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

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

1000 Chesterbrook Boulevard, Suite 250, Berwyn, Pennsylvania

19312

(Address of principal executive offices)

(Zip Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of exchange on which registered
Common Stock, par value $0.005 per share	ENV	New 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 filer

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 ~~54,404,069~~55,109,097 shares of common stock outstanding.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share information)

Accumulated
Additional Other Non-
Common Stock Treasury Stock Paid-in Comprehensive Accumulated Controlling Total
Shares Amount Shares Amount Capital Loss Deficit Interest Equity
Balance, December 31, 2021 68,879,152 $ 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 PSUs 514,319 3 — — — — — — 3
Net cash paid related to tax withholding for stock-based compensation — — (170,992) (12,570) — — — — (12,570)
Proceeds from the exercise of stock options 38,681 — — — 658 — — — 658
Other — — — — (84) — — 102 18
Balance, March 31, 2022 69,432,152 $ 347 (14,257,056) $ (147,566) $ 1,153,892 $ (3,377) $ (51,847) $ 1,706 $ 953,155


									Accumulated
							Additional		Other				Non-
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Accumulated		Controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, December 31, 2022	70,025,733	$	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 PSUs	524,316	2		—	—		—		—		—		—		2
Net cash paid related to tax withholding for stock-based compensation	—	—		(173,612)	(10,732)		—		—		—		—		(10,732)
Proceeds from the exercise of stock options	37,454	—		—	—		367		—		—		—		367
Purchase of non-controlling units from third-party shareholders	—	—		—	—		(984)		—		—		(24)		(1,008)
Other	—	—		—	—		—		—		—		(22)		(22)
Balance, March 31, 2023	70,587,503	$	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.

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


		Three Months Ended						Three Months Ended
		March 31,						March 31,
		2024					2024		2023
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,
			2023		2022
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 amortization			32,941		31,618
Provision for doubtful accounts			571		(1,747)
Deferred income taxes			5,221		(18,955)
Non-cash compensation expense			19,453		21,814
Non-cash interest expense			4,498		2,599
Loss allocations from equity method investments			2,940		1,545
Other

Other

Other	Other		(103)		(59)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:
Fees receivable, net
Fees receivable, net
Fees receivable, net	Fees receivable, net		(21,579)		8,661
Prepaid expenses and other assets	Prepaid expenses and other assets		(9,858)		(9,491)
Accounts payable, accrued expenses and other liabilities	Accounts payable, accrued expenses and other liabilities		(32,917)		(29,113)
Deferred revenue	Deferred revenue		8,073		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 equipment	Purchases of property and equipment		(4,402)		(3,896)
Purchases of property and equipment
Purchases of property and equipment
Capitalization of internally developed software	Capitalization of internally developed software		(23,664)		(21,671)

Investments in private companies
Investments in private companies
Investments in private companies
Acquisition of proprietary technology	Acquisition of proprietary technology		(10,000)		(15,000)
Investments in private companies			(950)		(3,000)
Issuance of loan receivable to private company	Issuance of loan receivable to private company		(20,000)		—

Other	Other		260		(2,500)
Other
Other
Net cash used in investing activities	Net 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 options	Proceeds from exercise of stock options		367		658
Payments related to tax withholdings for stock-based compensation	Payments 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 repurchases	Payments related to share repurchases		(9,289)		—
Proceeds from capital contributions received by non-controlling interest
Purchase of non-controlling units from third-party shareholders	Purchase of non-controlling units from third-party shareholders		(1,008)		—

Other	Other		2		3
Net cash used in financing activities			(20,812)		(26,232)
Effect of exchange rate on changes on cash, cash equivalents and restricted cash			3,580		(627)
Net change in cash, cash equivalents and restricted cash			(109,509)		(69,665)
Cash, cash equivalents and restricted cash, beginning of period			162,173		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 information	Supplemental disclosures of cash flow information
Net cash paid for income taxes
Net cash paid for income taxes
Net cash paid for income taxes	Net cash paid for income taxes		$	1,110	$	716
Cash paid for interest	Cash paid for interest		$	1,822	$	2,254
Supplemental disclosure of non-cash activities	Supplemental disclosure of non-cash activities
Conversion of equity method investee loan to shares	Conversion 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, net	Right-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 liabilities	Purchase 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.

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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 been~~is a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness ecosystem so that ~~our~~its clients can ~~deliver an intelligent financial life to~~better 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, ~~2023~~2024 and for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023 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 ~~our~~the Company's audited consolidated financial statements for the year ended December 31, ~~2022~~2023 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, ~~2023~~2024 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, ~~2023~~2024 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

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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 and~~amounts in the condensed consolidated statements of cash flows for the three months ended March 31, ~~2022~~2023 have been reclassified to conform to the current ~~year~~

~~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 ~~loss~~income (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,
2023 2022
(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, ~~2023~~2024 and ~~2022,~~2023, respectively. As of March 31, ~~2023~~2024 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.

~~Recent~~Recently 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, ~~including~~and interim periods within fiscal years beginning after December 15, 2024. Early adoption

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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.~~Acquisitions~~Assets and Liabilities Held for Deconsolidation

~~Acquisition~~As of ~~Redi2 Technologies~~

~~On July 1, 2022, Envestnet completed~~March 31, 2024, the ~~acquisition~~Company 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 ~~all~~accounting 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 connection~~During 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 consideration~~private 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 Estimate Measurement Period Adjustments Revised 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 recognized~~Assets and liabilities held for deconsolidation consisted of the following:


	March 31,
	2024

	(in thousands)
Cash and cash equivalents	$	11,073
Fees receivable, net	2,319
Prepaid expenses and other current assets	513
Internally developed software, net	14,090
Goodwill (1)	26,647
Other assets	374
Total assets held for deconsolidation	$	55,016

Accounts payable, accrued expenses and other current liabilities	$	2,463
Deferred revenue	5,085
Other liabilities	1,450
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 expense~~held for deconsolidation.

Effective April 1, 2024, the Company no longer had a controlling financial interest in the ~~condensed consolidated statements~~private company which will result in the derecognition of ~~operations. The performance bonuses recognized~~the 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 summarizes~~June 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 Estimate Measurement Period Adjustments Revised Estimate
(in thousands)
Total current assets $ 1,985 $ — $ 1,985
Other non-current assets 3,349 (28) 3,321
Identifiable intangible assets 26,500 — 26,500
Goodwill 44,236 2,231 46,467
Total assets acquired 76,070 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 related~~criteria to ~~the enhancement of the Company's existing technologies and increase in future revenue~~be 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 Estimate Estimated Useful Life Amortization Method
(in thousands) (in years)
Customer lists $ 14,000 14 - 16 Accelerated
Proprietary technologies 9,500 6 Straight-line
Trade names 3,000 6 - 7 Straight-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 ~~believes~~will apply the ~~preliminary information provides a reasonable basis~~equity 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.

~~Table of Contents~~

~~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,
2023 2022
(in thousands)
Prepaid technology $ 20,657 $ 16,649
Elevate Summit prepayments and deposits 6,447 528
Non-income tax receivable 5,484 5,488
Prepaid insurance 2,817 2,881
Income tax prepayments and receivables — 2,515
Other 11,986 13,302
Total prepaid expenses and other current assets $ 47,391 $ 41,363


	March 31,		December 31,
	2024		2023

	(in thousands)
Prepaid technology	$	17,275	$	14,630
Income tax prepayments and receivables	8,441		9,625
Prepaid data servers	7,147		7,991
Elevate Summit prepayments and deposits	3,932		773
Non-income tax receivable	3,507		4,041
Prepaid insurance	1,113		2,785
Other	11,915		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, ~~net~~Net

Internally developed software, net consisted of the following:

March 31, December 31,
Estimated Useful Life 2023 2022
(in thousands)
Internally developed software 5 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 Life	2024		2023

		(in thousands)
Internally developed software	5 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,
2023 2022
(in thousands)
United States $ 258,263 $ 245,817
India 2,705 1,093
Other 50 91
Total long-lived assets, net $ 261,018 $ 247,001


	March 31,		December 31,
	2024		2023

	(in thousands)
United States	$	259,085	$	270,381
India	2,278		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, 2024						December 31, 2023
			Gross				Net		Gross				Net
			Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
			Amount		Amortization		Amount		Amount		Amortization		Amount

			(in thousands)
Customer lists			$	595,400	$	(328,293)	$	267,107	$	604,080	$	(327,042)	$	277,038
Proprietary technologies			90,058		(38,476)		51,582		93,058		(37,052)		56,006
Trade names			11,000		(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.

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

7.~~Intangible Assets, Net~~

~~Intangible assets, net consisted of the following:~~

March 31, 2023 December 31, 2022
Gross Net Gross Net
Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount
(in thousands)
Customer lists $ 604,080 $ (295,976) $ 308,104 $ 604,080 $ (285,288) $ 318,792
Proprietary technologies 109,057 (46,894) 62,163 113,224 (59,401) 53,823
Trade names 15,700 (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.

~~Future~~future amortization expense of the Company's intangible assets as of March 31, ~~2023, is expected to be~~2024 was as follows (in thousands):

Remainder of 2023 $ 45,947
2024 56,040
2025 52,700
2026 44,797
2027 36,232
Thereafter 141,339
Total $ 377,055



Remainder of 2024	$	42,626
2025	53,973
2026	46,448
2027	37,672
2028	30,296
Thereafter	112,311
Total	$	323,326

8.Depreciation and Amortization Expense

Depreciation and amortization expense consisted of the following:

Three Months Ended
March 31,
2023 2022
(in thousands)
Intangible asset amortization $ 16,940 $ 17,520
Internally developed software amortization 11,090 8,494
Property and equipment depreciation 4,911 5,604
Total depreciation and amortization $ 32,941 $ 31,618


	Three Months Ended
	March 31,
		2024		2023

		(in thousands)
Intangible asset amortization		$	14,742	$	16,940
Internally developed software amortization		15,868		11,090
Property and equipment depreciation		3,282		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 Solutions Envestnet Data & Analytics Total
(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 Solutions		Envestnet Data & Analytics		Total

	(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.

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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 as~~condensed 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 ~~for~~during 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,
2023 2022
(in thousands)
Accrued investment manager fees $ 98,419 $ 99,851
Accrued compensation and related taxes 42,120 77,939
Accrued professional services 14,188 10,762
Accounts payable 9,605 11,271
Income tax payable 9,459 260
Accrued capital expenditures 6,359 4,783
Accrued interest 6,147 3,091
Accrued technology 5,179 6,393
Accrued treasury stock purchases — 9,289
Other accrued expenses 4,507 10,227
Total accounts payable, accrued expenses and other current liabilities $ 195,983 $ 233,866


	March 31,		December 31,
	2024		2023

	(in thousands)
Accrued investment manager fees	$	116,092	$	106,612
Accrued compensation and related taxes	36,603		72,466
Accounts payable	22,765		35,738
Accrued professional services	10,482		14,289
Accrued interest	5,648		2,473
Accrued technology	4,349		4,151





Other accrued expenses	5,187		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 Solutions		Envestnet Data & Analytics		Nonsegment		Total

	(in thousands)
Balance as of December 31, 2023	$	9,793	$	486	$	—	$	10,279
Severance expense	1,804		13		1,608		3,425
Cash payments	(4,442)		(499)		(1,608)		(6,549)

Balance as of March 31, 2024	$	7,155	$	—	$	—	$	7,155

Table of Contents

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, ~~2023~~2024 and December 31, ~~2022:~~2023:


		March 31, 2023									March 31, 2024
		Issuance Amount			Unamortized Issuance Costs		Carrying Value		Fair Value (Level II)		Issuance Amount	Unamortized Issuance Costs	Carrying Value	Fair Value (Level II)

				(in thousands)
				(in thousands)
				(in thousands)
		(in thousands)

Third Credit Agreement		$	—		$	—	$	—	$	—
Convertible Notes due 2023		45,000			(46)		44,954		44,168
Revolving Credit Facility
Revolving Credit Facility
Revolving Credit Facility
Convertible Notes due 2025	Convertible Notes due 2025	317,500			(4,318)		313,182		284,220
Convertible Notes due 2027	Convertible Notes due 2027	575,000			(15,214)		559,786		598,270
Total debt	Total debt	$	937,500		$	(19,578)	$	917,922	$	926,658


		December 31, 2022									December 31, 2023
		Issuance Amount			Unamortized Issuance Costs		Carrying Value		Fair Value (Level II)		Issuance Amount	Unamortized Issuance Costs	Carrying Value	Fair Value (Level II)

				(in thousands)
				(in thousands)
				(in thousands)
		(in thousands)

Third Credit Agreement		$	—		$	—	$	—	$	—
Convertible Notes due 2023		45,000			(114)		44,886		46,058
Revolving Credit Facility
Revolving Credit Facility
Revolving Credit Facility
Convertible Notes due 2025	Convertible Notes due 2025	317,500			(4,765)		312,735		293,688
Convertible Notes due 2027	Convertible Notes due 2027	575,000			(15,966)		559,034		606,119
Total debt	Total debt	$	937,500		$	(20,845)	$	916,655	$	945,865

Revolving Credit ~~Agreement~~Facility

The ~~Third~~Revolving Credit ~~Agreement~~Facility 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 financial~~all 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 was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:

Three Months Ended
March 31,
2023 2022
(in thousands)
Coupon interest $ 4,565 $ 2,480
Amortization of debt discount and issuance costs 1,442 2,060
Undrawn and other fees 313 313
Total interest expense $ 6,320 $ 4,853

~~Table of Contents~~

~~Envestnet, Inc.~~


	Three Months Ended
	March 31,
		2024		2023

		(in thousands)
Convertible Notes interest		$	4,369	$	4,565
Amortization of debt discount and issuance costs		1,405		1,442
Undrawn and other fees		315		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,
2023 2022
Convertible Notes due 2023 2.4 % 2.4 %
Convertible Notes due 2025 1.3 % 1.3 %
Convertible Notes due 2027 3.2 % N/A


	Three Months Ended
	March 31,
	2024		2023

Convertible Notes due 2023	N/A		2.4	%
Convertible Notes due 2025	1.3	%	1.3	%
Convertible Notes due 2027	3.2	%	3.2	%

13.Fair Value Measurements

The following tables set forth the ~~fair value of the Company’s~~Company'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 Value Level I Level II Level III
(in thousands)
Assets:
Money market funds $ 2,118 $ 2,118 $ — $ —
Assets to fund deferred compensation liability 10,380 — — 10,380
Total assets $ 12,498 $ 2,118 $ — $ 10,380
Liabilities:
Deferred compensation liability 8,667 8,667 — —
Total liabilities $ 8,667 $ 8,667 $ — $ —
Report:


	December 31, 2023
	Fair Value		Level I		Level II		Level III

	(in thousands)
Assets:
Money market funds	$	51,653	$	51,653	$	—	$	—
Assets to fund deferred compensation liability	10,961		—		—		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 ~~caused~~cause 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.

~~Table of Contents~~

~~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, ~~2022~~2023	$	~~10,074~~10,961

Fair value adjustments and fees	~~306~~412
Balance as of March 31, ~~2023~~2024	$	~~10,380~~11,373

The fair market value of the assets used to fund the Company's deferred compensation liability is ~~based upon~~measured using the cash surrender value of the Company's life insurance ~~premiums.~~ premiums and is included i~~The value of the assets used to fund the Company's deferred compensation liability, which are included in~~n other assets in the condensed consolidated balance ~~sheets, increased due to net gains on the underlying investment vehicles. These gains~~sheets. Changes in fair value, if any, are recognized in the Company's earnings and included in general and administrative ~~expenses~~expense 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, ~~2023~~2024 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, ~~2023~~2024 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, ~~2023~~2024 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:

~~Table of Contents~~

~~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,
2023 2022
(in thousands)
United States $ 293,214 $ 316,729
International 5,493 4,634
Total revenue $ 298,707 $ 321,363


	Three Months Ended
	March 31,
		2024		2023

		(in thousands)
United States		$	319,571	$	293,214
International		5,379		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 expect~~The 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.

Total deferred revenue as of March 31, ~~2023 increased~~2024 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, ~~2023~~2024 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

Table of Contents

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, ~~2023~~2024 and ~~2022.~~2023.

The following table summarizes direct expense by revenue category:

Three Months Ended
March 31,
2023 2022
(in thousands)
Asset-based $ 102,623 $ 117,428
Subscription-based 6,362 7,811
Professional services and other 4 43
Total direct expense $ 108,989 $ 125,282


	Three Months Ended
	March 31,
		2024		2023

		(in thousands)
Asset-based		$	118,403	$	102,623
Subscription-based		8,230		7,052
Professional services and other		—		4
Total direct expense		$	126,633	$	109,679

~~Table of Contents~~

~~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,
2023 2022
(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,
		2024		2023

		(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, ~~2023~~2024 and ~~2022.~~2023.

The following table summarizes option activity under the Company’s plans:

Weighted-Average
Weighted- Remaining
Average Contractual Life Aggregate
Options Exercise Price (Years) Intrinsic Value
(in thousands)
Outstanding as of December 31, 2022 277,535 $ 40.07 2.2 $ 6,005
Exercised (37,454) $ 15.34
Outstanding as of March 31, 2023 240,081 $ 43.93 2.2 $ 3,542
Options exercisable as of March 31, 2023 239,849 $ 43.90 2.2 $ 3,542


		Weighted-		Weighted-Average
		Average		Remaining	Aggregate
	Options	Exercise Price		Contractual Life	Intrinsic Value

				(in years)	(in thousands)
Outstanding as of December 31, 2023	202,166	$	45.22

Exercised	(20,033)	$	40.71
Forfeited	(186)	$	71.21
Outstanding and exercisable as of March 31, 2024	181,947	$	45.69	1.3	$	2,224

As of March 31, ~~2023,~~2024, there was ~~an immaterial~~no 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.

Table of Contents

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:

RSUs PSUs
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, 2022 1,681,976 $ 72.69 259,049 $ 74.83
Granted 1,089,706 $ 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, 2023 2,203,963 $ 67.35 227,353 $ 73.19


	RSUs			PSUs
	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, 2023	1,449,253	$	65.78	223,058	$	72.92
Granted	1,313,955	$	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, 2024	2,197,706	$	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 ~~1.4~~2.1 years.

~~Table of Contents~~

~~Envestnet, Inc.~~

~~Notes to Unaudited Condensed Consolidated Financial Statements (continued)~~

The following table includes the Company’s ~~loss~~income (loss) before income tax provision, income tax provision and effective tax rate:

Three Months Ended
March 31,
2023 2022
(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,
		2024			2023

		(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 rate		73.6		%	(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’s~~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, 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,
2023 2022
(in thousands)
Options to purchase common stock 240,081 326,300
Non-vested RSUs and PSUs 2,431,316 2,641,362
Convertible Notes 11,470,645 9,898,549
Warrants — 470,000
Total anti-dilutive securities 14,142,042 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,
		2024		2023

		(in thousands, except share and per share data)
Net income (loss) attributable to Envestnet, Inc.		$	2,513	$	(41,228)
Weighted average common shares outstanding:
Basic		54,884,074		54,143,259
Effect of dilutive shares:

Non-vested RSUs and PSUs		473,738		—
Options to purchase common stock		27,254		—

Diluted		55,385,066		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,
		2024	2023

Convertible Notes		10,811,884	11,470,645
Non-vested RSUs and PSUs		830,315	2,431,316
Options to purchase common stock		133,410	240,081

Total anti-dilutive securities		11,775,609	14,142,042

18.Segment Information

~~Business segments are generally~~Envestnet is organized around ~~the Company's~~two 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 ~~services~~solutions to empower financial advisors and institutions to enable them to deliver ~~an intelligent financial life~~holistic advice to their clients.

•Envestnet Data & Analytics – a leading provider of financial data aggregation, ~~intelligence,~~analytics and digital experiences ~~platform that powers data connectivity~~to 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 in~~Company also incurs expenses not directly attributable to the ~~following tables is derived from the Company’s internal financial reporting used for corporate management purposes. Nonsegment~~segments listed above. These nonsegment operating expenses ~~may include salary and benefits~~primarily 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 ~~loss~~income (loss) attributable to Envestnet, Inc.:

Three Months Ended
March 31,
2023 2022
(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 provision 23,769 2,020
Consolidated net loss (42,761) (14,708)
Add: Net loss attributable to non-controlling interest 1,533 849
Consolidated net loss attributable to Envestnet, Inc. $ (41,228) $ (13,859)


	Three Months Ended
	March 31,
		2024		2023

		(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 operations		8,708		(11,057)
Other expense, net		(6,664)		(7,935)
Income (loss) before income tax provision		2,044		(18,992)
Income tax provision		1,505		23,769
Net income (loss)		539		(42,761)
Add: Net loss attributable to non-controlling interest		1,974		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,
		2023		2022		2024	2023

		(in thousands)
		(in thousands)
		(in thousands)
		(in thousands)
Envestnet Wealth Solutions	Envestnet Wealth Solutions	$	1,477,230	$	1,503,646
Envestnet Data & Analytics	Envestnet Data & Analytics	579,227		608,519
Consolidated total assets	Consolidated total assets	$	2,056,457	$	2,112,165

~~Table of Contents~~

~~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)

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’s~~FinancialApps' 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’s~~FinancialApps' 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’s~~FinancialApps' 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 ~~allege~~alleged 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 ~~Court~~court 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 ~~Court~~court 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.

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-K~~Annual 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.

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 been~~is a leader in helping transform wealth management, working towards ~~our~~its goal of expanding a holistic financial wellness ecosystem so that our clients can ~~deliver an intelligent financial life to~~better serve their clients.

~~Approximately 106,000~~Envestnet's clients include more than 109,000 advisors, ~~and approximately 6,900 companies, including 16~~17 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.

~~Macroeconomic Environment~~Leadership 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.

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 Russia~~capital market valuations, including asset flows and ~~Ukraine~~redemption rates, both of which ~~escalated in~~

~~February 2022~~the Company’s control, as well as ~~rising inflation have contributed to significant volatility and decline~~a 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.~~

~~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.

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:

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.

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)
2022 2022 2022 2023
(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/A 793,392 678,049 666,459 708,556 743,087
Subscription 4,736,537 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
AUM 1,459,093 1,491,861 1,522,968 1,547,009 1,571,862
AUA 1,186,180 1,061,484 1,135,302 1,135,026 1,142,166
Total AUM/A 2,645,273 2,553,345 2,658,270 2,682,035 2,714,028
Subscription 15,151,569 15,312,144 15,596,403 15,665,020 15,779,980
Total Platform Accounts 17,796,842 17,865,489 18,254,673 18,347,055 18,494,008
Advisors
AUM/A 39,800 38,394 38,417 38,025 38,611
Subscription 67,168 66,838 67,348 67,520 67,843
Total Advisors 106,968 105,232 105,765 105,545 106,454
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,
	2023		2023		2023		2023		2024

	(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/A	743,087		778,851		773,490		846,847		923,865
Subscription	4,566,971		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
AUM	1,571,862		1,609,677		1,614,873		1,640,879		1,688,044
AUA	1,142,166		1,144,375		1,257,094		1,254,962		1,315,442
Total AUM/A	2,714,028		2,754,052		2,871,967		2,895,841		3,003,486
Subscription	15,779,980		15,916,955		16,072,848		16,248,598		16,641,631
Total Platform Accounts	18,494,008		18,671,007		18,944,815		19,144,439		19,645,117
Advisors
AUM/A	38,611		38,809		38,078		38,697		38,814
Subscription	67,843		68,439		69,318		69,973		70,262
Total Advisors	106,454		107,248		107,396		108,670		109,076

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:

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, ~~2023~~2024 bringing total conversions for the three months ended March 31, ~~2023~~2024 to ~~$65.9~~$60.9 billion.

Asset and account figures in the ~~“Reclass to Subscription”~~“Reclassifications” column for the three months ended March 31, ~~2023~~2024 represent ~~enterprise customers whose~~immaterial 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, with~~arrangements. These reclassifications have no impact on total platform assets or ~~accounts.~~accounts.

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,
2022 2022 2022 2022 2023
(in millions, except number of firms data)
Number of paying users 31.4 37.2 38.1 38.8 37.5
Number of firms 1,649 1,731 1,815 1,827 1,851


	As of
	March 31,	June 30,	September 30,	December 31,	March 31,
	2023	2023	2023	2023	2024

	(in millions, except number of firms data)
Number of paying users	37.5	38.0	42.3	38.3	43.8
Number of firms	1,310	1,339	1,322	1,324	1,323

Operational Highlights


	Three Months Ended
	March 31,
	2024		2023		$ Change		% Change

	(in thousands, except percentages)
Revenue:
Envestnet Wealth Solutions:
Asset-based	$	202,616	$	176,932	$	25,684	15	%
Subscription-based	84,168		80,470		3,698		5	%
Total recurring revenue	286,784		257,402		29,382		11	%
Professional services and other revenue	3,026		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 revenue	33,294		36,609		(3,315)		(9)	%
Professional services and other revenue	1,846		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	9	%

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, $ %
2023 2022 Change Change
(in thousands, except percentages)
Revenue:
Envestnet Wealth Solutions:
Asset-based $ 176,932 $ 202,717 $ (25,785) (13) %
Subscription-based 76,485 68,537 7,948 12 %
Total recurring revenue 253,417 271,254 (17,837) (7) %
Professional services and other revenue 3,243 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 revenue 40,594 46,197 (5,603) (12) %
Professional services and other revenue 1,453 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 adjustment 52 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) %

Results of Operations

Three Months Ended March 31,
2023 2022
Amount % of Revenue Amount % of Revenue $ Change % Change
(in thousands) (in thousands) (in thousands)
Revenue:
Asset-based $ 176,932 59 % $ 202,717 63 % $ (25,785) (13) %
Subscription-based 117,079 39 % 114,734 36 % 2,345 2 %
Total recurring revenue 294,011 98 % 317,451 99 % (23,440) (7) %
Professional services and other revenue 4,696 2 % 3,912 1 % 784 20 %
Total revenue 298,707 100 % 321,363 100 % (22,656) (7) %
Operating expenses:
Direct expense 108,989 36 % 125,282 39 % (16,293) (13) %
Employee compensation 114,215 38 % 126,849 39 % (12,634) (10) %
General and administrative 53,619 18 % 44,335 14 % 9,284 21 %
Depreciation and amortization 32,941 11 % 31,618 10 % 1,323 4 %
Total operating expenses 309,764 104 % 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 provision 23,769 8 % 2,020 1 % 21,749 *
Net loss (42,761) (14) % (14,708) (5) % (28,053) *
Add: Net loss attributable to non-controlling interest 1,533 1 % 849 — % 684 81 %
Net loss attributable to Envestnet, Inc. $ (41,228) (14) % $ (13,859) (4) % $ (27,369) *

Three months ended March 31, ~~2023~~2024 compared to three months ended March 31, ~~2022~~2023


	Three Months Ended March 31,
	2024			2023
		Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change

	(in thousands)			(in thousands)				(in thousands)
Revenue:
Asset-based		$	202,616	62	%	$	176,932	59	%	$	25,684	15	%
Subscription-based		117,462		36	%	117,079		39	%	383		—	%
Total recurring revenue		320,078		99	%	294,011		98	%	26,067		9	%
Professional services and other revenue		4,872		1	%	4,696		2	%	176		4	%
Total revenue		324,950		100	%	298,707		100	%	26,243		9	%
Operating expenses:
Direct expense		126,633		39	%	109,679		37	%	16,954		15	%
Employee compensation		103,652		32	%	114,215		38	%	(10,563)		(9)	%
General and administrative		52,065		16	%	54,350		18	%	(2,285)		(4)	%
Depreciation and amortization		33,892		10	%	31,520		11	%	2,372		8	%
Total operating expenses		316,242		97	%	309,764		104	%	6,478		2	%
Income (loss) from operations		8,708		3	%	(11,057)		(4)	%	19,765		*
Other expense, net		(6,664)		(2)	%	(7,935)		(3)	%	1,271		16	%
Income (loss) before income tax provision		2,044		1	%	(18,992)		(6)	%	21,036		111	%
Income tax provision		1,505		—	%	23,769		8	%	(22,264)		(94)	%
Net income (loss)		539		—	%	(42,761)		(14)	%	43,300		101	%
Add: Net loss attributable to non-controlling interest		1,974		1	%	1,533		1	%	441		29	%
Net income (loss) attributable to Envestnet, Inc.		$	2,513	1	%	$	(41,228)	(14)	%	$	43,741	106	%

Asset-based recurring revenue

Asset-based recurring revenue ~~decreased $25.8~~increased $25.7 million, or ~~13%~~15%, for the three months ended March 31, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 primarily due to ~~a decrease~~an 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 to~~remained 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-based~~asset 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 decrease~~the 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, ~~2023~~2024 compared to the three months ended March 31, ~~2022 primarily~~2023 due to an increase of $~~7.9~~3.7 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 ~~decrease~~loss in ~~revenue~~access 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.

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, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 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 ~~decreased $16.3~~increased $17.0 million, or ~~13%~~15%, for the three months ended March 31, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 primarily due to ~~a decrease~~an increase in asset-based direct expense, which directly correlates with the ~~decrease~~increase 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, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 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 $9.3~~expense decreased $2.3 million, or ~~21%~~4%, for the three months ended March 31, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 primarily due to ~~increases~~a 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 ~~increases~~decreases 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, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 primarily due to ~~increases~~an increase in amortization related to internally developed software of ~~$2.6~~$4.8 million, partially offset by ~~decreases~~a decrease in ~~property and equipment depreciation expense~~amortization related to intangible assets of ~~$1.4~~$2.2 million.

Other expense, net ~~increased $2.0~~decreased $1.3 million, or ~~33%~~16%, for the three months ended March 31, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 primarily due to ~~an increase~~a 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.

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.

~~For~~In December 2021, the ~~three months ended March 31, 2022, our effective tax~~Organization 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 placed~~15%, calculated on a ~~portion~~jurisdictional 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 state~~on 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.

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.:~~

Envestnet Wealth Solutions

~~The following table presents income from operations for the Envestnet Wealth Solutions segment:~~

Three Months Ended March 31,
2023 2022
Amount % of Revenue Amount % of Revenue $ Change % Change
(in thousands) (in thousands) (in thousands)
Revenue:
Asset-based $ 176,932 69 % $ 202,717 74 % $ (25,785) (13) %
Subscription-based 76,485 30 % 68,537 25 % 7,948 12 %
Total recurring revenue 253,417 99 % 271,254 99 % (17,837) (7) %
Professional services and other revenue 3,243 1 % 2,314 1 % 929 40 %
Total revenue 256,660 100 % 273,568 100 % (16,908) (6) %
Operating expenses:
Direct expense 104,049 41 % 118,808 43 % (14,759) (12) %
Employee compensation 76,883 30 % 78,644 29 % (1,761) (2) %
General and administrative 28,127 11 % 27,360 10 % 767 3 %
Depreciation and amortization 24,138 9 % 23,487 9 % 651 3 %
Total operating expenses 233,197 91 % 248,299 91 % (15,102) (6) %
Income from operations
$ 23,463 9 % $ 25,269 9 % $ (1,806) (7) %

Three months ended March 31, ~~2023~~2024 compared to three months ended March 31, ~~2022~~2023


	Three Months Ended March 31,
	2024			2023
		Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change

	(in thousands)			(in thousands)				(in thousands)
Revenue:
Asset-based		$	202,616	70	%	$	176,932	68	%	$	25,684	15	%
Subscription-based		84,168		29	%	80,470		31	%	3,698		5	%
Total recurring revenue		286,784		99	%	257,402		99	%	29,382		11	%
Professional services and other revenue		3,026		1	%	3,247		1	%	(221)		(7)	%
Total revenue		289,810		100	%	260,649		100	%	29,161		11	%
Operating expenses:
Direct expense		119,834		41	%	104,405		40	%	15,429		15	%
Employee compensation		75,196		26	%	79,047		30	%	(3,851)		(5)	%
General and administrative		29,032		10	%	29,107		11	%	(75)		—	%
Depreciation and amortization		26,818		9	%	25,492		10	%	1,326		5	%
Total operating expenses		250,880		87	%	238,051		91	%	12,829		5	%
Income from operations		$	38,930	13	%	$	22,598	9	%	$	16,332	72	%

Asset-based recurring revenue

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, ~~2023~~2024 compared to the three months ended March 31, ~~2022~~2023 primarily due to new and existing customer growth.

Professional services and other revenue


Delaware						20-1409613
(State or other jurisdiction of incorporation or organization)						(I.R.S Employer Identification No.)


			Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (u ~~naudited)~~(unaudited)
Condensed Consolidated Balance Sheets ~~as of~~ ~~March 31, 202~~3 ~~and December 31, 20~~2 2			3
Condensed Consolidated Statements of Operations ~~for the three~~ ~~months~~ ~~ended~~ ~~March 31, 202~~3 ~~and 20~~2 2			4
Condensed Consolidated Statements of Comprehensive Income (Loss ~~Loss~~ ~~for the~~ ~~three months ended March 31, 2023 and 20~~2 2)			5
Condensed Consolidated Statements of Stockholders' Equity ~~for the~~ ~~three months ended March 31, 2023 and 20~~2 2			6
Condensed Consolidated Statements of Cash Flows ~~for the~~ ~~three months ended March 31, 2023 and 20~~2 2			7
Notes to Unaudited Condensed Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements			2325
Overview			2325
Results of Operations			2729
Liquidity and Capital Resources			3841

Item 3. Quantitative and Qualitative Disclosures About Market Risk			3942

Item 4. Controls and Procedures			3942

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			4043

Item 1A. Risk Factors			4043

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4043

Item 3. Defaults Upon Senior Securities			4043

Item 4. Mine Safety Disclosures			4043

Item 5. Other Information			4043

Item 6. Exhibits			4043

Index to Exhibits			4144

Glossary of Terms			4245

Signatures			4346


			March 31,		December 31,
			2023		2022
		March 31,						March 31,	December 31,
		2024						2024	2023
Assets	Assets
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents		$	52,664	$	162,173
Fees receivable, net	Fees receivable, net		122,704		101,696
Prepaid expenses and other current assets	Prepaid expenses and other current assets		47,391		41,363
Assets held for deconsolidation
Total current assets	Total current assets		222,759		305,232
Property and equipment, net	Property and equipment, net		64,144		62,443
Internally developed software, net	Internally developed software, net		196,874		184,558
Intangible assets, net	Intangible assets, net		377,055		379,995
Goodwill	Goodwill		998,428		998,414
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net		79,553		81,596
Other assets	Other assets		117,644		99,927
Total assets	Total assets		$	2,056,457	$	2,112,165
Liabilities and equity	Liabilities 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 liabilities	Accounts payable, accrued expenses and other current liabilities		$	195,983	$	233,866
Operating lease liabilities	Operating lease liabilities		12,270		11,949
Deferred revenue

Deferred revenue			44,445		36,363
Current portion of debt			44,954		44,886
Liabilities held for deconsolidation
Liabilities held for deconsolidation
Liabilities held for deconsolidation
Total current liabilities	Total current liabilities		297,652		327,064
Debt, net of current portion			872,968		871,769
Debt
Operating lease liabilities, net of current portion	Operating lease liabilities, net of current portion		108,568		110,652
Deferred tax liabilities, net	Deferred tax liabilities, net		21,445		16,196
Other liabilities	Other liabilities		18,644		18,880
Total liabilities	Total liabilities		1,319,277		1,344,561
Commitments and contingencies (note 19)
Commitments and contingencies							Commitments and contingencies
Stockholders' equity	Stockholders' 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, respectively			352		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 capital	Additional paid-in capital		1,154,012		1,135,284
Accumulated deficit	Accumulated deficit		(160,155)		(118,927)
Accumulated other comprehensive loss	Accumulated 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 interest	Non-controlling interest		11,566		13,037
Total equity	Total equity		737,180		767,604
Total liabilities and equity	Total liabilities and equity		$	2,056,457	$	2,112,165


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate

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


	Preliminary Estimate		Estimated Useful Life	Amortization Method

	(in thousands)		(in years)
Customer lists	$	14,000	14 - 16	Accelerated
Proprietary technologies	9,500		6	Straight-line
Trade names	3,000		6 - 7	Straight-line
Total intangible assets acquired	$	26,500



Remainder of 2023	$	45,947
2024	56,040
2025	52,700
2026	44,797
2027	36,232
Thereafter	141,339
Total	$	377,055




																		Asset Rollforward - Three Months Ended March 31, 2024
																		As of December 31,		Gross			Net	Market		As of March 31,
		Asset Rollforward - Three Months Ended March 31, 2023															2023		Sales		Redemptions	Flows	Impact	Reclassifications	2024
		As of December 31,		Gross				Net		Market		Reclass to		As of March 31,
		2022		Sales		Redemptions		Flows		Impact		Subscription		2023

		(in millions, except account data)														(in millions, except account data)
AUM	AUM	$	341,144	$	24,657	$	(15,677)	$	8,980	$	14,259	$	(1,139)	$	363,244
AUA	AUA	367,412		32,551		(21,547)		11,004		14,529		(13,102)		379,843
Total AUM/A	Total AUM/A	$	708,556	$	57,208	$	(37,224)	$	19,984	$	28,788	$	(14,241)	$	743,087
Fee-Based Accounts	Fee-Based Accounts	2,682,035						116,249				(84,256)		2,714,028


	Three Months Ended March 31,
	2024	2023		$ Change		% Change

	(in thousands, except percentages)
Operating expenses:
Employee compensation		$	16,764	$	15,926	$	838	5	%
General and administrative		7,719		10,814		(3,095)		(29)	%
Nonsegment operating expenses		$	24,483	$	26,740	$	(2,257)	(8)	%


	Three Months Ended March 31, 2024
	Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total

	(in thousands)
Income (loss) from operations	$	38,930	$	(5,739)	$	(24,483)	$	8,708
Add (deduct):

Depreciation and amortization	26,818		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 Solutions		Envestnet Data & Analytics		Nonsegment		Total

	(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 amortization	25,492		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


	Three Months Ended March 31, 2022
	Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total

	(in thousands)
Revenue	$	273,568	$	47,795	$	—	$	321,363
Deferred revenue fair value adjustment	54		—		—		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 adjustment	54		—		—		54
Depreciation and amortization	23,487		8,131		—		31,618
Non-cash compensation expense	11,290		3,535		6,989		21,814
Restructuring charges and transaction costs	284		(3)		2,065		2,346
Severance	1,410		1,642		54		3,106
Litigation, regulatory and other governance related expenses	—		3,077		—		3,077
Non-income tax expense adjustment	107		(83)		—		24
Loss attributable to non-controlling interest	377		—		—		377
Other	—		2		—		2
Adjusted EBITDA	$	62,278	$	10,714	$	(17,295)	$	55,697


Exhibit No.						Description

10.1						Separation and Release Agreement with William Crager (filed as Exhibit 10.1 to the Company's Form 8-K filed January 8, 2024 and incorpor ated b y reference herein ).*
10.2						~~Cooperation~~Interim Executive Agreement ~~dated~~ with James Fox (filed as Exhibit 10.2 to the Company's Form 8-K filed January 8, 2024 and incorporated by reference herein).*
10.3						Amendment to Interim Executive Agreement with James Fox (filed as Exhibit 10.1 to the Company's Form 8-K filed March ~~27, 2023,~~15 , 2024 and incorporated by ~~and among Impactive Capital LP, Impactive Capital Master Fund LP and Envestnet, Inc. (filed~~reference herein).*
10.4						Empl oyment Agreement with William Crager (filed as Exhibit 10.1 to the ~~Company’s~~Company's Form 8-K filed ~~with the SEC on~~ March 28 ~~2023~~, 2024 and incorporated by reference herein).*
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1(1)						Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2(1)						Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document **
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document **
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document **
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document **
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document **
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


Abbreviations or Acronyms						Definition
2010 Plan						2010 Long-Term Incentive Plan
2019 Equity Plan						2019 Acquisition Equity Incentive Plan
~~2022 Form 10-K~~AETR						Annual effective tax rate
Annual Report						Form 10-K for the year ended December 31, ~~2022~~
~~AETR~~						~~Annual effective tax rate.~~2023
ASC						Accounting Standards Codification™
ASC 310 ~~- Receivables~~						Accounting Standards Codification Topic 310, Receivables
ASC 606						Accounting Standards Codification Topic 606, Revenue from Contracts with Customers
ASC 740-270						Accounting Standards Codification Topic 740, Income Taxes—Interim Reporting
ASC 842						Accounting Standards Codification Topic 842, Leases
ASU						Accounting Standards Update

~~ASU 2021-08~~						~~ASU Business Combinations (Topic 805): Accounting for Contract Assets and Contract~~
Board						Board of Directors
Company						Envestnet, Inc. and its subsidiaries
Convertible Notes due 2023						$~~345.0~~45.0 million of remaining aggregate principal amount of convertible notes ~~issued in May 2018~~ with an interest rate of 1.75% per year that ~~mature~~matured and were settled on June 1, ~~2023~~2023.
Convertible Notes due 2025						$~~517.5~~317.5 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, ~~2025~~2025.
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, ~~2027~~2027.
~~Convertible Promissory Note~~Envestnet						~~$20.0 million convertible promissory note issued in January 2023 with a customer of the Company's business, a privately held company~~Envestnet, Inc.
ETR						Effective tax rate
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
FinancialApps						FinancialApps, LLC
FinTech						Financial Technology
GAAP						United States Generally Accepted Accounting Principles

IRC Section 174						Internal Revenue Code of 1986, Section 174: Amortization of Research and Experimental Expenditures
Convertible Notes						Collectively the Convertible Notes due 2023, Convertible Notes due 2025 and Convertible Notes due 2027
PSU						Performance-based restricted stock unit
Quarterly Report						Form 10-Q for the quarter ended March 31, ~~2023~~2024
R&D						Research and Development.
Redi2						Redi2 Technologies Inc.
Redi2 acquisition						Stock purchase agreement between Envestnet and Redi2 Technologies, dated as of June 24, 2022
Revolving Credit Facility						Revolving credit facility of $500.0 million pursuant to the Third Amended and Restated Credit Agreement
RIAs						Registered investment advisors
RSU						Restricted stock unit
SEC						Securities and Exchange Commission
~~SOFR~~						~~Secured Overnight Financing Rate~~
TCS						Tata Consultancy Services
~~Third Credit Agreement~~Truelytics						~~Third Amended and Restated Credit Agreement~~Truelytics, Inc.
U.S.						United States
Waiver						Waiver with respect to the Revolving Credit Facility
Yodlee						Yodlee, Inc.


	ENVESTNET, INC.

Date: May 8, 2024	By:	/s/ ~~William C. Crager~~James L. Fox
		~~William C. Crager~~James L. Fox
		Interim Chief Executive Officer
		Principal Executive Officer

Date: May 8, 2024	By:	/s/ ~~Peter H. D’Arrigo~~Joshua B. Warren
		~~Peter H. D’Arrigo~~Joshua B. Warren
		Chief Financial Officer
		Principal Financial Officer

Date: May 8, 2024	By:	/s/ Matthew J. Majoros
		Matthew J. Majoros
		Senior Vice President, Financial Reporting
		Principal Accounting Officer