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, 2021

Share-based Payment Arrangement [Abstract]

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

As approved by the Company's shareholders at the Company's 2021 Annual Meeting of Shareholders, the 2010 Plan was amended whereby the maximum number of shares of common stock that may be delivered under the 2010 Plan was increased from 8,925,000 to 12,375,000. As of September 30, 2021, the maximum number of common shares available for future issuance under the Company’s plans is 3,747,932.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Stock-based compensation expense	$	18,512	$	15,729	$	49,934	$	42,500
Tax effect on stock-based compensation expense	(4,720)		(4,011)		(12,733)		(10,837)
Net effect on income	$	13,792	$	11,718	$	37,201	$	31,663

The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% for each of the three and nine months ended September 30, 2021 and 2020.

Stock Options

The Company has not granted any stock options since January 2019. 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
					(in thousands)
Outstanding as of December 31, 2020	438,040	$	36.28	4.1	$	20,156

Exercised	(44,079)	20.87
Forfeited	(1,277)	49.02
Outstanding as of September 30, 2021	392,684	37.97		3.6	16,601








Options exercisable	353,781	$	36.75	3.2	$	15,384

Exercise prices of stock options outstanding as of September 30, 2021 range from $10.40 to $55.29. At September 30, 2021, 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 0.3 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, 2020	1,345,347	$	70.56	302,797	$	72.50
Granted	1,140,358	70.43		119,699	69.66
Vested	(696,906)	69.58		(62,524)	61.53
Forfeited	(170,011)	70.57		(10,954)	78.97
Outstanding as of September 30, 2021	1,618,788	70.89		349,018	73.28

At September 30, 2021, there was $97.2 million 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, 2021, there was $11.2 million 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.