Envestnet, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

Stock-Based Compensation

12 Months Ended

Dec. 31, 2023

Share-Based Payment Arrangement [Abstract]

On June 22, 2010, the Board of Directors approved the 2010 Plan, effective upon the closing of the Company’s initial public offering. The 2010 Plan provides for the grant of options, stock appreciation rights, Full Value Awards (as defined in the 2010 Plan agreement) and cash incentive awards to employees, consultants and non-employee directors to purchase common stock, which vest over time and have a maximum ten-year contractual term. As approved by the Company’s shareholders, the 2010 Plan has since been amended whereby the maximum number of shares of common stock that may be delivered under the 2010 Plan is 12,375,000. Stock options and stock appreciation rights are granted with an exercise price no less than the fair-market-value price of the common stock at the date of the grant. As of December 31, 2023, the maximum number of options and restricted stock available for future issuance under the Company’s plans is 1,819,036.

As a result of the PIEtech acquisition in 2019, the Company adopted the 2019 Equity Plan in order to make inducement grants to certain PIEtech employees who joined Envestnet | MoneyGuide. Envestnet agreed to grant at future dates, not earlier than the sixty day anniversary of the PIEtech Acquisition, up to 301,469 shares of Envestnet common stock in the form of RSUs and PSUs pursuant to the 2019 Equity Plan. The RSUs vest over time and the PSUs vest upon the achievement of meeting certain performance conditions as well as a subsequent service condition. The Company recognizes the estimated expense on a graded-vesting method over a requisite service period of three to five years, which is the estimated vesting period. The Company estimates the expected vesting amount and recognizes compensation expense only for those awards expected to vest. This estimate is reassessed by management each reporting period and may change based upon new facts and circumstances. Changes in assumptions impact the total amount of expense and are recognized over the vesting period.

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


	Year Ended December 31,
	2023		2022		2021
	(in thousands)
Stock-based compensation expense	$	71,031	$	79,581	$	67,525
Tax effect on stock-based compensation expense	(18,113)		(20,293)		(17,219)
Net effect on income (loss)	$	52,918	$	59,288	$	50,306

The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% for each of the years ended December 31, 2023, 2022 and 2021, respectively.

Stock Options

There were no stock options granted during the years ended December 31, 2023 and 2022. The following assumptions were used to value options granted during the year ended December 31, 2021:


	Year Ended December 31,
		2021
Weighted-average grant date fair value		$	31.23
Expected volatility		42.1		%
Risk-free interest rate		0.4		%
Expected dividend yield		—		%
Expected term (in years)		6.5

The following tables summarize option activity under the Company’s plans:


	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value
				(Years)	(in thousands)







Outstanding as of December 31, 2022	277,535	$	40.07

Exercised	(72,410)	$	25.07
Forfeited	(2,959)	$	55.28
Outstanding and exercisable as of December 31, 2023	202,166	$	45.22	1.6	$	1,330


	Year Ended December 31,
	2023		2022		2021
	(in thousands)
Intrinsic value of options exercised	$	2,243	$	2,650	$	3,815
Cash received from exercises of stock options	$	1,608	$	2,620	$	2,090

As of December 31, 2023, there was no amount of unrecognized compensation expense related to stock options.

Restricted Stock Units and Performance Stock Units

Periodically, the Company grants restricted stock units and performance-based stock units to employees. Restricted stock units vest one-third on the first anniversary of the grant date and quarterly thereafter. Performance-based restricted 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 restricted stock units provide thresholds that dictate the number of shares to vest upon each evaluation date, which range from 0% to 150% of the original grant number. 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 non-vested restricted 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








Non-vested as of December 31, 2022	1,681,976	$	72.69	259,049	$	74.83
Granted	1,106,853	$	61.01	40,010	$	69.47
Vested	(1,006,719)	$	72.75	(24,939)	$	107.10
Forfeited	(332,857)	$	63.75	(51,062)	$	63.21
Non-vested as of December 31, 2023	1,449,253	$	65.78	223,058	$	72.92

At December 31, 2023, there was $67.4 million of unrecognized compensation expense related to non-vested restricted stock units, which the Company expects to recognize over a weighted-average period of 1.7 years. At December 31, 2023, there was $1.9 million of unrecognized compensation expense related to non-vested performance-based restricted stock units, which the Company expects to recognize over a weighted-average period of 1.1 years.