env-20210630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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

For the transition period from __________ to __________

Commission file number 001-34835

Envestnet, Inc.

(Exact name of registrant as specified in its charter)


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

35 East Wacker Drive, Suite 2400, Chicago, Illinois

60601

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(312) 827-2800

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


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

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

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

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

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of July 30, 2021, Envestnet, Inc. had 54,515,307 shares of common stock outstanding.

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020			3
Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020			4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020			5
Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2021 and 2020			6
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020			8
Notes to Unaudited Condensed Consolidated Financial Statements			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements			31
Overview			33
Results of Operations			38
Liquidity and Capital Resources			54

Item 3. Quantitative and Qualitative Disclosures About Market Risk			55

Item 4. Controls and Procedures			55

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			56

Item 1A. Risk Factors			56

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			56

Item 3. Defaults Upon Senior Securities			56

Item 4. Mine Safety Disclosures			56

Item 5. Other Information			56

Item 6. Exhibits			56

Index to Exhibits			57

Signatures			58

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)


	June 30,		December 31,
	2021		2020
Assets
Current assets:
Cash and cash equivalents	$	369,524	$	384,565
Fees receivable, net	81,037		80,064
Prepaid expenses and other current assets	40,619		40,570
Total current assets	491,180		505,199

Property and equipment, net	50,008		47,969
Internally developed software, net	114,770		96,501
Intangible assets, net	435,023		435,041
Goodwill	928,493		906,773
Operating lease right-of-use assets, net	93,298		105,249
Other non-current assets	57,924		47,558
Total assets	$	2,170,696	$	2,144,290

Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities	$	174,957	$	158,548
Accounts payable	20,423		18,003
Operating lease liabilities	12,477		13,649
Contingent consideration	1,312		11,251
Deferred revenue	38,645		34,918
Total current liabilities	247,814		236,369

Long-term debt	846,411		756,503
Non-current operating lease liabilities	107,045		112,182
Deferred tax liabilities, net	33,576		34,740
Other non-current liabilities	18,384		28,678
Total liabilities	1,253,230		1,168,472

Commitments and contingencies

Equity:
Stockholders’ equity:
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of June 30, 2021 and December 31, 2020	—		—
Common stock, par value $0.005, 500,000,000 shares authorized; 68,459,262 and 67,832,706 shares issued as of June 30, 2021 and December 31, 2020, respectively; 54,495,863 and 54,093,535 shares outstanding as of June 30, 2021 and December 31, 2020, respectively	342		339
Additional paid-in capital	1,089,263		1,166,774
Accumulated deficit	(44,619)		(79,912)
Treasury stock at cost, 13,963,399 and 13,739,171 shares as of June 30, 2021 and December 31, 2020, respectively	(125,583)		(110,466)
Accumulated other comprehensive loss	(2,286)		(398)
Total stockholders’ equity	917,117		976,337
Non-controlling interest	349		(519)
Total equity	917,466		975,818
Total liabilities and equity	$	2,170,696	$	2,144,290

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenues:
Asset-based	$	170,075	$	122,246	$	329,450	$	257,057
Subscription-based	112,504		104,979		222,333		209,530
Total recurring revenues	282,579		227,225		551,783		466,587
Professional services and other revenues	6,159		8,088		12,060		15,265
Total revenues	288,738		235,313		563,843		481,852

Operating expenses:
Cost of revenues	100,494		68,849		193,363		143,782
Compensation and benefits	105,548		95,565		206,262		205,995
General and administration	41,755		38,448		78,070		79,558
Depreciation and amortization	30,010		28,443		58,402		56,126
Total operating expenses	277,807		231,305		536,097		485,461

Income (loss) from operations	10,931		4,008		27,746		(3,609)
Other expense, net	(3,784)		(8,173)		(11,252)		(9,710)
Income (loss) before income tax provision (benefit)	7,147		(4,165)		16,494		(13,319)

Income tax provision (benefit)	15,516		1,306		9,928		(658)

Net income (loss)	(8,369)		(5,471)		6,566		(12,661)
Add: Net loss attributable to non-controlling interest	88		547		99		401
Net income (loss) attributable to Envestnet, Inc.	$	(8,281)	$	(4,924)	$	6,665	$	(12,260)

Net income (loss) per share attributable to Envestnet, Inc.:
Basic	$	(0.15)	$	(0.09)	$	0.12	$	(0.23)
Diluted	$	(0.15)	$	(0.09)	$	0.12	$	(0.23)

Weighted average common shares outstanding:
Basic	54,440,388		53,562,850		54,325,353		53,288,741
Diluted	54,440,388		53,562,850		55,136,946		53,288,741

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Net income (loss) attributable to Envestnet, Inc.	$	(8,281)	$	(4,924)	$	6,665	$	(12,260)
Foreign currency translation gains (losses), net of taxes	(1,264)		1,575		(1,888)		(1,449)
Comprehensive income (loss) attributable to Envestnet, Inc.	$	(9,545)	$	(3,349)	$	4,777	$	(13,709)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share information)

(unaudited)


									Accumulated
	Common Stock			Treasury Stock			Additional		Other				Non-
				Common			Paid-in		Comprehensive		Accumulated		controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, December 31, 2020	67,832,706	$	339	(13,739,171)	$	(110,466)	$	1,166,774	$	(398)	$	(79,912)	$	(519)	$	975,818
Adoption of ASU 2020-06, net of taxes of $7,641 (See Note 2)	—	—		—	—		(108,470)		—		28,628		—		(79,842)
Exercise of stock options	27,043	—		—	—		522		—		—		—		522
Issuance of common stock - vesting of restricted stock units	455,349	2		—	—		—		—		—		—		2
Stock-based compensation expense	—	—		—	—		14,013		—		—		—		14,013
Shares withheld to satisfy tax withholdings	—	—		(147,041)	(9,541)		—		—		—		—		(9,541)
Share repurchase	—	—		(24,227)	(1,672)		—		—		—		—		(1,672)
Foreign currency translation loss, net of taxes	—	—		—	—		—		(624)		—		—		(624)
Other	—	—		—	—		—		—		—		118		118
Net income (loss)	—	—		—	—		—		—		14,946		(11)		14,935
Balance, March 31, 2021	68,315,098	$	341	(13,910,439)	$	(121,679)	$	1,072,839	$	(1,022)	$	(36,338)	$	(412)	$	913,729
Exercise of stock options	4,082	—		—	—		51		—		—		—		51
Issuance of common stock - vesting of restricted stock units	140,082	1		—	—		—		—		—		—		1
Stock-based compensation expense	—	—		—	—		17,161		—		—		—		17,161
Shares withheld to satisfy tax withholdings	—	—		(46,699)	(3,479)		—		—		—		—		(3,479)
Share repurchase	—	—		(6,261)	(425)		—		—		—		—		(425)
Capital contribution - non-controlling interest	—	—		—	—		(788)		—		—		811		23
Foreign currency translation loss, net of taxes	—	—		—	—		—		(1,264)		—		—		(1,264)
Other	—	—		—	—		—		—		—		38		38
Net loss	—	—		—	—		—		—		(8,281)		(88)		(8,369)
Balance, June 30, 2021	68,459,262	$	342	(13,963,399)	$	(125,583)	$	1,089,263	$	(2,286)	$	(44,619)	$	349	$	917,466

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity (continued)

(in thousands, except share information)

(unaudited)


									Accumulated
	Common Stock			Treasury Stock			Additional		Other				Non-
				Common			Paid-in		Comprehensive		Accumulated		controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, December 31, 2019	66,320,706	$	331	(13,479,000)	$	(90,965)	$	1,037,141	$	(1,749)	$	(75,664)	$	(1,518)	$	867,576
Adoption of ASC 326, net of taxes	—	—		—	—		—		—		(1,141)		—		(1,141)
Exercise of stock options	357,974	2		—	—		3,406		—		—		—		3,408
Issuance of common stock - vesting of restricted stock units	398,881	2		—	—		—		—		—		—		2
Stock-based compensation expense	—	—		—	—		13,765		—		—		—		13,765
Shares withheld to satisfy tax withholdings	—	—		(130,164)	(9,199)		—		—		—		—		(9,199)
Foreign currency translation loss, net of taxes	—	—		—	—		—		(3,024)		—		—		(3,024)
Net income (loss)	—	—		—	—		—		—		(7,336)		146		(7,190)
Balance, March 31, 2020	67,077,561	$	335	(13,609,164)	$	(100,164)	$	1,054,312	$	(4,773)	$	(84,141)	$	(1,372)	$	864,197
Exercise of stock options	184,475	1		—	—		3,274		—		—		—		3,275
Issuance of common stock - vesting of restricted stock units	134,207	1		—	—		—		—		—		—		1
Stock-based compensation expense	—	—		—	—		13,006		—		—		—		13,006
Shares withheld to satisfy tax withholdings	—	—		(43,697)	(3,617)		—		—		—		—		(3,617)
Transfer of non-controlling units	—	—		—	—		910		—		—		(139)		771
Foreign currency translation gain (loss)	—	—		—	—		—		1,575		—		—		1,575
Net loss	—	—		—	—		—		—		(4,924)		(547)		(5,471)
Balance, June 30, 2020	67,396,243	$	337	(13,652,861)	$	(103,781)	$	1,071,502	$	(3,198)	$	(89,065)	$	(2,058)	$	873,737

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2021		2020
OPERATING ACTIVITIES:
Net income (loss)	$	6,566	$	(12,661)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	58,402		56,126
Provision for doubtful accounts	455		1,515
Deferred income taxes	8,137		(1,598)
Non-cash compensation expense	31,422		29,869
Non-cash interest expense	2,906		5,907
Accretion on contingent consideration and purchase liability	575		910
Payments of contingent consideration	(2,360)		—
Fair market value adjustment to contingent consideration liability	(140)		(1,982)
Fair market value adjustment to investment in private company	(758)		—
Gain on acquisition of equity method investment	—		(4,230)
Loss allocation from equity method investments	4,045		3,286
Impairment of right of use assets	1,110		1,426
Other	282		556
Changes in operating assets and liabilities, net of acquisitions:
Fees receivable, net	(1,334)		(8,560)
Prepaid expenses and other current assets	(155)		(7,756)
Other non-current assets	3,665		(353)
Accrued expenses and other liabilities	527		(4,484)
Accounts payable	2,333		(2,130)
Deferred revenue	2,789		7,236
Other non-current liabilities	692		1,946
Net cash provided by operating activities	119,159		65,023

INVESTING ACTIVITIES:
Purchases of property and equipment	(11,357)		(4,329)
Capitalization of internally developed software	(31,802)		(25,703)
Investments in private companies	(4,549)		(12,625)
Acquisition of proprietary technology	(25,517)		—
Acquisitions of businesses, net of cash acquired	(33,143)		(20,257)

Advance for technology solutions	(3,000)		—
Net cash used in investing activities	(109,368)		(62,914)

-continued-

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)


	Six Months Ended
	June 30,
	2021		2020
FINANCING ACTIVITIES:
Proceeds from borrowings on revolving credit facility	—		45,000
Payments on revolving credit facility	—		(30,000)
Capital contributions - non-controlling shareholders	23		—
Payments of contingent consideration	(9,200)		—
Proceeds from exercise of stock options	573		6,683
Taxes paid in lieu of shares issued for stock-based compensation	(13,020)		(12,816)
Share repurchases	(2,097)		—
Other	(587)		3
Net cash (used in) provided by financing activities	(24,308)		8,870

EFFECT OF EXCHANGE RATE CHANGES ON CASH	(524)		(1,342)

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(15,041)		9,637

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	384,714		82,755

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (See Note 2)	$	369,673	$	92,392

Supplemental disclosure of cash flow information - net cash paid during the period for income taxes	$	3,077	$	2,136
Supplemental disclosure of cash flow information - cash paid during the period for interest	5,533		7,861
Supplemental disclosure of non-cash operating, investing and financing activities:

Contingent consideration issued in acquisition of businesses	—		5,239
Purchase liabilities included in accrued expenses and other liabilities	—		632
Purchase liabilities included in other non-current liabilities	3,300		—
Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities	832		1,139
Membership interest liabilities included in other non-current liabilities	248		3,098

Leasehold improvements funded by lease incentive	164		1,710
Assets obtained in exchange for lease liabilities	999		—
Transfer of non-controlling units	—		771

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business

Envestnet, Inc. (“Envestnet”) through its subsidiaries (collectively, the “Company”) is transforming the way financial advice and wellness are delivered. Its mission is to empower advisors and financial service providers with innovative technology, solutions and intelligence to make financial wellness a reality for everyone. Through a combination of platform enhancements, partnerships and acquisitions, Envestnet provides a unique financial network connecting technology, solutions and data, delivering better intelligence and enabling its customers to drive better outcomes.

Envestnet is organized around two primary, complementary business segments. Financial information about each business segment is contained in “Note 15—Segment Information” to the condensed consolidated financial statements.

2.Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have not been audited by an independent registered public accounting firm. These unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2020 and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of June 30, 2021 and the results of operations, equity, comprehensive income (loss) and cash flows for the periods presented herein. The unaudited condensed consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation. Accounts for the Envestnet Wealth Solutions segment that are denominated in a non-U.S. currency have been re-measured using the U.S. dollar as the functional currency. Certain accounts within the Envestnet Data & Analytics segment are recorded and measured in foreign currencies. The assets and liabilities for those subsidiaries with a functional currency other than the U.S. dollar are translated at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates. Differences arising from these foreign currency translations are recorded in the unaudited condensed consolidated balance sheets as accumulated other comprehensive income (loss) within stockholders' equity. The Company is also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other expense, net in the condensed consolidated statements of operations.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. References to GAAP in these notes are to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification™, sometimes referred to as the codification or “ASC.” These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

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

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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


	June 30,		June 30,
	2021		2020

	(in thousands)
Cash and cash equivalents	$	369,524	$	92,244
Restricted cash included in prepaid expenses and other current assets	149		—
Restricted cash included in other non-current assets	—		148
Total cash, cash equivalents and restricted cash	$	369,673	$	92,392

Financial Impacts Related To COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak continues to cause disruptions to businesses and markets worldwide as the virus spreads. The extent of the effect on the Company’s operational and financial performance will continue to depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. Although the Company is unable to estimate the overall financial effect of the pandemic at this time, as the pandemic continues, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. As of June 30, 2021, these condensed consolidated financial statements do not reflect any adjustments as a result of the pandemic.

Related Party Transactions

The Company has a 4.3% membership interest in a private services company that it accounts for using the equity method of accounting and is considered to be a related party. Revenues from the private services company totaled $3.9 million and $2.4 million in the three months ended June 30, 2021 and 2020, respectively. Revenues from the private services company totaled $7.7 million and $5.1 million in the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021 and December 31, 2020, the Company had recorded a net receivable of $2.4 million and $2.1 million, respectively, from the private services company.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements—In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This update aims to reduce complexity within the accounting for income taxes as part of the simplification initiative. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2020. These changes became effective for the Company's fiscal year beginning January 1, 2021. This standard will be applied prospectively. Adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.” This update simplifies the accounting for certain convertible instruments by reducing the number of accounting models available for convertible debt instruments and revises Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative accounting. Under the new guidance, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. The convertible debt instruments will be accounted for as a single liability measured at amortized cost. In addition, the new guidance requires the if-converted method to be applied for all convertible instruments. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2021. Early adoption of the standard is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Adoption of the standard requires using either a modified retrospective or a full retrospective approach.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The Company has early adopted this standard as of January 1, 2021 using the modified retrospective approach. Adoption of this standard resulted in a decrease to accumulated deficit of $28.6 million (net of $0.9 million in taxes), a decrease to paid-in capital of $108.5 million (net of $6.7 million in taxes) and an increase to Convertible Notes of $87.5 million. Interest expense recognized in future periods is expected to be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost, with an expected decrease of approximately $22.1 million in 2021 as a result of the adoption. The adoption of ASU 2020-06 had no impact on the Company's consolidated statements of cash flows.

3.Acquisitions

Acquisition of Proprietary Technology

The Company previously owned approximately 29% of the outstanding units in a privately held company and accounted for it as an equity method investment. On March 11, 2021, the Company entered into an intellectual property purchase agreement with this privately held company to acquire all of the proprietary technology developed by the privately held company for approximately $35.5 million. Concurrent with the intellectual property purchase agreement, the Company also entered into a redemption agreement with the same privately held company to redeem its previously held equity interest for approximately $10.0 million. The Company accounted for these two arrangements as a single unit of account. As of the acquisition date, the net cost of the proprietary technology acquired, including capitalized transaction costs, was approximately $24.5 million, which will be amortized over a five-year period on a straight-line basis. The proprietary technology has been integrated into the Envestnet Wealth Solutions segment.

Acquisition of Harvest

On April 7, 2021, pursuant to an agreement and plan of merger (the “Merger Agreement”), dated as of March 31, 2021, between, among others, Harvest Savings & Wealth Technologies (“Harvest”), a Delaware corporation, and Bounty Merger Sub, Inc, a wholly-owned subsidiary of the Company (“Merger Sub”), the Company completed the merger of Harvest with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Harvest Acquisition”) and operating as a wholly-owned subsidiary of Envestnet. Harvest has been integrated into the Envestnet Wealth Solutions segment.

Harvest provides automated goals-based saving tools and wealth solutions to banks, credit unions, trust companies, and other financial institutions. The acquisition optimizes Envestnet's API-based financial wellness ecosystem, and also helps strengthen the Company's foothold to enable embedded finance, which Envestnet sees as a key driver of the future of financial services.

In connection with the Harvest Acquisition, Envestnet paid estimated consideration of $32.8 million (of which $3.3 million is being held in escrow for 18 months after the closing date), net of cash acquired, subject to certain post-closing adjustments. Envestnet funded the acquisition with cash on hand.

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


	Preliminary Estimate
	(in thousands)
Total tangible assets acquired, net of cash	$	2,032
Total liabilities assumed	(596)
Identifiable intangible assets	9,500
Goodwill	21,858
Total net assets acquired	$	32,794

The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction, primarily related to an increase in future revenues as a result of potential cross selling opportunities, as well as enhancements to our existing technologies. The goodwill is not deductible for income tax purposes.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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


	Preliminary Estimate (in thousands)		Estimated Useful Life in Years	Amortization Method
Proprietary technology	$	6,900	6	Straight-line
Customer list	$	2,600	14	Accelerated
Total intangible assets acquired	$	9,500

The estimated fair values of certain of the assets and liabilities acquired are provisional and based on information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation and other studies that are in progress and not yet at the point where there is sufficient information for a definitive measurement. The Company believes the preliminary information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize those fair values. Therefore, provisional measurements of fair values reflected herein are subject to change and such changes could be significant. The Company expects to finalize the valuation of tangible assets acquired, liabilities assumed, identifiable intangible assets and goodwill balances and complete the acquisition accounting as soon as reasonably practicable but no later than April 7, 2022.

The results of Harvest’s operations are included in the condensed consolidated statements of operations beginning April 7, 2021 and were not considered material to the Company’s results of operations.

For the three and six months ended June 30, 2021, the Company’s acquisition related costs were not material, and are included in general and administration expenses. The Company may incur additional acquisition related costs over the remainder of 2021.

4.Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	June 30,		December 31,
	2021		2020

	(in thousands)
Prepaid technology	$	17,032	$	13,165
Non-income tax receivables	8,447		6,571
Income tax prepayments and receivables	2,928		1,684
Prepaid insurance	2,788		1,777
Advance payroll taxes and benefits	1,046		6,429
Other	8,378		10,944
Total prepaid expenses and other current assets	$	40,619	$	40,570

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

5.Property and Equipment, Net

Property and equipment, net consisted of the following:


		June 30,		December 31,
	Estimated Useful Life	2021		2020

		(in thousands)
Cost:
Computer equipment and software	3 years	$	71,506	$	72,443
Leasehold improvements	Shorter of the lease term or useful life of the asset	43,731		37,671
Office furniture and fixtures	3-7 years	12,148		11,249
Office equipment and other	3-5 years	5,709		7,151
Building and building improvements	7-39 years	2,669		2,669
Land	Not applicable	940		940
		136,703		132,123
Less: accumulated depreciation and amortization		(86,695)		(84,154)
Total property and equipment, net		$	50,008	$	47,969

During the three and six months ended June 30, 2021, the Company retired property and equipment that was no longer in service for the Envestnet Wealth Solutions segment with an historical cost of $5.1 million and $7.8 million, respectively. During the three and six months ended June 30, 2021, the Company retired an immaterial amount of property and equipment that was no longer in service for the Envestnet Data & Analytics segment.

During the three and six months ended June 30, 2020, the Company retired property and equipment that was no longer in service for the Envestnet Wealth Solutions segment with an historical cost of $2.9 million and $4.5 million, respectively. During the three and six months ended June 30, 2020, the Company retired an immaterial amount of property and equipment that was no longer in service for the Envestnet Data & Analytics segment.

Gains and losses on asset retirements during the three and six months ended June 30, 2021 and 2020 were not material.

Depreciation and amortization expense was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

	(in thousands)
Depreciation and amortization expense	$	5,246	$	5,363	$	10,889	$	10,680

6.Internally Developed Software

Internally developed software, net consisted of the following:


		June 30,		December 31,
	Estimated Useful Life	2021		2020

		(in thousands)
Internally developed software	5 years	$	191,421	$	159,619
Less: accumulated amortization		(76,651)		(63,118)
Internally developed software, net		$	114,770	$	96,501

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Amortization expense was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020

	(in thousands)
Amortization expense	$	7,262	$	4,334	$	13,533	$