Envestnet, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Debt

Debt

9 Months Ended

Sep. 30, 2019

The Company’s outstanding debt obligations as of September 30, 2019 and December 31, 2018 were as follows:



	September 30,			December 31,
	2019			2018
Convertible Notes due 2019	$	172,500		$	172,500
Unaccreted discount on Convertible Notes due 2019	(1,338		)	(5,890		)
Unamortized issuance costs on Convertible Notes due 2019	(196		)	(899		)
Convertible Notes due 2019 carrying value	$	170,966		$	165,711

Convertible Notes due 2023	$	345,000		$	345,000
Unaccreted discount on Convertible Notes due 2023	(35,805		)	(42,641		)
Unamortized issuance costs on Convertible Notes due 2023	(6,410		)	(7,634		)
Convertible Notes due 2023 carrying value	$	302,785		$	294,725

Revolving credit facility balance	$	100,000		$	—

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statement of operations:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Accretion of debt discount	$	3,846	$	3,587	$	11,388	$	7,416
Coupon interest	2,264		2,264		6,792		4,385
Amortization of issuance costs	1,160		849		2,880		1,920
Interest on revolving credit facility	1,529		—		2,725		3,994
Undrawn and other fees	187		220		560		433
Total	$	8,986	$	6,920	$	24,345	$	18,148

Convertible Notes due 2019

In 2014, the Company issued $172,500 of Convertible Notes due 2019 that mature on December 15, 2019. The Convertible Notes due 2019 bear interest at a rate of 1.75% per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2015. The Convertible Notes due 2019 are general, unsecured obligations, subordinated in right of payment to the Company's obligations under its Credit Agreement.

Until the close of business on December 12, 2019, holders may surrender their notes for conversion. The conversion rate is 15.9022 shares of the Company’s common stock per one thousand principal amount of notes, which represents a conversion price of $62.88 per share. Upon conversion, the Company has the option to pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. The Company expects to pay the conversion price in cash.

The effective interest rate of the liability component of the Convertible Notes due 2019 is equal to the stated interest rate plus the accretion of original issue discount. The effective interest rate on the liability component of the Convertible Notes due 2019 for three and nine months ended September 30, 2019 and 2018 was 6%.

Convertible Notes due 2023

In May 2018, the Company issued $345,000 of Convertible Notes due 2023 that mature on June 1, 2023. The Convertible Notes due 2023 bear interest at a rate of 1.75% per annum payable semiannually in arrears on June 1 and December 1 of each year, beginning on December 1, 2018. The Convertible Notes due 2023 are general unsecured obligations, subordinated in right of payment to the Company's obligations under its Credit Agreement.

The effective interest rate of the liability component of the Convertible Notes due 2023 is equal to the stated interest rate plus the accretion of original issue discount. The effective interest rate on the liability component of the Convertible Notes due 2023 for the three and nine months ended September 30, 2019 was 6%.

See “Note 15—Net Income (Loss) Per Share” for further discussion of the effect of conversion on net income (loss) per common share.

Credit Agreement

In July 2017, the Company and certain of its subsidiaries entered into a Second Amended and Restated Credit Agreement with a group of banks (“Banks”), which was further amended in May 2018. In September 2019, the Company entered into a second amendment (the "Second Amendment" with the Banks (collectively, the “Amended Second Amended and Restated Credit Agreement”). In connection with entering into the Second Amendment, the Company capitalized an additional $2,103 of deferred financing charges to Other non-current assets on the condensed consolidated balance sheets and wrote off $299 of pre-existing finance charges to Other expense, net on the condensed consolidated statements of operations.

Prior to the Amended Second Amended and Restated Credit Agreement, the Banks agreed to provide to the Company revolving credit commitments (“Revolving Credit Facility”) in the aggregate amount of up to $350,000, of which amount may be increased by $50,000. Pursuant to the Amended Second Amended and Restated Credit Agreement, the Banks have agreed to provide to the Company a Revolving Credit Facility in the increased aggregate amount of up to $500,000, of which amount may be increased by $150,000. In addition, the Credit Agreement Amendment made certain changes to the definitions of “Senior Leverage Ratio” and “Total Leverage Ratio” in the Credit Agreement and modified certain covenants, including in relation to permitted acquisitions, permitted indebtedness, permitted investments and the required minimum liquidity levels.

The Company incurs interest on borrowings made under the Amended Second Amended and Restated Credit Agreement at rates between 1.50% and 3.25% above LIBOR based on the Company’s total leverage ratio. Borrowings under the Amended Second Amended and Restated Credit Agreement are scheduled to mature on September 27, 2024.

Obligations under the Amended Second Amended and Restated Credit Agreement are guaranteed by substantially all of the Company’s U.S. subsidiaries. The Amended Second Amended and Restated Credit Agreement includes certain financial covenants and, as of September 30, 2019, the Company was in compliance with these requirements.