Quarterly report pursuant to Section 13 or 15(d)

Revenue and Direct Expense

v3.23.3
Revenue and Direct Expense
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
Revenue and Direct Expense Revenue and Direct Expense
Disaggregation of Revenue
 
The following table presents the Company’s revenue by segment disaggregated by major source:

  Three Months Ended September 30,
  2023 2022
  Envestnet Wealth Solutions Envestnet Data & Analytics Total Envestnet Wealth Solutions Envestnet Data & Analytics Total
(in thousands)
Revenue:            
Asset-based $ 193,901  $ —  $ 193,901  $ 177,131  $ —  $ 177,131 
Subscription-based 76,813  38,126  114,939  75,975  47,772  123,747 
Total recurring revenue 270,714  38,126  308,840  253,106  47,772  300,878 
Professional services and other revenue 4,313  3,694  8,007  4,229  1,588  5,817 
Total revenue $ 275,027  $ 41,820  $ 316,847  $ 257,335  $ 49,360  $ 306,695 

  Nine Months Ended September 30,
  2023 2022
  Envestnet Wealth Solutions Envestnet Data & Analytics Total Envestnet Wealth Solutions Envestnet Data & Analytics Total
(in thousands)
Revenue:            
Asset-based $ 556,595  $ —  $ 556,595  $ 571,820  $ —  $ 571,820 
Subscription-based 228,807  118,170  346,977  218,080  138,521  356,601 
Total recurring revenue 785,402  118,170  903,572  789,900  138,521  928,421 
Professional services and other revenue 17,866  6,550  24,416  13,003  5,486  18,489 
Total revenue $ 803,268  $ 124,720  $ 927,988  $ 802,903  $ 144,007  $ 946,910 

The following table presents the Company’s revenue disaggregated by geography, based on the billing address of the customer:

  Three Months Ended Nine Months Ended
  September 30, September 30,
  2023 2022 2023 2022
(in thousands)
United States $ 311,045  $ 300,465  $ 911,205  $ 931,465 
International 5,802  6,230  16,783  15,445 
Total revenue $ 316,847  $ 306,695  $ 927,988  $ 946,910 

Remaining Performance Obligations
 
As of September 30, 2023, the Company's estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied is approximately $567.0 million. We expect to recognize approximately 12% of this revenue during the remainder of 2023, approximately 61% throughout 2024 and 2025, with the balance recognized thereafter. These remaining performance obligations are not indicative of revenue for future periods.
Contract Balances

Total deferred revenue as of September 30, 2023 decreased by $4.0 million from December 31, 2022, primarily the result of timing of cash receipts and revenue recognition. The majority of the Company's deferred revenue will be recognized over the course of the next twelve months.

The amount of revenue recognized for the three months ended September 30, 2023 and 2022 that was included in the opening deferred revenue balance was $5.4 million and $5.5 million, respectively. The amount of revenue recognized for the nine months ended September 30, 2023 and 2022, that was included in the opening deferred revenue balance was $33.6 million and $31.7 million, 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 $11.7 million and $11.0 million as of September 30, 2023 and December 31, 2022, respectively. Amortization expense for the deferred sales incentive compensation was $1.1 million and $1.0 million for the three months ended September 30, 2023 and 2022, respectively. Amortization expense for the deferred sales incentive compensation was $3.4 million and $3.2 million for the nine months ended September 30, 2023 and 2022, respectively. Deferred sales incentive compensation is included in other assets in the condensed consolidated balance sheets and amortization expense is included in employee compensation expense in the condensed consolidated statements of operations. No significant impairment loss for capitalized costs was recorded during the nine months ended September 30, 2023 and 2022.

Direct Expense

The following table summarizes direct expense by revenue category:

  Three Months Ended Nine Months Ended
  September 30, September 30,
  2023 2022 2023 2022
(in thousands)
Asset-based $ 112,938  $ 102,409  $ 324,093  $ 332,138 
Subscription-based 6,974  7,768  20,269  22,820 
Professional services and other (374) (69) 7,662  6,914 
Total direct expense $ 119,538  $ 110,108  $ 352,024  $ 361,872