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

Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

Stock-Based Compensation

6 Months Ended

Jun. 30, 2015

12.Stock-Based Compensation

The Company has stock options and restricted stock outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). On May 13, 2015, the shareholders approved the 2010 Long-Term Incentive Plan as Amended. The amendment increased the number of common shares of the Company reserved for delivery under the 2010 Plan by 2,700,000 shares. As of June 30, 2015, the maximum number of stock options and restricted stock available for future issuance under the Company’s plans is 3,022,264.

Employee stock-based compensation expense under the Company’s plans was as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Employee stock-based compensation expense	$	3,330		$	3,199		$	6,749		$	5,767
Tax effect on employee stock-based compensation expense	(1,332		)	(1,280		)	(2,700		)	(2,307		)
Net effect on income	$	1,998		$	1,919		$	4,049		$	3,460

Stock Options

The following weighted average assumptions were used to value options granted during the periods indicated:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015			2014		2015			2014

Grant date fair value of options	$	20.60		$	—	$	20.90		$	16.81
Volatility	36.8		%	—		37.2		%	38.7		%
Risk-free interest rate	1.8		%	—		1.7		%	1.8		%
Dividend yield	0.0		%	—		0.0		%	0.0		%
Expected term (in years)	6.0			—		6.0			6.0

The following table summarizes option activity under the Company’s plans:

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

Outstanding as of December 31, 2014	4,265,337		$	10.73
Granted	148,677		54.02
Exercised	(415,512	)	8.93
Forfeited	(9,941	)	24.94

Outstanding as of March 31, 2015	3,988,561		12.50		4.8	$	173,837
Granted	123,410		52.67
Exercised	(271,004	)	8.12
Forfeited	(28,403	)	46.07

Outstanding as of June 30, 2015	3,812,564		13.86		4.8	105,196

Options exercisable	3,469,757		11.03		4.4	103,576

Exercise prices of stock options outstanding as of June 30, 2015 range from $0.11 to $55.29. At June 30, 2015, there was $4,834 of unrecognized stock-based compensation expense related to unvested stock options, which the Company expects to recognize over a weighted-average period of 2.3 years.

Restricted Stock

Periodically, the Company grants restricted stock awards to employees that vest one-third on each of the first three anniversaries of the grant date. The following is a summary of the activity for unvested restricted stock awards granted under the Company’s plans:

			Weighted-
			Average Grant
	Number of		Date Fair Value
	Shares		per Share

Balance at December 31, 2014	1,098,674		$	33.72
Granted	207,531		53.89
Vested	(358,166	)	20.44
Forfeited	(6,628	)	33.53

Balance at March 31, 2015	941,411		38.61
Forfeited	(5,869	)	45.98

Balance at June 30, 2015	935,542		43.18

At June 30, 2015, there was $19,418 of unrecognized stock-based compensation expense related to unvested restricted stock awards, which the Company expects to recognize over a weighted-average period of 2.2 years. At June 30, 2015, there was an additional $1,580 of potential unrecognized stock-based compensation expense related to unvested restricted stock granted under the 2012 Plan that vests based upon Tamarac meeting certain performance conditions and then a subsequent two-year service condition, which the Company expects to recognize over the remaining estimated vesting period of 1.75 years.