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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
 
Commission file number 001-34835
env-logo.jpg
Envestnet, Inc.
(Exact name of registrant as specified in its charter)
Delaware20-1409613
(State or other jurisdiction of
incorporation or organization)		(I.R.S Employer
Identification No.)
1000 Chesterbrook Boulevard, Suite 250, Berwyn, Pennsylvania
19312
(Address of principal executive offices)(Zip Code)
 Registrant’s telephone number, including area code:
(312) 827-2800
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of exchange on which registered
Common Stock, par value $0.005 per shareENVNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒  No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý  No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerý Accelerated filer☐
Non-accelerated filer☐ 
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐  No ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐  No ☒
As of July 28, 2023, Envestnet, Inc. had 54,534,181 shares of common stock outstanding.


TABLE OF CONTENTS
Page
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Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(unaudited)
June 30,December 31,
20232022
Assets
Current assets:
Cash and cash equivalents$59,019 $162,173 
Fees receivable, net123,696 101,696 
Prepaid expenses and other current assets41,906 41,363 
Total current assets224,621 305,232 
Property and equipment, net66,668 62,443 
Internally developed software, net207,235 184,558 
Intangible assets, net361,335 379,995 
Goodwill998,436 998,414 
Operating lease right-of-use assets, net75,079 81,596 
Other assets120,531 99,927 
Total assets$2,053,905 $2,112,165 
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities$239,836 $233,866 
Operating lease liabilities13,222 11,949 
Deferred revenue35,846 36,363 
Current portion of debt20,000 44,886 
Total current liabilities308,904 327,064 
Debt, net of current portion874,175 871,769 
Operating lease liabilities, net of current portion105,606 110,652 
Deferred tax liabilities, net15,815 16,196 
Other liabilities16,947 18,880 
Total liabilities1,321,447 1,344,561 
Commitments and contingencies (note 19)
Stockholders' equity
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of June 30, 2023 and December 31, 2022
— — 
Common stock, par value $0.005, 500,000,000 shares authorized; 70,752,773 and 70,025,733 shares issued as of June 30, 2023 and December 31, 2022, respectively; 54,511,283 and 54,013,826 shares outstanding as of June 30, 2023 and December 31, 2022, respectively
353 350 
Treasury stock at cost, 16,241,490 and 16,011,907 shares as of June 30, 2023 and December 31, 2022, respectively
(267,325)(253,551)
Additional paid-in capital1,175,464 1,135,284 
Accumulated deficit(181,571)(118,927)
Accumulated other comprehensive loss(4,408)(8,589)
Total stockholders’ equity, attributable to Envestnet, Inc.722,513 754,567 
Non-controlling interest9,945 13,037 
Total equity732,458 767,604 
Total liabilities and equity$2,053,905 $2,112,165 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.
3

Envestnet, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)

Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Revenue:
Asset-based$185,762 $191,972 $362,694 $394,689 
Subscription-based114,959 118,120 232,038 232,854 
Total recurring revenue300,721 310,092 594,732 627,543 
Professional services and other revenue11,713 8,760 16,409 12,672 
Total revenue312,434 318,852 611,141 640,215 
Operating expenses:
Direct expense123,497 126,482 232,486 251,764 
Employee compensation117,097 125,767 231,312 252,616 
General and administrative53,346 66,144 106,965 110,479 
Depreciation and amortization33,806 32,182 66,747 63,800 
Total operating expenses327,746 350,575 637,510 678,659 
Loss from operations(15,312)(31,723)(26,369)(38,444)
Other (expense) income, net(7,402)1,622 (15,337)(4,345)
Loss before income tax provision (benefit)(22,714)(30,101)(41,706)(42,789)
Income tax provision (benefit)418 (5,833)24,187 (3,813)
Net loss(23,132)(24,268)(65,893)(38,976)
Add: Net loss attributable to non-controlling interest1,716 983 3,249 1,832 
Net loss attributable to Envestnet, Inc.$(21,416)$(23,285)$(62,644)$(37,144)
Net loss attributable to Envestnet, Inc. per share:
Basic and diluted$(0.39)$(0.42)$(1.15)$(0.67)
Weighted average common shares outstanding:
Basic and diluted54,439,733 55,203,120 54,289,443 55,054,272 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.
4

Envestnet, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
Three Months EndedSix Months Ended
June 30,June 30,
2023202220232022
Net loss attributable to Envestnet, Inc.
$(21,416)$(23,285)$(62,644)$(37,144)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(96)(3,093)4,181 (4,571)
Total other comprehensive income (loss), net of tax(96)(3,093)4,181 (4,571)
Comprehensive loss attributable to Envestnet, Inc.$(21,512)$(26,378)$(58,463)$(41,715)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

5

Envestnet, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share information)
(unaudited)

Accumulated
AdditionalOtherNon-
Common StockTreasury StockPaid-inComprehensiveAccumulatedControllingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 202270,025,733 $350 (16,011,907)$(253,551)$1,135,284 $(8,589)$(118,927)$13,037 $767,604 
Net loss— — — — — — (41,228)(1,533)(42,761)
Other comprehensive income, net of tax— — — — — 4,277 — — 4,277 
Stock-based compensation expense— — — — 19,345 — — 108 19,453 
Issuance of common stock, vesting of RSUs and PSUs
524,316 2 — — — — — — 2 
Net cash paid related to tax withholding for stock-based compensation— — (173,612)(10,732)— — — — (10,732)
Proceeds from the exercise of stock options37,454 — — — 367 — — — 367 
Purchase of non-controlling units from third-party shareholders— — — — (984)— — (24)(1,008)
Other— — — — — — — (22)(22)
Balance, March 31, 202370,587,503 352 (16,185,519)(264,283)$1,154,012 (4,312)(160,155)11,566 737,180 
Net loss— — — — — — (21,416)(1,716)(23,132)
Other comprehensive loss, net of tax— — — — — (96)— — (96)
Stock-based compensation expense— — — — 21,347 — — 43 21,390 
Issuance of common stock, vesting of RSUs and PSUs162,770 1 — — — — — — 1 
Net cash paid related to tax withholding for stock-based compensation— — (55,971)(3,042)— — — — (3,042)
Proceeds from the exercise of stock options2,500 — — — 105 — — — 105 
Other— — — — — — 52 52 
Balance, June 30, 202370,752,773 $353 (16,241,490)$(267,325)$1,175,464 $(4,408)$(181,571)$9,945 $732,458 










6

Envestnet, Inc.
Condensed Consolidated Statements of Stockholders' Equity (continued)
(in thousands, except share information)
(unaudited)

Accumulated
AdditionalOtherNon-
Common StockTreasury StockPaid-inComprehensiveAccumulatedControllingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 202168,879,152 $344 (14,086,064)$(134,996)$1,131,628 $(1,899)$(37,988)$2,453 $959,542 
Net loss— — — — — — (13,859)(849)(14,708)
Other comprehensive loss, net of tax— — — — — (1,478)— — (1,478)
Stock-based compensation expense— — — — 21,690 — — — 21,690 
Issuance of common stock, vesting of RSUs and PSUs514,319 3 — — — — — — 3 
Net cash paid related to tax withholding for stock-based compensation— — (170,992)(12,570)— — — — (12,570)
Proceeds from the exercise of stock options38,681 — — — 658 — — — 658 
Other— — — — (84)— — 102 18 
Balance, March 31, 202269,432,152 347 (14,257,056)(147,566)1,153,892 (3,377)(51,847)1,706 953,155 
Net loss— — — — — — (23,285)(983)(24,268)
Other comprehensive loss, net of tax— — — — — (3,093)— — (3,093)
Stock-based compensation expense— — — — 22,876 — — — 22,876 
Issuance of common stock, vesting of RSUs and PSUs232,328 1 — — — — — — 1 
Net cash paid related to tax withholding for stock-based compensation— — (78,506)(5,543)— — — — (5,543)
Proceeds from the exercise of stock options2,503 — — — 84 — — — 84 
Share repurchases— — (152,020)(9,235)— — — — (9,235)
Other— — — — (89)— — 104 15 
Balance, June 30, 202269,666,983 $348 (14,487,582)$(162,344)$1,176,763 $(6,470)$(75,132)$827 $933,992 


See accompanying notes to unaudited Condensed Consolidated Financial Statements.

7

Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30,
20232022
Cash flows from operating activities:
Net loss $(65,893)$(38,976)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization66,747 63,800 
Deferred income taxes(522)(8,222)
Non-cash compensation expense40,843 45,318 
Non-cash interest expense2,251 3,474 
Loss allocations from equity method investments5,872 2,945 
Dilution gain on equity method investee share issuance(546)(6,934)
Lease related impairments2,483 12,961 
Other304 (448)
Changes in operating assets and liabilities:
Fees receivable, net(22,357)13,694 
Prepaid expenses and other assets(6,762)(6,359)
Accounts payable, accrued expenses and other liabilities17,700 (32,888)
Deferred revenue(852)4,277 
Net cash provided by operating activities39,268 52,642 
Cash flows from investing activities:
Purchases of property and equipment(16,735)(9,141)
Capitalization of internally developed software(46,801)(43,045)
Acquisitions of businesses, net of cash acquired— (14,472)
Investments in private companies(1,450)(8,000)
Acquisition of proprietary technology(12,000)(19,000)
Issuance of loan receivable to private company(20,000)— 
Issuance of note receivable to equity method investees— (4,350)
Other319 — 
Net cash used in investing activities(96,667)(98,008)
Cash flows from financing activities:
Proceeds from borrowings on Revolving Credit Facility40,000 — 
Payments related to Revolving Credit Facility(20,000)(1,872)
Payments related to Convertible Notes(45,000)— 
Payments on finance lease obligations(792)(14,517)
Proceeds from exercise of stock options472 742 
Payments related to tax withholdings for stock-based compensation(13,774)(18,113)
Payments related to share repurchases(9,289)(9,235)
Purchase of non-controlling units from third-party shareholders(1,008)— 
Payments of contingent consideration— (750)
Other3 4 
Net cash used in financing activities(49,388)(43,741)
Effect of exchange rate on changes on cash, cash equivalents and restricted cash3,633 (2,057)
Net change in cash, cash equivalents and restricted cash(103,154)(91,164)
Cash, cash equivalents and restricted cash, beginning of period162,173 429,428 
Cash, cash equivalents and restricted cash, end of period$59,019 $338,264 
Supplemental disclosures of cash flow information
Net cash paid for income taxes$3,223 $5,460 
Cash paid for interest$10,600 $5,591 
Supplemental disclosure of non-cash activities
Conversion of equity method investee loan to shares$4,129 $2,623 
Right-of-use assets obtained in exchange for lease liabilities, net$380 $9,604 
Property and equipment acquired through finance lease$792 $14,517 
Purchase of property and equipment included in accounts payable, accrued expenses and other liabilities$2,029 $2,308 
Internally developed software costs included in accounts payable, accrued expenses and other liabilities$— $628 
Membership interest liabilities included in other liabilities$— $752 
See accompanying notes to unaudited Condensed Consolidated Financial Statements.
8
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business

Envestnet, Inc. (“Envestnet”) through its subsidiaries (collectively, the “Company”) is transforming the way financial advice and insight are delivered. Its mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet has been a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness ecosystem so that our clients can deliver an intelligent financial life to their clients.

Envestnet is organized around two primary, complementary business segments. Financial information about each business segment is contained in “Note 18—Segment Information” to the condensed consolidated financial statements and is described in detail within the Company's Annual Report on Form 10-K.

For a summary of commonly used industry terms and abbreviations used in this quarterly report on Form 10-Q, see the
Glossary of Terms.

2.Summary of Significant Accounting Policies

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements of the Company as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 have not been audited by an independent registered public accounting firm. These unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements for the year ended December 31, 2022 and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of June 30, 2023 and results of operations, equity, comprehensive income (loss) and cash flows for the periods presented herein. The unaudited condensed consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation. Accounts for the Envestnet Wealth Solutions segment that are denominated in a non-U.S. currency have been re-measured using the U.S. dollar as the functional currency. Certain accounts within the Envestnet Data & Analytics segment are recorded and measured in foreign currencies. The assets and liabilities for those subsidiaries with a functional currency other than the U.S. dollar are translated at exchange rates in effect at the balance sheet date, and revenue and expenses are translated at average exchange rates. Differences arising from these foreign currency translations are recorded in the unaudited condensed consolidated balance sheets as accumulated other comprehensive income (loss) within stockholders' equity. The Company is also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other income (expense), net in the condensed consolidated statements of operations.

The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results of operations to be expected for other interim periods or for the full fiscal year.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. References to GAAP in these notes are to the FASB ASC and ASUs. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.

 Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions.

9
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
 Reclassifications

Certain amounts in the condensed consolidated balance sheets as of December 31, 2022 and the condensed consolidated statements of cash flows for the six months ended June 30, 2022 have been reclassified to conform to the current period presentation. These reclassifications did not change the previously reported total assets, total liabilities and equity, or net change in cash and cash equivalents and did not affect the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss or condensed consolidated statements of stockholders' equity.

Cash, Cash Equivalents and Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash from the condensed consolidated balance sheets to amounts reported in the condensed consolidated statements of cash flows:
June 30,
20232022
(in thousands)
Cash and cash equivalents$59,019 $338,115 
Restricted cash included in prepaid expenses and other current assets— 149 
Total cash, cash equivalents and restricted cash$59,019 $338,264 

Related Party Transactions

The Company has an approximate 3.8% membership interest in a private services company that it accounts for using the equity method of accounting and is considered to be a related party. Revenue from the private services company totaled $3.3 million and $4.3 million in the three months ended June 30, 2023 and 2022, respectively. Revenue from the private services company totaled $6.9 million and $9.0 million in the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023 and December 31, 2022, the Company recorded a net receivable from the private services company of $1.9 million and $2.0 million, respectively.

Recent Accounting Pronouncements Not Yet Adopted

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements.” This update amends ASC 842 and the accounting for leasehold improvements associated with common control leases. This standard is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the standard is permitted. The Company is analyzing the impact of the adoption, but does not expect it to have a material impact on the consolidated financial statements.

3.Acquisitions

Acquisition of Redi2 Technologies

On July 1, 2022, the Company completed the acquisition of all of the issued and outstanding shares of Redi2 Technologies ("Redi2"). Redi2 provides revenue management and hosted fee-billing solutions. Its platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. Redi2 has been integrated into the Envestnet Wealth Solutions segment.

In connection with the Redi2 acquisition, the Company paid estimated consideration as follows:

Preliminary EstimateMeasurement Period AdjustmentsRevised Estimate
(in thousands)
Cash consideration, net$69,406 $— $69,406 
Estimated working capital adjustment(1,465)932 (533)
Total$67,941 $932 $68,873 

10
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The Company funded the Redi2 acquisition with available cash resources. In addition, certain executives may earn up to $20.0 million in performance bonuses based upon the achievement of certain target financial and non-financial metrics. These performance bonuses will be recognized as compensation and benefits expense in the condensed consolidated statements of operations. The Company recognized $1.1 million and $1.5 million related to these performance bonuses during the three and six months ended June 30, 2023, respectively.

The following table summarizes the estimated fair values of the assets acquired at the date of acquisition:

Preliminary EstimateMeasurement Period AdjustmentsRevised Estimate
(in thousands)
Total current assets$1,985 $— $1,985 
Other non-current assets3,349 (28)3,321 
Identifiable intangible assets26,500 — 26,500 
Goodwill44,236 2,231 46,467 
Total assets acquired76,070 2,203 78,273 
Accounts payable, accrued expenses and other current liabilities(1,157)(1,271)(2,428)
Operating lease liabilities(2,201)— (2,201)
Deferred revenue(4,771)— (4,771)
Total liabilities assumed(8,129)(1,271)(9,400)
Total net assets acquired, net of cash received$67,941 $932 $68,873 

The goodwill arising from the acquisition represents the expected benefits of the transaction, primarily related to the enhancement of the Company's existing technologies and increase in future revenue as a result of potential cross selling opportunities. Estimated goodwill of $40.7 million is deductible for income tax purposes.

A summary of estimated intangible assets acquired, estimated useful lives and amortization method is as follows:

Preliminary EstimateEstimated Useful LifeAmortization Method
(in thousands)(in years)
Customer lists$14,000 
14 - 16
Accelerated
Proprietary technologies9,500 
6
Straight-line
Trade names3,000 
6 - 7
Straight-line
Total intangible assets acquired$26,500 

During the six months ended June 30, 2023 the Company completed the acquisition accounting related to the Redi2 acquisition, finalizing the valuation of tangible assets acquired, liabilities assumed, identifiable intangible assets and goodwill balances. No measurement period adjustments were made during the six months ended June 30, 2023.

The results of Redi2 were included in the condensed consolidated statements of operations beginning July 1, 2022 and are not considered material to the Company’s results of operations.

For the three and six months ended June 30, 2023, the Company’s acquisition related costs were not material, and are included in general and administrative expenses. The Company may incur additional acquisition related costs over the remainder of 2023.

11
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
4.Prepaid Expenses and Other Current Assets
 
Prepaid expenses and other current assets consisted of the following:

June 30,December 31,
 20232022
(in thousands)
Prepaid technology$15,387 $16,649 
Prepaid insurance5,473 2,881 
Non-income tax receivable5,383 5,488 
Other15,663 16,345 
Total prepaid expenses and other current assets$41,906 $41,363 
  
5.Internally Developed Software, Net

Internally developed software, net consisted of the following:

  June 30,December 31,
 Estimated Useful Life20232022
(in thousands)
Internally developed software5 years$359,365 $313,200 
Less: accumulated amortization (152,130)(128,642)
Internally developed software, net $207,235 $184,558 

6.Geographical Information

The following table sets forth certain long-lived assets including property and equipment, net and internally developed software, net by geographic area:

 June 30,December 31,
 20232022
(in thousands)
United States$271,230 $245,817 
India2,665 1,093 
Other8 91 
Total long-lived assets, net$273,903 $247,001 

See “Note 14—Revenue and Direct Expense” for detail of revenue by geographic area.

7.Intangible Assets, Net 

Intangible assets, net consisted of the following:

 June 30, 2023December 31, 2022
 Gross NetGross Net
 CarryingAccumulatedCarryingCarryingAccumulatedCarrying
 AmountAmortizationAmountAmountAmortizationAmount
(in thousands)
Customer lists$604,080 $(306,457)$297,623 $604,080 $(285,288)$318,792 
Proprietary technologies109,057 (51,549)57,508 113,224 (59,401)53,823 
Trade names15,700 (9,496)6,204 15,700 (8,320)7,380 
Total intangible assets$728,837 $(367,502)$361,335 $733,004 $(353,009)$379,995 

12
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
On April 1, 2022, the Company entered into a purchase agreement with a privately held company to acquire technology solutions being developed by this privately held company for a purchase price of $9.0 million, including an advance of $4.0 million. The purchase agreement was amended in January 2023 to include additional functionality and features for additional consideration of $5.0 million. The Company closed the transaction and paid the remaining $10.0 million during the three months ended March 31, 2023. This proprietary technology asset has been integrated into the Envestnet Data & Analytics segment and is being amortized over an estimated useful life of five years.

On May 19, 2023, the Company entered into a purchase agreement with this same privately held company to acquire technology solutions being developed by this privately held company for a purchase price of $7.0 million, including an advance of $2.0 million. In addition, the prior purchase agreements that were entered into with this privately held company in June 2021 and April 2022 were amended in May 2023 to remove the earn-out payment provisions.

During the six months ended June 30, 2023, the Company retired fully amortized proprietary technologies with a historical cost of $17.5 million.

Future amortization expense of the Company's intangible assets as of June 30, 2023, is expected to be as follows (in thousands):

Remainder of 2023$30,136 
202455,968 
202552,573 
202645,048 
202736,283 
Thereafter141,327 
Total$361,335 

8.Depreciation and Amortization Expense

Depreciation and amortization expense consisted of the following:

Three Months EndedSix Months Ended
 June 30,June 30,
2023202220232022
(in thousands)
Intangible asset amortization$15,720 $17,645 $32,660 $35,165 
Internally developed software amortization12,398 9,087 23,488 17,581 
Property and equipment depreciation5,688 5,450 10,599 11,054 
Total depreciation and amortization$33,806 $32,182 $66,747 $63,800 

9.Goodwill

Changes in the carrying amount of goodwill by reportable segment were as follows:

 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsTotal
(in thousands)
Balance as of December 31, 2022$679,739 $318,675 $998,414 
Foreign currency translation— 22 22 
Balance as of June 30, 2023$679,739 $318,697 $998,436 

13
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
10.Other Assets

On January 31, 2023, the Company entered into a Convertible Promissory Note with a customer of the Company's business, a privately held company, whereby the Company was issued a convertible promissory note with a principal amount of $20.0 million and a stated interest rate of 8.0% per annum. The Convertible Promissory Note has a maturity date of January 31, 2026 and is convertible into common stock or preferred stock of the privately held company upon qualified financing events or corporate transactions.

In connection with the Convertible Promissory Note, the Company concurrently entered into a call option agreement with the privately held company, which provides the Company an option to acquire the privately held company at a predetermined price as of the earlier of July 2024 or upon satisfaction of certain financial metrics. Subsequent to June 30, 2023, the financial metrics were met, however, the Company did not exercise the call option.

The Company accounts for this loan receivable in accordance with ASC 310 - Receivables as it is not a security and includes it in other assets in the condensed consolidated balance sheets. Credit impairment is measured as the difference between this loan receivable’s amortized cost and its estimated recoverable value, which is the present value of its expected future cash flows discounted at the effective interest rate. There was no impairment for this investment during the six months ended June 30, 2023.

11.Accounts Payable, Accrued Expenses and Other Current Liabilities
 
Accounts payable, accrued expenses and other liabilities consisted of the following:

June 30,December 31,
 20232022
(in thousands)
Accrued investment manager fees$105,913 $99,851 
Accrued compensation and related taxes57,771 77,939 
Accounts payable27,853 11,271 
Accrued professional services17,622 10,762 
Income tax payable13,102 260 
Accrued technology8,331 6,393 
Accrued treasury stock purchases— 9,289 
Other accrued expenses9,244 18,101 
Total accounts payable, accrued expenses and other current liabilities$239,836 $233,866 

During the three and six months ended June 30, 2023, as part of a reduction in force initiative, the Company entered into separation agreements with a number of employees. In connection with the reduction in force initiatives as well as a fourth quarter 2022 organizational realignment, the Company incurred approximately $8.2 million and $14.4 million in total severance expense in the three and six months ended June 30, 2023, respectively. As of June 30, 2023 the Company had accrued approximately $9.4 million in severance related expenses in accrued compensation and related taxes.
14
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
12.Debt

The following tables set forth the carrying value and estimated fair value of the Company's debt obligations as of June 30, 2023 and December 31, 2022:

 June 30, 2023
 Issuance AmountUnamortized Issuance CostsCarrying ValueFair Value (Level II)
(in thousands)
Revolving Credit Facility$20,000 $— $20,000 $20,000 
Convertible Notes due 2025317,500 (3,870)313,630 292,576 
Convertible Notes due 2027575,000 (14,455)560,545 607,499 
Total debt$912,500 $(18,325)$894,175 $920,075 

 December 31, 2022
 Issuance AmountUnamortized Issuance CostsCarrying ValueFair Value (Level II)
(in thousands)
Revolving Credit Facility$— $— $— $— 
Convertible Notes due 202345,000 (114)44,886 46,058 
Convertible Notes due 2025317,500 (4,765)312,735 293,688 
Convertible Notes due 2027575,000 (15,966)559,034 606,119 
Total debt$937,500 $(20,845)$916,655 $945,865 

Revolving Credit Facility

The Revolving Credit Facility contains customary conditions, representations and warranties, affirmative and negative covenants, mandatory prepayment provisions and events of default. The covenants include certain financial covenants requiring the Company to maintain compliance with a maximum total leverage ratio and a minimum interest coverage ratio. The Company was in compliance with these financial covenants as of June 30, 2023.

As of June 30, 2023, the Company had $20.0 million of borrowings under the Revolving Credit Facility at an effective interest rate of 7.5%, with a remaining available balance on the Revolving Credit Facility of $480.0 million.

On July 19, 2023, the $20.0 million outstanding balance under the Revolving Credit Facility was repaid and the remaining available balance on the Revolving Credit Facility was $500.0 million.

As of June 30, 2023 and December 31, 2022, debt issuance costs related to the Revolving Credit Facility included in prepaid expense and other current assets in the condensed consolidated balance sheets was $0.7 million and $0.7 million, respectively and included in other assets in the condensed consolidated balance sheets was $1.8 million and $2.2 million, respectively.

Convertible Notes due 2023

The Convertible Notes due 2023 matured on June 1, 2023. Upon maturity, the Company settled the remaining aggregate principal amount on the Convertible Notes due 2023 for $45.0 million. The Convertible Notes due 2023 were paid using a combination of cash on hand and borrowings under the Company's Revolving Credit Facility. No shares of the Company's common stock were issued upon settlement of the Convertible Notes due 2023.

15
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Interest Expense

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:

 Three Months EndedSix Months Ended
 June 30,June 30,
 2023202220232022
(in thousands)
Convertible Notes interest$4,543 $2,480 $9,108 $4,960 
Amortization of debt discount and issuance costs1,427 1,415 2,869 3,474 
Undrawn and other fees311 317 624 631 
Revolving Credit Facility interest250 — 250 — 
 Total interest expense$6,531 $4,212 $12,851 $9,065 

The effective interest rate of the Notes was equal to the stated interest rate plus the amortization of the debt issuance costs and is set forth below:

 June 30,June 30,
 20232022
Convertible Notes due 2023N/A2.4 %
Convertible Notes due 20251.3 %1.3 %
Convertible Notes due 20273.2 %N/A

13.Fair Value Measurements
  
The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, based on the three-tier fair value hierarchy, as described in detail within the Company's Annual Report on Form 10-K:

 June 30, 2023
 Fair ValueLevel ILevel IILevel III
(in thousands)
Assets:    
Money market funds$23,764 $23,764 $— $— 
Assets to fund deferred compensation liability10,635 — — 10,635 
Total assets$34,399 $23,764 $— $10,635 
Liabilities:    
Deferred compensation liability8,864 8,864 — — 
Total liabilities$8,864 $8,864 $— $— 

 December 31, 2022
 Fair ValueLevel ILevel IILevel III
(in thousands)
Assets:    
Money market funds$2,628 $2,628 $— $— 
Assets to fund deferred compensation liability10,074 — — 10,074 
Total assets$12,702 $2,628 $— $10,074 
Liabilities:    
Deferred compensation liability8,088 8,088 — — 
Total liabilities$8,088 $8,088 $— $— 
16
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The Company assesses the categorization of assets and liabilities by level at each measurement date, and transfers between levels are recognized on the actual date of the event or when changes in circumstances caused the transfer, in accordance with the Company’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. There were no transfers between Levels I, II and III during the six months ended June 30, 2023 and 2022.

Fair Value of Assets Used to Fund the Deferred Compensation Liability

The table below presents a reconciliation of the assets used to fund the Company's deferred compensation liability, which is measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2022 to June 30, 2023:

 Fair Value of Assets Used to Fund Deferred Compensation Liability
(in thousands)
Balance as of December 31, 2022$10,074 
Fair value adjustments and fees561 
Balance as of June 30, 2023$10,635 

The fair market value of the assets used to fund the Company's deferred compensation liability is based upon the cash surrender value of the Company's life insurance premiums. The value of the assets used to fund the Company's deferred compensation liability, which are included in other assets in the condensed consolidated balance sheets, increased due to net gains on the underlying investment vehicles. These gains are recognized in the Company's earnings and included in general and administrative expenses in the condensed consolidated statements of operations.

Fair Value of Debt Agreements

The Company considered its Convertible Notes to be Level II liabilities as of June 30, 2023 and December 31, 2022, and used a market approach to calculate their respective fair values. The estimated fair value for each convertible note was determined based on estimated or actual bids and offers in an over-the-counter market on June 30, 2023 and December 31, 2022, respectively (See “Note 12—Debt”).

Fair Value of Other Financial Assets and Liabilities

The Company considered the recorded value of its other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities as of June 30, 2023 and December 31, 2022, based upon the short-term nature of these assets and liabilities.
17
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
14.Revenue and Direct Expense

Disaggregation of Revenue
 
The following table presents the Company’s revenue by segment disaggregated by major source:

 Three Months Ended June 30,
 20232022
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidatedEnvestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidated
(in thousands)
Revenue:      
Asset-based$185,762 $— $185,762 $191,972 $— $191,972 
Subscription-based75,509 39,450 114,959 73,568 44,552 118,120 
Total recurring revenue261,271 39,450 300,721 265,540 44,552 310,092 
Professional services and other revenue10,310 1,403 11,713 6,460 2,300 8,760 
Total revenue$271,581 $40,853 $312,434 $272,000 $46,852 $318,852