Annual report pursuant to Section 13 and 15(d)

Revenue

v3.19.3.a.u2
Revenue
12 Months Ended
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]  
Revenue
Revenue
 
On January 1, 2018, the Company adopted ASU 2014-09 and all subsequent ASUs that modified Topic 606 (“ASC 606”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. The Company recognized the cumulative effect of the initial application of ASC 606 as an adjustment of $9,217 to the opening balance of accumulated deficit.

In accordance with ASC 606 requirements, the impact of adoption on the Company’s consolidated statements of operations was as follows:
 
 
Year Ended December 31, 2018
 
 
As Reported
 
Without Adoption of ASC 606
 
Effect of Change Higher/(Lower)
Statements of Operations
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
Asset-based
 
$
481,233

 
$
495,646

 
$
(14,413
)
Subscription-based
 
295,467

 
295,467

 

Total recurring revenues
 
776,700

 
791,113

 
(14,413
)
Professional services and other revenues
 
35,663

 
35,840

 
(177
)
Total revenues
 
812,363

 
826,953

 
(14,590
)
Operating expenses:
 
 
 
 
 
 
Cost of revenues
 
263,400

 
277,813

 
(14,413
)
Compensation and benefits
 
317,188

 
318,887

 
(1,699
)
Total operating expenses
 
798,198

 
814,310

 
(16,112
)
Income from operations
 
14,165

 
12,643

 
1,522

Net income
 
4,010

 
2,488

 
1,522

Net income attributable to Envestnet, Inc.
 
$
5,755

 
$
4,233

 
$
1,522



The comparative information was not restated and will continue to be reported under the accounting standards in effect for those periods. The Company does not expect the adoption of ASC 606 to have a material impact to the results of operations on an ongoing basis.

The majority of the Company's revenues continue to be recognized when services are provided. The adoption of ASC 606 primarily impacted timing of revenue recognition for initial implementation services, deferral of incremental direct costs in obtaining contracts with customers and gross versus net presentation related to certain third party manager agreements.
 
Disaggregation of revenue
 
The following table presents the Company’s revenues disaggregated by major source:
 
 
Year Ended December 31, 2019
 
 
Envestnet Wealth Solutions
 
Envestnet Data & Analytics
 
Consolidated
Revenues:
 
 
 
 
 
 
Asset-based
 
$
484,312

 
$

 
$
484,312

Subscription-based
 
207,606

 
171,207

 
378,813

Total recurring revenues
 
691,918

 
171,207

 
863,125

Professional services and other revenues
 
17,540

 
19,462

 
37,002

Total revenues
 
$
709,458

 
$
190,669

 
$
900,127


 
 
Year Ended December 31, 2018
 
 
Envestnet Wealth Solutions
 
Envestnet Data & Analytics
 
Consolidated
Revenues:
 
 
 
 
 
 
Asset-based
 
$
481,233

 
$

 
$
481,233

Subscription-based
 
138,372

 
157,095

 
295,467

Total recurring revenues
 
619,605

 
157,095

 
776,700

Professional services and other revenues
 
13,000

 
22,663

 
35,663

Total revenues
 
$
632,605

 
$
179,758

 
$
812,363


 
 
Year Ended December 31, 2017
 
 
Envestnet Wealth Solutions(1)
 
Envestnet Data & Analytics(1)
 
Consolidated(1)
Revenues:
 
 
 
 
 
 
Asset-based
 
$
410,016

 
$

 
$
410,016

Subscription-based
 
106,048

 
139,819

 
245,867

Total recurring revenues
 
516,064

 
139,819

 
655,883

Professional services and other revenues
 
11,841

 
15,955

 
27,796

Total revenues
 
$
527,905

 
$
155,774

 
$
683,679

(1)
As noted above, prior period amounts have not been adjusted under the modified retrospective method.

One customer accounted for more than 10% of the Company’s total revenues:
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017
Fidelity
 
15
%
 
17
%
 
17
%


Fidelity accounted for 19%, 21% and 22% of the Envestnet Wealth Solutions segment's revenues for the years ended December 31, 2019, 2018 and 2017, respectively.

No single customer revenue amounts for Envestnet Data & Analytics exceeded 10% of the segment revenue total.
The following table presents the Company’s revenues disaggregated by geography, based on the billing address of the customer:
 
 
Year Ended December 31,
 
 
2019
 
2018
 
2017 (1)
United States
 
$
871,456

 
$
778,565

 
$
617,835

International (2), (3)
 
28,671

 
33,798

 
65,844

Total revenues
 
$
900,127

 
$
812,363

 
$
683,679

(1)
As previously noted, prior period amounts have not been adjusted under the modified retrospective method.
(2)
No foreign country accounted for more than 10% of total revenues.
(3)
In 2018, upon adoption of ASU 2014-09, gross revenue recognition changed to net revenue recognition for one customer.
 
Remaining performance obligations
 
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of December 31, 2019:
Years ending December 31,
 

2020
$
203,814

2021
131,567

2022
90,416

2023
41,141

2024
22,867

Thereafter
26,454

Total
$
516,259



Only fixed consideration from significant contracts with customers is included in the amounts presented above.

The Company has applied the practical expedients and exemption and does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less; (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed; and (iii) contracts for which the variable consideration is allocated entirely to a wholly unsatisfied performance obligations or to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.

Contract balances

Total deferred revenue as of December 31, 2019 increased by $9,609, primarily the result of the PIEtech and PortfolioCenter acquisitions and an increase in deferred revenue related to subscription-based services during the year ended December 31, 2019. Total deferred revenue as of December 31, 2018 increased by $1,507, primarily the result of an increase in deferred revenue related to subscription-based services during the year ended December 31, 2018. The majority of the Company's deferred revenue will be recognized over the course of the next twelve months.

The amount of revenue recognized that was included in the opening deferred revenue balance was $23,714 and $18,620 for the years ended December 31, 2019 and 2018, respectively. The majority of this revenue consists of subscription-based services and professional services arrangements. The amount of revenue recognized from performance obligations satisfied in prior periods was not material.

Deferred sales incentive compensation

Deferred sales incentive compensation was $9,387 and $7,014 as of December 31, 2019 and 2018, respectively. Amortization expense for the deferred sales incentive compensation was $3,452 and $2,132 for the years ended December 31, 2019 and 2018, respectively. No significant impairment loss for capitalized costs was recorded during the periods.

The Company has applied the practical expedient to recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period would have been one year or less. These costs are included in compensation and benefits in the consolidated statements of operations.