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

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

The Company has stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. 2019 Acquisition Equity Incentive Plan (the “2019 Equity Plan”).

As of March 31, 2020, the maximum number of common shares available for future issuance under the Company’s plans is 1,355,235.

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



	Three Months Ended
	March 31,
	2020			2019
Stock-based compensation expense	$	13,765		$	12,864
Tax effect on stock-based compensation expense	(3,510		)	(3,256		)
Net effect on income	$	10,255		$	9,608

The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% and 25.3% for the three months ended March 31, 2020 and 2019, respectively.

Stock Options

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



	Three Months Ended
	March 31,
	2020			2019
Grant date fair value of options	$	—		$	21.55
Volatility	—		%	40.0		%
Risk-free interest rate	—		%	2.5		%
Dividend yield	—		%	—		%
Expected term (in years)	0			6.5

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



					Weighted-Average
			Weighted-		Remaining
			Average		Contractual Life	Aggregate
	Options		Exercise Price		(Years)	Intrinsic Value
Outstanding as of December 31, 2019	1,150,586		$	25.66	3.4	$	50,590
Granted	—		—
Exercised	(357,974	)	16.57
Forfeited	(7,213	)	48.70
Outstanding as of March 31, 2020	785,399		29.60		3.6	19,010
Options exercisable	745,220		$	28.55	3.4	$	18,819

Exercise prices of stock options outstanding as of March 31, 2020 range from $9.00 to $55.29. At March 31, 2020, there was $539 of unrecognized stock-based compensation expense related to unvested stock options, which the Company expects to recognize over a weighted-average period of 1.8 years.

Restricted Stock Units and Restricted Stock Awards

Periodically, the Company grants restricted stock units and awards and performance-based stock units and awards to employees. Performance-based stock units and awards 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 stock units and awards provide thresholds that dictate the number of shares to vest upon each evaluation date, which range from 50% to 150%. 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 unvested restricted stock units and performance 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
Outstanding as of December 31, 2019	1,318,870		$	58.88	254,118		$	67.96
Granted	907,042		75.53		67,793		81.42
Vested	(398,881	)	55.93		—		—
Forfeited	(41,175	)	59.74		(33,010	)	64.70
Outstanding as of March 31, 2020	1,785,856		67.98		288,901		71.49

At March 31, 2020, there was $112,196 of unrecognized stock-based compensation expense related to unvested restricted stock units and awards, which the Company expects to recognize over a weighted-average period of 2.4 years. At March 31, 2020, there was $14,656 of unrecognized stock-based compensation expense related to unvested performance-based restricted stock units and awards, which the Company expects to recognize over a weighted-average period of 2.3 years.