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

Quarterly report pursuant to Section 13 or 15(d)

Debt

Debt

9 Months Ended

Sep. 30, 2024

The following tables set forth the carrying value and estimated fair value of the Company's debt obligations as of September 30, 2024 and December 31, 2023:


	September 30, 2024
	Issuance Amount		Unamortized Issuance Costs		Carrying Value		Fair Value (Level II)

	(in thousands)

Revolving Credit Facility	$	—	$	—	$	—	$	—
Convertible Notes due 2025	317,500		(1,604)		315,896		313,214
Convertible Notes due 2027	575,000		(10,571)		564,429		609,862
Total debt	$	892,500	$	(12,175)	$	880,325	$	923,076


	December 31, 2023
	Issuance Amount		Unamortized Issuance Costs		Carrying Value		Fair Value (Level II)

	(in thousands)

Revolving Credit Facility	$	—	$	—	$	—	$	—
Convertible Notes due 2025	317,500		(2,968)		314,532		294,958
Convertible Notes due 2027	575,000		(12,920)		562,080		571,746
Total debt	$	892,500	$	(15,888)	$	876,612	$	866,704

The Company issued $517.5 million aggregate principal amount of 0.75% Convertible Notes due 2025 in August 2020. As of September 30, 2024, $317.5 million aggregate principal of the Convertible Notes due 2025 remained outstanding. Pursuant to the indenture under which the Convertible Notes due 2025 were issued, the Company was required to remove a restrictive legend on the Convertible Notes due 2025 relating to restrictions on transfer under the Securities Act of 1933, as amended, on or before September 9, 2021. Due to a clerical error, the restrictive legend was not removed until June 18, 2022. As a result of its failure to remove the legend on a timely basis, the Company was required to pay certain amounts of Additional Interest and interest thereon after February 15, 2022. Failure to pay the Additional Interest constituted an event of default under the Indenture. The event of default under the Indenture was cured with the payment of an immaterial amount of Additional Interest, as well as certain penalties, in August 2024. In addition, the event of default under the Indenture resulted in an event of default under the Revolving Credit Facility due to a cross-default provision in the Revolving Credit Facility. The resulting event of default was waived by the required lenders under the Revolving Credit Facility in August 2024. As a result, any and all existing defaults and events of default that had arisen or may have arisen therefrom were cured and the Company was in compliance with the covenants contained in the Indenture and the Revolving Credit Facility as of August 9, 2024, and continues to be in compliance as of September 30, 2024.

In connection with the Merger, on October 2, 2024, subsequent to September 30, 2024, the Company gave notice to the Trustees and holders of the Convertible Notes due 2025 and Convertible Notes due 2027 that the Merger constitutes a Fundamental Change and a Make Whole Fundamental Change under each of the indentures under which the Convertible Notes were issued and that the Convertible Notes due 2025 and Convertible Notes due 2027 may be surrendered by the holders for

conversion. As a result of this event, the Convertible Notes due 2027 will be reclassified from Debt, net of current portion to Current portion of debt on the condensed consolidated balance sheets during the fourth quarter of 2024.

Revolving Credit Facility

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. There were no amounts outstanding under the Revolving Credit Facility as of September 30, 2024 and December 31, 2023.

As of September 30, 2024 and December 31, 2023, debt issuance costs related to the Revolving Credit Facility included in prepaid expenses and other current assets in the condensed consolidated balance sheets were $0.7 million, and included in other assets in the condensed consolidated balance sheets were $0.9 million and $1.5 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. The Company was in compliance with these financial covenants as of September 30, 2024.

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.

Interest Expense

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023

	(in thousands)
Convertible Notes interest	$	5,664	$	4,368	$	14,402	$	13,476
Amortization of debt discount and issuance costs	1,420		1,389		4,237		4,258
Undrawn and other fees	320		312		951		936
Revolving Credit Facility interest	—		133		—		383
Total interest expense	$	7,404	$	6,202	$	19,590	$	19,053

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:



	September 30,
	2024		2023

Convertible Notes due 2025	1.3	%	1.3	%
Convertible Notes due 2027	3.2	%	3.2	%