Envestnet Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

env-20200930

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 September 30, 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

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 October 30, 2020, Envestnet, Inc. had 53,949,796 shares of common stock outstanding.

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019			3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019			4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2020 and 2019			5
Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2020 and 2019			6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019			8
Notes to Unaudited Condensed Consolidated Financial Statements			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements			29
Overview			31
Results of Operations			38
Liquidity and Capital Resources			54

Item 3. Quantitative and Qualitative Disclosures About Market Risk			55

Item 4. Controls and Procedures			56

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			56

Item 1A. Risk Factors			56

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			57

Item 3. Defaults Upon Senior Securities			57

Item 4. Mine Safety Disclosures			57

Item 5. Other Information			57

Item 6. Exhibits			57

Index to Exhibits			58

Signatures			59

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)


	September 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	362,918	$	82,505
Fees receivable, net	76,328		67,815
Prepaid expenses and other current assets	41,966		32,183
Total current assets	481,212		182,503

Property and equipment, net	48,983		53,756
Internally developed software, net	87,478		60,263
Intangible assets, net	452,583		505,589
Goodwill	906,697		879,850
Operating lease right-of-use assets, net	76,090		82,796
Other non-current assets	48,218		37,127
Total assets	$	2,101,261	$	1,801,884

Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities	$	141,290	$	137,944
Accounts payable	29,609		17,277
Operating lease liabilities	13,835		13,816
Contingent consideration	1,549		—
Deferred revenue	40,037		34,753
Total current liabilities	226,320		203,790

Convertible Notes	749,918		305,513
Revolving credit facility	—		260,000
Contingent consideration	11,741		9,045
Deferred revenue	2,307		5,754
Non-current operating lease liabilities	83,820		88,365
Deferred tax liabilities, net	36,088		29,481
Other non-current liabilities	37,700		32,360
Total liabilities	1,147,894		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; 67,584,956 and 66,320,706 shares issued as of September 30, 2020 and December 31, 2019, respectively; 53,884,899 and 52,841,706 shares outstanding as of September 30, 2020 and December 31, 2019, respectively	337		331
Additional paid-in capital	1,150,198		1,037,141
Accumulated deficit	(87,155)		(75,664)
Treasury stock at cost, 13,700,057 and 13,479,000 shares as of September 30, 2020 and December 31, 2019, respectively	(107,248)		(90,965)
Accumulated other comprehensive loss	(1,459)		(1,749)
Total stockholders’ equity	954,673		869,094
Non-controlling interest	(1,306)		(1,518)
Total equity	953,367		867,576
Total liabilities and equity	$	2,101,261	$	1,801,884

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Revenues:
Asset-based	$	137,744	$	126,591	$	394,801	$	355,595
Subscription-based	107,897		100,583		317,427		275,928
Total recurring revenues	245,641		227,174		712,228		631,523
Professional services and other revenues	6,918		8,906		22,183		28,668
Total revenues	252,559		236,080		734,411		660,191

Operating expenses:
Cost of revenues	78,545		71,870		222,327		205,595
Compensation and benefits	94,428		95,587		300,423		285,590
General and administration	38,979		42,016		118,537		124,961
Depreciation and amortization	28,951		26,735		85,077		73,167
Total operating expenses	240,903		236,208		726,364		689,313

Income (loss) from operations	11,656		(128)		8,047		(29,122)
Other expense, net	(8,836)		(9,813)		(18,546)		(23,088)
Income (loss) before income tax provision (benefit)	2,820		(9,941)		(10,499)		(52,210)

Income tax provision (benefit)	497		(6,977)		(161)		(31,591)

Net income (loss)	2,323		(2,964)		(10,338)		(20,619)
Add: Net (income) loss attributable to non-controlling interest	(413)		(116)		(12)		247
Net income (loss) attributable to Envestnet, Inc.	$	1,910	$	(3,080)	$	(10,350)	$	(20,372)

Net income (loss) per share attributable to Envestnet, Inc.:
Basic	$	0.04	$	(0.06)	$	(0.19)	$	(0.40)
Diluted	$	0.03	$	(0.06)	$	(0.19)	$	(0.40)

Weighted average common shares outstanding:
Basic	53,800,048		52,215,469		53,464,101		50,414,427
Diluted	55,558,983		52,215,469		53,464,101		50,414,427

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Net income (loss) attributable to Envestnet, Inc.	$	1,910	$	(3,080)	$	(10,350)	$	(20,372)
Foreign currency translation gains (losses), net of taxes	1,739		(1,458)		290		(1,124)
Comprehensive income (loss) attributable to Envestnet, Inc.	$	3,649	$	(4,538)	$	(10,060)	$	(21,496)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

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
Shares withheld to satisfy tax withholdings	—	—		(130,164)	(9,199)		—		—		—		—		(9,199)
Foreign currency translation gain (loss), net of taxes	—	—		—	—		—		(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
Exercise of stock options	184,475	1		—	—		3,274		—		—		—		3,275
Issuance of common stock - vesting of restricted stock units	134,207	1		—	—		—		—		—		—		1
Stock-based compensation expense	—	—		—	—		13,006		—		—		—		13,006
Shares withheld to satisfy tax withholdings	—	—		(43,697)	(3,617)		—		—		—		—		(3,617)
Transfer of non-controlling units	—	—		—	—		910		—		—		(139)		771
Foreign currency translation gain (loss), net of taxes	—	—		—	—		—		1,575		—		—		1,575
Net income (loss)	—	—		—	—		—		—		(4,924)		(547)		(5,471)
Balance, June 30, 2020	67,396,243	$	337	(13,652,861)	$	(103,781)	$	1,071,502	$	(3,198)	$	(89,065)	$	(2,058)	$	873,737
Exercise of stock options	44,672	—		—	—		1,370		—		—		—		1,370
Issuance of common stock - vesting of restricted stock units	144,041	—		—	—		—		—		—		—		—
Stock-based compensation expense	—	—		—	—		15,729		—		—		—		15,729
Shares withheld to satisfy tax withholdings	—	—		(47,196)	(3,467)		—		—		—		—		(3,467)
Capital contribution - non-controlling interest	—	—		—	—		(339)		—		—		339		—
Issuance of Convertible Notes due 2025, net of offering costs and taxes of $8,617	—	—		—	—		61,936		—		—		—		61,936
Foreign currency translation gain (loss), net of taxes	—	—		—	—		—		1,739		—		—		1,739
Net income (loss)	—	—		—	—		—		—		1,910		413		2,323
Balance, September 30, 2020	67,584,956	$	337	(13,700,057)	$	(107,248)	$	1,150,198	$	(1,459)	$	(87,155)	$	(1,306)	$	953,367

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity (continued)

(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, 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
Shares withheld to satisfy tax withholdings	—	—		(160,456)	(9,819)		—		—		—		—		(9,819)
Foreign currency translation gain (loss)	—	—		—	—		—		222		—		—		222
Net income (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
Exercise of stock options	114,109	1		—	—		1,750		—		—		—		1,751
Issuance of common stock - vesting of restricted stock units	182,390	1		—	—		—		—		—		—		1
Acquisition of business	3,184,713	16		—	—		222,468		—		—		—		222,484
Stock-based compensation expense	—	—		—	—		13,434		—		—		—		13,434
Shares withheld to satisfy tax withholdings	—	—		(67,960)	(6,143)		—		—		—		—		(6,143)
Foreign currency translation gain (loss)	—	—		—	—		—		112		—		—		112
Net income (loss)	—	—		—	—		—		—		893		(280)		613
Balance, June 30, 2019	65,415,670	327		(13,345,514)	(83,820)		1,015,578		(660)		(76,174)		(1,461)		853,790
Exercise of stock options	225,414	1		—	—		2,114		—		—		—		2,115
Issuance of common stock - vesting of restricted stock units	242,789	1		—	—		—		—		—		—		1
Stock-based compensation expense	—	—		—	—		13,169		—		—		—		13,169
Shares withheld to satisfy tax withholdings	—	—		(84,538)	(3,735)		—		—		—		—		(3,735)
Foreign currency translation gain (loss)	—	—		—	—		—		(1,458)		—		—		(1,458)
Net income (loss)	—	—		—	—		—		—		(3,080)		116		(2,964)
Balance, September 30, 2019	65,883,873	$	329	(13,430,052)	$	(87,555)	$	1,030,861	$	(2,118)	$	(79,254)	$	(1,345)	$	860,918

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended
	September 30,
	2020		2019
OPERATING ACTIVITIES:
Net loss	$	(10,338)	$	(20,619)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	85,077		73,167
Provision for doubtful accounts	2,323		1,243
Deferred income taxes	79		(37,626)
Non-cash compensation expense	45,721		43,167
Non-cash interest expense	12,255		17,195
Accretion on contingent consideration and purchase liability	1,308		1,240
Payments of contingent consideration	—		(578)
Fair market value adjustment to contingent consideration liability	(2,056)		—
Gain on acquisition of equity method investment	(4,230)		—
Loss allocation from equity method investments	4,280		1,507
Impairment of right of use assets	1,426		—
Other	556		—
Changes in operating assets and liabilities, net of acquisitions:
Fees receivable, net	(10,825)		6,164
Prepaid expenses and other current assets	(11,139)		(4,784)
Other non-current assets	(1,807)		(6,113)
Accrued expenses and other liabilities	3,393		(9,732)
Accounts payable	12,084		(6,859)
Deferred revenue	1,488		1,231
Other non-current liabilities	2,084		3,242
Net cash provided by operating activities	131,679		61,845

INVESTING ACTIVITIES:
Purchases of property and equipment	(8,824)		(16,098)
Capitalization of internally developed software	(40,257)		(23,649)
Investments in private companies	(13,875)		(3,200)
Acquisitions of businesses, net of cash acquired	(20,257)		(321,571)

Net cash used in investing activities	(83,213)		(364,518)

-continued-

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)


	Nine Months Ended
	September 30,
	2020	2019
FINANCING ACTIVITIES:
Proceeds from issuance of Convertible Notes due 2025	517,500	—
Convertible Notes due 2025 issuance costs	(14,540)	—
Proceeds from borrowings on revolving credit facility	45,000	175,000
Payments on revolving credit facility	(305,000)	(75,000)
Revolving credit facility issuance costs	—	(2,103)
Payments of deferred consideration on prior acquisitions	(1,879)	—
Payments of contingent consideration	—	(171)
Proceeds from exercise of stock options	8,053	7,029
Taxes paid in lieu of shares issued for stock-based compensation	(16,283)	(19,697)
Issuance of restricted stock units	3	4
Net cash provided by financing activities

Price	56.97	EPS	-0
Shares	52	P/E	-145
MCap	2,988	P/FCF	48
Net Debt	-72	EBIT	-51
TEV	2,916	TEV/EBIT	-57
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-06
10-Q	2020-06-30	Filed 2020-08-10
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-K	2013-03-31	Filed 2013-06-14
10-Q	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	2020-11-05
8-K	2020-10-29
8-K	2020-08-17
8-K	2020-08-17
8-K	2020-08-17
8-K	2020-08-06
8-K	2020-06-26
8-K	2020-05-14
8-K	2020-05-07
8-K	2020-03-30
8-K	2020-02-20
8-K	2019-12-06
8-K	2019-11-07
8-K	2019-10-03
8-K	2019-09-27
8-K	2019-08-07
8-K	2019-07-11
8-K	2019-05-16
8-K	2019-05-08
8-K	2019-05-01
8-K	2019-04-01
8-K	2019-03-14
8-K	2019-02-21
8-K	2019-01-09
8-K	2018-12-20
8-K	2018-11-27
8-K	2018-11-07
8-K	2018-10-24
8-K	2018-08-07
8-K	2018-05-25
8-K	2018-05-24
8-K	2018-05-22
8-K	2018-05-21
8-K	2018-05-10
8-K	2018-05-09
8-K	2018-02-22
8-K	2018-01-02

EX-31.1	env20200930ex311.htm
EX-31.2	env20200930ex312.htm
EX-32.1	env20200930ex321.htm
EX-32.2	env20200930ex322.htm

ENV 10Q Quarterly Report

Envestnet Earnings 2020-09-30