EX-99.1 2 q42023exhibit991.htm EX-99.1 Document

Exhibit 99.1

Envestnet Reports Fourth Quarter 2023 Financial Results

Berwyn, PA — February 22, 2024 — Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the quarter and year ended December 31, 2023.
Three Months EndedYear Ended
Key Financial MetricsDecember 31,%December 31,%
(in millions, except per share data) (unaudited)
20232022Change20232022Change
GAAP:
Total revenue$317.6 $292.9 %$1,245.6 $1,239.8 — %
Net loss attributable to Envestnet, Inc.$(183.2)$(36.5)*$(238.7)$(80.9)*
Net loss attributable to Envestnet, Inc., per diluted share$(3.35)$(0.85)*$(4.38)$(1.59)*
Non-GAAP:
Adjusted revenue(1)
$317.6 $292.9 %$1,245.7 $1,240.0 — %
Adjusted EBITDA(1)
$75.5 $52.4 44 %$250.9 $215.4 16 %
Adjusted net income(1)
$43.0 $29.9 44 %$140.2 $122.5 14 %
Adjusted net income per diluted share(1)
$0.65 $0.45 44 %$2.12 $1.86 14 %
__________________________________________________________
*Not meaningful

“For 25 years it has been a privilege to be a part of and lead the amazing journey that is Envestnet — how foundational it is to the industry, our clients and the advisors who grow, serve and enrich the lives of millions of families,” said Bill Crager, Chief Executive Officer.

“The foundation of the business is strong and Envestnet has the right strategy and people to continue delivering for clients and the industry.”

Financial Results for the Fourth Quarter 2023 Compared to the Fourth Quarter 2022:
Total revenue increased 8% to $317.6 million for the fourth quarter of 2023 from $292.9 million for the fourth quarter of 2022. Asset-based recurring revenue increased 13% and represented 59% of total revenue for the fourth quarter of 2023, compared to 57% of total revenue for the fourth quarter of 2022. Subscription-based recurring revenue decreased 3% and represented 37% of total revenue for the fourth quarter of 2023, compared to 41% of total revenue for the fourth quarter of 2022. Professional services and other non-recurring revenue increased 115% for the fourth quarter of 2023 from the fourth quarter of 2022.

Total operating expenses increased 55% to $496.3 million for the fourth quarter of 2023 from $319.4 million for the fourth quarter of 2022. Direct expense increased 11% to $118.7 million for the fourth quarter of 2023 from $107.2 million for the fourth quarter of 2022. Employee compensation decreased 17% to $100.2 million for the fourth quarter of 2023 from $121.3 million for the fourth quarter of 2022. Employee compensation was 32% of total revenue for the fourth quarter of 2023, compared to 41% of total revenue for the fourth quarter of 2022. General and administrative expense decreased 13% to $51.3 million for the fourth quarter of 2023 from $59.0 million for the fourth quarter of 2022. General and administrative expense was 16% of total revenue for the fourth quarter of 2023,



compared to 20% of total revenue for the fourth quarter of 2022. A goodwill impairment charge of $191.8 million was recognized for the fourth quarter of 2023.

Loss from operations was $178.7 million for the fourth quarter of 2023 compared to $26.5 million for the fourth quarter of 2022. Net loss attributable to Envestnet, Inc. was $183.2 million, or $3.35 per diluted share, for the fourth quarter of 2023 compared to $36.5 million, or $0.85 per diluted share, for the fourth quarter of 2022.

Adjusted revenue(1) increased 8% to $317.6 million for the fourth quarter of 2023 from $292.9 million for the fourth quarter of 2022. Adjusted EBITDA(1) increased 44% to $75.5 million for the fourth quarter of 2023 from $52.4 million for the fourth quarter of 2022. Adjusted net income(1) increased 44% to $43.0 million, or $0.65 per diluted share, for the fourth quarter of 2023 from $29.9 million, or $0.45 per diluted share, for the fourth quarter of 2022.

Financial Results for the Full Year 2023 Compared to the Full Year 2022:

Total revenue remained consistent at $1.2 billion for the years ended December 31, 2023 and 2022. Asset-based recurring revenue increased 1% and represented 60% of total revenue for the years ended December 31, 2023 and 2022. Subscription-based recurring revenue decreased 3% and represented 37% of total revenue for the year ended December 31, 2023 compared to 39% of total revenue for the year ended December 31, 2022. Professional services and other non-recurring revenue increased 50% for the year ended December 31, 2023 from the year ended December 31, 2022.

Total operating expenses increased 11% to $1.5 billion for the year ended December 31, 2023 from $1.3 billion for the year ended December 31, 2022. Direct expense increased 1% to $473.0 million for the year ended December 31, 2023 from $470.4 million for the year ended December 31, 2022. Employee compensation decreased 9% to $444.8 million for the year ended December 31, 2023 from $490.7 million for the year ended December 31, 2022. Employee compensation was 36% of total revenue for the year ended December 31, 2023, compared to 40% of total revenue for the year ended December 31, 2022. General and administrative expense decreased 4% to $210.1 million for the year ended December 31, 2023 from $218.8 million for the year ended December 31, 2022. General and administrative expense was 17% of total revenue for the year ended December 31, 2023, compared to 18% for the year ended December 31, 2022. A goodwill impairment charge of $191.8 million was recognized for the year ended December 31, 2023.

Loss from operations was $204.5 million for the year ended December 31, 2023 compared to $66.0 million for the year ended December 31, 2022. Net loss attributable to Envestnet, Inc. was $238.7 million, or $4.38 per diluted share, for the year ended December 31, 2023 compared to $80.9 million, or $1.59 per diluted share, for the year ended December 31, 2022.

Adjusted revenue(1) remained consistent at $1.2 billion for the years ended December 31, 2023 and 2022. Adjusted EBITDA(1) increased 16% to $250.9 million for the year ended December 31, 2023 from $215.4 million for the year ended December 31, 2022. Adjusted net income(1) increased 14% to $140.2 million, or $2.12 per diluted share, for the year ended December 31, 2023 from $122.5 million, or $1.86 per diluted share, for the year ended December 31, 2022.

2


Balance Sheet and Liquidity

As of December 31, 2023, Envestnet had $91.4 million in cash and cash equivalents and $892.5 million in outstanding debt. Debt as of December 31, 2023 consisted of $317.5 million in convertible notes maturing in 2025 and $575.0 million in convertible notes maturing in 2027. Envestnet's $500.0 million revolving credit facility was undrawn as of December 31, 2023.

Segment Reporting
On October 1, 2023, the Company changed the composition of its reportable segments to reflect the way that the Company's chief operating decision maker reviews the operating results, assesses performance and allocates resources. As a result, the advisor-focused Wealth Analytics business has been reclassified from the Envestnet Data & Analytics segment to the Envestnet Wealth Solutions segment. The segment change does not impact nonsegment results or the Company's consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows. All segment information presented within this Exhibit 99.1 for the quarter and full year ended December 31, 2023 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.

Correction of Immaterial Error
During the fourth quarter of 2023, the Company identified that the arrangement with a third-party for the use of cloud hosted virtual servers which was previously accounted for as a finance lease transaction and included as a component of property and equipment, net in the consolidated balance sheets should have been recognized as a prepayment included within prepaid expenses and other current assets and other assets in the consolidated balance sheets. The Company concluded that the classification of these transactions was immaterial in prior period financial statements and that amendment of previously filed reports was not required. However, the Company corrected this immaterial error in the prior periods reported within this Exhibit 99.1.

3


Outlook

Envestnet provided the following outlook for the first quarter ending March 31, 2024. This outlook is based on the market value of assets under management or administration on December 31, 2023. We caution that we cannot predict the market value of these assets on any future date. See “Cautionary Statement Regarding Forward-Looking Statements.”

In Millions Except Adjusted EPS
1Q 2024
GAAP:
Revenue:
Asset-based$200.0 -$203.0 
Subscription-based117.0 -119.0 
Total recurring revenue317.0 -322.0 
Professional services and other revenue3.0 -4.0 
Total revenue$320.0 -$326.0 
Asset-based direct expense$117.5 -$119.0 
Total direct expense$125.5 -$127.0 
Net income (loss)
(a)
Diluted shares outstanding66.3
Net income (loss) per diluted share
(a)
Non-GAAP:
Adjusted EBITDA(1)
$64.0 -$69.0 
Adjusted net income per diluted share(1)
$0.52 -$0.57 
__________________________________________________________
(a) Envestnet does not forecast net income (loss) and net income (loss) 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 fourth quarter and full year 2023 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://investor.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 insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet's clients include more than 108,000 advisors, 16 of the 20 largest U.S. banks, 48 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of FinTech companies, all of which leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.

For more information on Envestnet, please visit www.envestnet.com and follow us on Twitter @ENVintel.
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(1) Non-GAAP Financial Measures

“Adjusted revenue” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. On January 1, 2022, the Company adopted ASU 2021-08 whereby it now accounts for contract assets and contract liabilities obtained upon a business combination in accordance with ASC 606. Prior to the adoption of ASU 2021-08, we recorded 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 did not reflect the full amount of revenue that would have been recorded by these entities had they remained stand‑alone entities. Adjusted revenue has limitations as a financial measure, should be considered as supplemental in nature and is not meant as a substitute for revenue prepared in accordance with GAAP.

“Adjusted EBITDA” represents net income (loss) before deferred revenue fair value adjustment, interest income, interest expense, income tax provision (benefit), depreciation and amortization, goodwill impairment, non‑cash compensation expense, restructuring charges and transaction costs, severance expense, fair market value adjustment on investment in private company, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, dilution gain on equity method investee share issuance, loss allocations from equity method investments and (income) loss attributable to non‑controlling interest.

“Adjusted net income” represents net income (loss) before income tax provision (benefit), deferred revenue fair value adjustment, non‑cash interest expense, cash interest on our Convertible Notes, goodwill impairment, non‑cash compensation expense, restructuring charges and transaction costs, severance expense, amortization of acquired intangibles, fair market value adjustment to investment in private company, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, dilution gain on equity method investee share issuance, loss allocations 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. For purposes of the adjusted net income per share calculation, we assume all potential shares to be issued in connection with our Convertible Notes are dilutive.

For further information see reconciliations of Non-GAAP Financial Measures on pages 11-16 of this press release, and the section entitled "Non-GAAP Financial Measures" in the most recent Annual Report on Form 10-K filed 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://investor.envestnet.com/. 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 revenue, net income (loss) or net income (loss) per share determined in accordance with GAAP.

5


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 first quarter and full year of 2024, its strategic and 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 our 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, our ability to recruit and retain senior executive leadership and other key employees and to successfully manage transitions, including the transition of our chief executive officer; adverse economic or global market conditions, including periods of rising inflation and market interest rates, and governmental responses to such conditions; the conflicts in the Middle East and between Russia and Ukraine, including related sanctions and their impact on the global economy and capital markets; the concentration of our revenue 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 revenue; the renegotiation of fees by our clients; changes in the estimates of fair value of reporting units or of long-lived assets, particularly goodwill and intangible assets; the amount of our debt, our ability to service our debt and risks associated with derivative transactions associated with our debt; limitations on our ability to access information from third parties or charges for accessing such information; the targeting of some of our sales efforts at large financial institutions and large financial technology companies which prolongs sales cycles, requires substantial upfront sales costs and results in less predictability in completing some of our sales; changes in investing patterns on the assets on which we derive revenue and the freedom of investors to redeem or withdraw investments generally at any time; the impact of fluctuations in market conditions and interest rates on the demand for our products and services and the value of assets under management or administration; increased geopolitical unrest and other events outside of our control that could adversely affect the global economy or specific international, regional and domestic markets; our ability to keep up with rapid technological change, evolving industry standards or changing requirements of clients; risks associated with our international operations; the competitiveness of our solutions and services as compared to those of others; liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest; harm to our reputation; the failure to protect our intellectual property rights; our reliance on outsourcing arrangements; activist shareholders hindering the execution of our business strategy, diverting board and management attention and resources and causing us to incur substantial expenses; public health crises, pandemics or similar events; our ability to successfully identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies; our ability 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 introduce new solutions and services and enhancements; regulatory compliance failures; our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information and potential liabilities for cybersecurity breaches; the effect of privacy laws and regulations, industry standards and contractual obligations and changes to these laws, regulations, standards and obligations on how we operate our business and the negative effects of failure to comply with these requirements; failure by our customers to obtain proper permissions or waivers for our use of disclosure of information; adverse judicial or regulatory proceedings against us; failure of our solutions, services or systems, or those of third parties on which we rely, to work properly; potential liability for use of inaccurate information by third parties provided by us; the occurrence of a deemed “change of control”; the uncertainty of the application and interpretation of certain tax laws; issuances of additional shares of common stock or issuances of shares of preferred stock or convertible securities on our existing stockholders; general economic, political and regulatory conditions; global events, natural disasters, environmental disasters, terrorist attacks and pandemics, including their impact on the economy and trading markets; management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in our filings with the SEC which are available on the SEC’s website at www.sec.gov or our Investor Relations website at http://investor.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 February 22, 2024 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.
6


Envestnet, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
December 31,
20232022
Assets
Current assets:
Cash and cash equivalents$91,378 $162,173 
Fees receivable, net120,958 101,696 
Prepaid expenses and other current assets51,472 47,422 
Total current assets263,808 311,291 
Property and equipment, net48,223 48,481 
Internally developed software, net224,713 184,558 
Intangible assets, net338,068 379,995 
Goodwill806,563 998,414 
Operating lease right-of-use assets, net69,154 81,596 
Other assets126,723 107,830 
Total assets$1,877,252 $2,112,165 
Liabilities and equity
Current liabilities:
Accounts payable, accrued expenses and other current liabilities$241,424 $233,866 
Operating lease liabilities12,909 11,949 
Deferred revenue38,201 36,363 
Current portion of debt— 44,886 
Total current liabilities292,534 327,064 
Debt876,612 871,769 
Operating lease liabilities, net of current portion100,830 110,652 
Deferred tax liabilities, net16,568 16,196 
Other liabilities16,202 18,880 
Total liabilities1,302,746 1,344,561 
Equity:
Total stockholders’ equity, attributable to Envestnet, Inc.568,191 754,567 
Non-controlling interest6,315 13,037 
Total liabilities and equity$1,877,252 $2,112,165 
7


Envestnet, Inc.
Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)
Three Months EndedYear Ended
December 31,December 31,
2023202220232022
Revenue:
Asset-based$188,643 $166,408 $745,238 $738,228 
Subscription-based117,753 121,243 464,730 477,844 
Total recurring revenue306,396 287,651 1,209,968 1,216,072 
Professional services and other revenue11,236 5,223 35,652 23,712 
Total revenue317,632 292,874 1,245,620 1,239,784 
Operating expenses:
Direct expense118,729 107,179 473,038 470,424 
Employee compensation100,182 121,272 444,828 490,725 
General and administrative51,297 59,048 210,113 218,831 
Depreciation and amortization34,319 31,909 130,304 125,828 
Goodwill impairment191,818 — 191,818 — 
Total operating expenses496,345 319,408 1,450,101 1,305,808 
Loss from operations(178,713)(26,534)(204,481)(66,024)
Other income (expense), net(8,810)(2,704)(28,516)(12,395)
Loss before income tax provision (benefit)(187,523)(29,238)(232,997)(78,419)
Income tax provision (benefit)(2,586)8,603 12,777 7,061 
Net loss(184,937)(37,841)(245,774)(85,480)
Add: Net loss attributable to non-controlling interest1,766 1,336 7,050 4,541 
Net loss attributable to Envestnet, Inc.$(183,171)$(36,505)$(238,724)$(80,939)
Net loss attributable to Envestnet, Inc., per share:
Basic$(3.35)$(0.66)$(4.38)$(1.47)
Diluted$(3.35)$(0.85)$(4.38)$(1.59)
Weighted average common shares outstanding:
Basic54,689,559 55,119,075 54,457,365 55,199,482 
Diluted54,689,559 56,076,261 54,457,365 56,842,125 

8


Envestnet, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Year Ended December 31,
20232022
Cash flows from operating activities:
Net loss
$(245,774)$(85,480)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization130,304 125,828 
Deferred income taxes(1,479)(3,490)
Goodwill impairment191,818 — 
Non-cash compensation expense71,031 80,333 
Non-cash interest expense5,037 7,445 
Fair market value adjustment to investment in private company(804)(400)
Dilution gain on equity method investee share issuance(546)(9,517)
Loss allocations from equity method investments10,579 8,874 
Lease related impairments5,120 15,750 
Loss on extinguishment of Convertible Notes due 2023— 13,421 
Gain on extinguishment of Convertible Notes due 2025— (15,089)
Loss on property and equipment disposals — 5,097 
Other1,781 1,266 
Changes in operating assets and liabilities:
Fees receivable, net(20,584)(5,031)
Prepaid expenses and other assets(11,573)(16,090)
Accounts payable, accrued expenses and other liabilities19,229 (24,257)
Deferred revenue729 (305)
Net cash provided by operating activities154,868 98,355 
Cash flows from investing activities:
Purchases of property and equipment(18,995)(16,172)
Capitalization of internally developed software(94,307)(89,153)
Acquisitions of businesses, net of cash acquired— (104,100)
Investments in private companies(4,175)(16,351)
Acquisition of proprietary technology(17,000)(19,000)
Issuance of loan receivable to private company(20,000)— 
Issuance of note receivable to equity method investees— (6,350)
Other414 — 
Net cash used in investing activities(154,063)(251,126)
-continued-

9


Envestnet, Inc.
Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)

Year Ended December 31,
20232022
Cash flows from financing activities:
Proceeds from borrowings on Revolving Credit Facility55,000 — 
Payments related to Revolving Credit Facility(55,000)— 
Settlement of Convertible Notes due 2023(45,000)— 
Proceeds from issuance of Convertible Notes due 2027— 575,000 
Convertible Notes due 2027 issuance costs— (16,323)
Repurchase of Convertible Notes due 2023— (312,422)
Repurchase of Convertible Notes due 2025— (181,772)
Payments related to Capped Call Transactions— (79,585)
Proceeds from exercise of stock options1,608 2,620 
Payments related to tax withholdings for stock-based compensation(19,022)(23,516)
Payments related to share repurchases(9,289)(85,750)
Purchase of non-controlling units from third-party shareholders(1,008)— 
Proceeds from capital contributions of non-controlling shareholders— 16,037 
Payments of contingent consideration— (743)
Other(1,866)
Net cash used in financing activities(72,706)(108,320)
Effect of exchange rate on changes on cash, cash equivalents and restricted cash1,106 (6,164)
Net change in cash, cash equivalents and restricted cash(70,795)(267,255)
Cash, cash equivalents and restricted cash, beginning of period162,173 429,428 
Cash, cash equivalents and restricted cash, end of period$91,378 $162,173 
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Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands)
(unaudited)
Three Months EndedYear Ended
December 31,December 31,
2023202220232022
Total revenue$317,632 $292,874 $1,245,620 $1,239,784 
Deferred revenue fair value adjustment (a)
— 54 69 216 
Adjusted revenue$317,632 $292,928 $1,245,689 $1,240,000 
Net loss$(184,937)$(37,841)$(245,774)$(85,480)
Add (deduct):
Deferred revenue fair value adjustment (a)
— 54 69 216 
Interest income (b)
(1,721)(1,911)(6,288)(4,184)
Interest expense (b)
6,085 3,536 25,138 16,843 
Income tax provision (benefit)(2,586)8,603 12,777 7,061 
Depreciation and amortization34,319 31,909 130,304 125,828 
Goodwill impairment191,818 — 191,818 — 
Non-cash compensation expense (d)
12,890 17,750 71,031 80,333 
Restructuring charges and transaction costs (e)
3,897 7,874 16,263 35,141 
Severance expense (d)
9,495 18,738 35,399 30,117 
Litigation, regulatory and other governance related expenses (c)
1,159 722 6,982 6,055 
Foreign currency (b)
107 806 437 1,419 
Non-income tax expense adjustment (c)
(168)914 (392)802 
Fair market value adjustment to investment in private company (b)
2,000 (400)(804)(400)
Dilution gain on equity method investee share issuance (b)
— (2,583)(546)(9,517)
Loss allocations from equity method investments (b)
2,339 3,542 10,579 8,874 
Loss attributable to non-controlling interest838 663 3,920 2,300 
Adjusted EBITDA$75,535 $52,376 $250,913 $215,408 
__________________________________________________________
(a)Included within subscription-based revenue in the consolidated statements of operations.
(b)Included within other income (expense), net in the consolidated statements of operations.
(c)Included within general and administrative expense in the consolidated statements of operations.
(d)Included within employee compensation in the consolidated statements of operations.
(e)For the three months ended December 31, 2023 and 2022, $3.3 million and $7.9 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the three months ended December 31, 2023 and 2022, $0.6 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $13.5 million and $35.1 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $2.8 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations.
11


Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures (continued)
(in thousands, except share and per share information)
(unaudited)
Three Months EndedYear Ended
December 31,December 31,
2023202220232022
Net loss$(184,937)$(37,841)$(245,774)$(85,480)
Income tax provision (benefit) (a)
(2,586)8,603 12,777 7,061 
Loss before income tax provision (benefit)(187,523)(29,238)(232,997)(78,419)
Add (deduct):
Deferred revenue fair value adjustment (b)
— 54 69 216 
Non-cash interest expense (c)
1,397 (239)5,655 4,678 
Cash interest - Convertible Notes (c)
4,369 3,458 17,845 10,897 
Amortization of acquired intangibles (g)
15,143 18,087 62,927 71,901 
Goodwill impairment191,818 — 191,818 — 
Non-cash compensation expense (f)
12,890 17,750 71,031 80,333 
Restructuring charges and transaction costs (e)
3,897 7,874 16,263 35,141 
Severance expense (f)
9,495 18,738 35,399 30,117 
Litigation, regulatory and other governance related expenses (d)
1,159 722 6,982 6,055 
Foreign currency (c)
107 806 437 1,419 
Non-income tax expense adjustment (d)
(168)914 (392)802 
Fair market value adjustment to investment in private company (c)
2,000 (400)(804)(400)
Dilution gain on equity method investee share issuance (c)
— (2,583)(546)(9,517)
Loss allocations from equity method investments (c)
2,339 3,542 10,579 8,874 
Loss attributable to non-controlling interest838 663 3,920 2,300 
Adjusted net income before income tax effect57,761 40,148 188,186 164,397 
Income tax effect (h)
(14,729)(10,238)(47,987)(41,921)
Adjusted net income$43,032 $29,910 $140,199 $122,476 
Basic number of weighted-average shares outstanding54,689,559 55,119,075 54,457,365 55,199,482 
Effect of dilutive shares:
Convertible Notes10,811,884 10,667,509 11,084,413 10,092,369 
Non-vested RSUs and PSUs252,597 265,187 413,734 390,270 
Options to purchase common stock19,509 70,947 47,388 111,327 
Diluted number of weighted-average shares outstanding65,773,549 66,122,718 66,002,900 65,793,448 
Adjusted net income per share - diluted$0.65 $0.45 $2.12 $1.86 
__________________________________________________________
(a)For the three months ended December 31, 2023 and 2022, the effective tax rate computed in accordance with GAAP equaled 1.4% and (29.4)%, respectively. For the years ended December 31, 2023 and 2022, the effective tax rate computed in accordance with GAAP equaled (5.5)% and (9.0)%, respectively.
(b)Included within subscription-based revenue in the consolidated statements of operations.
(c)Included within other income (expense), net in the consolidated statements of operations.
(d)Included within general and administrative expense in the consolidated statements of operations.
(e)For the three months ended December 31, 2023 and 2022, $3.3 million and $7.9 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the three months ended December 31, 2023 and 2022, $0.6 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $13.5 million and $35.1 million, respectively, were included within general and administrative expense in the consolidated statements of operations. For the years ended December 31, 2023 and 2022, $2.8 million and $0.0 million, respectively, were included within employee compensation in the consolidated statements of operations.
(f)Included within employee compensation in the consolidated statements of operations.
(g)Included within depreciation and amortization in the consolidated statements of operations.
(h)An estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income for the three months and years ended December 31, 2023 and 2022.


12


Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information
(in thousands)
(unaudited)
Three Months Ended December 31, 2023
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue$278,988 $38,644 $— $317,632 
Deferred revenue fair value adjustment (a)
— — — — 
Adjusted revenue$278,988 $38,644 $— $317,632 
Revenue:
Asset-based$188,643 $— $— $188,643 
Subscription-based84,184 33,569 — 117,753 
Total recurring revenue272,827 33,569 — 306,396 
Professional services and other revenue6,161 5,075 — 11,236 
Total revenue$278,988 $38,644 $— $317,632 
Operating expenses:
Direct expense:
Asset-based$110,030 $— $— $110,030 
Subscription-based1,367 6,893 — 8,260 
Professional services and other439 — — 439 
Total direct expense111,836 6,893 — 118,729 
Employee compensation77,520 9,938 12,724 100,182 
General and administrative29,822 13,641 7,834 51,297 
Depreciation and amortization26,631 7,688 — 34,319 
Goodwill impairment— 191,818 — 191,818 
Total operating expenses$245,809 $229,978 $20,558 $496,345 
Income (loss) from operations$33,179 $(191,334)$(20,558)$(178,713)
Add:
Deferred revenue fair value adjustment (a)
— — — — 
Depreciation and amortization26,631 7,688 — 34,319 
Goodwill impairment— 191,818 — 191,818 
Non-cash compensation expense (c)
9,763 1,136 1,991 12,890 
Restructuring charges and transaction costs (d)
2,883 1,013 3,897 
Severance expense (c)
6,679 586 2,230 9,495 
Litigation, regulatory and other governance related expenses (b)
— 1,159 — 1,159 
Non-income tax expense adjustment (b)
(167)(1)— (168)
Loss attributable to non-controlling interest838 — — 838 
Adjusted EBITDA$79,806 $11,053 $(15,324)$75,535 
__________________________________________________________
(a)Included within subscription-based revenue in the consolidated statements of operations.
(b)Included within general and administrative expense in the consolidated statements of operations.
(c)Included within employee compensation in the consolidated statements of operations.
(d)For the three months ended December 31, 2023, $3.3 million was included within general and administrative expense and $0.6 million was included within employee compensation in the consolidated statements of operations.






13


Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited) 
Three Months Ended December 31, 2022
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue$251,101 $41,773 $— $292,874 
Deferred revenue fair value adjustment (a)
54 — — 54 
Adjusted revenue$251,155 $41,773 $— $292,928 
Revenue:
Asset-based$166,408 $— $— $166,408 
Subscription-based81,026 40,217 — 121,243 
Total recurring revenue247,434 40,217 — 287,651 
Professional services and other revenue3,667 1,556 — 5,223 
Total revenue$251,101 $41,773 $— $292,874 
Operating expenses:
Direct expense:
Asset-based$98,207 $— $— $98,207 
Subscription-based1,593 6,791 — 8,384 
Professional services and other588 — — 588 
Total direct expense100,388 6,791 — 107,179 
Employee compensation80,796 27,034 13,442 121,272 
General and administrative37,693 13,787 7,568 59,048 
Depreciation and amortization25,511 6,398 — 31,909 
Total operating expenses$244,388 $54,010 $21,010 $319,408 
Income (loss) from operations$6,713 $(12,237)$(21,010)$(26,534)
Add:
Deferred revenue fair value adjustment (a)
54 — — 54 
Depreciation and amortization25,511 6,398 — 31,909 
Non-cash compensation expense (c)
11,397 2,118 4,235 17,750 
Restructuring charges and transaction costs (d)
4,762 1,717 1,395 7,874 
Severance expense (c)
8,251 9,330 1,157 18,738 
Litigation, regulatory and other governance related expenses (b)
— 722 — 722 
Non-income tax expense adjustment (b)
930 (16)— 914 
Loss attributable to non-controlling interest663 — — 663 
Other283 — 286 
Adjusted EBITDA$58,564 $8,035 $(14,223)$52,376 
__________________________________________________________
(a)Included within subscription-based revenue in the consolidated statements of operations.
(b)Included within general and administrative expense in the consolidated statements of operations.
(c)Included within employee compensation in the consolidated statements of operations.
(d)For the three months ended December 31, 2022, $7.9 million was included within general and administrative expense and $0.0 million was included within employee compensation in the consolidated statements of operations.
14


Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited)
Year Ended December 31, 2023
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue$1,094,704 $150,916 $— $1,245,620 
Deferred revenue fair value adjustment (a)
69 — — 69 
Adjusted revenue$1,094,773 $150,916 $— $1,245,689 
Revenue:
Asset-based$745,238 $— $— $745,238 
Subscription-based325,398 139,332 — 464,730 
Total recurring revenue1,070,636 139,332 — 1,209,968 
Professional services and other revenue24,068 11,584 — 35,652 
Total revenue$1,094,704 $150,916 $— $1,245,620 
Operating expenses:
Direct expense:
Asset-based$434,123 $— $— $434,123 
Subscription-based6,851 23,963 — 30,814 
Professional services and other8,091 10 — 8,101 
Total direct expense449,065 23,973 — 473,038 
Employee compensation313,338 69,414 62,076 444,828 
General and administrative120,247 55,250 34,616 210,113 
Depreciation and amortization103,301 27,003 — 130,304 
Goodwill impairment— 191,818 — 191,818 
Total operating expenses$985,951 $367,458 $96,692 $1,450,101 
Income (loss) from operations$108,753 $(216,542)$(96,692)$(204,481)
Add (deduct):
Deferred revenue fair value adjustment (a)
69 — — 69 
Depreciation and amortization103,301 27,003 — 130,304 
Goodwill impairment— 191,818 — 191,818 
Non-cash compensation expense (c)
44,510 8,193 18,328 71,031 
Restructuring charges and transaction costs (d)
10,868 215 5,180 16,263 
Severance expense (c)
17,232 11,813 6,354 35,399 
Litigation, regulatory and other governance related expenses (b)
— 5,322 1,660 6,982 
Non-income tax expense adjustment (b)
(320)(72)— (392)
Loss attributable to non-controlling interest3,920 — — 3,920 
Adjusted EBITDA$288,333 $27,750 $(65,170)$250,913 
__________________________________________________________
(a)Included within subscription-based revenue in the consolidated statements of operations.
(b)Included within general and administrative expense in the consolidated statements of operations.
(c)Included within employee compensation in the consolidated statements of operations.
(d)For the year ended December 31, 2023, $13.5 million was included within general and administrative expense and $2.8 million was included within employee compensation in the consolidated statements of operations.
15


Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
Segment Information (continued)
(in thousands)
(unaudited) 
Year Ended December 31, 2022
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
Revenue$1,065,244 $174,540 $— $1,239,784 
Deferred revenue fair value adjustment (a)
216 — — 216 
Adjusted revenue$1,065,460 $174,540 $— $1,240,000 
Revenue:
Asset-based$738,228 $— $— $738,228 
Subscription-based310,217 167,627 — 477,844 
Total recurring revenue1,048,445 167,627 — 1,216,072 
Professional services and other revenue16,799 6,913 — 23,712 
Total revenue$1,065,244 $174,540 $— $1,239,784 
Operating expenses:
Direct expense:
Asset-based$430,345 $— $— $430,345 
Subscription-based6,681 25,896 — 32,577 
Professional services and other7,421 81 — 7,502 
Total direct expense444,447 25,977 — 470,424 
Employee compensation321,277 101,300 68,148 490,725 
General and administrative143,597 42,256 32,978 218,831 
Depreciation and amortization98,600 27,228 — 125,828 
Total operating expenses$1,007,921 $196,761 $101,126 $1,305,808 
Income (loss) from operations$57,323 $(22,221)$(101,126)$(66,024)
Add (deduct):
Deferred revenue fair value adjustment (a)
216 — — 216 
Depreciation and amortization98,600 27,228 — 125,828 
Non-cash compensation expense (c)
47,891 9,891 22,551 80,333 
Restructuring charges and transaction costs (d)
22,871 3,731 8,539 35,141 
Severance expense (c)
13,237 10,745 6,135 30,117 
Litigation, regulatory and other governance related expenses (b)
— 6,055 — 6,055 
Non-income tax expense adjustment (b)
878 (76)— 802 
Loss attributable to non-controlling interest2,300 — — 2,300 
Other635 — 640 
Adjusted EBITDA$243,951 $35,358 $(63,901)$215,408 
__________________________________________________________
(a)Included within subscription-based revenue in the consolidated statements of operations.
(b)Included within general and administrative expense in the consolidated statements of operations.
(c)Included within employee compensation in the consolidated statements of operations.
(d)For the year ended December 31, 2022, $35.1 million was included within general and administrative expense and $0.0 million was included within employee compensation in the consolidated statements of operations.
16


Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except accounts and advisors)
(unaudited)

Envestnet Wealth Solutions Segment
As of
December 31,March 31,June 30,September 30,December 31,
20222023202320232023
(in millions, except accounts and advisors data)
Platform Assets
Assets under management ("AUM")$341,144 $363,244 $384,773 $375,408 $416,001 
Assets under administration ("AUA")367,412 379,843 394,078 398,082 430,846 
Total AUM/A708,556 743,087 778,851 773,490 846,847 
Subscription4,382,109 4,566,971 4,643,313 4,579,248 4,959,514 
Total platform assets$5,090,665 $5,310,058 $5,422,164 $5,352,738 $5,806,361 
Platform Accounts   
AUM1,547,009 1,571,862 1,609,677 1,614,873 1,640,879 
AUA1,135,026 1,142,166 1,144,375 1,257,094 1,254,962 
Total AUM/A2,682,035 2,714,028 2,754,052 2,871,967 2,895,841 
Subscription15,665,020 15,779,980 15,916,955 16,072,848 16,248,598 
Total platform accounts18,347,055 18,494,008 18,671,007 18,944,815 19,144,439 
Advisors
AUM/A38,025 38,611 38,809 38,078 38,697 
Subscription67,520 67,843 68,439 69,318 69,973 
Total advisors105,545 106,454 107,248 107,396 108,670 

The following table summarizes the changes in AUM and AUA for the three months ended December 31, 2023:
Asset Rollforward - Three Months Ended December 31, 2023
As ofGross SalesRedemptionsNet FlowsMarket ImpactAs of
September 30, 2023December 31, 2023
(in millions, except account data)
AUM$375,408 $26,612 $(19,064)$7,548 $33,045 $416,001 
AUA398,082 30,342 (30,019)323 32,441 430,846 
Total AUM/A$773,490 $56,954 $(49,083)$7,871 $65,486 $846,847 
Fee-Based Accounts2,871,967 23,874 2,895,841 

The above AUM/A gross sales figures include $17.7 billion in new client conversions. The Company onboarded an additional $73.1 billion in subscription conversions during the fourth quarter, bringing total conversions for the quarter to $90.8 billion.

17


The following table summarizes the changes in AUM and AUA for the year ended December 31, 2023:
 
Asset Rollforward - Year Ended December 31, 2023
 
As of December 31, 2022
Gross SalesRedemptionsNet FlowsMarket ImpactReclass to Subscription
As of December 31, 2023
 
 (in millions, except account data)
AUM$341,144 $101,305 $(71,217)$30,088 $47,360 $(2,591)$416,001 
AUA367,412 127,906 (99,468)28,438 48,868 (13,872)430,846 
Total AUM/A$708,556 $229,211 $(170,685)$58,526 $96,228 $(16,463)$846,847 
Fee-Based Accounts2,682,035 312,915 (99,109)2,895,841 

The above AUM/A gross sales figures include $72.3 billion in new client conversions. We onboarded an additional $169.7 billion in subscription conversions during 2023, bringing total conversions for the year to $242.0 billion.

Asset and account figures in the “Reclass to Subscription” columns for the three months and year ended December 31, 2023 represent enterprise customers whose billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, with no impact on total platform assets or accounts.

Envestnet Data & Analytics Segment

The following table provides information regarding the number of paid end-users and firms using the Envestnet Data & Analytics platform in the periods indicated:


As of
December 31,March 31,June 30,September 30,December 31,
20222023202320232023
(in millions, except number of firms data)
Number of paid end-users38.8 37.5 38.0 42.3 38.3 
Number of firms1,286 1,310 1,339 1,322 1,324 
18