Annual report pursuant to Section 13 and 15(d)

Revenues and Cost of Revenues

v3.20.4
Revenues and Cost of Revenues
 12 Months Ended
Dec. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenues and Cost of Revenues Revenues and Cost of Revenues
 
On January 1, 2018, the Company adopted ASU 2014-09 and all subsequent ASUs that modified Topic 606 (“ASC 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. The Company recognized the cumulative effect of the initial application of ASC 606 as an adjustment of $9,217 to the opening balance of accumulated deficit. Comparative information was not restated and will continue to be reported under the accounting standards in effect for those periods.

In accordance with ASC 606 requirements, the impact of adoption on the Company’s consolidated statements of operations was as follows:
Year Ended December 31, 2018
As Reported Without Adoption of ASC 606 Effect of Change Higher/(Lower)
Statements of Operations
Revenues:
Asset-based $ 481,233  $ 495,646  $ (14,413)
Subscription-based 295,467  295,467  — 
Total recurring revenues 776,700  791,113  (14,413)
Professional services and other revenues 35,663  35,840  (177)
Total revenues 812,363  826,953  (14,590)
Operating expenses:
Cost of revenues 263,400  277,813  (14,413)
Compensation and benefits 317,188  318,887  (1,699)
Total operating expenses 798,198  814,310  (16,112)
Income from operations 14,165  12,643  1,522 
Net income 4,010  2,488  1,522 
Net income attributable to Envestnet, Inc. $ 5,755  $ 4,233  $ 1,522 

The majority of the Company's revenues continue to be recognized when services are provided. The adoption of ASC 606 primarily impacted timing of revenue recognition for initial implementation services, deferral of incremental direct costs in obtaining contracts with customers and gross versus net presentation related to certain third party manager agreements.
 
Disaggregation of revenue
 
The following table presents the Company’s revenues disaggregated by major source:
  Year Ended December 31, 2020
  Envestnet Wealth Solutions Envestnet Data & Analytics Consolidated
Revenues:      
Asset-based $ 540,947  $ —  $ 540,947 
Subscription-based 248,810  177,697  426,507 
Total recurring revenues 789,757  177,697  967,454 
Professional services and other revenues 16,333  14,443  30,776 
Total revenues $ 806,090  $ 192,140  $ 998,230 
  Year Ended December 31, 2019
  Envestnet Wealth Solutions Envestnet Data & Analytics Consolidated
Revenues:  
Asset-based $ 484,312  $ —  $ 484,312 
Subscription-based 207,606  171,207  378,813 
Total recurring revenues 691,918  171,207  863,125 
Professional services and other revenues 17,540  19,462  37,002 
Total revenues $ 709,458  $ 190,669  $ 900,127 

  Year Ended December 31, 2018
 
Envestnet Wealth Solutions(1)
Envestnet Data & Analytics(1)
Consolidated(1)
Revenues:      
Asset-based $ 481,233  $ —  $ 481,233 
Subscription-based 138,372  157,095  295,467 
Total recurring revenues 619,605  157,095  776,700 
Professional services and other revenues 13,000  22,663  35,663 
Total revenues $ 632,605  $ 179,758  $ 812,363 
(1)As noted above, prior period amounts have not been adjusted under the modified retrospective method.

One customer accounted for more than 10% of the Company’s total revenues:
  Year Ended December 31,
  2020 2019 2018
Fidelity 15  % 15  % 17  %

Fidelity accounted for 18%, 19% and 21% of the Envestnet Wealth Solutions segment's revenues for the years ended December 31, 2020, 2019 and 2018, respectively.

No single customer revenue amounts for Envestnet Data & Analytics exceeded 10% of the segment revenue total.

The following table presents the Company’s revenues disaggregated by geography, based on the billing address of the customer:
  Year Ended December 31,
  2020 2019 2018
United States $ 977,047  $ 871,456  $ 778,565 
International (1), (2)
21,183  28,671  33,798 
Total revenues $ 998,230  $ 900,127  $ 812,363 
(1)No foreign country accounted for more than 10% of total revenues.
(2)In 2018, upon adoption of ASU 2014-09, gross revenue recognition changed to net revenue recognition for one customer.
 
Remaining performance obligations
 
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2020:
Years ending December 31,  
2021 $ 243,989 
2022 172,981 
2023 101,768 
2024 53,620 
2025 27,744 
Thereafter 13,030 
Total $ 613,132 

Only fixed consideration from significant contracts with customers is included in the amounts presented above.

Contract balances

Total deferred revenue as of December 31, 2020 decreased by $3,776, primarily due to timing differences related to the satisfaction of outstanding performance obligations and the Company's billing cycles during the year ended December 31, 2020. Total deferred revenue as of December 31, 2019 increased by $9,609, primarily the result of the PIEtech and PortfolioCenter acquisitions and an increase in deferred revenue related to subscription-based services during the year ended December 31, 2019. The majority of the Company's deferred revenue will be recognized over the course of the next twelve months.

The amount of revenue recognized that was included in the opening deferred revenue balance was $34,261 and $23,714 for the years ended December 31, 2020 and 2019, respectively. The majority of this revenue consists of subscription-based services and professional services arrangements. The amount of revenue recognized from performance obligations satisfied in prior periods was not material.

Deferred sales incentive compensation

Deferred sales incentive compensation was $10,814 and $9,387 as of December 31, 2020 and 2019, respectively. Amortization expense for the deferred sales incentive compensation was $3,936 and $3,452 for the years ended December 31, 2020 and 2019, respectively. Deferred sales incentive compensation is included in other non-current assets on the consolidated balance sheets and amortization expense is included in compensation and benefits expenses on the consolidated statements of operations. No significant impairment loss for capitalized costs was recorded during the periods.

Cost of Revenues

The following table summarizes cost of revenues by revenue category:
Year Ended December 31,
  2020 2019 2018
Asset-based $ 278,569  $ 243,913  $ 232,145 
Subscription-based 26,934  28,904  25,192 
Professional services and other 426  5,994  6,063 
Total cost of revenues $ 305,929  $ 278,811  $ 263,400