Exhibit 99.1

Envestnet Reports Fourth Quarter 2019 Financial Results

Chicago, IL — February 20, 2020 — 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, 2019.
 
 
Three Months Ended
 
 
 
Year Ended
 
 
Key Financial Metrics
 
December 31,
 
%
 
December 31,
 
%
(in millions except per share data)
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
GAAP:
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
239.9

 
$
210.1

 
14%
 
$
900.1

 
$
812.4

 
11%
Net income (loss)
 
$
3.4

 
$
(0.5
)
 
n/m
 
$
(17.2
)
 
$
4.0

 
n/m
Net income (loss) per diluted share attributable to Envestnet, Inc.
 
$
0.07

 
$
0.00

 
n/m
 
$
(0.33
)
 
$
0.12

 
n/m
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP:
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted revenues(1)
 
$
242.5

 
$
210.1

 
15%
 
$
909.4

 
$
812.5

 
12%
Adjusted net revenues(1)
 
$
177.1

 
$
150.2

 
18%
 
$
665.5

 
$
580.3

 
15%
Adjusted EBITDA(1)
 
$
61.5

 
$
47.5

 
30%
 
$
193.3

 
$
157.5

 
23%
Adjusted net income(1)
 
$
37.1

 
$
28.9

 
28%
 
$
113.4

 
$
91.1

 
24%
Adjusted net income per diluted share(1)
 
$
0.69

 
$
0.61

 
13%
 
$
2.15

 
$
1.92

 
12%
 
 
 
 
 
 
 
 
 
 
 
 
 
n/m - Not meaningful

“Envestnet had an unprecedented year in 2019. We experienced a great tragedy. We stood up, moved forward and remained committed to the vision of building the operating system for financial wellness powered by our data infrastructure which enables financial advisors and their firms to help millions of American households achieve their financial goals and aspirations. In the fourth quarter, we grew revenue 14%, adjusted EBITDA 30%, and adjusted earnings per share 13% compared to the prior year,” said Bill Crager, Interim Chief Executive Officer.

“We are moving forward very purposefully with our vision and mission in mind. We are focused on expanding the definition of unified advice and continuing to launch services and tools that help advisors grow their businesses and serve more clients efficiently,” concluded Mr. Crager.

Financial Results for the Fourth Quarter of 2019 Compared to the Fourth Quarter of 2018:

Total revenues increased 14% to $239.9 million for the fourth quarter of 2019 from $210.1 million for the fourth quarter of 2018. The PortfolioCenter and PIEtech acquisitions contributed revenues of $2.3 million and $12.2 million, respectively, for the fourth quarter of 2019. Excluding these items, total revenues grew 7% for the fourth quarter of 2019 compared to the prior year period. Asset-based recurring revenues increased 5% from the prior year period, and represented 54% of total revenues for the fourth quarter of 2019, compared to 58% of total revenues for the same period in 2018. Subscription-based recurring revenues increased 32% from the prior year period, and represented 43% of total revenues for the fourth quarter of 2019, compared to 37% of total revenues for the same period in 2018. Professional services and other non-recurring revenues decreased 11% from the prior year period.

Total operating expenses for the fourth quarter of 2019 increased 14% to $226.9 million from $198.6 million in the prior year period. Cost of revenues increased 8% to $73.2 million for the fourth quarter of 2019 from $67.9 million





for the fourth quarter of 2018. Compensation and benefits increased 34% to $98.0 million for the fourth quarter of 2019 from $73.0 million for the prior year period. Compensation and benefits were 41% of total revenues for the fourth quarter of 2019, compared to 35% in the prior year period. General and administration expenses decreased 28% to $27.6 million for the fourth quarter of 2019 from $38.4 million for the prior year period. General and administrative expenses were 12% of total revenues for the fourth quarter of 2019, compared to 18% in the prior year period. The acquisitions of PortfolioCenter and PIEtech were significant contributors to compensation and benefits, as well as general and administrative expenses for the fourth quarter of 2019. Excluding PortfolioCenter and PIEtech, operating expenses for the fourth quarter of 2019 increased 4% compared to the prior year period to $205.6 million.

Income from operations was $13.0 million for the fourth quarter of 2019 compared to income from operations of $11.5 million for the fourth quarter of 2018. Net income attributable to Envestnet, Inc. was $3.6 million, or $0.07 per diluted share, for the fourth quarter of 2019 compared to $0.2 million, or $0.00 per diluted share, for the fourth quarter of 2018.

Adjusted revenues(1) for the fourth quarter of 2019 increased 15% to $242.5 million from $210.1 million for the prior year period. Adjusted net revenues(1) for the fourth quarter of 2019 increased 18% to $177.1 million from $150.2 million for the prior year period. Adjusted EBITDA(1) for the fourth quarter of 2019 increased 30% to $61.5 million from $47.5 million for the prior year period. Adjusted Net Income(1) increased 28% for the fourth quarter of 2019 to $37.1 million from $28.9 million for the prior year period. Adjusted Net Income per Diluted Share(1) for the fourth quarter of 2019 increased 13% to $0.69 from $0.61 in the fourth quarter of 2018.

Financial Results for the Full Year of 2019 Compared to the Full Year of 2018:

Total revenues increased 11% to $900.1 million for the year ended December 31, 2019 from $812.4 million for the year ended December 31, 2018. The PortfolioCenter and PIEtech acquisition contributed revenues of $6.7 million and $30.3 million, respectively, for the year ended December 31, 2019. Excluding these items, total revenues grew 6% for the year ended December 31, 2019 compared to the prior year period. Asset-based recurring revenues increased 1% from the prior year period, and represented 54% of total revenues for the year ended December 31, 2019 compared to 59% of total revenues for the same period in 2018. Subscription-based revenues increased 28% from the prior year period, and represented 42% of total revenues for the year ended December 31, 2019 compared to 36% of total revenues for the same period in 2018. Professional services and other non-recurring revenues increased 4% from the prior year period.

Total operating expenses for the year ended December 31, 2019 increased 15% to $916.2 million from $798.2 million in the prior year period. Cost of revenues increased 6% to $278.8 million for the year ended December 31, 2019 from $263.4 million for the year ended December 31, 2018. Compensation and benefits increased 21% to $383.6 million for the year ended December 31, 2019 from $317.2 million for the prior year period. Compensation and benefits were 43% of total revenues for the year ended December 31, 2019, compared to 39% in the prior year period. General and administration expenses increased 9% to $152.6 million for the year ended December 31, 2019 from $140.0 million for the prior year period. General and administrative expenses were 17% of total revenues for the year ended December 31, 2019, consistent with the prior year period. The acquisitions of PortfolioCenter and PIEtech were significant contributors to the year-over-year increases in compensation and benefits, as well as general and administrative expenses for the year ended December 31, 2019. Excluding PortfolioCenter and PIEtech, operating expenses for the year ended December 31, 2019 increased 7% compared to the prior year period to $857.5 million.


2



Loss from operations was $16.1 million for the year ended December 31, 2019 compared to income from operations of $14.2 million or the year ended December 31, 2018. Net loss attributable to Envestnet, Inc. was $16.8 million, or $0.33 per diluted share, for the year ended December 31, 2019 compared to net income of $5.8 million, or $0.12 per diluted share, for the year ended December 31, 2018.

Adjusted revenues(1) for the year ended December 31, 2019 increased 12% to $909.4 million from $812.5 million for the prior year period. Adjusted net revenues (1) for the year ended December 31, 2019 increased 15% to $665.5 million from $580.3 million for the prior year period. Adjusted EBITDA(1) for the year ended December 31, 2019 increased 23% to $193.3 million from $157.5 million for the prior year period. Adjusted Net Income(1) increased 24% for the year ended December 31, 2019 to $113.4 million from $91.1 million for the prior year period. Adjusted Net Income per Diluted Share(1) for the year ended December 31, 2019 increased 12% to $2.15 from $1.92 in the year ended December 31, 2018.


Outlook

The Company provided the following outlook for the first quarter ending March 31, 2020 and full year ending December 31, 2020. This outlook is based on the market value of assets on December 31, 2019.
In Millions Except Adjusted EPS
 
1Q 2020
 
FY 2020
GAAP:
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Asset-based
 
$134.0
 
-
 
$135.0
 
 
 
 
 
 
Subscription-based
 
$101.7
 
-
 
$102.2
 
 
 
 
 
 
Total recurring revenues
 
$235.7
 
-
 
$237.2
 
 
 
 
 
 
Professional services and other revenues
 
$6.0
 
-
 
$6.5
 
 
 
 
 
 
Total revenues
 
$241.7
 
-
 
$243.7
 
$1,017.5
 
-
 
$1,027.5
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset-based cost of revenues
 
$69.5
 
-
 
$70.0
 
$292.0
 
-
 
$294.0
Total cost of revenues
 
$76.5
 
-
 
$77.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
(a)
 
-
 
(a)
 
(a)
 
-
 
(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted shares outstanding
 
 
 
55.6
 
 
 
 
 
 
 
 
Net Income per diluted share
 
(a)
 
-
 
(a)
 
(a)
 
-
 
(a)
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP:
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted revenues(1):
 
 
 
 
 
 
 
 
 
 
 
 
Asset-based
 
$134.0
 
-
 
$135.0
 
 
 
 
 
 
Subscription-based
 
$102.0
 
-
 
$102.5
 
 
 
 
 
 
Total recurring revenues
 
$236.0
 
-
 
$237.5
 
 
 
 
 
 
Professional services and other revenues
 
$6.0
 
-
 
$6.5
 
 
 
 
 
 
Total revenues
 
$242.0
 
-
 
$244.0
 
$1,018.0
 
-
 
$1,028.0
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net revenues(1)
 
$172.0
 
-
 
$174.5
 
$724.0
 
-
 
$736.0
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(1)
 
$46.0
 
-
 
$47.0
 
$220.0
 
-
 
$224.0
Adjusted net income per diluted share(1)
 
 
 
$0.45
 
 
 
$2.22
 
-
 
$2.27
 
 
 
 
 
 
 
 
 
 
 
 
 

3



(a) 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 fourth quarter 2019 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 7137531. The replay will be available until Thursday, February 27, 2020.

About Envestnet

Envestnet, Inc. (NYSE: ENV) is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet's unified technology empowers enterprises and advisors to more fully understand their clients and deliver actionable intelligence that drives better outcomes and improves lives.

Envestnet Wealth Solutions enables enterprises and advisors to better manage client outcomes and strengthen their practices through its leading Wealth Management Operating System and advanced portfolio solutions. Envestnet | Tamarac provides portfolio management, reporting, trading, rebalancing and client portal solutions for registered investment advisors (RIAs). Envestnet | MoneyGuide provides goals-based financial planning applications. Envestnet Data & Analytics enables innovation and insights through its Envestnet | Yodlee data aggregation platform.

More than 100,000 advisors and more than 4,700 companies including: 16 of the 20 largest U.S. banks, 43 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs 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 us on Twitter @ENVintel.

(1) Non-GAAP Financial Measures

“Adjusted revenues” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. Under 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 net revenues” represents adjusted revenues less asset-based cost of revenues. Under GAAP, we are required to recognize as revenue certain fees paid to investment managers and other third parties needed for implementation of investment solutions included in our assets under management. Those fees also are required to be recorded as cost of revenues. This non-GAAP metric presents adjusted revenues without such fees included, as they have no impact on our profitability.


4



Adjusted revenues and Adjusted net revenues have limitations as financial measures, should be considered as supplemental in nature and are not meant as a substitute for revenue prepared in accordance with GAAP.

“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 liability, 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 and fair value adjustment to property and equipment, net, fair market value adjustment on contingent consideration liability, 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. The normalized tax rate is based solely on the estimated blended statutory income tax rates in the jurisdictions in which we operate. We monitor the normalized tax rate based on events or trends that could materially impact the rate, including tax legislation changes and changes in the geographic mix of our operations.

“Adjusted net income per share” represents adjusted net income attributable to common stockholders divided by the diluted number of weighted‑average shares outstanding.

See reconciliation of Non-GAAP Financial Measures on pages 12-15 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 (loss) or net income (loss) 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 2020, 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 acquisitions of FolioDynamix, PortfolioCenter and PIEtech 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 revenues, 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

5



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, 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 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 February 20, 2020 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
 
 


6



Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 
 
December 31,
 
December 31,
 
 
2019
 
2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
82,505

 
$
289,345

Fees receivable, net
 
67,815

 
68,004

Prepaid expenses and other current assets
 
32,183

 
23,557

Total current assets
 
182,503

 
380,906

 
 
 
 
 
Property and equipment, net
 
53,756

 
44,991

Internally developed software, net
 
60,263

 
38,209

Intangible assets, net
 
505,589

 
305,241

Goodwill
 
879,850

 
519,102

Operating lease right-of-use assets, net
 
82,796

 

Other non-current assets
 
37,127

 
25,298

Total assets
 
$
1,801,884

 
$
1,313,747

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accrued expenses and other liabilities
 
$
137,944

 
$
133,298

Accounts payable
 
17,277

 
19,567

Operating lease liabilities
 
13,816

 

Convertible Notes due 2019
 

 
165,711

Contingent consideration
 

 
732

Deferred revenue
 
34,753

 
23,988

Total current liabilities
 
203,790

 
343,296

 
 
 
 
 
Convertible Notes due 2023
 
305,513

 
294,725

Revolving credit facility
 
260,000

 

Contingent consideration
 
9,045

 

Deferred revenue
 
5,754

 
6,910

Non-current operating lease liabilities
 
88,365

 

Deferred rent and lease incentive
 

 
17,569

Deferred tax liabilities, net
 
29,481

 
640

Other non-current liabilities
 
32,360

 
18,005

Total liabilities
 
934,308

 
681,145

 
 
 
 
 
Equity:
 
 
 
 
Total stockholders’ equity
 
869,094

 
633,700

Non-controlling interest
 
(1,518
)
 
(1,098
)
Total liabilities and equity
 
$
1,801,884

 
$
1,313,747



7



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,
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Asset-based
 
$
128,717

 
$
122,872

 
$
484,312

 
$
481,233

Subscription-based
 
102,885

 
77,799

 
378,813

 
295,467

Total recurring revenues
 
231,602

 
200,671

 
863,125

 
776,700

Professional services and other revenues
 
8,334

 
9,409

 
37,002

 
35,663

Total revenues
 
239,936

 
210,080

 
900,127

 
812,363

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Cost of revenues
 
73,216

 
67,875

 
278,811

 
263,400

Compensation and benefits
 
97,964

 
73,014

 
383,554

 
317,188

General and administration
 
27,603

 
38,356

 
152,564

 
139,984

Depreciation and amortization
 
28,104

 
19,332

 
101,271

 
77,626

Total operating expenses
 
226,887

 
198,577

 
916,200

 
798,198

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
13,049

 
11,503

 
(16,073
)
 
14,165

Other expense, net
 
(8,934
)
 
(6,525
)
 
(32,022
)
 
(23,327
)
Income (loss) before income tax provision (benefit)
 
4,115

 
4,978

 
(48,095
)
 
(9,162
)
 
 
 
 
 
 
 
 
 
Income tax provision (benefit)
 
698

 
5,490

 
(30,893
)
 
(13,172
)
 
 
 
 
 
 
 
 
 
Net income (loss)
 
3,417

 
(512
)
 
(17,202
)
 
4,010

Add: Net loss attributable to non-controlling interest
 
173

 
735

 
420

 
1,745

Net income (loss) attributable to Envestnet, Inc.
 
$
3,590

 
$
223

 
$
(16,782
)
 
$
5,755

 
 
 
 
 
 
 
 
 
Net income (loss) per share attributable to Envestnet, Inc.:
 
 
 
 
 
 
 
 
Basic
 
$
0.07

 
$

 
$
(0.33
)
 
$
0.13

 
 
 
 
 
 
 
 
 
Diluted
 
$
0.07

 
$

 
$
(0.33
)
 
$
0.12

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
52,574,128

 
45,985,791

 
50,937,919

 
45,268,002

 
 
 
 
 
 
 
 
 
Diluted
 
54,034,972

 
47,752,500

 
50,937,919

 
47,384,085



8



Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

 
 
Year Ended
 
 
December 31,
 
 
2019
 
2018
OPERATING ACTIVITIES:
 
 
 
 
Net income (loss)
 
$
(17,202
)
 
$
4,010

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
101,271

 
77,626

Deferred rent and lease incentive amortization
 

 
671

Provision for doubtful accounts
 
2,855

 
1,618

Deferred income taxes
 
(39,630
)
 
(23,629
)
Non-cash compensation expense
 
60,444

 
40,245

Non-cash interest expense
 
19,246

 
14,534

Accretion on contingent consideration and purchase liability
 
1,772

 
222

Payments of contingent consideration
 
(578
)
 

Fair market value adjustment to contingent consideration liability
 
(8,126
)
 

Loss allocation from equity method investment
 
2,361

 
1,146

Gain on life insurance proceeds
 
(5,000
)
 

Changes in operating assets and liabilities, net of acquisitions:
 
 
 
 
Fees receivable, net
 
1,139

 
(12,890
)
Prepaid expenses and other current assets
 
(6,440
)
 
(887
)
Other non-current assets
 
(5,234
)
 
(3,336
)
Accrued expenses and other liabilities
 
(811
)
 
12,939

Accounts payable
 
(2,863
)
 
1,743

Deferred revenue
 
727

 
345

Other non-current liabilities
 
4,795

 
3,028

Net cash provided by operating activities
 
108,726

 
117,385

 
 
 
 
 
INVESTING ACTIVITIES:
 
 
 
 
Purchases of property and equipment
 
(19,847
)
 
(20,524
)
Capitalization of internally developed software
 
(34,096
)
 
(24,068
)
Investment in private companies
 
(5,250
)
 
(1,200
)
Acquisitions of businesses, net of cash acquired
 
(320,915
)
 
(194,617
)
Proceeds from life insurance policy
 
5,000

 

Other
 
(600
)
 
(1,270
)
Net cash used in investing activities
 
(375,708
)
 
(241,679
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 
 
 
Proceeds from issuance of Convertible Notes due 2023
 

 
345,000

Convertible Notes due 2023 issuance costs
 

 
(9,982
)
Payment of Convertible Notes due 2019
 
(184,751
)
 

Proceeds from borrowings on revolving credit facility
 
345,000

 
195,000

Payments on revolving credit facility
 
(85,000
)
 
(276,168
)
Revolving credit facility issuance costs
 
(2,103
)
 

Payments of contingent consideration
 
(171
)
 
(2,193
)
Issuance of common stock and warrants - private placement, net of offering costs
 

 
122,704

Proceeds from exercise of stock options
 
10,592

 
5,305

Purchase of treasury stock for stock-based tax withholdings
 
(23,107
)
 
(20,816
)
Purchase of ERS units
 

 
(6,560
)
Issuance of restricted stock units
 
5

 
4

Net cash provided by financing activities
 
60,465

 
352,294

 
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
(399
)
 
(592
)

9



 
 
 
 
 
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
(206,916
)
 
227,408

 
 
 
 
 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD
 
289,671

 
62,263

 
 
 
 
 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
 
$
82,755

 
$
289,671


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

 
 
December 31,
 
 
2019
 
2018
Cash and cash equivalents
 
$
82,505

 
$
289,345

Restricted cash included in prepaid expenses and other current assets
 
82

 
158

Restricted cash included in other non-current assets
 
168

 
168

Total cash, cash equivalents and restricted cash
 
$
82,755

 
$
289,671



10



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,
 
 
2019
 
2018
 
2019
 
2018
Total revenues
 
$
239,936

 
$
210,080

 
$
900,127

 
$
812,363

Deferred revenue fair value adjustment
 
2,601

 
26

 
9,271

 
118

Adjusted revenues
 
242,537

 
210,106

 
909,398

 
812,481

Less: Asset-based cost of revenues
 
(65,439
)
 
(59,893
)
 
$
(243,913
)
 
$
(232,145
)
Adjusted net revenues
 
$
177,098

 
$
150,213

 
$
665,485

 
$
580,336

 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
3,417

 
$
(512
)
 
$
(17,202
)
 
$
4,010

Add (deduct):
 
 
 
 
 
 
 
 
Deferred revenue fair value adjustment
 
2,601

 
26

 
9,271

 
118

Interest income
 
(488
)
 
(960
)
 
(3,347
)
 
(2,363
)
Interest expense
 
8,175

 
7,055

 
32,520

 
25,203

Accretion on contingent consideration and purchase liability
 
532

 
13

 
1,772

 
222

Income tax provision (benefit)
 
698

 
5,490

 
(30,893
)
 
(13,172
)
Depreciation and amortization
 
28,104

 
19,332

 
101,271

 
77,626

Non-cash compensation expense
 
17,203

 
10,671

 
60,444

 
40,245

Restructuring charges and transaction costs
 
1,833

 
5,547

 
26,558

 
15,580

Severance
 
7,220

 
49

 
15,367

 
8,318

Fair market value adjustment on contingent consideration liability
 
(8,126
)
 

 
(8,126
)
 

Litigation related expense
 
814

 

 
2,879

 

Foreign currency
 
(280
)
 
413

 
(72
)
 
(589
)
Non-income tax expense adjustment
 
(1,106
)
 
(466
)
 
374

 
(590
)
Loss allocation from equity method investment
 
854

 
77

 
2,361

 
1,146

Loss attributable to non-controlling interest
 
79

 
719

 
110

 
1,791

Adjusted EBITDA
 
$
61,530

 
$
47,454

 
$
193,287

 
$
157,545

 
 
 
 
 
 
 
 
 
Net income (loss)
 
$
3,417

 
$
(512
)
 
$
(17,202
)
 
$
4,010

Income tax provision (benefit) (1)
 
698

 
5,490

 
(30,893
)
 
(13,172
)
Loss before income tax provision (benefit)
 
4,115

 
4,978

 
(48,095
)
 
(9,162
)
Add (deduct):
 
 
 
 
 
 
 
 
Deferred revenue fair value adjustment
 
2,601

 
26

 
9,271

 
118

Accretion on contingent consideration and purchase liability
 
532

 
13

 
1,772

 
222

Non-cash interest expense
 
4,475

 
4,570

 
18,743

 
13,905

Non-cash compensation expense
 
17,203

 
10,671

 
60,444

 
40,245

Restructuring charges and transaction costs
 
1,833

 
5,547

 
26,558

 
15,580

Severance
 
7,220

 
49

 
15,367

 
8,318

Amortization of acquired intangibles and fair value adjustment to property and equipment, net
 
19,629

 
13,025

 
70,677

 
53,856

Fair market value adjustment on contingent consideration liability
 
(8,126
)
 

 
(8,126
)
 

Litigation related expense
 
814

 

 
2,879

 

Foreign currency
 
(280
)
 
413

 
(72
)
 
(589
)
Non-income tax expense adjustment
 
(1,106
)
 
(466
)
 
374

 
(590
)
Loss allocation from equity method investment
 
854

 
77

 
2,361

 
1,146

Loss attributable to non-controlling interest
 
79

 
719

 
110

 
1,791

Adjusted net income before income tax effect
 
49,843

 
39,622

 
152,263

 
124,840

Income tax effect (2)
 
(12,710
)
 
(10,697
)
 
(38,827
)
 
(33,705
)
Adjusted net income
 
$
37,133

 
$
28,925

 
$
113,436

 
$
91,135

 
 
 
 
 
 
 
 
 

11



Basic number of weighted-average shares outstanding
 
52,574,128

 
45,985,791

 
50,937,919

 
45,268,002

Effect of dilutive shares:
 
 
 
 
 
 
 
 
Options to purchase common stock
 
784,361

 
1,173,064

 
1,015,164

 
1,304,493

Unvested restricted stock units
 
591,657

 
593,645

 
691,740

 
811,590

Convertible Notes
 
84,826

 

 
33,388

 

Warrants
 
951

 

 

 

Diluted number of weighted-average shares outstanding
 
54,035,923

 
47,752,500

 
52,678,211

 
47,384,085

 
 
 
 
 
 
 
 
 
Adjusted net income per share - diluted
 
$
0.69

 
$
0.61

 
$
2.15

 
$
1.92


(1) For the three months ended December 31, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 17.0% and 110.3%, respectively. For the year ended December 31, 2019 and 2018, the effective tax rate computed in accordance with GAAP equaled 64.2% and 143.8%, respectively.
(2) For 2019, an estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income. For 2018, an estimated normalized effective tax rate of 27% has been used to compute adjusted net income.


12



Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)
 
 
Three Months Ended December 31, 2019
 
 
Envestnet Wealth Solutions
 
Envestnet Data & Analytics
 
Nonsegment
 
Total
Revenues
 
$
191,639

 
$
48,297

 
$

 
$
239,936

Deferred revenue fair value adjustment
 
2,601

 

 

 
2,601

Adjusted revenues
 
194,240

 
48,297

 

 
242,537

Less: Asset-based cost of revenues
 
(65,439
)
 

 

 
(65,439
)
Adjusted net revenues
 
128,801

 
48,297

 

 
177,098

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
$
20,744

 
$
(1,262
)
 
$
(6,433
)
 
$
13,049

Add:
 
 
 
 
 
 
 
 
Deferred revenue fair value adjustment
 
2,601

 

 

 
2,601

Accretion on contingent consideration and purchase liability
 
532

 

 

 
532

Depreciation and amortization
 
19,689

 
8,415

 

 
28,104

Non-cash compensation expense
 
10,382

 
3,164

 
3,657

 
17,203

Restructuring charges and transaction costs
 
702

 
(758
)
 
1,090

 
1,034

Severance
 
4,071

 
1,498

 
1,651

 
7,220

Fair market value adjustment on contingent consideration liability
 

 

 
(8,126
)
 
(8,126
)
Litigation related expense
 

 
814

 

 
814

Other
 
128

 

 
(2
)
 
126

Non-income tax expense adjustment
 
(907
)
 
(199
)
 

 
(1,106
)
Loss attributable to non-controlling interest
 
79

 

 

 
79

Adjusted EBITDA
 
$
58,021

 
$
11,672

 
$
(8,163
)
 
$
61,530

 
 
 
Three Months Ended December 31, 2018
 
 
Envestnet Wealth Solutions
 
Envestnet Data & Analytics
 
Nonsegment
 
Total
Revenues
 
$
162,222

 
$
47,858

 
$

 
$
210,080

Deferred revenue fair value adjustment
 
26

 

 

 
26

Adjusted revenues
 
162,248

 
47,858

 

 
210,106

Less: Asset-based cost of revenues
 
(59,893
)
 

 

 
(59,893
)
Adjusted net revenues
 
102,355

 
47,858

 

 
150,213

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
$
26,722

 
$
(1,205
)
 
$
(14,014
)
 
$
11,503

Add:
 
 
 
 
 
 
 
 
Deferred revenue fair value adjustment
 
26

 

 

 
26

Accretion on contingent consideration and purchase liability
 
13

 

 

 
13

Depreciation and amortization
 
11,218

 
8,114

 

 
19,332

Non-cash compensation expense
 
5,198

 
2,987

 
2,486

 
10,671

Restructuring charges and transaction costs
 
720

 
822

 
4,005

 
5,547

Severance
 
(49
)
 
97

 
1

 
49

Other
 
67

 
4

 
(11
)
 
60

Non-income tax expense adjustment
 
(1,053
)
 
587

 

 
(466
)
Loss attributable to non-controlling interest
 
719

 

 

 
719

Adjusted EBITDA
 
$
43,581

 
$
11,406

 
$
(7,533
)
 
$
47,454


13



 
 
Year Ended December 31, 2019
 
 
Envestnet Wealth Solutions
 
Envestnet Data & Analytics
 
Nonsegment
 
Total
Revenues
 
$
709,458

 
$
190,669

 
$

 
$
900,127

Deferred revenue fair value adjustment
 
9,271

 

 

 
9,271

Adjusted revenues
 
718,729

 
190,669

 

 
909,398

Less: Asset-based cost of revenues
 
(243,913
)
 

 

 
(243,913
)
Adjusted net revenues
 
474,816

 
190,669

 

 
665,485

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
$
67,713

 
$
(25,262
)
 
$
(58,524
)
 
$
(16,073
)
Add (deduct):
 
 
 
 
 
 
 
 
Deferred revenue fair value adjustment
 
9,271

 

 

 
9,271

Accretion on contingent consideration and purchase liability
 
1,772

 

 

 
1,772

Depreciation and amortization
 
65,746

 
35,525

 

 
101,271

Non-cash compensation expense
 
33,968

 
14,963

 
11,513

 
60,444

Restructuring charges and transaction costs
 
2,491

 
635

 
22,633

 
25,759

Severance
 
6,315

 
7,212

 
1,840

 
15,367

Fair market value adjustment on contingent consideration liability
 

 

 
(8,126
)
 
(8,126
)
Litigation related expense
 

 
2,879

 

 
2,879

Other
 
239

 

 

 
239

Non-income tax expense adjustment
 
500

 
(126
)
 

 
374

Loss attributable to non-controlling interest
 
110

 

 

 
110

Adjusted EBITDA
 
$
188,125

 
$
35,826

 
$
(30,664
)
 
$
193,287

 
 
 
Year Ended December 31, 2018
 
 
Envestnet Wealth Solutions
 
Envestnet Data & Analytics
 
Nonsegment
 
Total
Revenues
 
$
632,605

 
$
179,758

 
$

 
$
812,363

Deferred revenue fair value adjustment
 
110

 
8

 

 
118

Adjusted revenues
 
632,715

 
179,766

 

 
812,481

Less: Asset-based cost of revenues
 
(232,145
)
 

 

 
(232,145
)
Adjusted net revenues
 
400,570

 
179,766

 

 
580,336

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
$
75,491

 
$
(10,013
)
 
$
(51,313
)
 
$
14,165

Add:
 
 
 
 
 
 
 
 
Deferred revenue fair value adjustment
 
110

 
8

 

 
118

Accretion on contingent consideration and purchase liability
 
222

 

 

 
222

Depreciation and amortization
 
45,139

 
32,487

 

 
77,626

Non-cash compensation expense
 
19,342

 
11,552

 
9,351

 
40,245

Restructuring charges and transaction costs
 
3,143

 
1,735

 
10,702

 
15,580

Severance
 
7,810

 
480

 
28

 
8,318

Other
 
66

 
4

 

 
70

Non-income tax expense adjustment
 
(1,177
)
 
587

 

 
(590
)
Loss attributable to non-controlling interest
 
1,791

 

 

 
1,791

Adjusted EBITDA
 
$
151,937

 
$
36,840

 
$
(31,232
)
 
$
157,545



14



Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except accounts and advisors)
(unaudited)

 
 
As of
 
 
December 31,
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
 
2018
 
2019
 
2019
 
2019
 
2019
 
 
(in millions except accounts and advisors data)
Platform Assets
 
 
 
 
 
 
 
 
 
 
Assets under Management ("AUM")
 
$
150,591

 
$
176,144

 
$
182,143

 
$
188,739

 
$
207,083

Assets under Administration ("AUA")
 
291,934

 
319,129

 
330,226

 
316,742

 
343,505

Total AUM/A
 
442,525

 
495,273

 
512,369

 
505,481

 
550,588

Subscription
 
2,314,253

 
2,546,483

 
2,835,780

 
2,947,582

 
3,205,281

Total Platform Assets
 
$
2,756,778

 
$
3,041,756

 
$
3,348,149

 
$
3,453,063

 
$
3,755,869

Platform Accounts
 
 
 
 
 
 
 
 
 
 
AUM
 
816,354

 
874,574

 
907,034

 
934,811

 
935,039

AUA
 
1,182,764

 
1,187,589

 
1,196,114

 
1,136,430

 
1,193,882

Total AUM/A
 
1,999,118

 
2,062,163

 
2,103,148

 
2,071,241

 
2,128,921

Subscription
 
8,865,435

 
8,909,581

 
9,492,653

 
9,692,714

 
9,793,175

Total Platform Accounts
 
10,864,553

 
10,971,744

 
11,595,801

 
11,763,955

 
11,922,096

Advisors
 
 
 
 
 
 
 
 
 
 
AUM/A
 
40,103

 
39,035

 
39,727

 
39,735

 
40,563

Subscription
 
56,237

 
57,594

 
59,292

 
60,319

 
61,180

Total Advisors
 
96,340

 
96,629

 
99,019

 
100,054

 
101,743


The following table summarizes the changes in AUM and AUA for the three months ended December 31, 2019:
 
 
As of
 
Gross
 
 
 
Net
 
Market
 
As of
 
 
9/30/2019
 
Sales
 
Redemptions
 
Flows
 
Impact
 
12/31/2019
 
 
(in millions except account data)
 
AUM
 
$
188,739

 
$
17,267

 
$
(8,584
)
 
$
8,683

 
$
9,661

 
$
207,083

AUA
 
316,742

 
25,377

 
(14,654
)
 
10,723

 
16,040

 
343,505

Total AUM/A
 
$
505,481

 
$
42,644

 
$
(23,238
)
 
$
19,406

 
$
25,701

 
$
550,588

 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Based Accounts
 
2,071,241

 
 
 
 
 
57,680

 
 
 
2,128,921


The above AUM/A gross sales figures include $8.3 billion in new client conversions. We onboarded an additional $32.0 billion in subscription conversions during the fourth quarter, bringing total conversions for the quarter to $40.3 billion.


15



The following table summarizes the changes in AUM and AUA for the year ended December 31, 2019:
 
 
As of
 
Gross
 
 
 
Net
 
Market
 
Reclass to
 
As of
 
 
12/31/2018
 
Sales
 
Redemptions
 
Flows
 
Impact
 
Subscription
 
12/31/2019
 
 
(in millions, except account data)
AUM
 
$
150,591

 
$
68,652

 
$
(33,980
)
 
$
34,672

 
$
28,382

 
$
(6,562
)
 
$
207,083

AUA
 
291,934

 
93,901

 
(68,534
)
 
25,367

 
48,899

 
(22,695
)
 
343,505

Total AUM/A
 
$
442,525

 
$
162,553

 
$
(102,514
)
 
$
60,039

 
$
77,281

 
$
(29,257
)
 
$
550,588

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Based Accounts
 
1,999,118

 
 
 
 
 
228,759

 
 
 
(98,956
)
 
2,128,921


The above AUM/A gross sales figures include $31.5 billion in new client conversions. We onboarded an additional $297.9 billion in subscription conversions during 2019, bringing total conversions for the year to $329.4 billion.

Asset and account figures in the “Reclass to Subscription” column for the year ended December 31, 2019 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 quarter in which the reclassification occurred, with no impact on total platform assets or accounts.

16