Debt |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
Debt The following tables set forth the carrying value and estimated fair value of the Company's debt obligations as of December 31, 2023 and 2022:
Revolving Credit Facility
On February 4, 2022, the the Company entered into the Revolving Credit Facility with a group of banks for which Bank of Montreal is acting as administrative agent. The Revolving Credit Facility amended and restated, in its entirety, the Company's prior credit agreement. In connection with entering into the Revolving Credit Facility, the Company capitalized $1.9 million of deferred financing charges to other assets in the consolidated balance sheets and wrote off $0.6 million of pre-existing finance charges to other income (expense), net in the consolidated statements of operations.
The Revolving Credit Facility provides for a $500.0 million revolving line of credit, including a sub-facility for a $20.0 million letter of credit, and is set to mature in February 2027. There were no amounts outstanding under the Revolving Credit Facility as of December 31, 2023 and December 31, 2022.
Obligations under the Revolving Credit Facility are guaranteed by substantially all of Envestnet’s U.S. subsidiaries and are secured by a first-priority lien on substantially all of the personal property (other than intellectual property) of Envestnet and the guarantors, subject to certain exclusions.
In the event the Company has borrowings under the Revolving Credit Facility, at the Company's option, it will pay interest on these borrowings at a rate equal to either (i) a base rate plus an applicable margin ranging from 0.25% to 1.75% per annum or (ii) an adjusted Term SOFR plus an applicable margin ranging from 1.25% to 2.75% per annum, in each case based upon the total net leverage ratio, as calculated pursuant to the Revolving Credit Facility. There is also a commitment fee at a rate ranging from 0.25% to 0.30% per annum based upon the total net leverage ratio.
As of December 31, 2023 and December 31, 2022, debt issuance costs related to the Revolving Credit Facility included in prepaid expenses and other current assets in consolidated balance sheets were $0.7 million and $0.7 million, respectively, and included in other assets in the consolidated balance sheets were $1.5 million and $2.2 million, respectively.
The Revolving Credit Facility contains customary conditions, representations and warranties, affirmative and negative covenants, mandatory prepayment provisions and events of default. The covenants include certain financial covenants requiring the Company to maintain compliance with a maximum total leverage ratio and a minimum interest coverage ratio.
On February 20, 2024, the Company entered into a Waiver with respect to the Revolving Credit Facility, between the Company, the Guarantors party thereto from time to time, the Lenders party thereto from time to time and Bank of Montreal, as administrative agent. Under the Waiver, the Lenders party thereto waived the events of default resulting from the non-compliance with the Total Leverage Ratio financial covenant for the fiscal quarters ended on March 31, 2023 and June 30, 2023. The Company was in compliance with all other covenants in the Revolving Credit Facility as of December 31, 2023.
Convertible Notes
In May 2018, the Company issued $345.0 million of Convertible Notes due 2023. The Convertible Notes due 2023 bore interest at a rate of 1.75% per annum payable semiannually in arrears on June 1 and December 1 of each year. In November 2022, the Company repurchased $300.0 million aggregate principal of the outstanding Convertible Notes due 2023 for cash consideration of approximately $312.4 million and recognized a loss on extinguishment of approximately $13.4 million included within interest expense in the consolidated statements of operations. The Convertible Notes due 2023 matured on June 1, 2023. Upon maturity, the Company settled the remaining aggregate principal amount on the Convertible Notes due 2023 for $45.0 million. The Convertible Notes due 2023 were paid using a combination of cash on hand and borrowings under the Company's Revolving Credit Facility. No shares of the Company's common stock were issued upon settlement of the Convertible Notes due 2023.
In August 2020, the Company issued $517.5 million of Convertible Notes due 2025 that mature on August 15, 2025. The Convertible Notes due 2025 bear interest at a rate of 0.75% per annum payable semiannually in arrears in cash on February 15 and August 15 of each year. In November 2022, the Company repurchased $200.0 million aggregate principal of the outstanding Convertible Notes due 2025 for cash consideration of approximately $181.8 million and recognized a gain on extinguishment of approximately $15.1 million within interest expense in the consolidated statements of operations. As of December 31, 2023, the Convertible Notes due 2025 could result in approximately 3.0 million shares issuable upon conversion, subject to adjustment under certain conditions.
In November 2022, the Company issued $575.0 million of Convertible Notes due 2027 that mature on December 1, 2027. The Convertible Notes due 2027 bear interest at a rate of 2.625% per annum payable semiannually in arrears in cash on June 1 and December 1 of each year. As of December 31, 2023, the Convertible Notes due 2027 could result in approximately 7.8 million shares issuable upon conversion, subject to adjustment under certain conditions.
The Convertible Notes are general unsecured senior obligations, subordinated in right of payment to the Company’s obligations under its Credit Agreement. The Convertible Notes rank equally in right of payment with all of the Company’s other existing and future senior indebtedness and will be senior in right of payment to any of the Company’s future subordinated obligations. The Convertible Notes will be structurally subordinated to the indebtedness and other liabilities of any of the Company’s subsidiaries, other than its wholly owned subsidiary, Envestnet Asset Management, Inc., which will fully and unconditionally guarantee the Convertible Notes on an unsecured basis, and other than to the extent the Convertible Notes are guaranteed in the future by any of the Company's other subsidiaries as described in the indenture and will be effectively subordinated to and future secured indebtedness to the extent of the value of the assets securing such indebtedness.
Upon the occurrence of a “fundamental change,” as defined in the indenture, the holders may require the Company to repurchase all or a portion of the Convertible Notes for cash at 100% of the principal amount of the Convertible Notes being purchased, plus any accrued and unpaid interest.
The Company may redeem for cash all or any portion of the Convertible Notes due 2025 and the Convertible Notes due 2027, at the Company's option, on or after August 15, 2023 and December 5, 2025, respectively, if the last reported sale price of the Company's common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, consecutive or non-consecutive, within a 30 consecutive trading day period ending on, and including, any of the trading days immediately preceding the date on which the Company provides notice of redemption.
The Convertible Notes due 2025 and the Convertible Notes due 2027 are convertible into shares of the Company's common stock under certain circumstances prior to maturity at an initial shares per one thousand principal amount conversion rate of 9.3682 and 13.6304, respectively, which represents a conversion price per share, subject to adjustment under certain conditions, of $106.74 and $73.37, respectively. The initial conversion rate is subject to adjustment upon a "fundamental change", as defined in the indenture, if the Company calls all or any portion of the Convertible Notes for optional redemption, or subject to anti-dilution provisions provided in the indenture. Holders may convert the Convertible Notes due 2025 and the Convertible Notes due 2027 at their option at any time prior to the close of business on the business day immediately preceding February 15, 2025 and June 1, 2027, respectively, only under the following circumstances: (a) during any calendar quarter
commencing after the calendar quarter ending on September 30, 2020 and December 31, 2022, respectively (and only during such calendar quarter), if the last reported sale price of the Company's common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Convertible Notes in effect on each applicable trading day; (b) during the consecutive business-day period following any consecutive trading-day period in which the trading price for the notes for each such trading day is less than 98% of the last reported sale price of the Company's common stock on such date multiplied by the then-current conversion rate; (c) if the Company calls any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or (d) upon the occurrence of specified corporate events described in the indenture. Holders may surrender the Convertible Notes due 2025 and Convertible Notes due 2027 for conversion at any time, regardless of the foregoing circumstances, on or after February 15, 2025 and June 1 2027, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Company may pay cash, shares of the Company's common stock or a combination of cash and stock, as determined by the Company in its discretion. See “Note 22—Net Income (Loss) Per Share” for further discussion of the effect of conversion on net income per common share.
In connection with the pricing of the Convertible Notes due 2027, the Company entered into privately negotiated Capped Call Transactions for a total cost of approximately $79.6 million. The Capped Call Transactions initially cover the number of shares of the Company's common stock underlying the Convertible Notes due 2027, subject to customary anti-dilution adjustments. The Capped Call Transactions generally are expected to reduce the potential dilutive effect on the common stock upon any conversion of the Convertible Notes due 2027 and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted Convertible Notes due 2027, as the case may be, with such reduction and/or offset subject to a cap, subject to certain adjustments under the terms of the Capped Call Transactions. The Capped Call Transactions allow the Company to purchase shares of the Company's common stock at a strike price equal to the initial conversion price of $73.37 per share and are subject to a cap of $110.74 per share, subject to certain adjustments under the terms of the Capped Call Transactions. The options underlying the Capped Call Transactions can, at the Company’s option, remain outstanding until the maturity date for the Convertible Notes due 2027 of December 1, 2027, even if all or a portion of the Convertible Notes due 2027 are converted, repurchased or redeemed prior to such date.
Interest Expense
Interest expense was comprised of the following and is included in other income (expense), net in the consolidated statements of operations:
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(1) For the year ended December 31, 2022, amount includes a net gain on the extinguishment of debt of $1.7 million related to the partial repurchase of Convertible Notes due 2023 and Convertible Notes due 2025.
The effective interest rate of the Convertible Notes was equal to the stated interest rate plus the amortization of the debt issuance costs and is set forth below:
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