Envestnet, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Equity Method Investments

Equity Method Investments

12 Months Ended

Dec. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

The Company owns equity interests in various privately held companies. As of December 31, 2020, the Company’s ownership interests in these companies ranged from 4% to 44%. As of December 31, 2019, the Company’s ownership interests in these companies ranged from 28% to 47%.

Equity method investments are initially recorded at cost. Under the equity method of accounting, the investment is adjusted for the Company’s proportionate share of earnings or losses, dividends, capital contributions and changes in ownership interests.

As of December 31, 2020 and December 31, 2019, the carrying value of the Company’s equity method investments was $15,318 and $5,014 respectively, which are included in other non-current assets in the consolidated balance sheets.

As of December 31, 2020, the Company has committed $5,740 in future funding to certain of these equity method investees.

Summarized combined financial information for these investments is as follows (amounts represent 100% of investee financial information, except Envestnet’s proportional share of losses):


	December 31,
Balance Sheets	2020		2019
Current assets	$	23,469	$	2,457
Non-current assets	21,329		1,413
Current liabilities	11,325		775
Non-current liabilities	1,418		1,617


	Year Ended December 31,
Statements of Operations	2020		2019		2018
Revenues	$	35,603	$	866	$	1,327
Loss from operations	(4,758)		(6,192)		(2,418)
Net loss	(5,062)		(6,193)		(2,438)
Envestnet’s proportional share of losses	(5,399)		(2,361)		(1,146)

Envestnet's proportional share of losses from the Company’s equity method investments are included in other income (expense), net in the consolidated statements of operations.

Investment in Private Services Company

On January 8, 2020, the Company acquired a 4.25% membership interest in a private services company for cash consideration of $11,000. The private services company partners with independent network advisory firms to help them grow, become more profitable and run more efficiently. The Company uses the equity method of accounting to record its portion of the private services company’s net income or loss on a one quarter lag from the actual results of operations. The Company uses

the equity method of accounting because of its less than 50% ownership and lack of control and does not otherwise exercise control over the significant economic decisions of the private services company.

The private services company is and remains a client of the Company and has thus been determined to be a related party. Revenues from the private services company totaled $11,494 in the twelve months ended December 31, 2020. As of December 31, 2020, the Company had recorded a net receivable of $2,088 from the private services company.

As of December 31, 2020, the carrying value of the Company’s investment in the private services company exceeded its proportionate share of the net assets of the private services company by approximately $9,900, which represents goodwill and amortizable intangible assets arising from acquisitions. The Company recognizes amortization on the basis difference allocated to intangible assets over a period between six to fifteen years. This amortization is included within Envestnet's proportional share of losses in other income (expense), net in the consolidated statements of operations.