Company Quick10K Filing
Envestnet
Price56.97 EPS-0
Shares52 P/E-145
MCap2,988 P/FCF48
Net Debt-72 EBIT-51
TEV2,916 TEV/EBIT-57
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-02-28
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-10
10-K 2016-12-31 Filed 2017-03-24
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-09
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-06-14
10-K 2013-03-31 Filed 2013-06-14
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-09
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-10
10-Q 2011-03-31 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-03-18
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-09-03
8-K 2020-05-14 Shareholder Vote
8-K 2020-05-07 Earnings, Exhibits
8-K 2020-03-30 Officers, Other Events, Exhibits
8-K 2020-02-20 Earnings, Exhibits
8-K 2019-12-06 Exhibits
8-K 2019-11-07 Earnings, Exhibits
8-K 2019-10-03 Officers, Other Events, Exhibits
8-K 2019-09-27 Enter Agreement, Off-BS Arrangement
8-K 2019-08-07 Earnings, Exhibits
8-K 2019-07-11 Exhibits
8-K 2019-05-16 Shareholder Vote
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-01 M&A, Sale of Shares, Other Events, Exhibits
8-K 2019-04-01 M&A, Exhibits
8-K 2019-03-14 Enter Agreement, Regulation FD, Exhibits
8-K 2019-02-21 Earnings, Exhibits
8-K 2019-01-09 Officers, Regulation FD, Exhibits
8-K 2018-12-20 Enter Agreement, Sale of Shares, Other Events, Exhibits
8-K 2018-11-27 Enter Agreement, Sale of Shares, Other Events, Exhibits
8-K 2018-11-07 Earnings, Exhibits
8-K 2018-10-24 Officers
8-K 2018-08-07 Earnings, Exhibits
8-K 2018-05-25 Enter Agreement, Off-BS Arrangement, Sale of Shares, Other Events, Exhibits
8-K 2018-05-24 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-22 Other Events, Exhibits
8-K 2018-05-21 Other Events, Exhibits
8-K 2018-05-10 Shareholder Vote
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-02-22 Earnings, Exhibits
8-K 2018-01-02 M&A, Other Events, Exhibits

ENV 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 env20200331ex311.htm
EX-31.2 env20200331ex312.htm
EX-32.1 env20200331ex321.htm
EX-32.2 env20200331ex322.htm

Envestnet Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
1.91.51.10.80.40.02012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.1-0.0-0.2-0.3-0.42012201420172020
Ops, Inv, Fin

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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 March 31, 2020
 
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
 
Envestnet, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
20-1409613
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S Employer
Identification No.)
35 East Wacker Drive, Suite 2400
Chicago,
Illinois
 
60601
(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 class
Trading symbol(s)
Name of exchange on which registered
Common Stock, par value $0.005 per share
ENV
New 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 filer
ý
 
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.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No 
 
As of May 1, 2020, Envestnet, Inc. had 53,513,623 shares of common stock outstanding.
 




TABLE OF CONTENTS

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2





Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(unaudited)
 
 
March 31,
 
December 31,
 
 
2020
 
2019
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
68,601

 
$
82,505

Fees receivable, net
 
81,133

 
67,815

Prepaid expenses and other current assets
 
37,699

 
32,183

Total current assets
 
187,433


182,503

 
 
 
 
 
Property and equipment, net
 
53,190

 
53,756

Internally developed software, net
 
68,227

 
60,263

Intangible assets, net
 
489,840

 
505,589

Goodwill
 
906,501

 
879,850

Operating lease right-of-use assets, net
 
78,860

 
82,796

Other non-current assets
 
46,407

 
37,127

Total assets
 
$
1,830,458


$
1,801,884

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accrued expenses and other liabilities
 
$
132,142

 
$
137,944

Accounts payable
 
14,294

 
17,277

Operating lease liabilities
 
13,736

 
13,816

Contingent consideration
 
2,569

 

Deferred revenue
 
40,177

 
34,753

Total current liabilities
 
202,918


203,790

 
 
 
 
 
Convertible Notes due 2023
 
308,262

 
305,513

Revolving credit facility
 
290,000

 
260,000

Contingent consideration
 
12,222

 
9,045

Deferred revenue
 
6,277

 
5,754

Non-current operating lease liabilities
 
84,935

 
88,365

Deferred tax liabilities, net
 
26,680

 
29,481

Other non-current liabilities
 
34,967

 
32,360

Total liabilities
 
966,261

 
934,308

 
 
 
 
 
Commitments and contingencies
 


 


 
 
 
 
 
Equity:
 
 
 
 
Stockholders’ equity:
 
 
 
 
Preferred stock, par value $0.005, 50,000,000 shares authorized
 

 

Common stock, par value $0.005, 500,000,000 shares authorized; 67,077,561 and 66,320,706 shares issued as of March 31, 2020 and December 31, 2019, respectively; 53,468,397 and 52,841,706 shares outstanding as of March 31, 2020 and December 31, 2019, respectively
 
335

 
331

Additional paid-in capital
 
1,054,312

 
1,037,141

Accumulated deficit
 
(84,141
)
 
(75,664
)
Treasury stock at cost, 13,609,164 and 13,479,000 shares as of March 31, 2020 and December 31, 2019, respectively
 
(100,164
)
 
(90,965
)
Accumulated other comprehensive loss
 
(4,773
)
 
(1,749
)
Total stockholders’ equity
 
865,569

 
869,094

Non-controlling interest
 
(1,372
)
 
(1,518
)
Total equity
 
864,197

 
867,576

Total liabilities and equity
 
$
1,830,458


$
1,801,884

 
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 Ended
 
 
March 31,
 
 
2020
 
2019
Revenues:
 
 
 
 
Asset-based
 
$
134,811

 
$
108,934

Subscription-based
 
104,551

 
83,087

Total recurring revenues

239,362


192,021

Professional services and other revenues
 
7,177

 
7,645

Total revenues
 
246,539


199,666

 
 
 
 
 
Operating expenses:
 
 
 
 
Cost of revenues
 
74,933

 
61,645

Compensation and benefits
 
110,430

 
86,717

General and administration
 
41,110

 
40,524

Depreciation and amortization
 
27,683

 
19,517

Total operating expenses

254,156


208,403

 
 
 
 
 
Loss from operations
 
(7,617
)
 
(8,737
)
Other expense, net
 
(1,537
)

(5,763
)
Loss before income tax provision (benefit)

(9,154
)

(14,500
)
 
 
 
 
 
Income tax provision (benefit)
 
(1,964
)
 
3,768

 
 
 
 
 
Net loss
 
(7,190
)

(18,268
)
Add: Net (income) loss attributable to non-controlling interest
 
(146
)
 
83

Net loss attributable to Envestnet, Inc.

$
(7,336
)

$
(18,185
)
 
 
 
 
 
Net loss per share attributable to Envestnet, Inc.:
 
 
 
 
Basic
 
$
(0.14
)
 
$
(0.38
)
Diluted
 
$
(0.14
)
 
$
(0.38
)
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
Basic
 
53,016,511

 
48,237,265

Diluted
 
53,016,511

 
48,237,265


See accompanying notes to unaudited Condensed Consolidated Financial Statements.

4



Envestnet, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(unaudited)
 
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
Net loss attributable to Envestnet, Inc.
 
$
(7,336
)
 
$
(18,185
)
Other comprehensive loss, net of taxes:
 
 
 
 
Foreign currency translation gains (losses), net
 
(3,024
)
 
222

Comprehensive loss attributable to Envestnet, Inc.

$
(10,360
)

$
(17,963
)

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
 
 
 
 
 
 
 
 
Common Stock
 
Treasury Stock
 
Additional
 
Other
 
 
 
Non-
 
 
 
 
 
 
 
 
Common
 
 
 
Paid-in
 
Comprehensive
 
Accumulated
 
controlling
 
Total
 
 
Shares
 
Amount
 
Shares
 
Amount
 
Capital
 
Income (Loss)
 
Deficit
 
Interest
 
Equity
Balance, December 31, 2019
 
66,320,706

 
$
331

 
(13,479,000
)
 
$
(90,965
)
 
$
1,037,141

 
$
(1,749
)
 
$
(75,664
)
 
$
(1,518
)
 
$
867,576

Adoption of ASC 326
 

 

 

 

 

 

 
(1,141
)
 

 
$
(1,141
)
Exercise of stock options
 
357,974

 
2

 

 

 
3,406

 

 

 

 
3,408

Issuance of common stock - vesting of restricted stock units
 
398,881

 
2

 

 

 

 

 

 

 
2

Stock-based compensation expense
 

 

 

 

 
13,765

 

 

 

 
13,765

Purchase of treasury stock for stock-based tax withholdings
 

 

 
(130,164
)
 
(9,199
)
 

 

 

 

 
(9,199
)
Foreign currency translation loss
 

 

 

 

 

 
(3,024
)
 

 

 
(3,024
)
Net income (loss)
 

 

 

 

 

 

 
(7,336
)
 
146

 
(7,190
)
Balance, March 31, 2020
 
67,077,561

 
$
335

 
(13,609,164
)
 
$
(100,164
)
 
$
1,054,312

 
$
(4,773
)
 
$
(84,141
)
 
$
(1,372
)
 
$
864,197


Balance, December 31, 2018
 
61,238,898

 
$
306

 
(13,117,098
)
 
$
(67,858
)
 
$
761,128

 
$
(994
)
 
$
(58,882
)
 
$
(1,098
)
 
$
632,602

Exercise of stock options
 
200,326

 
1

 

 

 
3,162

 

 

 

 
3,163

Issuance of common stock - vesting of restricted stock units
 
479,479

 
2

 

 

 

 

 

 

 
2

Acquisition of business
 
15,755

 

 

 

 
772

 

 

 

 
772

Stock-based compensation expense
 

 

 

 

 
12,864

 

 

 

 
12,864

Purchase of treasury stock for stock-based tax withholdings
 

 

 
(160,456
)
 
(9,819
)
 

 

 

 

 
(9,819
)
Foreign currency translation gain
 

 

 

 

 

 
222

 

 

 
222

Net loss
 

 

 

 

 

 

 
(18,185
)
 
(83
)
 
(18,268
)
Balance, March 31, 2019
 
61,934,458

 
$
309

 
(13,277,554
)
 
$
(77,677
)
 
$
777,926

 
$
(772
)
 
$
(77,067
)
 
$
(1,181
)
 
$
621,538


See accompanying notes to unaudited Condensed Consolidated Financial Statements.

6



Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
OPERATING ACTIVITIES:
 
 
 
 
Net loss
 
$
(7,190
)
 
$
(18,268
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
27,683

 
19,517

Provision for doubtful accounts
 
1,026

 
451

Deferred income taxes
 
(1,587
)
 
169

Non-cash compensation expense
 
15,985

 
12,864

Non-cash interest expense
 
4,463

 
6,880

Accretion on contingent consideration and purchase liability
 
599

 
240

Gain on acquisition of equity method investment
 
(4,230
)
 

Loss allocation from equity method investments
 
2,030

 
203

Changes in operating assets and liabilities, net of acquisitions:
 
 
 
 
Fees receivable, net
 
(14,333
)
 
1,198

Prepaid expenses and other current assets
 
(6,793
)
 
(13,346
)
Other non-current assets
 
641

 
(1,060
)
Accrued expenses and other liabilities
 
(11,554
)
 
(34,495
)
Accounts payable
 
(3,205
)
 
5,179

Deferred revenue
 
5,598

 
7,039

Other non-current liabilities
 
(145
)
 
854

Net cash provided by (used in) operating activities
 
8,988

 
(12,575
)
 
 
 
 
 
INVESTING ACTIVITIES:
 
 
 
 
Purchases of property and equipment
 
(2,160
)
 
(5,247
)
Capitalization of internally developed software
 
(11,572
)
 
(7,185
)
Investments in private companies
 
(11,700
)
 
(1,000
)
Acquisitions of businesses, net of cash acquired
 
(20,257
)
 
(11,061
)
Net cash used in investing activities
 
(45,689
)
 
(24,493
)
 
 
 
 
 
FINANCING ACTIVITIES:
 
 
 
 
Proceeds from borrowings on revolving credit facility
 
45,000

 

Payments on revolving credit facility
 
(15,000
)
 

Proceeds from exercise of stock options
 
3,408

 
3,163

Purchase of treasury stock for stock-based tax withholdings
 
(9,199
)
 
(9,819
)
Issuance of restricted stock units
 
2

 
2

Net cash provided by (used in) financing activities
 
24,211

 
(6,654
)
 
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
 
(1,496
)
 
112

 
 
 
 
 
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
(13,986
)

(43,610
)
 
 
 
 
 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD
 
82,755

 
289,671

 
 
 
 
 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (See Note 2)
 
$
68,769

 
$
246,061

 
 
 
 
 
Supplemental disclosure of cash flow information - net cash paid during the period for income taxes
 
$
814

 
$
4,998

Supplemental disclosure of cash flow information - cash paid during the period for interest
 
2,740

 
216

Supplemental disclosure of non-cash operating, investing and financing activities:
 
 
 
 
Contingent consideration issued in acquisition of businesses
 
5,239

 
7,580

Purchase liabilities included in accrued expenses and other liabilities
 
375

 

Purchase liabilities included in other non-current liabilities
 
257

 
5,468

Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities
 
1,752

 
359

Membership interest liabilities included in other non-current liabilities
 
2,220

 

Common stock issued to settle purchase liability
 

 
772

Leasehold improvements funded by lease incentive
 
894

 
489


See accompanying notes to unaudited Condensed Consolidated Financial Statements.

7

Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)


1.
Organization and Description of Business

Envestnet, Inc. (“Envestnet”) and its subsidiaries (collectively, the “Company”) provide intelligent systems for wealth management and financial wellness. Envestnet’s unified technology enhances advisor productivity and strengthens the wealth management process. Through a combination of platform enhancements, partnerships and acquisitions, Envestnet empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.

Envestnet is organized around two primary, complementary business segments. Financial information about each business segment is contained in “Note 16—Segment Information” to the condensed consolidated financial statements.

2.
Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements of the Company as of March 31, 2020 and for the three months ended March 31, 2020 and 2019 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, 2019 and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of March 31, 2020 and the results of operations, equity, comprehensive 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 revenues 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 expense, net in the condensed consolidated statements of operations.

The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the operating results 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 U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. References to GAAP in these notes are to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification, sometimes referred to as the codification or “ASC.” 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, 2019, filed with the SEC on February 28, 2020.
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates.
 
The following table reconciles cash, cash equivalents and restricted cash from the condensed consolidated balance sheets to amounts reported within the condensed consolidated statements of cash flows:
 
 
March 31,
 
March 31,
 
 
2020
 
2019
Cash and cash equivalents
 
$
68,601

 
$
245,735

Restricted cash included in prepaid expenses and other current assets
 

 
158

Restricted cash included in other non-current assets
 
168

 
168

Total cash, cash equivalents and restricted cash
 
$
68,769

 
$
246,061


 

8

Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Financial Impacts Related To COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads. The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. Although the Company is unable to estimate the overall financial effect of the pandemic at this time, if the pandemic continues, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. As of March 31, 2020, these condensed consolidated financial statements do not reflect any adjustments as a result of the pandemic.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements—In June 2016, the FASB issued ASU 2016-13, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326).” This update significantly changes the way that entities will be required to measure credit losses. This standard requires that entities estimate credit losses based upon an “expected credit loss” approach rather than the “incurred loss” approach, which is currently used. The new approach will require entities to measure all expected credit losses for financial assets based on historical experience, current conditions and reasonable forecasts of collectability. The change in approach is anticipated to impact the timing of recognition of credit losses. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2019. These changes became effective for the Company's fiscal year beginning January 1, 2020. The Company recognized the cumulative effect of the initial application of ASU 2016-13 as an adjustment of $1,141 to the opening balance of accumulated deficit. The Company does not expect the adoption of ASU 2016-13 to have a material impact to the results of its operations on an ongoing basis.
Not Yet Adopted Accounting Pronouncements—In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This update aims to reduce complexity within the accounting for income taxes as part of the simplification initiative. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2020. Early adoption of the standard is permitted. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements. 

3.
Acquisitions and Other Investments

Investment in Private Services Company

On January 8, 2020, the Company acquired a 4.25% membership interest in a private services company for cash consideration of $11,000. The private services company partners with independent network advisory firms to help them grow, become more profitable and run more efficiently. The Company will use the equity method of accounting to record its portion of the private services company’s net income or loss on a one quarter lag from the actual results of operations. The Company uses the equity method of accounting because of its less than 50% ownership and lack of control and does not otherwise exercise control over the significant economic decisions of the private services company.

The private services company is and remains a client of the Company and has thus been determined to be a related party. Revenues from the private services company totaled $2,689 in the three months ended March 31, 2020. As of March 31, 2020, the Company had recorded a net receivable of $1,963 from the private services company.

Acquisition of Private Technology Company

On February 18, 2020, the Company, through it's wholly owned subsidiary Yodlee, Inc. (“Yodlee”), acquired a private technology company (the “Private Technology Company Acquisition”). The private technology company enables the consent generation and data flow between financial information providers, such as banks and financial institutions, and financial information users, such as financial technology lenders and other financial services agencies, through a network of cloud-based interoperable interfaces or application programming interfaces. The technology and operations of the private technology company have been integrated into our Envestnet Data & Analytics segment.


9

Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

In connection with the Private Technology Company Acquisition, the Company acquired all of the outstanding shares and paid cash consideration of $2,343, net of cash acquired, subject to certain closing and post-closing adjustments, plus up to an additional $6,750 in contingent consideration, based upon achieving certain performance targets. The Company recorded a liability as of the date of acquisition of $5,239, which represented the estimated fair value of contingent consideration on the date of acquisition. Future changes to the estimated fair value of the contingent consideration, if any, are recognized in earnings of the Company.

The Company recorded estimated goodwill of $7,017, which is not deductible for income tax purposes, and estimated identifiable intangible assets for proprietary technologies of $1,000. The tangible assets acquired and liabilities assumed were not material.

The results of the private technology company's operations are included in the condensed consolidated statements of operations beginning February 18, 2020 and were not considered material to the Company’s results of operations.

Acquisition of Private Cloud Technology Company

On March 2, 2020, the Company acquired certain assets of a private cloud technology company (the “Private Cloud Technology Company Acquisition”). The private cloud technology company enables enterprises to design and implement the digital transition from legacy systems and applications to a modern cloud computing platform. The technology and operations of the private cloud technology company have been integrated into our Envestnet Wealth Solutions segment.

In connection with the Private Cloud Technology Company Acquisition, the Company paid estimated consideration of $11,968, net of cash acquired. In connection with the acquisition, the Company recorded estimated goodwill of $10,932, which is deductible for income tax purposes. The tangible assets acquired and liabilities assumed were not material.

The results of the private cloud technology company's operations are included in the condensed consolidated statements of operations beginning March 2, 2020 and were not considered material to the Company’s results of operations.

Acquisition of Private Financial Technology Design Company

On March 3, 2020, the Company acquired the outstanding units of a private financial technology design company that were not owned by the Company and merged the acquired company into a wholly owned subsidiary of the Company (the “Private Financial Technology Design Company Acquisition”). The private financial technology design company designs integrated, intuitive digital technology applications for institutional financial services firms, bank wealth management organizations, independent advisor networks, and broker-dealers. The technology and operations of the private financial technology design company have been integrated into our Envestnet Wealth Solutions segment.

The Company previously owned approximately 45% of the outstanding units in this private financial technology design company, and accounted for it as an equity method investment. Based upon the estimated value of the private financial technology design company of $11,026, the Company paid estimated consideration of $5,946, net of cash acquired, for the remaining outstanding units. As a result of the acquisition, the Company recognized a gain of $4,230 on the re-measurement to fair value of its previously held interest, which is included in other expense, net in the condensed consolidated statements of operations
In connection with the Private Financial Technology Design Company Acquisition, the Company recorded estimated total goodwill of $9,241, of which approximately $1,800 is deductible for income tax purposes, and estimated identifiable intangible assets for proprietary technologies of $2,000. The tangible assets acquired and liabilities assumed were not material.

The results of the private financial technology design company's operations are included in the condensed consolidated statements of operations beginning March 3, 2020 and were not considered material to the Company’s results of operations.

For the three months ended March 31, 2020, acquisition related costs for all of the Company's first quarter 2020 acquisitions were not material, and are included in general and administration expenses. The Company may incur additional acquisition related costs over the remainder of 2020.


10

Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

The goodwill arising from these acquisitions represents the expected synergistic benefits of these transactions, primarily related to an increase in future revenues as a result of potential new business and cross selling opportunities as well as enhancements to our existing technologies.

Pro Forma Financial Information

On April 1, 2019, the Company acquired certain of the assets, primarily consisting of intangible assets, and the assumption of certain liabilities of the PortfolioCenter business (“PortfolioCenter”) from Performance Technologies, Inc., a wholly-owned subsidiary of The Charles Schwab Corporation. On May 1, 2019, the Company acquired all of the outstanding shares of capital stock of PIEtech, Inc. (“PIEtech”). The following pro forma financial information presents the combined results of operations of Envestnet, PortfolioCenter and PIEtech for the three months ended March 31, 2019 and assumes the acquisitions of PortfolioCenter and PIEtech had occurred as of the beginning of 2018. The results of the Company's other acquisitions since January 1, 2019 are not included in the pro forma financial information presented below as they were not considered material to the Company's results of operations.

The unaudited pro forma results presented below include amortization charges for acquired intangible assets, interest expense, stock-based compensation expense and income tax. The Company's pro forma information below includes the reversal of a valuation allowance on its deferred tax assets as of January 1, 2018 and the reversal of transaction costs that were incurred in 2019 as a result of these acquisitions and reverses these amounts from the appropriate periods in 2019. All intercompany revenues have been eliminated within this pro forma information.

Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place as of the beginning of 2018.
 
 
Three Months Ended
March 31,
 
 
2019
Revenues
 
$
214,753

Net loss attributable to Envestnet, Inc.
 
(11,245
)
Net loss per share attributable to Envestnet, Inc.:
 
 
Basic
 
$
(0.22
)
Diluted
 
$
(0.22
)


4.
Prepaid Expenses and Other Current Assets
 
Prepaid expenses and other current assets consisted of the following:
 
 
March 31,
 
December 31,
 
 
2020
 
2019
Prepaid technology
 
$
10,653

 
$
8,178

Non-income tax receivables
 
6,357

 
5,555

Advance payroll taxes and benefits
 
5,329

 
5,446

Prepaid insurance
 
2,509

 
1,919

Prepaid outside information services
 
2,131

 
2,209

Other
 
10,720

 
8,876

Total prepaid expenses and other current assets
 
$
37,699

 
$
32,183


 

11

Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

5.
Property and Equipment, Net
 
Property and equipment, net consists of the following:
 
 
 
 
March 31,
 
December 31,
 
 
Estimated Useful Life
 
2020
 
2019
Cost:
 
 
 
 

 
 

Computer equipment and software
 
3 years
 
$
72,700

 
$
72,190

Leasehold improvements
 
Shorter of the lease term or useful life of the asset
 
36,180

 
34,645

Office furniture and fixtures
 
3-7 years
 
10,846

 
10,832

Office equipment and other
 
3-5 years
 
6,898

 
6,850

Building and building improvements
 
7-39 years
 
2,647

 
2,647

Land
 
Not applicable
 
940

 
940

 
 
 
 
130,211

 
128,104

Less: accumulated depreciation and amortization
 
(77,021
)
 
(74,348
)
Total property and equipment, net
 
$
53,190

 
$
53,756


 
During the three months ended March 31, 2020, the Company retired an immaterial amount of property and equipment that was no longer in service. Gains and losses on asset retirements during the three months ended March 31, 2020 and 2019 were not material.
 
Depreciation and amortization expense was as follows:
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
Depreciation and amortization expense
 
$
5,317

 
$
4,366


 
6.
Internally Developed Software
 
Internally developed software consists of the following:
 
 
 
 
March 31,
 
December 31,
 
 
Estimated Useful Life
 
2020
 
2019
Internally developed software
 
5 years
 
$
116,275

 
$
104,703

Less: accumulated amortization
 
 
 
(48,048
)
 
(44,440
)
Internally developed software, net
 
 
 
$
68,227

 
$
60,263


 
Amortization expense was as follows:
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
Amortization expense
 
$
3,608

 
$
2,623


 
7.
Goodwill and Intangible Assets, Net
 
Changes in the carrying amount of goodwill were as follows:
 
 
Envestnet Wealth Solutions
 
Envestnet Data & Analytics
 
Total
Balance at December 31, 2019
 
$
583,247

 
$
296,603

 
$
879,850

Acquisitions
 
20,173

 
7,017

 
27,190

Foreign currency and other
 
(70
)
 
(469
)
 
(539
)
Balance at March 31, 2020
 
$
603,350

 
$
303,151

 
$
906,501



12

Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

Intangible assets, net consist of the following:
 
 
 
 
March 31, 2020
 
December 31, 2019
 
 
 
 
Gross
 
 
 
Net
 
Gross
 
 
 
Net
 
 
Estimated
 
Carrying
 
Accumulated
 
Carrying
 
Carrying
 
Accumulated
 
Carrying
 
 
Useful Life
 
Amount
 
Amortization
 
Amount
 
Amount
 
Amortization
 
Amount
Customer lists
 
7-16 years
 
$
591,520

 
$
(161,339
)
 
$
430,181

 
$
591,520

 
$
(148,517
)
 
$
443,003

Proprietary technologies
 
4-8 years
 
90,719

 
(48,865
)
 
41,854

 
87,714

 
(44,165
)
 
43,549

Trade names
 
2-7 years
 
33,700

 
(15,895
)
 
17,805

 
33,700

 
(14,663
)
 
19,037

Total intangible assets
 
$
715,939

 
$
(226,099
)
 
$
489,840

 
$
712,934

 
$
(207,345
)
 
$
505,589



There were no retirements of intangible assets during the three months ended March 31, 2020.

Amortization expense was as follows:
 
 
Three Months Ended
 
 
March 31,
 
 
2020
 
2019
Amortization expense
 
$
18,758

 
$
12,528


 
8.
Accrued Expenses and Other Liabilities
 
Accrued expenses and other liabilities consisted of the following:
 
 
March 31,
 
December 31,
 
 
2020
 
2019
Accrued compensation and related taxes
 
$
54,336

 
$
53,627

Accrued investment manager fees
 
40,221

 
48,720

Non-income tax payables
 
11,249

 
11,040

Accrued professional services
 
4,271

 
3,833

Accrued technology
 
3,967

 
3,042

Accrued transaction costs
 
2,456

 
2,482

Accrued charitable contribution
 

 
5,020

Other accrued expenses
 
15,642

 
10,180

Total accrued expenses and other liabilities
 
$
132,142

 
$
137,944



In the fourth quarter of 2019, the Company offered a voluntary early retirement program (the “Early Retirement Program”) to employees over a certain age, who have a combined age and years of experience with the Company of at least 65 years. Employees had until January 31, 2020 to voluntarily accept the program with separation of service no later than March 31, 2020. In connection with this program, the Company recorded $11,966 of severance expense during the three months ended March 31, 2020. As of March 31, 2020, the Company has accrued approximately $10,670 in accrued compensation and related taxes and $2,336 recorded in other non-current liabilities. As of December 31, 2019, the Company had accrued approximately $1,733 in accrued compensation and related taxes and $599 recorded in other non-current liabilities. The Company anticipates approximately $12,000 of payments in 2020 with the remainder paid through 2030.
 

13

Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
(in thousands, except share and per share amounts)

9.
Debt
 
The Company’s outstanding debt obligations as of March 31, 2020 and December 31, 2019 were as follows: 
 
 
March 31,
 
December 31,
 
 
2020
 
2019
Revolving credit facility balance
 
$