certain provisions in our charter documents and agreements and Delaware law may inhibit potential acquisition bids for our company and prevent changes in our management.
Our certificate of incorporation and bylaws contains provisions that could depress the trading price of our common stock by acting to discourage, delay or prevent a change of control of our company or changes in management that our stockholders might deem advantageous. As a result of these provisions in our certificate of incorporation, the price investors may be willing to pay for shares of our common stock may be limited.
In addition, we are subject to Section 203 of the Delaware General Corporation Law, which imposes certain restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock.
Item 1B.  Unresolved Staff Comments
None.

Item 1C. Cybersecurity

Risk Management and Strategy

Envestnet’s Information Security Program uses a risk-based approach to assess, identify and manage material risks from cybersecurity threats and is an integral part of our enterprise risk management program and processes. The Information Security Program is complemented by our business continuity and disaster recovery planning controls. Envestnet’s Group Head, Cybersecurity/Information Security Officer is a member of the firm’s Risk Management Committee.

We regularly update our enterprise-wide Information Security Program to align with industry best practices and applicable regulations. Envestnet’s Information Security Program includes a policy framework that leverages elements from National Institute of Standards and Technology Cybersecurity Frameworks, NIST 800-53 Standards, ISO 27001, Cloud Security Alliance, and other relevant industry best practices to protect the confidentiality, availability, and integrity of our data and systems.

Directed by Envestnet’s Group Head, Cybersecurity/Information Security Officer, the Information Security team defines, implements and monitors our Information Security Program. We review and approve our security policies, procedures, and standards annually or whenever material updates are made during the year. Moreover, we undergo SOC 1 Type 2, SOC 2 Type 2, and PCI-DSS (where applicable) audits on multiple technology platforms.

In addition to our Information Security team, we use third-party vendors to help address material risks from cybersecurity threats. Among other things, third parties conduct security assessments, monitor endpoint security, probe our defenses, and conduct cybersecurity exercises. We also leverage third-party providers to aid management to detect, respond and recover in the event of a cyber incident.

To keep information security risks related to suppliers and other third parties within an acceptable range, Envestnet has a third-party oversight program. This program categorizes our third parties, assesses the potential impact of a compromise of Envestnet data and other resources in relation to the third-party’s engagement and manages the risk associated with third parties. This risk management includes understanding whether the third-party has required controls in place, whether it has vulnerabilities that need to be managed before beginning work with us and what residual risks will remain and require acceptance or further decision making.

Risks from Cybersecurity Threats

No risks from cybersecurity threats materially affected Envestnet’s business strategy, results of operations or financial condition during the year that ended December 31, 2023. Moreover, such risks do not appear to be reasonably likely to affect our business strategy, results of operations or financial condition.

Governance

Board of Directors’ Oversight of Risks from Cybersecurity Threats

Envestnet’s Board of Directors maintains regular oversight of risks from cybersecurity threats. In particular, its Compliance and Information Security Committee reviews, assesses, and makes recommendations to our Board about our regulatory compliance programs and information technology security framework, including cybersecurity threats. This includes receiving regular reports from the Information Security team on audits, security issues, changes in risk postures and regulatory matters. The Compliance and Information Security Committee also oversees selection of Envestnet’s independent security
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assessors and reviews their reports. The Committee is authorized to request that any Envestnet director, officer, employee, outside counsel or independent auditor attend a meeting of the committee or meet with any of its members or advisors.

The majority of the directors who serve on the Compliance and Information Security Committee must be independent. The Committee meets quarterly and on an ad hoc basis.

Management’s Role in Assessing and Managing Material Risks from Cybersecurity Threats

Envestnet’s senior management assesses and manages material risks from cybersecurity threats through its Information Security Management Committee. The Information Security Management Committee provides direction, management, support and sponsorship associated with information security. Chaired by Envestnet’s Group Head, Cybersecurity/Information Security Officer, the Information Security Management Committee consists of Envestnet’s Executive and Senior management from Operations, Legal, Compliance, Systems, Business, Human Resources and Finance.

Our Group Head, Cybersecurity/Information Security Officer has a total of more than 28 years of experience in cybersecurity, technology and information technology roles with financial services, technology and consulting companies. She joined Envestnet in 2020.

The Information Security Management Committee's responsibilities include, but are not limited to:

Setting, reviewing and supporting the components of the Information Security Program;
Monitoring significant risk trends and proposing changes to controls and policies, as appropriate;
Ensuring that information security is resourced and prioritized;
Ensuring the proper execution of risk management activities;
Establishing and maintaining a culture that promotes information security;
Reviewing and evaluating the implementation and effectiveness of the Information Security Program through regular external and internal assessments;
Maintaining cybersecurity incident response preparedness;
Providing support for and visibility to information security initiatives; and
Coordinating with the Information Security team to provide regular reports to the Compliance and Information Security Committee of the Board of Directors about audits, security issues, changes in risk postures and regulatory matters, among other cybersecurity topics.

Item 2. Properties
Our headquarters are located in Berwyn, Pennsylvania. We support our Envestnet Wealth Solutions segment primarily through offices in Denver, Colorado; Raleigh, North Carolina; Berwyn, Pennsylvania; Richmond, Virginia; Boston, Massachusetts; and Trivandrum, India. We support our Envestnet Data & Analytics segment primarily through our office in Raleigh, North Carolina. The majority of our offices are leased. We believe that our office facilities are adequate for our immediate needs and that additional or substitute space is available if needed to accommodate the foreseeable growth of our operations.
Item 3. Legal Proceedings
See Part II, Item 8, “Note 24—Commitments and Contingencies” for Legal Proceedings details.

Item 4. Mine Safety Disclosures
This section is not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
(a)Market Information
Our common stock is listed on the New York Stock Exchange under the symbol “ENV”.
(b)Holders
The number of holders of record of our common stock was 114 as of February 23, 2024.
Common Stock
As of December 31, 2023, we had 500,000,000 common shares authorized at a par value of $0.005, of which 54,773,662 shares were outstanding.
Preferred Stock
As of December 31, 2023, we had 50,000,000 preferred shares authorized at a par value of $0.005, of which no shares were outstanding.
(c)Dividends
We have never declared or paid cash dividends on our common stock, and we intend to retain our future earnings, if any, to fund the growth of our business. We therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future. Our future decisions concerning the payment of dividends on our common stock will depend upon our results of operations, financial condition and capital expenditure plans, as well as any other factors that the Board, in its sole discretion, may consider relevant.
(d)Securities Authorized for Issuance Under Equity Compensation Plan
For a description of securities authorized under our equity compensation plans, see Part II, Item 8, “Note 19—Stock-Based Compensation” and Part III, Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”.
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(e)Stock Performance Graph
The following graph compares the cumulative return to stockholders for $100 invested in our common stock relative to the cumulative total returns of the Russell® 2000 Index and The S&P North American Technology Sector Index for each of the last five fiscal years. In calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purposes only. This graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act, as amended, or the Exchange Act, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
5 YEAR STOCK PERFORMANCE GRAPH

549755817405
 12/31/201812/31/201912/31/202012/31/202112/31/202212/31/2023
Envestnet, Inc.$100.00 $141.55 $167.29 $161.29 $125.43 $100.67 
Russell® 2000 Index
$100.00 $123.72 $146.44 $166.50 $130.60 $150.31 
S&P North American Technology Sector Index$100.00 $143.19 $205.04 $257.70 $165.34 $264.45 
__________________________________________________________
The stock price performance included in the graph above is not necessarily indicative of future stock price performance.
(f)Recent Sales of Unregistered Securities
None
(g)Issuer Purchases of Equity Securities
In 2016, the Company announced that its Board of Directors had authorized a share repurchase program under which the Company may repurchase up to 2.0 million shares of its common stock. The timing and volume of share repurchases will be determined by the Company’s management based on its ongoing assessments of the capital needs of the business, the market price of its common stock and general market conditions. No time limit has been set for the completion of the repurchase program, and the program may be suspended or discontinued at any time. The repurchase program authorizes the Company to purchase its common stock from time to time in the open market (including pursuant to a “Rule 10b5-1 plan”), in block transactions, in privately negotiated transactions, through accelerated stock repurchase programs, through option or other forward transactions or otherwise, all in compliance with applicable laws and other restrictions. No share repurchases were made during the three months ended December 31, 2023. As of December 31, 2023, 0.3 million shares could still be purchased under this program.

Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and the notes to those statements included in Part II, Item 8, "Financial Statements and Supplementary Data" in this Annual Report on Form 10‑K. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See Part I, "Forward-Looking Statements" and Part I, Item 1A, "Risk Factors" for a discussion of the uncertainties, risks, and assumptions associated with these statements. Actual results could differ materially from the results referenced in forward-looking statements.

Overview

Envestnet, through its subsidiaries, is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet is a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness ecosystem so that our clients can better serve their clients.

Envestnet's clients include more than 108,000 advisors, 16 of the 20 largest U.S. banks, 48 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, all of which leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.

Through a combination of platform enhancements, partnerships and acquisitions, Envestnet uniquely provides a financial network connecting technology, solutions and data, delivering better intelligence and enabling its customers to drive better outcomes.
Envestnet, a Delaware corporation originally founded in 1999, serves clients from its headquarters in Berwyn, Pennsylvania, as well as other locations throughout the United States and India and other international locations.

Recent Developments

Leadership Update

On January 7, 2024, the Company entered into a separation and release agreement with Mr. Crager in which it was agreed that Mr. Crager will step down as chief executive officer on March 31, 2024 and as a member of the Company’s Board of Directors promptly following Envestnet’s 2024 Annual Meeting. Beginning April 2024, Mr. Crager will serve as a senior advisor, focusing on client and partner relationships. Beginning April 1, 2024, James Fox will begin serving as our Interim Chief Executive Officer until our Board of Directors has appointed a new chief executive officer. Mr. Fox has served as a member of our Board of Directors since February 2015 and Chair of the Board of Directors since March 2020.

Business Segments

On October 1, 2023, we changed the composition of our reportable segments to reflect the way that the Company's chief operating decision maker reviews the operating results, assesses performance and allocates resources. As a result, the advisor-focused Wealth Analytics business has been reclassified from the Envestnet Data & Analytics segment to the Envestnet Wealth Solutions segment. The segment change does not impact nonsegment results or the Company's consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows. All segment information presented within this Annual Report on Form 10-K for the year ended December 31, 2023 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.

Correction of Immaterial Error
During the fourth quarter of 2023, the Company identified that the arrangement with a third-party for the use of cloud hosted virtual servers which was previously accounted for as a finance lease transaction and included as a component of property and equipment, net in the consolidated balance sheets should have been recognized as a prepayment included within prepaid expenses and other current assets and other assets in the consolidated balance sheets. The Company concluded that the classification of these transactions was immaterial in prior period financial statements and that amendment of previously filed reports was not required. However, the Company corrected this immaterial error in the prior years reported within this Annual Report on Form 10-K for the year ended December 31, 2023.

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Macroeconomic Environment

Our business is directly and indirectly affected by macroeconomic conditions and the state of global financial markets. Recent geopolitical uncertainty, resulting, in part, from the conflict in the Middle East which intensified on and after October 7, 2023, the military conflict between Russia and Ukraine which escalated in February 2022, as well as rising inflation, contributed to significant volatility and decline in global financial markets during 2022 which continued throughout most of 2023. The uncertainty over the extent and duration of the ongoing conflict and this period of inflation continues to cause disruptions to businesses and markets worldwide. The extent of the effect on our financial performance will continue to depend on future developments, including the extent and duration of the conflict and this period of inflation, the Federal Reserve's monetary policy in response to rising inflation, the extent of economic sanctions imposed, changes in market interest rates, further governmental and private sector responses and the timing and extent normal economic conditions resume, all of which are uncertain and difficult to predict. Although we are unable to estimate the overall financial effect of these conflicts and this period of inflation at this time, as these conditions continue, they could have a material adverse effect on our business, results of operations, financial condition and cash flows. As of December 31, 2023, the consolidated financial statements do not reflect any adjustments as a result of these macroeconomic conditions.

Convertible Promissory Note

On January 31, 2023, we entered into a Convertible Promissory Note with a customer of the Company's business, a privately held company, whereby we were 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. During the year ended December 31, 2023, interest income related to the Convertible Promissory Note included in interest income in the consolidated statements of operations was $1.5 million.

In connection with the Convertible Promissory Note, we concurrently entered into a call option agreement with the privately held company, which provides us 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 financial metrics were met during the year ended December 31, 2023; however, we did not exercise the call option.

Convertible Notes due 2023

The Convertible Notes due 2023 matured on June 1, 2023. Upon maturity, we settled the remaining aggregate principal amount of the Convertible Notes due 2023 for $45.0 million. The Convertible Notes due 2023 were paid using a combination of cash on hand and borrowings under the Company's Revolving Credit Facility. No shares of the Company's common stock were issued upon settlement of the Convertible Notes due 2023.

Reduction in Force Initiative

During the year ended December 31, 2023, as part of a reduction in force initiative, we entered into separation agreements with a number of employees. In connection with this reduction in force initiative that began in the first quarter of 2023, as well as a fourth quarter 2022 organizational realignment, we incurred approximately $35.4 million of total severance expense in the year ended December 31, 2023.

As of December 31, 2023 we had an ending liability balance of $10.3 million related to these efforts, of which we anticipate approximately $9.2 million to be paid throughout 2024, with the remaining balance paid through 2030.

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Operating Results

Beginning in the three months ended December 31, 2021 through December 31, 2023, the Company reported a loss from operations and loss before income tax provision in every quarter. We have incurred these quarterly losses as a result of several factors as described below.

Revenue Factors: Throughout 2022, the financial markets experienced a broad downturn and our redemption rates were higher than our historical average, and as a result, in our Wealth Solutions segment, our asset-based recurring revenue was materially adversely affected. Beginning in the three months ended March 31, 2023 asset-based recurring revenue has been increasing steadily. In addition, as a result of competitive pricing pressures in our Data & Analytics segment research business, beginning in the three months ended December 31, 2022 subscription-based recurring revenue has been materially adversely affected.

Expense Factors: We have incurred certain expenses that are not recurring in nature and that are a direct result of significant, distinct enterprise-wide strategic initiatives that we have taken in order to reshape and streamline the organization, which we believe will increase our operational efficiencies and to reduce future operating expenses, while negatively impacting our operating results in the short-term. These actions include both internal and external related expenses associated with an accelerated investment plan announced in the first quarter of 2021, expenses associated with office closures announced in the second quarter of 2022, severance and office closure related expenses associated with an organizational realignment and entry into an outsourcing arrangement announced in the fourth quarter of 2022, as well as severance expense for a reduction in force initiative announced in the first quarter of 2023 which has continued into the fourth quarter of 2023. In addition, during the fourth quarter of 2023, the Company recognized a non-cash impairment charge to goodwill of $191.8 million. See below for further discussion of the goodwill impairment.

As discussed above, our business is directly and indirectly affected by macroeconomic conditions and the state of global financial markets. The return to positive income before income taxes largely depends on a combination of improved industry dynamics, including overall technology and data spending by financial institutions and an improvement in capital market valuations, including asset flows and redemption rates, both of which are outside of the Company’s control, as well as a reduction in future operating expenses, which the Company has undertaken as discussed above.

Goodwill Impairment

Due to lower revenue and profits in the Envestnet Data & Analytics segment in 2023 compared to prior years, the Company performed a quantitative goodwill impairment evaluation as part of the annual goodwill impairment analysis for each reporting unit in the fourth quarter of 2023 utilizing a combination of the discounted cash flow method (income approach) and guideline public company method (market approach). As a result of this impairment test, the carrying value of the Envestnet Data & Analytics reporting unit exceeded its fair value, which resulted in the recognition of a non-cash impairment charge to goodwill of $191.8 million in the consolidated statements of operations for the year ended December 31, 2023.


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Key Metrics
    
Envestnet Wealth Solutions Segment

The following table provides information regarding the amount of assets utilizing our platforms, financial advisors and investor accounts in the periods indicated:

 As of December 31,
 202320222021
 (in millions, except accounts and advisors data)
Platform Assets
AUM$416,001 $341,144 $362,038 
AUA430,846 367,412 456,316 
Total AUM/A846,847 708,556 818,354 
Subscription4,959,514 4,382,109 4,901,662 
Total platform assets$5,806,361 $5,090,665 $5,720,016 
Platform Accounts   
AUM1,640,879 1,547,009 1,345,274 
AUA1,254,962 1,135,026 1,217,076 
Total AUM/A2,895,841 2,682,035 2,562,350 
Subscription16,248,598 15,665,020 14,986,531 
Total platform accounts19,144,439 18,347,055 17,548,881 
Advisors   
AUM/A38,697 38,025 39,735 
Subscription69,973 67,520 68,808 
Total Advisors108,670 105,545 108,543 

The following tables provide information regarding the degree to which gross sales, redemptions, net flows and changes in the market values of assets contributed to changes in AUM or AUA in the periods indicated:

 Asset Rollforward - 2023
 
As of December 31, 2022
Gross SalesRedemptionsNet FlowsMarket ImpactReclass to Subscription
As of December 31, 2023
 
 (in millions, except account data)
AUM$341,144 $101,305 $(71,217)$30,088 $47,360 $(2,591)$416,001 
AUA367,412 127,906 (99,468)28,438 48,868 (13,872)430,846 
Total AUM/A$708,556 $229,211 $(170,685)$58,526 $96,228 $(16,463)$846,847 
Fee-Based Accounts2,682,035 312,915 (99,109)2,895,841 

The above AUM/A gross sales figures for the year ended December 31, 2023 include $72.3 billion in new client conversions. We onboarded an additional $169.7 billion in subscription conversions during the year ended December 31, 2023 bringing total conversions for the year ended December 31, 2023 to $242.0 billion.

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 Asset Rollforward - 2022
 
As of December 31, 2021
Gross SalesRedemptionsNet FlowsMarket ImpactReclass to Subscription
Reclassification(1)
As of December 31, 2022
 
 (in millions, except account data)
AUM$362,038 $100,098 $(68,181)$31,917 $(60,948)$(584)$8,721 $341,144 
AUA456,316 120,409 (95,016)25,393 (73,849)(31,727)(8,721)367,412 
Total AUM/A$818,354 $220,507 $(163,197)$57,310 $(134,797)$(32,311)$— $708,556 
Fee-Based Accounts2,562,350 243,320 (123,635)2,682,035 
__________________________________________________________
(1) Certain assets have been reclassified from AUA to AUM to better reflect the nature of the services provided to certain customers.

The above AUM/A gross sales figures for the year ended December 31, 2022 include $52.9 billion in new client conversions. We onboarded an additional $132.3 billion in subscription conversions during the year ended December 31, 2022, bringing total conversions for the year ended December 31, 2022 to $185.2 billion.

Asset and account figures in the “Reclass to Subscription” columns for the years ended December 31, 2023 and 2022 represent enterprise customers whose billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the year in which the reclassification occurred, with no impact on total platform assets or accounts.

Envestnet Data & Analytics Segment

Paid End-Users

A paid end-user is defined as a user of an application or service provided to our customer using the Envestnet Data & Analytics platform whose status corresponds to a billable activity under the associated customer contract. We believe that our ability to increase the number of paid end-users is an indicator of our market penetration, the growth of our business, and our potential future business opportunities.

The following table provides information regarding the number of paid end-users and firms using the Envestnet Data & Analytics platform in the periods indicated:

As of
December 31,December 31,December 31,
202320222021
(in millions, except number of firms data)
Number of paid end-users38.3 38.8 31.8 
Number of firms1,324 1,286 1,211 

Revenue

Overview

We earn revenue primarily under three pricing models. First, a portion of our revenue is derived from fees charged as a percentage of the assets that are managed or administered on our technology platforms by financial advisors. This revenue is recorded under asset-based revenue. Our asset‑based fees vary based on the types of investment solutions and services that financial advisors utilize. In future periods, the percentage of our total revenue attributable to asset‑based fees is expected to vary based on fluctuations in securities markets, whether we enter into new, or lose, significant subscription agreements, the mix of AUM or AUA, and other factors.


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We also generate revenue from recurring, contractual subscription fees for providing access to our technology platforms. This subscription revenue includes both contractual minimum payments and usage-based fees and is driven primarily by the number of customers, including new customers as well as customers who renew their existing subscription contracts, and the number of paid end-users. This revenue is recorded under subscription-based revenue. Subscription fees vary based on the scope of technology solutions and services being used, and are priced in a variety of constructs based on the size of the business, number of users or number of accounts and in many cases can increase over time based on the growth of these factors.

Finally, a portion of our revenue is generated from fees received in connection with professional services and other sources.

Asset-based recurring revenue

We generally charge our customers fees based on a higher percentage of the market value of AUM than the fees we charge on the market value of AUA, because we provide fiduciary oversight and/or act as the investment advisor in connection with assets we categorize as AUM. The level of fees varies based on the nature of the investment solutions and services we provide, as well as the specific investment manager, fund and/or custodian chosen by the financial advisor. A portion of our revenue from assets under management or administration includes costs paid by us to third parties for sub‑advisory, clearing, custody and brokerage services. These expenses are recorded under direct expense. We do not have fiduciary responsibility in connection with AUA and, therefore, generally charge lower fees on these assets. Our fees for AUA vary based on the nature of the investment solutions and services we provide.

Approximately 75% of our asset-based recurring revenue from AUM/A are billed to customers at the beginning of each quarter and are based on the market value of their assets on our platforms as of the end of the prior quarter. For example, asset-based recurring revenue recognized during the fourth quarter of 2023 was primarily based on the market value of assets as of September 30, 2023. Our asset-based recurring revenue is generally recognized ratably throughout the quarter based on the number of days in the quarter.

Our asset-based recurring revenue is affected by the amount of new assets that are added to existing and new client accounts, which we refer to as gross sales. Gross sales, from time to time, also include conversions of client assets to our technology platforms. The amounts of assets that are withdrawn from client accounts are referred to as redemptions. We refer to the difference between gross sales and redemptions as net flows. Positive net flows indicate that the market value of assets added to client accounts exceeds the market value of assets that have been withdrawn from client accounts.

Our asset-based revenue is also affected by changes in the market values of securities held in client accounts due to fluctuations in the securities markets. Certain types of securities have historically experienced greater market price fluctuations, such as equity securities, than other securities, such as fixed income securities, though in any given period the type of securities that experience the greatest fluctuations may vary.

Subscription-based recurring revenue

Subscription-based recurring revenue is generally recognized ratably over the term of each respective subscription agreement, commencing on the date the service is provisioned to the customer, provided all applicable revenue recognition criteria have been satisfied. As part of the subscription contracts, many of our open banking customers commit to a minimum level of paid end-users from which a minimum level of non-refundable subscription revenue is derived. As paid end-users in excess of the guaranteed minimum level access the platform, the customer is then required to pay additional usage fees calculated based upon a contracted per-paid-user fee. No refunds or credits are given if fewer paid end-users access the platform than the contracted minimum level. Usage-based revenue is recognized as earned, provided all applicable revenue recognition criteria have been satisfied. Our subscription-based revenue is affected by the addition, loss and timing of customer contracts as well as access to data in the research business.

Professional services and other revenue

We also receive revenue from professional services fees by providing customers with certain technology platform software development and implementation services. This revenue is recognized when completed, under a proportional‑performance model utilizing an output‑based approach or on a straight‑line basis, over the estimated life of the customer relationship. Our contracts generally have fixed prices and generally specify or quantify interim deliverables.

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Expenses

The following is a description of our principal expense items:

Direct expense

Direct expense primarily consists of expenses related to our receipt of sub‑advisory and clearing, custody and brokerage services from third parties. The largest component of direct expense is paid to third-party investment managers. Clearing, custody and brokerage services are performed by third‑party providers. These expenses are typically calculated based upon a contractual percentage of the market value of assets held in customer accounts measured as of the end of each fiscal quarter and are recognized ratably throughout the quarter based on the number of days in the quarter. Also included in direct expense are vendor specific expenses related to the direct support of revenue associated with the Envestnet Data & Analytics products.

Employee compensation

Employee compensation expense primarily consists of employee salaries, incentive compensation, non‑cash stock‑based compensation, incentive compensation, benefits and employer‑related taxes.

General and administrative

General and administrative expense primarily consists of costs related to occupancy, communications services, research and data services, software and maintenance charges, marketing, professional and legal services, travel and entertainment and acquisition/transaction related expenses.

Depreciation and amortization

Depreciation and amortization expense primarily consists of depreciation and amortization related to:

fixed assets, including building and building improvements, computer equipment and software, leasehold improvements, office furniture and fixtures and office equipment and other;
internally developed software; and
intangible assets, primarily related to customer lists, proprietary technology and trade names, the values of which are capitalized in connection with our acquisitions.
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Operational Highlights

 Year Ended December 31,2023 vs 20222022 vs 2021
 202320222021$ Change% Change$ Change% Change
 
(in thousands, except per share information and percentages)
Revenue:    
Envestnet Wealth Solutions:
Asset-based$745,238 $738,228 $709,376 $7,010 %$28,852 %
Subscription-based325,398 310,217 280,076 15,181 %30,141 11 %
Total recurring revenue1,070,636 1,048,445 989,452 22,191 %58,993 %
Professional services and other revenue24,068 16,799 14,190 7,269 43 %2,609 18 %
Total Envestnet Wealth Solutions revenue$1,094,704 $1,065,244 $1,003,642 $29,460 %$61,602 %
Envestnet Data & Analytics:
Subscription-based$139,332 $167,627 $173,913 $(28,295)(17)%$(6,286)(4)%
Total recurring revenue139,332 167,627 173,913 (28,295)(17)%(6,286)(4)%
Professional services and other revenue11,584 6,913 8,962 4,671 68 %(2,049)(23)%
Total Envestnet Data & Analytics revenue$150,916 $174,540 $182,875 $(23,624)(14)%$(8,335)(5)%
Total consolidated revenue$1,245,620 $1,239,784 $1,186,517 $5,836 — %$53,267 %
Deferred revenue fair value adjustment69 216 284 (147)(68)%(68)(24)%
Total consolidated adjusted revenue*$1,245,689 $1,240,000 $1,186,801 $5,689 — %$53,199 %
Consolidated net income (loss) attributable to Envestnet, Inc.$(238,724)$(80,939)$13,296 $(157,785)**$(94,235)**
Net income (loss) attributable to Envestnet, Inc. per share:
Basic$(4.38)$(1.47)$0.24 $(2.91)**$(1.71)**
Diluted$(4.38)$(1.59)$0.24 $(2.79)**$(1.83)**
Adjusted EBITDA*$250,913 $215,408 $261,730 $35,505 16 %$(46,322)(18)%
Adjusted net income*$140,199 $122,476 $158,022 $17,723 14 %$(35,546)(22)%
Adjusted net income per diluted share*$2.12 $1.86 $2.42 $0.26 14 %$(0.56)(23)%
_________________________________________
*Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for definitions and reconciliations of non-GAAP measures.
**Not meaningful
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Results of Operations

Year ended December 31, 2023 compared to year ended December 31, 2022

 Year Ended December 31,
20232022
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands, except percentages)
Revenue:   
Asset-based$745,238 60 %$738,228 60 %$7,010 %
Subscription-based464,730 37 %477,844 39 %(13,114)(3)%
Total recurring revenue1,209,968 97 %1,216,072 98 %(6,104)(1)%
Professional services and other revenue35,652 %23,712 %11,940 50 %
Total revenue1,245,620 100 %1,239,784 100 %5,836 — %
Operating expenses:  
Direct expense473,038 38 %470,424 38 %2,614 %
Employee compensation444,828 36 %490,725 40 %(45,897)(9)%
General and administrative210,113 17 %218,831 18 %(8,718)(4)%
Depreciation and amortization130,304 10 %125,828 10 %4,476 %
Goodwill impairment191,818 15 %— — %191,818 100 %
Total operating expenses1,450,101 116 %1,305,808 105 %144,293 11 %
Loss from operations
(204,481)(16)%(66,024)(5)%(138,457)*
Other income (expense):  
Interest income6,288 %4,184 — %2,104 50 %
Interest expense(25,138)(2)%(16,843)(1)%(8,295)(49)%
Other income (expense), net(9,666)(1)%264 — %(9,930)*
Total other income (expense), net(28,516)(2)%(12,395)(1)%(16,121)(130)%
Loss before income tax provision
(232,997)(19)%(78,419)(6)%(154,578)*
Income tax provision
12,777 %7,061 %5,716 81 %
Net loss
(245,774)(20)%(85,480)(7)%(160,294)*
Add: Net loss attributable to non-controlling interest7,050 %4,541 — %2,509 55 %
Net loss attributable to Envestnet, Inc.
$(238,724)(19)%$(80,939)(7)%$(157,785)*
___________________________________________________
*Not meaningful

Asset-based recurring revenue

Asset-based recurring revenue increased $7.0 million, or 1%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in asset values applicable to our quarterly billing cycles, which are based on the market value of the customers' assets on our platforms as of the end of the previous quarter.

The number of financial advisors with asset-based recurring revenue on our technology platforms increased from approximately 38,000 as of December 31, 2022 to approximately 39,000 as of December 31, 2023 and the number of AUM/A client accounts increased from approximately 2.7 million as of December 31, 2022 to approximately 2.9 million as of December 31, 2023.

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Subscription-based recurring revenue

Subscription-based recurring revenue decreased $13.1 million, or 3%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to a decrease of $28.3 million in the Envestnet Data & Analytics segment, which is primarily attributable to a loss in access to data in the research business and continued impact from the regional banking crisis which led to our customer’s cost cutting initiatives, partially offset by an increase of $15.2 million in the Envestnet Wealth Solutions segment, which can be attributed to new and existing customer growth.

Professional services and other revenue

Professional services and other revenue increased $11.9 million, or 50%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to timing of the completion of customer projects and deployments and an increase in revenue recognized in the Data & Analytics segment as a result of point in time revenue recognized on customer deployments.

Direct expense

Direct expense increased $2.6 million, or 1%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in asset-based direct expense of $3.8 million, which directly correlates with the increase to asset-based recurring revenue during the period, partially offset by a decrease in subscription-based direct expense of $1.8 million, which directly correlates with the decrease to subscription-based recurring revenue during the period.

Employee compensation

Employee compensation decreased $45.9 million, or 9%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to decreases in salaries, benefits and related payroll taxes of $38.8 million, which is primarily a result of the outsourcing arrangement with TCS in the Envestnet Data & Analytics segment, which shifted certain expenses from employee compensation to general and administrative expense, a reduction in force initiative in 2023 and an organizational realignment in the fourth quarter of 2022, a decrease in non-cash compensation expense of $9.3 million and other immaterial decreases within employee compensation, partially offset by an increase in severance expense of $5.3 million as a result of the reduction in force initiative and organizational realignment.

As a percentage of total revenue, employee compensation decreased 4% points for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily a result of the outsourcing arrangement with TCS, a reduction in force initiative in 2023 and an organizational realignment in the fourth quarter of 2022.

General and administrative

General and administrative expenses decreased $8.7 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to decreases in restructuring charges and transaction costs of $22.1 million, marketing costs of $7.3 million, occupancy costs of $4.6 million, communications, research and data services of $3.4 million and other immaterial decreases within general and administrative expense, partially offset by increases in software and maintenance charges of $31.4 million which is primarily a result of the outsourcing arrangement with TCS.

Depreciation and amortization

Depreciation and amortization expense increased $4.5 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to an increase in amortization related to internally developed software of $15.5 million, partially offset by decreases in amortization related to intangible assets of $9.0 million and deprecation related to fixed assets of $2.2 million.

Goodwill impairment

Goodwill impairment increased $191.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022 as a result of the recognition of a non-cash impairment charge to goodwill in the Envestnet Data & Analytics segment during the year ended December 31, 2023.

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Total other income (expense), net

Total other income (expense), net increased $16.1 million, or 130% for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to a $9.0 million decrease in dilution gain on equity method investee share issuance, an $8.3 million increase in interest expense and a $1.7 million increase in loss allocations from equity method investments. These increases were partially offset by an increase of $2.1 million in interest income, a $1.0 million decrease in foreign currency expense and a $0.4 million increase in fair market value adjustment on investment in private company.

Income tax provision

 Year Ended December 31,
 20232022
(in thousands, except for percentages)
Loss before income tax provision
$(232,997)$(78,419)
Income tax provision12,7777,061
Effective tax rate(5.5)%(9.0)%
 
Our 2023 effective tax rate differs from the statutory rate primarily due to the effect of goodwill impairment, the change in the valuation allowance we have placed on a portion of U.S. deferred tax assets, the generation of R&D tax credits, executive compensation deduction limitations, tax deficiency related to stock-based compensation, income related to Indian partnerships, a change in our India indefinite reinvestment assertion and state income taxes.

Our 2022 effective tax rate differs from the statutory rate primarily due to the change in the valuation allowance we have placed on a portion of U.S. deferred tax assets, the generation of R&D tax credits, executive compensation deduction limitations, income related to Indian partnerships, a change in our India indefinite reinvestment assertion and state income taxes.

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Year ended December 31, 2022 compared to year ended December 31, 2021

 Year Ended December 31,
2022
2021
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands, except percentages)
Revenue:   
Asset-based$738,228 60 %$709,376 60 %$28,852 %
Subscription-based477,844 39 %453,989 38 %23,855 %
Total recurring revenue1,216,072 98 %1,163,365 98 %52,707 %
Professional services and other revenue23,712 %23,152 %560 %
Total revenue1,239,784 100 %1,186,517 100 %53,267 %
Operating expenses:
Direct expense470,424 38 %423,723 36 %46,701 11 %
Employee compensation490,725 40 %432,829 36 %57,896 13 %
General and administrative218,831 18 %171,657 14 %47,174 27 %
Depreciation and amortization125,828 10 %117,767 10 %8,061 %
Total operating expenses1,305,808 105 %1,145,976 97 %159,832 14 %
Income (loss) from operations(66,024)(5)%40,541 %(106,565)*
Other income (expense):
Interest income4,184 — %827 — %3,357 *
Interest expense(16,843)(1)%(16,931)(1)%88 %
Other income (expense), net264 — %(4,076)— %4,340 106%
Total other income (expense), net(12,395)(1)%(20,180)(2)%7,785 39 %
Income (loss) before income tax provision
(78,419)(6)%20,361 %(98,780)*
Income tax provision
7,061 %7,667 %(606)(8)%
Net income (loss)(85,480)(7)%12,694 %(98,174)*
Add: Net loss attributable to non-controlling interest4,541 — %602 — %3,939 *
Net income (loss) attributable to Envestnet, Inc.$(80,939)(7)%$13,296 %$(94,235)*
___________________________________________________
*Not meaningful

Asset-based recurring revenue

Asset-based recurring revenue increased $28.9 million, or 4%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in asset values applicable to our quarterly billing cycles, which are based on the market value of the customers' assets on our platforms at the end of the previous quarter, partially offset by existing customers switching from an asset-based pricing model to a subscription-based pricing model.

The number of financial advisors with asset-based recurring revenue on our technology platforms decreased from approximately 40,000 as of December 31, 2021 to approximately 38,000 as of December 31, 2022 and the number of AUM/A client accounts increased from approximately 2.6 million as of December 31, 2021 to approximately 2.7 million as of December 31, 2022.

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Subscription-based recurring revenue

Subscription-based recurring revenue increased $23.9 million, or 5%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase of $30.1 million in the Envestnet Wealth Solutions segment, which can be attributed to new and existing customer growth along with additional revenue from existing customers switching from an asset-based pricing model to a subscription-based pricing model, partially offset by a decrease of $6.3 million in the Envestnet Data & Analytics segment, which is primarily attributable to the equity market decline impacting our asset management customers in the research business.

Professional services and other revenue

Professional services and other revenue increased $0.6 million, or 2%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in revenue resulting from the 2022 Advisor Summit, which was held as an in-person event. The 2021 Advisor Summit was virtual due to the COVID-19 pandemic.

Direct expense

Direct expense increased $46.7 million, or 11%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in asset-based direct expense of $36.6 million, which directly correlates with the increase to asset-based recurring revenue during the period, an increase in professional services and other direct expense of $6.9 million, primarily as a result of our 2022 Advisor Summit, which was held in-person, and an increase in subscription-based direct expense of $3.1 million, which directly correlates with the increase in subscription-based recurring revenue during the period.

Employee compensation

Employee compensation increased $57.9 million, or 13%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in salaries, benefits and related payroll taxes of $40.5 million, non-cash compensation expense of $12.3 million and other miscellaneous increases within employee compensation of $3.6 million, primarily due to increased headcount as a result of growth and acquisitions in the Envestnet Wealth Solutions segment. Also contributing to this increase was an increase in severance expense of $18.8 million, primarily a result of the outsourcing arrangement with TCS in the Envestnet Data & Analytics segment and an organizational realignment in the fourth quarter of 2022. These increases were partially offset by a decrease in incentive compensation expense of $20.5 million primarily due to lower revenue and profitability measures achieved in our incentive compensation program.

As a percentage of total revenue, employee compensation increased 4% points for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher employee compensation related to increased headcount in the Envestnet Wealth Solutions segment and higher severance expense primarily a result of the outsourcing arrangement with TCS and an organizational realignment in the fourth quarter of 2022.

General and administrative

General and administrative expenses increased $47.2 million, or 27%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in lease restructuring and transaction costs of $16.6 million driven by the closure of four offices, software and maintenance charges of $16.6 million, travel and entertainment expenses of $5.6 million, communications, research and data services of $3.5 million, insurance, bank and payroll expenses of $2.0 million and other miscellaneous increases within general and administrative expense of $2.5 million. These increases were partially offset by decreases in total occupancy costs of $4.6 million and professional and legal fees of $4.3 million.

As a percentage of total revenue, general and administrative expense increased 4% points for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to an increase in lease restructuring and other related costs.

Depreciation and amortization

Depreciation and amortization expense increased $8.1 million, or 7%, for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to increases in amortization related to internally developed software of $8.4 million and intangible assets of $3.3 million, partially offset by a decrease in deprecation related to fixed assets of $3.7 million.
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Total other income (expense), net

Total other income (expense), net decreased $7.8 million, or 39% for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to a $9.5 million increase in dilution gain on equity method investee share issuance and a $3.4 million increase in interest income, partially offset by a $1.8 million increase in loss allocations from equity method investments and a $1.4 million increase in foreign currency expense.

Income tax provision

 Year Ended December 31,
 20222021
(in thousands, except for percentages)
Income (loss) before income tax provision$(78,419)$20,361
Income tax provision7,0617,667
Effective tax rate(9.0)%37.7 %
 
Our 2022 effective tax rate differs from the statutory rate primarily due to the change in the valuation allowance we have placed on a portion of U.S. deferred tax assets, the generation of R&D tax credits, executive compensation deduction limitations, income related to Indian partnerships, a change in our India indefinite reinvestment assertion and state income taxes.

Our 2021 effective tax rate differs from the statutory rate primarily due to the change in the valuation allowance we have placed on a portion of U.S. deferred tax assets, the generation of R&D tax credits, executive compensation deduction limitations, income related to Indian partnerships and state income taxes.

Segment Results

Envestnet is organized around two business segments based on clients served and products provided to meet those needs. Financial information about each business segment is contained in Part II, Item 8, “Note 23—Segment Information” to the consolidated financial statements included within this Annual Report. Our business segments are as follows:

Envestnet Wealth Solutions – a leading provider of comprehensive and unified wealth management software, services and solutions to empower financial advisors and institutions to enable them to deliver holistic advice to their clients.

Envestnet Data & Analytics – a leading provider of financial data aggregation, analytics and digital experiences to meet the needs of financial institutions, enterprise FinTech firms and market investment research firms worldwide.

We also incur expenses not directly attributable to the segments listed above. These nonsegment operating expenses primarily consist of employee compensation for certain corporate officers, certain types of professional service expenses, insurance, acquisition related transaction costs, certain restructuring charges and other non-recurring and/or non-operationally related expenses.

On October 1, 2023, the Company changed the composition of its reportable segments to reflect the way that the Company's chief operating decision maker reviews the operating results, assesses performance and allocates resources. As a result, the advisor-focused Wealth Analytics business has been reclassified from the Envestnet Data & Analytics segment to the Envestnet Wealth Solutions segment. The segment change does not impact nonsegment results or the Company's consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows. All segment information presented within this Annual report on Form 10-K for the year ended December 31, 2023 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.

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The following table reconciles income (loss) from operations by segment to consolidated net income (loss) attributable to Envestnet, Inc.:

 Year Ended December 31,
 202320222021
(in thousands)
Envestnet Wealth Solutions$108,753 $57,323 $129,287 
Envestnet Data & Analytics(216,542)(22,221)(2,603)
Nonsegment operating expenses(96,692)(101,126)(86,143)
Income (loss) from operations
(204,481)(66,024)40,541 
Total other income (expense), net(28,516)(12,395)(20,180)
Income (loss) before income tax provision
(232,997)(78,419)20,361 
Income tax provision
12,777 7,061 7,667 
Net income (loss)
(245,774)(85,480)12,694 
Add: Net loss attributable to non-controlling interest7,050 4,541 602 
Net income (loss) attributable to Envestnet, Inc.
$(238,724)$(80,939)$13,296 
 
Envestnet Wealth Solutions

Year ended December 31, 2023 compared to year ended December 31, 2022

 Year Ended December 31,
20232022
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands, except percentages)
Revenue:   
Asset-based$745,238 68 %$738,228 69 %$7,010 %
Subscription-based325,398 30 %310,217 29 %15,181 %
Total recurring revenue1,070,636 98 %1,048,445 98 %22,191 %
Professional services and other revenue24,068 %16,799 %7,269 43 %
Total revenue1,094,704 100 %1,065,244 100 %29,460