Exhibit 99.1

 

Envestnet Reports Second Quarter 2018 Financial Results

 

Chicago, IL — August 7, 2018 — Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for its quarter ended June 30, 2018.

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

 

Key Financial Metrics

June 30,

%

 

June 30,

%

(in millions except per share data)

2018

2017

Change

 

2018

2017

Change

GAAP:

 

 

 

 

 

 

 

Total Revenues

$201.1

$167.4

20%

 

$399.1

$325.2

23%

Net income (loss)

(6.0)

(6.5)

(7%)

 

2.0

(19.6)

n/m

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

$ (0.12)

$ (0.15)

(20%)

 

$ 0.05

$ (0.45)

n/m

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

Adjusted EBITDA(1)

$34.8

$29.5

18%

 

$67.5

$55.4

22%

Adjusted Net Income(1)

19.3

13.1

47%

 

36.9

24.7

50%

Adjusted Net Income per Diluted Share(1)

$ 0.41

$ 0.29

41%

 

$ 0.78

$ 0.54

44%

 


n/m - Not meaningful

 

 

 

“Envestnet delivered solid results in the second quarter, with revenue, adjusted EBITDA and adjusted earnings per share exceeding our expectations,” said Jud Bergman, Chairman and CEO.

 

“We believe we are well positioned to create meaningful value for shareholders, as we expand our operating system for financial wellness, enabling our clients to attain better financial outcomes through better intelligence,” concluded Mr. Bergman.

 

Financial Results for the Second Quarter of 2018:

 

Total revenues increased 20% to $201.1 million in the three months ended June 30, 2018 from $167.4 million in the three months ended June 30, 2017. Revenues for FolioDynamix, which the Company acquired in January 2018, were $17.3 million in the three months ended June 30, 2018. The Company’s total revenues in the three months ended June 30, 2018 were negatively impacted by $3.7 million due to the adoption of ASU 2014-09. Excluding the effect of these items, total revenues grew 12% in the three months ended June 30, 2018 compared to the prior year period.

 

Asset-based revenues were 59% of total revenues for the second quarter of 2018, consistent with the same period in 2017, and increased 19% from the prior year period. Subscription-based revenues increased 20% from the prior year period. Professional services and other non-recurring revenues increased 30% from the prior year period.

 

Total operating expenses for the second quarter of 2018 increased 22% to $201.1 million from $164.7 million in the prior year period. Cost of revenues increased 21% to $67.6 million for the second quarter of 2018 from $55.7 million for the second quarter of 2017. Compensation and benefits increased 23% to $80.2 million for the second quarter of 2018 from $65.0 million for the prior year period. Compensation and benefits were 40% of total revenues for the second quarter of 2018, compared to 39% in the prior year period. General and administration expenses increased 20% to $34.1 million for the second quarter of 2018 from $28.5 million for the prior year period. General and administrative expenses were 17% of total revenues for the second quarter of 2018 consistent with the prior year period. FolioDynamix was a significant contributor to the year-over-year increase in cost of revenues, compensation and benefits, and general and administrative expenses for the second quarter of 2018. Excluding FolioDynamix, operating expenses for the second quarter of 2018 increased 10% to $180.5 million.

 

Income from operations was $5 thousand for the second quarter of 2018 compared to income of $2.7 million for the second quarter of 2017. Net loss was $6.0 million for the second quarter of 2018 compared to a loss of $6.5 million for the second quarter of 2017. Net loss per diluted share attributable to Envestnet, Inc. was $0.12 per diluted share for the second quarter of 2018 compared to a loss of $0.15 per diluted share for the second quarter of 2017.

 

Adjusted EBITDA(1) for the second quarter of 2018 increased 18% to $34.8 million from $29.5 million for the prior year period. Adjusted Net Income(1) increased 47% for the second quarter of 2018 to $19.3 million from $13.1 million for the


 

prior year period. Adjusted Net Income per Diluted Share(1) for the second quarter of 2018 increased 41% to $0.41 from $0.29 in the second quarter of 2017.

 

Outlook

 

The Company provided the following outlook for the third quarter ended September 30, 2018 and full year ended December 31, 2018. This outlook is based on the market value of assets on June 30, 2018.

 

 

 

 

 

 

 

 

 

 

In Millions Except Adjusted EPS

 

3Q 2018

 

FY 2018

GAAP:

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

Asset-based

 

$118.5

-

$119.5

 

 

-

 

Subscription-based

 

76.0

-

77.0

 

 

-

 

Total recurring revenues

 

$194.5

 

$196.5

 

 

 

 

Professional services and other revenues

 

7.5

-

8.5

 

 

-

 

Total revenues

 

$202.0

-

$205.0

 

$812.0

-

$818.0

 

 

 

 

 

 

 

 

 

Cost of revenues

 

$65.0

-

$66.5

 

 

-

 

Net Income

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Diluted shares outstanding

 

 

47.5

 

 

 

-

 

Net Income per Diluted Share

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Non-GAAP:

 

 

 

 

 

 

 

 

Adjusted EBITDA(1)

 

$40.0

-

$41.0

 

$153.0

-

$156.0

Adjusted Net Income per Diluted Share(1)

 

 

$
0.50

 

 

$
1.85

-

$ 1.89

 

The Company does not forecast net income and net income per diluted share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

 

Conference Call

 

Envestnet will host a conference call to discuss second quarter 2018 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 (800)  239-9838, or for international callers (323) 794-2551. 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 2732311. 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 | 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 88,000 advisors and more than 3,500 companies including: 15 of the 20 largest U.S. banks, 43 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.

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

 


(1) Non-GAAP Financial Measures

 

“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, litigation related expense, foreign currency, non-income tax expense adjustment, 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, litigation related expense, foreign currency,  non-income tax expense adjustment, 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 8-10 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 third 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 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, difficulty in sustaining rapid revenue growth, which may place significant demands on the Company’s administrative, operational and financial resources, the concentration of nearly all of our revenues 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 fee percentages or termination of our services by our clients, our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, the impact of market and economic conditions on revenues, our inability 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 expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium financial applications (“FinApps”), compliance failures, adverse judicial or regulatory proceedings against us, liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest, changes in laws and regulations, including tax laws and regulations, general economic conditions, political and regulatory conditions, the impact of fluctuations in market condition and interest rates on the demand for our products and services and the value of assets under management or administration, the impact of market conditions on our ability to issue debt and equity, the impact of fluctuations in interest rates on our cost of borrowing, our financial performance, the results of our investments in research and development, our data center and other infrastructure, our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information, failure of our systems to work properly, our ability to realize operating efficiencies, the advantages of our solutions as compared to those of others, the failure to protect our intellectual property rights, our ability to establish and maintain intellectual property rights, our ability to

3


 

retain and hire necessary employees and appropriately staff our 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 August 7,  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

 

 

 

 

 

4


 

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

June 30,

 

December 31,

 

    

2018

    

2017

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

134,032

 

$

60,115

Fees receivable, net

 

 

64,164

 

 

51,522

Prepaid expenses and other current assets

 

 

22,721

 

 

19,470

Total current assets

 

 

220,917

 

 

131,107

 

 

 

 

 

 

 

Property and equipment, net

 

 

40,397

 

 

35,909

Internally developed software, net

 

 

29,257

 

 

22,174

Intangible assets, net

 

 

313,743

 

 

222,731

Goodwill

 

 

526,955

 

 

432,955

Other non-current assets

 

 

23,907

 

 

17,176

Total assets

 

$

1,155,176

 

$

862,052

 

 

 

 

 

 

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accrued expenses and other liabilities

 

$

109,537

 

$

105,897

Accounts payable

 

 

21,133

 

 

11,097

Contingent consideration

 

 

707

 

 

2,115

Deferred revenue

 

 

25,739

 

 

21,246

Total current liabilities

 

 

157,116

 

 

140,355

 

 

 

 

 

 

 

Convertible Notes due 2019

 

 

162,299

 

 

158,990

Convertible Notes due 2023

 

 

289,562

 

 

 -

Revolving credit facility

 

 

 -

 

 

81,168

Contingent consideration

 

 

 -

 

 

666

Deferred revenue

 

 

7,929

 

 

12,047

Deferred rent and lease incentive

 

 

17,334

 

 

15,185

Deferred tax liabilities, net

 

 

2,154

 

 

969

Other non-current liabilities

 

 

16,744

 

 

15,102

Total liabilities

 

 

653,138

 

 

424,482

 

 

 

 

 

 

 

Redeemable units in ERS

 

 

900

 

 

900

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Stockholders’ equity

 

 

500,434

 

 

436,272

Non-controlling interest

 

 

704

 

 

398

Total liabilities and equity

 

$

1,155,176

 

$

862,052

 

 

 

 

 

 

 

 

 

5


 

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

June 30,

 

    

2018

    

2017

 

2018

    

2017

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based

 

$

118,111

 

$

98,959

 

$

239,264

 

$

193,121

Subscription-based

 

 

71,779

 

 

59,802

 

 

141,474

 

 

117,712

Total recurring revenues

 

 

189,890

 

 

158,761

 

 

380,738

 

 

310,833

Professional services and other revenues

 

 

11,226

 

 

8,656

 

 

18,389

 

 

14,370

Total revenues

 

 

201,116

 

 

167,417

 

 

399,127

 

 

325,203

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

67,627

 

 

55,735

 

 

130,561

 

 

104,961

Compensation and benefits

 

 

80,210

 

 

64,996

 

 

163,750

 

 

130,528

General and administration

 

 

34,089

 

 

28,478

 

 

66,818

 

 

59,025

Depreciation and amortization

 

 

19,185

 

 

15,465

 

 

38,731

 

 

31,300

Total operating expenses

 

 

201,111

 

 

164,674

 

 

399,860

 

 

325,814

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

 5

 

 

2,743

 

 

(733)

 

 

(611)

Other expense, net

 

 

(5,430)

 

 

(4,369)

 

 

(10,684)

 

 

(9,852)

Loss before income tax provision (benefit)

 

 

(5,425)

 

 

(1,626)

 

 

(11,417)

 

 

(10,463)

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax provision (benefit)

 

 

566

 

 

4,844

 

 

(13,428)

 

 

9,142

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 

(5,991)

 

 

(6,470)

 

 

2,011

 

 

(19,605)

Add: Net loss attributable to non-controlling interest

 

 

465

 

 

 —

 

 

567

 

 

 —

Net income (loss) attributable to Envestnet, Inc.

 

$

(5,526)

 

$

(6,470)

 

$

2,578

 

$

(19,605)

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.12)

 

$

(0.15)

 

$

0.06

 

$

(0.45)

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

$

(0.12)

 

$

(0.15)

 

$

0.05

 

$

(0.45)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

45,247,331

 

 

43,855,479

 

 

44,963,735

 

 

43,513,074

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

45,247,331

 

 

43,855,479

 

 

47,156,205

 

 

43,513,074

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6


 

 

 

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

Six Months Ended

 

June 30,

 

2018

 

2017

OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss)

$

2,011

 

$

(19,605)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

38,731

 

 

31,300

Deferred rent and lease incentive

 

1,069

 

 

583

Provision for doubtful accounts

 

924

 

 

341

Deferred income taxes

 

(17,093)

 

 

6,524

Stock-based compensation expense

 

18,971

 

 

15,403

Non-cash interest expense

 

5,630

 

 

4,853

Accretion on contingent consideration and purchase liability

 

196

 

 

304

Payments of contingent consideration

 

 -

 

 

(357)

Loss allocation from equity method investment

 

811

 

 

702

Loss on disposal of fixed assets

 

10

 

 

69

Changes in operating assets and liabilities, net of acquisitions:

 

 

 

 

 

Fees and other receivables

 

(8,204)

 

 

(5,639)

Prepaid expenses and other current assets

 

(3,426)

 

 

(2,681)

Other non-current assets

 

(2,450)

 

 

(514)

Accrued expenses and other liabilities

 

(5,448)

 

 

(752)

Accounts payable

 

4,166

 

 

(184)

Deferred revenue

 

3,478

 

 

1,818

Other non-current liabilities

 

1,578

 

 

3,022

Net cash provided by operating activities

 

40,954

 

 

35,187

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Purchase of property and equipment   

 

(9,569)

 

 

(9,181)

Capitalization of internally developed software

 

(10,622)

 

 

(5,651)

Acquisition of business

 

(188,345)

 

 

 -

Net cash used in investing activities

 

(208,536)

 

 

(14,832)

 

 

 

 

 

 

FINANCING ACTIVITIES:

 

 

 

 

 

Proceeds from issuance of Convertible Notes due 2023

 

345,000

 

 

 -

Debt issuance costs

 

(9,488)

 

 

 -

Proceeds from borrowings on revolving credit facility

 

195,000

 

 

25,000

Payments on revolving credit facility

 

(276,168)

 

 

(25,000)

Payment of Term Notes

 

 -

 

 

(35,862)

Payments of definite consideration

 

 -

 

 

(445)

Payments of contingent consideration

 

(2,193)

 

 

(1,929)

Payments of purchase consideration liabilities

 

 -

 

 

(235)

Proceeds from exercise of stock options

 

2,540

 

 

2,617

Purchase of treasury stock for stock-based tax withholdings

 

(14,395)

 

 

(9,650)

Issuance of restricted stock

 

 3

 

 

 4

Net cash provided by (used in) financing activities

 

240,299

 

 

(45,500)

 

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH

 

(572)

 

 

283

 

 

 

 

 

 

INCREASE (DECREASE) IN CASH,  CASH EQUIVALENTS AND RESTRICTED CASH

 

72,145

 

 

(24,862)

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

 

62,115

 

 

54,592

 

 

 

 

 

 

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (a)

$

134,260

 

$

29,730

 

 

 

 

 

 

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the consolidated balance sheet:

Current Assets:

 

 

 

 

 

Cash and cash equivalents

$

134,032

 

$

27,730

Restricted cash included in prepaid expenses and other current assets

 

228

 

 

2,000

Total cash, cash equivalents and restricted cash

$

134,260

 

$

29,730

 

7


 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

June 30,

 

2018

 

2017

 

2018

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

201,116

 

$

167,417

 

$

399,127

 

$

325,203

  Deferred revenue fair value adjustment

 

62

 

 

52

 

 

66

 

 

105

Adjusted revenues

$

201,178

 

$

167,469

 

$

399,193

 

$

325,308

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(5,991)

 

$

(6,470)

 

$

2,011

 

$

(19,605)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

62

 

 

52

 

 

66

 

 

105

  Interest income

 

(374)

 

 

(29)

 

 

(784)

 

 

(50)

  Interest expense

 

5,992

 

 

3,877

 

 

11,228

 

 

8,813

  Accretion on contingent consideration and purchase liability

 

95

 

 

148

 

 

196

 

 

304

  Income tax provision (benefit)

 

566

 

 

4,844

 

 

(13,428)

 

 

9,142

  Depreciation and amortization

 

19,185

 

 

15,465

 

 

38,731

 

 

31,300

  Non-cash compensation expense

 

10,476

 

 

7,945

 

 

18,971

 

 

15,403

  Restructuring charges and transaction costs

 

3,345

 

 

2,249

 

 

5,937

 

 

5,627

  Severance

 

1,049

 

 

338

 

 

3,861

 

 

663

  Litigation related expense

 

 -

 

 

52

 

 

 -

 

 

1,033

  Foreign currency

 

(339)

 

 

122

 

 

(571)

 

 

412

  Non-income tax expense adjustment

 

27

 

 

414

 

 

(101)

 

 

1,163

  Loss allocation from equity method investment

 

151

 

 

417

 

 

811

 

 

702

  Loss attributable to non-controlling interest

 

515

 

 

101

 

 

584

 

 

351

Adjusted EBITDA

$

34,759

 

$

29,525

 

$

67,512

 

$

55,363

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

$

(5,991)

 

$

(6,470)

 

$

2,011

 

$

(19,605)

Income tax provision (benefit) (1)

 

566

 

 

4,844

 

 

(13,428)

 

 

9,142

Loss before income tax provision

 

(5,425)

 

 

(1,626)

 

$

(11,417)

 

$

(10,463)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

62

 

 

52

 

 

66

 

 

105

  Accretion on contingent consideration and purchase liability

 

95

 

 

148

 

 

196

 

 

304

  Non-cash interest expense

 

3,032

 

 

1,331

 

 

4,900

 

 

4,853

  Non-cash compensation expense

 

10,476

 

 

7,945

 

 

18,971

 

 

15,403

  Restructuring charges and transaction costs

 

3,345

 

 

2,249

 

 

5,937

 

 

5,627

  Severance

 

1,049

 

 

338

 

 

3,861

 

 

663

  Amortization of acquired intangibles

 

13,419

 

 

10,371

 

 

27,354

 

 

20,956

  Litigation related expense

 

 -

 

 

52

 

 

 -

 

 

1,033

  Foreign currency

 

(339)

 

 

122

 

 

(571)

 

 

412

  Non-income tax expense adjustment

 

27

 

 

414

 

 

(101)

 

 

1,163

  Loss allocation from equity method investment

 

151

 

 

417

 

 

811

 

 

702

  Loss attributable to non-controlling interest

 

515

 

 

101

 

 

584

 

 

351

Adjusted net income before income tax effect

 

26,407

 

 

21,914

 

 

50,591

 

 

41,109

Income tax effect (2)

 

(7,130)

 

 

(8,766)

 

 

(13,660)

 

 

(16,444)

Adjusted net income

$

19,277

 

$

13,148

 

$

36,931

 

$

24,665

 

 

 

 

 

 

 

 

 

 

 

 

Basic number of weighted-average shares outstanding

 

45,247,331

 

 

43,855,479

 

 

44,963,735

 

 

43,513,074

Effect of dilutive shares:

 

 

 

 

 

 

 

 

 

 

 

  Options to purchase common stock

 

1,325,947

 

 

1,597,746

 

 

1,360,300

 

 

1,670,493

  Unvested restricted stock units

 

643,319

 

 

473,892

 

 

832,170

 

 

551,227

Diluted number of weighted-average shares outstanding

 

47,216,597

 

 

45,927,117

 

 

47,156,205

 

 

45,734,794

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net income per share - diluted

$

0.41

 

$

0.29

 

$

0.78

 

$

0.54


(1) For the three months ended June 30, 2018 and 2017, the effective tax rate computed in accordance with US GAAP equaled (10.4%) and (297.9%), respectively. For the six months ended June 30, 2018 and 2017, the effective tax rate computed in accordance with US GAAP equaled 117.6% and (87.4%), respectively.

(2) An estimated normalized effective tax rate of 27% has been used to compute adjusted net income for the three and six months ended June 30, 2018. An estimated normalized effective tax rate of 40% has been used to compute adjusted net income for the three and six months ended June 30, 2017.

 

8


 

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

Segment Information 

(in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

156,928

 

$

44,188

 

$

 —

 

$

201,116

  Deferred revenue fair value adjustment

 

60

 

 

 2

 

 

 —

 

 

62

Adjusted revenues

$

156,988

 

$

44,190

 

$

 —

 

$

201,178

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

16,359

 

$

(3,296)

 

$

(13,058)

 

$

 5

Add:

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

60

 

 

 2

 

 

 —

 

 

62

  Accretion on contingent consideration and purchase liability

 

95

 

 

 —

 

 

 —

 

 

95

  Depreciation and amortization

 

11,026

 

 

8,159

 

 

 —

 

 

19,185

  Non-cash compensation expense

 

5,080

 

 

2,936

 

 

2,460

 

 

10,476

  Restructuring charges and transaction costs

 

188

 

 

403

 

 

2,754

 

 

3,345

  Non-income tax expense adjustment

 

27

 

 

 —

 

 

 —

 

 

27

  Severance

 

1,049

 

 

 —

 

 

 —

 

 

1,049

  Loss attributable to non-controlling interest

 

515

 

 

 —

 

 

 —

 

 

515

Adjusted EBITDA

$

34,399

 

$

8,204

 

$

(7,844)

 

$

34,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2017

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

129,372

 

$

38,045

 

$

 —

 

$

167,417

  Deferred revenue fair value adjustment

 

 7

 

 

45

 

 

 —

 

 

52

Adjusted revenues

$

129,379

 

$

38,090

 

$

 —

 

$

167,469

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

15,811

 

$

(5,635)

 

$

(7,433)

 

$

2,743

Add:

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

 7

 

 

45

 

 

 —

 

 

52

  Accretion on contingent consideration and purchase liability

 

148

 

 

 —

 

 

 —

 

 

148

  Depreciation and amortization

 

6,361

 

 

9,104

 

 

 —

 

 

15,465

  Non-cash compensation expense

 

4,218

 

 

2,721

 

 

1,006

 

 

7,945

  Restructuring charges and transaction costs

 

600

 

 

 —

 

 

1,649

 

 

2,249

  Non-income tax expense adjustment

 

414

 

 

 —

 

 

 —

 

 

414

  Severance

 

307

 

 

15

 

 

16

 

 

338

  Litigation related expense

 

 —

 

 

52

 

 

 —

 

 

52

  Other loss

 

 —

 

 

 —

 

 

18

 

 

18

  Loss attributable to non-controlling interest

 

101

 

 

 —

 

 

 —

 

 

101

Adjusted EBITDA

$

27,967

 

$

6,302

 

$

(4,744)

 

$

29,525

 

 

 

9


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2018

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

312,916

 

$

86,211

 

$

 —

 

$

399,127

  Deferred revenue fair value adjustment

 

58

 

 

 8

 

 

 —

 

 

66

Adjusted revenues

$

312,974

 

$

86,219

 

$

 —

 

$

399,193

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

32,220

 

$

(7,705)

 

$

(25,248)

 

$

(733)

Add (deduct):

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

58

 

 

 8

 

 

 —

 

 

66

  Accretion on contingent consideration and purchase liability

 

196

 

 

 —

 

 

 —

 

 

196

  Depreciation and amortization

 

22,499

 

 

16,232

 

 

 —

 

 

38,731

  Non-cash compensation expense

 

9,134

 

 

5,400

 

 

4,437

 

 

18,971

  Restructuring charges and transaction costs

 

225

 

 

603

 

 

5,109

 

 

5,937

  Non-income tax expense adjustment

 

(101)

 

 

 —

 

 

 —

 

 

(101)

  Severance

 

3,478

 

 

383

 

 

 —

 

 

3,861

  Loss attributable to non-controlling interest

 

584

 

 

 —

 

 

 —

 

 

584

Adjusted EBITDA

$

68,293

 

$

14,921

 

$

(15,702)

 

$

67,512

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 2017

 

Envestnet

 

Envestnet | Yodlee

 

Nonsegment

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

$

250,690

 

$

74,513

 

$

 —

 

$

325,203

  Deferred revenue fair value adjustment

 

36

 

 

69

 

 

 —

 

 

105

Adjusted revenues

$

250,726

 

$

74,582

 

$

 —

 

$

325,308

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

$

29,322

 

$

(13,343)

 

$

(16,590)

 

$

(611)

Add:

 

 

 

 

 

 

 

 

 

 

 

  Deferred revenue fair value adjustment

 

36

 

 

69

 

 

 —

 

 

105

  Accretion on contingent consideration and purchase liability

 

304

 

 

 —

 

 

 —

 

 

304

  Depreciation and amortization

 

12,782

 

 

18,518

 

 

 —

 

 

31,300

  Non-cash compensation expense

 

7,892

 

 

5,462

 

 

2,049

 

 

15,403

  Restructuring charges and transaction costs

 

695

 

 

 —

 

 

4,932

 

 

5,627

  Non-income tax expense adjustment

 

1,163

 

 

 —

 

 

 —

 

 

1,163

  Severance

 

423

 

 

224

 

 

16

 

 

663

  Litigation related expense

 

 —

 

 

1,033

 

 

 —

 

 

1,033

  Other loss

 

 —

 

 

 —

 

 

25

 

 

25

  Loss attributable to non-controlling interest

 

351

 

 

 —

 

 

 —

 

 

351

Adjusted EBITDA

$

52,968

 

$

11,963

 

$

(9,568)

 

$

55,363

 

 

10


 

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

June 30,

 

September 30,

 

December 31,

 

March 31,

 

June 30,

 

2017

 

2017

 

2017

 

2018

 

2018

 

(in millions except accounts and advisors data)

Platform Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Assets Under Management (AUM)

$

122,543

 

$

131,809

 

$

141,518

 

$

143,945

 

$

148,537

 Assets Under Administration (AUA)

 

271,450

 

 

293,963

 

 

308,480

 

 

353,379

 

 

360,850

   Subtotal AUM/A

 

393,993

 

 

425,772

 

 

449,998

 

 

497,324

 

 

509,387

 Subscription

 

1,099,775

 

 

1,161,893

 

 

1,253,528

 

 

2,076,382

 

 

2,167,084

Total Platform Assets

$

1,493,768

 

$

1,587,665

 

$

1,703,526

 

$

2,573,706

 

$

2,676,471

Platform Accounts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 AUM

 

614,973

 

 

652,060

 

 

685,925

 

 

724,774

 

 

759,926

 AUA

 

1,083,417

 

 

1,145,050

 

 

1,217,697

 

 

1,389,489

 

 

1,417,795

   Subtotal AUM/A

 

1,698,390

 

 

1,797,110

 

 

1,903,622

 

 

2,114,263

 

 

2,177,721

 Subscription

 

4,846,596

 

 

4,944,640

 

 

5,054,015

 

 

7,985,777

 

 

8,042,900

Total Platform Accounts

 

6,544,986

 

 

6,741,750

 

 

6,957,637

 

 

10,100,040

 

 

10,220,621

Advisors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 AUM/A

 

38,498

 

 

40,379

 

 

40,485

 

 

44,790

 

 

44,900

 Subscription

 

24,499

 

 

24,501

 

 

25,566

 

 

43,037

 

 

43,700

Total Advisors

 

62,997

 

 

64,880

 

 

66,051

 

 

87,827

 

 

88,600

 

The following tables summarize the changes in AUM and AUA for the three months ended June 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In Millions Except Accounts

 

3/31/2018

 

Gross            Sales

 

Redemp-   tions

 

Net           Flows

 

Market Impact

 

Reclass to Subscription

 

6/30/2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets under Management (AUM)

 

$

143,945

 

$

13,859

 

$

(8,138)

 

$

5,721

 

$

987

 

$

(2,116)

 

$

148,537

Assets under Administration (AUA)

 

 

353,379

 

 

27,015

 

 

(23,186)

 

 

3,829

 

 

5,022

 

 

(1,380)

 

 

360,850

 Total AUM/A

 

$

497,324

 

$

40,874

 

$

(31,324)

 

$

9,550

 

$

6,009

 

$

(3,496)

 

$

509,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee-Based Accounts

 

 

2,114,263

 

 

 

 

 

 

 

 

65,515

 

 

 

 

 

(2,057)

 

 

2,177,721

 

 

The above AUM/A gross sales figures include $5.1 billion in new client conversions. The Company onboarded an additional $31.0 billion in subscription conversions during the second quarter, bringing total conversions for the quarter to $36.1 billion.

 

 

11