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, 2022

Share-Based Payment Arrangement [Abstract]

The Company has stock options, restricted stock units (“RSUs”) and performance-based 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 of September 30, 2022, the maximum number of common shares available for future issuance under the Company’s plans is 2,538,508.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021

	(in thousands)
Stock-based compensation expense	$	17,265	$	18,512	$	61,831	$	49,934
Tax effect on stock-based compensation expense	(4,403)		(4,720)		(15,767)		(12,733)
Net effect on income	$	12,862	$	13,792	$	46,064	$	37,201

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, 2022 and 2021.

Stock Options

The Company did not grant any stock options in the three and nine months ended September 30, 2021 or 2022. 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, 2021	365,241	$	38.61	3.3	$	14,878

Exercised	(78,802)	32.49
Forfeited	(4,904)	72.96
Outstanding as of September 30, 2022	281,535	39.73		2.4	2,496








Options exercisable	281,303	$	39.69	2.4	$	2,496

Exercise prices of stock options outstanding as of September 30, 2022 range from $15.34 to $74.83. At September 30, 2022, 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 0.8 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 0% 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-based 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, 2021	1,507,424	$	71.50	359,184	$	73.64
Granted	1,385,937	73.31		113,269	68.51
Vested	(759,930)	70.79		(148,904)	66.33
Forfeited	(262,510)	73.05		(57,987)	77.53
Outstanding as of September 30, 2022	1,870,921	72.91		265,562	74.70

At September 30, 2022, there was $109.2 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, 2022, there was $6.4 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 1.7 years.