UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20232024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
 
Commission file number 001-34835
env-logo.jpg
Envestnet, Inc.
(Exact name of registrant as specified in its charter)
Delaware20-1409613
(State or other jurisdiction of
incorporation or organization)
(I.R.S Employer
Identification No.)
1000 Chesterbrook Boulevard, Suite 250, Berwyn, Pennsylvania19312
(Address of principal executive offices)(Zip Code)
 Registrant’s telephone number, including area code:
(312) 827-2800
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of exchange on which registered
Common Stock, par value $0.005 per shareENVNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerý Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes   No 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No 
As of April 28, 2023,May 3, 2024, Envestnet, Inc. had 54,404,06955,109,097 shares of common stock outstanding.



TABLE OF CONTENTS
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Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(unaudited)
March 31,December 31,
20232022
March 31,March 31,December 31,
202420242023
AssetsAssets
Current assets:Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$52,664 $162,173 
Fees receivable, netFees receivable, net122,704 101,696 
Prepaid expenses and other current assetsPrepaid expenses and other current assets47,391 41,363 
Assets held for deconsolidation
Total current assetsTotal current assets222,759 305,232 
Property and equipment, netProperty and equipment, net64,144 62,443 
Internally developed software, netInternally developed software, net196,874 184,558 
Intangible assets, netIntangible assets, net377,055 379,995 
GoodwillGoodwill998,428 998,414 
Operating lease right-of-use assets, netOperating lease right-of-use assets, net79,553 81,596 
Other assetsOther assets117,644 99,927 
Total assetsTotal assets$2,056,457 $2,112,165 
Liabilities and equityLiabilities and equity
Current liabilities:Current liabilities:
Current liabilities:
Current liabilities:
Accounts payable, accrued expenses and other current liabilities
Accounts payable, accrued expenses and other current liabilities
Accounts payable, accrued expenses and other current liabilitiesAccounts payable, accrued expenses and other current liabilities$195,983 $233,866 
Operating lease liabilitiesOperating lease liabilities12,270 11,949 
Deferred revenue
Deferred revenue44,445 36,363 
Current portion of debt44,954 44,886 
Liabilities held for deconsolidation
Liabilities held for deconsolidation
Liabilities held for deconsolidation
Total current liabilitiesTotal current liabilities297,652 327,064 
Debt, net of current portion872,968 871,769 
Debt
Operating lease liabilities, net of current portionOperating lease liabilities, net of current portion108,568 110,652 
Deferred tax liabilities, netDeferred tax liabilities, net21,445 16,196 
Other liabilitiesOther liabilities18,644 18,880 
Total liabilitiesTotal liabilities1,319,277 1,344,561 
Commitments and contingencies (note 19)
Commitments and contingenciesCommitments and contingencies
Stockholders' equityStockholders' equity
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022— — 
Common stock, par value $0.005, 500,000,000 shares authorized; 70,587,503 and 70,025,733 shares issued as of March 31, 2023 and December 31, 2022, respectively; 54,401,984 and 54,013,826 shares outstanding as of March 31, 2023 and December 31, 2022, respectively352 350 
Treasury stock at cost, 16,185,519 and 16,011,907 shares as of March 31, 2023 and December 31, 2022, respectively(264,283)(253,551)
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023
Common stock, par value $0.005, 500,000,000 shares authorized; 71,633,071 and 71,129,801 shares issued as of March 31, 2024 and December 31, 2023, respectively; 55,099,000 and 54,773,662 shares outstanding as of March 31, 2024 and December 31, 2023, respectively
Treasury stock at cost, 16,534,071 and 16,356,139 shares as of March 31, 2024 and December 31, 2023, respectively
Additional paid-in capitalAdditional paid-in capital1,154,012 1,135,284 
Accumulated deficitAccumulated deficit(160,155)(118,927)
Accumulated other comprehensive lossAccumulated other comprehensive loss(4,312)(8,589)
Total stockholders’ equity, attributable to Envestnet, Inc.Total stockholders’ equity, attributable to Envestnet, Inc.725,614 754,567 
Non-controlling interestNon-controlling interest11,566 13,037 
Total equityTotal equity737,180 767,604 
Total liabilities and equityTotal liabilities and equity$2,056,457 $2,112,165 

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
March 31,
20232022
Three Months Ended
Three Months Ended
Three Months Ended
March 31,March 31,
202420242023
Revenue:Revenue:
Asset-based
Asset-based
Asset-basedAsset-based$176,932 $202,717 
Subscription-basedSubscription-based117,079 114,734 
Total recurring revenueTotal recurring revenue294,011 317,451 
Professional services and other revenueProfessional services and other revenue4,696 3,912 
Total revenueTotal revenue298,707 321,363 
Operating expenses:Operating expenses:
Direct expenseDirect expense108,989 125,282 
Direct expense
Direct expense
Employee compensationEmployee compensation114,215 126,849 
General and administrativeGeneral and administrative53,619 44,335 
Depreciation and amortizationDepreciation and amortization32,941 31,618 
Total operating expensesTotal operating expenses309,764 328,084 
Loss from operations(11,057)(6,721)
Income (loss) from operations
Other expense, netOther expense, net(7,935)(5,967)
Loss before income tax provision(18,992)(12,688)
Income (loss) before income tax provision
Income tax provisionIncome tax provision23,769 2,020 
Net loss(42,761)(14,708)
Net income (loss)
Add: Net loss attributable to non-controlling interestAdd: Net loss attributable to non-controlling interest1,533 849 
Net loss attributable to Envestnet, Inc.$(41,228)$(13,859)
Net loss attributable to Envestnet, Inc. per share:
Basic and diluted$(0.76)$(0.25)
Net income (loss) attributable to Envestnet, Inc.
Net income (loss) attributable to Envestnet, Inc. per share:
Basic
Basic
Basic
Diluted
Weighted average common shares outstanding:Weighted average common shares outstanding:
Basic and diluted54,143,259 54,903,677 
Basic
Basic
Basic
Diluted

See accompanying notes to unaudited Condensed Consolidated Financial Statements.
4


Envestnet, Inc.
Condensed Consolidated Statements of Comprehensive LossIncome (Loss)
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
20232022
Net loss attributable to Envestnet, Inc.$(41,228)$(13,859)
Three Months Ended
Three Months Ended
Three Months Ended
March 31,March 31,
202420242023
Net income (loss) attributable to Envestnet, Inc.
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Foreign currency translation adjustmentsForeign currency translation adjustments4,277 (1,478)
Foreign currency translation adjustments
Foreign currency translation adjustments
Total other comprehensive income (loss), net of taxTotal other comprehensive income (loss), net of tax4,277 (1,478)
Comprehensive loss attributable to Envestnet, Inc.$(36,951)$(15,337)
Comprehensive income (loss) attributable to Envestnet, Inc.

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

5


Envestnet, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share information)
(unaudited)

Accumulated
AdditionalOtherNon-
Common StockTreasury StockPaid-inComprehensiveAccumulatedControllingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 202270,025,733 $350 (16,011,907)$(253,551)$1,135,284 $(8,589)$(118,927)$13,037 $767,604 
Net loss— — — — — — (41,228)(1,533)(42,761)
Other comprehensive income, net of tax— — — — — 4,277 — — 4,277 
Accumulated
Additional
Additional
Additional
Common Stock
Common Stock
Common StockTreasury StockPaid-inComprehensiveAccumulatedControllingTotal
SharesSharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 2023
Net income (loss)
Other comprehensive loss, net of tax
Stock-based compensation expenseStock-based compensation expense— — — — 19,345 — — 108 19,453 
Issuance of common stock, vesting of RSUs and PSUsIssuance of common stock, vesting of RSUs and PSUs524,316 — — — — — — 
Net cash paid related to tax withholding for stock-based compensationNet cash paid related to tax withholding for stock-based compensation— — (173,612)(10,732)— — — — (10,732)
Proceeds from the exercise of stock optionsProceeds from the exercise of stock options37,454 — — — 367 — — — 367 
Purchase of non-controlling units from third-party shareholders— — — — (984)— — (24)(1,008)
Proceeds from capital contributions received by non-controlling interest
OtherOther— — — — — — — (22)(22)
Balance, March 31, 202370,587,503 $352 (16,185,519)$(264,283)$1,154,012 $(4,312)$(160,155)$11,566 $737,180 
Balance, March 31, 2024

Accumulated
AdditionalOtherNon-
Common StockTreasury StockPaid-inComprehensiveAccumulatedControllingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 202168,879,152 $344 (14,086,064)$(134,996)$1,131,628 $(1,899)$(37,988)$2,453 $959,542 
Net loss— — — — — — (13,859)(849)(14,708)
Other comprehensive loss, net of tax— — — — — (1,478)— — (1,478)
Stock-based compensation expense— — — — 21,690 — — — 21,690 
Issuance of common stock, vesting of RSUs and PSUs514,319 — — — — — — 
Net cash paid related to tax withholding for stock-based compensation— — (170,992)(12,570)— — — — (12,570)
Proceeds from the exercise of stock options38,681 — — — 658 — — — 658 
Other— — — — (84)— — 102 18 
Balance, March 31, 202269,432,152 $347 (14,257,056)$(147,566)$1,153,892 $(3,377)$(51,847)$1,706 $953,155 

Accumulated
AdditionalOtherNon-
Common StockTreasury StockPaid-inComprehensiveAccumulatedControllingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 202270,025,733 $350 (16,011,907)$(253,551)$1,135,284 $(8,589)$(118,927)$13,037 $767,604 
Net loss— — — — — — (41,228)(1,533)(42,761)
Other comprehensive income, net of tax— — — — — 4,277 — — 4,277 
Stock-based compensation expense— — — — 19,345 — — 108 19,453 
Issuance of common stock, vesting of RSUs and PSUs524,316 — — — — — — 
Net cash paid related to tax withholding for stock-based compensation— — (173,612)(10,732)— — — — (10,732)
Proceeds from the exercise of stock options37,454 — — — 367 — — — 367 
Purchase of non-controlling units from third-party shareholders— — — — (984)— — (24)(1,008)
Other— — — — — — — (22)(22)
Balance, March 31, 202370,587,503 $352 (16,185,519)$(264,283)$1,154,012 $(4,312)$(160,155)$11,566 $737,180 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

6


Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Three Months EndedThree Months Ended
March 31,March 31,
202420242023
Cash flows from operating activities:
Net income (loss)
Net income (loss)
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization
Deferred income taxes
Non-cash compensation expense
Non-cash compensation expense
Non-cash compensation expense
Non-cash interest expense
Loss allocations from equity method investments
Three Months Ended
March 31,
20232022
Cash flows from operating activities:
Net loss$(42,761)$(14,708)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization32,941 31,618 
Provision for doubtful accounts571 (1,747)
Deferred income taxes5,221 (18,955)
Non-cash compensation expense19,453 21,814 
Non-cash interest expense4,498 2,599 
Loss allocations from equity method investments2,940 1,545 
Other
Other
OtherOther(103)(59)
Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Fees receivable, net
Fees receivable, net
Fees receivable, netFees receivable, net(21,579)8,661 
Prepaid expenses and other assetsPrepaid expenses and other assets(9,858)(9,491)
Accounts payable, accrued expenses and other liabilitiesAccounts payable, accrued expenses and other liabilities(32,917)(29,113)
Deferred revenueDeferred revenue8,073 11,097 
Net cash (used in) provided by operating activities(33,521)3,261 
Net cash provided by (used in) operating activities
Cash flows from investing activities:Cash flows from investing activities:
Purchases of property and equipmentPurchases of property and equipment(4,402)(3,896)
Purchases of property and equipment
Purchases of property and equipment
Capitalization of internally developed softwareCapitalization of internally developed software(23,664)(21,671)
Investments in private companies
Investments in private companies
Investments in private companies
Acquisition of proprietary technologyAcquisition of proprietary technology(10,000)(15,000)
Investments in private companies(950)(3,000)
Issuance of loan receivable to private companyIssuance of loan receivable to private company(20,000)— 
OtherOther260 (2,500)
Other
Other
Net cash used in investing activitiesNet cash used in investing activities(58,756)(46,067)
Cash flows from financing activities:Cash flows from financing activities:
Proceeds from exercise of stock options
Proceeds from exercise of stock options
Proceeds from exercise of stock optionsProceeds from exercise of stock options367 658 
Payments related to tax withholdings for stock-based compensationPayments related to tax withholdings for stock-based compensation(10,732)(12,570)
Payments on finance lease obligations(152)(12,454)
Payments related to revolving credit facility— (1,869)
Payments related to share repurchasesPayments related to share repurchases(9,289)— 
Proceeds from capital contributions received by non-controlling interest
Purchase of non-controlling units from third-party shareholdersPurchase of non-controlling units from third-party shareholders(1,008)— 
OtherOther
Net cash used in financing activities(20,812)(26,232)
Effect of exchange rate on changes on cash, cash equivalents and restricted cash3,580 (627)
Net change in cash, cash equivalents and restricted cash(109,509)(69,665)
Cash, cash equivalents and restricted cash, beginning of period162,173 429,428 
Cash, cash equivalents and restricted cash, end of period$52,664 $359,763 
Other
Other
Net cash provided by (used in) financing activities
Effect of exchange rate on changes on cash and cash equivalents
Net change in cash and cash equivalents due to cash reclassified to assets held for deconsolidation
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosures of cash flow informationSupplemental disclosures of cash flow information
Net cash paid for income taxes
Net cash paid for income taxes
Net cash paid for income taxesNet cash paid for income taxes$1,110 $716 
Cash paid for interestCash paid for interest$1,822 $2,254 
Supplemental disclosure of non-cash activitiesSupplemental disclosure of non-cash activities
Conversion of equity method investee loan to sharesConversion of equity method investee loan to shares$4,129 $— 
Conversion of equity method investee loan to shares
Conversion of equity method investee loan to shares
Right-of-use assets obtained in exchange for lease liabilities, netRight-of-use assets obtained in exchange for lease liabilities, net$206 $— 
Property and equipment acquired through finance lease$152 $12,454 
Purchase of property and equipment included in accounts payable, accrued expenses and other liabilitiesPurchase of property and equipment included in accounts payable, accrued expenses and other liabilities$2,018 $1,883 
Internally developed software costs included in accrued expenses and other liabilities$— $178 
Membership interest liabilities included in other non-current liabilities$— $124 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.
7

Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business

Envestnet, Inc. (“Envestnet”) through its subsidiaries, (collectively, the “Company”) is transforming the way financial advice and insight are delivered. Its mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet has beenis a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness ecosystem so that ourits clients can deliver an intelligent financial life tobetter serve their clients.

Envestnet is organized around two primary, complementary business segments.segments based on clients served and products provided to meet those needs. Financial information about each business segment is contained in “Note 18—Segment Information” to the condensed consolidated financial statements and is described in detail within the Company's Annual Report on Form 10-K.Report.

For a summary of commonly used industry terms and abbreviations used in this quarterly report on Form 10-Q,Quarterly Report, see the
Glossary of Terms.

2.Summary of Significant Accounting Policies

Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements of the Company as of March 31, 20232024 and for the three months ended March 31, 20232024 and 20222023 have not been audited by an independent registered public accounting firm. These unaudited condensed consolidated financial statements have been prepared on the same basis as ourthe Company's audited consolidated financial statements for the year ended December 31, 20222023 and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of March 31, 20232024 and results of operations, equity, comprehensive income (loss) and cash flows for the periods presented herein. The unaudited condensed consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation. Accounts for the Envestnet Wealth Solutions segment that are denominated in a non-U.S. currency have been re-measured using the U.S. dollar as the functional currency. Certain accounts within the Envestnet Data & Analytics segment are recorded and measured in foreign currencies. The assets and liabilities for those subsidiaries with a functional currency other than the U.S. dollar are translated at exchange rates in effect at the balance sheet date, and revenue and expenses are translated at average exchange rates. Differences arising from these foreign currency translations are recorded in the unaudited condensed consolidated balance sheets as accumulated other comprehensive income (loss) within stockholders' equity. The Company is also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other expense, net in the condensed consolidated statements of operations.

The results of operations for the three months ended March 31, 20232024 are not necessarily indicative of the results of operations to be expected for other interim periods or for the full fiscal year.

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 GAAP have been condensed or omitted pursuant to such rules and regulations. References to GAAP in these notes are to the FASB ASC and ASUs. 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 for the year ended December 31, 2022, filed with the SEC on February 28, 2023.2024.

Segment Reporting

On October 1, 2023, the Company changed the composition of its reportable segments to reflect the way that the Company's chief operating decision maker reviews the operating results, assesses performance and allocates resources. All segment information presented within this Quarterly Report is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.
Correction of Immaterial Error

During the fourth quarter of 2023, the Company identified that the arrangement with a third-party for the use of cloud hosted virtual servers which was previously accounted for as a finance lease transaction and included as a component of


Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
property and equipment, net in the condensed consolidated balance sheets should have been recognized as a prepayment included within prepaid expenses and other current assets and other assets in the condensed consolidated balance sheets. The Company concluded that the classification of these transactions was immaterial in prior period financial statements and that amendment of previously filed reports was not required. However, the Company corrected this immaterial error in the prior period reported within this Quarterly Report.
In the condensed consolidated statements of operations for the three months ended March 31, 2023, these adjustments resulted in an increase in direct expense of $0.7 million, an increase in general and administrative expense of $0.7 million and a corresponding decrease in depreciation and amortization expense of $1.4 million. In the condensed consolidated statements of cash flows for the three months ended March 31, 2023, these adjustments resulted in a decrease in net cash provided by operating activities of $0.2 million and a corresponding decrease in net cash used in financing activities of $0.2 million.
Assets and Liabilities Held for Sale

Assets and the related liabilities are classified as held for sale in the period in which all of the following criteria are met: management commits to a plan of sale, the assets are available for immediate sale, an active program to locate a buyer has been initiated, the assets are actively marketed at a reasonable price, the sale is probable within one year and significant changes to the plan are unlikely. Assets and liabilities classified as held for sale are presented separately in the condensed consolidated balance sheets at the lower of their carrying amount and fair value, less costs to sell for each reporting period they meet the held for sale criteria. Depreciation and amortization expense is not recognized on long-lived assets once they are classified as assets held for sale. Unless otherwise specified, the amounts and information presented in the notes do not include assets and liabilities classified as held for sale as of March 31, 2024. See "Note 3— Assets and Liabilities Held for Deconsolidation" for additional information.
Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions.

 Reclassifications

Certain items on the condensed consolidated balance sheets as of December 31, 2022 andamounts in the condensed consolidated statements of cash flows for the three months ended March 31, 20222023 have been reclassified to conform to the current year
8

Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
period presentation. These reclassifications did not change the previously reported total assets, total liabilities and equity, or net change in cash and cash equivalents and did not affect the condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statements of comprehensive lossincome (loss) or condensed consolidated statements of stockholders' equity.

Cash, Cash Equivalents and Restricted Cash

The following table reconciles cash, cash equivalents and restricted cash from the condensed consolidated balance sheets to amounts reported in the condensed consolidated statements of cash flows:
March 31,March 31,
20232022
(in thousands)
Cash and cash equivalents$52,664 $359,614 
Restricted cash included in prepaid expenses and other current assets— 149 
Total cash, cash equivalents and restricted cash$52,664 $359,763 

Related Party Transactions

The Company has an approximate 3.7% membership interest in a private services company that it accounts for using the equity method of accounting and is considered to be a related party. Revenue from the private services company totaled $3.6$2.6 million and $4.7$3.6 million in the three months ended March 31, 20232024 and 2022,2023, respectively. As of March 31, 20232024 and December 31, 2022,2023, the Company recorded a net receivable from the private services company of $3.9$0.7 million and $2.0$1.7 million, respectively.

RecentRecently Adopted Accounting Pronouncements Not Yet Adopted

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842): Common Control Arrangements.” This update amends ASC 842 and the accounting for leasehold improvements associated with common control leases. The Company adopted this standard as of January 1, 2024 and it did not have a material impact on the Company's consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." This update amends the requirements for segment disclosures. This standard is effective for fiscal years beginning after December 15, 2023, includingand interim periods within fiscal years beginning after December 15, 2024. Early adoption


Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
of the standard is permitted. The Company is analyzing the impact of the adoption, but does not expect it to have a material impact on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." This update amends the requirements for income tax disclosures. This standard is effective for fiscal years beginning after December 15, 2024. Early adoption of the standard is permitted. The Company is analyzing the impact of the adoption, but does not expect it to have a material impact on the Company's consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, "Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards." This update clarifies how to account for profits interest and similar awards. This standard is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. Early adoption of the standard is permitted. The Company is analyzing the impact of the adoption, but does not expect it to have a material impact on the Company's consolidated financial statements.

In March 2024, the SEC adopted “The Enhancement and Standardization of Climate-Related Disclosures for Investors” that requires public companies to disclose information about the material impacts of climate-related risks on their business, financial condition and governance. These rules are effective, pending judicial review, starting with fiscal year 2025. The Company is analyzing the impact of these rules and has not yet determined the impact on the Company's consolidated financial statements and related disclosures.

3.AcquisitionsAssets and Liabilities Held for Deconsolidation

AcquisitionAs of Redi2 Technologies

On July 1, 2022, Envestnet completedMarch 31, 2024, the acquisitionCompany held a controlling financial interest in a private company due to its majority representation on the company’s board and, as such, used the consolidation method of allaccounting to include the private company’s assets, liabilities and results of the issued and outstanding shares of Redi2 Technologies ("Redi2"). Redi2 provides revenue management and hosted fee-billing solutions. Its platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. Redi2 has been integrated intooperations within the Envestnet Wealth Solutions segment.segment of the Company’s condensed consolidated financial statements.

In connectionDuring the three months ended March 31, 2024, this private company entered into an amended operating agreement with its members which will result in Envestnet no longer having majority representation of the Redi2 acquisition,company's board and therefore no longer holding a controlling financial interest in the Company paid estimated considerationprivate company as follows:of April 1, 2024. Upon no longer having controlling financial interest, Envestnet will deconsolidate the private company's assets, liabilities and results of operations. This transaction qualifies for fair value measurement which results in it being considered a sale. This plan of sale meets the held for sale criteria as of March 31, 2024 and therefore the assets and related liabilities of this private company were classified as held for deconsolidation in the Company's condensed consolidated balance sheets as of March 31, 2024.

Preliminary EstimateMeasurement Period AdjustmentsRevised Estimate
(in thousands)
Cash consideration, net$69,406 $— $69,406 
Estimated working capital adjustment(1,465)932 (533)
Total$67,941 $932 $68,873 

The Company funded the Redi2 acquisition with available cash resources. In addition, certain executives may earn up to $20.0 million in performance bonuses based upon the achievement of certain target financial and non-financial metrics.
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
These performance bonuses will be recognizedAssets and liabilities held for deconsolidation consisted of the following:

March 31,
2024
(in thousands)
Cash and cash equivalents$11,073 
Fees receivable, net2,319 
Prepaid expenses and other current assets513 
Internally developed software, net14,090 
Goodwill (1)
26,647 
Other assets374 
Total assets held for deconsolidation$55,016 
Accounts payable, accrued expenses and other current liabilities$2,463 
Deferred revenue5,085 
Other liabilities1,450 
Total liabilities held for deconsolidation$8,998 

(1) The assignment of goodwill was based on the relative fair value of the private company and the Envestnet Wealth Solutions reporting unit prior to the private company being classified as compensation and benefits expenseheld for deconsolidation.

Effective April 1, 2024, the Company no longer had a controlling financial interest in the condensed consolidated statementsprivate company which will result in the derecognition of operations. The performance bonuses recognizedthe carrying amount of the noncontrolling interest as of April 1, 2024, the derecognition of the above assets and liabilities held for deconsolidation and which may result in the recognition of a gain during the three months ended March 31, 2023 were immaterial.

The following table summarizesJune 30, 2024. This transaction does not represent a strategic shift and therefore does not meet the estimated fair values of the assets acquired at the date of acquisition:

Preliminary EstimateMeasurement Period AdjustmentsRevised Estimate
(in thousands)
Total current assets$1,985 $— $1,985 
Other non-current assets3,349 (28)3,321 
Identifiable intangible assets26,500 — 26,500 
Goodwill44,236 2,231 46,467 
Total assets acquired76,070 2,203 78,273 
Accounts payable and accrued expenses(1,157)(1,271)(2,428)
Operating lease liabilities(2,201)— (2,201)
Deferred revenue(4,771)— (4,771)
Total liabilities assumed(8,129)(1,271)(9,400)
Total net assets acquired, net of cash received$67,941 $932 $68,873 

The goodwill arising from the acquisition represents the expected benefits of the transaction, primarily relatedcriteria to the enhancement of the Company's existing technologies and increase in future revenuebe classified as a result of potential cross selling opportunities. Estimated goodwill of $40.7 million is deductible for income tax purposes.

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

Preliminary EstimateEstimated Useful LifeAmortization Method
(in thousands)(in years)
Customer lists$14,000 14 - 16Accelerated
Proprietary technologies9,500 6Straight-line
Trade names3,000 6 - 7Straight-line
Total intangible assets acquired$26,500 

The estimated fair values of certain of the assets acquired and liabilities assumed are provisional and based on information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation procedures that are in progress and not yet at the point where there is sufficient information for a definitive measurement.discontinued operations. The Company believeswill apply the preliminary information provides a reasonable basisequity method to account 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 values reflected herein are subject to change and such changes could be significant. No measurement period adjustments were made during the three months ended March 31, 2023. The Company expects to finalize the valuation of tangible assets acquired, liabilities assumed, identifiable intangible assets and goodwill balances and complete the acquisition accounting as soon as reasonably practicable, though no later than Julyits noncontrolling investment in this private company starting April 1, 2023.

The results of Redi2 are included in the condensed consolidated statements of operations beginning July 1, 2022 and are not considered material to the Company’s results of operations.

For the three months ended March 31, 2023, the Company’s acquisition related costs were not material, and are included in general and administrative expenses. The Company may incur additional acquisition related costs over the remainder of 2023.


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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
2024.

4.Prepaid Expenses and Other Current Assets
 
Prepaid expenses and other current assets consisted of the following:
March 31,December 31,
 20232022
(in thousands)
Prepaid technology$20,657 $16,649 
Elevate Summit prepayments and deposits6,447 528 
Non-income tax receivable5,484 5,488 
Prepaid insurance2,817 2,881 
Income tax prepayments and receivables— 2,515 
Other11,986 13,302 
Total prepaid expenses and other current assets$47,391 $41,363 

March 31,December 31,
 20242023
(in thousands)
Prepaid technology$17,275 $14,630 
Income tax prepayments and receivables8,441 9,625 
Prepaid data servers7,147 7,991 
Elevate Summit prepayments and deposits3,932 773 
Non-income tax receivable3,507 4,041 
Prepaid insurance1,113 2,785 
Other11,915 11,627 
Total prepaid expenses and other current assets$53,330 $51,472 
  


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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
5.Internally Developed Software, netNet

Internally developed software, net consisted of the following:
  March 31,December 31,
 Estimated Useful Life20232022
(in thousands)
Internally developed software5 years$336,607 $313,200 
Less: accumulated amortization (139,733)(128,642)
Internally developed software, net $196,874 $184,558 

  March 31,December 31,
 Estimated Useful Life20242023
(in thousands)
Internally developed software5 years$398,021 $405,078 
Less: accumulated amortization (183,514)(180,365)
Internally developed software, net $214,507 $224,713 


6.Geographical Information

The following table sets forth certain long-lived assets including property and equipment, net and internally developed software, net by geographic area:
 March 31,December 31,
 20232022
(in thousands)
United States$258,263 $245,817 
India2,705 1,093 
Other50 91 
Total long-lived assets, net$261,018 $247,001 

 March 31,December 31,
 20242023
(in thousands)
United States$259,085 $270,381 
India2,278 2,555 
Total long-lived assets, net$261,363 $272,936 

See “Note 14—Revenue and Direct Expense” for detail of revenue by geographic area.

7.Intangible Assets, Net

Intangible assets, net consisted of the following:

 March 31, 2024December 31, 2023
 Gross NetGross Net
 CarryingAccumulatedCarryingCarryingAccumulatedCarrying
 AmountAmortizationAmountAmountAmortizationAmount
(in thousands)
Customer lists$595,400 $(328,293)$267,107 $604,080 $(327,042)$277,038 
Proprietary technologies90,058 (38,476)51,582 93,058 (37,052)56,006 
Trade names11,000 (6,363)4,637 15,700 (10,676)5,024 
Total intangible assets$696,458 $(373,132)$323,326 $712,838 $(374,770)$338,068 

During the three months ended March 31, 2024 and 2023, the Company retired fully amortized intangible assets with historical costs of $16.4 million and $17.5 million, respectively.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
7.Intangible Assets, Net

Intangible assets, net consisted of the following:
 March 31, 2023December 31, 2022
 Gross NetGross Net
 CarryingAccumulatedCarryingCarryingAccumulatedCarrying
 AmountAmortizationAmountAmountAmortizationAmount
(in thousands)
Customer lists$604,080 $(295,976)$308,104 $604,080 $(285,288)$318,792 
Proprietary technologies109,057 (46,894)62,163 113,224 (59,401)53,823 
Trade names15,700 (8,912)6,788 15,700 (8,320)7,380 
Total intangible assets$728,837 $(351,782)$377,055 $733,004 $(353,009)$379,995 

On April 1, 2022, the Company entered into a purchase agreement with a privately held company to acquire the technology solutions being developed by this privately held company for a purchase price of $9.0 million, including an advance of $4.0 million. The purchase agreement was amended in January 2023 to include additional functionality and features for additional consideration of $5.0 million. The Company closed the transaction and paid the remaining $10.0 million during the three months ended March 31, 2023. This proprietary technology asset has been integrated into the Envestnet Data & Analytics segment and is being amortized over an estimated useful life of five years.

During the three months ended March 31, 2023, the Company retired fully amortized proprietary technologies with a historical cost of $17.5 million. During the three months ended March 31, 2022, the Company had no material retirements of intangible assets.
Futurefuture amortization expense of the Company's intangible assets as of March 31, 2023, is expected to be2024 was as follows (in thousands):
Remainder of 2023$45,947 
202456,040 
202552,700 
202644,797 
202736,232 
Thereafter141,339 
Total$377,055 

Remainder of 2024$42,626 
202553,973 
202646,448 
202737,672 
202830,296 
Thereafter112,311 
Total$323,326 

8.Depreciation and Amortization Expense

Depreciation and amortization expense consisted of the following:
Three Months Ended
 March 31,
20232022
(in thousands)
Intangible asset amortization$16,940 $17,520 
Internally developed software amortization11,090 8,494 
Property and equipment depreciation4,911 5,604 
Total depreciation and amortization$32,941 $31,618 

Three Months Ended
 March 31,
20242023
(in thousands)
Intangible asset amortization$14,742 $16,940 
Internally developed software amortization15,868 11,090 
Property and equipment depreciation3,282 3,490 
Total depreciation and amortization$33,892 $31,520 

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
9.Goodwill

Changes in the carrying amount of goodwill by reportable segment were as follows:

 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsTotal
(in thousands)
Balance as of December 31, 2022$679,739 $318,675 $998,414 
Foreign currency translation— 14 14 
Balance as of March 31, 2023$679,739 $318,689 $998,428 
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsTotal
(in thousands)
Balance as of December 31, 2023$710,326 $96,237 $806,563 
Goodwill reclassified to assets held for deconsolidation (1)
(26,647)— (26,647)
Balance as of March 31, 2024$683,679 $96,237 $779,916 


(1)
The reclassification of goodwill to assets held for deconsolidation was considered an event or change in circumstance which required goodwill to be tested for impairment as of March 31, 2024. A qualitative assessment was performed and it was determined that it was not more likely than not that the carrying value of the reporting unit exceeded its fair value and therefore a quantitative goodwill impairment evaluation was not required and no impairment was recorded.



Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
10.Other Assets

On January 31, 2023, the Company entered into a Convertible Promissory Note with a customer of the Company's business, a privately held company, whereby the Company was issued a convertible promissory note with a principal amount of $20.0 million and a stated interest rate of 8.0% per annum. The Convertible Promissory Note has a maturity date of January 31, 2026 and is convertible into common stock or preferred stock of the privately held company upon qualified financing events or corporate transactions.
In connection with During the three months ended March 31, 2024 and 2023, interest income related to the Convertible Promissory Note included in other expense, net in the Company concurrently entered into a call option agreement with the privately held company, which provides the Company an option to acquire the privately held company at a predetermined price ascondensed consolidated statements of the earlier of July 2024 or upon satisfaction of certain financial metrics.operations was $0.4 million and $0.3 million, respectively.

The Company accounts for this Convertible Promissory Note as a loan receivable in accordance with ASC 310 - Receivables as it is not a security and includes it in other assets in the condensed consolidated balance sheets. Credit impairment is measured as the difference between this loan receivable’s amortized cost and its estimated recoverable value, which is the present value of its expected future cash flows discounted at the effective interest rate. There was no impairment for this investment forduring the three months ended March 31, 2023.2024.

11.Accounts Payable, Accrued Expenses and Other Current Liabilities
 
Accounts payable, accrued expenses and other current liabilities consisted of the following:
March 31,December 31,
 20232022
(in thousands)
Accrued investment manager fees$98,419 $99,851 
Accrued compensation and related taxes42,120 77,939 
Accrued professional services14,188 10,762 
Accounts payable9,605 11,271 
Income tax payable9,459 260 
Accrued capital expenditures6,359 4,783 
Accrued interest6,147 3,091 
Accrued technology5,179 6,393 
Accrued treasury stock purchases— 9,289 
Other accrued expenses4,507 10,227 
Total accounts payable, accrued expenses and other current liabilities$195,983 $233,866 

March 31,December 31,
 20242023
(in thousands)
Accrued investment manager fees$116,092 $106,612 
Accrued compensation and related taxes36,603 72,466 
Accounts payable22,765 35,738 
Accrued professional services10,482 14,289 
Accrued interest5,648 2,473 
Accrued technology4,349 4,151 
Other accrued expenses5,187 5,695 
Total accounts payable, accrued expenses and other current liabilities$201,126 $241,424 

As of March 31, 2024 the Company had an ending liability balance of $7.2 million primarily in connection with a reduction in force initiative that began during the first quarter of 2023. The Company anticipates approximately $4.6 million to be paid during the remainder of 2024, $1.7 million to be paid throughout 2025, with the remaining balance paid through 2030.

The following table presents a reconciliation of the beginning and ending liability balance related to this effort, which is primarily included within accrued compensation and related taxes in the table above.

 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
(in thousands)
Balance as of December 31, 2023$9,793 $486 $— $10,279 
Severance expense1,804 13 1,608 3,425 
Cash payments(4,442)(499)(1,608)(6,549)
Balance as of March 31, 2024$7,155 $— $— $7,155 

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
12.Debt

The following tables set forth the carrying value and estimated fair value of the Company's debt obligations as of March 31, 20232024 and December 31, 2022:2023:

March 31, 2023 March 31, 2024
Issuance AmountUnamortized Issuance CostsCarrying ValueFair Value (Level II) Issuance AmountUnamortized Issuance CostsCarrying ValueFair Value (Level II)
(in thousands)
(in thousands)
(in thousands)
(in thousands)
Third Credit Agreement$— $— $— $— 
Convertible Notes due 202345,000 (46)44,954 44,168 
Revolving Credit Facility
Revolving Credit Facility
Revolving Credit Facility
Convertible Notes due 2025Convertible Notes due 2025317,500 (4,318)313,182 284,220 
Convertible Notes due 2027Convertible Notes due 2027575,000 (15,214)559,786 598,270 
Total debtTotal debt$937,500 $(19,578)$917,922 $926,658 

December 31, 2022 December 31, 2023
Issuance AmountUnamortized Issuance CostsCarrying ValueFair Value (Level II) Issuance AmountUnamortized Issuance CostsCarrying ValueFair Value (Level II)
(in thousands)
(in thousands)
(in thousands)
(in thousands)
Third Credit Agreement$— $— $— $— 
Convertible Notes due 202345,000 (114)44,886 46,058 
Revolving Credit Facility
Revolving Credit Facility
Revolving Credit Facility
Convertible Notes due 2025Convertible Notes due 2025317,500 (4,765)312,735 293,688 
Convertible Notes due 2027Convertible Notes due 2027575,000 (15,966)559,034 606,119 
Total debtTotal debt$937,500 $(20,845)$916,655 $945,865 

Revolving Credit AgreementFacility

The ThirdRevolving Credit AgreementFacility provides for a $500.0 million revolving line of credit, including a sub-facility for a $20.0 million letter of credit. There were no amounts outstanding under the Revolving Credit Facility as of March 31, 2024 and December 31, 2023.

As of March 31, 2024 and December 31, 2023, debt issuance costs related to the Revolving Credit Facility included in prepaid expenses and other current assets in the condensed consolidated balance sheets was $0.7 million and $0.7 million, respectively, and included in other assets in the condensed consolidated balance sheets was $1.3 million and $1.5 million, respectively.

The Revolving Credit Facility contains customary conditions, representations and warranties, affirmative and negative covenants, mandatory prepayment provisions and events of default. The covenants include certain financial covenants requiring the Company to maintain compliance with a maximum total leverage ratio and a minimum interest coverage ratio.

On February 20, 2024, the Company entered into a Waiver with respect to the Revolving Credit Facility, between the Company, the Guarantors party thereto from time to time, the Lenders party thereto from time to time and Bank of Montreal, as administrative agent. Under the Waiver, the Lenders party thereto waived the events of default resulting from the non-compliance with the Total Leverage Ratio financial covenant for the fiscal quarters ended on March 31, 2023 and June 30, 2023. The Company was in compliance with these financialall other covenants in the Revolving Credit Facility as of March 31, 2023.2024.

As of March 31, 2023 and December 31, 2022, there were no amounts outstanding under the Revolving Credit Facility and as of March 31, 2023 all $500.0 million was available to borrow. As of March 31, 2023 and December 31, 2022, debt issuance costs related to the Third Credit Agreement included in prepaid expense and other current assets in the condensed consolidated balance sheets was $0.7 million and $0.7 million, respectively and included in other assets in the condensed consolidated balance sheets was $2.0 million and $2.2 million, respectively.


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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Interest Expense

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:
 Three Months Ended
 March 31,
 20232022
(in thousands)
Coupon interest$4,565 $2,480 
Amortization of debt discount and issuance costs1,442 2,060 
Undrawn and other fees313 313 
 Total interest expense$6,320 $4,853 
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Envestnet, Inc.
 Three Months Ended
 March 31,
 20242023
(in thousands)
Convertible Notes interest$4,369 $4,565 
Amortization of debt discount and issuance costs1,405 1,442 
Undrawn and other fees315 313 
 Total interest expense$6,089 $6,320 
Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The effective interest rate of the Convertible Notes was equal to the stated interest rate plus the amortization of the debt issuance costs and is set forth below:
 Three Months Ended
 March 31,
 20232022
Convertible Notes due 20232.4 %2.4 %
Convertible Notes due 20251.3 %1.3 %
Convertible Notes due 20273.2 %N/A

Three Months Ended
 March 31,
 20242023
Convertible Notes due 2023N/A2.4 %
Convertible Notes due 20251.3 %1.3 %
Convertible Notes due 20273.2 %3.2 %

13.Fair Value Measurements
The following tables set forth the fair value of the Company’sCompany's financial assets and liabilities measured at fair value on a recurring basis, in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, based on the three-tier fair value hierarchy, as described in detail within the Company's Annual Report on Form 10-K:
 March 31, 2023
 Fair ValueLevel ILevel IILevel III
(in thousands)
Assets:    
Money market funds$2,118 $2,118 $— $— 
Assets to fund deferred compensation liability10,380 — — 10,380 
Total assets$12,498 $2,118 $— $10,380 
Liabilities:    
Deferred compensation liability8,667 8,667 — — 
Total liabilities$8,667 $8,667 $— $— 
Report:

December 31, 2022 March 31, 2024
Fair ValueLevel ILevel IILevel III Fair ValueLevel ILevel IILevel III
(in thousands)
(in thousands)
(in thousands)
(in thousands)
Assets:Assets:    Assets:   
Money market fundsMoney market funds$2,628 $2,628 $— $— 
Assets to fund deferred compensation liability
Assets to fund deferred compensation liability
Assets to fund deferred compensation liabilityAssets to fund deferred compensation liability10,074 — — 10,074 
Total assetsTotal assets$12,702 $2,628 $— $10,074 
Liabilities:Liabilities:    Liabilities: 
Deferred compensation liabilityDeferred compensation liability8,088 8,088 — — 
Deferred compensation liability
Deferred compensation liability
Total liabilitiesTotal liabilities$8,088 $8,088 $— $— 

 December 31, 2023
 Fair ValueLevel ILevel IILevel III
(in thousands)
Assets:    
Money market funds$51,653 $51,653 $— $— 
Assets to fund deferred compensation liability10,961 — — 10,961 
Total assets$62,614 $51,653 $— $10,961 
Liabilities:    
Deferred compensation liability$8,045 $8,045 $— $— 
Total liabilities$8,045 $8,045 $— $— 


Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The Company assesses the categorization of assets and liabilities by level at each measurement date, and transfers between levels are recognized on the actual date of the event or when changes in circumstances causedcause the transfer, in accordance with the Company’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. There were no transfers between Levels I, II and III during the three months ended March 31, 2023 and 2022.2024.
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Fair Value of Assets Used to Fund the Deferred Compensation Liability

The table below presents a reconciliation of the assets used to fund the Company's deferred compensation liability, which is measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2022 to March 31, 2023::

 Fair Value of Assets Used to Fund Deferred Compensation Liability
(in thousands)
Balance as of December 31, 20222023$10,07410,961 
Fair value adjustments and fees306412 
Balance as of March 31, 20232024$10,38011,373 

The fair market value of the assets used to fund the Company's deferred compensation liability is based uponmeasured using the cash surrender value of the Company's life insurance premiums. premiums and is included iThe value of the assets used to fund the Company's deferred compensation liability, which are included inn other assets in the condensed consolidated balance sheets, increased due to net gains on the underlying investment vehicles. These gainssheets. Changes in fair value, if any, are recognized in the Company's earnings and included in general and administrative expensesexpense in the condensed consolidated statements of operations.

Fair Value of Debt Agreements

The Company considered its Convertible Notes to be Level II liabilities as of March 31, 20232024 and December 31, 2022,2023, and used a market approach to calculate their respective fair values. The estimated fair value for each convertible note was determined based on estimated or actual bids and offers in an over-the-counter market on March 31, 20232024 and December 31, 2022,2023, respectively (See “Note 12—Debt”).

Fair Value of Other Financial Assets and Liabilities

The Company considered the recorded value of its other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities as of March 31, 20232024 and December 31, 2022,2023, based upon the short-term nature of these assets and liabilities.



Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
14.Revenue and Direct Expense

Disaggregation of Revenue
 
The following table presents the Company’s revenue by segment disaggregated by major source:

Three Months Ended March 31, Three Months Ended March 31,
20232022 20242023
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidatedEnvestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidated Envestnet Wealth SolutionsEnvestnet Data & AnalyticsTotalEnvestnet Wealth SolutionsEnvestnet Data & AnalyticsTotal
(in thousands)
(in thousands)
(in thousands)
(in thousands)
Revenue:Revenue:      Revenue: 
Asset-basedAsset-based$176,932 $— $176,932 $202,717 $— $202,717 
Subscription-basedSubscription-based76,485 40,594 117,079 68,537 46,197 114,734 
Total recurring revenueTotal recurring revenue253,417 40,594 294,011 271,254 46,197 317,451 
Professional services and other revenueProfessional services and other revenue3,243 1,453 4,696 2,314 1,598 3,912 
Total revenueTotal revenue$256,660 $42,047 $298,707 $273,568 $47,795 $321,363 
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following table presents the Company’s revenue disaggregated by geography, based on the billing address of the customer:
 Three Months Ended
 March 31,
 20232022
(in thousands)
United States$293,214 $316,729 
International5,493 4,634 
Total revenue$298,707 $321,363 

 Three Months Ended
 March 31,
 20242023
(in thousands)
United States$319,571 $293,214 
International5,379 5,493 
Total revenue$324,950 $298,707 

Remaining Performance Obligations
 
As of March 31, 2023,2024, the Company's estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied is approximately $527.0$554.5 million. We expectThe Company expects to recognize approximately 35%31% of this revenue during the remainder of 2023,2024, approximately 50% throughout 2025 and 2026, with the balance recognized thereafter. These remaining performance obligations are not indicative of revenue for future periods.

Contract Balances

Total deferred revenue as of March 31, 2023 increased2024 decreased by $8.1$4.1 million from December 31, 2022,2023, primarily the result of revenue growth, timing of cash receipts and revenue recognition. The majority of the Company's deferred revenue as of March 31, 2024 will be recognized over the course of the next twelve months.

The amount of revenue recognized for the three months ended March 31, 2024 and 2023 that was included in the opening deferred revenue balance was $16.8$15.9 million and $15.9$16.8 million, for the three months ended March 31, 2023 and 2022, respectively. The majority of this revenue consists of subscription-based services and professional services arrangements. The amount of revenue recognized from performance obligations satisfied in prior periods was not material.

Deferred Sales Incentive Compensation

Deferred sales incentive compensation was $11.3 million and $11.0$11.5 million as of March 31, 20232024 and December 31, 2022,2023, respectively. Amortization expense for the deferred sales incentive compensation was $1.2 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively. Deferred sales incentive compensation is included in other assets in


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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
the condensed consolidated balance sheets and 2022.amortization expense is included in employee compensation expense in the condensed consolidated statements of operations. No significant impairment loss for capitalized costs was recorded during the three months ended March 31, 20232024 and 2022.2023.

Direct Expense

The following table summarizes direct expense by revenue category:
 Three Months Ended
 March 31,
 20232022
(in thousands)
Asset-based$102,623 $117,428 
Subscription-based6,362 7,811 
Professional services and other43 
Total direct expense$108,989 $125,282 

 Three Months Ended
 March 31,
 20242023
(in thousands)
Asset-based$118,403 $102,623 
Subscription-based8,230 7,052 
Professional services and other— 
Total direct expense$126,633 $109,679 

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
15.Stock-Based Compensation
 
The Company has stock options, RSUs and PSUs outstanding under the 2010 Plan and the 2019 Equity Plan. As of March 31, 2023,2024, the maximum number of common shares available for future issuance under the Company's plans is 1,564,414.654,040.

Stock-based compensation expense under the Company’s plans was as follows:
 Three Months Ended
 March 31,
 20232022
(in thousands)
Stock-based compensation expense$19,453 $21,690 
Tax effect on stock-based compensation expense(4,961)(5,531)
Net effect on income$14,492 $16,159 

 Three Months Ended
 March 31,
 20242023
(in thousands)
Stock-based compensation expense$18,898 $19,453 
Tax effect on stock-based compensation expense(4,819)(4,961)
Net effect on income (loss)$14,079 $14,492 
 
The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% for each of the three months ended March 31, 20232024 and 2022.2023.

Stock Options
 
The following table summarizes option activity under the Company’s plans:
   Weighted-Average 
  Weighted-Remaining 
  AverageContractual LifeAggregate
 OptionsExercise Price(Years)Intrinsic Value
(in thousands)
Outstanding as of December 31, 2022277,535$40.07 2.2$6,005 
Exercised(37,454)$15.34 
Outstanding as of March 31, 2023240,081$43.93 2.2$3,542 
Options exercisable as of March 31, 2023239,849$43.90 2.2$3,542 

  Weighted-Weighted-Average 
  AverageRemainingAggregate
 OptionsExercise PriceContractual LifeIntrinsic Value
(in years)(in thousands)
Outstanding as of December 31, 2023202,166$45.22 
Exercised(20,033)$40.71 
Forfeited(186)$71.21 
Outstanding and exercisable as of March 31, 2024181,947$45.69 1.3$2,224 
 
As of March 31, 2023,2024, there was an immaterialno amount of unrecognized stock-based compensation expense related to stock options, which the Company expects to recognize over a weighted-average period of 0.3 years.options.



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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Restricted Stock Units and Performance Stock Units
 
The following table summarizes RSU and PSU activity under the Company’s plans:
RSUsPSUs
 Number of
Shares
Weighted-
Average Grant
Date Fair Value
per Share
Number of
Shares
Weighted-
Average Grant
Date Fair Value
per Share
Non-vested as of December 31, 20221,681,976 $72.69 259,049 $74.83 
Granted1,089,706 $62.51 40,010 $69.47 
Vested(502,322)$74.09 (21,994)$81.25 
Forfeited(65,397)$71.96 (49,712)$75.18 
Non-vested as of March 31, 20232,203,963 $67.35 227,353 $73.19 

RSUsPSUs
 Number of
Shares
Weighted-
Average Grant
Date Fair Value
per Share
Number of
Shares
Weighted-
Average Grant
Date Fair Value
per Share
Non-vested as of December 31, 20231,449,253 $65.78 223,058 $72.92 
Granted1,313,955 $51.49 37,270 $83.76 
Vested(460,680)$65.45 (22,557)$69.24 
Forfeited(104,822)$58.98 (81,221)$70.28 
Non-vested as of March 31, 20242,197,706 $57.63 156,550 $77.40 

As of March 31, 2023,2024, there was $134.8$112.4 million of unrecognized stock-based compensation expense related to RSUs, which the Company expects to recognize over a weighted-average period of 2.1 years. As of March 31, 2023,2024, there was $7.8$4.0 million of unrecognized stock-based compensation expense related to PSUs, which the Company expects to recognize over a weighted-average period of 1.42.1 years.
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
16. Income Taxes

The following table includes the Company’s lossincome (loss) before income tax provision, income tax provision and effective tax rate:
 Three Months Ended
 March 31,
 20232022
(in thousands, except for effective tax rate)
Loss before income tax provision$(18,992)$(12,688)
Income tax provision$23,769 $2,020 
Effective tax rate(125.2)%(15.9)%

 Three Months Ended
 March 31,
 20242023
(in thousands, except for effective tax rate)
Income (loss) before income tax provision$2,044 $(18,992)
Income tax provision$1,505 $23,769 
Effective tax rate73.6 %(125.2)%

Under ASC 740-270-25, the Company is required to report income tax expense by applying a projected AETR to ordinary pre-tax book income for the interim period. The tax impact of discrete items is accounted for separately in the period in which they occur. The ETR for the quarter is the result of the projected AETR applied to actual pre-tax book income plus discrete items as a percentage of pre-tax book income. Therefore, a change in pre-tax book income, either forecasted or actual year-to-date, from one period to the next will cause the ETR to change.

For the three months ended March 31, 2024 and March 31, 2023, the Company’sCompany's effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, uncertain tax positions and the impact of state and local taxes offset by federal and state R&D credits.

For the three months ended March 31, 2022, the Company's effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, the impact of state and local taxes offset by federal and state R&D credits and the windfall from stock-based compensation.

Inflation Reduction Act of 2022

On August 16, 2022, the U.S. enacted the IRA, which, among other things, implements a 15% minimum tax on book income of certain large corporations and a 1% excise tax on net stock repurchases. The provisions of the IRA became effective beginning in 2023. The Company does not anticipate a material impact on the consolidated financial statements.

17.Net Loss Per Share
Securities that were anti-dilutive and therefore excluded from the computation of diluted net lossper share were as follows:
Three Months Ended
 March 31,
 20232022
(in thousands)
Options to purchase common stock240,081 326,300 
Non-vested RSUs and PSUs2,431,316 2,641,362 
Convertible Notes11,470,645 9,898,549 
Warrants— 470,000 
Total anti-dilutive securities14,142,042 13,336,211 
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
17.Net Income (Loss) Per Share

The following table provides the numerators and denominators used in computing basic and diluted net income (loss) attributable to Envestnet, Inc., per share:

Three Months Ended
 March 31,
20242023
(in thousands, except share and per share data)
Net income (loss) attributable to Envestnet, Inc.$2,513 $(41,228)
Weighted average common shares outstanding:
Basic54,884,074 54,143,259 
Effect of dilutive shares:
Non-vested RSUs and PSUs473,738 — 
Options to purchase common stock27,254 — 
Diluted55,385,066 54,143,259 
Net income (loss) attributable to Envestnet, Inc., per share:
Basic$0.05 $(0.76)
Diluted$0.05 $(0.76)
Securities that were anti-dilutive and therefore excluded from the computation of diluted net income (loss)per share were as follows:

Three Months Ended
 March 31,
20242023
Convertible Notes10,811,884 11,470,645 
Non-vested RSUs and PSUs830,315 2,431,316 
Options to purchase common stock133,410 240,081 
Total anti-dilutive securities11,775,609 14,142,042 
18.Segment Information
 
Business segments are generallyEnvestnet is organized around the Company'stwo business services.segments based on clients served and products provided to meet those needs. The Company's business segments are:
 
Envestnet Wealth Solutions a leading provider of comprehensive and unified wealth management software, services and servicessolutions to empower financial advisors and institutions to enable them to deliver an intelligent financial lifeholistic advice to their clients.

Envestnet Data & Analytics – a leading provider of financial data aggregation, intelligence,analytics and digital experiences platform that powers data connectivityto meet the needs of financial institutions, enterprise FinTech firms and business intelligence across digital financial services to enable them to deliver an intelligent financial life to their clients.market investment research firms worldwide.

The information inCompany also incurs expenses not directly attributable to the following tables is derived from the Company’s internal financial reporting used for corporate management purposes. Nonsegmentsegments listed above. These nonsegment operating expenses may include salary and benefitsprimarily consist of employee compensation for certain corporate officers, certain types of professional service expenses, and insurance, acquisition related transaction costs, certain restructuring charges and other non-recurring and/or non-operationally related expenses. Intersegment revenue was not material for the three months ended March 31, 2023 and 2022.

See “Note 14—Revenue and Direct Expense” for detail of revenue by segment.



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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following table presents a reconciliation from net income (loss) from operations by segment to consolidated net lossincome (loss) attributable to Envestnet, Inc.:
 Three Months Ended
 March 31,
 20232022
(in thousands)
Envestnet Wealth Solutions$23,463 $25,269 
Envestnet Data & Analytics(7,780)(5,587)
Nonsegment operating expenses(26,740)(26,403)
Loss from operations(11,057)(6,721)
Other expense, net(7,935)(5,967)
Consolidated loss before income tax provision(18,992)(12,688)
Income tax provision23,769 2,020 
Consolidated net loss(42,761)(14,708)
Add: Net loss attributable to non-controlling interest1,533 849 
Consolidated net loss attributable to Envestnet, Inc.$(41,228)$(13,859)

 Three Months Ended
 March 31,
 20242023
(in thousands)
Envestnet Wealth Solutions$38,930 $22,598 
Envestnet Data & Analytics(5,739)(6,915)
Nonsegment operating expenses(24,483)(26,740)
Income (loss) from operations8,708 (11,057)
Other expense, net(6,664)(7,935)
Income (loss) before income tax provision2,044 (18,992)
Income tax provision1,505 23,769 
Net income (loss)539 (42,761)
Add: Net loss attributable to non-controlling interest1,974 1,533 
Net income (loss) attributable to Envestnet, Inc.$2,513 $(41,228)

The following table presents a summary of consolidated total assets by segment:

March 31,December 31, March 31,December 31,
20232022 20242023
(in thousands)
(in thousands)
(in thousands)
(in thousands)
Envestnet Wealth SolutionsEnvestnet Wealth Solutions$1,477,230 $1,503,646 
Envestnet Data & AnalyticsEnvestnet Data & Analytics579,227 608,519 
Consolidated total assetsConsolidated total assets$2,056,457 $2,112,165 

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
19.Commitments and Contingencies
 
Purchase Obligations and Indemnifications
 
The Company includes various types of indemnification and guarantee clauses in certain arrangements. These indemnifications and guarantees may include, but are not limited to, infringement claims related to intellectual property, direct or consequential damages and guarantees to certain service providers and service level requirements with certain customers. The type and amount of any potential indemnification or guarantee varies substantially based on the nature of each arrangement. The Company has experienced no previous claims and cannot determine the maximum amount of potential future payments, if any, related to such indemnification and guarantee provisions. The Company believes that it is unlikely it will have to make material payments under these arrangements and therefore has not recorded a contingent liability associated with these arrangements in the condensed consolidated balance sheets.

 The Company enters into unconditional purchase obligations arrangements for certain of its services that it receives in the normal course of business.

In connection with the Redi2 acquisition, the Company has agreed to pay up to $20.0 million in performance bonuses based upon the achievement of certain performance targets. These performance bonuses will be recognized as employee compensation in the condensed consolidated statements of operations. The amount recognized during the three months ended March 31, 2024 and 2023, as well as the liability as of March 31, 2024, associated with these performance bonuses were immaterial.



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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Legal Proceedings
 
The Company and its subsidiary, Yodlee, have been named as defendants in a lawsuit filed on July 17, 2019, by FinancialApps in the United States District Court for the District of Delaware. The case caption is FinancialApps, LLC v. Envestnet Inc., et al., No. 19-cv-1337 (D. Del.). FinancialApps alleges that, after entering into a 2017 services agreement with Yodlee, Envestnet and Yodlee breached the agreement and misappropriated proprietary information to develop competing credit risk assessment software. The complaint includes claims for, among other things, misappropriation of trade secrets, fraud, tortious interference with prospective business opportunities, unfair competition, copyright infringement and breach of contract. FinancialApps is seeking significant monetary damages and various equitable and injunctive relief.

On September 17, 2019, the Company and Yodlee filed a motion to dismiss certain of the claims in the complaint filed by FinancialApps, including the copyright infringement, unfair competition and fraud claims. On August 25, 2020, the District Court granted in part and denied in part the Company and Yodlee’s motion. Specifically, the Company and Yodlee prevailed on FinancialApps’ counts alleging copyright infringement and violations of the Illinois Deceptive Trade Practices Act. And while the Court was receptive to Envestnet and Yodlee’s argument that several of FinancialApps’ other counts are based on allegations that amount to copyright infringement—and therefore should fail due to copyright preemption—the Court found that FinancialApps had alleged enough conduct distinct from copyright infringement to survive dismissal at this early stage.

On October 30, 2019, the Company and Yodlee filed counterclaims against FinancialApps. Yodlee alleges that FinancialApps fraudulently induced it to enter into contracts with FinancialApps, then breached those contracts. FinancialApps has filed a motion to dismiss Yodlee’s counterclaims. On September 15, 2020, the District Court denied FinancialApps’ motion on all counts except for the breach-of-contract claim which was dismissed on a pleading technicality without prejudice. On that count, the Court granted Yodlee leave to amend its counterclaim, cure the technical deficiency, and reassert its claim. Yodlee and Envestnet filed amended counterclaims on September 30, 2020. The amended counterclaims (1) cure that technical deficiency and reassert Yodlee’s contract counterclaim; and (2) broaden the defamation counterclaims arising out of various defamatory statements FinancialApps disseminated in the trade press after filing the lawsuit. On January 14, 2021, the Court ordered that (i) FinancialApps’sFinancialApps' claims against Yodlee—as well as Yodlee’s counterclaims against FinancialApps—must be tried before the judge instead of a jury pursuant to a jury waiver provision in the parties’ agreement; and (ii) FinancialApps’sFinancialApps' claims against Envestnet (and Envestnet’s counterclaim) must be heard by a jury. The Court has scheduled the Envestnet jury trial to take place before the Yodlee bench trial. Fact discovery closed on April 23, 2021, other than a few outstanding matters, and expert discovery concluded on September 30, 2022. The parties’ respective summary judgment and motions to exclude the presentation of expert testimony (a “Daubert Motion”) are fully briefed and are awaiting final ruling.
On July 25, 2023, the Magistrate Judge issued a report and recommendation that the Court grant FinancialApps’ summary judgment motion on Envestnet’s defamation counterclaim.
The Magistrate Judge did not make a ruling as to Yodlee’s defamation counterclaim. On July 28, 2023, the Magistrate Judge denied Envestnet and Yodlee's Daubert motion to exclude FinancialApps' technical expert, Isaac Pflaum. On July 31, 2023, the Magistrate Judge issued a report and recommendation that the Court grant in part and deny in part Envestnet's summary judgment motion. The Magistrate Judge recommended that the motion be denied as to FinancialApps' vicarious liability theory and direct liability theory but recommended that the motion be granted with respect to the unjust enrichment count. The reports and recommendations are not final rulings, however, and the Company has filed objections against their adoption by the District Court. Those objections are fully briefed and pending before the District Court. On August 14, 2023, the Magistrate Judge granted-in-part and denied-in-part FinancialApps' Daubert motion to exclude Envestnet and Yodlee's technical expert. On September 13, 2023, the Magistrate Judge granted-in-part and denied-in-part Envestnet and Yodlee's Daubert motion to exclude FinancialApps' damages expert. On January 18, 2024, FinancialApps filed a motion seeking sanctions for purported spoliation of evidence against Yodlee and Envestnet. Yodlee and Envestnet filed a brief opposing the motion on February 22, 2024. The motion is fully briefed and pending before the Magistrate Judge. The Company believes FinancialApps’sFinancialApps' allegations are without merit and will continue to defend the claims against it and litigate the counterclaims vigorously.

The Company and Yodlee were also named as defendants in a putative class action lawsuit filed on August 25, 2020, by Plaintiff Deborah Wesch in the United States District Court for the Northern District of California. On October 21, 2020, an amended class action complaint was filed by Plaintiff Wesch and nine additional named plaintiffs. The case caption currently is Clark, et al., v. Yodlee, Inc. Case No. 3:20-cv-5991-SK (formerly entitled Deborah Wesch, et al., v. Yodlee, Inc., et al., Case No. 3:20-cv-05991-SK.20-cv-05991-SK). Plaintiffs allegealleged that Yodlee unlawfully collected their financial transaction data when plaintiffs linked their bank accounts to a mobile application that uses Yodlee’s Instant Account Verification API, and plaintiffs further allege that Yodlee unlawfully sold the transaction data to third parties. The complaint alleged violations of certain California
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
plaintiffs further allege that Yodlee unlawfully sold the transaction data to third parties. The complaint alleges violations of certain California statutes and common law, including the Unfair Competition Law, and federal statutes, including the Stored Communications Act. Plaintiffs are seeking monetary damages and equitable and injunctive relief on behalf of themselves and a putative nationwide class and California subclass of persons who provided their log-in credentials to a Yodlee-powered app in an allegedly similar manner from 2014 to the present. The Company believes that it is not properly named as a defendant in the lawsuit and it further believes, along with Yodlee, that plaintiffs’ claims are without merit.

On November 4, 2020, the Company and Yodlee filed separate motions to dismiss all of the claims in the complaint. On February 16, 2021, the district court granted in part and denied in part Yodlee’s motion to dismiss the amended complaint and granted the plaintiffs leave to further amend. The Courtcourt reserved ruling on the Company’s motion to dismiss and granted limited jurisdictional discovery to the plaintiffs. On March 15, 2021, Plaintiffs filed a second amended class action complaint re-alleging, among others, the claims the district court had dismissed. The second amended complaint did not allege any claims against the Company or Yodlee that were not previously alleged in first amended complaint. On May 5, 2021, the Company filed a motion to dismiss all claims asserted against it in the second amended complaint, and Yodlee filed a motion to dismiss most claims asserted against it in the second amended complaint. On July 19, 2021, the Courtcourt granted in part Yodlee’s motion, resulting in the dismissal of all federal law claims and two of the state-law claims. On August 5, 2021, the Court granted the Company's motion to dismiss, and dismissed the Company from the lawsuit. On October 8, 2021, Yodlee filed an early motion for summary judgment. On August 12, 2022, Plaintiffs moved for leave to file a third amended complaint, which Yodlee opposed. On September 29, 2022, the Court denied Plaintiffs’ motion to amend the complaint. On December 13, 2022, the Court granted in part and denied in part Yodlee’s early motion for summary judgment, narrowing the scope of issues that remain to be resolved. On January 30, 2023, the Court granted Yodlee’s motion for reconsideration and dismissed one additional claim. Plaintiffs filed an amended complaint on September 19, 2023, which Yodlee answered on October 3, 2023. Yodlee believes the allegations are without merit and will continue to vigorously defend the remaining claims against it.

In addition, the Company is involved in legal proceedings arising in the ordinary course of its business. Legal fees and other costs associated with such actions are expensed as incurred. The Company will record a provision for these claims when it is both probable that a liability has been incurred and the amount of the loss, or a range of the potential loss, can be reasonably estimated. These provisions are reviewed regularly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information or events pertaining to a particular case. For litigation matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established, but if the matter is material, it is subject to disclosures. The Company believes that liabilities associated with any claims, while possible, are not probable, and therefore has not recorded any accrual for any claims as of March 31, 2023.2024. Further, while any possible range of loss cannot be reasonably estimated at this time, the Company does not believe that the outcome of any of these proceedings, individually or in the aggregate, would, if determined adversely to it, have a material adverse effect on its financial condition or business, although an adverse resolution of legal proceedings could have a material adverse effect on the Company’s results of operations or cash flow in a particular quarter or year. 
 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements
 
The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q for the quarter ended March 31, 2023 2024 and the consolidated financial statements and related notes included on Form 10-K for the year ended December 31, 2022.2023.

This Quarterly Report 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 variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business and other characteristics of future events or circumstances are forward-looking statements. 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 Part I, Item 1A.“Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022;Annual Report; 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 report to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

You should read this Quarterly Report and the 2022 Form 10-KAnnual Report 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, 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.

Unless otherwise indicated, the terms “Envestnet,” the “Company,” “we,” “us” and “our” refer to Envestnet, Inc. and its subsidiaries as a whole.

Overview
 
Envestnet, through its subsidiaries, is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet has beenis a leader in helping transform wealth management, working towards ourits goal of expanding a holistic financial wellness ecosystem so that our clients can deliver an intelligent financial life tobetter serve their clients.
 
Approximately 106,000Envestnet's clients include more than 109,000 advisors, and approximately 6,900 companies, including 1617 of the 20 largest U.S. banks, 4748 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs, and hundreds of FinTech companies, all of which leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients. We also operate six RIAs registered with the SEC. We believe that our business model results in a high degree of recurring and predictable financial results.

Through a combination of platform enhancements, partnerships and acquisitions, Envestnet uniquely provides a financial network connecting technology, solutions and data, delivering better intelligence and enabling its customers to drive better outcomes.

Envestnet, a Delaware corporation originally founded in 1999, serves clients from its headquarters based in Berwyn, Pennsylvania, as well as other locations throughout the United States, India and other international locations.





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Recent Developments

Macroeconomic EnvironmentLeadership Update

On January 7, 2024, the Company entered into a separation and release agreement with Mr. Crager in which it was agreed that Mr. Crager would step down as chief executive officer on March 31, 2024 and as a member of the Company’s Board of Directors promptly following Envestnet’s 2024 Annual Meeting. On April 1, 2024, Mr. Crager began serving as a senior advisor, focusing on client and partner relationships. James Fox began serving as our Interim Chief Executive Officer on April 1, 2024 and will continue to serve this role until our Board of Directors appoints a new chief executive officer. Mr. Fox has served as a member of our Board of Directors since February 2015 and Chair of the Board of Directors since March 2020.

Operating Results

Beginning in the three months ended December 31, 2021 through March 31, 2024, the Company reported a loss from operations and loss before income tax provision in every quarter with the exception of the three months ended September 30, 2023 and March 31, 2024.We have incurred these quarterly losses as a result of several factors as described below.

Revenue Factors: Throughout 2022, the financial markets experienced a broad downturn and our redemption rates were higher than our historical average, and as a result, in our Wealth Solutions segment, our asset-based recurring revenue was materially adversely affected. Beginning in the three months ended March 31, 2023 asset-based recurring revenue has been increasing steadily.In addition, as a result of competitive pricing pressures in our Data & Analytics segment research business, beginning in the three months ended December 31, 2022 subscription-based recurring revenue has been materially adversely affected.

Expense Factors: We have incurred certain expenses that are not recurring in nature and that are a direct result of significant, distinct enterprise-wide strategic initiatives that we have taken in order to reshape and streamline the organization, which we believe will increase our operational efficiencies and to reduce future operating expenses, while negatively impacting our operating results in the short-term.These actions include both internal and external related expenses associated with office closures announced in the second quarter of 2022, severance and office closure related expenses associated with an organizational realignment and entry into an outsourcing arrangement announced in the fourth quarter of 2022, as well as severance expense for a reduction in force initiative announced in the first quarter of 2023 which continued throughout 2023.

Our business is directly and indirectly affected by macroeconomic conditions and the state of global financial markets. Recent geopolitical uncertainty resulting,The return to recurring positive income before income taxes, largely depends on a combination of improved industry dynamics, including overall technology and data spending by financial institutions and an improvement in part, from military conflict between Russiacapital market valuations, including asset flows and Ukraineredemption rates, both of which escalated in
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February 2022the Company’s control, as well as rising inflation have contributed to significant volatility and declinea reduction in global financial markets during 2022 which continues as of the date of this Quarterly Report. The uncertainty over the extent and duration of the ongoing conflict and this period of inflation continues to cause disruptions to businesses and markets worldwide. The extent of the effect on our financial performance will continue to depend on future developments, including the extent and duration of the conflict and this period of inflation, the Federal Reserve's monetary policy in response to rising inflation, the extent of economic sanctions imposed, changes in market interest rates, further governmental and private sector responses and the timing and extent normal economic conditions resume, all of which are uncertain and difficult to predict. Although we are unable to estimate the overall financial effect of the conflict and this period of inflation at this time, as these conditions continue, they could have a material adverse effect on our business, results of operations, financial condition and cash flows. As of March 31, 2023, the consolidated financial statements do not reflect any adjustmentsoperating expenses, as a result of these macroeconomic conditions.

Convertible Promissory Note

On January 31, 2023, the Company entered into a Convertible Promissory Note with a customer of the Company's business, a privately held company, whereby the Company was issued a convertible promissory note with a principal amount of $20.0 million and a stated interest rate of 8.0% per annum. The Convertible Promissory Note has a maturity date of January 31, 2026 and is convertible into common stock or preferred stock of the privately held company upon qualified financing events or corporate transactions.

In connection with the Convertible Promissory Note, the Company concurrently entered into a call option agreement with the privately held company, which provides the Company an option to acquire the privately held company at a predetermined priceactions taken by management as of the earlier of July 2024 or upon satisfaction of certain financial metrics.

discussed above.
Reduction in Force

In the first quarter of 2023, as part of a reduction in force initiative, we entered into separation agreements with a number of employees. In connection with the reduction in force initiative as well as a fourth quarter organizational realignment, we incurred approximately $6.2 million of total severance expense in the three months ended March 31, 2023.

Segments
 
Envestnet is organized around two primary, complementary business segments.segments based on clients served and products provided to meet those needs. Financial information about each business segment is contained in Part I, Item 1, “Note"Note 18—Segment Information” to the condensed consolidated financial statements included in Item 1 of this Quarterly Report.statements. Our business segments are as follows:

Envestnet Wealth Solutions – a leading provider of comprehensive and unified wealth management software, services and servicessolutions to empower financial advisors and institutions to enable them to deliver an intelligent financial lifeholistic advice to their clients.

Envestnet Data & Analytics – a leading provider of financial data aggregation, intelligence,analytics and digital experiences platform that powers data connectivityto meet the needs of financial institutions, enterprise FinTech firms and business intelligence across digital financial servicesmarket investment research firms worldwide.

The Company also incurs expenses not directly attributable to enable them to deliver an intelligent financial life to their clients.the segments listed above. These nonsegment operating expenses primarily consist of employee compensation for certain corporate officers, certain types of professional service expenses, insurance, acquisition related transaction costs, certain restructuring charges and other non-recurring and/or non-operationally related expenses.

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On October 1, 2023, the Company changed the composition of its reportable segments to reflect the way that the Company's chief operating decision maker reviews the operating results, assesses performance and allocates resources. All segment information presented within this Quarterly Report is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.
Key Metrics

Envestnet Wealth Solutions Segment
 
The following table provides information regarding the amount of assets utilizing our platforms, financial advisors and investor accounts in the periods indicated:
As of
March 31,June 30,September 30,December 31,March 31,
2022(1)
2022202220222023
(in millions, except accounts and advisors data)
Platform Assets
Assets under Management (“AUM”)$361,251 $325,209 $315,883 $341,144 $363,244 
Assets under Administration (“AUA”)432,141 352,840 350,576 367,412 379,843 
Total AUM/A793,392 678,049 666,459 708,556 743,087 
Subscription4,736,537 4,312,114 4,134,414 4,382,109 4,566,971 
Total Platform Assets$5,529,929 $4,990,163 $4,800,873 $5,090,665 $5,310,058 
Platform Accounts
AUM1,459,0931,491,8611,522,9681,547,0091,571,862
AUA1,186,1801,061,4841,135,3021,135,0261,142,166
Total AUM/A2,645,2732,553,3452,658,2702,682,0352,714,028
Subscription15,151,56915,312,14415,596,40315,665,02015,779,980
Total Platform Accounts17,796,84217,865,48918,254,67318,347,05518,494,008
Advisors
AUM/A39,80038,39438,41738,02538,611
Subscription67,16866,83867,34867,52067,843
Total Advisors106,968105,232105,765105,545106,454
accounts:
(1) Certain assets and accounts have been reclassified from AUA to AUM to better reflect the nature of the services provided to certain customers.
As of
March 31,June 30,September 30,December 31,March 31,
20232023202320232024
(in millions, except accounts and advisors data)
Platform Assets
Assets under Management (“AUM”)$363,244 $384,773 $375,408 $416,001 $452,464 
Assets under Administration (“AUA”)379,843 394,078 398,082 430,846 471,401 
Total AUM/A743,087 778,851 773,490 846,847 923,865 
Subscription4,566,971 4,643,313 4,579,248 4,959,514 5,158,180 
Total Platform Assets$5,310,058 $5,422,164 $5,352,738 $5,806,361 $6,082,045 
Platform Accounts
AUM1,571,8621,609,6771,614,8731,640,8791,688,044
AUA1,142,1661,144,3751,257,0941,254,9621,315,442
Total AUM/A2,714,0282,754,0522,871,9672,895,8413,003,486
Subscription15,779,98015,916,95516,072,84816,248,59816,641,631
Total Platform Accounts18,494,00818,671,00718,944,81519,144,43919,645,117
Advisors
AUM/A38,61138,80938,07838,69738,814
Subscription67,84368,43969,31869,97370,262
Total Advisors106,454107,248107,396108,670109,076
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:AUA:

Asset Rollforward - Three Months Ended March 31, 2024
As of
 December 31,
GrossNetMarketAs of
 March 31,
Asset Rollforward - Three Months Ended March 31, 2023 2023SalesRedemptionsFlowsImpactReclassifications2024
As of December 31,GrossNetMarketReclass toAs of March 31,
2022SalesRedemptionsFlowsImpactSubscription2023
(in millions, except account data)(in millions, except account data)
AUMAUM$341,144 $24,657 $(15,677)$8,980 $14,259 $(1,139)$363,244 
AUAAUA367,412 32,551 (21,547)11,004 14,529 (13,102)379,843 
Total AUM/ATotal AUM/A$708,556 $57,208 $(37,224)$19,984 $28,788 $(14,241)$743,087 
Fee-Based AccountsFee-Based Accounts2,682,035 116,249 (84,256)2,714,028 

The above AUM/A gross sales figures for the three months ended March 31, 2024 include $17.1$29.8 billion in new client conversions. We onboarded an additional $48.8$31.1 billion in subscription conversions during the three months ended March 31, 20232024 bringing total conversions for the three months ended March 31, 20232024 to $65.9$60.9 billion.

Asset and account figures in the “Reclass to Subscription”“Reclassifications” column for the three months ended March 31, 20232024 represent enterprise customers whoseimmaterial amounts that were reclassified between AUM, AUA and subscription to reflect updated customer billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, witharrangements. These reclassifications have no impact on total platform assets or accounts.accounts.

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Envestnet Data & Analytics Segment
 
The following table provides information regarding the amount of paid-end users and firms using the Envestnet Data & Analytics platform in the periods indicated:
As of
March 31,June 30,September 30,December 31,March 31,
20222022202220222023
(in millions, except number of firms data)
Number of paying users31.4 37.2 38.1 38.8 37.5 
Number of firms1,649 1,731 1,815 1,827 1,851 
platform:

As of
March 31,June 30,September 30,December 31,March 31,
20232023202320232024
(in millions, except number of firms data)
Number of paying users37.5 38.0 42.3 38.3 43.8 
Number of firms1,310 1,339 1,322 1,324 1,323 
Operational Highlights
 
 Three Months Ended 
 March 31,
 20242023$ Change% Change
 (in thousands, except percentages)
Revenue:   
Envestnet Wealth Solutions:
Asset-based$202,616 $176,932 $25,684 15 %
Subscription-based84,168 80,470 3,698 %
Total recurring revenue286,784 257,402 29,382 11 %
Professional services and other revenue3,026 3,247 (221)(7)%
Total Envestnet Wealth Solutions revenue$289,810 $260,649 $29,161 11 %
Envestnet Data & Analytics:
Subscription-based$33,294 $36,609 $(3,315)(9)%
Total recurring revenue33,294 36,609 (3,315)(9)%
Professional services and other revenue1,846 1,449 397 27 %
Total Envestnet Data & Analytics revenue$35,140 $38,058 $(2,918)(8)%
Total consolidated revenue$324,950 $298,707 $26,243 %
Consolidated net income (loss) attributable to Envestnet, Inc.$2,513 $(41,228)$43,741 106 %
Net income (loss) attributable to Envestnet, Inc. per share - basic and diluted$0.05 $(0.76)$0.81 107 %
Adjusted EBITDA*$70,378 $54,003 $16,375 30 %
Adjusted net income*$39,407 $30,149 $9,258 31 %
Adjusted net income per diluted share*$0.60 $0.46 $0.14 30 %
Free cash flow*$(19,909)$(61,739)$41,830 68 %

*Non-GAAP financial measure. See "Non-GAAP Financial Measures" below for definitions and reconciliations of non-GAAP measures.

 Three Months Ended 
 March 31,$%
 20232022ChangeChange
 (in thousands, except percentages)
Revenue:   
Envestnet Wealth Solutions:
Asset-based$176,932 $202,717 $(25,785)(13)%
Subscription-based76,485 68,537 7,948 12 %
Total recurring revenue253,417 271,254 (17,837)(7)%
Professional services and other revenue3,243 2,314 929 40 %
Total Envestnet Wealth Solutions revenue$256,660 $273,568 $(16,908)(6)%
Envestnet Data & Analytics:
Subscription-based$40,594 $46,197 $(5,603)(12)%
Total recurring revenue40,594 46,197 (5,603)(12)%
Professional services and other revenue1,453 1,598 (145)(9)%
Total Envestnet Data & Analytics revenue$42,047 $47,795 $(5,748)(12)%
Total consolidated revenue$298,707 $321,363 $(22,656)(7)%
Deferred revenue fair value adjustment52 54 (2)(4)%
Total consolidated adjusted revenue$298,759 $321,417 $(22,658)(7)%
Consolidated net loss attributable to Envestnet, Inc.$(41,228)$(13,859)$(27,369)*
Net loss attributable to Envestnet, Inc. per share - basic and diluted$(0.76)$(0.25)$(0.51)*
Adjusted EBITDA$55,424 $55,697 $(273)— %
Adjusted net income$30,149 $30,996 $(847)(3)%
Adjusted net income per share - diluted$0.46 $0.47 $(0.01)(2)%

*Not meaningful
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Results of Operations
 Three Months Ended March 31,
 20232022
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands)(in thousands)(in thousands)
Revenue:   
Asset-based$176,932 59 %$202,717 63 %$(25,785)(13)%
Subscription-based117,079 39 %114,734 36 %2,345 %
Total recurring revenue294,011 98 %317,451 99 %(23,440)(7)%
Professional services and other revenue4,696 %3,912 %784 20 %
Total revenue298,707 100 %321,363 100 %(22,656)(7)%
Operating expenses:   
Direct expense108,989 36 %125,282 39 %(16,293)(13)%
Employee compensation114,215 38 %126,849 39 %(12,634)(10)%
General and administrative53,619 18 %44,335 14 %9,284 21 %
Depreciation and amortization32,941 11 %31,618 10 %1,323 %
Total operating expenses309,764 104 %328,084 102 %(18,320)(6)%
Loss from operations(11,057)(4)%(6,721)(2)%(4,336)(65)%
Other expense, net(7,935)(3)%(5,967)(2)%(1,968)(33)%
Loss before income tax provision(18,992)(6)%(12,688)(4)%(6,304)(50)%
Income tax provision23,769 %2,020 %21,749 *
Net loss(42,761)(14)%(14,708)(5)%(28,053)*
Add: Net loss attributable to non-controlling interest1,533 %849 — %684 81 %
Net loss attributable to Envestnet, Inc.$(41,228)(14)%$(13,859)(4)%$(27,369)*

*Not meaningful

Three months ended March 31, 20232024 compared to three months ended March 31, 20222023

 Three Months Ended March 31,
 20242023
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands)(in thousands)(in thousands)
Revenue:   
Asset-based$202,616 62 %$176,932 59 %$25,684 15 %
Subscription-based117,462 36 %117,079 39 %383 — %
Total recurring revenue320,078 99 %294,011 98 %26,067 %
Professional services and other revenue4,872 %4,696 %176 %
Total revenue324,950 100 %298,707 100 %26,243 %
Operating expenses:  
Direct expense126,633 39 %109,679 37 %16,954 15 %
Employee compensation103,652 32 %114,215 38 %(10,563)(9)%
General and administrative52,065 16 %54,350 18 %(2,285)(4)%
Depreciation and amortization33,892 10 %31,520 11 %2,372 %
Total operating expenses316,242 97 %309,764 104 %6,478 %
Income (loss) from operations8,708 %(11,057)(4)%19,765 *
Other expense, net(6,664)(2)%(7,935)(3)%1,271 16 %
Income (loss) before income tax provision2,044 %(18,992)(6)%21,036 111 %
Income tax provision1,505 — %23,769 %(22,264)(94)%
Net income (loss)539 — %(42,761)(14)%43,300 101 %
Add: Net loss attributable to non-controlling interest1,974 %1,533 %441 29 %
Net income (loss) attributable to Envestnet, Inc.$2,513 %$(41,228)(14)%$43,741 106 %

*Not meaningful

Asset-based recurring revenue
 
Asset-based recurring revenue decreased $25.8increased $25.7 million, or 13%15%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to a decreasean increase in asset values applicable to our quarterly billing cycles, which are based on the market value of the customers' assets on our platforms as of the end of the previous quarter.

The number of financial advisors with asset-based recurring revenue on our technology platforms decreased from approximately 40,000 as of March 31, 2022 toremained consistent at approximately 39,000 as of March 31, 2024 and 2023 and the number of AUM/A client accounts increased from approximately 2.6 million as of March 31, 2022 to approximately 2.7 million as of March 31, 2023.2023 to approximately 3.0 million as of March 31, 2024.

As a percentage of total revenue, asset-basedasset based recurring revenue decreased 4%increased 3% points for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to a decreasethe increase in asset-based recurring revenue compared to an increase in subscription-based recurring revenue.period over period.

Subscription-based recurring revenue
 
Subscription-based recurring revenue increased $2.3$0.4 million or 2%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 2022 primarily2023 due to an increase of $7.93.7 million in the Envestnet Wealth Solutions segment, which can be attributed to new and existing customer growth, partially offset by a decrease of $5.6$3.3 million in the Envestnet Data & Analytics segment, which is primarily attributable to a decreaseloss in revenueaccess to data in the research business and continued impact from existing customers.the regional banking crisis.

As a percentage of total revenue, subscription-based recurring revenue increased 3% points primarily due to an increase in subscription-based recurring revenue compared to a decrease in asset-based recurring revenue.

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As a percentage of total revenue, subscription-based recurring revenue decreased 3% points for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to the increase in total revenue period over period.

Professional services and other revenue
 
Professional services and other revenue increased $0.8$0.2 million, or 20%4%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to timing of the completion of customer projects and deployments and an increase in revenue recognized in the Data & Analytics segment as a result of point in time revenue recognized on customer deployments.

Direct expense
 
Direct expense decreased $16.3increased $17.0 million, or 13%15%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to a decreasean increase in asset-based direct expense, which directly correlates with the decreaseincrease to asset-based recurring revenue during the period.

As a percentage of total revenue, direct expense decreased 3% points for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to shifts in pricing and product mix for asset-based revenue in the Envestnet Wealth Solutions segment.
 
Employee compensation

Employee compensation decreased $12.6$10.6 million, or 10%9%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to decreases in salaries, benefits and related payroll taxes of $9.5$6.7 million and severance expense of $2.8 million which isare primarily a result of the outsourcing arrangement with TCS in the Envestnet Data & Analytics segment, a reduction in force initiative that began in the first quarter of 2023.

As a percentage of total revenue, employee compensation expense decreased 6% points for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to a reduction in force initiative that began in the first quarter of 2023 and the organizational realignment in the fourth quarter of 2022, non-cash compensation expense of $2.4 million, incentive compensation of $2.3 million and other immaterial decreases within employee compensation, partially offset by an increase in severance expense of $3.1 million as a result of the reduction in force and organizational realignment.total revenue period over period.

General and administrative
 
General and administrative expenses increased $9.3expense decreased $2.3 million, or 21%4%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to increasesa decrease in software and maintenance charges of $8.6 million primarily a result of the outsourcing arrangement with TCS which shifted certain expenses from employee compensation to general and administrative expense, governance related expense of $1.8 million as a result of expense associated with activist shareholder activity, restructuring charges and transaction costs of $1.5 million, travel and entertainment expense of $1.0$1.6 million and other immaterial increasesdecreases within general and administrative expense. These increases were partially offset by decreases in occupancy costs of $1.8 million, litigation related expense of $1.8 million and marketing costs of $0.9 million.

As a percentage of total revenue, general and administrative increased 4% points for three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily a result of the outsourcing arrangement with TCS as well as a decrease in revenue in the three months ended March 31, 2023 compared to the prior year period.

Depreciation and amortization
 
Depreciation and amortization expense increased $1.3$2.4 million, or 4%8%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to increasesan increase in amortization related to internally developed software of $2.6$4.8 million, partially offset by decreasesa decrease in property and equipment depreciation expenseamortization related to intangible assets of $1.4$2.2 million.

Other expense, net

Other expense, net increased $2.0decreased $1.3 million, or 33%16%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to an increasea decrease in net interest expense of $0.9 million and a decrease in loss allocations from equity method investments of $1.4$0.7 million, partially offset by an increase in foreign currency expense of $0.2 million.

Income tax provision
Under ASC 740-270-25, we are required to report income tax expense by applying a projected AETR to ordinary pre-tax book income for the interim period. The tax impact of discrete items is accounted for separately in the period in which they occur. The ETR for the quarter is the result of the projected AETR applied to actual pre-tax book income plus discrete items as a percentage of pre-tax book income. Therefore, a change in pre-tax book income, either forecasted or actual year-to-date, from one period to the next will cause the ETR to change.




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Income tax provision

For the three months ended March 31, 2024 and 2023, our effective tax rate of 73.6% and (125.2)%, respectively, differed from the statutory rate primarily due to the increase in the valuation allowance we have placed on a portion of U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, uncertain tax positions and the impact of state and local taxes offset by federal and state R&D credits.

ForIn December 2021, the three months ended March 31, 2022, our effective taxOrganization for Economic Co-Operation and Development released Model Global Anti-Base Erosion rules under Pillar Two. These rules provide for the taxation of certain large multinational corporations at a minimum rate of (15.9%) differed from the statutory rate primarily due to the increase in the valuation allowance the Company has placed15%, calculated on a portionjurisdictional basis. Certain countries in which we operate have enacted legislation to implement many aspects of U.S. deferred tax assets which includes the Pillar Two rules beginning on January 1, 2024, with certain remaining impacts to be effective from January 1, 2025. We do not currently anticipate that Pillar Two legislation will have a material impact of IRC Section 174, permanent book-tax differences, the impact of stateon our consolidated financial statements, but we will continue to monitor future legislation and local taxes offset by federal and state R&D credits and the windfall from stock-based compensation.any additional guidance that is issued.

Segment Results
Business segments are generally organized around our service offerings. Financial information about each of our two business segments is contained in “Note 18—Segment Information” to the condensed consolidated financial statements.

The following table reconciles income (loss) from operations by segment to consolidated net loss attributable to Envestnet, Inc.:
 Three Months Ended
 March 31,
 20232022
(in thousands)
Envestnet Wealth Solutions$23,463 $25,269 
Envestnet Data & Analytics(7,780)(5,587)
Nonsegment operating expenses(26,740)(26,403)
Loss from operations(11,057)(6,721)
Other expense, net(7,935)(5,967)
Consolidated loss before income tax provision(18,992)(12,688)
Income tax provision23,769 2,020 
Consolidated net loss(42,761)(14,708)
Add: Net loss attributable to non-controlling interest1,533 849 
Consolidated net loss attributable to Envestnet, Inc.$(41,228)$(13,859)

 Envestnet Wealth Solutions
The following table presents income from operations for the Envestnet Wealth Solutions segment:
 Three Months Ended March 31,
 20232022
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands)(in thousands)(in thousands)
Revenue:   
Asset-based$176,932 69 %$202,717 74 %$(25,785)(13)%
Subscription-based76,485 30 %68,537 25 %7,948 12 %
Total recurring revenue253,417 99 %271,254 99 %(17,837)(7)%
Professional services and other revenue3,243 %2,314 %929 40 %
Total revenue256,660 100 %273,568 100 %(16,908)(6)%
Operating expenses:
Direct expense104,049 41 %118,808 43 %(14,759)(12)%
Employee compensation76,883 30 %78,644 29 %(1,761)(2)%
General and administrative28,127 11 %27,360 10 %767 %
Depreciation and amortization24,138 %23,487 %651 %
Total operating expenses233,197 91 %248,299 91 %(15,102)(6)%
Income from operations
$23,463 %$25,269 %$(1,806)(7)%

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Three months ended March 31, 20232024 compared to three months ended March 31, 20222023

 Three Months Ended March 31,
 20242023
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands)(in thousands)(in thousands)
Revenue:   
Asset-based$202,616 70 %$176,932 68 %$25,684 15 %
Subscription-based84,168 29 %80,470 31 %3,698 %
Total recurring revenue286,784 99 %257,402 99 %29,382 11 %
Professional services and other revenue3,026 %3,247 %(221)(7)%
Total revenue289,810 100 %260,649 100 %29,161 11 %
Operating expenses:
Direct expense119,834 41 %104,405 40 %15,429 15 %
Employee compensation75,196 26 %79,047 30 %(3,851)(5)%
General and administrative29,032 10 %29,107 11 %(75)— %
Depreciation and amortization26,818 %25,492 10 %1,326 %
Total operating expenses250,880 87 %238,051 91 %12,829 %
Income from operations
$38,930 13 %$22,598 %$16,332 72 %

Asset-based recurring revenue

Asset-based recurring revenue decreased $25.8increased $25.7 million, or 13%15%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to a decreasean increase in asset values applicable to our quarterly billing cycles, which are based on the market value of the customers' assets on our platforms as of the end of the previous quarter.

The number of financial advisors with asset-based recurring revenue on our technology platforms decreased from approximately 40,000 as of March 31, 2022 toremained consistent at approximately 39,000 as of March 31, 2024 and 2023 and the number of AUM/A client accounts increased from approximately 2.6 million as of March 31, 2022 to approximately 2.7 million as of March 31, 2023.2023 to approximately 3.0 million as of March 31, 2024.

As a percentage of segment revenue, asset-based recurring revenue decreased 5% points for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to a decrease in asset-based recurring revenue compared to an increase in subscription-based recurring revenue.
Subscription-based recurring revenue

Subscription-based recurring revenue increased $7.9$3.7 million, or 12%5%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to new and existing customer growth.

 As a percentage


Table of segment revenue, subscription-based recurring revenue increased 5% points primarily due to an increase in subscription-based recurring revenue compared to a decrease in asset-based recurring revenue.Contents

Professional services and other revenue

Professional services and other revenue increased $0.9decreased $0.2 million, or 40%7%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to timing of the completion of customer projects and deployments.

Direct expense
 
Direct expense decreased $14.8increased $15.4 million, or 12%15%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due a decreasean increase in asset-based direct expense, which directly correlates with the decreaseincrease in asset-based recurring revenue during the period.

Employee compensation
 
Employee compensation decreased $1.8$3.9 million, or 2%5%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to decreases in severance expense of $2.0 million and salaries, benefits and related payroll taxes of $1.5$1.8 million which isare primarily a result of a reduction in force initiative that began in the first quarter of 2023.

As a percentage of segment revenue, employee compensation expense decreased 4% points for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to a reduction in force initiative that began in the first quarter of 2023 and an organizational realignment in the fourth quarter of 2022, incentive compensation of $1.1 million and other immaterial decreases within employee compensation. These decreases were partially offset by an increase in severance expense of $2.2 million as a result of the reduction in force and organizational realignment.segment revenue period over period.

General and administrative

General and administrative expenses increased $0.8decreased $0.1 million or 3%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to increases in software and maintenance charges of $1.6 million, restructuring charges and transaction costs of $0.8 million, travel and entertainment expense of $0.7 million and other immaterial increasesmovements within general and administrative expense. These increases were partially offset by decreases in occupancy costs of $1.5 million and marketing costs of $0.8 million.
 
Depreciation and amortization
 
Depreciation and amortization expense increased $0.7$1.3 million, or 3%5%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to increasesan increase in amortization related to internally developed software of $1.6$3.4 million, partially offset by decreasesa decrease in property and equipment depreciation expenseamortization related to intangible assets of $0.8$2.0 million.

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Envestnet Data & Analytics

The following table presents loss from operations for the Envestnet Data & Analytics segment:
 Three Months Ended March 31,
 20232022
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands)(in thousands)(in thousands)
Revenue:   
Subscription-based$40,594 97 %$46,197 97 %$(5,603)(12)%
Professional services and other revenue1,453 %1,598 %(145)(9)%
Total revenue42,047 100 %47,795 100 %(5,748)(12)%
Operating expenses: 
Direct expense4,940 12 %6,474 14 %(1,534)(24)%
Employee compensation21,406 51 %30,166 63 %(8,760)(29)%
General and administrative14,678 35 %8,611 18 %6,067 70 %
Depreciation and amortization8,803 21 %8,131 17 %672 %
Total operating expenses49,827 119 %53,382 112 %(3,555)(7)%
Income loss from operations$(7,780)(19)%$(5,587)(12)%$(2,193)(39)%

Three months ended March 31, 20232024 compared to three months ended March 31, 20222023

 Three Months Ended March 31,
 20242023
 Amount% of RevenueAmount% of Revenue$ Change% Change
 (in thousands)(in thousands)(in thousands)
Revenue:   
Subscription-based$33,294 95 %$36,609 96 %$(3,315)(9)%
Professional services and other revenue1,846 %1,449 %397 27 %
Total revenue35,140 100 %38,058 100 %(2,918)(8)%
Operating expenses: 
Direct expense6,799 19 %5,274 14 %1,525 29 %
Employee compensation11,692 33 %19,242 51 %(7,550)(39)%
General and administrative15,314 44 %14,429 38 %885 %
Depreciation and amortization7,074 20 %6,028 16 %1,046 17 %
Total operating expenses40,879 116 %44,973 118 %(4,094)(9)%
Loss from operations$(5,739)(16)%$(6,915)(18)%$1,176 17 %

Subscription-based recurring revenue
 
Subscription-based recurring revenue decreased $5.6$3.3 million, or 12%9%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to decreasesa loss in revenueaccess to data in the research business and continued impact from existing customers.the regional banking crisis.
 
Professional services and other revenue
 
Professional services and other revenue decreasedincreased $0.10.4 million, or 9%27%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 2022.2023 primarily due to an increase in point in time revenue recognized on customer deployments.

Direct expense
 
Direct expense decreasedincreased $1.5 million, or 24%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to a decrease in subscription-based direct expense as a result of a decrease in subscription-based recurring revenue during the period.

Employee compensation

Employee compensation decreased $8.8 million, or 29%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to increased costs related to migrating infrastructure to the cloud.

As a percentage of segment revenue, direct expense increased 5% points for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to the increase in direct expense and decrease in segment revenue period over period.

Employee compensation

Employee compensation decreased $7.6 million, or 39%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to decreases in salaries, benefits and related payroll taxes of $6.8$4.3 million and severance expense of $2.2 million which isare primarily as a result of the outsourcing arrangement with TCS which shifted certain expenses from employee compensation to general and administrative expense, a reduction in force initiative that began in the first quarter of 2023 and an organizational realignment in the fourth quarter of 2022, incentive compensation of $1.1 million, non-cash compensation expense of $0.9 million and other immaterial decreases within employee compensation. These decreases were partially offset by an increase in severance expense of $0.8 million as a result of the reduction in force and organizational realignment.2023.

As a percentage of segment revenue, employee compensation expense decreased 12%18% points for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to the outsourcing arrangement with TCS,reduction in force initiative that began in the first quarter of 2023, partially offset by a decrease in segment revenue in the three months ended March 31, 2023 compared to the prior yearperiod over period.

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General and administrative

General and administrative expenses increased $6.1$0.9 million, or 70%6%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to increasesan increase in softwarerestructuring charges and maintenance chargestransaction costs of $6.8$1.0 million, which is primarily a result of the outsourcing arrangement with TCS, andpartially offset by other immaterial increasesdecreases within general and administrative expense. These increases were partially offset by decrease in litigation related expense of $1.8 million.

As a percentage of segment revenue, general and administrative expense increased 17%6% points for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to the outsourcing arrangement with TCS as well asan increase in restructuring charges and transaction costs and a decrease in segment revenue.revenue period over period.

Depreciation and amortization
 
Depreciation and amortization expense increased $0.7$1.0 million, or 8%17%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to increasesan increase in amortization related to internally developed software of $1.0$1.4 million, partially offset by a decrease in amortization related to intangible assets of $0.2 million.

As a percentage of segment revenue, depreciation and amortization expense increased 4% points for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to an increase in depreciation and amortization expense and a decrease in segment revenue for the three months ended March 31, 2023 compared to the prior yearperiod over period.

Nonsegment
The following table presents nonsegment operating expenses:
 Three Months Ended March 31,$%
 20232022ChangeChange
 (in thousands, except percentages)
Operating expenses:   
Employee compensation$15,926 $18,039 $(2,113)(12)%
General and administrative10,814 8,364 2,450 29 %
Nonsegment operating expenses$26,740 $26,403 $337 %

Three months ended March 31, 20232024 compared to three months ended March 31, 20222023


 Three Months Ended
March 31,
 20242023$ Change% Change
 (in thousands, except percentages)
Operating expenses:   
Employee compensation$16,764 $15,926 $838 %
General and administrative7,719 10,814 (3,095)(29)%
Nonsegment operating expenses$24,483 $26,740 $(2,257)(8)%
 
Employee compensation
 
Employee compensation decreased $2.1increased $0.8 million, or 12%5%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to decreasesan increase in non-cash compensationseverance expense of $1.4 million, andpartially offset by a decrease in salaries, benefits and related payroll taxes of $1.1 million, partially offset by other immaterial changes within employee compensation.$0.7 million.
 
General and administrative
 
General and administrative expenses increased $2.5decreased $3.1 million, or 29%, for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to an increasea decrease in governance related expense of $1.8 million as a result of expense associated with activist shareholder activity.activity during the three months ended March 31, 2023 and a decrease in restructuring charges and transaction costs of $1.4 million, partially offset by other immaterial increases within general and administrative expense.


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Non-GAAP Financial Measures

In addition to reporting results according to GAAP, we also disclose certain non-GAAP financial measures to enhance the understanding of our operating performance. We believe these non-GAAP financial measures are useful supplemental metrics that provide greater transparency into our results of operations and can assist both management and investors in understanding and assessing the operational performance of our business on a consistent basis, as it removes the impact of non-cash or non-recurring items from operating results and provides an additional tool to compare our results with other companies in the industry, many of which present similar non-GAAP financial measures.Those measures include “adjusted revenue,” “adjusted EBITDA,” “adjusted net income” andincome,” “adjusted net income per diluted share.”

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

“Adjusted EBITDA” represents net income (loss) before deferred revenue fair value adjustment, interest income, interest expense, income tax provision, (benefit), depreciation and amortization, non-cashnon‑cash compensation expense, restructuring charges and transaction costs, severance expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, loss allocations from equity method investments and (income) loss attributable to non-controllingnon‑controlling interest.

“Adjusted net income” represents net income (loss) before income tax provision, deferred revenue fair value adjustment, non-cashnon‑cash interest expense, cash interest on our convertible notes, non-cashConvertible Notes, amortization of acquired intangibles, non‑cash compensation expense, restructuring charges and transaction costs, severance amortization of acquired intangibles,expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, loss allocations from equity method investments and (income) loss attributable to non-controllingnon‑controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income. The normalized tax rate is based solely on the estimated blended statutory income tax rates in the jurisdictions in which we operate. We monitor the normalized tax rate based on events or trends that could materially impact the rate, including tax legislation changes and changes in the geographic mix of our operations.

“Adjusted net income per diluted share” represents adjusted net income attributable to common stockholders divided by the diluted number of weighted averageweighted-average shares outstanding. For purposes of the adjusted net income per share calculation, we assume all potential shares to be issued in connection with our Convertible Notes are dilutive.

"Free cash flow" represents net cash provided by (used in) operating activities less purchases of property and equipment and capitalization of internally developed software.

 Our Board and management use these non-GAAP financial measures:

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 concerning our financial performance.

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

We also present adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow as supplemental performance measures because we believe that they provide our Board, management and investors with additional information to assess our performance. Adjusted revenueEBITDA, adjusted net income and adjusted net income per diluted share provide 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 changes in interest expense and interest income that are influenced by capital structure decisions and capital market conditions, income tax provision (benefit), variations in the age and book depreciation of fixed assets affecting relative depreciation expense and amortization of internally developed software, amortization of acquired intangible assets, income tax provision (benefit), non-income tax expense, restructuring charges and transaction costs, severance expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense adjustment, loss allocations from equity method investments pre-tax (income)and loss attributable to non‑controlling interest and changes in interest expense and interest income that are influenced by capital structure decisions and capital market conditions.interest. Our management also believes it is useful to exclude non‑cash compensation expense from adjusted EBITDA, adjusted net income and adjusted net income per diluted share 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. Free cash flow is useful to analyze cash flows generated from our business and our ability to fund our ongoing operations, debt service obligations and to fund potential acquisitions or other strategic activities.

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We believe adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow are useful to investors in evaluating our operating performance because securities analysts use adjusted revenue, adjusted EBITDA, adjusted net income and(loss), adjusted net income (loss) per diluted share and free cash flow as supplemental measures to evaluate the overall performance of companies, and we anticipate that our investors and analyst presentations will include adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share.share and free cash flow.

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

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

Adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;

Adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow do not reflect changes in, or cash requirements for, our working capital needs;

Adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow 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 expense or the use of federal and state net operating loss carryforwards, we paid net cash of $1.1paid for income taxes was $0.6 million and $0.7$1.1 million for the three months ended March 31, 20232024 and 2022,2023, respectively. In the event that we generate taxable income and our existing net operating loss carryforwards for federal and state income taxes have been fully utilized or have expired, income tax payments will be higher; and

Other companies in our industry may calculate adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow differently than we do, limiting their usefulness as a comparative measure.

Management compensates for the inherent limitations associated with using adjusted revenue, adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of adjusted revenue to revenue, the most directly comparable GAAP measure and adjusted EBITDA, adjusted net income, and adjusted net income per diluted share and free cash flow to net income (loss), net income (loss) per share and net income per share,cash provided by (used in) operating activities, the most directly comparable GAAP measures. Further, our management also reviews GAAP measures and evaluates individual measures that are not included in some or all of our non‑GAAP financial measures, such as our level of capital expenditures and interest income, among other measures.

The following tables set forth reconciliations of GAAP financial measures to non-GAAP financial measures. See "Footnotes to GAAP to Non-GAAP Reconciliations" below for further detail on adjustments.













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The following table sets forth a reconciliation of total revenuenet income (loss) to adjusted revenue:
Three Months Ended
March 31,
20232022
(in thousands)
Total revenue$298,707 $321,363 
Deferred revenue fair value adjustment52 54 
Adjusted revenue$298,759 $321,417 
EBITDA:

The following table sets forth a reconciliation of net loss to adjusted EBITDA:
Three Months Ended
March 31,
20232022
(in thousands)
Net loss$(42,761)$(14,708)
Add (deduct):  
Deferred revenue fair value adjustment52 54 
Interest income(1,358)(321)
Interest expense6,320 4,853 
Income tax provision23,769 2,020 
Depreciation and amortization32,941 31,618 
Non-cash compensation expense19,453 21,814 
Restructuring charges and transaction costs4,163 2,346 
Severance6,188 3,106 
Litigation, regulatory and other governance related expenses3,074 3,077 
Foreign currency33 (108)
Non-income tax expense adjustment(168)24 
Loss allocations from equity method investments2,940 1,545 
Loss attributable to non-controlling interest778 377 
Adjusted EBITDA$55,424 $55,697 
Three Months Ended
March 31,
20242023
(in thousands)
Net income (loss)$539 $(42,761)
Add (deduct):  
Deferred revenue fair value adjustment (1)
— 52 
Interest income(1,983)(1,358)
Interest expense6,089 6,320 
Income tax provision (2)(3)
1,505 23,769 
Depreciation and amortization33,892 31,520 
Non-cash compensation expense (4)
18,898 19,453 
Restructuring charges and transaction costs (5)
2,056 4,163 
Severance expense (6)
3,425 6,188 
Litigation, regulatory and other governance related expenses (7)
2,288 3,074 
Foreign currency (8)
275 33 
Non-income tax expense adjustment (9)
(49)(168)
Loss allocations from equity method investments (10)
2,283 2,940 
Loss attributable to non-controlling interest (11)
1,160 778 
Adjusted EBITDA$70,378 $54,003 

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The following table sets forth thea reconciliation of net lossincome (loss) to adjusted net income and adjusted net income per diluted share based on our historical results:share:
 Three Months Ended
 March 31,
 20232022
 (in thousands, except share and per share information)
Net loss$(42,761)$(14,708)
Income tax provision (1)
23,769 2,020 
Loss before income tax provision(18,992)(12,688)
Add (deduct):
Deferred revenue fair value adjustment52 54 
Non-cash interest expense1,442 2,059 
Cash interest - Convertible Notes4,565 2,480 
Non-cash compensation expense19,453 21,814 
Restructuring charges and transaction costs4,163 2,346 
Severance6,188 3,106 
Amortization of acquired intangibles16,940 17,520 
Litigation, regulatory and other governance related expenses3,074 3,077 
Foreign currency33 (108)
Non-income tax expense adjustment(168)24 
Loss allocations from equity method investments2,940 1,545 
Loss attributable to non-controlling interest778 377 
Adjusted net income before income tax effect40,468 41,606 
Income tax effect (2)
(10,319)(10,610)
Adjusted net income$30,149 $30,996 
Basic number of weighted-average shares outstanding54,143,259 54,903,677 
Effect of dilutive shares:
Options to purchase common stock88,323 156,349 
Unvested restricted stock units463,719 568,914 
Convertible notes11,470,645 9,898,549 
Warrants— 51,764 
Diluted number of weighted-average shares outstanding66,165,946 65,579,253 
Adjusted net income per share - diluted$0.46 $0.47 
 Three Months Ended
 March 31,
 20242023
 (in thousands, except share and per share information)
Net income (loss)$539 $(42,761)
Income tax provision (2)(3)
1,505 23,769 
Income (loss) before income tax provision2,044 (18,992)
Add (deduct):
Deferred revenue fair value adjustment (1)
— 52 
Non-cash interest expense (12)
1,405 1,442 
Cash interest - Convertible Notes (13)
4,369 4,565 
Amortization of acquired intangibles (14)
14,742 16,940 
Non-cash compensation expense (4)
18,898 19,453 
Restructuring charges and transaction costs (5)
2,056 4,163 
Severance expense (6)
3,425 6,188 
Litigation, regulatory and other governance related expenses (7)
2,288 3,074 
Foreign currency (8)
275 33 
Non-income tax expense adjustment (9)
(49)(168)
Loss allocations from equity method investments (10)
2,283 2,940 
Loss attributable to non-controlling interest (11)
1,160 778 
Adjusted net income before income tax effect52,896 40,468 
Income tax effect (15)
(13,489)(10,319)
Adjusted net income$39,407 $30,149 
Basic number of weighted average shares outstanding54,884,074 54,143,259 
Effect of dilutive shares:
Convertible Notes10,811,884 11,470,645 
Non-vested RSUs and PSUs473,738 463,719 
Options to purchase common stock27,254 88,323 
Diluted number of weighted average shares outstanding66,196,950 66,165,946 
Adjusted net income per diluted share$0.60 $0.46 

The following table sets forth a reconciliation of net cash provided by (used in) operating activities to free cash flow:

Three Months Ended
March 31,
20242023
(in thousands)
Net cash provided by (used in) operating activities$1,944 $(33,673)
Less: Purchases of property and equipment(1,900)(4,402)
Less: Capitalization of internally developed software(19,953)(23,664)
Free cash flow$(19,909)$(61,739)


Table of Contents

The following tables set forth the reconciliation income (loss) from operations to adjusted EBITDA for each segment for the three months ended March 31, 2024 and 2023:


 Three Months Ended March 31, 2024
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
 (in thousands)
Income (loss) from operations$38,930 $(5,739)$(24,483)$8,708 
Add (deduct):
Depreciation and amortization26,818 7,074 — 33,892 
Non-cash compensation expense (4)
11,387 1,864 5,647 18,898 
Restructuring charges and transaction costs (5)
43 679 1,334 2,056 
Severance expense (6)
1,804 13 1,608 3,425 
Litigation, regulatory and other governance related expenses (7)
— 2,288 — 2,288 
Non-income tax expense adjustment (9)
(49)— — (49)
Loss attributable to non-controlling interest (11)
1,160 — — 1,160 
Adjusted EBITDA$80,093 $6,179 $(15,894)$70,378 

 Three months ended March 31, 2023
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
 (in thousands)
Income (loss) from operations$22,598 $(6,915)$(26,740)$(11,057)
Add:
Deferred revenue fair value adjustment (1)
52 — — 52 
Depreciation and amortization25,492 6,028 — 31,520 
Non-cash compensation expense (4)
11,467 2,437 5,549 19,453 
Restructuring charges and transaction costs (5)
1,139 243 2,781 4,163 
Severance expense (6)
3,799 2,205 184 6,188 
Litigation, regulatory and other governance related expenses (7)
— 1,324 1,750 3,074 
Non-income tax expense adjustment (9)
(102)(66)— (168)
Loss attributable to non-controlling interest (11)
778 — — 778 
Adjusted EBITDA$65,223 $5,256 $(16,476)$54,003 


Table of Contents

Footnotes to GAAP to Non-GAAP Reconciliations

(1)Deferred revenue fair value adjustment represents the effect of purchase accounting on the fair value of acquired deferred revenue in accordance with ASC 606.
(2)For the three months ended March 31, 20232024 and 2022,2023, the effective tax rate computed in accordance with GAAP equaled (125.2)%73.6% and (15.9)(125.2)%, respectively.
(2)(3)An estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income for both the three months ended March 31, 2023 and 2022.

Note on income taxes: As of December 31, 2022,2023, we had net operating loss carryforwards, before any uncertain tax position reserves, of approximately $69.0$64 million and $221.0$225 million for federal and state income tax purposes, respectively, available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we pay for federal, state and foreign income taxes differs significantly from both the amount calculated in accordance with GAAP using the effective income tax rate computedand from the income tax effect amount calculated using the normalized effective tax rate.
(4)Non-cash compensation expense represents expense related to stock-based awards made to employees and directors. We exclude stock-based compensation because the Company does not view it as reflective of our core operating performance as it is a non-cash expense.
(5)Restructuring charges and transaction costs represent third-party costs incurred related to significant, distinct enterprise-wide strategic initiatives such as the closure of certain offices in the United States, acquisition and transaction related expenditures and system integration costs related to implementation of a new Enterprise Resource Planning System. These third-party costs are infrequent and outside the ordinary course of our continuing operations. We exclude these costs to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.
(6)Severance expense represents severance and related costs associated with certain strategic initiatives that have reshaped our workforce such as an organizational realignment in the fourth quarter of 2022, post-acquisition integration activity and a reduction in force initiative in 2023. These are not reflective of future ongoing operations and affect comparability of the Company’s operational results across reporting periods.
(7)Litigation, regulatory and other governance related expenses represent certain third-party non-recurring litigation fees primarily related to litigation matters discussed in Note 19—Commitments and Contingencies as well as governance related expenses associated with activist shareholder activity. The litigation costs relate to two matters over a three-year time period and are not reoccurring expenditures.
(8)Foreign currency represents gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts. These adjustments can vary significantly from period to period and are not indicative of our core operating performance.
(9)Non-income tax expense adjustments relate to the remediation of historical sales and use tax issues and are not indicative of our core operating performance.
(10)Loss allocations from equity method investments represents gains and losses from our various equity method investments. These investments are not part of our core business and the ventures associated with these investments generally are start-up or early-stage businesses where we have limited influence over their operational and financial policies. The results of operations for each of these investments can vary significantly from period to period and do not represent the Company’s ongoing operations.
(11)Loss attributable to non-controlling interest represents the loss attributable to the Company’s minority economic interest in a private company excluding the impact of non-cash or non-recurring items included within other line items. Although the Company consolidates its minority interest in a private company as a result of its ability to control this private company interest through majority representation on the board, the Company has excluded loss attributable to non-controlling interest as it owns a minority economic interest in the private company. This private company is a start-up business and the results of its operations vary significantly from period to period and are not representative of the Company’s financial performance.
(12)Non-cash interest expense represents third-party costs incurred in securing debt and are amortized over the term of the debt. We exclude non-cash interest expense because the Company does not view this expense as reflective of our core operating performance as it is a non-cash expense.
(13)For purposes of computing adjusted net income and adjusted net income per share, the Company always assumes the convertible notes to be fully converted for all periods presented. Therefore, cash interest for convertible notes is added to adjusted net income in accordance with GAAP, and from the normalized rate shown above.

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(14)
Amortization of acquired intangibles represents non-cash amortization expense from intangible assets acquired through acquisitions. The fair value of these acquired intangible assets are estimates and the Company does not view it as reflective of our core operating performance as it is a non-cash expense.
The following tables set forth(15)Income tax effect represents the reconciliationtax effect of revenue to adjusted revenueNon-GAAP adjustments as described above and income (loss) from operations to adjusted EBITDA based on our historical resultsis calculated using an estimated normalized tax rate of 25.5% for each segment forboth the three months ended March 31, 20232024 and 2022:

 Three Months Ended March 31, 2023
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
 (in thousands)
Revenue$256,660 $42,047 $— $298,707 
Deferred revenue fair value adjustment52 — — 52 
Adjusted revenue$256,712 $42,047 $— $298,759 
Income (loss) from operations$23,463 $(7,780)$(26,740)$(11,057)
Add:
Deferred revenue fair value adjustment52 — — 52 
Depreciation and amortization24,138 8,803 — 32,941 
Non-cash compensation expense11,242 2,662 5,549 19,453 
Restructuring charges and transaction costs1,138 244 2,781 4,163 
Severance3,576 2,428 184 6,188 
Litigation, regulatory and other governance related expenses— 1,324 1,750 3,074 
Non-income tax expense adjustment(102)(66)— (168)
Loss attributable to non-controlling interest778 — — 778 
Adjusted EBITDA$64,285 $7,615 $(16,476)$55,424 

 Three Months Ended March 31, 2022
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
 (in thousands)
Revenue$273,568 $47,795 $— $321,363 
Deferred revenue fair value adjustment54 — — 54 
Adjusted revenue$273,622 $47,795 $— $321,417 
Income (loss) from operations$25,269 $(5,587)$(26,403)$(6,721)
Add (deduct):
Deferred revenue fair value adjustment54 — — 54 
Depreciation and amortization23,487 8,131 — 31,618 
Non-cash compensation expense11,290 3,535 6,989 21,814 
Restructuring charges and transaction costs284 (3)2,065 2,346 
Severance1,410 1,642 54 3,106 
Litigation, regulatory and other governance related expenses— 3,077 — 3,077 
Non-income tax expense adjustment107 (83)— 24 
Loss attributable to non-controlling interest377 — — 377 
Other— — 
Adjusted EBITDA$62,278 $10,714 $(17,295)$55,697 





2023.
37

Table of Contents


Liquidity and Capital Resources
 
AsOur primary sources of March 31, 2023, we had totalliquidity include cash provided by operating activities, including fluctuations in working capital, and access to external capital. Our working capital is affected by the timing of payments related to fees receivable, investment manager fees, employee compensation, income tax, our annual Advisor Summit and various other items. Historically the first quarter of the year is our lowest quarter of cash provided by operating activities primarily due to the payment of annual bonuses during the first quarter of the year following the year they were incurred and prepayments made during the first quarter of the year associated with our Advisor Summit which is held during the second quarter of the year.

We believe our existing cash and cash equivalents of $52.7 million compared to $162.2 million as of December 31, 2022. We plan to use existing cash as of March 31, 2023,and cash generated in the ongoing operations of our business and amounts under our Revolving Credit Facilitywill be sufficient to fund our current operations, including capital expendituresexpenditure needs and possible acquisitions or other strategic activity, and to meet our debt service obligations.obligations, over the next twelve months and beyond. If the cash generated in the ongoing operations of our business is insufficient to fund these requirements, we may be required to borrow under our Revolving Credit Facility or incur additional debt to fund our ongoing operations or to fund potential acquisitions or other strategic activities.

We will continue to actively manage our cash balances by making decisions regarding the amounts, timing and manner in which cash is generated and used in order to ensure we are able to meet our cash, capital and liquidity requirements and maintain operations for both the short and long term.

As of March 31, 2023,2024, we had total cash and cash equivalents of $61.2 million, no amounts outstanding under the Revolving Credit Facility and $500.0 million available to borrow under our revolving credit facility.the Revolving Credit Facility, subject to covenant compliance.

Cash Flows
 
The following table presents a summary of our cash flows:
 Three Months Ended
 March 31,
 20232022
 (in thousands)
Net cash (used in) provided by operating activities$(33,521)$3,261 
Net cash used in investing activities(58,756)(46,067)
Net cash used in financing activities(20,812)(26,232)
Effect of exchange rate on changes on cash3,580 (627)
Net decrease in cash, cash equivalents and restricted cash$(109,509)$(69,665)

 Three Months Ended
 March 31,
 20242023
 (in thousands)
Net cash provided by (used in) operating activities$1,944 $(33,673)
Net cash used in investing activities(24,658)(58,756)
Net cash provided by (used in) financing activities3,637 (20,660)
Effect of exchange rate on changes on cash(2)3,580 
Net change in cash and cash equivalents due to cash reclassified to assets held for deconsolidation(11,073)— 
Net change in cash and cash equivalents$(30,152)$(109,509)
 
Operating Activities
 
Net cash used inprovided by operating activities increased $36.8$35.6 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to an increase of $40.1 million in cash provided by our business operations, partially offset by a decrease of $4.5 million in cash provided due to timing of payments within our working capital items.accounts. Our working capital is affected by the timing of payments related to several items, including but not limited to, employee incentives, income tax payments and cash collections from our clients. For the three months ended March 31, 2024 compared to the three months ended March 31, 2023, the decrease of $4.5 million in cash provided within our working capital accounts is primarily related to timing of cash collections from our clients and cash payment timing differences within accounts payable and accrued expenses and prepaid expenses and other assets.

Investing Activities
 
Net cash used in investing activities increased $12.7decreased $34.1 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to thea decrease in cash disbursementused related to thean issuance of a loan receivable to a private company of $20.0 million, during the three months ended March 31, 2023. Also contributinga decrease in cash used to this increase was an additional $2.0acquire proprietary technology of $10.0 million, a decrease in capitalization of internally developed software costs capitalized during the three months ended March 31, 2023 as compared to the same period in 2022. These increases were partially offset by decreasesof $3.7 million and a decrease in cash disbursementsused to purchase property and equipment of $5.0 million for proprietary technology assets and $2.1 million in investments in private companies for the three months ended March 31, 2023 compare to the same period in the prior year.$2.5 million.
 



Financing Activities
 
Net cash used inprovided by financing activities decreased $5.4increased $24.3 million for the three months ended March 31, 20232024 compared to the three months ended March 31, 20222023 primarily due to decreasescash proceeds from capital contributions received by non-controlling interest of $12.0 million, a decrease in finance lease paymentscash used for share repurchases of $12.3 million, decreases in payments related to our Revolving Credit Facility of $1.9$9.8 million and a decrease of taxes paid on the vesting of restricted shares of $1.8 million for the three months ended March 31, 2023 compared to the same period in the prior year. These decreases were partially offset by increases in cash paid related to tax withholdings for share repurchasesstock-based compensation of $9.3 million and increases in cash paid to purchase non-controlling units from third-party shareholders of $1.0 million for the three months ended March 31, 2023 compared to the same period in the prior year.$2.3 million.


38

Table of Contents

Commitments and Off-Balance Sheet Arrangements
 
Purchase Obligations and Indemnifications
 
See “Part I, Item 1, Note 19—Commitments and Contingencies, Purchase Obligations and Indemnifications.”

Acquisition of Redi2 Technologies

See “Part I, Item 1, Note 3— Acquisitions”19—Commitments and Contingencies” for details related to this transaction.

Legal Proceedings
 
See “Part I, Item 1, Note 19—Commitments and Contingencies, Legal Proceedings” for legal proceedings details. 

Critical Accounting Policies and Estimates
 
The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. See "Note 2—Summary of Significant Accounting Policies" to the consolidated financial statements in our 2022 Form 10-K describes theAnnual Report for significant accounting policies and methods used in the preparation of the consolidated financial statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our 2022 Form 10-KAnnual Report include, but are not limited to, the discussion of estimates used for recognition of revenue, impairment of goodwill and acquired intangible assets and income taxes. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the condensed consolidated financial statements, and actual results could differ materially from the amounts reported.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
There have been no material changes to our market, foreign currency or interest rate risks as discussed in Part II, Item 7A of our 2022 Form 10-K.Annual Report.

Item 4. Controls and Procedures
 
Disclosure Controls and Procedures
 
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023.2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, meansare controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
 
Based on theirthis evaluation of our disclosure controls and procedures as of March 31, 2023,2024, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective.
 



Changes in Internal Control Over Financial Reporting
 
There were no changes to our internal control over financial reporting during the three months ended March 31, 2023,2024, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 

39

Table of Contents

PART II — OTHER INFORMATION

Item 1. Legal Proceedings
 
The information in Part I, Note 19—Commitments and Contingencies, Legal Proceedings is incorporated herein by reference.

Item 1A. Risk Factors
 
Investment in our securities involves risk. An investor or potential investor should consider the risks summarized below and under the caption “Risk Factors” in Part I, Item 1A of our 2022 Form 10-KAnnual Report when making investment decisions regarding our securities. The risk factors that were disclosed in our 2022 Form 10-KAnnual Report have not materially changed since the date our 2022 Form 10-Kthe Annual Report was filed.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
(c)Issuer Purchases of Equity Securities
 
On February 25,In 2016, wethe Company announced that our Board had authorized a share repurchase program under which wethe Company may repurchase up to 2.0 million shares of ourits common stock. There were no purchases of equity securities made under the share repurchase program in the three months ended March 31, 2023. As of March 31, 2023, there were 0.3 million shares that may yet be repurchased under the program.

The timing and volume of share repurchases will be determined by ourthe Company's management based on its ongoing assessments of the capital needs of the business, the market price of our common stock and general market conditions. No time limit has been set for the completion of the repurchase program, and the program may be suspended or discontinued at any time. The repurchase program authorizes the Company to purchase its common stock from time to time in the open market (including pursuant to a “Rule 10b5-1 plan”), in block transactions, in privately negotiated transactions, through accelerated stock repurchase programs, through option or other forward transactions or otherwise, all in compliance with applicable laws and other restrictions.

There were no purchases of equity securities made under the share repurchase program during the three months ended March 31, 2024. As of March 31, 2024, 0.3 million shares are still available to be purchased under this program.

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.
40


INDEX TO EXHIBITS
Exhibit
No.
Description
10.1
10.2
10.3
10.4
31.1
31.2
32.1(1)
32.2(1)
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document **
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document **
101.LABInline XBRL Taxonomy Extension Label Linkbase Document **
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document **
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document **
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
 


* Exhibits omitted pursuant to Item 601(a)(5) of Regulation S-K. Envestnet, Inc. agrees to furnish supplementally a copy of any omitted exhibit to(1) The material contained in Exhibit 32.1 and 32.2 is not deemed “filed” with the SEC upon request; provided, however, that Envestnet, Inc. may request confidential treatment pursuantand is not to Rule 24b-2be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, forwhether made before or after the date hereof and irrespective of any schedulesgeneral incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.
* Management contract or exhibits so furnished.compensation plan.
** The following materials are formatted in Inline XBRL (Extensible Business Reporting Language): (i) the cover page; (ii) the Condensed Consolidated Balance Sheets as of March 31, 20232024 and December 31, 2022;2023; (iii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 20232024 and 2022;2023; (iv) the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 20232024 and 2022;2023; (v) the Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 20232024 and 2022;2023; (vi) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 20232024 and 2022;2023; (vii) Notes to Condensed Consolidated Financial Statements tagged as blocks of text.



41

GLOSSARY OF TERMS
The following abbreviations or acronyms used in this Form 10-QQuarterly Report are defined below:

Abbreviations or AcronymsDefinition
2010 Plan2010 Long-Term Incentive Plan
2019 Equity Plan2019 Acquisition Equity Incentive Plan
2022 Form 10-KAETRAnnual effective tax rate
Annual ReportForm 10-K for the year ended December 31, 2022
AETRAnnual effective tax rate.2023
ASCAccounting Standards Codification™
ASC 310 - ReceivablesAccounting Standards Codification Topic 310, Receivables
ASC 606Accounting Standards Codification Topic 606, Revenue from Contracts with
Customers
ASC 740-270Accounting Standards Codification Topic 740, Income Taxes—Interim Reporting
ASC 842Accounting Standards Codification Topic 842, Leases
ASUAccounting Standards Update
ASU 2021-08ASU Business Combinations (Topic 805): Accounting for Contract Assets and Contract
BoardBoard of Directors
CompanyEnvestnet, Inc. and its subsidiaries
Convertible Notes due 2023$345.045.0 million of remaining aggregate principal amount of convertible notes issued in May 2018 with an interest rate of 1.75% per year that maturematured and were settled on June 1, 20232023.
Convertible Notes due 2025$517.5317.5 million of remaining aggregate principal amount of convertible notes issued in August 2020 with an interest rate of 0.75% per year that mature on August 15, 20252025.
Convertible Notes due 2027$575.0 million aggregate principal amount of convertible notes issued in November 2022 with an interest rate of 2.625% per year that mature on December 1, 20272027.
Convertible Promissory NoteEnvestnet$20.0 million convertible promissory note issued in January 2023 with a customer of the Company's business, a privately held companyEnvestnet, Inc.
ETREffective tax rate
Exchange ActSecurities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FinancialAppsFinancialApps, LLC
FinTechFinancial Technology
GAAPUnited States Generally Accepted Accounting Principles
IRC Section 174Internal Revenue Code of 1986, Section 174: Amortization of Research and Experimental Expenditures
Convertible NotesCollectively the Convertible Notes due 2023, Convertible Notes due 2025 and Convertible Notes due 2027
PSUPerformance-based restricted stock unit
Quarterly ReportForm 10-Q for the quarter ended March 31, 20232024
R&DResearch and Development.
Redi2Redi2 Technologies Inc.
Redi2 acquisitionStock purchase agreement between Envestnet and Redi2 Technologies, dated as of June 24, 2022
Revolving Credit FacilityRevolving credit facility of $500.0 million pursuant to the Third Amended and Restated Credit Agreement
RIAsRegistered investment advisors
RSURestricted stock unit
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate
TCSTata Consultancy Services
Third Credit AgreementTruelyticsThird Amended and Restated Credit AgreementTruelytics, Inc.
U.S.United States
WaiverWaiver with respect to the Revolving Credit Facility
YodleeYodlee, Inc.
42

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 May 5, 2023.authorized.
 
 ENVESTNET, INC.
   
Date: May 8, 2024By:/s/ William C. CragerJames L. Fox
  William C. CragerJames L. Fox
  Interim Chief Executive Officer
  Principal Executive Officer
   
Date: May 8, 2024By:/s/ Peter H. D’ArrigoJoshua B. Warren
  Peter H. D’ArrigoJoshua B. Warren
  Chief Financial Officer
  Principal Financial Officer
   
Date: May 8, 2024By:/s/ Matthew J. Majoros
  Matthew J. Majoros
  Senior Vice President, Financial Reporting
  Principal Accounting Officer
43