Business Wire | Nov 5, 2020 04:06PM EST

Envestnet Reports Third Quarter 2020 Financial Results

Nov. 05, 2020

CHICAGO--(BUSINESS WIRE)--Nov. 05, 2020--Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the three and nine months ended September 30, 2020.

Three months ended Nine months ended

Key Financial September 30, % September 30, %Metrics

(in millionsexcept per 2020 2019 Change 2020 2019 Changeshare data)

GAAP:

Total $ 252.6 $ 236.1 7 % $ 734.4 $ 660.2 11 %revenues

Net income $ 2.3 $ (3.0 ) n/m $ (10.3 ) $ (20.6 ) (50 )%(loss)

Net income(loss) perdiluted share $ 0.03 $ (0.06 ) n/m $ (0.19 ) $ (0.40 ) (53 )%attributableto Envestnet,Inc.



Non-GAAP:

Adjusted $ 252.7 $ 239.3 6 % $ 735.0 $ 666.9 10 %revenues^(1)

Adjusted net $ 181.5 $ 175.0 4 % $ 533.4 $ 488.4 9 %revenues^(1)

Adjusted $ 67.6 $ 54.5 24 % $ 178.0 $ 131.8 35 %EBITDA^(1)

Adjusted net $ 40.2 $ 32.4 24 % $ 103.2 $ 76.3 35 %income^(1)

Adjusted netincome per $ 0.72 $ 0.60 20 % $ 1.88 $ 1.46 29 %diluted share^(1)

n/m - not meaningful

"During the third quarter Envestnet again delivered strong financial results, managing through these uncertain days, while supporting our clients and executing on our strategic plan," said Bill Crager, Chief Executive Officer.

"Our mission is to make financial wellness a reality for everyone. We are building the ecosystem that enables a new standard for personal financial services," concluded Mr. Crager.

Financial Results for the Third Quarter of 2020

Asset-based recurring revenues increased 9% from the third quarter of 2019, and represented 55% of total revenues for the third quarter of 2020 compared to 54% for the third quarter 2019. Subscription-based recurring revenues increased 7% from the third quarter of 2019, and represented 43% of total revenues for the third quarter of 2020, consistent with the third quarter of 2019. Professional services and other non-recurring revenues decreased 22% from the prior year period. Total revenues increased 7% to $252.6 million for the third quarter of 2020 from $236.1 million for the third quarter of 2019.

Total operating expenses for the third quarter of 2020 increased 2% to $240.9 million from $236.2 million in the prior year period. Cost of revenues increased 9% to $78.5 million for the third quarter of 2020 from $71.9 million for the prior year period. Compensation and benefits decreased 1% to $94.4 million for the third quarter of 2020 from $95.6 million for the prior year period. Compensation and benefits were 37% of total revenues for the third quarter of 2020, compared to 40% in the prior year period. General and administration expenses decreased 7% to $39.0 million for the third quarter of 2020 from $42.0 million for the prior year period. General and administrative expenses were 15% of total revenues for the third quarter of 2020, compared to 18% in the prior year period.

Income from operations was $11.7 million for the third quarter of 2020 compared to loss of $0.1 million for the third quarter of 2019. Net income was $2.3 million for the third quarter of 2020 compared to net loss of $3.0 million for the third quarter of 2019. Net income per diluted share attributable to Envestnet, Inc. was $0.03 for the third quarter of 2020 compared to net loss per diluted share attributable to Envestnet, Inc. of $0.06 for the third quarter of 2019.

Adjusted revenues(1) for the third quarter of 2020 increased 6% to $252.7 million from $239.3 million for the prior year period. Adjusted net revenues(1) for the third quarter of 2020 increased 4% to $181.5 million from $175.0 million for the prior year period. Adjusted EBITDA(1) for the third quarter of 2020 increased 24% to $67.6 million from $54.5 million for the prior year period. Adjusted net income(1) increased 24% for the third quarter of 2020 to $40.2 million from $32.4 million for the prior year period. Adjusted net income per diluted share(1) for the third quarter of 2020 increased 20% to $0.72 from $0.60 in the third quarter of 2019.

Balance Sheet and Liquidity

As of September 30, 2020, the Company had $362.9 million in cash and cash equivalents and $862.5 million in outstanding debt. The outstanding debt as of September 30, 2020 included $345 million in convertible notes maturing in 2023 and $517.5 million in convertible notes maturing in 2025. The Company's $500 million revolving credit facility was undrawn as of September 30, 2020.

Outlook

The Company provided the following outlook for the fourth quarter and full year ending December 31, 2020. This outlook is based on the market value of assets on September 30, 2020. We caution that we cannot predict the market value of our assets on any future date and, in particular, in light of recent market volatility. See "Cautionary Statement Regarding Forward-Looking Statements."

In Millions Except 4Q 2020 FY 2020Adjusted EPS

GAAP:

Revenues:

Asset-based $ 141.5 - $ 142.5

Subscription-based 108.0 - 108.5

Total recurring $ 249.5 - $ 251.0 revenues

Professionalservices and other 6.0 - 6.5 revenues

Total revenues $ 255.5 - $ 257.5 $ 989.8 - $ 991.8



Asset-based cost $ 74.0 - $ 74.5 $ 275.6 - $ 276.1 of revenues

Total cost of $ 81.5 - $ 82.0 revenues



Net income (a) - (a) (a) - (a)



Diluted shares 55.5 55.0 outstanding

Net income per (a) - (a) (a) - (a)diluted share



Non-GAAP:

Adjusted revenues ^(1):

Asset-based $ 141.5 - $ 142.5

Subscription-based 108.0 - 108.5

Total recurring $ 249.5 - $ 251.0 revenues

Professionalservices and other 6.0 - 6.5 revenues

Total revenues $ 255.5 - $ 257.5 $ 990.5 - $ 992.5



Adjusted net $ 181.0 - $ 183.5 $ 714.4 - $ 716.9 revenues ^(1)



Adjusted EBITDA^ $ 60.0 - $ 61.0 $ 238.0 - $ 239.0 (1)

Adjusted netincome per diluted $ 0.64 $ 2.51 - $ 2.53 share^(1)

(a) The Company does not forecast net income and net income per diluted share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

Conference Call

Envestnet will host a conference call to discuss third quarter 2020 financial results today at 5:00 p.m. ET. The live webcast and accompanying presentation can be accessed from Envestnet's investor relations website at http://ir.envestnet.com/. A replay of the webcast will be available on the investor relations website following the call.

About Envestnet

Envestnet, Inc. (NYSE: ENV) is transforming the way financial advice and wellness are delivered. Our mission is to empower advisors and financial service providers with innovative technology, solutions, and intelligence to make financial wellness a reality for everyone. Over 105,000 advisors and more than 5,100 companies including: 17 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, leverage the Envestnet platform to grow their business and client relationships.

For more information on Envestnet, please visit www.envestnet.com and follow us on Twitter (@ENVintel).

_________________________________________ (1) Non-GAAP Financial Measures

"Adjusted revenues" excludes the effect of purchase accounting on the fair value of acquired deferred revenue. Under GAAP, we record at fair value the acquired deferred revenue for contracts in effect at the time the entities were acquired. Consequently, revenue related to acquired entities for periods subsequent to the acquisition does not reflect the full amount of revenue that would have been recorded by these entities had they remained stand-alone entities.

"Adjusted net revenues" represents adjusted revenues less asset-based cost of revenues. Under GAAP, we are required to recognize as revenue certain fees paid to investment managers and other third parties needed for implementation of investment solutions included in our assets under management. Those fees also are required to be recorded as cost of revenues. This non-GAAP metric presents adjusted revenues without such fees included, as they have no impact on our profitability.

Adjusted revenues and Adjusted net revenues have limitations as financial measures, should be considered as supplemental in nature and are not meant as a substitute for revenue prepared in accordance with GAAP.

"Adjusted EBITDA" represents net income before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration liability, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, gain on acquisition of equity method investment, loss allocation from equity method investments and (income) loss attributable to non-controlling interest.

"Adjusted net income" represents net income before deferred revenue fair value adjustment, accretion on contingent consideration and purchase liability, non-cash interest expense, non-cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration liability, amortization of acquired intangibles, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, gain on acquisition of equity method investment, loss allocation from equity method investments and (income) loss attributable to non-controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income. The normalized tax rate is based solely on the estimated blended statutory income tax rates in the jurisdictions in which we operate. We monitor the normalized tax rate based on events or trends that could materially impact the rate, including tax legislation changes and changes in the geographic mix of our operations.

"Adjusted net income per diluted share" represents adjusted net income attributable to common stockholders divided by the diluted number of weighted-average shares outstanding.

See reconciliations of Non-GAAP Financial Measures on pages 10-16 of this press release. Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company's Non-GAAP Financial Measures should not be viewed as a substitute for revenues, net income or net income per share determined in accordance with GAAP.

Cautionary Statement Regarding Forward-Looking Statements

The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.'s expected financial performance and outlook for the fourth quarter and full year of 2020, its strategic operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and the Company's actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, a pandemic or health crisis, including the COVID-19 pandemic, and its impact on financial institutions, the global economy or capital markets, as well as our products, clients, vendors and employees, and our results of operations, the full extent of which is currently unknown; changes and volatility in financial and capital markets, which could result in changes in demand for our products or services or in the value of assets on which we earn revenue; the possibility that the anticipated benefits of any of our acquisitions will not be realized to the extent or when expected, difficulty in sustaining rapid revenue growth, which may place significant demands on our administrative, operational and financial resources, the concentration of nearly all of our revenues from the delivery of our solutions and services to clients in the financial services industry, our reliance on a limited number of clients for a material portion of our revenues, the renegotiation of fee percentages or termination of our services by our clients, our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, the impact of market and economic conditions on revenues, our inability to successfully execute the conversion of clients' assets from their technology platform to our technology platforms in a timely and accurate manner, our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium financial applications, compliance failures, adverse judicial or regulatory proceedings against us, liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest, changes in laws and regulations, including tax laws and regulations, general economic conditions, political and regulatory conditions, the impact of fluctuations in market condition and interest rates on the demand for our products and services and the value of assets under management or administration, the impact of market conditions on our ability to issue debt and equity, the impact of fluctuations in interest rates on our cost of borrowing, our financial performance, the results of our investments in research and development, our data center and other infrastructure, our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information, failure of our systems to work properly, our ability to realize operating efficiencies, the advantages of our solutions as compared to those of others, the failure to protect our intellectual property rights, our ability to establish and maintain intellectual property rights, our ability to retain and hire necessary employees and appropriately staff our operations and management's response to these factors. More information regarding these and other risks, uncertainties and factors is contained in our filings with the Securities and Exchange Commission ("SEC") which are available on the SEC's website at www.sec.gov or our Investor Relations website at http://ir.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of November 5, 2020 and, unless required by law, we undertake no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands)

(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



Equity:

Total stockholders' equity 954,673 869,094

Non-controlling interest (1,306 ) (1,518 )

Total liabilities and equity $ 2,101,261 $ 1,801,884

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

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 245,641 227,174 712,228 631,523 revenues

Professionalservices and other 6,918 8,906 22,183 28,668 revenues

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 94,428 95,587 300,423 285,590 benefits

General and 38,979 42,016 118,537 124,961 administration

Depreciation and 28,951 26,735 85,077 73,167 amortization

Total operating 240,903 236,208 726,364 689,313 expenses



Income (loss) from 11,656 (128 ) 8,047 (29,122 )operations

Other expense, net (8,836 ) (9,813 ) (18,546 ) (23,088 )

Income (loss)before income tax 2,820 (9,941 ) (10,499 ) (52,210 )provision (benefit)



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



Net income (loss) 2,323 (2,964 ) (10,338 ) (20,619 )

Add: Net (income)loss attributable (413 ) (116 ) (12 ) 247 to non-controllinginterest

Net income (loss)attributable to $ 1,910 $ (3,080 ) $ (10,350 ) $ (20,372 )Envestnet, Inc.



Net income (loss)per share attributable toEnvestnet, Inc.:

Basic $ 0.04 $ (0.06 ) $ (0.19 ) $ (0.40 )



Diluted $ 0.03 $ (0.06 ) $ (0.19 ) $ (0.40 )



Weighted averagecommon 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

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 investment

4,280

1,507

Impairment of right of use assets

1,426

-

Other

556

-

Changes in operating assets and liabilities, net of acquisitions:

Fees receivables, 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

)

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 1,308 1,240 liability

Payments of contingent consideration - (578 )

Fair market value adjustment to contingent (2,056 ) - consideration liability

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

Loss allocation from equity method investment 4,280 1,507

Impairment of right of use assets 1,426 -

Other 556 -

Changes in operating assets and liabilities, net of acquisitions:

Fees receivables, 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 )

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 past 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

232,854

85,062

EFFECT OF EXCHANGE RATE CHANGES ON CASH

(1,009

)

(178

)

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

280,311

(217,789

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

82,755

289,671

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (a)

$

363,066

$

71,882

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

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 past (1,879 ) - acquisitions

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 (16,283 ) (19,697 )compensation

Issuance of restricted stock units 3 4

Net cash provided by financing activities 232,854 85,062



EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,009 ) (178 )



INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND 280,311 (217,789 )RESTRICTED CASH



CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING 82,755 289,671 OF PERIOD



CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF $ 363,066 $ 71,882 PERIOD (a)

(a) The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the Condensed Consolidated Balance Sheets:

September September 30, 30,

2020 2019

Cash and cash equivalents $ 362,918 $ 71,632

Restricted cash included in prepaid expenses and - 82 other current assets

Restricted cash included in other non-current assets 148 168

Total cash, cash equivalents and restricted cash $ 363,066 $ 71,882

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Total revenues

$

252,559

$

236,080

$

734,411

$

660,191

Deferred revenue fair value adjustment (a)

91

3,250

607

6,670

Adjusted revenues

252,650

239,330

735,018

666,861

Asset-based cost of revenues

(71,133

)

(64,339

)

(201,600

)

(178,474

)

Adjusted net revenues

$

181,517

$

174,991

$

533,418

$

488,387

Net income (loss)

$

2,323

$

(2,964

)

$

(10,338

)

$

(20,619

)

Add (deduct):

Deferred revenue fair value adjustment (a)

91

3,250

607

6,670

Interest income (b)

(262

)

(448

)

(850

)

(2,859

)

Interest expense (b)

8,139

8,986

21,907

24,345

Accretion on contingent consideration and purchase liability (c)

398

498

1,308

1,240

Income tax provision (benefit)

497

(6,977

)

(161

)

(31,591

)

Depreciation and amortization

28,951

26,735

85,077

73,167

Non-cash compensation expense (d)

15,852

15,389

43,197

43,241

Restructuring charges and transaction costs (e)

4,993

4,151

14,461

24,725

Severance (f)

2,715

2,387

18,566

8,147

Fair market value adjustment on contingent consideration liability (c)

(74

)

-

(2,056

)

-

Non-recurring litigation and regulatory related expenses (c)

1,809

2,065

6,029

2,065

Foreign currency (b)

(37

)

363

(68

)

208

Non-income tax expense adjustment (c)

1,795

362

1,341

1,480

Non-recurring gain (b)

-

-

(4,230

)

-

Loss allocation from equity method investments (b)

994

957

4,280

1,507

(Income) loss attributable to non-controlling interest

(603

)

(210

)

(1,103

)

31

Adjusted EBITDA

$

67,581

$

54,544

$

177,967

$

131,757

Reconciliation of Non-GAAP Financial Measures

(in thousands)

(unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Total revenues $ 252,559 $ 236,080 $ 734,411 $ 660,191

Deferred revenue fair 91 3,250 607 6,670 value adjustment ^(a)

Adjusted revenues 252,650 239,330 735,018 666,861

Asset-based cost of (71,133 ) (64,339 ) (201,600 ) (178,474 )revenues

Adjusted net revenues $ 181,517 $ 174,991 $ 533,418 $ 488,387



Net income (loss) $ 2,323 $ (2,964 ) $ (10,338 ) $ (20,619 )

Add (deduct):

Deferred revenue fair 91 3,250 607 6,670 value adjustment ^(a)

Interest income ^(b) (262 ) (448 ) (850 ) (2,859 )

Interest expense ^(b) 8,139 8,986 21,907 24,345

Accretion on contingentconsideration and 398 498 1,308 1,240 purchase liability ^(c)

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

Depreciation and 28,951 26,735 85,077 73,167 amortization

Non-cash compensation 15,852 15,389 43,197 43,241 expense ^(d)

Restructuring chargesand transaction costs ^ 4,993 4,151 14,461 24,725 (e)

Severance ^(f) 2,715 2,387 18,566 8,147

Fair market valueadjustment oncontingent (74 ) - (2,056 ) - consideration liability^(c)

Non-recurringlitigation and 1,809 2,065 6,029 2,065 regulatory relatedexpenses ^(c)

Foreign currency ^(b) (37 ) 363 (68 ) 208

Non-income tax expense 1,795 362 1,341 1,480 adjustment ^(c)

Non-recurring gain ^(b) - - (4,230 ) -

Loss allocation fromequity method 994 957 4,280 1,507 investments ^(b)

(Income) lossattributable to (603 ) (210 ) (1,103 ) 31 non-controllinginterest

Adjusted EBITDA $ 67,581 $ 54,544 $ 177,967 $ 131,757

(a)

For the three months ended September 30, 2020 and 2019, $91 and $3,249 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019, $605 and $6,664 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. The remaining amounts for all periods were included within professional services and other revenues in the condensed consolidated statements of operations.

(b)

Included within other expense, net in the condensed consolidated statements of operations.

(c)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(d)

For the three months ended September 30, 2020, the entire amount was included in compensation and benefits in the condensed consolidated statements of operations. For the nine months ended September 30, 2020, $45,721 was included in compensation and benefits and a fair value adjustment of $(2,524) included in other expense, net, in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

(e)

For the three months ended September 30, 2020 and 2019, $3,992 and $3,240 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2020 and 2019, $969 and $911 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019 , $11,485 and $14,071 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019, $2,764 and $10,654 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. The remaining amounts for the 2020 periods were included within other expense, net in the condensed consolidated statements of operations.

(f)

Included within compensation and benefits in the condensed consolidated statements of operations.

For the three months ended September 30, 2020 and 2019, $91 and $3,249 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. For the nine months (a) ended September 30, 2020 and 2019, $605 and $6,664 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. The remaining amounts for all periods were included within professional services and other revenues in the condensed consolidated statements of operations.

(b) Included within other expense, net in the condensed consolidated statements of operations.

(c) Included within general and administrative expenses in the condensed consolidated statements of operations.

For the three months ended September 30, 2020, the entire amount was included in compensation and benefits in the condensed consolidated statements of operations. For the nine months ended September 30, 2020, (d) $45,721 was included in compensation and benefits and a fair value adjustment of $(2,524) included in other expense, net, in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

For the three months ended September 30, 2020 and 2019, $3,992 and $3,240 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2020 and 2019, $969 and $911 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months (e) ended September 30, 2020 and 2019 , $11,485 and $14,071 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019, $2,764 and $10,654 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. The remaining amounts for the 2020 periods were included within other expense, net in the condensed consolidated statements of operations.

(f) Included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2020

2019

2020

2019

Net income (loss)

$

2,323

$

(2,964

)

$

(10,338

)

$

(20,619

)

Income tax provision (benefit) (a)

497

(6,977

)

(161

)

(31,591

)

Loss before income tax provision (benefit)

2,820

(9,941

)

(10,499

)

(52,210

)

Add (deduct):

Deferred revenue fair value adjustment (b)

91

3,250

607

6,670

Accretion on contingent consideration and purchase liability (d)

398

498

1,308

1,240

Non-cash interest expense (c)

4,738

5,006

10,682

14,268

Non-cash compensation expense (f)

15,852

15,389

43,197

43,241

Restructuring charges and transaction costs (e)

4,993

4,151

14,461

24,725

Severance (g)

2,715

2,387

18,566

8,147

Fair market value adjustment on contingent consideration liability (d)

(74

)

-

(2,056

)

-

Amortization of acquired intangibles (h)

18,510

19,242

56,014

51,048

Non-recurring litigation and regulatory related expenses (d)

1,809

2,065

6,029

2,065

Foreign currency (c)

(37

)

363

(68

)

208

Non-income tax expense adjustment (d)

1,795

362

1,341

1,480

Non-recurring gain (c)

-

-

(4,230

)

-

Loss allocation from equity method investments (c)

994

957

4,280

1,507

(Income) loss attributable to non-controlling interest

(603

)

(210

)

(1,103

)

31

Adjusted net income before income tax effect

54,001

43,519

138,529

102,420

Income tax effect (i)

(13,772

)

(11,097

)

(35,325

)

(26,117

)

Adjusted net income

$

40,229

$

32,422

$

103,204

$

76,303

Basic number of weighted-average shares outstanding

53,800,048

52,215,469

53,464,101

50,414,427

Effect of dilutive shares:

Options to purchase common stock

331,728

953,184

458,232

1,107,995

Unvested restricted stock units

610,442

548,057

548,858

662,364

Convertible notes

730,267

9,875

280,375

11,637

Warrants

86,498

-

46,562

-

Diluted number of weighted-average shares outstanding

55,558,983

53,726,585

54,798,128

52,196,423

Adjusted net income per share - diluted

$

0.72

$

0.60

$

1.88

$

1.46

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, except share and per share information)

(unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2020 2019 2020 2019

Net income (loss) $ 2,323 $ (2,964 ) $ (10,338 ) $ (20,619 )

Income taxprovision (benefit) 497 (6,977 ) (161 ) (31,591 )^(a)

Loss before incometax provision 2,820 (9,941 ) (10,499 ) (52,210 )(benefit)

Add (deduct):

Deferred revenuefair value 91 3,250 607 6,670 adjustment ^(b)

Accretion oncontingentconsideration and 398 498 1,308 1,240 purchase liability^(d)

Non-cash interest 4,738 5,006 10,682 14,268 expense ^(c)

Non-cashcompensation 15,852 15,389 43,197 43,241 expense ^(f)

Restructuringcharges and 4,993 4,151 14,461 24,725 transaction costs ^(e)

Severance ^(g) 2,715 2,387 18,566 8,147

Fair market valueadjustment oncontingent (74 ) - (2,056 ) - considerationliability ^(d)

Amortization ofacquired 18,510 19,242 56,014 51,048 intangibles ^(h)

Non-recurringlitigation and 1,809 2,065 6,029 2,065 regulatory relatedexpenses ^(d)

Foreign currency ^ (37 ) 363 (68 ) 208 (c)

Non-income taxexpense adjustment 1,795 362 1,341 1,480 ^(d)

Non-recurring gain - - (4,230 ) - ^(c)

Loss allocationfrom equity method 994 957 4,280 1,507 investments ^(c)

(Income) lossattributable to (603 ) (210 ) (1,103 ) 31 non-controllinginterest

Adjusted net incomebefore income tax 54,001 43,519 138,529 102,420 effect

Income tax effect ^ (13,772 ) (11,097 ) (35,325 ) (26,117 )(i)

Adjusted net income $ 40,229 $ 32,422 $ 103,204 $ 76,303



Basic number ofweighted-average 53,800,048 52,215,469 53,464,101 50,414,427 shares outstanding

Effect of dilutive shares:

Options to purchase 331,728 953,184 458,232 1,107,995 common stock

Unvested restricted 610,442 548,057 548,858 662,364 stock units

Convertible notes 730,267 9,875 280,375 11,637

Warrants 86,498 - 46,562 -

Diluted number ofweighted-average 55,558,983 53,726,585 54,798,128 52,196,423 shares outstanding



Adjusted net income $ 0.72 $ 0.60 $ 1.88 $ 1.46 per share - diluted

(a)

For the three months ended September 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled 17.6% and 70.2%, respectively. For the nine months ended September 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled 1.5% and 60.5%, respectively.

(b)

For the three months ended September 30, 2020 and 2019, $91 and $3,249 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019, $605 and $6,664 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. The remaining amounts for all periods were included within professional services and other revenues in the condensed consolidated statements of operations.

(c)

Included within other expense, net in the condensed consolidated statements of operations.

(d)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(e)

For the three months ended September 30, 2020 and 2019, $3,992 and $3,240 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2020 and 2019, $969 and $911 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019, $11,485 and $14,071 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019, $2,764 and $10,654 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. The remaining amounts for the 2020 periods were included within other expense, net in the condensed consolidated statements of operations.

(f)

For the three months ended September 30, 2020, $15,852 included in compensation and benefits in the condensed consolidated statements of operations. For the nine months ended September 30, 2020, $45,721 included in compensation and benefits and a fair value adjustment of $(2,524) included in other expense, net, in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

(g)

Included within compensation and benefits in the condensed consolidated statements of operations.

(h)

Included within depreciation and amortization in the condensed consolidated statements of operations.

(i)

An estimated normalized effective tax rate of 25.5% have been used to compute adjusted net income for the three and nine months ended September 30, 2020 and 2019.

For the three months ended September 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled 17.6% and 70.2%, (a) respectively. For the nine months ended September 30, 2020 and 2019, the effective tax rate computed in accordance with GAAP equaled 1.5% and 60.5%, respectively.

For the three months ended September 30, 2020 and 2019, $91 and $3,249 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. For the nine months (b) ended September 30, 2020 and 2019, $605 and $6,664 were included within subscription-based revenues, respectively, in the condensed consolidated statements of operations. The remaining amounts for all periods were included within professional services and other revenues in the condensed consolidated statements of operations.

(c) Included within other expense, net in the condensed consolidated statements of operations.

(d) Included within general and administrative expenses in the condensed consolidated statements of operations.

For the three months ended September 30, 2020 and 2019, $3,992 and $3,240 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the three months ended September 30, 2020 and 2019, $969 and $911 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. For the nine months (e) ended September 30, 2020 and 2019, $11,485 and $14,071 were included within general and administrative expenses, respectively, in the condensed consolidated statements of operations. For the nine months ended September 30, 2020 and 2019, $2,764 and $10,654 were included within compensation and benefits, respectively, in the condensed consolidated statements of operations. The remaining amounts for the 2020 periods were included within other expense, net in the condensed consolidated statements of operations.

For the three months ended September 30, 2020, $15,852 included in compensation and benefits in the condensed consolidated statements of operations. For the nine months ended September 30, 2020, $45,721 (f) included in compensation and benefits and a fair value adjustment of $ (2,524) included in other expense, net, in the condensed consolidated statements of operations. All of 2019 included in compensation and benefits in the condensed consolidated statements of operations.

(g) Included within compensation and benefits in the condensed consolidated statements of operations.

(h) Included within depreciation and amortization in the condensed consolidated statements of operations.

An estimated normalized effective tax rate of 25.5% have been used to (i) compute adjusted net income for the three and nine months ended September 30, 2020 and 2019.

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

Three months ended September 30, 2020

Envestnet

Wealth Solutions

Envestnet Data

& Analytics

Nonsegment

Total

Total Revenues

$

204,294

$

48,265

$

-

$

252,559

Deferred revenue fair value adjustment (a)

91

-

-

91

Adjusted revenues

204,385

48,265

-

252,650

Less: Asset-based cost of revenues

(71,133

)

-

-

(71,133

)

Adjusted net revenues

$

133,252

$

48,265

$

-

$

181,517

Revenues:

Asset-based

$

137,744

$

-

$

-

$

137,744

Subscription-based

62,783

45,114

-

107,897

Total recurring revenues

200,527

45,114

-

245,641

Professional services and other revenues

3,767

3,151

-

6,918

Total revenues

204,294

48,265

-

252,559

Operating expenses:

Cost of revenues:

Asset-based

71,133

-

-

71,133

Subscription-based

1,272

6,019

-

7,291

Professional services and other

30

91

-

121

Total cost of revenues

72,435

6,110

-

78,545

Compensation and benefits

59,522

26,540

8,366

94,428

General and administration

22,248

8,308

8,423

38,979

Depreciation and amortization

20,406

8,545

-

28,951

Total operating expenses

$

174,611

$

49,503

$

16,789

$

240,903

Income (loss) from operations

$

29,683

$

(1,238

)

$

(16,789

)

$

11,656

Add:

Deferred revenue fair value adjustment (a)

91

-

-

91

Accretion on contingent consideration and purchase liability (b)

341

57

-

398

Depreciation and amortization

20,406

8,545

-

28,951

Non-cash compensation expense (c)

8,685

4,458

2,709

15,852

Restructuring charges and transaction costs (d)

944

33

4,016

4,993

Non-income tax expense adjustment (b)

1,860

(65

)

-

1,795

Severance (c)

2,154

495

66

2,715

Fair market value adjustment on contingent consideration liability (b)

-

(74

)

-

(74

)

Non-recurring litigation and regulatory related expenses (b)

-

1,809

-

1,809

Income attributable to non-controlling interest

(603

)

-

-

(603

)

Other

(2

)

-

-

(2

)

Adjusted EBITDA

$

63,559

$

14,020

$

(9,998

)

$

67,581

Reconciliation of Non-GAAP Financial Measures

Segment Information

(in thousands)

(unaudited)

Three months ended September 30, 2020

Envestnet Envestnet Data Wealth Nonsegment Total Solutions & Analytics

Total Revenues $ 204,294 $ 48,265 $ - $ 252,559

Deferred revenue fair 91 - - 91 value adjustment ^(a)

Adjusted revenues 204,385 48,265 - 252,650

Less: Asset-based cost (71,133 ) - - (71,133 )of revenues

Adjusted net revenues $ 133,252 $ 48,265 $ - $ 181,517



Revenues:

Asset-based $ 137,744 $ - $ - $ 137,744

Subscription-based 62,783 45,114 - 107,897

Total recurring revenues 200,527 45,114 - 245,641

Professional services 3,767 3,151 - 6,918 and other revenues

Total revenues 204,294 48,265 - 252,559



Operating expenses:

Cost of revenues:

Asset-based 71,133 - - 71,133

Subscription-based 1,272 6,019 - 7,291

Professional services 30 91 - 121 and other

Total cost of revenues 72,435 6,110 - 78,545

Compensation and 59,522 26,540 8,366 94,428 benefits

General and 22,248 8,308 8,423 38,979 administration

Depreciation and 20,406 8,545 - 28,951 amortization

Total operating expenses $ 174,611 $ 49,503 $ 16,789 $ 240,903



Income (loss) from $ 29,683 $ (1,238 ) $ (16,789 ) $ 11,656 operations

Add:

Deferred revenue fair 91 - - 91 value adjustment ^(a)

Accretion on contingentconsideration and 341 57 - 398 purchase liability ^(b)

Depreciation and 20,406 8,545 - 28,951 amortization

Non-cash compensation 8,685 4,458 2,709 15,852 expense ^(c)

Restructuring chargesand transaction costs ^ 944 33 4,016 4,993 (d)

Non-income tax expense 1,860 (65 ) - 1,795 adjustment ^(b)

Severance ^(c) 2,154 495 66 2,715

Fair market valueadjustment on contingent - (74 ) - (74 )consideration liability^(b)

Non-recurring litigationand regulatory related - 1,809 - 1,809 expenses ^(b)

Income attributable to (603 ) - - (603 )non-controlling interest

Other (2 ) - - (2 )

Adjusted EBITDA $ 63,559 $ 14,020 $ (9,998 ) $ 67,581

(a)

Included within subscription-based revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

$3,992 included within general and administrative expenses, $969 included within compensation and benefits and $32 included within other expense, net in the condensed consolidated statements of operations.

(a) Included within subscription-based revenues in the condensed consolidated statements of operations.

(b) Included within general and administrative expenses in the condensed consolidated statements of operations.

(c) Included within compensation and benefits in the condensed consolidated statements of operations.

$3,992 included within general and administrative expenses, $969 (d) included within compensation and benefits and $32 included within other expense, net in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

Nine months ended September 30, 2020

Envestnet

Wealth Solutions

Envestnet Data

& Analytics

Nonsegment

Total

Total Revenues

$

590,399

$

144,012

$

-

$

734,411

Deferred revenue fair value adjustment (a)

607

-

-

607

Adjusted revenues

591,006

144,012

-

735,018

Less: Asset-based cost of revenues

(201,600

)

-

-

(201,600

)

Adjusted net revenues

$

389,406

$

144,012

$

-

$

533,418

Revenues:

Asset-based

$

394,801

$

-

$

-

$

394,801

Subscription-based

184,516

132,911

-

317,427

Total recurring revenues

579,317

132,911

-

712,228

Professional services and other revenues

11,082

11,101

-

22,183

Total revenues

590,399

144,012

-

734,411

Operating expenses:

Cost of revenues:

Asset-based

201,600

-

-

201,600

Subscription-based

3,691

16,684

-

20,375

Professional services and other

47

305

-

352

Total cost of revenues

205,338

16,989

-

222,327

Compensation and benefits

194,906

82,455

23,062

300,423

General and administration

69,358

26,162

23,017

118,537

Depreciation and amortization

59,907

25,170

-

85,077

Total operating expenses

$

529,509

$

150,776

$

46,079

$

726,364

Income (loss) from operations

$

60,890

$

(6,764

)

$

(46,079

)

$

8,047

Add:

Deferred revenue fair value adjustment (a)

607

-

-

607

Accretion on contingent consideration and purchase liability (b)

1,087

221

-

1,308

Depreciation and amortization

59,907

25,170

-

85,077

Non-cash compensation expense (c)

27,437

11,665

6,619

45,721

Restructuring charges and transaction costs (d)

5,864

489

8,108

14,461

Non-income tax expense adjustment (b)

1,532

(191

)

-

1,341

Severance (c)

14,593

2,587

1,386

18,566

Fair market value adjustment on contingent consideration liability (b)

-

(2,056

)

-

(2,056

)

Non-recurring litigation and regulatory related expenses (b)

-

6,029

-

6,029

Income attributable to non-controlling interest

(1,103

)

-

-

(1,103

)

Other

(31

)

-

-

(31

)

Adjusted EBITDA

$

170,783

$

37,150

$

(29,966

)

$

177,967

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

Nine months ended September 30, 2020

Envestnet Envestnet Data Nonsegment Total Wealth Solutions & Analytics

Total Revenues $ 590,399 $ 144,012 $ - $ 734,411

Deferred revenue fair 607 - - 607 value adjustment ^(a)

Adjusted revenues 591,006 144,012 - 735,018

Less: Asset-based cost (201,600 ) - - (201,600 )of revenues

Adjusted net revenues $ 389,406 $ 144,012 $ - $ 533,418



Revenues:

Asset-based $ 394,801 $ - $ - $ 394,801

Subscription-based 184,516 132,911 - 317,427

Total recurring 579,317 132,911 - 712,228 revenues

Professional services 11,082 11,101 - 22,183 and other revenues

Total revenues 590,399 144,012 - 734,411



Operating expenses:

Cost of revenues:

Asset-based 201,600 - - 201,600

Subscription-based 3,691 16,684 - 20,375

Professional services 47 305 - 352 and other

Total cost of revenues 205,338 16,989 - 222,327

Compensation and 194,906 82,455 23,062 300,423 benefits

General and 69,358 26,162 23,017 118,537 administration

Depreciation and 59,907 25,170 - 85,077 amortization

Total operating $ 529,509 $ 150,776 $ 46,079 $ 726,364 expenses



Income (loss) from $ 60,890 $ (6,764 ) $ (46,079 ) $ 8,047 operations

Add:

Deferred revenue fair 607 - - 607 value adjustment ^(a)

Accretion on contingentconsideration and 1,087 221 - 1,308 purchase liability ^(b)

Depreciation and 59,907 25,170 - 85,077 amortization

Non-cash compensation 27,437 11,665 6,619 45,721 expense ^(c)

Restructuring chargesand transaction costs ^ 5,864 489 8,108 14,461 (d)

Non-income tax expense 1,532 (191 ) - 1,341 adjustment ^(b)

Severance ^(c) 14,593 2,587 1,386 18,566

Fair market valueadjustment oncontingent - (2,056 ) - (2,056 )consideration liability^ (b)

Non-recurringlitigation and - 6,029 - 6,029 regulatory relatedexpenses ^(b)

Income attributable tonon-controlling (1,103 ) - - (1,103 )interest

Other (31 ) - - (31 )

Adjusted EBITDA $ 170,783 $ 37,150 $ (29,966 ) $ 177,967

(a)

$605 included within subscription-based revenues and $2 included within professional services and other revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

$11,485 included within general and administrative expenses, $2,764 included within compensation and benefits and $212 included within other expense, net in the condensed consolidated statements of operations.

$605 included within subscription-based revenues and $2 included within (a) professional services and other revenues in the condensed consolidated statements of operations.

(b) Included within general and administrative expenses in the condensed consolidated statements of operations.

(c) Included within compensation and benefits in the condensed consolidated statements of operations.

$11,485 included within general and administrative expenses, $2,764 (d) included within compensation and benefits and $212 included within other expense, net in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

Three months ended September 30, 2019

Envestnet

Wealth Solutions

Envestnet Data

& Analytics

Nonsegment

Total

Revenues

$

188,224

$

47,856

$

-

$

236,080

Deferred revenue fair value adjustment (a)

3,250

-

-

3,250

Adjusted revenues

191,474

47,856

-

239,330

Less: Asset-based cost of revenues

(64,339

)

-

-

(64,339

)

Adjusted net revenues

$

127,135

$

47,856

$

-

$

174,991

Revenues:

Asset-based

$

126,591

$

-

$

-

$

126,591

Subscription-based

57,353

43,230

-

100,583

Total recurring revenues

183,944

43,230

-

227,174

Professional services and other revenues

4,280

4,626

-

8,906

Total revenues

188,224

47,856

-

236,080

Operating expenses:

Cost of revenues:

Asset-based

64,339

-

-

64,339

Subscription-based

1,248

6,030

-

7,278

Professional services and other

165

88

-

253

Total cost of revenues

65,752

6,118

-

71,870

Compensation and benefits

60,836

28,956

5,795

95,587

General and administration

25,476

11,573

4,967

42,016

Depreciation and amortization

18,414

8,321

-

26,735

Total operating expenses

$

170,478

$

54,968

$

10,762

$

236,208

Income (loss) from operations

$

17,746

$

(7,112

)

$

(10,762

)

$

(128

)

Add:

Deferred revenue fair value adjustment (a)

3,250

-

-

3,250

Accretion on contingent consideration and purchase liability (b)

498

-

-

498

Depreciation and amortization

18,414

8,321

-

26,735

Non-cash compensation expense (c)

9,317

3,844

2,228

15,389

Restructuring charges and transaction costs (d)

733

624

2,794

4,151

Non-income tax expense adjustment (b)

299

63

-

362

Severance (c)

1,076

1,218

93

2,387

Non-recurring litigation and regulatory related expenses (b)

-

2,065

-

2,065

Loss attributable to non-controlling interest

(210

)

-

-

(210

)

Other

46

(1

)

-

45

Adjusted EBITDA

$

51,169

$

9,022

$

(5,647

)

$

54,544

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

Three months ended September 30, 2019

Envestnet Envestnet Data Wealth Nonsegment Total Solutions & Analytics

Revenues $ 188,224 $ 47,856 $ - $ 236,080

Deferred revenue fair 3,250 - - 3,250 value adjustment ^(a)

Adjusted revenues 191,474 47,856 - 239,330

Less: Asset-based cost (64,339 ) - - (64,339 )of revenues

Adjusted net revenues $ 127,135 $ 47,856 $ - $ 174,991



Revenues:

Asset-based $ 126,591 $ - $ - $ 126,591

Subscription-based 57,353 43,230 - 100,583

Total recurring revenues 183,944 43,230 - 227,174

Professional services 4,280 4,626 - 8,906 and other revenues

Total revenues 188,224 47,856 - 236,080



Operating expenses:

Cost of revenues:

Asset-based 64,339 - - 64,339

Subscription-based 1,248 6,030 - 7,278

Professional services 165 88 - 253 and other

Total cost of revenues 65,752 6,118 - 71,870

Compensation and 60,836 28,956 5,795 95,587 benefits

General and 25,476 11,573 4,967 42,016 administration

Depreciation and 18,414 8,321 - 26,735 amortization

Total operating expenses $ 170,478 $ 54,968 $ 10,762 $ 236,208



Income (loss) from $ 17,746 $ (7,112 ) $ (10,762 ) $ (128 )operations

Add:

Deferred revenue fair 3,250 - - 3,250 value adjustment ^(a)

Accretion on contingentconsideration and 498 - - 498 purchase liability ^(b)

Depreciation and 18,414 8,321 - 26,735 amortization

Non-cash compensation 9,317 3,844 2,228 15,389 expense ^(c)

Restructuring chargesand transaction costs ^ 733 624 2,794 4,151 (d)

Non-income tax expense 299 63 - 362 adjustment ^(b)

Severance ^(c) 1,076 1,218 93 2,387

Non-recurring litigationand regulatory related - 2,065 - 2,065 expenses ^(b)

Loss attributable to (210 ) - - (210 )non-controlling interest

Other 46 (1 ) - 45

Adjusted EBITDA $ 51,169 $ 9,022 $ (5,647 ) $ 54,544

(a)

$3,249 included within subscription-based revenues and $1 included within professional services and other revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

$3,240 included within general and administrative expenses and $911 included within compensation and benefits in the condensed consolidated statements of operations.

$3,249 included within subscription-based revenues and $1 included (a) within professional services and other revenues in the condensed consolidated statements of operations.

(b) Included within general and administrative expenses in the condensed consolidated statements of operations.

(c) Included within compensation and benefits in the condensed consolidated statements of operations.

$3,240 included within general and administrative expenses and $911 (d) included within compensation and benefits in the condensed consolidated statements of operations.

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

Nine Months Ended September 30, 2019

Envestnet

Wealth Solutions

Envestnet Data

& Analytics

Nonsegment

Total

Revenues

$

517,819

$

142,372

$

-

$

660,191

Deferred revenue fair value adjustment (a)

6,670

-

-

6,670

Adjusted revenues

524,489

142,372

-

666,861

Less: Asset-based cost of revenues

(178,474

)

-

-

(178,474

)

Adjusted net revenues

$

346,015

$

142,372

$

-

$

488,387

Revenues:

Asset-based

$

355,595

$

-

$

-

$

355,595

Subscription-based

148,457

127,471

-

275,928

Total recurring revenues

504,052

127,471

-

631,523

Professional services and other revenues

13,767

14,901

-

28,668

Total revenues

517,819

142,372

-

660,191

Operating expenses:

Cost of revenues:

Asset-based

178,474

-

-

178,474

Subscription-based

4,371

17,281

-

21,652

Professional services and other

5,012

457

-

5,469

Total cost of revenues

187,857

17,738

-

205,595

Compensation and benefits

165,610

91,913

28,067

285,590

General and administration

71,326

29,611

24,024

124,961

Depreciation and amortization

46,057

27,110

-

73,167

Total operating expenses

$

470,850

$

166,372

$

52,091

$

689,313

Income (loss) from operations

$

46,969

$

(24,000

)

$

(52,091

)

$

(29,122

)

Add:

Deferred revenue fair value adjustment (a)

6,670

-

-

6,670

Accretion on contingent consideration and purchase liability (b)

1,240

-

-

1,240

Depreciation and amortization

46,057

27,110

-

73,167

Non-cash compensation expense (c)

23,586

11,799

7,856

43,241

Restructuring charges and transaction costs (d)

1,789

1,393

21,543

24,725

Non-income tax expense adjustment (b)

1,407

73

-

1,480

Severance (c)

2,244

5,714

189

8,147

Non-recurring litigation and regulator related expenses (b)

-

2,065

-

2,065

Loss attributable to non-controlling interest

31

-

-

31

Other

111

-

2

113

Adjusted EBITDA

$

130,104

$

24,154

$

(22,501

)

$

131,757

Reconciliation of Non-GAAP Financial Measures

Segment Information (continued)

(in thousands)

(unaudited)

Nine Months Ended September 30, 2019

Envestnet Envestnet Data Nonsegment Total Wealth Solutions & Analytics

Revenues $ 517,819 $ 142,372 $ - $ 660,191

Deferred revenue fair 6,670 - - 6,670 value adjustment ^(a)

Adjusted revenues 524,489 142,372 - 666,861

Less: Asset-based cost (178,474 ) - - (178,474 )of revenues

Adjusted net revenues $ 346,015 $ 142,372 $ - $ 488,387



Revenues:

Asset-based $ 355,595 $ - $ - $ 355,595

Subscription-based 148,457 127,471 - 275,928

Total recurring 504,052 127,471 - 631,523 revenues

Professional services 13,767 14,901 - 28,668 and other revenues

Total revenues 517,819 142,372 - 660,191



Operating expenses:

Cost of revenues:

Asset-based 178,474 - - 178,474

Subscription-based 4,371 17,281 - 21,652

Professional services 5,012 457 - 5,469 and other

Total cost of revenues 187,857 17,738 - 205,595

Compensation and 165,610 91,913 28,067 285,590 benefits

General and 71,326 29,611 24,024 124,961 administration

Depreciation and 46,057 27,110 - 73,167 amortization

Total operating $ 470,850 $ 166,372 $ 52,091 $ 689,313 expenses



Income (loss) from $ 46,969 $ (24,000 ) $ (52,091 ) $ (29,122 )operations

Add:

Deferred revenue fair 6,670 - - 6,670 value adjustment ^(a)

Accretion on contingentconsideration and 1,240 - - 1,240 purchase liability ^(b)

Depreciation and 46,057 27,110 - 73,167 amortization

Non-cash compensation 23,586 11,799 7,856 43,241 expense ^(c)

Restructuring chargesand transaction costs ^ 1,789 1,393 21,543 24,725 (d)

Non-income tax expense 1,407 73 - 1,480 adjustment ^(b)

Severance ^(c) 2,244 5,714 189 8,147

Non-recurringlitigation and - 2,065 - 2,065 regulator relatedexpenses ^(b)

Loss attributable tonon-controlling 31 - - 31 interest

Other 111 - 2 113

Adjusted EBITDA $ 130,104 $ 24,154 $ (22,501 ) $ 131,757

(a)

$6,664 included within subscription-based revenues and $6 included within professional services and other revenues in the condensed consolidated statements of operations.

(b)

Included within general and administrative expenses in the condensed consolidated statements of operations.

(c)

Included within compensation and benefits in the condensed consolidated statements of operations.

(d)

$14,071 included within general and administrative expenses and $10,654 included within compensation and benefits in the condensed consolidated statements of operations.

$6,664 included within subscription-based revenues and $6 included (a) within professional services and other revenues in the condensed consolidated statements of operations.

(b) Included within general and administrative expenses in the condensed consolidated statements of operations.

(c) Included within compensation and benefits in the condensed consolidated statements of operations.

$14,071 included within general and administrative expenses and $10,654 (d) included within compensation and benefits in the condensed consolidated statements of operations.

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

As of

September 30,

December 31,

March 31,

June 30,

September 30,

2019

2019

2020

2020

2020

(in millions, except accounts and advisors data)

Platform Assets

Assets under Management ("AUM")

$

188,739

$

207,083

$

185,065

$

215,994

$

228,905

Assets under Administration ("AUA")

316,742

343,505

312,472

344,957

375,860

Total AUM/A

505,481

550,588

497,537

560,951

604,765

Subscription

2,947,582

3,205,281

2,875,394

3,247,400

3,498,353

Total Platform Assets

$

3,453,063

$

3,755,869

$

3,372,931

$

3,808,351

$

4,103,118

Platform Accounts

AUM

934,811

935,039

970,896

1,007,386

1,018,817

AUA

1,136,430

1,193,882

1,254,856

1,252,247

1,318,730

Total AUM/A

2,071,241

2,128,921

2,225,752

2,259,633

2,337,547

Subscription

9,692,714

9,793,175

10,090,172

10,003,156

10,639,399

Total Platform Accounts

11,763,955

11,922,096

12,315,924

12,262,789

12,976,946

Advisors

AUM/A

39,735

40,563

40,971

41,206

41,450

Subscription

60,319

61,180

62,077

62,404

63,862

Total Advisors

100,054

101,743

103,048

103,610

105,312

The following table summarizes the changes in AUM and AUA for the three months ended September 30, 2020:

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

As of

September 30, December 31, March 31, June 30, September 30,

2019 2019 2020 2020 2020

(in millions, except accounts and advisors data)

Platform Assets

Assets underManagement $ 188,739 $ 207,083 $ 185,065 $ 215,994 $ 228,905 ("AUM")

Assets underAdministration 316,742 343,505 312,472 344,957 375,860 ("AUA")

Total AUM/A 505,481 550,588 497,537 560,951 604,765

Subscription 2,947,582 3,205,281 2,875,394 3,247,400 3,498,353

Total Platform $ 3,453,063 $ 3,755,869 $ 3,372,931 $ 3,808,351 $ 4,103,118 Assets

Platform Accounts

AUM 934,811 935,039 970,896 1,007,386 1,018,817

AUA 1,136,430 1,193,882 1,254,856 1,252,247 1,318,730

Total AUM/A 2,071,241 2,128,921 2,225,752 2,259,633 2,337,547

Subscription 9,692,714 9,793,175 10,090,172 10,003,156 10,639,399

Total Platform 11,763,955 11,922,096 12,315,924 12,262,789 12,976,946 Accounts

Advisors

AUM/A 39,735 40,563 40,971 41,206 41,450

Subscription 60,319 61,180 62,077 62,404 63,862

Total Advisors 100,054 101,743 103,048 103,610 105,312

The following table summarizes the changes in AUM and AUA for the three months ended September 30, 2020:

Gross Net Market 6/30/2020 Redemptions 9/30/2020 Sales Flows Impact

(in millions except account data)

AUM $ 215,994 $ 12,526 $ (10,151 ) $ 2,375 $ 10,536 $ 228,905

AUA 344,957 33,944 (19,618 ) 14,326 16,577 375,860

Total AUM/A $ 560,951 $ 46,470 $ (29,769 ) $ 16,701 $ 27,113 $ 604,765



Fee-Based 2,259,633 77,914 2,337,547 Accounts

The above AUM/A gross sales figures include $8.4 billion in new client conversions. The Company onboarded an additional $33.9 billion in subscription conversions during the three months ended September 30, 2020, bringing total conversions for the quarter to $42.3 billion.

View source version on businesswire.com: https://www.businesswire.com/news/home/20201105006052/en/

CONTACT: Investor Relations investor.relations@envestnet.com (312) 827-3940

CONTACT: Media Relations mediarelations@envestnet.com