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

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

The Company has stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. 2019 Acquisition Equity Incentive Plan (the “2019 Equity Plan”).

As of September 30, 2020, the maximum number of common shares available for future issuance under the Company’s plans is 1,385,029.

Stock-based compensation expense under the Company’s plans was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Stock-based compensation expense	$	15,729	$	13,169	$	42,500	$	39,467
Tax effect on stock-based compensation expense	(4,011)		(3,438)		(10,837)		(10,305)
Net effect on income	$	11,718	$	9,731	$	31,663	$	29,162

The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% and 26.1% for the three and nine months ended September 30, 2020 and 2019, respectively.

Stock Options

The following weighted average assumptions were used to value options granted during the periods indicated:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Grant date fair value of options	$	—		$	—		$	—		$	21.55
Volatility	—		%	—		%	—		%	40.0		%
Risk-free interest rate	—		%	—		%	—		%	2.5		%
Dividend yield	—		%	—		%	—		%	—		%
Expected term (in years)	0.0			0.0			0.0			6.5

The following table summarizes option activity under the Company’s plans:


				Weighted-Average
		Weighted-		Remaining
		Average		Contractual Life	Aggregate
	Options	Exercise Price		(Years)	Intrinsic Value
Outstanding as of December 31, 2019	1,150,586	$	25.66	3.4	$	50,590
Granted	—	—
Exercised	(587,121)	18.02
Forfeited	(7,213)	48.70
Outstanding as of September 30, 2020	556,252	33.44		3.9	24,324








Options exercisable	516,073	$	32.22	3.5	$	23,191

Exercise prices of stock options outstanding as of September 30, 2020 range from $10.40 to $55.29. At September 30, 2020, there was an immaterial amount of unrecognized stock-based compensation expense related to unvested stock options, which the Company expects to recognize over a weighted-average period of 1.3 years.

Restricted Stock Units

The Company has granted restricted stock units and performance-based stock units to employees that are unvested. Performance-based stock units vest upon the achievement of certain pre-established business and financial metrics as well as a subsequent service condition. The business and financial metrics governing the vesting of these performance-based stock units provide thresholds that dictate the number of shares to vest upon each evaluation date, which range from 50% to 150%. If these metrics are achieved, as defined in the individual grant terms, these shares would cliff vest three years from the grant date.

The following is a summary of the activity for unvested restricted stock units and performance stock units granted under the Company’s plans:


	RSUs			PSUs
	Number of Shares	Weighted- Average Grant Date Fair Value per Share		Number of Shares	Weighted- Average Grant Date Fair Value per Share
Outstanding as of December 31, 2019	1,318,870	$	58.88	254,118	$	67.96
Granted	956,494	74.55		67,793	81.42
Vested	(677,129)	57.51		—	—
Forfeited	(120,421)	61.04		(33,010)	64.70
Outstanding as of September 30, 2020	1,477,814	69.48		288,901	71.49

At September 30, 2020, there was $85,651 of unrecognized stock-based compensation expense related to unvested restricted stock units, which the Company expects to recognize over a weighted-average period of 2.0 years. At September 30, 2020, there was $11,153 of unrecognized stock-based compensation expense related to unvested performance-based restricted stock units, which the Company expects to recognize over a weighted-average period of 1.9 years.