ENVESTNET, INC. - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - ENVESTNET, INC.	d434997d8k.htm

Exhibit 99.1

Envestnet Reports Third Quarter 2012 Financial Results

Chicago, IL – November 8, 2012 – Envestnet (NYSE: ENV), a leading provider of technology-enabled wealth management solutions to investment advisors, today reported financial results for its third quarter ended September 30, 2012.


Key Financial Metrics	Third Quarter				%
(in millions except per share data)	2012		2011		Change
Revenues from AUM/A	$	33.2	$	26.0		28	%
Total Revenues	$	42.3	$	32.0		32	%
Adjusted Revenues⁽¹⁾	$	42.7	$	32.0		33	%
Adjusted EBITDA⁽¹⁾	$	6.4	$	7.6		-16	%
Adjusted Net Income per Share⁽¹⁾	$	0.09	$	0.12		-25	%

Financial results for the third quarter of 2012 compared to the third quarter of 2011:

•

Revenues from assets under management (AUM) or assets under administration (AUA) increased 28% to $33.2 million for the third quarter of 2012 from $26.0 million for the third quarter of 2011; total revenues, which include licensing and professional services fees, increased 32% to $42.3 million for the third quarter of 2012 from $32.0 million for the third quarter of 2011.

•

Adjusted revenues, which exclude the effect of purchase accounting on the fair value of acquired deferred revenue, increased 33% to $42.7 million for the third quarter of 2012 from $32.0 million for the third quarter of 2011.

•

Net income was $0.6 million, or $0.02 per diluted share, for the third quarter of 2012 compared to net income of $1.9 million, or $0.06 per diluted share, for the third quarter of 2011.

•

Adjusted EBITDA⁽¹⁾ was $6.4 million for the third quarter of 2012 compared to $7.6 million for the third quarter of 2011.

•

Adjusted Net Income⁽¹⁾ was $2.9 million, or $0.09 per diluted share, for the third quarter of 2012 compared to $3.8 million, or $0.12 per diluted share, for the third quarter of 2011.

“We continue to enable and benefit from the trends in our business toward fee-based advice and advisor service models that highlight transparency and are free from conflicts,” said Jud Bergman, chairman and chief executive officer of Envestnet. “Our opportunity to grow revenue and profits is substantial, as Envestnet empowers advisors to improve client outcomes and strengthen their practices.”

Key Operating Metrics as of and for the quarter ended September 30, 2012:

•

AUM/A of $93.5 billion, up 41% from September 30, 2011

•

Accounts (AUM/A only) of 427,112, up 27% from September 30, 2011

•

Advisors (AUM/A only) served totaled 15,735, up 11% from September 30, 2011

•

Gross sales of AUM/A of $7.9 billion, resulting in net flows of $2.9 billion

The following table summarizes the changes in AUM and AUA for the quarter ended September 30, 2012:


In Millions Except Account Data	6/30/12		Gross Sales		Redemp- tions			Net Flows		Market Impact		9/30/12
Assets under Management (AUM)	$	26,758	$	2,955	$	(1,568	)	$	1,387	$	1,087	$	29,232
Assets under Administration (AUA)		60,511		4,914		(3,377	)		1,537		2,181		64,229

Total AUM/A	$	87,269	$	7,869	$	(4,945	)	$	2,924	$	3,268	$	93,461

Fee-Based Accounts		416,017		35,620		(24,525	)		11,095				427,112

During the third quarter, the Company added $0.2 billion of conversions included in the above AUM/A gross sales figures, and an additional $4.1 billion of conversions in Licensing.

Review of Financial Results

Adjusted revenues increased 33% to $42.7 million for the third quarter of 2012 from $32.0 million for the third quarter of 2011. The increase was primarily due to a 28% increase in revenues from AUM or AUA to $33.2 million from $26.0 million in the prior year period, as well as higher licensing and professional services revenues related to the acquisitions of Tamarac Inc. and Prima Capital Holding, Inc., both of which closed during the second quarter of 2012.

Total operating expenses in the third quarter of 2012 increased 44% to $41.4 million from $28.8 million in the prior year period. Cost of revenues increased 32% to $15.1 million in the third quarter of 2012 from $11.4 million in the third quarter of 2011 due to the increase in revenue from AUM or AUA and additional cost from acquired businesses. Compensation and benefits increased 50% to $15.3 million in the third quarter of 2012 from $10.2 million in the prior year period due to higher personnel cost from completed acquisitions, as well as higher stock-based compensation expense. General and administration expenses increased 34% to $7.6 million in the third quarter of 2012 from $5.7 million in the prior year period, primarily due to transaction costs related to the completed acquisitions, and ongoing expense from the acquired companies.

Income from operations was $0.9 million for the third quarter of 2012 compared to $3.2 million for the third quarter of 2011. Net income was $0.6 million, or $0.02 per diluted share, for the third quarter of 2012 compared to $1.9 million, or $0.06 per diluted share, for the third quarter of 2011.

Adjusted EBITDA⁽¹⁾ in the third quarter of 2012 was $6.4 million, compared to $7.6 million in the prior year period. Adjusted Net Income⁽¹⁾ was $2.9 million, compared to $3.8 million in the third quarter of 2011. Adjusted Net Income Per Share⁽¹⁾ was $0.09 per diluted share, compared to $0.12 per diluted share in the third quarter of 2011.

Conference Call

The Company will host a conference call to discuss third quarter 2012 financial results today at 5:00 p.m. ET. The live webcast can be accessed from the Company’s investor relations website at http://ir.envestnet.com/. The conference call can also be accessed live over the phone by dialing (888) 401-4691, or (719) 325-2333 for international callers. A replay will be available beginning one hour after the call and can be accessed from the Company’s investor relations website, or by dialing (877) 870-5176, or (858) 384-5517 for international callers; the conference ID is 5587845. The dial-in replay will be available for one week and the webcast replay will be available for one month following the date of the conference call.

About Envestnet

Envestnet, Inc. (NYSE: ENV) is a leading provider of technology-enabled wealth management solutions to investment advisors. Envestnet’s Advisor Suite software empowers advisors to better manage client outcomes and strengthen their practice. Envestnet offers advanced portfolio solutions through its Portfolio Management Consultants Group, Envestnet | PMC. Envestnet | Tamarac provides leading rebalancing, reporting and practice management software. Envestnet | Prima provides institutional-quality research and due diligence on investment and fund managers. Envestnet | Vantage gives advisors an in-depth view of clients’ investments, empowering them to give holistic, personalized advice.

For more information on Envestnet, please visit www.envestnet.com.

(1) Non-GAAP Financial Measures

“Adjusted revenues” exclude the effect of purchase accounting on the fair value of acquired deferred revenue. Under U.S. 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 EBITDA” represents net income before deferred revenue fair value adjustment, interest income, interest expense, income tax provision, depreciation and amortization, non-cash stock-based compensation expense, gain on investments, other income, restructuring charges and transaction costs, severance, customer inducement costs, and litigation related expense.

“Adjusted net income” represents net income before deferred revenue fair value adjustment, non-cash stock-based compensation expense, restructuring expense and transaction costs, severance, amortization of acquired intangibles, customer inducement costs, imputed interest expense and litigation related expense. Reconciling items are tax effected using the income tax rates in effect on the applicable date.

“Adjusted net income per share” represents adjusted net income divided by the diluted number of weighted-average shares outstanding.

See reconciliation of Non-GAAP Financial Measures at the end of this press release. These measures should not be viewed as a substitute for revenues or net income determined in accordance with United States generally accepted accounting principles (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 (the “Company”) expected financial performance and outlook, 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, difficulty in sustaining rapid revenue growth, which may place significant demands on the Company’s administrative, operational and financial resources, fluctuations in the Company’s revenue, the concentration of nearly all of the Company’s revenues from the delivery of investment solutions and services to clients in the financial advisory industry, the Company’s reliance on a limited number of clients for a material portion of its revenue, the renegotiation of fee percentages or termination of the Company’s services by its clients, the Company’s ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, the impact of market and economic conditions on the Company’s revenues, compliance failures, regulatory actions against the Company, the failure to protect the Company’s intellectual property rights, the Company’s inability to successfully execute the conversion of its clients’ assets from their technology platform to the Company’s technology platform in a timely and accurate manner, general economic, political and regulatory conditions, as well as management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in the Company’s filings with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at www.sec.gov or the Company’s 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 8, 2012 and, unless required by law, the Company undertakes 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.


Contacts
Investor Relations		Media Relations
investor.relations@envestnet.com		mediarelations@envestnet.com
(312) 827-3940

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share information)

(Unaudited)


	September 30,		December 31,
	2012		2011
Assets
Current assets:
Cash and cash equivalents	$	21,133	$	64,909
Fees receivable		10,692		9,644
Deferred tax assets, net		611		192
Prepaid expenses and other current assets		2,936		4,040

Total current assets		35,372		78,785

Property and equipment, net		12,294		11,091
Internally developed software, net		4,053		3,524
Intangible assets, net		28,910		12,225
Goodwill		66,152		22,223
Deferred tax assets, net		7,187		6,692
Other non-current assets		3,544		3,162

Total assets	$	157,512	$	137,702

Liabilities and Stockholders’ Equity
Current liabilities:
Accrued expenses	$	18,892	$	14,919
Accounts payable		2,519		1,974
Note payable		—		171
Deferred revenue		5,340		79

Total current liabilities		26,751		17,143

Deferred rent liability		2,038		1,414
Lease incentive liability		4,020		2,933
Other non-current liabilities		752		573

Total liabilities		33,561		22,063

Stockholders’ equity		123,951		115,639

Total liabilities and stockholders’ equity	$	157,512	$	137,702

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,
	2012		2011			2012			2011
Revenues:
Assets under management or administration	$	33,223	$	25,971		$	92,498		$	74,669
Licensing and professional services		9,060		6,069			20,389			17,967

Total revenues		42,283		32,040			112,887			92,636

Operating expenses:
Cost of revenues		15,088		11,429			40,163			32,474
Compensation and benefits		15,261		10,160			40,031			30,693
General and administration		7,621		5,675			22,542			15,809
Depreciation and amortization		3,393		1,550			9,016			4,676
Restructuring charges		—		—			115			53

Total operating expenses		41,363		28,814			111,867			83,705

Income from operations		920		3,226			1,020			8,931

Other income (expense):
Interest income		3		19			26			65
Interest expense		—		(206	)		(3	)		(621	)
Other income		—		—			—			1,100
Loss on investments		—		(8	)		—			(4	)

Total other income (expense)		3		(195	)		23			540

Income before income tax provision		923		3,031			1,043			9,471

Income tax provision		372		1,106			420			3,695

Net income	$	551	$	1,925		$	623		$	5,776

Net income per share:
Basic	$	0.02	$	0.06		$	0.02		$	0.18

Diluted	$	0.02	$	0.06		$	0.02		$	0.18

Weighted average common shares outstanding:
Basic		32,296,636		31,760,998			32,102,386			31,589,279

Diluted		33,358,706		32,871,269			33,179,044			32,937,601

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, unaudited)


	Nine Months Ended
	September 30,
	2012			2011
OPERATING ACTIVITIES:
Net income	$	623		$	5,776
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,016			4,676
Amortization of customer inducements		—			3,620
Deferred rent and lease incentive		1,366			357
Gain on investments		—			4
Impairment of customer inducement asset					174
Deferred income taxes		(562	)		2,794
Stock-based compensation		3,125			2,359
Interest expense		3			621
Changes in operating assets and liabilities:
Fees receivable		(487	)		544
Prepaid expenses and other current assets		3,084			(872	)
Customer inducements		—			(1,077	)
Other non-current assets		(194	)		(1,000	)
Accrued expenses		1,791			441
Accounts payable		545			306
Deferred revenue		600			(119	)
Other non-current liabilities		179			204

Net cash provided by operating activities		19,089			18,808

INVESTING ACTIVITIES:
Purchase of property and equipment		(4,098	)		(4,257	)
Capitalization of internally developed software		(1,698	)		(1,135	)
Repayment of notes payable assumed in acquisition		(174	)		(162	)
Proceeds from investments		4			23
Goodwill—working capital settlement		889			—
Acquisition of businesses, net		(62,352	)		—

Net cash used in investing activities		(67,429	)		(5,531	)

FINANCING ACTIVITIES:
Proceeds from exercise of stock options		1,927			2,702
Issuance of restricted stock		2,759			—
Purchase of treasury stock		(122	)		(94	)

Net cash provided by financing activities		4,564			2,608

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(43,776	)		15,885

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		64,909			67,668

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	21,133		$	83,553

Envestnet, Inc.

Reconciliation of Non-GAAP Financial Measures

(in thousands, unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Revenue	$	42,283		$	32,040		$	112,887		$	92,636
Deferred revenue fair value adjustment		401			—			1,018			—

Adjusted revenues	$	42,684		$	32,040		$	113,905		$	92,636


Net income	$	551		$	1,925		$	623		$	5,776
Deferred revenue fair value adjustment		401			—			1,018			—
Interest income		(3	)		(19	)		(26	)		(65	)
Interest expense		—			206			3			621
Income tax provision		372			1,106			420			3,695
Depreciation and amortization		3,393			1,550			9,016			4,676
Stock-based compensation expense		1,195			714			3,125			2,359
Restructuring charges and transaction costs		215			302			2,212			365
Severance		146			370			229			673
Litigation related expense		92			24			150			115
Gain on investments		—			8			—			4
Impairment of customer inducement asset		—			174			—			174
Other income		—			—			—			(1,100	)
Customer inducement costs		—			1,207			—			3,620

Adjusted EBITDA	$	6,362		$	7,567		$	16,770		$	20,913


Net income	$	551		$	1,925		$	623		$	5,776
Deferred revenue fair value adjustment		240			—			609			—
Stock-based compensation expense		714			427			1,868			1,411
Restructuring charges and transaction costs		129			181			1,322			218
Severance		87			221			137			402
Amortization of acquired intangibles		1,077			76			2,633			383
Litigation related expense		55			14			90			69
Customer inducement costs		—			722			—			2,165
Impairment of customer inducement asset		—			104			—			104
Other income		—			—			—			(658	)
Imputed interest expense		—			121			—			364

Adjusted net income	$	2,853		$	3,791		$	7,282		$	10,234


Diluted number of weighted-average shares outstanding		33,358,706			32,871,269			33,179,044			32,937,601

Adjusted net income per share	$	0.09		$	0.12		$	0.22		$	0.31

*	Adjustments are tax effected using an income tax rate of 40.2% for 2012 and 2011, respectively.

Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except account and advisor data; unaudited)


	As of
	September 30, 2011		December 31, 2011		March 31, 2012		June 30, 2012		September 30, 2012
Platform Assets
Assets Under Management (AUM)	$	15,560	$	22,936	$	26,084	$	26,758	$	29,232
Assets Under Administration (AUA)		50,607		47,148		54,336		60,511		64,229

Subtotal AUM/A		66,167		70,084		80,420		87,269		93,461
Licensing		61,571		69,514		76,235		229,268		254,256

Total Platform Assets	$	127,738	$	139,598	$	156,655	$	316,537	$	347,717

Platform Accounts
AUM		83,073		124,636		134,294		141,695		148,920
AUA		254,100		216,038		229,942		274,322		278,192

Subtotal AUM/A		337,173		340,674		364,236		416,017		427,112
Licensing		572,791		588,038		588,936		1,138,233		1,170,978

Total Platform Accounts		909,964		928,712		953,172		1,554,250		1,598,090

Advisors
AUM/A		14,206		13,887		14,386		15,045		15,735
Licensing		5,522		5,709		5,351		6,758		6,878

Total Advisors		19,728		19,596		19,737		21,803		22,613

ENVESTNET, INC. - FORM 8-K - EX-99.1 - PRESS RELEASE - November 8, 2012

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ENVESTNET, INC. Reports