Exhibit 99.1

 

Envestnet Reports Fourth Quarter and Full Year 2017 Financial Results

 

Chicago, IL — February 22,  2018 — Envestnet (NYSE: ENV), a  leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for its quarter and year ended December 31, 2017. 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Year Ended

 

Key Financial Metrics (unaudited)

December 31,

%

 

December 31,

%

(in millions except per share data)

2017

2016

Change

 

2017

2016

Change

GAAP:

 

 

 

 

 

 

 

Total Revenues

$182.9

$155.5

18%

 

$683.7

$578.2

18%

Net Income (Loss)

17.6

(32.6)

n/m

 

(3.3)

(55.6)

(94%)

Net Income (loss) per Diluted Share

$ 0.38

$ (0.75)

n/m

 

$ (0.08)

$ (1.30)

(94%)

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

Adjusted Revenues(1)

$182.9

$156.0

17%

 

$683.8

$579.4

18%

Adjusted EBITDA(1)

38.7

30.4

27%

 

128.9

99.4

30%

Adjusted Net Income(1)

18.7

14.2

32%

 

60.6

43.6

39%

Adjusted Net Income per Diluted Share(1)

$ 0.40

$ 0.32

25%

 

$ 1.31

$ 0.98

34%

 


n/m – Not meaningful

 

“The fourth quarter completed a year of solid organic growth in revenue, adjusted EBITDA and earnings for Envestnet, driven by strong execution and a healthy market environment,” said Jud Bergman, Chairman and CEO. “As we begin 2018, we are focused on integrating FolioDynamix’s customers and employees. And, we continue to pursue our advice- and data- centric strategy to drive adoption of our wealth management and financial wellness platforms.”

 

“We see significant growth opportunities to establish Envestnet as the premier operating system for financial wellness, enabling better outcomes for a network of enterprises, advisors and clients,” concluded Mr. Bergman.

 

Financial Results for the Fourth Quarter of 2017 Compared to the Fourth Quarter of 2016:

 

Total revenues increased 18%  to $182.9 million in the three months ended December 31, 2017 from $155.5 million in the three months ended December 31, 2016.  Asset-based revenues, which were 61% and 60% of total revenues for the fourth quarter of 2017 and 2016, respectively, increased 18% from the prior year period. Subscription and licensing revenues increased 17% from the prior year period.

 

Total operating expenses for the fourth quarter of 2017 increased 7% to $170.2 million from $158.5 million in the prior year period. Cost of revenues increased 20% to $58.0 million for the fourth quarter of 2017 from $48.3 million for the fourth quarter of 2016. Compensation and benefits increased 7% to $65.3 million for the fourth quarter of 2017 from $61.0 million for the prior year period. Compensation and benefits were 36% of total revenues for the fourth quarter of 2017, compared to 39% for the prior year period. General and administration expenses decreased 12% to  $30.8 million for the fourth quarter of 2017 from  $35.2 million for the prior year period. General and administrative expenses were 17% of total revenues for the fourth quarter of 2017 compared to 23% for the prior year period.

 

Income  from operations was $12.7 million for the fourth quarter of 2017 compared to a loss of $3.1 million for the fourth quarter of 2016. Net income attributable to Envestnet, Inc. was $17.6 million, or $0.38 per diluted share, for the fourth quarter of 2017 compared to  a loss of $32.6 million, or a loss of $0.75 per diluted share, for the fourth quarter of 2016.

 

Adjusted Revenues(1) for the fourth quarter of 2017 increased 17% to $182.9 million from $156.0 million for the prior year period. Adjusted EBITDA(1) for the fourth quarter of 2017 increased 27% to $38.7 million from $30.4 million for the prior year period. Adjusted Net Income(1) increased 32% for the fourth quarter of 2017 to $18.7 million from $14.2 million for the prior year period. Adjusted Net Income per


 

 

 

Diluted Share(1) for the fourth quarter of 2017 increased 25% to $0.40 from $0.32 in the fourth quarter of 2016.

 

The above results are unaudited and could change in connection with the completion of the audit of our full year financial statements.

 

FolioDynamix Acquisition

 

On January 2, 2018, Envestnet (“the Company”) completed its acquisition of FolioDynamix. In connection with the acquisition, Envestnet paid $195 million in cash for all the outstanding shares of FolioDynamix, subject to certain closing and post-closing adjustments, using a combination of cash on the Company’s balance sheet and borrowings under its revolving credit facility. As a standalone firm, the FolioDynamix platform supported approximately 28,000 advisors, 3.2 million accounts and $899 billion in assets  as of December 31, 2017. FolioDynamix’s expected contribution to Envestnet’s 2018 financial results is included in the Outlook section below.

 

Recent Accounting Pronouncements

 

Effective January 1, 2018, Envestnet adopted ASU 2014-09, “Revenue from Contracts with Customers,” using the modified retrospective method. The new rules impact the accounting for revenue, as well as the costs to obtain customer contracts. While most of the changes in revenue and expense recognition will be immaterial to Envestnet’s financial results,  revenues and cost of revenues will be lower under the new rules, beginning in the first quarter of 2018, due to the treatment of certain third party fees. The expected financial impact from these changes in accounting principles is included in the Outlook section below.

 

Income Taxes

 

On December 22, 2017, the Tax Cuts and Jobs Act was signed into law in the US. The provisions of the new tax law that are effective during 2017 do not have a material impact on Envestnet’s financial statements due to a valuation allowance on our U.S. temporary differences. From a cash tax perspective, we also do not anticipate a material impact as a result of the new tax law due to the use of foreign tax credits and net operating losses.  For 2017, we will pay foreign income tax and in the U.S. alternative minimum tax and state income tax.  

 

For purposes of calculating and reporting adjusted net income and adjusted net income per share, we are reducing our estimated normalized effective tax rate from 40% to 27% beginning in 2018. This reflects the new 21% federal statutory rate and an incremental 6% for state taxes. The expected financial impact of this change in assumption is included in the Outlook section below.

 

Outlook

 

The Company provided the following outlook for the first quarter ended March 31, 2018 and full year ending December 31, 2018. This outlook is based on the market value of assets on December 31, 2017. As noted above, it also includes the anticipated contribution from FolioDynamix, the change in accounting for certain revenues and expenses under ASU 2014-09, and a lower normalized effective tax rate.

2


 

 

 

 

 

 

 

 

 

 

 

 

In Millions Except Adjusted EPS

 

1Q 2018

 

FY 2018

GAAP:

 

 

 

 

 

 

 

 

AUM/A revenue

 

$118.0

-

$120.0

 

 

-

 

Subscription and licensing revenue

 

69.5

-

70.0

 

 

-

 

Professional services and other revenue

 

4.5

-

5.0

 

 

-

 

Revenues

 

$192.0

-

$195.0

 

$808.0

-

$823.0

 

 

 

 

 

 

 

 

 

Cost of revenues

 

$63.0

-

$64.5

 

 

-

 

Net Income

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

47

 

 

 

-

 

Net Income per Diluted Share

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

Adjusted Revenues(1)

 

$192.0

-

$195.0

 

$808.0

-

$823.0

Adjusted EBITDA(1)

 

$30.5

-

$31.5

 

$151.0

-

$155.0

Adjusted Net Income per Diluted Share(1)

 

 

$
0.36

 

 

$
1.78

-

$ 1.83

 

The above outlook for adjusted revenues is equal to GAAP revenues, as the Company currently expects immaterial deferred revenue fair value adjustments in 2018. The Company does not forecast net income and net income per share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

 

As noted above, various items have been incorporated into the Company’s outlook for 2018. Estimates of the impact on growth in revenue and adjusted EBITDA are noted in the table below.

 

 

 

 

 

Approximate Impact on Growth vs. 2017

 

 

 

 

 

Full Year 2018

 

Revenues

 

Adjusted EBITDA

Core Business

12-14%

 

15-17%

Adoption of ASU 2014-09

(2-3%)

 

-

FolioDynamix

9-10%

 

5-6%

Growth Initiatives

-

 

(2-3%)

 

 

 

 

Guidance Range

18-20%

 

17-20%

 

 

 

Conference Call

 

Envestnet will host a conference call to discuss fourth quarter 2017 financial results today at 5:00 p.m. ET. The live webcast can be accessed from Envestnet’s investor relations website at http://ir.envestnet.com/. The call can also be accessed live over the phone by dialing (866) 548-4713, or for international callers (323) 794-2093. A replay will be available two hours after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 1228086. The dial-in replay will be available for one week and the webcast replay will be available for one month following the date of the conference call.

 

About Envestnet

 

Envestnet, Inc. (NYSE: ENV) is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet's unified technology enhances advisor productivity and strengthens the wealth management process. Envestnet empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.

 

Envestnet enables financial advisors to better manage client outcomes and strengthen their practices. Institutional-quality research and advanced portfolio solutions are provided through Envestnet | PMC, our Portfolio Management Consultants group. Envestnet | Yodlee is a leading data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services. Envestnet |

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Tamarac provides leading rebalancing, reporting, and practice management software for advisors. Envestnet | Retirement Solutions provides retirement advisors with an integrated platform that combines leading practice management technology, research and due diligence, data aggregation, compliance tools, fiduciary solutions and intelligent managed account solutions.

 

More than 59,000 advisors and 2,900 companies including: 16 of the 20 largest U.S. banks, 39 of the 50 largest wealth management and brokerage firms, over 500 of the largest Registered Investment Advisers, and hundreds of Internet services companies, leverage Envestnet technology and services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences, and help drive better outcomes for enterprises, advisors, and their clients.

 

For more information on Envestnet, please visit www.envestnet.com and follow @ENVintel.

 


(1) Non-GAAP Financial Measures

 

“Adjusted revenues” excludes the effect of purchase accounting on the fair value of acquired deferred revenue.  Under United States generally accepted accounting principles (“GAAP”), we record at fair value the acquired deferred revenue for contracts in effect at the time the entities were acquired.  Consequently, revenue related to acquired entities for periods subsequent to the acquisition does not reflect the full amount of revenue that would have been recorded by these entities had they remained stand-alone entities.

 

“Adjusted EBITDA” represents net income (loss) before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration, litigation related expense, foreign currency and related hedging activity, other income, non-income tax expense adjustment, impairment of equity method investment, loss allocation from equity method investment and loss attributable to non-controlling interest.

 

“Adjusted net income” represents net income (loss) before deferred revenue fair value adjustment, accretion on contingent consideration and purchase liability, non-cash interest expense, non-cash compensation expense, restructuring charges and transaction costs, severance, amortization of acquired intangibles, fair market value adjustment on contingent consideration, litigation related expense, foreign currency and related hedging activity, other income, non-income tax expense adjustment, impairment of equity method investment, loss allocation from equity method investment and loss attributable to non-controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income. 

 

“Adjusted net income per diluted share” represents adjusted net income divided by the diluted number of weighted-average shares outstanding.

 

See reconciliation of Non-GAAP Financial Measures on pages 9-11 of this press release. Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company’s Non-GAAP Financial Measures should not be viewed as a substitute for revenues, net income or net income per share determined in accordance with GAAP.

 

Cautionary Statement Regarding Forward-Looking Statements

 

The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.’s expected financial performance and outlook for the first quarter and full year of 2018, its strategic operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and the Company’s actual results could differ materially from the results expressed or implied by such forward-looking statements.  Furthermore, reported results should not be considered as an indication of

4


 

 

 

future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, the possibility that the anticipated benefits of the Company’s acquisition of FolioDynamix will not be realized to the extent or when expected, potential exposure to state and local non-income tax obligations, the Company’s ability to remediate material weaknesses in internal controls over financial reporting and associated costs, difficulty in sustaining rapid revenue growth, which may place significant demands on the Company’s administrative, operational and financial resources, fluctuations in the Company’s revenue, the concentration of nearly all of the Company’s revenues from the delivery of investment solutions and services to clients in the financial services industry, the impact of market and economic conditions on revenues, the Company’s reliance on a limited number of clients for a material portion of its revenue, the renegotiation of fee percentages or termination of the Company’s services by its clients, the Company’s ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, potential dilution from issuing equity securities or a weaker balance sheet from using cash or incurring debt to finance acquisitions, the impact of market conditions on the Company’s ability to issue additional debt and equity to fund acquisitions, compliance failures, regulatory or third-party actions against the Company, the failure to protect the Company’s intellectual property rights, the Company’s inability to successfully execute the conversion of its clients’ assets from their technology platform to the Company’s technology platform in a timely and accurate manner, general economic conditions, political and regulatory conditions,  the impact of fluctuations in interest rates on the Company’s business,  ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytic solutions and market research services and premium FinApps, the results of our investments in research and development, our data center and other infrastructure, our ability to realize operating efficiencies, the advantages of our solutions as compared to those of others, our ability to retain and hire necessary employees and appropriately staff our operations, in particular our India operations, and management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in the Company’s filings with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at www.sec.gov or the Company’s Investor Relations website at http://ir.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of February 22, 2018 and, unless required by law, the Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

 

 

 

 

Contacts

 

 

Investor Relations

 

Media Relations

investor.relations@envestnet.com

 

mediarelations@envestnet.com

(312) 827-3940

 

 

 

 

 

 

5


 

 

 

 

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

    

2017

    

2016

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

60,115

 

$

52,592

Fees and other receivables, net

 

 

51,522

 

 

44,268

Prepaid expenses and other current assets

 

 

19,470

 

 

16,224

Total current assets

 

 

131,107

 

 

113,084

 

 

 

 

 

 

 

Property and equipment, net

 

 

35,909

 

 

33,000

Internally developed software, net

 

 

22,174

 

 

14,860

Intangible assets, net

 

 

222,731

 

 

265,558

Goodwill

 

 

432,955

 

 

431,936

Other non-current assets

 

 

17,176

 

 

13,963

Total assets

 

$

862,052

 

$

872,401

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accrued expenses and other liabilities

 

$

105,897

 

$

87,763

Accounts payable

 

 

11,097

 

 

11,480

Current portion of debt

 

 

 —

 

 

37,926

Contingent consideration

 

 

2,115

 

 

2,286

Deferred revenue

 

 

21,246

 

 

16,499

Total current liabilities

 

 

140,355

 

 

155,954

 

 

 

 

 

 

 

Convertible Notes

 

 

158,990

 

 

152,575

Revolving credit facility

 

 

81,168

 

 

 —

Term Notes

 

 

 —

 

 

100,409

Contingent consideration

 

 

666

 

 

2,582

Deferred revenue

 

 

12,047

 

 

15,643

Deferred rent and lease incentive

 

 

15,185

 

 

12,060

Deferred tax liabilities, net

 

 

969

 

 

5,555

Other non-current liabilities

 

 

15,102

 

 

13,436

Total liabilities

 

 

424,482

 

 

458,214

 

 

 

 

 

 

 

Redeemable units in ERS

 

 

900

 

 

900

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Stockholders’ equity

 

 

436,272

 

 

412,889

Non-controlling interest

 

 

398

 

 

398

Total liabilities and equity

 

$

862,052

 

$

872,401

 

 

 

 

 

 

 

 

 

 

 

 

6


 

 

 

 

 

 

 

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2017

 

2016

 

2017

 

2016

Revenues:

 

 

 

 

 

 

 

 

 

 

 

Assets under management or administration

$

110,748

 

$

93,529

 

$

410,016

 

$

352,498

Subscription and licensing

 

65,192

 

 

55,822

 

 

245,867

 

 

198,125

Professional services and other

 

6,922

 

 

6,129

 

 

27,796

 

 

27,541

Total revenues

 

182,862

 

 

155,480

 

 

683,679

 

 

578,164

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

58,006

 

 

48,271

 

 

219,037

 

 

180,590

Compensation and benefits

 

65,313

 

 

60,959

 

 

264,392

 

 

241,584

General and administration

 

30,832

 

 

35,186

 

 

121,010

 

 

115,435

Depreciation and amortization

 

16,028

 

 

14,127

 

 

62,820

 

 

63,999

Total operating expenses

 

170,179

 

 

158,543

 

 

667,259

 

 

601,608

Income (loss) from operations

 

12,683

 

 

(3,063)

 

 

16,420

 

 

(23,444)

Other expense, net

 

(4,271)

 

 

(3,832)

 

 

(18,109)

 

 

(17,046)

Income (loss) before income tax provision (benefit)

 

8,412

 

 

(6,895)

 

 

(1,689)

 

 

(40,490)

Income tax provision (benefit)

 

(9,233)

 

 

25,679

 

 

1,591

 

 

15,077

Net income (loss)

 

17,645

 

 

(32,574)

 

 

(3,280)

 

 

(55,567)

Add: Net income (loss) attributable to non-controlling interest

 

 —

 

 

 —

 

 

 —

 

 

 —

Net income (loss) attributable to Envestnet, Inc.

$

17,645

 

$

(32,574)

 

$

(3,280)

 

$

(55,567)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share attributable to Envestnet, Inc.:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.40

 

$

(0.75)

 

$

(0.08)

 

$

(1.30)

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

$

0.38

 

$

(0.75)

 

$

(0.08)

 

$

(1.30)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

44,404,104

 

 

43,155,793

 

 

43,732,148

 

 

42,814,222

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

46,957,681

 

 

43,155,793

 

 

43,732,148

 

 

42,814,222

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7


 

 

 

 

 

 

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

Year Ended

 

December 31,

 

2017

 

2016

OPERATING ACTIVITIES:

 

 

 

 

 

Net loss

$

(3,280)

 

$

(55,567)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

62,820

 

 

63,999

Deferred rent and lease incentive

 

1,027

 

 

(438)

Provision for doubtful accounts

 

867

 

 

1,122

Deferred income taxes

 

(4,597)

 

 

5,584

Stock-based compensation expense

 

31,331

 

 

33,276

Non-cash interest expense

 

8,994

 

 

8,244

Accretion on contingent consideration and purchase liability

 

512

 

 

150

Fair market value adjustment on contingent consideration

 

 —

 

 

1,588

Impairment of equity method investment

 

 —

 

 

734

Loss allocation from equity method investment

 

1,469

 

 

1,420

Loss on disposal of fixed assets

 

76

 

 

398

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

Fees and other receivables

 

(8,121)

 

 

1,646

Prepaid expenses and other current assets

 

(787)

 

 

(3,290)

Other non-current assets

 

(1,690)

 

 

(98)

Accrued expenses and other liabilities

 

16,810

 

 

17,174

Accounts payable

 

(442)

 

 

(462)

Deferred revenue

 

1,191

 

 

2,014

Other non-current liabilities

 

2,427

 

 

3,776

Net cash provided by operating activities

 

108,607

 

 

81,270

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Purchase of property and equipment   

 

(14,945)

 

 

(13,967)

Capitalization of internally developed software

 

(12,624)

 

 

(8,609)

Investment in private company

 

(1,450)

 

 

(2,238)

Purchase of ERS units

 

 —

 

 

(1,500)

Acquisition of businesses, net of cash acquired

 

 —

 

 

(31,613)

Net cash used in investing activities

 

(29,019)

 

 

(57,927)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

Payment of Term Notes

 

(35,862)

 

 

(8,000)

Proceeds from borrowings on revolving credit facility

 

35,000

 

 

40,000

Payments on revolving credit facility

 

(62,500)

 

 

(40,000)

Payments of contingent consideration

 

(2,286)

 

 

(3,729)

Payments of definite consideration

 

(445)

 

 

 —

Payments of purchase consideration liabilities

 

(235)

 

 

(3,256)

Proceeds from exercise of stock options

 

7,951

 

 

4,924

Debt issuance costs

 

(94)

 

 

 —

Purchase of treasury stock for stock-based tax withholdings

 

(13,974)

 

 

(10,966)

Common stock acquired under the share repurchase program

 

 —

 

 

(1,448)

Issuance of restricted stock

 

 5

 

 

 6

Net cash used in financing activities

 

(72,440)

 

 

(22,469)

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

375

 

 

 —

 

 

 

 

 

 

INCREASE IN CASH AND CASH EQUIVALENTS

 

7,523

 

 

874

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

52,592

 

 

51,718

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

60,115

 

$

52,592

 

 

 

 

 

 

 

 

 

 

 

8


 

 

 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

December 31,

 

December 31,

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

182,862

 

$

155,480

 

$

683,679

 

$

578,164

  Deferred revenue fair value adjustment

 

10

 

 

489

 

 

130

 

 

1,270

Adjusted revenues

$

182,872

 

$

155,969

 

$

683,809

 

$

579,434

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

17,645

 

$

(32,574)

 

$

(3,280)

 

$

(55,567)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

10

 

 

489

 

 

130

 

 

1,270

  Interest income

 

(93)

 

 

(9)

 

 

(201)

 

 

(37)

  Interest expense

 

3,676

 

 

4,255

 

 

16,347

 

 

16,600

  Accretion on contingent consideration and purchase liability

 

104

 

 

 7

 

 

512

 

 

150

  Income tax provision (benefit)

 

(9,233)

 

 

25,679

 

 

1,591

 

 

15,077

  Depreciation and amortization

 

16,028

 

 

14,127

 

 

62,820

 

 

63,999

  Non-cash compensation expense

 

7,880

 

 

7,528

 

 

31,331

 

 

33,276

  Restructuring charges and transaction costs

 

3,431

 

 

1,300

 

 

13,666

 

 

5,784

  Severance

 

56

 

 

1,238

 

 

2,316

 

 

4,342

  Fair market value adjustment on contingent consideration

 

 -

 

 

750

 

 

 -

 

 

1,588

  Litigation related expense

 

 -

 

 

1,526

 

 

1,033

 

 

5,591

  Foreign currency and related hedging activity

 

198

 

 

(44)

 

 

494

 

 

(716)

  Other income

 

 -

 

 

(1,384)

 

 

 -

 

 

(1,384)

  Non-income tax expense adjustment

 

(1,388)

 

 

6,229

 

 

346

 

 

6,229

  Impairment of equity method investment

 

 -

 

 

734

 

 

 -

 

 

734

  Loss allocation from equity method investment

 

485

 

 

290

 

 

1,469

 

 

1,420

  Loss (income) attributable to non-controlling interest

 

(61)

 

 

294

 

 

316

 

 

1,081

Adjusted EBITDA

$

38,738

 

$

30,435

 

$

128,890

 

$

99,437

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

17,645

 

$

(32,574)

 

$

(3,280)

 

$

(55,567)

Income tax provision (benefit) (1)

 

(9,233)

 

 

25,679

 

 

1,591

 

 

15,077

Income (loss) before income tax provision

$

8,412

 

$

(6,895)

 

$

(1,689)

 

$

(40,490)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

10

 

 

489

 

 

130

 

 

1,270

  Accretion on contingent consideration and purchase liability

 

104

 

 

 7

 

 

512

 

 

150

  Non-cash interest expense

 

1,210

 

 

2,174

 

 

8,994

 

 

8,244

  Non-cash compensation expense

 

7,880

 

 

7,528

 

 

31,331

 

 

33,276

  Restructuring charges and transaction costs

 

3,431

 

 

1,300

 

 

13,666

 

 

5,784

  Severance

 

56

 

 

1,238

 

 

2,316

 

 

4,342

  Amortization of acquired intangibles

 

10,794

 

 

9,359

 

 

42,127

 

 

45,515

  Fair market value adjustment on contingent consideration

 

 -

 

 

750

 

 

 -

 

 

1,588

  Litigation related expense

 

 -

 

 

1,526

 

 

1,033

 

 

5,591

  Foreign currency and related hedging activity

 

198

 

 

(44)

 

 

494

 

 

(716)

  Other income

 

 -

 

 

(1,384)

 

 

 -

 

 

(1,384)

  Non-income tax expense adjustment

 

(1,388)

 

 

6,229

 

 

346

 

 

6,229

  Impairment of equity method investment

 

 -

 

 

734

 

 

 -

 

 

734

  Loss allocation from equity method investment

 

485

 

 

290

 

 

1,469

 

 

1,420

  Loss (income) attributable to non-controlling interest

 

(61)

 

 

294

 

 

316

 

 

1,081

Adjusted net income before income tax effect

 

31,131

 

 

23,595

 

 

101,045

 

 

72,634

Income tax effect (2)

 

(12,452)

 

 

(9,438)

 

 

(40,418)

 

 

(29,054)

Adjusted net income

$

18,679

 

$

14,157

 

$

60,627

 

$

43,580

 

 

 

 

 

 

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

44,404,104

 

 

43,155,793

 

 

43,732,148

 

 

42,814,222

Effect of dilutive shares:

 

 

 

 

 

 

 

 

 

 

 

  Options to purchase common stock

 

1,596,965

 

 

1,206,908

 

 

1,649,225

 

 

1,278,827

  Unvested restricted stock units

 

956,612

 

 

478,820

 

 

770,428

 

 

486,823

Diluted number of weighted-average shares outstanding

 

46,957,681

 

 

44,841,521

 

 

46,151,801

 

 

44,579,872

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share - diluted

$

0.40

 

$

0.32

 

$

1.31

 

$

0.98


(1) For the three months ended December 31, 2017 and 2016, the effective tax rate computed in accordance with US GAAP equaled (109.8%) and (372.4%), respectively. For the year ended December 31, 2017 and 2016, the effective tax rate computed in accordance with US GAAP equaled (94.2%) and (37.2%), respectively.

(2) For 2017, an estimated normalized effective tax rate of 40% has been used to compute adjusted net income.

9


 

 

 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information 

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2017

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

141,267

 

$

41,595

 

$

 -

 

$

182,862

  Deferred revenue fair value adjustment

 

 2

 

 

 8

 

 

 -

 

 

10

Adjusted revenues

$

141,269

 

$

41,603

 

$

 -

 

$

182,872

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

27,172

 

$

(2,749)

 

$

(11,740)

 

$

12,683

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

 2

 

 

 8

 

 

 -

 

 

10

  Accretion on contingent consideration and purchase liability

 

104

 

 

 -

 

 

 -

 

 

104

  Depreciation and amortization

 

7,027

 

 

9,001

 

 

 -

 

 

16,028

  Non-cash compensation expense

 

3,620

 

 

2,743

 

 

1,517

 

 

7,880

  Restructuring charges and transaction costs

 

(402)

 

 

 -

 

 

3,828

 

 

3,426

  Non-income tax expense adjustment

 

(1,388)

 

 

 -

 

 

 -

 

 

(1,388)

  Severance

 

12

 

 

44

 

 

 -

 

 

56

  Gain attributable to non-controlling interest

 

(61)

 

 

 -

 

 

 -

 

 

(61)

Adjusted EBITDA

$

36,086

 

$

9,047

 

$

(6,395)

 

$

38,738

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2016

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

119,215

 

$

36,265

 

$

 -

 

$

155,480

  Deferred revenue fair value adjustment

 

215

 

 

274

 

 

 -

 

 

489

Adjusted revenues

$

119,430

 

$

36,539

 

$

 -

 

$

155,969

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

9,253

 

$

(4,819)

 

$

(7,497)

 

$

(3,063)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

215

 

 

274

 

 

 -

 

 

489

  Accretion on contingent consideration and purchase liability

 

 7

 

 

 -

 

 

 -

 

 

 7

  Depreciation and amortization

 

5,998

 

 

8,129

 

 

 -

 

 

14,127

  Non-cash compensation expense

 

3,692

 

 

2,847

 

 

989

 

 

7,528

  Restructuring charges and transaction costs

 

543

 

 

30

 

 

727

 

 

1,300

  Non-income tax expense adjustment

 

6,229

 

 

 -

 

 

 -

 

 

6,229

  Severance

 

1,315

 

 

(77)

 

 

 -

 

 

1,238

  Fair market value adjustment on contingent consideration

 

 -

 

 

 -

 

 

750

 

 

750

  Litigation related expense

 

 -

 

 

1,526

 

 

 -

 

 

1,526

  Foreign currency and related hedging activity

 

 -

 

 

 -

 

 

 -

 

 

 -

  Other loss

 

 -

 

 

 -

 

 

10

 

 

10

  Loss attributable to non-controlling interest

 

294

 

 

 -

 

 

 -

 

 

294

Adjusted EBITDA

$

27,546

 

$

7,910

 

$

(5,021)

 

$

30,435

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10


 

 

 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information 

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended December 31, 2017

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

527,905

 

$

155,774

 

$

 -

 

$

683,679

  Deferred revenue fair value adjustment

 

38

 

 

92

 

 

 -

 

 

130

Adjusted revenues

$

527,943

 

$

155,866

 

$

 -

 

$

683,809

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

75,449

 

$

(19,456)

 

$

(39,573)

 

$

16,420

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

38

 

 

92

 

 

 -

 

 

130

  Accretion on contingent consideration and purchase liability

 

512

 

 

 -

 

 

 -

 

 

512

  Depreciation and amortization

 

26,223

 

 

36,597

 

 

 -

 

 

62,820

  Non-cash compensation expense

 

15,191

 

 

10,880

 

 

5,260

 

 

31,331

  Restructuring charges and transaction costs

 

366

 

 

 -

 

 

13,300

 

 

13,666

  Non-income tax expense adjustment

 

346

 

 

 -

 

 

 -

 

 

346

  Severance

 

1,954

 

 

346

 

 

16

 

 

2,316

  Litigation related expense

 

 -

 

 

1,033

 

 

 -

 

 

1,033

  Loss attributable to non-controlling interest

 

316

 

 

 -

 

 

 -

 

 

316

Adjusted EBITDA

$

120,395

 

$

29,492

 

$

(20,997)

 

$

128,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended December 31, 2016

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

447,632

 

$

130,532

 

$

 -

 

$

578,164

  Deferred revenue fair value adjustment

 

329

 

 

941

 

 

 -

 

 

1,270

Adjusted revenues

$

447,961

 

$

131,473

 

$

 -

 

$

579,434

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

41,678

 

$

(38,547)

 

$

(26,575)

 

$

(23,444)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

329

 

 

941

 

 

 -

 

 

1,270

  Accretion on contingent consideration and purchase liability

 

150

 

 

 -

 

 

 -

 

 

150

  Depreciation and amortization

 

24,784

 

 

39,215

 

 

 -

 

 

63,999

  Non-cash compensation expense

 

12,719

 

 

15,033

 

 

5,524

 

 

33,276

  Restructuring charges and transaction costs

 

904

 

 

64

 

 

4,816

 

 

5,784

  Non-income tax expense adjustment

 

6,229

 

 

 -

 

 

 -

 

 

6,229

  Severance

 

3,334

 

 

670

 

 

338

 

 

4,342

  Fair market value adjustment on contingent consideration

 

 -

 

 

 -

 

 

1,588

 

 

1,588

  Litigation related expense

 

 -

 

 

5,350

 

 

241

 

 

5,591

  Foreign currency and related hedging activity

 

 -

 

 

(462)

 

 

 -

 

 

(462)

  Other loss

 

 -

 

 

 -

 

 

33

 

 

33

  Loss attributable to non-controlling interest

 

1,081

 

 

 -

 

 

 -

 

 

1,081

Adjusted EBITDA

$

91,208

 

$

22,264

 

$

(14,035)

 

$

99,437

 

 

 

 

 

11


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

December 31, 2016

 

March 31, 2017

 

June 30, 2017

 

September 30, 2017

 

December 31, 2017

 

(in millions except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Assets Under Management (AUM)

$

105,178

 

$

113,544

 

$

122,543

 

$

131,809

 

$

141,518

 Assets Under Administration (AUA)

 

241,682

 

 

248,445

 

 

271,450

 

 

293,963

 

 

308,480

   Subtotal AUM/A

 

346,860

 

 

361,989

 

 

393,993

 

 

425,772

 

 

449,998

 Subscription and Licensing

 

748,125

 

 

763,372

 

 

825,829

 

 

867,967

 

 

926,880

Total Platform Assets

$

1,094,985

 

$

1,125,361

 

$

1,219,822

 

$

1,293,739

 

$

1,376,878

Platform Accounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 AUM

 

545,130

 

 

574,132

 

 

614,973

 

 

652,060

 

 

685,925

 AUA

 

994,583

 

 

986,554

 

 

1,083,417

 

 

1,145,050

 

 

1,217,697

   Subtotal AUM/A

 

1,539,713

 

 

1,560,686

 

 

1,698,390

 

 

1,797,110

 

 

1,903,622

 Subscription and Licensing

 

4,558,883

 

 

4,263,002

 

 

4,811,390

 

 

4,925,146

 

 

5,027,900

Total Platform Accounts

 

6,098,596

 

 

5,823,688

 

 

6,509,780

 

 

6,722,256

 

 

6,931,522

Advisors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 AUM/A

 

36,483

 

 

36,985

 

 

38,498

 

 

40,379

 

 

40,485

 Subscription and Licensing

 

17,852

 

 

18,159

 

 

19,007

 

 

19,104

 

 

19,445

Total Advisors

 

54,335

 

 

55,144

 

 

57,505

 

 

59,483

 

 

59,930

 

 

The following tables summarize the changes in AUM and AUA for the three months ended December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions Except Accounts

 

9/30/2017

 

Gross            Sales

 

Redemp-   tions

 

Net           Flows

 

Market Impact

 

12/31/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets under Management (AUM)

 

$

131,809

 

$

14,218

 

$

(8,987)

 

$

5,231

 

$

4,478

 

$

141,518

Assets under Administration (AUA)

 

 

293,963

 

 

47,609

 

 

(43,982)

 

 

3,627

 

 

10,890

 

 

308,480

 Total AUM/A

 

$

425,772

 

$

61,827

 

$

(52,969)

 

$

8,858

 

$

15,368

 

$

449,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

 

1,797,110

 

 

 

 

 

 

 

 

106,512

 

 

 

 

 

1,903,622

 

 

The above AUM/A gross sales figures include $28.7 billion in new client conversions. The Company onboarded an additional $22.4 billion in subscription and licensing conversions during the fourth quarter, bringing total conversions for the quarter to $51.1 billion.

 

The following tables summarize the changes in AUM and AUA for the year ended December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions Except Accounts

 

12/31/2016

 

Gross            Sales

 

Redemp-   tions

 

Net           Flows

 

Market Impact

 

Reclass (to) from
Licensing

 

12/31/2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets under Management (AUM)

 

$

105,178

 

$

50,331

 

$

(28,876)

 

$

21,455

 

$

14,885

 

$

 -

 

$

141,518

Assets under Administration (AUA)

 

 

241,682

 

 

121,653

 

 

(84,240)

 

 

37,413

 

 

34,276

 

 

(4,891)

 

 

308,480

 Total AUM/A

 

$

346,860

 

$

171,984

 

$

(113,116)

 

$

58,868

 

$

49,161

 

$

(4,891)

 

$

449,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

 

1,539,713

 

 

 

 

 

 

 

 

386,673

 

 

 

 

 

(22,764)

 

 

1,903,622

 

 

The above AUM/A gross sales figures include $49.6 billion in new client conversions. The Company onboarded an additional $57.1 billion in subscription and licensing conversions during 2017, bringing total conversions for the year to $106.7 billion.

 

 

12