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

Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

Acquisitions

3 Months Ended

Mar. 31, 2023

Business Combination and Asset Acquisition [Abstract]

Acquisition of Redi2 Technologies

On July 1, 2022, Envestnet completed the acquisition of all of the issued and outstanding shares of Redi2 Technologies ("Redi2"). Redi2 provides revenue management and hosted fee-billing solutions. Its platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. Redi2 has been integrated into the Envestnet Wealth Solutions segment.

In connection with the Redi2 acquisition, the Company paid estimated consideration as follows:


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate

	(in thousands)
Cash consideration, net	$	69,406	$	—	$	69,406
Estimated working capital adjustment	(1,465)		932		(533)
Total	$	67,941	$	932	$	68,873

The Company funded the Redi2 acquisition with available cash resources. In addition, certain executives may earn up to $20.0 million in performance bonuses based upon the achievement of certain target financial and non-financial metrics.

These performance bonuses will be recognized as compensation and benefits expense in the condensed consolidated statements of operations. The performance bonuses recognized during the three months ended March 31, 2023 were immaterial.

The following table summarizes the estimated fair values of the assets acquired at the date of acquisition:


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate

	(in thousands)
Total current assets	$	1,985	$	—	$	1,985
Other non-current assets	3,349		(28)		3,321
Identifiable intangible assets	26,500		—		26,500
Goodwill	44,236		2,231		46,467
Total assets acquired	76,070		2,203		78,273

Accounts payable and accrued expenses	(1,157)		(1,271)		(2,428)
Operating lease liabilities	(2,201)		—		(2,201)
Deferred revenue	(4,771)		—		(4,771)
Total liabilities assumed	(8,129)		(1,271)		(9,400)
Total net assets acquired, net of cash received	$	67,941	$	932	$	68,873

The goodwill arising from the acquisition represents the expected benefits of the transaction, primarily related to the enhancement of the Company's existing technologies and increase in future revenue as a result of potential cross selling opportunities. Estimated goodwill of $40.7 million is deductible for income tax purposes.

A summary of estimated intangible assets acquired, estimated useful lives and amortization method is as follows:


	Preliminary Estimate		Estimated Useful Life	Amortization Method

	(in thousands)		(in years)
Customer lists	$	14,000	14 - 16	Accelerated
Proprietary technologies	9,500		6	Straight-line
Trade names	3,000		6 - 7	Straight-line
Total intangible assets acquired	$	26,500

The estimated fair values of certain of the assets acquired and liabilities assumed are provisional and based on information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation procedures that are in progress and not yet at the point where there is sufficient information for a definitive measurement. The Company believes the preliminary information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize those fair values. Therefore, provisional measurements of fair values reflected herein are subject to change and such changes could be significant. No measurement period adjustments were made during the three months ended March 31, 2023. The Company expects to finalize the valuation of tangible assets acquired, liabilities assumed, identifiable intangible assets and goodwill balances and complete the acquisition accounting as soon as reasonably practicable, though no later than July 1, 2023.

The results of Redi2 are included in the condensed consolidated statements of operations beginning July 1, 2022 and are not considered material to the Company’s results of operations.

For the three months ended March 31, 2023, the Company’s acquisition related costs were not material, and are included in general and administrative expenses. The Company may incur additional acquisition related costs over the remainder of 2023.