10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-34835

Envestnet, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-1409613
(State or other jurisdiction of incorporation or organization)	(I.R.S Employer Identification No.)
35 East Wacker Drive, Suite 2400, Chicago, IL	60601
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

(312) 827-2800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

As of August 1, 2012, 32,280,646 shares of the common stock with a par value of $0.005 per share were outstanding.

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011		3
Condensed Consolidated Statements of Operations for the three and six months ended June  30, 2012 and 2011		4
Condensed Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2012		5
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011		6
Notes to Condensed Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
Forward-Looking Statements		24
Overview		24
Results of Operations		27
Liquidity and Capital Resources		34
Item 3. Quantitative and Qualitative Disclosures About Market Risk		35
Item 4. Controls and Procedures		35
PART II - OTHER INFORMATION
Item 1. Legal Proceedings		37
Item 1A. Risk Factors		37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		37
Item 6. Exhibits		37

2

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share information)

(Unaudited)

	June 30, 2012			December 31, 2011
Assets
Current assets:
Cash and cash equivalents	$	13,400		$	64,909
Fees receivable		8,631			9,644
Deferred tax assets, net		610			192
Prepaid expenses and other current assets		7,036			4,040
Total current assets		29,677			78,785
Property and equipment, net		12,377			11,091
Internally developed software, net		3,752			3,524
Intangible assets, net		30,712			12,225
Goodwill		66,152			22,223
Deferred tax assets, net		7,058			6,692
Other non-current assets		3,284			3,162
Total assets	$	153,012		$	137,702
Liabilities and Stockholders’ Equity
Current liabilities:
Accrued expenses	$	16,485		$	14,919
Accounts payable		2,683			1,974
Note payable		—			171
Deferred revenue		5,214			79
Total current liabilities		24,382			17,143
Deferred rent liability		1,891			1,414
Lease incentive liability		4,163			2,933
Other non-current liabilities		689			573
Total liabilities		31,125			22,063
Commitments and contingencies
Stockholders’ equity
Preferred stock		—			—
Common stock, par value $0.005, 500,000,000 shares authorized as of June 30, 2012 and December 31, 2011 respectively; 43,994,077 and 43,515,899 shares issued as of June 30, 2012 and December 31, 2011, respectively; 32,282,802 and 31,810,726 shares outstanding as of June 30, 2012 and December 31, 2011, respectively		220			218
Treasury stock at cost, 11,711,275 and 11,705,173 shares as of June 30, 2012 and December 31, 2011, respectively		(10,499	)		(10,421	)
Additional paid-in capital		169,836			163,584
Accumulated deficit		(37,670	)		(37,742	)
Total stockholders’ equity		121,887			115,639
Total liabilities and stockholders’ equity	$	153,012		$	137,702

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

3

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share information)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Revenues:
Assets under management or administration	$	31,012		$	25,427		$	59,275		$	48,698
Licensing and professional services		6,950			5,907			11,329			11,898
Total revenues		37,962			31,334			70,604			60,596
Operating expenses:
Cost of revenues		13,549			10,917			25,075			21,045
Compensation and benefits		14,085			10,387			24,770			20,533
General and administration		8,148			5,258			14,921			10,134
Depreciation and amortization		3,224			1,578			5,623			3,126
Restructuring charges		88			43			115			53
Total operating expenses		39,094			28,183			70,504			54,891
Income (loss) from operations		(1,132	)		3,151			100			5,705
Other income (expense):
Interest income		14			20			23			46
Interest expense		—			(204	)		(3	)		(415	)
Other income		—			1,100			—			1,100
Gain on investments		—			1			—			4
Total other income (expense)		14			917			20			735
Income (loss) before income tax provision (benefit)		(1,118	)		4,068			120			6,440
Income tax provision (benefit)		(450	)		1,621			48			2,589
Net income (loss)	$	(668	)	$	2,447		$	72		$	3,851
Net income (loss) per share:
Basic	$	(0.02	)	$	0.08		$	0.00		$	0.12
Diluted	$	(0.02	)	$	0.07		$	0.00		$	0.12
Weighted average common shares outstanding:
Basic		32,149,957			31,591,412			32,004,386			31,502,139
Diluted		32,149,957			32,969,824			33,054,632			32,912,916

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

4

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share information)

(Unaudited)

	Common Stock				Treasury Stock						Additional Paid-in Capital		Accumulated deficit			Total Stockholders’ Equity
	Shares		Amount		Common Shares			Amount
Balance, December 31, 2011		43,515,899	$	218		(11,705,173	)	$	(10,421	)	$	163,584	$	(37,742	)	$	115,639
Exercise of stock options		224,793		1		—			—			1,564		—			1,565
Issuance of common stock -
Vesting of restricted stock		21,235		—		—			—			—		—			—
Issuance of restricted stock		232,150		1								2,758					2,759
Stock-based compensation		—		—		—			—			1,930		—			1,930
Purchase of treasury stock (at cost)		—		—		(6,102	)		(78	)		—		—			(78	)
Net income		—		—		—			—			—		72			72
Balance, June 30, 2012		43,994,077	$	220		(11,711,275	)	$	(10,499	)	$	169,836	$	(37,670	)	$	121,887

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

5

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2012			2011
OPERATING ACTIVITIES:
Net income	$	72		$	3,851
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,623			3,126
Amortization of customer inducements		—			2,413
Deferred rent and lease incentive		1,362			(110	)
Gain on investments		—			(4	)
Deferred income taxes		(432	)		2,117
Stock-based compensation		1,930			1,645
Interest expense		3			415
Changes in operating assets and liabilities:
Fees receivable		1,574			442
Prepaid expenses and other current assets		(1,016	)		(422	)
Customer inducements		—			(1,000	)
Other non-current assets		67			—
Accrued expenses		(616	)		119
Accounts payable		709			51
Deferred revenue		474			(130	)
Other non-current liabilities		116			132
Net cash provided by operating activities		9,866			12,645
INVESTING ACTIVITIES:
Purchase of property and equipment		(2,999	)		(2,917	)
Capitalization of internally developed software		(988	)		(817	)
Repayment of notes payable assumed in acquisition		(174	)		(162	)
Proceeds from investments		3			17
Goodwill - working capital settlement		889			—
Acquisition of businesses, net		(62,352	)		—
Net cash used in investing activities		(65,621	)		(3,879	)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options		1,565			2,260
Issuance of restricted stock		2,759			—
Purchase of treasury stock		(78	)		(94	)
Net cash provided by financing activities		4,246			2,166
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(51,509	)		10,932
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		64,909			67,668
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	13,400		$	78,600
Supplemental disclosure of cash flow information - cash paid during the period for:
Income taxes	$	325		$	391

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

6

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

1. Organization and Description of Business

Envestnet, Inc. (“Envestnet”) and its subsidiaries (collectively, the “Company”) provide open-architecture wealth management services and technology to independent financial advisors and financial institutions. These services and related technology are provided via the Envestnet AdvisorSuite^®, Envestnet | PMC^®, Envestnet | Vantage^™, Envestnet | Prima^™ and Envestnet | Tamarac^™.

AdvisorSuite is a platform of integrated, internet-based technology applications and related services that provide portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back-office and middle-office operations and administration.

The Company’s investment consulting group, Envestnet | PMC, provides investment manager due diligence and research, a full spectrum of investment offerings supported by both proprietary and third-party research, and overlay portfolio management services.

Envestnet | Prima provides institutional-quality research and due diligence on investment and fund managers and Envestnet | Tamarac provides leading rebalancing, performance reporting and practice management software.

Through these platform and service offerings, the Company provides open-architecture support for a wide range of investment products (separately managed accounts, multi-manager accounts, mutual funds, exchange-traded funds, stock baskets, alternative investments, and other fee-based investment solutions) from Envestnet | PMC and other leading investment providers via multiple custodians, and also account administration and reporting services.

Envestnet operates six registered investment advisor subsidiaries (“RIAs”) and a registered broker-dealer. Four of the RIAs are registered with the Securities and Exchange Commission (“SEC”), one RIA is registered only with States of Colorado, North Carolina and Texas and one RIA is registered only with the State of Washington. The broker-dealer is registered with the SEC, all 50 states and the District of Columbia and is a member of the Financial Industry Regulatory Authority (“FINRA”).

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of the Company as of June 30, 2012 and for the three and six months ended June 30, 2012 and 2011 have not been audited by an independent registered public accounting firm. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of June 30, 2012 and the results of operations, stockholders’ equity and cash flows for the periods presented herein. The unaudited condensed consolidated balance sheet as of December 31, 2011 was derived from the Company’s audited financial statements for the year ended December 31, 2011 but does not include all disclosures, including notes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar amounts contained in these unaudited condensed consolidated financial statements are in thousands, except share and per share amounts.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2011.

The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in these unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in these unaudited condensed consolidated financial statements include estimating uncollectible receivables, costs capitalized for internally developed software, valuations and assumptions used for impairment testing of goodwill, intangible and other long-lived assets, fair value of stock and stock options issued, realization of deferred tax assets and valuation and other assumptions used to allocate purchase prices in business combinations. Actual results could differ materially from those estimates under different assumptions or conditions.

7

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Revenue Recognition—The Company recognizes revenue from services related to asset management and administration, licensing and professional services fees.

• Asset management and administration fees—The Company derives revenues from fees charged as a percentage of the assets that are managed or administered on its technology platform by financial advisors, financial institutions, and their clients (collectively “customers”) and for services the Company provides to its customers. Such services include investment manager due diligence and research, portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back office and middle-office operations and administration. Investment decisions for assets under management or administration are made by our customers. The asset management and administration fees the Company earns are generally based upon a contractual percentage of assets managed or administered on our platform based on preceding quarter-end values. The contractual fee percentages vary based on the level and type of services the Company provides to its customers. Fees related to assets under management or administration increase or decrease based on values of existing customer accounts. The values are affected by inflows or outflows of customer funds and market fluctuations.

• Licensing and professional services fees—

Licensing—The Company derives licensing fees from recurring contractual fixed fee contracts with larger financial institutions or enterprise clients. Licensing contracts allow the customer to provide a unique configuration of platform features and investment solutions for their advisors. The licensing fees vary based on the type of services provided and our revenues received under license agreements are recognized over the contractual term.

The Company’s license agreements do not generally provide its customers the ability to take possession of its software or host the software on its own systems or through a hosting arrangement with an unrelated party. However, in a certain instance, a customer has the ability to take possession of the software, and accordingly, the Company considers this circumstance as a software multiple-element arrangement. As a software multiple-element arrangement, the Company is required to determine whether there is vendor specific objective evidence (“VSOE”) of the various elements, including the software license and service components. The Company has not established VSOE of fair value for the separate components, and accordingly, recognizes revenue from these arrangements at such time as all elements of the arrangement have been delivered.

For the Company’s non-software multiple-element arrangements, the Company allocates the revenue in the arrangement using VSOE or third-party evidence (“TPE”) of selling price, or using the estimated selling price (“ESP”) of deliverables if it does not have VSOE or TPE. VSOE is the price charged when the same or similar product or service is sold separately. Many of the Company’s contracts renew automatically at the same rate as the original contract. The Company defines VSOE as the renewal rates of the standalone transactions.

TPE is determined based on the prices charged by the Company’s competitors for a similar deliverable when sold separately. However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in the Company’s product offerings when compared with those of the Company’s peers, the Company generally is unable to reliably determine TPE.

ESP is the Company’s best estimate of selling price of an element in a transaction involving multiple deliverables. If the Company is unable to establish selling price using either VSOE or TPE, the Company uses ESP in the allocation of arrangement consideration. The objective of ESP is to determine the price at which the Company would transact business if the product or service were sold on a standalone basis. The Company determines ESP based on revenue price drivers applied within a narrow range.

For multiple-element arrangements, the consideration allocated to online license fees is recognized on a straight line basis over the initial contract period, which typically ranges from one to five years and commences with the completed implementation date for the related product. The Company generally recognizes revenue for consideration allocated to implementation and consulting services in a multiple-element arrangement as services are performed because these services have standalone value separate from the online license fees.

Professional services—The Company derives professional service fees from providing contractual customized service platform software development, which are recognized under a proportional performance model utilizing an output based approach. The Company’s contracts have fixed prices, and generally specify or quantify interim deliverables.

8

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Substantially all of the Company’s revenues are based on contractual arrangements. Revenues are recognized in the periods in which the related services are performed provided that persuasive evidence of an agreement exists, the fee is fixed or determinable, and collectability is reasonably assured. Cash received by the Company in advance of the performance of services is deferred and recognized as revenue when earned. Certain portions of the Company’s revenues require management’s consideration of the nature of the client relationship in determining whether to recognize as revenue the gross amount billed or net amount retained after payments are made to providers for certain services related to the product or service offering.

The two main factors the Company uses to determine whether to record revenue on a gross or net basis is based on whether:

• the Company has a direct contract with the third party provider; and

• the Company has discretion in establishing fees paid by the customer and fees due to the third party service provider.

When customer fees include charges for third party service providers where the Company has a direct contract with such third party service providers, gross revenue recognized by the Company equals the fee paid by customer. The cost of revenues recognized by the Company is the amount due to the third party provider.

In instances where the Company does not have a direct contract with the third party service provider, the Company does not recognize any revenue or expense. The fees that are collected from the customer by the Company and are remitted to the third party service provider are considered pass through amounts and accordingly are not a component of revenue or cost of revenues.

Deferred Revenue—Deferred revenue primarily consists of implementation and set up fees, professional services, and license fee payments received in advance from customers.

Segments—The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis. Historically, the Company has determined that it has a single reporting segment and operating unit structure. As a result of the acquisitions as discussed in Note 3, the Company has re-examined its reporting and operating structure and has determined it continues to maintain a single reporting and operating unit structure.

Recent Accounting Pronouncements

In June 2011, the FASB issued authoritative guidance that amends ASC Topic 220, Comprehensive Income, to require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and it eliminates the option to present components of other comprehensive income as a part of the statement of changes in stockholders’ equity. In addition, this guidance requires an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. These amendments are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In September 2011, the FASB issued authoritative guidance regarding the testing of goodwill for impairment. This guidance allows companies to perform a “qualitative” assessment to determine whether or not the current two-step quantitative testing method, in which a company compares the fair value of reporting units to its carrying amount including goodwill, must be followed. If a qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment test is not required. A company may choose to use the qualitative assessment on none, some, or all of its reporting units or to bypass the qualitative assessment and proceed directly to the two-step quantitative testing method. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

9

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

3. Business Acquisitions

FundQuest Acquisition

On December 13, 2011, the Company acquired all of the outstanding shares of FundQuest Incorporated (“FundQuest”), a subsidiary of BNP Paribas Investment Partners USA Holdings, Inc. for total consideration of approximately $27,796. FundQuest was renamed Envestnet Portfolio Solutions, Inc. (“EPS”) subsequent to the acquisition. EPS provides managed account programs, overlay portfolio management, mutual funds, institutional asset management and investment consulting to registered investment advisors, independent advisors, broker-dealers, banks and trust organizations. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is not deductible for income tax purposes.

During the three months ended March 31, 2012, the Company finalized the estimated working capital adjustment. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date of December 13, 2011 as initially reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011:

	December 13, 2011			Consideration			December 13, 2011
	(As initially reported)			Adjustments			(As adjusted)
Accounts receivable	$	2,603		$	—		$	2,603
Prepaid expenses and other current assets		46			—			46
Property and equipment		442			—			442
Intangible assets		11,830			—			11,830
Goodwill		20,192			(889	)		19,303
Accounts payable and accrued liabilities		(1,364	)		—			(1,364	)
Deferred income taxes		(4,710	)		—			(4,710	)
Deferred revenue		(354	)		—			(354	)
Total assets acquired	$	28,685		$	(889	)	$	27,796

The initially reported estimated fair values of assets acquired and liabilities assumed were based on the information that was available at the time the Company filed its annual report on Form 10-K for the year ended December 31, 2011. Management of the Company believes all relevant information is now available to finalize the estimates.

Prima Capital Holding, Inc. Acquisition

On April 5, 2012, the Company completed the acquisition of Prima Capital Holding, Inc. (“Prima”). In accordance with the stock purchase agreement, the Company acquired all of the outstanding shares of Prima for total consideration of approximately $13,925. Prima provides investment management due diligence, research applications, asset allocation modeling and multi-manager portfolios to the wealth management and retirement industries. Prima’s clientele includes seven of the top 20 banks in the U.S. as measured by total assets, independent RIAs, regional broker-dealers, family offices and trust companies. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is not deductible for income tax purposes.

The consideration transferred in the acquisition was as follows:

Cash paid to owners	$	13,750
Cash assumed		(1,767	)
Cash paid for working capital settlement		1,942
	$	13,925

10

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Accounts receivable	$	72
Prepaid expenses and other current assets		36
Notes receivable		860
Property and equipment		103
Deferred income taxes - non current		1,129
Intangible assets		4,940
Goodwill		9,555
Accounts payable and accrued liabilities		(171	)
Deferred income tax liabilities		(1,869	)
Deferred revenue		(730	)
Total net assets acquired	$	13,925

The estimated fair value of deferred revenue is provisional and is based on the information that was available as of the acquisition date to estimate the fair value of this amount. The Company believes the information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize the fair value. Therefore, provisional measurements of fair value reflected are subject to change and such change could be significant. The Company expects to finalize the valuation of deferred revenue and complete the acquisition accounting as soon as practicable but no later than September 31, 2012.

A summary of intangible assets acquired, estimated useful lives and amortization method is as follows:

	Amount		Weighted Average Useful Life in Years		Amortization Method
Customer list	$	3,740		10	Accelerated
Proprietary technology		700		5	Accelerated
Trade names		500		5	Accelerated
Total	$	4,940

The results of Prima’s operations are included in the consolidated statement of operations beginning April 5, 2012. Prima’s revenues and net loss for the period beginning April 5, 2012 through June 30, 2012 totaled $1,149 and ($330), respectively. The net loss included pre-tax acquired intangible asset amortization of $325.

Tamarac, Inc. Acquisition

On May 1, 2012, the Company completed the acquisition of Tamarac, Inc. (“Tamarac”). In accordance with the merger agreement, a newly formed subsidiary of Envestnet merged with and into Tamarac, and Tamarac became a wholly owned subsidiary of Envestnet. Under the terms of the merger agreement, total consideration was approximately $48,427 for all of the outstanding stock of Tamarac. Tamarac is a provider of sophisticated portfolio management technology that enables RIAs to efficiently deliver customized individual account management to their clients. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is expected to be non-deductible for income tax purposes.

As a result of the merger with Tamarac, the Company adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock. The unvested common stock vests based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition (Note 13). The Company also granted to certain Tamarac employees 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date (Note 13).

In accordance with the terms of the merger agreement between Envestnet and Tamarac, Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed (Note 12).

11

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

The consideration transferred in the acquisition was as follows:

Cash paid to owners	$	54,000
Non-cash consideration		101
Cash assumed		(2,533	)
Receivable from working capital settlement		(3,141	)
	$	48,427

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Accounts receivable	$	489
Other receivables		681
Prepaid expenses and other current assets		216
Deferred income tax assets		7,235
Property and equipment		444
Deposits		379
Intangible assets		16,150
Goodwill		35,263
Accounts payable and accrued liabilities		(2,356	)
Deferred income tax liabilities		(6,143	)
Deferred revenue		(3,931	)
Total net assets acquired	$	48,427

The estimated fair value of deferred revenue and the working capital settlement is provisional and is based on the information that was available as of the acquisition date to estimate the fair value of these amounts. The Company believes the information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize those fair values. Therefore, provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to finalize the valuation of deferred revenue and working capital settlement, and complete the acquisition accounting as soon as practicable but no later than the contractual period.

A summary of intangible assets acquired, estimated useful lives and amortization method is as follows:

	Amount		Weighted Average Useful Life in Years		Amortization Method
Customer list	$	8,680		12	Accelerated
Proprietary technology		5,880		8	Accelerated
Trade names		1,590		5	Accelerated
Total	$	16,150

The results of Tamarac’s operations are included in the consolidated statement of operations beginning May 1, 2012. Tamarac’s revenues and net loss for the period May 1, 2012 through June 30, 2012 totaled $1,784 and ($589), respectively. The net loss includes acquired intangible asset amortization of $326

12

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

For the three and six months ended June 30, 2012, acquisition related costs for FundQuest, Tamarac and Prima, totaled $1,265 and $1,881, respectively, and are included in general and administration expenses.

Pro forma results for Envestnet, Inc. giving effect to the FundQuest, Prima and Tamarac acquisitions

The following unaudited pro forma financial information presents the combined results of operations of Envestnet, Prima and Tamarac for the three and six months ended June 30, 2012. The following unaudited pro forma financial information presents the combined results of operations of Envestnet, FundQuest, Prima and Tamarac for the three and six months ended June 30, 2011. For the three and six months ended June 30, 2012 and 2011, the unaudited pro forma financial information presents the results as if the acquisitions had occurred as of the beginning of 2011.

The unaudited pro forma results presented include amortization charges for acquired intangible assets, the elimination of intercompany transactions, restructuring charges, unrealized gain or loss on warrant and imputed interest expense, stock based compensation expense and the related tax effect on the aforementioned items.

Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented.

	Three Months ended June 30,					Six Months ended June 30,
	2012			2011		2012			2011
Revenue	$	39,082		$	37,968	$	76,197		$	73,606
Net income (loss)		(957	)		2,146		(1,980	)		2,158
Net income (loss) per share:
Basic		(0.03	)		0.07		(0.06	)		0.07
Diluted		(0.03	)		0.06		(0.06	)		0.06

4. Customer Inducements

Prior to acquiring FundQuest, the Company provided FundQuest and its clients with the Company’s platform technology and support services, replacing FundQuest’s technology platform (“Platform Services Agreement”). The Company earned fees based upon a contractual percentage of assets under administration. As a result of the acquisition of FundQuest on December 13, 2011 (Note 3), the Platform Services Agreement was terminated, and all of the assets and liabilities associated with the Platform Services Agreement were eliminated.

In connection with the Platform Services Agreement, the Company was required to make various payments to FundQuest during the contract term as defined in the Platform Services Agreement. These payments included an up-front payment upon completion of the conversion of FundQuest’s clients’ assets to the Company’s technology platform, five annual payments and a payment after the fifth year of the Platform Services Agreement calculated based on the average annual revenues the Company was to receive from FundQuest during the first five years of the contract term. As of December 31, 2010, the estimate of the present value of these payments was approximately $30,400. The Company also issued to FundQuest a warrant to purchase 1,388,888 shares of its common stock, with an exercise price of $10.80 for an estimated fair value of $2,946 as of December 31, 2010. The present value of all payments and the fair value of the warrant was accounted for as customer inducement costs and were amortized as a reduction to the Company’s revenues from assets under management or administration on a straight-line basis over the contract term of seven years.

13

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Amortization and imputed interest expense was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	—	$	1,207	$	—	$	2,413
Imputed interest expense		—		202		—		407

5. Property and Equipment

Property and equipment consist of the following:

	Estimated Useful Life	June 30, 2012			December 31, 2011
Cost:
Office furniture and fixtures	5-7 years	$	3,338		$	2,713
Computer equipment and software	3 years		20,831			18,942
Other office equipment	5 years		598			598
Leasehold improvements	Shorter of the term of the lease or useful life of the asset		7,340			5,833
			32,107			28,086
Less accumulated depreciation and amortization			(19,730	)		(16,995	)
Property and equipment, net		$	12,377		$	11,091

Depreciation and amortization expense for property and equipment was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Depreciation and amortization expense	$	1,223	$	950	$	2,260	$	1,814

6. Internally Developed Software

Internally developed software consists of the following:

	Estimated Useful Life	June 30, 2012			December 31, 2011
Internally developed software	5 years	$	11,870		$	10,882
Less accumulated depreciation			(8,118	)		(7,358	)
Internally developed software, net		$	3,752		$	3,524

14

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Amortization expense for internally developed software was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	377	$	397	$	760	$	799

7. Goodwill and Intangible Assets

Changes in the carrying amount of the Company’s goodwill was as follows:

Balance at December 31, 2011	$	22,223
FundQuest adjustment (note 3)		(889	)
Balance at March 31, 2012		21,334
Prima acquisition (note 3)		9,555
Tamarac acquisition (note 3)		35,263
Balance at June 30, 2012	$	66,152

Intangible assets consist of the following:

		June 30, 2012							December 31, 2011
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer list	4 -8 years	$	28,103	$	(5,815	)		22,288	$	15,683	$	(3,458	)	$	12,225
Proprietary technology	5 - 8 years		6,580		(178	)		6,402		—		—			—
Trade Names	5 years		2,090		(68	)		2,022		—		—			—
Total intangible assets		$	36,773	$	(6,061	)	$	30,712	$	15,683	$	(3,458	)	$	12,225

Amortization expense for intangible assets was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	1,624	$	231	$	2,603	$	513

15

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

8. Other Non-Current Assets

Other non-current assets consist of the following:

	June 30, 2012		December 31, 2011
Investment in private company	$	1,250	$	1,250
Deposits
Lease		1,660		1,538
Other		264		259
Other		110		115
Total other non-current assets	$	3,284	$	3,162

9. Fair Value Measurements

Financial assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon a fair value hierarchy established by U.S. GAAP, which prioritizes the inputs used to measure fair value into the following levels:

Level 1:	Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2:	Inputs based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or inputs that are observable and can be corroborated by observable market data.
Level 3:	Inputs reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

Fair Value on a Recurring Basis:

The Company periodically invests excess cash in money market funds not insured by the FDIC. The Company believes that the investments in money market funds are on deposit with creditworthy financial institutions and that the funds are highly liquid. The fair values of the Company’s investments in money market funds are based on the daily quoted market prices for the net asset value of the various money market funds. These money market funds are considered Level 1 assets, totaled approximately $9,761 and $52,383 as of June 30, 2012 and December 31, 2011, respectively and are included in cash and cash equivalents in the unaudited condensed consolidated balance sheet.

16

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

10. Accrued Expenses

Accrued expenses consist of the following:

	June 30, 2012		December 31, 2011
Accrued investment manager fees	$	10,901	$	8,451
Accrued compensation and related taxes		3,807		4,230
Accrued professional services		501		481
Accrued restructuring charges		34		290
Other accrued expenses		1,242		1,467
Total accrued expenses	$	16,485	$	14,919

As a result of the FundQuest, Prima and Tamarac acquisitions, the Company incurred restructuring charges, primarily severance charges related to the termination of certain FundQuest and Tamarac employees and lease abandonment charges related to Prima in the six months ended June 30, 2012.

In the three and six months ended June 30, 2012, the Company recognized pretax restructuring charges of $88 and $115, respectively. In the three and six months ended June 30, 2011, the Company recognized pretax restructuring charges of $43 and $53, respectively.

The summary of activity in accrued restructuring charges was as follows:

Balance at December 31, 2011	$	290
Restructuring provision incurred		27
Payments		(298	)
Balance at March 31, 2012		19
Restructuring provision incurred		88
Payments		(73	)
Balance at June 30, 2012	$	34

11. Income Taxes

U.S. GAAP requires the interim period tax provision to be determined as follows:

• At the end of each quarter, the Company estimates the tax that will be provided for the year stated as a percent of estimated “ordinary” income for the year. The term ordinary income refers to earnings from continuing operations before income taxes, excluding significant unusual or infrequently occurring items.

The estimated annual effective rate is applied to the year-to-date “ordinary” income at the end of each quarter to compute the year-to-date tax applicable to ordinary income. The tax expense or benefit related to ordinary income in each quarter is the difference between the most recent year-to-date and the prior quarter year-to-date computations.

• The tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, the effects of changes in judgment about beginning of the year valuation allowances and change in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs.

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income of the Company and the development of tax planning strategies during the year.

17

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Net deferred tax assets consist of the following:

	June 30, 2012			December 31, 2011
Current:
Deferred revenue	$	291		$	30
Prepaid expenses and accruals		319			162
Net current deferred tax assets		610			192
Non-Current:
Deferred rent	$	586		$	535
Net operating loss and tax credit carry-forwards		16,315			9,910
Loss on investments		2,157			2,157
Amortization and depreciation		(12,807	)		(4,516	)
Other		4,251			2,050
Net long-term deferred tax assets		10,502			10,136
Net deferred tax assets		11,112			10,328
Less valuation allowance		(3,444	)		(3,444	)
	$	7,668		$	6,884

The valuation allowance as of June 30, 2012 and December 31, 2011 was related to capital losses of $2,157 and Federal and state net operating losses of $1,287 primarily due to Section 382 limitations. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some or all of the deferred tax assets will be realized.

The following table includes tax expense and the effective tax rate for the Company’s income from operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Income (loss) before income taxes	$	(1,118	)	$	4,068		$	120		$	6,440
Income tax provision		(450	)		1,621			48			2,589
Effective tax rate		40.2	%		39.8	%		40.2	%		40.2	%

Upon exercise of stock options, the Company recognizes any difference between U.S. GAAP compensation expense and income tax compensation expense as a tax windfall or shortfall. The difference is charged to equity in the case of a windfall. When the exercise results in a windfall and the windfall results in a net operating loss (“NOL”), or the windfall increases an NOL carryforward, no windfall is recognized until the deduction reduces the income tax payable. For U.S. GAAP purposes, the Company has deferred the recognition of approximately $1,381 in windfall tax benefits associated with its stock-based compensation until a cash tax savings is realized. The benefit will be recorded in stockholders’ equity when utilized on an income tax return to reduce taxes payable, and as such, it will not impact the Company’s effective tax rate.

The total amount of the gross liability for unrecognized tax benefits reported in other non-current liabilities was $688 and $573 at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012, the amount of unrecognized tax benefits that would benefit the Company’s effective tax rate, if recognized, was $522.

The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. The Company had accrued interest and penalties of $209 as of both June 30, 2012 and December 31, 2011.

18

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

The Company files a consolidated federal income tax return and separate tax returns with various states. Additionally, a subsidiary of the Company files a tax return in a foreign jurisdiction. The Company’s tax returns for the calendar years ended December 31, 2011, 2010 and 2009, and fiscal year ended March 31, 2009 remain open to examination by the Internal Revenue Service in their entirety. They also remain open with respect to state taxing jurisdictions.

12. Stockholders’ Equity

In accordance with the terms of the merger agreement between Envestnet and Tamarac (Note 3 and 13), Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed. These shares cannot be sold or otherwise transferred for a period of two years following the date of merger. If a participant terminates their employment with the Company or is terminated for cause, the participant shall be required to pay the Company an amount equal to 5% multiplied by the closing market price on the day before the merger closed.

13. Stock-Based Compensation

As a result of the merger between Envestnet and Tamarac (Note 3), the Company adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of restricted common stock, stock options and the purchase of common stock for certain Tamarac employees. The maximum number of shares of stock which may be issued with respect to awards under the 2012 Plan shall be equal to 1,023,851 shares of stock

The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock (“Target Revenue Incentive Awards”). The Target Revenue Incentive Awards vest based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition. The Company measured the cost of these awards based on the estimated fair value of the award as of the market closing price on the day before the acquisition closed. The Company is recognizing the estimated expense on a graded-vesting method over a requisite service period of three to five years, which is the estimated vesting period. The Company has estimated expected forfeitures at the grant date and will recognize compensation expense only for those awards expected to vest. The initial forfeiture assumption will be reassessed in subsequent periods and may change based upon new facts and circumstances. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized over the vesting period.

The Company also granted to certain Tamarac employees 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date.

In addition, in accordance with the 2012 Plan, Tamarac senior management was required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed (Note 12). These shares cannot be sold or otherwise transferred for a period of two years following the date of merger. If a participant terminates their employment with the Company or is terminated for cause, the participant shall be required to pay the Company an amount equal to 5% multiplied by the closing market price on the day before the merger closed.

Stock Options

The Company has stock options and restricted stock outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”) as described below (collectively “the Plans”). As of June 30, 2012, the maximum number of shares available for future issuance under the Plans is 1,775,746.

19

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Employee stock-based compensation expense was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Employee stock-based compensation expense	$	1,135		$	829		$	1,930		$	1,645
Tax effect on employee stock-based compensation expense		(456	)		(330	)		(777	)		(661	)
Net effect on income	$	679		$	499		$	1,153		$	984

The following weighted average assumptions were used to value options granted during the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Grant date fair value of options	$	4.97		$	—	$	4.91		$	5.26
Volatility		39.7	%		—		39.7	%		39.3	%
Risk-free interest rate		1.2	%		—		1.2	%		2.5	%
Dividend yield		0.0	%		—		0.0	%		0.0	%
Expected term (in years)		6.0			—		6.0			6.0

The following table summarizes option activity under the 2004 Plan, 2010 Plan and 2012 Plan:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2011		4,863,718		$	8.19
Granted		149,652			12.45
Exercised		(124,956	)		7.59
Forfeited		(2,000	)		9.70
Outstanding as of March 31, 2012		4,886,414			8.34		6.7	$	20,544
Granted		589,263			12.55
Exercised		(99,837	)		6.18
Forfeited		(1,800	)		9.00
Outstanding as of June 30, 2012		5,374,040			8.84		6.8		17,737
Options exercisable		2,977,757			7.43		5.4		13,769

20

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

Exercise prices of stock options outstanding as of June 30, 2012 range from $0.11 to $13.45.

Restricted Stock

Periodically, the Company grants restricted stock awards under the 2010 Plan to employees that vest one-third on each of the first three anniversaries of the grant date. The Company also granted restricted stock awards under the 2012 Plan that vest upon Tamarac meeting certain performance conditions and then a subsequent two year service condition.

The following is a summary of the activity for unvested restricted stock awards granted under all Plans:

	Number of Shares			Weighted- Average Grant Date Fair Value per Share
Balance at December 31, 2011		73,820		$	12.26
Granted		155,383			12.44
Vested		(21,235	)		12.55
Expired/cancelled		(1,064	)		12.45
Forfeited		(104	)		12.55
Balance at March 31, 2012		206,800			12.36
Granted		559,551			12.51
Forfeited		(381	)		12.49
Balance at June 30, 2012		765,970		$	12.47

At June 30, 2012, there was $7,643 of unrecognized compensation cost related to unvested stock options which the Company expects to recognize over a weighted-average period of 2.1 years. At June 30, 2012, there was $2,060 of unrecognized compensation cost related to unvested restricted stock which the Company expects to recognize over a weighted-average period of 4.1 years.

14. Earnings Per Share

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share reflects the weighted average number of shares outstanding after the assumed conversion of all dilutive securities.

21

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

The following is a reconciliation of net earnings to basic earnings per share and diluted earnings per share:

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012		2011
Net income (loss)	$	(668	)	$	2,447	$	72	$	3,851
Basic number of weighted-average shares outstanding		32,149,957			31,591,412		32,004,386		31,502,139
Effect of dilutive shares:
Options to purchase common stock		—			1,082,818		900,085		1,112,797
Common warrants		—			295,594		144,076		297,980
Unvested restricted stock		—			—		6,085		—
Diluted number of weighted-average shares outstanding		32,149,957			32,969,824		33,054,632		32,912,916
Net income (loss) per share:
Basic	$	(0.02	)	$	0.08	$	0.00	$	0.12
Diluted	$	(0.02	)	$	0.07	$	0.00	$	0.12

Common share equivalents for securities that were anti-dilutive and therefore excluded from the computation of diluted earnings per share was as follows:

	Three Months Ended June  30,				Six Months Ended June  30,
	2012		2011		2012		2011
Options to purchase common stock		5,374,040		—		1,227,248		—
Common warrants		1,388,888		—		—		—
Unvested restricted stock		765,970		—		755,970		—

15. Major Customers

One customer accounted for more than 10% of the Company’s fees receivable:

	June 30, 2012			December 31, 2011
Fidelity		19	%		34	%

The Company has not established an allowance for doubtful accounts related to the receivables from this customer as of June 30, 2012 or December 31, 2011.

22

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

One customer accounted for more than 10% of the Company’s revenues:

	Three Months Ended June  30,						Six Months Ended June  30,
	2012			2011			2012			2011
Fidelity		22	%		31	%		23	%		31	%

16. Commitments and Contingencies

The Company is involved in litigation arising in the ordinary course of its business. Management does not believe that the outcome of any of the current litigation, individually or in the aggregate, would, if determined adversely to it, have a material adverse effect on its results of operations, financial condition, cash flows or business.

The Company rents office space under leases that expire at various dates through 2023. Future minimum lease commitments under these operating leases was as follows:

Years ending December 31:
Remainder of 2012	$	1,720
2013		4,189
2014		5,075
2015		5,272
2016		5,490
Thereafter		26,411
	$	48,157

23

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, the terms “Envestnet”, the “Company”, “we”, “us” and “our” refer to Envestnet, Inc. and its subsidiaries. All amounts are in thousands, except share and per share information, financial advisors and client accounts.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, in particular, statements about our plans, strategies and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are based on our current expectations and projections about future events and are identified by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “expected,” “intend,” “will,” “may,” or “should” or the negative of those terms or other comparable terminology. Although we believe that our plans, intentions and expectations are reasonable, we may not achieve our plans, intentions or expectations.

These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this quarterly report are set forth in our Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”) under “Risk Factors”; accordingly, investors should not place undue reliance upon our forward-looking statements. We undertake no obligation to update any of the forward-looking statements after the date of this quarterly report to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

You should read this quarterly report on Form 10-Q and our 2011 Form 10-K completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material. We qualify all of our forward-looking statements by these cautionary statements.

The following discussion and analysis should also be read along with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report and the audited consolidated financial statements and the related notes included in our 2011 Form 10-K. Except for the historical information contained herein, this discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed below.

Overview

We are a leading independent provider of integrated wealth management software and services to financial advisors and institutions. Envestnet AdvisorSuite^® software empowers advisors to better manage client outcomes and strengthen their practice. Envestnet^® also offers advanced portfolio solutions through Envestnet | PMC^®. Envestnet | Vantage^™ gives advisors an in-depth view of clients’ various investments, empowering them to give holistic, personalized advice. Envestnet | Prima™ provides institutional-quality research and due diligence on investment and fund managers and Envestnet | Tamarac™ provides leading rebalancing, reporting and practice management software.

By integrating a wide range of investment solutions and services, our Web-based technology platform provides financial advisors with the flexibility to address their clients’ needs. We work with financial advisors who are independent, as well as those who are associated with financial advisory firms and financial institutions, which we refer to as enterprise clients. We focus our technology development efforts and our sales and marketing approach on addressing financial advisors’ front-, middle- and back-office needs. We believe that our investment solutions and services allow financial advisors to be more efficient and effective in the activities critical to their businesses by facilitating client interactions, supporting and enhancing portfolio management and analysis, and enabling reliable account support and administration. In addition, we are not controlled by a financial institution, broker-dealer or other entity operating in the securities or wealth management industry, which we believe affords us a greater level of independence and impartiality.

Operational Highlights

Revenues from assets under management (“AUM”) or assets under administration (“AUA”) increased 22% from $25,427 in the three months ended June 30, 2011 to $31,012 in the three months ended June 30, 2012. Revenues from assets under management (“AUM”) or assets under administration (“AUA”) increased 22% from $48,698 in the six months ended June 30, 2011 to $59,275 in the six months ended June 30, 2012. The increase in revenues from assets under management or administration were a result of the positive effects of new account growth and positive net flows of AUM or AUA, as well as an increase in revenues related to the FundQuest acquisition.

Total revenues, which include licensing and professional service fees, increased 21% from $31,334 in the three months ended June 30, 2011 to $37,962 in the three months ended June 30, 2012. Total revenues, which include licensing and professional service fees, increased 17% from $60,596 in the six months ended June 30, 2011 to $70,604 in the six months ended June 30, 2012. The overall increase in revenues were also favorably impacted by revenues related to acquired companies.

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Net loss for the three months ended June 30, 2012 was ($668), or ($0.02) per diluted share, compared to net income of $2,447, or $0.07 per diluted share for the three months ended June 30, 2011. Net income for the six months ended June 30, 2012 was $72, or $0.00 per diluted share, compared to net income of $3,851, or $0.12 per diluted share for the six months ended June 30, 2011.

Adjusted revenues for the three months ended June 30, 2012 was $38,579, an increase of 23% from $31,334 in the prior year period. Adjusted revenue for the six months ended June 30, 2012 was $71,221, an increase of 18% from $60,596 in the prior year period.

Adjusted EBITDA for the three months ended June 30, 2012 was $5,314, a decrease of 25% from $7,122 in the prior year period. Adjusted EBITDA for the six months ended June 30, 2012 was $10,408, a decrease of 22% from $13,346 in the prior year period.

Adjusted net income for the three months ended June 30, 2012 was $2,230, or $0.07 per diluted share, compared to adjusted net income of $3,479, or $0.11 per diluted share in the prior year period. Adjusted net income for the six months ended June 30, 2012 was $4,431, or $0.13 per diluted share, compared to adjusted net income of $6,443, or $0.20 per diluted share in the prior year period.

Adjusted EBITDA and Adjusted net income are non-GAAP financial measures. See “Non-GAAP Financial Measures” for a discussion of non-GAAP measures and a reconciliation of such measures to GAAP.

Recent Events

Prima Capital Holding, Inc. Acquisition

On April 5, 2012, we completed the acquisition of Prima Capital Holding, Inc. (“Prima”). In accordance with the stock purchase agreement, we acquired all of the outstanding shares of Prima for consideration of approximately $13,925. Prima provides investment management due diligence, research applications, asset allocation modeling and multi-manager portfolios to the wealth management and retirement industries. Prima’s clientele includes seven of the top 20 banks in the U.S. as measured by total assets, independent RIAs, regional broker-dealers, family offices and trust companies.

Tamarac, Inc. Acquisition

On May 1, 2012, the Company completed the acquisition of Tamarac, Inc. (“Tamarac”). In accordance with the merger agreement, a newly formed subsidiary of Envestnet merged with and into Tamarac, and Tamarac became a wholly owned subsidiary of Envestnet. Under the terms of the merger agreement, total consideration was approximately $48,427 for all of the outstanding stock of Tamarac. Such shares vest at pre-established intervals, but in no event later than May 15, 2015, based upon Tamarac meeting certain financial targets. Tamarac is a provider of sophisticated portfolio management technology that enables RIAs to efficiently deliver customized individual account management to their clients.

As a result of the merger with Tamarac, we adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock. The unvested common stock vests based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition (Note 13). We also granted to certain Tamarac employees, 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date.

In accordance with the terms of the merger agreement between Envestnet and Tamarac, Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed.

Key Operating Metrics

The following table provides information regarding the amount of assets utilizing our platform, financial advisors and investor accounts in the periods indicated.

Licensing metrics in the table below, include Envestnet | Tamarac, which added approximately $149 billion in assets, 550,000 accounts and 1,700 advisors as of May 1, 2012.

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	As of
	June 30, 2011		September 30, 2011		December 31, 2011		March 31, 2012		June 30, 2012
Platform Assets
Assets Under Management (AUM)	$	16,493	$	15,560	$	22,936	$	26,084	$	26,758
Assets Under Administration (AUA)		54,261		50,607		47,148		54,336		60,511
Subtotal AUM/A		70,754		66,167		70,084		80,420		87,269
Licensing		68,531		61,571		69,514		76,235		229,268
Total Platform Assets	$	139,285	$	127,738	$	139,598	$	156,655	$	316,537
Platform Accounts
AUM		77,302		83,073		124,636		134,294		141,695
AUA		254,995		254,100		216,038		229,942		274,322
Subtotal AUM/A		332,297		337,173		340,674		364,236		416,017
Licensing		572,612		572,791		588,038		588,936		1,138,233
Total Platform Accounts		904,909		909,964		928,712		953,172		1,554,250
Advisors
AUM/A		14,613		14,206		13,887		14,386		15,045
Licensing		6,201		5,522		5,709		5,351		6,758
Total Advisors		20,814		19,728		19,596		19,737		21,803

The following table provides information regarding the degree to which gross sales, redemptions, net flows and changes in the market values of assets contributed to changes in AUM or AUA in the periods indicated.

	Asset Rollforward - Three Months Ended June 30, 2012
	As of 3/31/12		Gross Sales		Redemptions			Net Flows		Market Impact			As of 6/30/12
	(in millions except account data, unaudited)
Assets under Management (AUM)	$	26,084	$	3,120	$	(1,843	)	$	1,277	$	(603	)	$	26,758
Assets under Administration (AUA)		54,336		10,011		(2,826	)		7,185		(1,010	)		60,511
Subtotal AUM/A	$	80,420	$	13,131	$	(4,669	)	$	8,462	$	(1,613	)	$	87,269
Fee-Based Accounts		364,236		70,079		(18,298	)		51,781					416,017

Gross sales for the three months ended June 30, 2012 included $4.6 billion in new client conversions.

	Asset Rollforward - Six Months Ended June 30, 2012
	As of 12/31/11		Gross Sales		Redemptions			Net Flows		Market Impact		As of 6/30/12
	(in millions except account data, unaudited)
Assets under Management (AUM)	$	22,936	$	6,213	$	(3,374	)	$	2,839	$	983	$	26,758
Assets under Administration (AUA)		47,148		17,130		(5,578	)		11,552		1,811		60,511
Subtotal AUM/A	$	70,084	$	23,343	$	(8,952	)	$	14,391	$	2,794	$	87,269
Fee-Based Accounts		340,674		112,399		(37,056	)		75,343				416,017

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Gross sales for the six months ended June 30, 2012 included $8.7 billion in new client conversions

The mix of AUM and AUM was as follows for the periods indicated:

	June 30, 2011			September 30, 2011			December 31, 2011			March 31, 2012			June 30, 2012
Assets under management (AUM)		23	%		24	%		33	%		32	%		31	%
Assets under administration (AUA)		77	%		76	%		67	%		68	%		69	%
		100	%		100	%		100	%		100	%		100	%

Results of Operations

Three months ended June 30, 2012 compared to three months ended June 30, 2011

	Three Months Ended June 30,						Increase (Decrease)
	2012			2011			Amount			%
	(In thousands, unaudited)
Revenues:
Assets under management or administration	$	31,012		$	25,427		$	5,585			22	%
Licensing and professional services		6,950			5,907			1,043			18	%
Total revenues		37,962			31,334			6,628			21	%
Operating expenses:
Cost of revenues		13,549			10,917			2,632			24	%
Compensation and benefits		14,085			10,387			3,698			36	%
General and administration		8,148			5,258			2,890			55	%
Depreciation and amortization		3,224			1,578			1,646			104	%
Restructuring charges		88			43			45			105	%
Total operating expenses		39,094			28,183			10,911			39	%
Income (loss) from operations		(1,132	)		3,151			(4,283	)		-136	%
Other income (expense):
Interest income		14			20			(6	)		-30	%
Interest expense		—			(204	)		204			-100	%
Other income		—			1,100			(1,100	)		-100	%
Gain on investments		—			1			(1	)		-100	%
Total other income (expense)		14			917			(903	)		-98	%
Income (loss) before income tax provision (benefit)		(1,118	)		4,068			(5,186	)		-127	%
Income tax provision (benefit)		(450	)		1,621			(2,071	)		-128	%
Net income (loss)	$	(668	)	$	2,447		$	(3,115	)		-127	%

Revenues

Total revenues increased 21% from $31,334 in the three months ended June 30, 2011 to $37,962 in the three months ended June 30, 2012. The increase was primarily due to an increase in revenues from AUM or AUA of $5,585. Revenues from assets under management or administration were 82% and 81% of total revenues in the three months ended June 30, 2012 and 2011, respectively.

Assets under management or administration

Revenues earned from AUM or AUA increased 22% from $25,427 in the three months ended June 30, 2011 to $31,012 in the three months ended June 30, 2012. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycle in 2012, relative to the corresponding period in 2011. In the second quarter of 2012, revenues were positively affected by new account growth and positive net flows of AUM or AUA during 2011 and 2012, as well as an increase in revenues related to the FundQuest acquisition.

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The number of financial advisors with AUM or AUA that had client accounts on our technology platform increased from 14,613 as of June 30, 2011 to 15,045 as of June 30, 2012 and the number of AUM or AUA client accounts increased from approximately 332,000 as of June 30, 2011 to approximately 416,000 as of June 30, 2012.

Licensing and professional services

Licensing and professional services revenues increased 18% from $5,907 in the three months ended June 30, 2011 to $6,950 in the three months ended June 30, 2012, primarily due to an increase in net licensing revenue of $576. This increase was a result of the acquisitions of Prima and Tamarac, offset by the renegotiated license agreement with Fidelity.

Cost of revenues

Cost of revenues increased 24% from $10,917 in the three months ended June 30, 2011 to $13,549 in the three months ended June 30, 2012, primarily due to a corresponding increase in revenues from AUM or AUA. As a percentage of total revenues, cost of revenues increased from 35% in the three months ended June 30, 2011 to 36% in the three months ended June 30, 2012.

Compensation and benefits

Compensation and benefits increased 36% from $10,387 in the three months ended June 30, 2011 to $14,085 in the three months ended June 30, 2012, primarily due to an increase in salaries, benefits and commissions of $3,180 related to an increase in headcount as a result of the FundQuest, Prima and Tamarac acquisitions. As a percentage of total revenues, compensation and benefits increased from 33% in the three months ended June 30, 2011 to 37% in the three months ended June 30, 2012.

General and administration

General and administration expenses increased 55% from $5,258 in the three months ended June 30, 2011 to $8,148 in the three months ended June 30, 2012, primarily due to increases in transaction related costs of $1,265, occupancy costs of $472, professional and other legal fees of $260 and communication, research and data services expense of $286. Transaction related costs were not material in the prior year period. As a percentage of total revenues, general and administration expenses increased from 17% in the three months ended June 30, 2011 to 21% in the three months ended June 30, 2012.

Depreciation and amortization

Depreciation and amortization expense increased 104% from $1,578 in the three months ended June 30, 2011 to $3,224 in the three months ended June 30, 2012, primarily due to an increase in intangible asset amortization of $1,394 and fixed asset depreciation of $252. The increase in intangible asset amortization was due to an increase in intangible asset amortization as a result of the FundQuest, Prima and Tamarac acquisitions (see note 3 to the unaudited condensed consolidated financial statements). The increase in fixed asset depreciation expense was primarily due to increases in computer equipment and software to support the growth of our operations. As a percentage of total revenues, depreciation and amortization expense increased from 5% in the three months ended June 30, 2011 to 8% in the three months ended June 30, 2012.

Interest expense

Interest expense decreased from $204 in the three months ended June 30, 2011 to zero in the three months ended June 30, 2012, primarily due to three months of imputed interest on payments due to FundQuest compared to no imputed interest in the current year period. As discussed in notes 3 and 4 to the unaudited consolidated financial statements, due to the FundQuest acquisition and the related termination of the Platform Services Agreement with FundQuest, we have ceased imputing interest expense as of the date of acquisition.

Other income

Other income decreased from $1,100 in the three months ended June 30, 2011 to zero in the three months ended June 30, 2012. In 2011, the Company received proceeds from an insurance recovery.

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Income tax provision (benefit)

	Three Months Ended June 30,
	2012			2011
	(in thousands, unaudited)
Income tax provision (benefit)	$	(450	)	$	1,621
Effective tax rate		40.2	%		39.8	%

For the three months ended June 30, 2012 and June 30, 2011, our effective tax rate differs from the statutory rate primarily due to the effect of state taxes and permanent differences.

Six months ended June 30, 2012 compared to six months ended June 30, 2011

	Six Months Ended June 30,						Increase (Decrease)
	2012			2011			Amount			%
	(In thousands, unaudited)
Revenues:
Assets under management or administration	$	59,275		$	48,698		$	10,577			22	%
Licensing and professional services		11,329			11,898			(569	)		-5	%
Total revenues		70,604			60,596			10,008			17	%
Operating expenses:
Cost of revenues		25,075			21,045			4,030			19	%
Compensation and benefits		24,770			20,533			4,237			21	%
General and administration		14,921			10,134			4,787			47	%
Depreciation and amortization		5,623			3,126			2,497			80	%
Restructuring charges		115			53			62			117	%
Total operating expenses		70,504			54,891			15,613			28	%
Income from operations		100			5,705			(5,605	)		-98	%
Other income (expense):
Interest income		23			46			(23	)		-50	%
Interest expense		(3	)		(415	)		412			-99	%
Other income		—			1,100			(1,100	)		-100	%
Gain on investments		—			4			(4	)		-100	%
Total other income (expense)		20			735			(715	)		-97	%
Income before income tax provision		120			6,440			(6,320	)		-98	%
Income tax provision		48			2,589			(2,541	)		-98	%
Net income	$	72		$	3,851		$	(3,779	)		-98	%

Revenues

Total revenues increased 17% from $60,596 in the six months ended June 30, 2011 to $70,604 in the six months ended June 30, 2012. The increase was primarily due to an increase in revenues from AUM or AUA of $10,577. Revenues from assets under management or administration were 84% and 80% of total revenues in the six months ended June 30, 2012 and 2011, respectively.

Assets under management or administration

Revenues earned from AUM or AUA increased 22% from $48,698 in the six months ended June 30, 2011 to $59,275 in the six months ended June 30, 2012. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycle in 2012, relative to the corresponding period in 2011. In 2012, revenues were positively affected by new account growth and positive net flows of AUM or AUA during 2011 and the first quarter of 2012, as well as an increase in revenues related to the FundQuest acquisition.

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The number of financial advisors with AUM or AUA that had client accounts on our technology platform increased from 14,613 as of June 30, 2011 to 15,045 as of June 30, 2012 and the number of AUM or AUA client accounts increased from approximately 332,000 as of June 30, 2011 to approximately 416,000 as of June 30, 2012.

Licensing and professional services

Licensing and professional services revenues decreased 5% from $11,898 in the six months ended June 30, 2011 to $11,329 in the six months ended June 30, 2012, primarily due to a net decrease in licensing revenue of $1,486 and an increase in professional services revenue of $913. The decrease in licensing revenue was a result of the renegotiated license agreement with Fidelity, offset by the acquisitions of Prima and Tamarac.

Cost of revenues

Cost of revenues increased 19% from $21,045 in the six months ended June 30, 2011 to $25,075 in the six months ended June 30, 2012, primarily due to a corresponding increase in revenues from AUM or AUA. As a percentage of total revenues, cost of revenues increased from 35% in the six months ended June 30, 2011 to 36% in the six months ended June 30, 2012.

Compensation and benefits

Compensation and benefits increased 21% from $20,533 in the six months ended June 30, 2011 to $24,770 in the six months ended June 30, 2012, primarily due to an increase in salaries, benefits and commissions of $4,053 related to an increase in headcount as a result of the FundQuest, Prima and Tamarac acquisitions. As a percentage of total revenues, compensation and benefits increased from 34% in the six months ended June 30, 2011 to 35% in the six months ended June 30, 2012.

General and administration

General and administration expenses increased 47% from $10,134 in the six months ended June 30, 2011 to $14,921 in the six months ended June 30, 2012, primarily due to increases in transaction related costs of $1,881, occupancy costs of $880, professional and other legal fees of $641 and communication, research and data services expense of $505. Transaction related costs were not material in the prior year period. As a percentage of total revenues, general and administration expenses increased from 17% in the six months ended June 30, 2011 to 21% in the six months ended June 30, 2012.

Depreciation and amortization

Depreciation and amortization expense increased 80% from $3,126 in the six months ended June 30, 2011 to $5,623 in the six months ended June 30, 2012, primarily due to an increase in intangible asset amortization of $2,091 and fixed asset depreciation of $406. The increase in intangible asset amortization was due to an increase in intangible asset amortization as a result of the FundQuest, Prima and Tamarac acquisitions (see note 3 to the unaudited condensed consolidated financial statements). The increase in fixed asset depreciation expense was primarily due to increases in computer equipment and software to support the growth of our operations. As a percentage of total revenues, depreciation and amortization expense increased from 5% in the six months ended June 30, 2011 to 8% in the six months ended June 30, 2012.

Interest expense

Interest expense decreased from $415 in the six months ended June 30, 2011 to $3 in the six months ended June 30, 2012, primarily due to six months of imputed interest on payments due to FundQuest in 2011 compared to no imputed interest in the current year period. As discussed in notes 3 and 4 to the unaudited consolidated financial statements, due to the FundQuest acquisition and the related termination of the Platform Services Agreement with FundQuest, we have ceased imputing interest expense as of the date of acquisition.

Other income

Other income decreased from $1,100 in the six months ended June 30, 2011 to zero in the six months ended June 30, 2012. In 2011, the Company received proceeds from an insurance recovery.

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Income tax provision

	Six Months Ended June 30,
	2012			2011
	(in thousands, unaudited)
Income tax provision	$	48		$	2,589
Effective tax rate		40.2	%		40.2	%

For the six months ended June 30, 2012 and June 30, 2011, our effective tax rate differs from the statutory rate primarily due to the effect of state taxes and permanent differences.

Non GAAP Financial Measures

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(in thousands, unaudited)
Adjusted revenues	$	38,579	$	31,334	$	71,221	$	60,596
Adjusted EBITDA		5,314		7,122		10,408		13,346
Adjusted net income		2,230		3,479		4,431		6,443
Adjusted net income per share		0.07		0.11		0.13		0.20

“Adjusted revenues” excludes 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 the effect of purchase accounting on the fair value of acquired deferred revenue, interest income, interest expense, income tax provision, depreciation and amortization, 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 the effect of purchase accounting on the fair value of acquired deferred revenue, stock-based compensation expense, restructuring charges 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.

The Compensation Committee of our Board of Directors and our management use adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share:

• as measures of operating performance;

• for planning purposes, including the preparation of annual budgets;

• to allocate resources to enhance the financial performance of our business;

• to evaluate the effectiveness of our business strategies; and

• in communications with our Board of Directors concerning our financial performance.

Our Compensation Committee and our management may also consider adjusted EBITDA, among other factors, when determining management’s incentive compensation.

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We also present adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share as supplemental performance measures because we believe that they provide our Board of Directors, management and investors with additional information to assess our performance. Adjusted revenues provides comparisons from period to period by excluding the effect of purchase accounting on the fair value of acquired deferred revenue. Adjusted EBITDA provides comparisons from period to period by excluding potential differences caused by variations in the age and book depreciation of fixed assets affecting relative depreciation expense and amortization of internally developed software, amortization of customer inducement costs, litigation-related expense, severance, gain on investments, and changes in interest expense and interest income that are influenced by capital structure decisions and capital market conditions. Our management also believes it is useful to exclude non-cash stock-based compensation expense from adjusted EBITDA, adjusted operating income and adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time.

We believe adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are useful to investors in evaluating our operating performance because securities analysts use adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share as supplemental measures to evaluate the overall performance of companies, and we anticipate that our investor and analyst presentations will include adjusted EBITDA, adjusted net income and adjusted net income per share.

Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, or any other performance measures derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity.

We understand that, although adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are frequently used by securities analysts and others in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for an analysis of our results as reported under U.S. GAAP. In particular you should consider:

• Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

• Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share do not reflect changes in, or cash requirements for, our working capital needs;

• Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share do not reflect non-cash components of employee compensation;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements;

• Due to either net losses before income tax expenses or the use of federal and state net operating loss carryforwards in 2012 and 2011 we had cash income tax payments of $325 and $391 in the six months ended June 30, 2012 and 2011, respectively. Income tax payments will be higher if we continue to generate taxable income and our existing net operating loss carryforwards for federal and state income taxes have been fully utilized or have expired; and

• Other companies in our industry may calculate adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share differently than we do, limiting their usefulness as a comparative measure.

Management compensates for the inherent limitations associated with using adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share through disclosure of such limitations, presentation of our financial statements in accordance with U.S. GAAP and reconciliation of adjusted revenues adjusted EBITDA, adjusted net income and adjusted net income per share to revenues, net income and net income per share, the most directly comparable U.S. GAAP measure. Further, our management also reviews U.S. GAAP measures and evaluates individual measures that are not included in some or all of our non-U.S. GAAP financial measures, such as our level of capital expenditures and interest income, among other measures.

The following table sets forth a reconciliation of revenue to adjusted revenue based on our historical results:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(in thousands, unaudited)
Revenue	$	37,962	$	31,334	$	70,604	$	60,596
Deferred revenue fair value adjustment		617		—		617		—
Adjusted revenues	$	38,579	$	31,334	$	71,221	$	60,596

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The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA based on our historical results:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(in thousands, unaudited)
Net income	$	(668	)	$	2,447		$	72		$	3,851
Add (deduct):
Deferred revenue fair value adjustment		617			—			617			—
Interest income		(14	)		(20	)		(23	)		(46	)
Interest expense		—			204			3			415
Income tax provision (benefit)		(450	)		1,621			48			2,589
Depreciation and amortization		3,224			1,578			5,623			3,126
Stock-based compensation expense		1,135			829			1,930			1,645
Restructuring charges and transaction costs		1,353			53			1,997			63
Severance		78			246			83			303
Litigation related expense		39			58			58			91
Gain on investments		—			(1	)		—			(4	)
Other income		—			(1,100	)		—			(1,100	)
Customer inducement costs		—			1,207			—			2,413
Adjusted EBITDA	$	5,314		$	7,122		$	10,408		$	13,346

The following table sets forth the reconciliation of net income (loss) to adjusted net income and adjusted net income per share based on our historical results:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012 *			2011 *			2012 *		2011 *
	(in thousands, unaudited)
Net income (loss)	$	(668	)	$	2,447		$	72	$	3,851
Add:
Deferred revenue fair value adjustment		369			—			369		—
Stock-based compensation expense		679			496			1,154		984
Restructuring charges and transaction costs		809			32			1,194		38
Severance		47			147			50		181
Amortization of acquired intangibles		971			137			1,557		307
Litigation related expense		23			35			35		54
Customer inducement costs		—			722			—		1,443
Other income		—			(658	)		—		(658	)
Imputed interest expense		—			121			—		243
Adjusted net income		2,230			3,479			4,431		6,443
Basic number of weighted-average shares outstanding		32,149,957			31,591,412			32,004,386		31,502,139
Effect of dilutive shares:
Options to purchase common stock		886,748			1,082,818			900,085		1,112,797
Common warrants		131,554			295,594			144,076		297,980
Restricted stock		5,519			—			6,085		—
Diluted number of weighted-average shares outstanding		33,173,778			32,969,824			33,054,632		32,912,916
Adjusted net income per share	$	0.07		$	0.11		$	0.13	$	0.20

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

33

Liquidity and Capital Resources

As of June 30, 2012, we had total cash and cash equivalents of $13,400 compared to $64,909 as of December 31, 2011. We believe that our current level of cash generation, together with our existing current assets, will adequately support our operations and capital expenditures over the next 12 months.

Cash Flows

The following table presents information regarding our cash flows and cash and cash equivalents for the periods indicated:

	Six Months Ended June 30,
	2012			2011
	(In thousands, unaudited)
Net cash provided by operating activities	$	9,866		$	12,645
Net cash used in investing activities		(65,621	)		(3,879	)
Net cash provided by financing activities		4,246			2,166
Net increase (decrease) in cash and cash equivalents		(51,509	)		10,932
Cash and cash equivalents, end of period		13,400			78,600

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2012 decreased by $2,779 compared to the same period in 2011, primarily due to a decrease in net income of $3,779 from the six months ended June 30, 2012 compared to the prior year period, offset by various other non-cash adjustments and changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2012 decreased by $61,742 compared to the same period in 2011. During the six months ended June 30, 2012 the company acquired Prima and Tamarac for a total consideration of $62,352 (see note 3 to the unaudited condensed consolidated financial statements). Cash disbursements in 2012 and 2011 totaled $3,987 and $3,734, respectively, for purchases of property and equipment and capitalization of internally developed software. In the six months ended June 30, 2012 the Company also decreased goodwill by $889 resulting from the finalization of the working capital adjustment related to the FundQuest acquisition (see note 3 to the unaudited condensed consolidated financial statements).

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2012 increased by $2,080 primarily a result of the proceeds from the issuance of restricted stock of $2,759, offset by a net decrease in proceeds from the exercise of stock options of $695.

Critical Accounting Estimates

There have been no changes in the matters for which we make critical accounting estimates in the preparation of our unaudited condensed consolidated financial statements during the six months ended June 30, 2012, as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2011 included in our 2011 Form 10-K.

34

Commitments and Off-Balance Sheet Arrangements

Leases

The following table sets forth information regarding our future minimum lease obligations as of June 30, 2012:

Years ending December 31:
Remainder of 2012	$	1,720
2013		4,189
2014		5,075
2015		5,272
2016		5,490
Thereafter		26,411
	$	48,157

Recent Accounting Pronouncements

In June 2011, the FASB issued authoritative guidance that amends ASC Topic 220, Comprehensive Income, to require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and it eliminates the option to present components of other comprehensive income as a part of the statement of changes in stockholders’ equity. In addition, this guidance requires an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. These amendments are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on our consolidated financial statements.

In September 2011, the FASB issued authoritative guidance regarding the testing of goodwill for impairment. This guidance allows companies to perform a “qualitative” assessment to determine whether or not the current two-step quantitative testing method, in which a company compares the fair value of reporting units to its carrying amount including goodwill, must be followed. If a qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment test is not required. A company may choose to use the qualitative assessment on none, some, or all of its reporting units or to bypass the qualitative assessment and proceed directly to the two-step quantitative testing method. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk

Our exposure to market risk is directly related to revenues from asset management or administration services earned based upon a contractual percentage of AUM or AUA. In the three and six months ended June 30, 2012, 81% and 84%, respectively of our revenues were derived from revenues based on the market value of AUM or AUA. We expect this percentage to vary over time. A decrease in the aggregate value of AUM or AUA may cause our revenue and income to decline.

Foreign currency risk

The expenses of our India subsidiary, which primarily consist of expenditures related to compensation and benefits, are paid using the Indian Rupee. We are directly exposed to changes in foreign currency exchange rates through the translation of these monthly expenditures into U.S. dollars. For the three and six months ended June 30, 2012, we estimate that a hypothetical 10% increase in the value of the Indian Rupee to the U.S. dollar would result in a decrease of approximately $100 and $200 to pre-tax earnings, respectively and a hypothetical 10% decrease in the value of the Indian Rupee to the U.S. dollar would result in an increase of approximately $100 and $200 to pre-tax earnings, respectively.

Interest rate risk

We have no floating interest rate debt and therefore we are not directly exposed to interest rate risk.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“the Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. In

35

designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet the reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation, our principal executive officer and our principal financial officer concluded that as of June 30, 2012, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In December 2011, the Company acquired FundQuest Incorporated (“FundQuest”). In accordance with the rules of the Securities and Exchange Commission (the “SEC”), FundQuest, now known as Envestnet Portfolio Solutions, Inc. (“EPS”) was excluded from management’s annual report on internal control over financial reporting for the fiscal year ended December 31, 2011. Beginning in the fourth quarter of 2012, management will include the internal controls of EPS in its assessment of the effectiveness of Envestnet’s internal controls over financial reporting.

In April 2012, the Company acquired Prima Capital Holding, Inc. (“Prima”) and in May 2012, the Company acquired Tamarac, Inc. (“Tamarac”). In accordance with the rules of the SEC, management will include the internal controls of Prima and Tamarac in its assessment of the effectiveness of Envestnet’s internal controls over financial reporting beginning in the fourth quarter of 2012.

36

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in litigation arising in the ordinary course of our business. We do not believe that the outcome of any of the current litigation, individually or in the aggregate, would, if determined adversely to us, have a material adverse effect on our results of operations, financial condition, cash flows or business.

Item 1A. Risk Factors

Investment in our securities involves risk. An investor or potential investor should consider the risks summarized under the caption “Risk Factors” in Part I, Item 1A of our 2011 Form 10-K filed, when making investment decisions regarding our securities. The risk factors that were disclosed in our 2011 Form 10-K have not materially changed since the date our 2011 Form 10-K was filed.

Item 2. Unregistered Sales of Equity Securities

(a) Unregistered Sales of Equity Securities

See Form 8-K filed May 1, 2012 with the Securities and Exchange Commission.

(c) Issuer Purchases of Equity Securities

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

(a) Exhibits

See the exhibit index, which is incorporated herein by reference.

37

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 9, 2012.

ENVESTNET, INC.
By:	/S/    JUDSON BERGMAN
	Judson Bergman Chairman and Chief Executive Officer Principal Executive Officer
By:	/S/    PETER D’ARRIGO
	Peter D’Arrigo Chief Financial Officer Principal Financial Officer
By:	/S/    DALE SEIER
	Dale Seier Senior Vice President, Finance Principal Accounting Officer

38

INDEX TO EXHIBITS

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1(1)	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2(1)	Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema Document *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document *
101.LAB	XBRL Taxonomy Extension Label Linkbase Document *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document *
101 DEF	XBRL Taxonomy Extension Definition Linkbase Document *

⁽¹⁾  The material contained in Exhibit 32.1 and 32.2 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

* Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011; (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011; (iii) the Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2012; (iv) the Condensed Consolidated Statements of Cash Flow for the six months ended June 30, 2012 and 2011; (v) Notes to the Condensed Consolidated Financial Statements.

The XBRL related information in this Quarterly Report on Form 10-Q, Exhibit 101, is not deemed “filed” for purposes of Section 11 or 12 of the Securities Act of 1933, as amended (the Securities Act), or Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of those sections, and is not part of any registration statement to which it may relate, and is not incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as is expressly set forth by specific reference in such filing or document.

39

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Judson Bergman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2012, of Envestnet Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012	/s/ JUDSON BERGMAN
	Judson Bergman
	Chairman and Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Peter D’Arrigo, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended June 30, 2012, of Envestnet Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2012	/s/ PETER D’ARRIGO
	Peter D’Arrigo
	Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Envestnet, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Judson Bergman, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Judson Bergman

By: Judson Bergman

Chairman and Chief Executive Officer

(Principal Executive Officer)

Dated: August 9, 2012

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Envestnet, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Peter D’Arrigo, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Peter D’Arrigo

By: Peter D’Arrigo

Chief Financial Officer

(Principal Financial Officer)

Dated: August 9, 2012

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Business Acquisitions (Details 3) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Pro forma financial information
Revenue	$ 39,082	$ 37,968	$ 76,197	$ 73,606
Net income (loss)	$ (957)	$ 2,146	$ (1,980)	$ 2,158
Net income (loss) per share:
Basic	$ (0.03)	$ 0.07	$ (0.06)	$ 0.07
Diluted	$ (0.03)	$ 0.06	$ (0.06)	$ 0.06

XML

Accrued Expenses (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Accrued Expenses (Textual) [Abstract]
Restructuring charges	$ 88	$ 43	$ 115	$ 53

XML

Goodwill and Intangible Assets (Details 1) (USD $) In Thousands, unless otherwise specified					6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Customer list [Member]	Dec. 31, 2011 Customer list [Member]	Jun. 30, 2012 Proprietary Technology [Member]	Jun. 30, 2012 Trade Names [Member]	Jun. 30, 2012 Minimum [Member] Customer list [Member]	Jun. 30, 2012 Maximum [Member] Customer list [Member]
Components of intangible assets
Useful Life					5 years	5 years	4 years	8 years
Accumulated Amortization	$ (6,061)	$ (3,458)	$ (5,815)	$ (3,458)	$ (178)	$ (68)
Gross Carrying Amount	36,773	15,683	28,103	15,683	6,580	2,090
Net Carrying Amount	$ 30,712	$ 12,225	$ 22,288	$ 12,225	$ 6,402	$ 2,022

XML

Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Current:
Deferred revenue	$ 291	$ 30	$ 30
Prepaid expenses and accruals	319	162	162
Net current deferred tax assets	610	192	192
Non-Current:
Deferred rent	586	535	535
Net operating loss and tax credit carry-forwards	16,315	9,910	9,910
Loss on investments	2,157	2,157	2,157
Amortization and depreciation	(12,807)	(4,516)	(4,516)
Other	4,251	2,050	2,050
Net long-term deferred tax assets	10,502	10,136	10,136
Net deferred tax assets	11,112	10,328	10,328
Less valuation allowance	(3,444)	(3,444)	(3,444)
Total deferred tax assets	$ 7,668	$ 6,884	$ 6,884

XML

Internally Developed Software (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Depreciation expense for internally developed software
Amortization expense	$ 377	$ 397	$ 760	$ 799

XML

Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Reconciliation of net earnings to basic earnings per share and diluted earnings per share

The following is a reconciliation of net earnings to basic earnings per share and diluted earnings per share:

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012		2011
Net income (loss)	$	(668	)	$	2,447	$	72	$	3,851
Basic number of weighted-average shares outstanding		32,149,957			31,591,412		32,004,386		31,502,139
Effect of dilutive shares:
Options to purchase common stock		—			1,082,818		900,085		1,112,797
Common warrants		—			295,594		144,076		297,980
Unvested restricted stock		—			—		6,085		—
Diluted number of weighted-average shares outstanding		32,149,957			32,969,824		33,054,632		32,912,916
Net income (loss) per share:
Basic	$	(0.02	)	$	0.08	$	0.00	$	0.12
Diluted	$	(0.02	)	$	0.07	$	0.00	$	0.12

Anti-dilutive securities excluded from computation of diluted earnings per share

Common share equivalents for securities that were anti-dilutive and therefore excluded from the computation of diluted earnings per share was as follows:

	Three Months Ended June  30,				Six Months Ended June  30,
	2012		2011		2012		2011
Options to purchase common stock		5,374,040		—		1,227,248		—
Common warrants		1,388,888		—		—		—
Unvested restricted stock		765,970		—		755,970		—

XML

Income Taxes (Details Textual) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Income Taxes (Textual) [Abstract]
Deferred tax benefits associated with stock-based compensation	$ 1,381
Amount of gross liability for unrecognized tax benefits in non-current liabilities	688	573
Unrecognized tax benefits that would impact effective tax rate, if recognized	522
Unrecognized tax benefits accrued interest and penalties	209	209
Valuation allowance related to capital losses	2,157
Federal and state net operating losses		$ 1,287

XML

Customer Inducements (Tables)

6 Months Ended

Jun. 30, 2012

Customer Inducements [Abstract]

Amortization and imputed interest expense

Amortization and imputed interest expense was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	—	$	1,207	$	—	$	2,413
Imputed interest expense		—		202		—		407

XML

Other Non-Current Assets (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Summary of other non-current assets
Investment in private company	$ 1,250	$ 1,250
Deposits
Lease	1,660	1,538
Other	264	259
Other	110	115
Total other non-current assets	$ 3,284	$ 3,162

XML

Customer Inducements (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2010
Customer Inducements (Textual) [Abstract]
Number of annual payments receivable with regard to service agreement	5
Fund Quest [Member]
Customer Inducements (Textual) [Abstract]
Acquisition date	Dec. 13, 2011
Present value of up-front payments		$ 30,400
Warrants issued		1,388,888
Estimated fair value of warrants issued		$ 2,946
Exercise price of warrants issued		$ 10.80
Contract term annual revenues receivable	5 years
Amortization term of warrant expenses	7 years

XML

Business Acquisitions (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012
Consideration transferred in acquisition
Non-cash consideration	$ 101
Prima Capital Holding, Inc. [Member]
Consideration transferred in acquisition
Cash paid to owners	13,750
Cash assumed	(1,767)
Working capital adjustment	1,942
Total consideration transferred	13,925
Tamarac, Inc. [Member]
Consideration transferred in acquisition
Cash paid to owners	54,000
Cash assumed	(2,533)
Working capital adjustment	(3,141)
Total consideration transferred	$ 48,427

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Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011
Components of accrued expenses
Accrued investment manager fees	$ 10,901		$ 8,451
Accrued compensation and related taxes	3,807		4,230
Accrued professional services	501		481
Accrued restructuring charges	34	19	290
Other accrued expenses	1,242		1,467
Total accrued expenses	$ 16,485		$ 14,919

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Major Customers (Details Textual)	6 Months Ended
	Jun. 30, 2012 Customer
Major Customers (Textual) [Abstract]
Number of customer account as major customer of fees receivable	1
Number of customer account as major customer of revenues	1

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Stock-Based Compensation (Details 2) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2012
Summary of option activity
Shares Outstanding, Beginning	4,886,414	4,863,718	4,863,718
Shares, Granted	589,263	149,652
Shares, Exercised	(99,837)	(124,956)
Shares, Forfeited	(1,800)	(2,000)
Shares Outstanding, Ending	5,374,040	4,886,414	5,374,040
Shares, Options exercisable	2,977,757		2,977,757
Weighted-Average Exercise Price, Outstanding, Beginning	$ 8.34	$ 8.19	$ 8.19
Weighted-Average Exercise Price, Granted	$ 12.55	$ 12.45
Weighted-Average Exercise Price, Exercised	$ 6.18	$ 7.59
Weighted-Average Exercise Price, Forfeited	$ 9.00	$ 9.70
Weighted-Average Exercise Price, Outstanding, Ending	$ 8.84	$ 8.34	$ 8.84
Weighted-Average Exercise Price, Options exercisable	$ 7.43		$ 7.43
Weighted-Average Remaining Contractual Life (Years), Outstanding	6 years 9 months 18 days	6 years 8 months 12 days
Weighted-Average Remaining Contractual Life (Years), Exercisable			5 years 4 months 24 days
Aggregate Intrinsic Value, Outstanding	$ 17,737	$ 20,544	$ 17,737
Aggregate Intrinsic Value, Options exercisable	$ 13,769		$ 13,769

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified				3 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Fund Quest [Member]	Jun. 30, 2012 Prima Capital Holding, Inc. [Member]	Jun. 30, 2012 Tamarac, Inc. [Member]
Goodwill
Goodwill, Allocation Adjustment				$ (889)
Goodwill, Acquired During Period					9,555	35,263
Goodwill	$ 66,152	$ 21,334	$ 22,223

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Business Acquisitions

6 Months Ended

Jun. 30, 2012

Business Acquisitions [Abstract]

Business Acquisitions

3. Business Acquisitions

FundQuest Acquisition

On December 13, 2011, the Company acquired all of the outstanding shares of FundQuest Incorporated (“FundQuest”), a subsidiary of BNP Paribas Investment Partners USA Holdings, Inc. for total consideration of approximately $27,796. FundQuest was renamed Envestnet Portfolio Solutions, Inc. (“EPS”) subsequent to the acquisition. EPS provides managed account programs, overlay portfolio management, mutual funds, institutional asset management and investment consulting to registered investment advisors, independent advisors, broker-dealers, banks and trust organizations. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is not deductible for income tax purposes.

During the three months ended March 31, 2012, the Company finalized the estimated working capital adjustment. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date of December 13, 2011 as initially reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011:

	December 13, 2011			Consideration			December 13, 2011
	(As initially reported)			Adjustments			(As adjusted)
Accounts receivable	$	2,603		$	—		$	2,603
Prepaid expenses and other current assets		46			—			46
Property and equipment		442			—			442
Intangible assets		11,830			—			11,830
Goodwill		20,192			(889	)		19,303
Accounts payable and accrued liabilities		(1,364	)		—			(1,364	)
Deferred income taxes		(4,710	)		—			(4,710	)
Deferred revenue		(354	)		—			(354	)
Total assets acquired	$	28,685		$	(889	)	$	27,796

The initially reported estimated fair values of assets acquired and liabilities assumed were based on the information that was available at the time the Company filed its annual report on Form 10-K for the year ended December 31, 2011. Management of the Company believes all relevant information is now available to finalize the estimates.

Prima Capital Holding, Inc. Acquisition

On April 5, 2012, the Company completed the acquisition of Prima Capital Holding, Inc. (“Prima”). In accordance with the stock purchase agreement, the Company acquired all of the outstanding shares of Prima for total consideration of approximately $13,925. Prima provides investment management due diligence, research applications, asset allocation modeling and multi-manager portfolios to the wealth management and retirement industries. Prima’s clientele includes seven of the top 20 banks in the U.S. as measured by total assets, independent RIAs, regional broker-dealers, family offices and trust companies. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is not deductible for income tax purposes.

The consideration transferred in the acquisition was as follows:

Cash paid to owners	$	13,750
Cash assumed		(1,767	)
Cash paid for working capital settlement		1,942
	$	13,925

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Accounts receivable	$	72
Prepaid expenses and other current assets		36
Notes receivable		860
Property and equipment		103
Deferred income taxes - non current		1,129
Intangible assets		4,940
Goodwill		9,555
Accounts payable and accrued liabilities		(171	)
Deferred income tax liabilities		(1,869	)
Deferred revenue		(730	)
Total net assets acquired	$	13,925

The estimated fair value of deferred revenue is provisional and is based on the information that was available as of the acquisition date to estimate the fair value of this amount. The Company believes the information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize the fair value. Therefore, provisional measurements of fair value reflected are subject to change and such change could be significant. The Company expects to finalize the valuation of deferred revenue and complete the acquisition accounting as soon as practicable but no later than September 31, 2012.

A summary of intangible assets acquired, estimated useful lives and amortization method is as follows:

	Amount		Weighted Average Useful Life in Years		Amortization Method
Customer list	$	3,740		10	Accelerated
Proprietary technology		700		5	Accelerated
Trade names		500		5	Accelerated
Total	$	4,940

The results of Prima’s operations are included in the consolidated statement of operations beginning April 5, 2012. Prima’s revenues and net loss for the period beginning April 5, 2012 through June 30, 2012 totaled $1,149 and ($330), respectively. The net loss included pre-tax acquired intangible asset amortization of $325.

Tamarac, Inc. Acquisition

On May 1, 2012, the Company completed the acquisition of Tamarac, Inc. (“Tamarac”). In accordance with the merger agreement, a newly formed subsidiary of Envestnet merged with and into Tamarac, and Tamarac became a wholly owned subsidiary of Envestnet. Under the terms of the merger agreement, total consideration was approximately $48,427 for all of the outstanding stock of Tamarac. Tamarac is a provider of sophisticated portfolio management technology that enables RIAs to efficiently deliver customized individual account management to their clients. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is expected to be non-deductible for income tax purposes.

As a result of the merger with Tamarac, the Company adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock. The unvested common stock vests based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition (Note 13). The Company also granted to certain Tamarac employees 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date (Note 13).

In accordance with the terms of the merger agreement between Envestnet and Tamarac, Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed (Note 12).

The consideration transferred in the acquisition was as follows:

Cash paid to owners	$	54,000
Non-cash consideration		101
Cash assumed		(2,533	)
Receivable from working capital settlement		(3,141	)
	$	48,427

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Accounts receivable	$	489
Other receivables		681
Prepaid expenses and other current assets		216
Deferred income tax assets		7,235
Property and equipment		444
Deposits		379
Intangible assets		16,150
Goodwill		35,263
Accounts payable and accrued liabilities		(2,356	)
Deferred income tax liabilities		(6,143	)
Deferred revenue		(3,931	)
Total net assets acquired	$	48,427

The estimated fair value of deferred revenue and the working capital settlement is provisional and is based on the information that was available as of the acquisition date to estimate the fair value of these amounts. The Company believes the information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize those fair values. Therefore, provisional measurements of fair value reflected are subject to change and such changes could be significant. The Company expects to finalize the valuation of deferred revenue and working capital settlement, and complete the acquisition accounting as soon as practicable but no later than the contractual period.

A summary of intangible assets acquired, estimated useful lives and amortization method is as follows:

	Amount		Weighted Average Useful Life in Years		Amortization Method
Customer list	$	8,680		12	Accelerated
Proprietary technology		5,880		8	Accelerated
Trade names		1,590		5	Accelerated
Total	$	16,150

The results of Tamarac’s operations are included in the consolidated statement of operations beginning May 1, 2012. Tamarac’s revenues and net loss for the period May 1, 2012 through June 30, 2012 totaled $1,784 and ($589), respectively. The net loss includes acquired intangible asset amortization of $326

For the three and six months ended June 30, 2012, acquisition related costs for FundQuest, Tamarac and Prima, totaled $1,265 and $1,881, respectively, and are included in general and administration expenses.

Pro forma results for Envestnet, Inc. giving effect to the FundQuest, Prima and Tamarac acquisitions

The following unaudited pro forma financial information presents the combined results of operations of Envestnet, Prima and Tamarac for the three and six months ended June 30, 2012. The following unaudited pro forma financial information presents the combined results of operations of Envestnet, FundQuest, Prima and Tamarac for the three and six months ended June 30, 2011. For the three and six months ended June 30, 2012 and 2011, the unaudited pro forma financial information presents the results as if the acquisitions had occurred as of the beginning of 2011.

The unaudited pro forma results presented include amortization charges for acquired intangible assets, the elimination of intercompany transactions, restructuring charges, unrealized gain or loss on warrant and imputed interest expense, stock based compensation expense and the related tax effect on the aforementioned items.

Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented.

	Three Months ended June 30,					Six Months ended June 30,
	2012			2011		2012			2011
Revenue	$	39,082		$	37,968	$	76,197		$	73,606
Net income (loss)		(957	)		2,146		(1,980	)		2,158
Net income (loss) per share:
Basic		(0.03	)		0.07		(0.06	)		0.07
Diluted		(0.03	)		0.06		(0.06	)		0.06

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Stock-Based Compensation (Details 3) (Restricted Stock [Member], USD $)	3 Months Ended
	Jun. 30, 2012	Mar. 31, 2012
Restricted Stock [Member]
Summary of unvested restricted stock awards activity
Number of Shares, Balance Beginning	206,800	73,820
Number of Shares, Granted	559,551	155,383
Number of Shares, Vested		(21,235)
Number of Shares, Expired/cancelled		(1,064)
Number of Shares, Forfeited	(381)	(104)
Number of Shares, Balance, Ending	765,970	206,800
Weighted-Average Grant Date Fair Value per share, Balance Beginning	$ 12.36	$ 12.26
Weighted-Average Grant Date Fair Value per share, Granted	$ 12.51	$ 12.44
Weighted-Average Grant Date Fair Value Per Share, Vested		$ 12.55
Weighted-Average Grant Date Fair Value Per Share, Expired/cancelled		$ 12.45
Weighted-Average Grant Date Fair Value per share, Forfeited	$ 12.49	$ 12.55
Weighted-Average Grant Date Fair value per share, Balance Ending	$ 12.47	$ 12.36

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Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Cost:
Property and equipment, gross	$ 32,107	$ 28,086
Less accumulated depreciation and amortization	(19,730)	(16,995)
Property and equipment, net	12,377	11,091
Office furniture and fixtures [Member]
Cost:
Property and equipment, gross	3,338	2,713
Computer equipment and software [Member]
Cost:
Property and equipment, gross	20,831	18,942
Other office Equipment [Member]
Cost:
Property and equipment, gross	598	598
Leasehold improvements [Member]
Cost:
Estimated Useful Life	Shorter of the term of the lease or useful life of the asset
Property and equipment, gross	$ 7,340	$ 5,833
Minimum [Member] | Office furniture and fixtures [Member]
Cost:
Estimated Useful Life	5 years
Minimum [Member] | Computer equipment and software [Member]
Cost:
Estimated Useful Life	3 years
Minimum [Member] | Other office Equipment [Member]
Cost:
Estimated Useful Life	5 years
Maximum [Member]
Cost:
Estimated Useful Life	7 years

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Other Non-Current Assets (Tables)

6 Months Ended

Jun. 30, 2012

Other Non-Current Assets [Abstract]

Components of other non-current assets

Other non-current assets consist of the following:

	June 30, 2012		December 31, 2011
Investment in private company	$	1,250	$	1,250
Deposits
Lease		1,660		1,538
Other		264		259
Other		110		115
Total other non-current assets	$	3,284	$	3,162

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets [Abstract]

Changes in the carrying amount of the Company's goodwill

Changes in the carrying amount of the Company’s goodwill was as follows:

Balance at December 31, 2011	$	22,223
FundQuest adjustment (note 3)		(889	)
Balance at March 31, 2012		21,334
Prima acquisition (note 3)		9,555
Tamarac acquisition (note 3)		35,263
Balance at June 30, 2012	$	66,152

Components of intangible assets

Intangible assets consist of the following:

		June 30, 2012							December 31, 2011
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer list	4 -8 years	$	28,103	$	(5,815	)		22,288	$	15,683	$	(3,458	)	$	12,225
Proprietary technology	5 - 8 years		6,580		(178	)		6,402		—		—			—
Trade Names	5 years		2,090		(68	)		2,022		—		—			—
Total intangible assets		$	36,773	$	(6,061	)	$	30,712	$	15,683	$	(3,458	)	$	12,225

Amortization expense for intangible assets

Amortization expense for intangible assets was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	1,624	$	231	$	2,603	$	513

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Income Taxes (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Tax expense and effective tax rate
Income (loss) before income taxes	$ (1,118)	$ 4,068	$ 120	$ 6,440
Income tax provision	$ (450)	$ 1,621	$ 48	$ 2,589
Effective tax rate	40.20%	39.80%	40.20%	40.20%

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Property and Equipment (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Depreciation and amortization expense for property and equipment
Depreciation and amortization expense	$ 1,223	$ 950	$ 2,260	$ 1,814

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2012

Accrued Expenses [Abstract]

Components of accrued expenses

Accrued expenses consist of the following:

	June 30, 2012		December 31, 2011
Accrued investment manager fees	$	10,901	$	8,451
Accrued compensation and related taxes		3,807		4,230
Accrued professional services		501		481
Accrued restructuring charges		34		290
Other accrued expenses		1,242		1,467
Total accrued expenses	$	16,485	$	14,919

Summary of activity in accrued restructuring charges

The summary of activity in accrued restructuring charges was as follows:

Balance at December 31, 2011	$	290
Restructuring provision incurred		27
Payments		(298	)
Balance at March 31, 2012		19
Restructuring provision incurred		88
Payments		(73	)
Balance at June 30, 2012	$	34

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Income Taxes (Tables)

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Net deferred tax assets

Net deferred tax assets consist of the following:

	At June 30,
	2012			2011
Current:
Deferred revenue	$	291		$	30
Prepaid expenses and accruals		319			162
Net current deferred tax assets		610			192
Non-Current:
Deferred rent	$	586		$	535
Net operating loss and tax credit carry-forwards		16,315			9,910
Loss on investments		2,157			2,157
Amortization and depreciation		(12,807	)		(4,516	)
Other		4,251			2,050
Net long-term deferred tax assets		10,502			10,136
Net deferred tax assets		11,112			10,328
Less valuation allowance		(3,444	)		(3,444	)
	$	7,668		$	6,884

Tax expense and effective tax rate

The following table includes tax expense and the effective tax rate for the Company’s income from operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Income (loss) before income taxes	$	(1,118	)	$	4,068		$	120		$	6,440
Income tax provision		(450	)		1,621			48			2,589
Effective tax rate		40.2	%		39.8	%		40.2	%		40.2	%

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Basis of Presentation and Summary of Significant Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of the Company as of June 30, 2012 and for the three and six months ended June 30, 2012 and 2011 have not been audited by an independent registered public accounting firm. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of June 30, 2012 and the results of operations, stockholders’ equity and cash flows for the periods presented herein. The unaudited condensed consolidated balance sheet as of December 31, 2011 was derived from the Company’s audited financial statements for the year ended December 31, 2011 but does not include all disclosures, including notes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar amounts contained in these unaudited condensed consolidated financial statements are in thousands, except share and per share amounts.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2011.

The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in these unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in these unaudited condensed consolidated financial statements include estimating uncollectible receivables, costs capitalized for internally developed software, valuations and assumptions used for impairment testing of goodwill, intangible and other long-lived assets, fair value of stock and stock options issued, realization of deferred tax assets and valuation and other assumptions used to allocate purchase prices in business combinations. Actual results could differ materially from those estimates under different assumptions or conditions.

Revenue Recognition—The Company recognizes revenue from services related to asset management and administration, licensing and professional services fees.

• Asset management and administration fees—The Company derives revenues from fees charged as a percentage of the assets that are managed or administered on its technology platform by financial advisors, financial institutions, and their clients (collectively “customers”) and for services the Company provides to its customers. Such services include investment manager due diligence and research, portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back office and middle-office operations and administration. Investment decisions for assets under management or administration are made by our customers. The asset management and administration fees the Company earns are generally based upon a contractual percentage of assets managed or administered on our platform based on preceding quarter-end values. The contractual fee percentages vary based on the level and type of services the Company provides to its customers. Fees related to assets under management or administration increase or decrease based on values of existing customer accounts. The values are affected by inflows or outflows of customer funds and market fluctuations.

• Licensing and professional services fees—

Licensing—The Company derives licensing fees from recurring contractual fixed fee contracts with larger financial institutions or enterprise clients. Licensing contracts allow the customer to provide a unique configuration of platform features and investment solutions for their advisors. The licensing fees vary based on the type of services provided and our revenues received under license agreements are recognized over the contractual term.

The Company’s license agreements do not generally provide its customers the ability to take possession of its software or host the software on its own systems or through a hosting arrangement with an unrelated party. However, in a certain instance, a customer has the ability to take possession of the software, and accordingly, the Company considers this circumstance as a software multiple-element arrangement. As a software multiple-element arrangement, the Company is required to determine whether there is vendor specific objective evidence (“VSOE”) of the various elements, including the software license and service components. The Company has not established VSOE of fair value for the separate components, and accordingly, recognizes revenue from these arrangements at such time as all elements of the arrangement have been delivered.

For the Company’s non-software multiple-element arrangements, the Company allocates the revenue in the arrangement using VSOE or third-party evidence (“TPE”) of selling price, or using the estimated selling price (“ESP”) of deliverables if it does not have VSOE or TPE. VSOE is the price charged when the same or similar product or service is sold separately. Many of the Company’s contracts renew automatically at the same rate as the original contract. The Company defines VSOE as the renewal rates of the standalone transactions.

TPE is determined based on the prices charged by the Company’s competitors for a similar deliverable when sold separately. However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in the Company’s product offerings when compared with those of the Company’s peers, the Company generally is unable to reliably determine TPE.

ESP is the Company’s best estimate of selling price of an element in a transaction involving multiple deliverables. If the Company is unable to establish selling price using either VSOE or TPE, the Company uses ESP in the allocation of arrangement consideration. The objective of ESP is to determine the price at which the Company would transact business if the product or service were sold on a standalone basis. The Company determines ESP based on revenue price drivers applied within a narrow range.

For multiple-element arrangements, the consideration allocated to online license fees is recognized on a straight line basis over the initial contract period, which typically ranges from one to five years and commences with the completed implementation date for the related product. The Company generally recognizes revenue for consideration allocated to implementation and consulting services in a multiple-element arrangement as services are performed because these services have standalone value separate from the online license fees.

Professional services—The Company derives professional service fees from providing contractual customized service platform software development, which are recognized under a proportional performance model utilizing an output based approach. The Company’s contracts have fixed prices, and generally specify or quantify interim deliverables.

Substantially all of the Company’s revenues are based on contractual arrangements. Revenues are recognized in the periods in which the related services are performed provided that persuasive evidence of an agreement exists, the fee is fixed or determinable, and collectability is reasonably assured. Cash received by the Company in advance of the performance of services is deferred and recognized as revenue when earned. Certain portions of the Company’s revenues require management’s consideration of the nature of the client relationship in determining whether to recognize as revenue the gross amount billed or net amount retained after payments are made to providers for certain services related to the product or service offering.

The two main factors the Company uses to determine whether to record revenue on a gross or net basis is based on whether:

• the Company has a direct contract with the third party provider; and

• the Company has discretion in establishing fees paid by the customer and fees due to the third party service provider.

When customer fees include charges for third party service providers where the Company has a direct contract with such third party service providers, gross revenue recognized by the Company equals the fee paid by customer. The cost of revenues recognized by the Company is the amount due to the third party provider.

In instances where the Company does not have a direct contract with the third party service provider, the Company does not recognize any revenue or expense. The fees that are collected from the customer by the Company and are remitted to the third party service provider are considered pass through amounts and accordingly are not a component of revenue or cost of revenues.

Deferred Revenue—Deferred revenue primarily consists of implementation and set up fees, professional services, and license fee payments received in advance from customers.

Segments—The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis. Historically, the Company has determined that it has a single reporting segment and operating unit structure. As a result of the acquisitions as discussed in Note 3, the Company has re-examined its reporting and operating structure and has determined it continues to maintain a single reporting and operating unit structure.

Recent Accounting Pronouncements

In June 2011, the FASB issued authoritative guidance that amends ASC Topic 220, Comprehensive Income, to require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and it eliminates the option to present components of other comprehensive income as a part of the statement of changes in stockholders’ equity. In addition, this guidance requires an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. These amendments are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In September 2011, the FASB issued authoritative guidance regarding the testing of goodwill for impairment. This guidance allows companies to perform a “qualitative” assessment to determine whether or not the current two-step quantitative testing method, in which a company compares the fair value of reporting units to its carrying amount including goodwill, must be followed. If a qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment test is not required. A company may choose to use the qualitative assessment on none, some, or all of its reporting units or to bypass the qualitative assessment and proceed directly to the two-step quantitative testing method. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Employee stock-based compensation expense

Employee stock-based compensation expense was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Employee stock-based compensation expense	$	1,135		$	829		$	1,930		$	1,645
Tax effect on employee stock-based compensation expense		(456	)		(330	)		(777	)		(661	)
Net effect on income	$	679		$	499		$	1,153		$	984

Weighted average assumptions used to value options granted

The following weighted average assumptions were used to value options granted during the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Grant date fair value of options	$	4.97		$	—	$	4.91		$	5.26
Volatility		39.7	%		—		39.7	%		39.3	%
Risk-free interest rate		1.2	%		—		1.2	%		2.5	%
Dividend yield		0.0	%		—		0.0	%		0.0	%
Expected term (in years)		6.0			—		6.0			6.0

Summary of option activity

The following table summarizes option activity under the 2004 Plan, 2010 Plan and 2012 Plan:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2011		4,863,718		$	8.19
Granted		149,652			12.45
Exercised		(124,956	)		7.59
Forfeited		(2,000	)		9.70
Outstanding as of March 31, 2012		4,886,414			8.34		6.7	$	20,544
Granted		589,263			12.55
Exercised		(99,837	)		6.18
Forfeited		(1,800	)		9.00
Outstanding as of June 30, 2012		5,374,040			8.84		6.8		17,737
Options exercisable		2,977,757			7.43		5.4		13,769

Restricted Stock [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of unvested stock awards activity

The following is a summary of the activity for unvested restricted stock awards granted under all Plans:

	Number of Shares			Weighted- Average Grant Date Fair Value per Share
Balance at December 31, 2011		73,820		$	12.26
Granted		155,383			12.44
Vested		(21,235	)		12.55
Expired/cancelled		(1,064	)		12.45
Forfeited		(104	)		12.55
Balance at March 31, 2012		206,800			12.36
Granted		559,551			12.51
Forfeited		(381	)		12.49
Balance at June 30, 2012		765,970		$	12.47

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Business Acquisitions (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended			6 Months Ended				3 Months Ended	6 Months Ended		2 Months Ended	6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012 Fund Quest [Member]	Dec. 13, 2011 Fund Quest [Member]	Jun. 30, 2012 Prima Capital Holding, Inc. [Member]	Jun. 30, 2012 Prima Capital Holding, Inc. [Member]	Apr. 05, 2012 Prima Capital Holding, Inc. [Member]	Jun. 30, 2012 Tamarac, Inc. [Member]	Jun. 30, 2012 Tamarac, Inc. [Member]	May 01, 2012 Tamarac, Inc. [Member]	Jun. 30, 2012 Tamarac, Inc. [Member] Maximum [Member]	Jun. 30, 2012 Tamarac, Inc. [Member] Minimum [Member]
Business Acquisitions (Textual) [Abstract]
Acquisition date						Dec. 13, 2011			Apr. 05, 2012			May 01, 2012
Total consideration of acquisition							$ 27,796			$ 13,925			$ 48,427
Acquisition related costs	1,265			1,881
Revenue								1,149			1,784
Net income (loss)	(668)		2,447	72	3,851			(330)			(589)
Acquired intangible asset amortization								325			326
Unvested common stock grant											559,551	559,551
Granted to certain Tamarac employees stock options to acquire Envestnet common stock												232,150
Stock options to acquire Envestnet common stock at an exercise price	$ 12.55	$ 12.45										$ 12.51
Merger agreement Percentage														100.00%	50.00%
Aggregate proceeds of the Tamarac change of control payment											$ 2,759	$ 2,759
Purchase registered shares of Envestnet common stock											232,150	232,150
Purchase registered shares of Envestnet common stock Percentage											95.00%	95.00%
Service Period For unvested common stock				2 years

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Accrued Expenses (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jun. 30, 2012	Mar. 31, 2012
Components of accrued expenses
Beginning Balance	$ 19	$ 290
Restructuring provision incurred	88	27
Payments	(73)	(298)
Ending Balance	$ 34	$ 19

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Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 13,400	$ 64,909
Fees receivable	8,631	9,644
Deferred tax assets, net	610	192
Prepaid expenses and other current assets	7,036	4,040
Total current assets	29,677	78,785
Property and equipment, net	12,377	11,091
Internally developed software, net	3,752	3,524
Intangible assets, net	30,712	12,225
Goodwill	66,152	22,223
Deferred tax assets, net	7,058	6,692
Other non-current assets	3,284	3,162
Total assets	153,012	137,702
Current liabilities:
Accrued expenses	16,485	14,919
Accounts payable	2,683	1,974
Note payable		171
Deferred revenue	5,214	79
Total current liabilities	24,382	17,143
Deferred rent liability	1,891	1,414
Lease incentive liability	4,163	2,933
Other non-current liabilities	689	573
Total liabilities	31,125	22,063
Commitments and contingencies
Stockholders' equity
Preferred stock
Common stock, par value $0.005, 500,000,000 shares authorized as of June 30, 2012 and December 31, 2011 respectively, 43,994,077 and 43,515,899 shares issued as of June 30, 2012 and December 31, 2011, respectively, 32,282,802 and 31,810,726 shares outstanding as of June 30, 2012 and December 31, 2011, respectively	220	218
Treasury stock at cost, 11,711,275 and 11,705,173 shares as of June 30, 2012 and December 31, 2011, respectively	(10,499)	(10,421)
Additional paid-in capital	169,836	163,584
Accumulated deficit	(37,670)	(37,742)
Total stockholders' equity	121,887	115,639
Total liabilities and stockholders' equity	$ 153,012	$ 137,702

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Internally Developed Software (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Components of internally developed software
Internally developed software, Estimated Useful Life	5 years
Internally developed software	$ 11,870	$ 10,882
Less accumulated depreciation	(8,118)	(7,358)
Internally developed software, net	$ 3,752	$ 3,524

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
OPERATING ACTIVITIES:
Net income	$ 72	$ 3,851
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,623	3,126
Amortization of customer inducements		2,413
Deferred rent and lease incentive	1,362	(110)
Gain on investments		(4)
Deferred income taxes	(432)	2,117
Stock-based compensation	1,930	1,645
Interest expense	3	415
Changes in operating assets and liabilities:
Fees receivable	1,574	442
Prepaid expenses and other current assets	(1,016)	(422)
Customer inducements		(1,000)
Other non-current assets	67
Accrued expenses	(616)	119
Accounts payable	709	51
Deferred revenue	474	(130)
Other non-current liabilities	116	132
Net cash provided by operating activities	9,866	12,645
INVESTING ACTIVITIES:
Purchase of property and equipment	(2,999)	(2,917)
Capitalization of internally developed software	(988)	(817)
Repayment of notes payable	(174)	(162)
Proceeds from investments	3	17
Goodwill adjustment	889
Acquisition of businesses, net	(62,352)
Net cash used in investing activities	(65,621)	(3,879)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options	1,565	2,260
Issuance of restricted stock	2,759
Purchase of treasury stock	(78)	(94)
Net cash provided by financing activities	4,246	2,166
DECREASE IN CASH AND CASH EQUIVALENTS	(51,509)	10,932
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	64,909	67,668
CASH AND CASH EQUIVALENTS, END OF PERIOD	13,400	78,600
Supplemental disclosure of cash flow information - cash paid during the period for:
Income taxes	$ 325	$ 391

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Stock-Based Compensation (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Summary of employee stock-based compensation expense
Employee stock-based compensation expense	$ 1,135	$ 829	$ 1,930	$ 1,645
Tax effect on employee stock-based compensation expense	(456)	(330)	(777)	(661)
Net effect on income	$ 679	$ 499	$ 1,153	$ 984

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

Future annual minimum lease commitments under operating leases

The Company rents office space under leases that expire at various dates through 2023. Future minimum lease commitments under these operating leases was as follows:

Years ending December 31:
Remainder of 2012	$	1,720
2013		4,189
2014		5,075
2015		5,272
2016		5,490
Thereafter		26,411
	$	48,157

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Earnings Per Share (Details 1)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Options to purchase common stock [Member]
Anti-dilutive securities excluded from computation of diluted earnings per share
Anti-dilutive securities excluded from computation of diluted earnings per share	5,374,040		1,227,248
Common warrants [Member]
Anti-dilutive securities excluded from computation of diluted earnings per share
Anti-dilutive securities excluded from computation of diluted earnings per share	1,388,888
Unvested restricted stock [Member]
Anti-dilutive securities excluded from computation of diluted earnings per share
Anti-dilutive securities excluded from computation of diluted earnings per share	765,970		755,970

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

16. Commitments and Contingencies

The Company is involved in litigation arising in the ordinary course of its business. Management does not believe that the outcome of any of the current litigation, individually or in the aggregate, would, if determined adversely to it, have a material adverse effect on its results of operations, financial condition, cash flows or business.

The Company rents office space under leases that expire at various dates through 2023. Future minimum lease commitments under these operating leases was as follows:

Years ending December 31:
Remainder of 2012	$	1,720
2013		4,189
2014		5,075
2015		5,272
2016		5,490
Thereafter		26,411
	$	48,157

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Business Acquisitions (Details) (USD $) In Thousands, unless otherwise specified	Dec. 13, 2011 Fund Quest [Member]	Dec. 13, 2011 Fund Quest [Member] As initially reported [Member]	Dec. 13, 2011 Fund Quest [Member] Consideration Adjustments [Member]	Apr. 05, 2012 Prima Capital Holding, Inc. [Member]	May 01, 2012 Tamarac, Inc. [Member]
Estimated fair values of assets acquired and liabilities assumed
Accounts receivable	$ 2,603	$ 2,603		$ 72	$ 489
Other receivables					681
Prepaid expenses and other current assets	46	46		36	216
Deferred income taxes				1,129	7,235
Notes receivable				860
Property and equipment	442	442		103	444
Deposits					379
Intangible assets	11,830	11,830		4,940	16,150
Goodwill	19,303	20,192	(889)	9,555	35,263
Accounts payable and accrued liabilities	(1,364)	(1,364)		(171)	(2,356)
Deferred revenue	(354)	(354)		(730)	(3,931)
Deferred income taxes liabilities	(4,710)	(4,710)		(1,869)	(6,143)
Total assets acquired	$ 27,796	$ 28,685	$ (889)	$ 13,925	$ 48,427

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Business Acquisitions (Tables)

6 Months Ended

Jun. 30, 2012

Business Acquisition [Line Items]

Pro forma financial information

Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented.

	Three Months ended June 30,					Six Months ended June 30,
	2012			2011		2012			2011
Revenue	$	39,082		$	37,968	$	76,197		$	73,606
Net income (loss)		(957	)		2,146		(1,980	)		2,158
Net income (loss) per share:
Basic		(0.03	)		0.07		(0.06	)		0.07
Diluted		(0.03	)		0.06		(0.06	)		0.06

Fund Quest [Member]

Business Acquisition [Line Items]

Estimated fair values of assets acquired and liabilities assumed

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date of December 13, 2011 as initially reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011:

	December 13, 2011			Consideration			December 13, 2011
	(As initially reported)			Adjustments			(As adjusted)
Accounts receivable	$	2,603		$	—		$	2,603
Prepaid expenses and other current assets		46			—			46
Property and equipment		442			—			442
Intangible assets		11,830			—			11,830
Goodwill		20,192			(889	)		19,303
Accounts payable and accrued liabilities		(1,364	)		—			(1,364	)
Deferred income taxes		(4,710	)		—			(4,710	)
Deferred revenue		(354	)		—			(354	)
Total assets acquired	$	28,685		$	(889	)	$	27,796

Prima Capital Holding, Inc. [Member]

Business Acquisition [Line Items]

Estimated fair values of assets acquired and liabilities assumed

The following table summarizes estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Accounts receivable	$	72
Prepaid expenses and other current assets		36
Notes receivable		860
Property and equipment		103
Deferred income taxes - non current		1,129
Intangible assets		4,940
Goodwill		9,555
Accounts payable and accrued liabilities		(171	)
Deferred income tax liabilities		(1,869	)
Deferred revenue		(730	)
Total net assets acquired	$	13,925

Consideration transferred in acquisition

The consideration transferred in the acquisition was as follows:

Cash paid to owners	$	13,750
Cash assumed		(1,767	)
Cash paid for working capital settlement		1,942
	$	13,925

Summary of intangible assets acquired, estimated useful lives and amortization method

A summary of intangible assets acquired, estimated useful lives and amortization method is as follows:

	Amount		Weighted Average Useful Life in Years		Amortization Method
Customer list	$	3,740		10	Accelerated
Proprietary technology		700		5	Accelerated
Trade names		500		5	Accelerated
Total	$	4,940

Tamarac, Inc. [Member]

Business Acquisition [Line Items]

Estimated fair values of assets acquired and liabilities assumed

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

Accounts receivable	$	489
Other receivables		681
Prepaid expenses and other current assets		216
Deferred income tax assets		7,235
Property and equipment		444
Deposits		379
Intangible assets		16,150
Goodwill		35,263
Accounts payable and accrued liabilities		(2,356	)
Deferred income tax liabilities		(6,143	)
Deferred revenue		(3,931	)
Total net assets acquired	$	48,427

Consideration transferred in acquisition

The consideration transferred in the acquisition was as follows:

Cash paid to owners	$	54,000
Non-cash consideration		101
Cash assumed		(2,533	)
Receivable from working capital settlement		(3,141	)
	$	48,427

Summary of intangible assets acquired, estimated useful lives and amortization method

A summary of intangible assets acquired, estimated useful lives and amortization method is as follows:

	Amount		Weighted Average Useful Life in Years		Amortization Method
Customer list	$	8,680		12	Accelerated
Proprietary technology		5,880		8	Accelerated
Trade names		1,590		5	Accelerated
Total	$	16,150

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Commitments and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Future annual minimum lease commitments under operating leases
Remainder of 2012	$ 1,720
2013	4,189
2014	5,075
2015	5,272
2016	5,490
Thereafter	26,411
Total	$ 48,157

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Organization and Description of Business

6 Months Ended

Jun. 30, 2012

Organization and Description of Business [Abstract]

Organization and Description of Business

1. Organization and Description of Business

Envestnet, Inc. (“Envestnet”) and its subsidiaries (collectively, the “Company”) provide open-architecture wealth management services and technology to independent financial advisors and financial institutions. These services and related technology are provided via the Envestnet AdvisorSuite ^®, Envestnet | PMC ^®, Envestnet | Vantage^™, Envestnet | Prima^™ and Envestnet | Tamarac ^™.

AdvisorSuite is a platform of integrated, internet-based technology applications and related services that provide portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back-office and middle-office operations and administration.

The Company’s investment consulting group, Envestnet | PMC, provides investment manager due diligence and research, a full spectrum of investment offerings supported by both proprietary and third-party research, and overlay portfolio management services.

Envestnet | Prima provides institutional-quality research and due diligence on investment and fund managers and Envestnet | Tamarac provides leading rebalancing, performance reporting and practice management software.

Through these platform and service offerings, the Company provides open-architecture support for a wide range of investment products (separately managed accounts, multi-manager accounts, mutual funds, exchange-traded funds, stock baskets, alternative investments, and other fee-based investment solutions) from Envestnet | PMC and other leading investment providers via multiple custodians, and also account administration and reporting services.

Envestnet operates six registered investment advisor subsidiaries (“RIAs”) and a registered broker-dealer. Four of the RIAs are registered with the Securities and Exchange Commission (“SEC”), one RIA is registered only with States of Colorado, North Carolina and Texas and one RIA is registered only with the State of Washington. The broker-dealer is registered with the SEC, all 50 states and the District of Columbia and is a member of the Financial Industry Regulatory Authority (“FINRA”).

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Common stock, par value	$ 0.005	$ 0.005
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	43,994,077	43,515,899
Common stock, shares outstanding	32,282,802	31,810,726
Treasury stock, shares	11,711,275	11,705,173

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Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

11. Income Taxes

U.S. GAAP requires the interim period tax provision to be determined as follows:

• At the end of each quarter, the Company estimates the tax that will be provided for the year stated as a percent of estimated “ordinary” income for the year. The term ordinary income refers to earnings from continuing operations before income taxes, excluding significant unusual or infrequently occurring items.

The estimated annual effective rate is applied to the year-to-date “ordinary” income at the end of each quarter to compute the year-to-date tax applicable to ordinary income. The tax expense or benefit related to ordinary income in each quarter is the difference between the most recent year-to-date and the prior quarter year-to-date computations.

• The tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, the effects of changes in judgment about beginning of the year valuation allowances and change in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs.

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income of the Company and the development of tax planning strategies during the year.

Net deferred tax assets consist of the following:

	June 30, 2012			December 31, 2011
Current:
Deferred revenue	$	291		$	30
Prepaid expenses and accruals		319			162
Net current deferred tax assets		610			192
Non-Current:
Deferred rent	$	586		$	535
Net operating loss and tax credit carry-forwards		16,315			9,910
Loss on investments		2,157			2,157
Amortization and depreciation		(12,807	)		(4,516	)
Other		4,251			2,050
Net long-term deferred tax assets		10,502			10,136
Net deferred tax assets		11,112			10,328
Less valuation allowance		(3,444	)		(3,444	)
	$	7,668		$	6,884

The valuation allowance as of June 30, 2012 and December 31, 2011 was related to capital losses of $2,157 and Federal and state net operating losses of $1,287 primarily due to Section 382 limitations. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some or all of the deferred tax assets will be realized.

The following table includes tax expense and the effective tax rate for the Company’s income from operations:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Income (loss) before income taxes	$	(1,118	)	$	4,068		$	120		$	6,440
Income tax provision		(450	)		1,621			48			2,589
Effective tax rate		40.2	%		39.8	%		40.2	%		40.2	%

Upon exercise of stock options, the Company recognizes any difference between U.S. GAAP compensation expense and income tax compensation expense as a tax windfall or shortfall. The difference is charged to equity in the case of a windfall. When the exercise results in a windfall and the windfall results in a net operating loss (“NOL”), or the windfall increases an NOL carryforward, no windfall is recognized until the deduction reduces the income tax payable. For U.S. GAAP purposes, the Company has deferred the recognition of approximately $1,381 in windfall tax benefits associated with its stock-based compensation until a cash tax savings is realized. The benefit will be recorded in stockholders’ equity when utilized on an income tax return to reduce taxes payable, and as such, it will not impact the Company’s effective tax rate.

The total amount of the gross liability for unrecognized tax benefits reported in other non-current liabilities was $688 and $573 at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012, the amount of unrecognized tax benefits that would benefit the Company’s effective tax rate, if recognized, was $522.

The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. The Company had accrued interest and penalties of $209 as of both June 30, 2012 and December 31, 2011.

The Company files a consolidated federal income tax return and separate tax returns with various states. Additionally, a subsidiary of the Company files a tax return in a foreign jurisdiction. The Company’s tax returns for the calendar years ended December 31, 2011, 2010 and 2009, and fiscal year ended March 31, 2009 remain open to examination by the Internal Revenue Service in their entirety. They also remain open with respect to state taxing jurisdictions.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 01, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	ENVESTNET, INC.
Entity Central Index Key	0001337619
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		32,280,646

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Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

12. Stockholders’ Equity

In accordance with the terms of the merger agreement between Envestnet and Tamarac (Note 3 and 13), Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed. These shares cannot be sold or otherwise transferred for a period of two years following the date of merger. If a participant terminates their employment with the Company or is terminated for cause, the participant shall be required to pay the Company an amount equal to 5% multiplied by the closing market price on the day before the merger closed.

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Revenues:
Assets under management or administration	$ 31,012	$ 25,427	$ 59,275	$ 48,698
Licensing and professional services	6,950	5,907	11,329	11,898
Total revenues	37,962	31,334	70,604	60,596
Operating expenses:
Cost of revenues	13,549	10,917	25,075	21,045
Compensation and benefits	14,085	10,387	24,770	20,533
General and administration	8,148	5,258	14,921	10,134
Depreciation and amortization	3,224	1,578	5,623	3,126
Restructuring charges	88	43	115	53
Total operating expenses	39,094	28,183	70,504	54,891
Income (loss) from operations	(1,132)	3,151	100	5,705
Other income (expense):
Interest income	14	20	23	46
Interest expense		(204)	(3)	(415)
Other income		1,100		1,100
Gain on investments		1		4
Total other income (expense)	14	917	20	735
Income (loss) before income tax provision (benefit)	(1,118)	4,068	120	6,440
Income tax provision (benefit)	(450)	1,621	48	2,589
Net income (loss)	$ (668)	$ 2,447	$ 72	$ 3,851
Net income (loss) per share:
Basic	$ (0.02)	$ 0.08	$ 0.00	$ 0.12
Diluted	$ (0.02)	$ 0.07	$ 0.00	$ 0.12
Weighted average common shares outstanding:
Basic	32,149,957	31,591,412	32,004,386	31,502,139
Diluted	32,149,957	32,969,824	33,054,632	32,912,916

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Internally Developed Software

6 Months Ended

Jun. 30, 2012

Internally Developed Software [Abstract]

Internally Developed Software

6. Internally Developed Software

Internally developed software consists of the following:

	Estimated Useful Life	June 30, 2012			December 31, 2011
Internally developed software	5 years	$	11,870		$	10,882
Less accumulated depreciation			(8,118	)		(7,358	)
Internally developed software, net		$	3,752		$	3,524

Amortization expense for internally developed software was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	377	$	397	$	760	$	799

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Property and Equipment

6 Months Ended

Jun. 30, 2012

Property and Equipment [Abstract]

Property and Equipment

5. Property and Equipment

Property and equipment consist of the following:

	Estimated Useful Life	June 30, 2012			December 31, 2011
Cost:
Office furniture and fixtures	5-7 years	$	3,338		$	2,713
Computer equipment and software	3 years		20,831			18,942
Other office equipment	5 years		598			598
Leasehold improvements	Shorter of the term of the lease or useful life of the asset		7,340			5,833
			32,107			28,086
Less accumulated depreciation and amortization			(19,730	)		(16,995	)
Property and equipment, net		$	12,377		$	11,091

Depreciation and amortization expense for property and equipment was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Depreciation and amortization expense	$	1,223	$	950	$	2,260	$	1,814

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Basis of Presentation and Summary of Significant Accounting Policies [Abstract]

Revenue Recognition

Revenue Recognition—The Company recognizes revenue from services related to asset management and administration, licensing and professional services fees.

• Asset management and administration fees—The Company derives revenues from fees charged as a percentage of the assets that are managed or administered on its technology platform by financial advisors, financial institutions, and their clients (collectively “customers”) and for services the Company provides to its customers. Such services include investment manager due diligence and research, portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back office and middle-office operations and administration. Investment decisions for assets under management or administration are made by our customers. The asset management and administration fees the Company earns are generally based upon a contractual percentage of assets managed or administered on our platform based on preceding quarter-end values. The contractual fee percentages vary based on the level and type of services the Company provides to its customers. Fees related to assets under management or administration increase or decrease based on values of existing customer accounts. The values are affected by inflows or outflows of customer funds and market fluctuations.

• Licensing and professional services fees—

Licensing—The Company derives licensing fees from recurring contractual fixed fee contracts with larger financial institutions or enterprise clients. Licensing contracts allow the customer to provide a unique configuration of platform features and investment solutions for their advisors. The licensing fees vary based on the type of services provided and our revenues received under license agreements are recognized over the contractual term.

The Company’s license agreements do not generally provide its customers the ability to take possession of its software or host the software on its own systems or through a hosting arrangement with an unrelated party. However, in a certain instance, a customer has the ability to take possession of the software, and accordingly, the Company considers this circumstance as a software multiple-element arrangement. As a software multiple-element arrangement, the Company is required to determine whether there is vendor specific objective evidence (“VSOE”) of the various elements, including the software license and service components. The Company has not established VSOE of fair value for the separate components, and accordingly, recognizes revenue from these arrangements at such time as all elements of the arrangement have been delivered.

For the Company’s non-software multiple-element arrangements, the Company allocates the revenue in the arrangement using VSOE or third-party evidence (“TPE”) of selling price, or using the estimated selling price (“ESP”) of deliverables if it does not have VSOE or TPE. VSOE is the price charged when the same or similar product or service is sold separately. Many of the Company’s contracts renew automatically at the same rate as the original contract. The Company defines VSOE as the renewal rates of the standalone transactions.

TPE is determined based on the prices charged by the Company’s competitors for a similar deliverable when sold separately. However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in the Company’s product offerings when compared with those of the Company’s peers, the Company generally is unable to reliably determine TPE.

ESP is the Company’s best estimate of selling price of an element in a transaction involving multiple deliverables. If the Company is unable to establish selling price using either VSOE or TPE, the Company uses ESP in the allocation of arrangement consideration. The objective of ESP is to determine the price at which the Company would transact business if the product or service were sold on a standalone basis. The Company determines ESP based on revenue price drivers applied within a narrow range.

For multiple-element arrangements, the consideration allocated to online license fees is recognized on a straight line basis over the initial contract period, which typically ranges from one to five years and commences with the completed implementation date for the related product. The Company generally recognizes revenue for consideration allocated to implementation and consulting services in a multiple-element arrangement as services are performed because these services have standalone value separate from the online license fees.

Professional services—The Company derives professional service fees from providing contractual customized service platform software development, which are recognized under a proportional performance model utilizing an output based approach. The Company’s contracts have fixed prices, and generally specify or quantify interim deliverables.

Substantially all of the Company’s revenues are based on contractual arrangements. Revenues are recognized in the periods in which the related services are performed provided that persuasive evidence of an agreement exists, the fee is fixed or determinable, and collectability is reasonably assured. Cash received by the Company in advance of the performance of services is deferred and recognized as revenue when earned. Certain portions of the Company’s revenues require management’s consideration of the nature of the client relationship in determining whether to recognize as revenue the gross amount billed or net amount retained after payments are made to providers for certain services related to the product or service offering.

The two main factors the Company uses to determine whether to record revenue on a gross or net basis is based on whether:

• the Company has a direct contract with the third party provider; and

• the Company has discretion in establishing fees paid by the customer and fees due to the third party service provider.

When customer fees include charges for third party service providers where the Company has a direct contract with such third party service providers, gross revenue recognized by the Company equals the fee paid by customer. The cost of revenues recognized by the Company is the amount due to the third party provider.

In instances where the Company does not have a direct contract with the third party service provider, the Company does not recognize any revenue or expense. The fees that are collected from the customer by the Company and are remitted to the third party service provider are considered pass through amounts and accordingly are not a component of revenue or cost of revenues.

Deferred Revenue—Deferred revenue primarily consists of implementation and set up fees, professional services, and license fee payments received in advance from customers.

Segments—The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis. Historically, the Company has determined that it has a single reporting segment and operating unit structure. As a result of the acquisitions as discussed in Note 3, the Company has re-examined its reporting and operating structure and has determined it continues to maintain a single reporting and operating unit structure.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In June 2011, the FASB issued authoritative guidance that amends ASC Topic 220, Comprehensive Income, to require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and it eliminates the option to present components of other comprehensive income as a part of the statement of changes in stockholders’ equity. In addition, this guidance requires an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. These amendments are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In September 2011, the FASB issued authoritative guidance regarding the testing of goodwill for impairment. This guidance allows companies to perform a “qualitative” assessment to determine whether or not the current two-step quantitative testing method, in which a company compares the fair value of reporting units to its carrying amount including goodwill, must be followed. If a qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment test is not required. A company may choose to use the qualitative assessment on none, some, or all of its reporting units or to bypass the qualitative assessment and proceed directly to the two-step quantitative testing method. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

13. Stock-Based Compensation

As a result of the merger between Envestnet and Tamarac (Note 3), the Company adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of restricted common stock, stock options and the purchase of common stock for certain Tamarac employees. The maximum number of shares of stock which may be issued with respect to awards under the 2012 Plan shall be equal to 1,023,851 shares of stock

The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock (“Target Revenue Incentive Awards”). The Target Revenue Incentive Awards vest based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition. The Company measured the cost of these awards based on the estimated fair value of the award as of the market closing price on the day before the acquisition closed. The Company is recognizing the estimated expense on a graded-vesting method over a requisite service period of three to five years, which is the estimated vesting period. The Company has estimated expected forfeitures at the grant date and will recognize compensation expense only for those awards expected to vest. The initial forfeiture assumption will be reassessed in subsequent periods and may change based upon new facts and circumstances. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized over the vesting period.

The Company also granted to certain Tamarac employees 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date.

In addition, in accordance with the 2012 Plan, Tamarac senior management was required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed (Note 12). These shares cannot be sold or otherwise transferred for a period of two years following the date of merger. If a participant terminates their employment with the Company or is terminated for cause, the participant shall be required to pay the Company an amount equal to 5% multiplied by the closing market price on the day before the merger closed.

Stock Options

The Company has stock options and restricted stock outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”) as described below (collectively “the Plans”). As of June 30, 2012, the maximum number of shares available for future issuance under the Plans is 1,775,746.

Employee stock-based compensation expense was as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Employee stock-based compensation expense	$	1,135		$	829		$	1,930		$	1,645
Tax effect on employee stock-based compensation expense		(456	)		(330	)		(777	)		(661	)
Net effect on income	$	679		$	499		$	1,153		$	984

The following weighted average assumptions were used to value options granted during the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012			2011
Grant date fair value of options	$	4.97		$	—	$	4.91		$	5.26
Volatility		39.7	%		—		39.7	%		39.3	%
Risk-free interest rate		1.2	%		—		1.2	%		2.5	%
Dividend yield		0.0	%		—		0.0	%		0.0	%
Expected term (in years)		6.0			—		6.0			6.0

The following table summarizes option activity under the 2004 Plan, 2010 Plan and 2012 Plan:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding as of December 31, 2011		4,863,718		$	8.19
Granted		149,652			12.45
Exercised		(124,956	)		7.59
Forfeited		(2,000	)		9.70
Outstanding as of March 31, 2012		4,886,414			8.34		6.7	$	20,544
Granted		589,263			12.55
Exercised		(99,837	)		6.18
Forfeited		(1,800	)		9.00
Outstanding as of June 30, 2012		5,374,040			8.84		6.8		17,737
Options exercisable		2,977,757			7.43		5.4		13,769

Exercise prices of stock options outstanding as of June 30, 2012 range from $0.11 to $13.45.

Restricted Stock

Periodically, the Company grants restricted stock awards under the 2010 Plan to employees that vest one-third on each of the first three anniversaries of the grant date. The Company also granted restricted stock awards under the 2012 Plan that vest upon Tamarac meeting certain performance conditions and then a subsequent two year service condition.

The following is a summary of the activity for unvested restricted stock awards granted under all Plans:

	Number of Shares			Weighted- Average Grant Date Fair Value per Share
Balance at December 31, 2011		73,820		$	12.26
Granted		155,383			12.44
Vested		(21,235	)		12.55
Expired/cancelled		(1,064	)		12.45
Forfeited		(104	)		12.55
Balance at March 31, 2012		206,800			12.36
Granted		559,551			12.51
Forfeited		(381	)		12.49
Balance at June 30, 2012		765,970		$	12.47

At June 30, 2012, there was $7,643 of unrecognized compensation cost related to unvested stock options which the Company expects to recognize over a weighted-average period of 2.1 years. At June 30, 2012, there was $2,060 of unrecognized compensation cost related to unvested restricted stock which the Company expects to recognize over a weighted-average period of 4.1 years.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

9. Fair Value Measurements

Financial assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon a fair value hierarchy established by U.S. GAAP, which prioritizes the inputs used to measure fair value into the following levels:

Level 1:	Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2:	Inputs based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or inputs that are observable and can be corroborated by observable market data.
Level 3:	Inputs reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

Fair Value on a Recurring Basis:

The Company periodically invests excess cash in money market funds not insured by the FDIC. The Company believes that the investments in money market funds are on deposit with creditworthy financial institutions and that the funds are highly liquid. The fair values of the Company’s investments in money market funds are based on the daily quoted market prices for the net asset value of the various money market funds. These money market funds are considered Level 1 assets, totaled approximately $9,761 and $52,383 as of June 30, 2012 and December 31, 2011, respectively and are included in cash and cash equivalents in the unaudited condensed consolidated balance sheet.

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Stock-Based Compensation (Details 1) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Summary of weighted average assumptions to value options granted
Grant date fair value of options	$ 4.97		$ 4.91	$ 5.26
Volatility	39.70%		39.70%	39.30%
Risk-free interest rate	1.20%		1.20%	2.50%
Dividend yield	0.00%		0.00%	0.00%
Expected term (in years)	6 years 0 months		6 years 0 months	6 years 0 months

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

7. Goodwill and Intangible Assets

Changes in the carrying amount of the Company’s goodwill was as follows:

Balance at December 31, 2011	$	22,223
FundQuest adjustment (note 3)		(889	)
Balance at March 31, 2012		21,334
Prima acquisition (note 3)		9,555
Tamarac acquisition (note 3)		35,263
Balance at June 30, 2012	$	66,152

Intangible assets consist of the following:

		June 30, 2012							December 31, 2011
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer list	4 -8 years	$	28,103	$	(5,815	)		22,288	$	15,683	$	(3,458	)	$	12,225
Proprietary technology	5 - 8 years		6,580		(178	)		6,402		—		—			—
Trade Names	5 years		2,090		(68	)		2,022		—		—			—
Total intangible assets		$	36,773	$	(6,061	)	$	30,712	$	15,683	$	(3,458	)	$	12,225

Amortization expense for intangible assets was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	1,624	$	231	$	2,603	$	513

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Other Non-Current Assets

6 Months Ended

Jun. 30, 2012

Other Non-Current Assets [Abstract]

Other Non-Current Assets

8. Other Non-Current Assets

Other non-current assets consist of the following:

	June 30, 2012		December 31, 2011
Investment in private company	$	1,250	$	1,250
Deposits
Lease		1,660		1,538
Other		264		259
Other		110		115
Total other non-current assets	$	3,284	$	3,162

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Accrued Expenses

6 Months Ended

Jun. 30, 2012

Accrued Expenses [Abstract]

Accrued Expenses

10. Accrued Expenses

Accrued expenses consist of the following:

	June 30, 2012		December 31, 2011
Accrued investment manager fees	$	10,901	$	8,451
Accrued compensation and related taxes		3,807		4,230
Accrued professional services		501		481
Accrued restructuring charges		34		290
Other accrued expenses		1,242		1,467
Total accrued expenses	$	16,485	$	14,919

As a result of the FundQuest, Prima and Tamarac acquisitions, the Company incurred restructuring charges, primarily severance charges related to the termination of certain FundQuest and Tamarac employees and lease abandonment charges related to Prima in the six months ended June 30, 2012.

In the three and six months ended June 30, 2012, the Company recognized pretax restructuring charges of $88 and $115, respectively. In the three and six months ended June 30, 2011, the Company recognized pretax restructuring charges of $43 and $53, respectively.

The summary of activity in accrued restructuring charges was as follows:

Balance at December 31, 2011	$	290
Restructuring provision incurred		27
Payments		(298	)
Balance at March 31, 2012		19
Restructuring provision incurred		88
Payments		(73	)
Balance at June 30, 2012	$	34

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Reconciliation of net earnings to basic earnings per share and diluted earnings per share
Net income (loss)	$ (668)	$ 2,447	$ 72	$ 3,851
Basic number of weighted-average shares outstanding	32,149,957	31,591,412	32,004,386	31,502,139
Effect of dilutive shares:
Options to purchase common stock		1,082,818	900,085	1,112,797
Common warrants		295,594	144,076	297,980
Unvested restricted stock			6,085
Diluted number of weighted-average shares outstanding	32,149,957	32,969,824	33,054,632	32,912,916
Net income per share:
Basic	$ (0.02)	$ 0.08	$ 0.00	$ 0.12
Diluted	$ (0.02)	$ 0.07	$ 0.00	$ 0.12

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Major Customers (Details)	6 Months Ended	12 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2012 Fees receivable [Member]	Dec. 31, 2011 Fees receivable [Member]	Jun. 30, 2012 Revenues [Member]	Jun. 30, 2011 Revenues [Member]	Jun. 30, 2012 Revenues [Member]	Jun. 30, 2011 Revenues [Member]
Summary of major customers
Fidelity	19.00%	34.00%	22.00%	31.00%	23.00%	31.00%

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Stock-Based Compensation (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Mar. 31, 2012	Jun. 30, 2012
Stock Based Compensation (Textual) [Abstract]
Shares available for future issuance	1,023,851		1,023,851
Unrecognized compensation cost related to unvested stock options and restricted stock, weighted-average recognition period			2 years 1 month 6 days
Unvested restricted stock, service condition			2 years
Stock options to acquire Envestnet common stock at an exercise price	$ 12.55	$ 12.45
Transferred for a date of merger			2 years
Closing market price on the day before the merger closed			5.00%
Stock Based Compensation (Additional Textual) [Abstract]
Unrecognized compensation cost related to unvested stock options	$ 7,643		$ 7,643
Exercise prices of stock options outstanding, lower range			$ 0.11
Exercise prices of stock options outstanding, upper range			$ 13.45
Shares available for future issuance	1,023,851		1,023,851
Stock Options [Member]
Stock Based Compensation (Textual) [Abstract]
Unvested common stock grant	1,775,746		1,775,746
Target Revenue Incentive Award [Member]
Stock Based Compensation (Textual) [Abstract]
Unvested restricted stock, service condition			2 years
Unvested common stock grant	559,551		559,551
Tamarac, Inc. [Member]
Stock Based Compensation (Textual) [Abstract]
Purchase registered shares of Envestnet common stock	232,150		232,150
Stock options to acquire Envestnet common stock at an exercise price			$ 12.51
Aggregate proceeds of the Tamarac change of control payment	2,759		2,759
Purchase registered shares of Envestnet common stock Percentage	95.00%		95.00%
Transferred for a date of merger			2 years
Closing market price on the day before the merger closed			5.00%
Tamarac, Inc. [Member] | Maximum [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized compensation cost related to unvested stock options and restricted stock, weighted-average recognition period			5 years
Percentage of aggregate proceeds of control payment to be applied by acquiree	100.00%		100.00%
Tamarac, Inc. [Member] | Minimum [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized compensation cost related to unvested stock options and restricted stock, weighted-average recognition period			3 years
Percentage of aggregate proceeds of control payment to be applied by acquiree	50.00%		50.00%
Restricted Stock [Member]
Stock Based Compensation (Textual) [Abstract]
Unrecognized compensation cost related to unvested stock options and restricted stock, weighted-average recognition period			41 months 6 days
Unrecognized compensation cost related to unvested restricted stock	$ 2,060		$ 2,060

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Major Customers (Tables)

6 Months Ended

Jun. 30, 2012

Fees receivable [Member]

Concentration Risk [Line Items]

Summary of major customers

One customer accounted for more than 10% of the Company’s fees receivable:

	June 30, 2012			December 31, 2011
Fidelity		19	%		34	%

Revenues [Member]

Concentration Risk [Line Items]

Summary of major customers

One customer accounted for more than 10% of the Company’s revenues:

	Three Months Ended June  30,						Six Months Ended June  30,
	2012			2011			2012			2011
Fidelity		22	%		31	%		23	%		31	%

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Fair Value Measurements (Details) (Level 1 [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Level 1 [Member]
Fair Value Measurements (Textual) [Abstract]
Money market funds	$ 9,761	$ 52,383

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Major Customers

6 Months Ended

Jun. 30, 2012

Major Customers [Abstract]

Major Customers

15. Major Customers

One customer accounted for more than 10% of the Company’s fees receivable:

	June 30, 2012			December 31, 2011
Fidelity		19	%		34	%

The Company has not established an allowance for doubtful accounts related to the receivables from this customer as of June 30, 2012 or December 31, 2011.

One customer accounted for more than 10% of the Company’s revenues:

	Three Months Ended June  30,						Six Months Ended June  30,
	2012			2011			2012			2011
Fidelity		22	%		31	%		23	%		31	%

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2012

Property and Equipment [Abstract]

Components of property and equipment

Property and equipment consist of the following:

	Estimated Useful Life	June 30, 2012			December 31, 2011
Cost:
Office furniture and fixtures	5-7 years	$	3,338		$	2,713
Computer equipment and software	3 years		20,831			18,942
Other office equipment	5 years		598			598
Leasehold improvements	Shorter of the term of the lease or useful life of the asset		7,340			5,833
			32,107			28,086
Less accumulated depreciation and amortization			(19,730	)		(16,995	)
Property and equipment, net		$	12,377		$	11,091

Depreciation and amortization expense for property and equipment

Depreciation and amortization expense for property and equipment was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Depreciation and amortization expense	$	1,223	$	950	$	2,260	$	1,814

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Goodwill and Intangible Assets (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Amortization expense for intangible assets
Amortization expense	$ 1,624	$ 231	$ 2,063	$ 513

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Customer Inducements (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Amortization and imputed interest expense
Amortization of customer inducements		$ 1,207		$ 2,413
Imputed interest expense		$ 202		$ 407

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Condensed Consolidated Statements of Stockholders' Equity (Unaudited) (USD $) In Thousands, except Share data	Total	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]
Beginning Balance at Dec. 31, 2011	$ 115,639	$ 218	$ (10,421)	$ 163,584	$ (37,742)
Beginning Balance, shares at Dec. 31, 2011		43,515,899	(11,705,173)
Exercise of stock options	1,565	1		1,564
Exercise of stock options, shares		224,793
Issuance of common stock - Vesting of restricted stock, shares		21,235
Issuance of restricted stock	2,759	1		2,758
Issuance of common stock - Issuance of restricted stock, shares		232,150
Stock-based compensation	1,930			1,930
Purchase of treasury stock (at cost)	(78)		(78)
Purchase of treasury stock (at cost), shares			(6,102)
Net income	72				72
Ending Balance at Jun. 30, 2012	$ 121,887	$ 220	$ (10,499)	$ 169,836	$ (37,670)
Ending Balance, shares at Jun. 30, 2012		43,994,077	(11,711,275)

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Customer Inducements

6 Months Ended

Jun. 30, 2012

Customer Inducements [Abstract]

Customer Inducements

4. Customer Inducements

Prior to acquiring FundQuest, the Company provided FundQuest and its clients with the Company’s platform technology and support services, replacing FundQuest’s technology platform (“Platform Services Agreement”). The Company earned fees based upon a contractual percentage of assets under administration. As a result of the acquisition of FundQuest on December 13, 2011 (Note 3), the Platform Services Agreement was terminated, and all of the assets and liabilities associated with the Platform Services Agreement were eliminated.

In connection with the Platform Services Agreement, the Company was required to make various payments to FundQuest during the contract term as defined in the Platform Services Agreement. These payments included an up-front payment upon completion of the conversion of FundQuest’s clients’ assets to the Company’s technology platform, five annual payments and a payment after the fifth year of the Platform Services Agreement calculated based on the average annual revenues the Company was to receive from FundQuest during the first five years of the contract term. As of December 31, 2010, the estimate of the present value of these payments was approximately $30,400. The Company also issued to FundQuest a warrant to purchase 1,388,888 shares of its common stock, with an exercise price of $10.80 for an estimated fair value of $2,946 as of December 31, 2010. The present value of all payments and the fair value of the warrant was accounted for as customer inducement costs and were amortized as a reduction to the Company’s revenues from assets under management or administration on a straight-line basis over the contract term of seven years.

Amortization and imputed interest expense was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	—	$	1,207	$	—	$	2,413
Imputed interest expense		—		202		—		407

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Stockholders' Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Stockholders' Equity (Textual) [Abstract]
Transferred for a date of merger	2 years
Penalty Percent in Case of Termination of Employment	5.00%
Tamarac, Inc. [Member]
Stockholders' Equity (Textual) [Abstract]
Change of control payment value	2,759
Number of purchase registered shares for control payment	232,150
Percentage denominator multiple of closing market price used to compute shares in purchase register agreement	95.00%
Minimum [Member] | Tamarac, Inc. [Member]
Stockholders' Equity (Textual) [Abstract]
Percentage of aggregate proceeds of control payment to be applied by acquiree	50.00%
Maximum [Member] | Tamarac, Inc. [Member]
Stockholders' Equity (Textual) [Abstract]
Percentage of aggregate proceeds of control payment to be applied by acquiree	100.00%

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Commitments and Contingencies (Details Textual)	6 Months Ended
	Jun. 30, 2012
Commitments and Contingencies Disclosure (Textual) [Abstract]
Expiration of office lease agreement	The Company rents office space under leases that expire at various dates through 2023.

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Internally Developed Software (Tables)

6 Months Ended

Jun. 30, 2012

Internally Developed Software [Abstract]

Components of internally developed software

Internally developed software consists of the following:

	Estimated Useful Life	June 30, 2012			December 31, 2011
Internally developed software	5 years	$	11,870		$	10,882
Less accumulated depreciation			(8,118	)		(7,358	)
Internally developed software, net		$	3,752		$	3,524

Amortization expense for internally developed software

Amortization expense for internally developed software was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Amortization expense	$	377	$	397	$	760	$	799

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Business Acquisitions (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Prima Capital Holding, Inc. [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	$ 4,940
Prima Capital Holding, Inc. [Member] | Customer list [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	3,740
Intangible assets acquired, Weighted Average Useful Life	10 years
Prima Capital Holding, Inc. [Member] | Proprietary Technology [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	700
Intangible assets acquired, Weighted Average Useful Life	5 years
Prima Capital Holding, Inc. [Member] | Trade names [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	500
Intangible assets acquired, Weighted Average Useful Life	5 years
Tamarac, Inc. [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	16,150
Tamarac, Inc. [Member] | Customer list [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	8,680
Intangible assets acquired, Weighted Average Useful Life	12 years
Tamarac, Inc. [Member] | Proprietary Technology [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	5,880
Intangible assets acquired, Weighted Average Useful Life	8 years
Tamarac, Inc. [Member] | Trade names [Member]
Summary of intangible assets acquired, estimated useful lives and amortization method
Intangible assets acquired, Amount	$ 1,590
Intangible assets acquired, Weighted Average Useful Life	5 years

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

14. Earnings Per Share

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share reflects the weighted average number of shares outstanding after the assumed conversion of all dilutive securities.

The following is a reconciliation of net earnings to basic earnings per share and diluted earnings per share:

	Three Months Ended June 30,					Six Months Ended June 30,
	2012			2011		2012		2011
Net income (loss)	$	(668	)	$	2,447	$	72	$	3,851
Basic number of weighted-average shares outstanding		32,149,957			31,591,412		32,004,386		31,502,139
Effect of dilutive shares:
Options to purchase common stock		—			1,082,818		900,085		1,112,797
Common warrants		—			295,594		144,076		297,980
Unvested restricted stock		—			—		6,085		—
Diluted number of weighted-average shares outstanding		32,149,957			32,969,824		33,054,632		32,912,916
Net income (loss) per share:
Basic	$	(0.02	)	$	0.08	$	0.00	$	0.12
Diluted	$	(0.02	)	$	0.07	$	0.00	$	0.12

Common share equivalents for securities that were anti-dilutive and therefore excluded from the computation of diluted earnings per share was as follows:

	Three Months Ended June  30,				Six Months Ended June  30,
	2012		2011		2012		2011
Options to purchase common stock		5,374,040		—		1,227,248		—
Common warrants		1,388,888		—		—		—
Unvested restricted stock		765,970		—		755,970		—