UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended ~~September 30, 2017~~

March 31, 2024

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

For the transition period from __________ to __________

Commission file number 001-34835

Envestnet, Inc.

(Exact name of registrant as specified in its charter)


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

~~35 East Wacker Drive,~~

1000 Chesterbrook Boulevard, Suite ~~2400, Chicago, IL~~

250, Berwyn, Pennsylvania

~~60601~~

19312

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(312) 827-2800

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


Title of each 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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T ~~(232.405~~(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒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”,~~filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

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~~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 ~~November 5, 2017, 44,305,791~~May 3, 2024, Envestnet, Inc. had 55,109,097 shares of ~~the~~ common stock ~~with a par value of $0.005 per share were~~ outstanding.

~~Table of Contents~~

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION			3

Item 1. Financial Statements ~~(Unaudited)~~(unaudited)			3
Condensed Consolidated Balance Sheets ~~as of September 30, 2017 and December 31, 2016~~			3 3
Condensed Consolidated Statements of Operations ~~for the three and nine months ended September 30, 2017 and 2016~~			4 4
Condensed Consolidated Statements of Comprehensive ~~Loss for the three and nine months ended September 30, 2017 and 2016~~Income (Loss )			5 5
Condensed Consolidated ~~Statement~~Statements of Stockholders' Equity ~~for the nine months ended September 30, 2017~~			6 6
Condensed Consolidated Statements of Cash Flows ~~for the nine months ended September 30, 2017 and 2016~~			7 7
Notes to Unaudited Condensed Consolidated Financial Statements			8 8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Forward-Looking Statements			25 28
Overview			25 29
Results of Operations			29 34
Liquidity and Capital Resources			41 50

Item 3. Quantitative and Qualitative Disclosures About Market Risk			42 53

Item 4. Controls and Procedures			42 54

PART II - OTHER INFORMATION			56

Item 1. Legal Proceedings			43 56

Item 1A. Risk Factors			43 56

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43 56

Item 3. Defaults Upon Senior Securities			43 56

Item 4. Mine Safety Disclosures			43 56

Item 5. Other Information			43 56

Item 6. Exhibits			43 57

Index to Exhibits			44

Glossary of Terms			45

Signatures			46

~~Table of Contents~~

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)


	September 30,			December 31,
	2017			2016
			March 31,				March 31,	December 31,
			2024				2024	2023
Assets
Current assets:
Current assets:
Current assets:
Cash and cash equivalents	$	48,704		$	52,592
Fees and other receivables, net		49,726			44,268
Cash and cash equivalents
Cash and cash equivalents
Fees receivable, net
Prepaid expenses and other current assets		23,999			16,224
Assets held for deconsolidation
Total current assets		122,429			113,084

Property and equipment, net		35,274			33,000
Internally developed software, net		20,279			14,860
Intangible assets, net		233,525			265,558
Goodwill		432,746			431,936
Other non-current assets		17,969			13,963
Operating lease right-of-use assets, net
Other assets
Total assets	$	862,222		$	872,401
Liabilities and equity
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
Operating lease liabilities
Deferred revenue

Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities	$	102,877		$	87,763
Accounts payable		13,215			11,480
Current portion of debt		—			37,926
Contingent consideration		2,055			2,286
Deferred revenue		18,388			16,499
Liabilities held for deconsolidation
Liabilities held for deconsolidation
Liabilities held for deconsolidation
Total current liabilities		136,535			155,954

Convertible Notes		157,353			152,575
Revolving credit facility		101,168			—
Term Notes		—			100,409
Contingent consideration		641			2,582
Deferred revenue		14,454			15,643
Deferred rent and lease incentive		14,867			12,060
Debt
Operating lease liabilities, net of current portion
Deferred tax liabilities, net		12,216			5,555
Other non-current liabilities		14,527			13,436
Other liabilities
Total liabilities		451,761			458,214

Commitments and contingencies						Commitments and contingencies

Redeemable units in ERS		900			900
Equity:
Stockholders’ equity:
Preferred stock, par value $0.005, 50,000,000 shares authorized		—			—
Common stock, par value $0.005, 500,000,000 shares authorized; 56,918,043 and 55,642,686 shares issued as of September 30, 2017 and December 31, 2016, respectively; 44,213,751 and 43,240,567 shares outstanding as of September 30, 2017 and December 31, 2016, respectively		284			278
Stockholders' equity
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		544,895			516,675
Accumulated deficit		(91,499)			(70,574)
Treasury stock at cost, 12,704,292 and 12,402,119 shares as of September 30, 2017 and December 31, 2016, respectively		(44,687)			(33,068)
Accumulated other comprehensive income (loss)		170			(422)
Total stockholders’ equity		409,163			412,889
Accumulated other comprehensive loss
Total stockholders’ equity, attributable to Envestnet, Inc.
Non-controlling interest		398			398
Total equity		409,561			413,287
Total liabilities and equity	$	862,222		$	872,401

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

~~Table of Contents~~

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Revenues:

Assets under management or administration

$
106,147

$
90,042

$
299,268

$
258,969
Subscription and licensing

62,963

51,959

180,675

142,303
Professional services and other

6,504

7,154

20,874

21,412
Total revenues

175,614

149,155

500,817

422,684

Operating expenses:

Cost of revenues

56,070

47,259

161,031

132,319
Compensation and benefits

68,551

60,345

199,079

180,625
General and administration

31,153

26,150

90,178

80,249
Depreciation and amortization

15,492

16,692

46,792

49,872
Total operating expenses

171,266

150,446

497,080

443,065

Income (loss) from operations

4,348

(1,291)

3,737

(20,381)
Other expense, net

(3,986)

(4,434)

(13,838)

(13,214)
Income (loss) before income tax provision (benefit)

362

(5,725)

(10,101)

(33,595)

Income tax provision (benefit)

1,682

(1,668)

10,824

(10,602)

Net loss

(1,320)

(4,057)

(20,925)

(22,993)
Add: Net loss attributable to non-controlling interest

—

—

—

—
Net loss attributable to Envestnet, Inc.

$
(1,320)

$
(4,057)

$
(20,925)

$
(22,993)

Net loss per share attributable to Envestnet, Inc.:

Basic

$
(0.03)

$
(0.09)

$
(0.48)

$
(0.54)

Diluted

$
(0.03)

$
(0.09)

$
(0.48)

$
(0.54)

Weighted average common shares outstanding:

Basic

44,044,527

42,843,103

43,604,869

42,704,383

Diluted

44,044,527

42,843,103

43,604,869

42,704,383


	Three Months Ended
	March 31,
		2024		2023
Revenue:
Asset-based		$	202,616	$	176,932
Subscription-based		117,462		117,079
Total recurring revenue		320,078		294,011
Professional services and other revenue		4,872		4,696
Total revenue		324,950		298,707
Operating expenses:
Direct expense		126,633		109,679
Employee compensation		103,652		114,215
General and administrative		52,065		54,350
Depreciation and amortization		33,892		31,520
Total operating expenses		316,242		309,764
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)
Net income (loss) attributable to Envestnet, Inc. per share:
Basic		$	0.05	$	(0.76)
Diluted		$	0.05	$	(0.76)
Weighted average common shares outstanding:
Basic		54,884,074		54,143,259
Diluted		55,385,066		54,143,259

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

~~Table of Contents~~

Envestnet, Inc.

Condensed Consolidated Statements of Comprehensive ~~Loss~~

Income (Loss)

(in thousands)

(unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Net loss attributable to Envestnet, Inc.

$
(1,320)

$
(4,057)

$
(20,925)

$
(22,993)
Other comprehensive income (loss), net of taxes

Foreign currency translation gain (loss)

(217)

192

592

(122)
Gains on foreign currency contracts designated as cash flow hedges reclassified to earnings

—

(556)

—

(204)
Total other comprehensive income (loss), net of taxes

(217)

(364)

592

(326)
Comprehensive loss, net of taxes

$
(1,537)

$
(4,421)

$
(20,333)

$
(23,319)


	Three Months Ended
	March 31,
		2024		2023
Net income (loss) attributable to Envestnet, Inc.		$	2,513	$	(41,228)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(4)		4,277
Total other comprehensive income (loss), net of tax		(4)		4,277
Comprehensive income (loss) attributable to Envestnet, Inc.		$	2,509	$	(36,951)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

~~Table of Contents~~

Envestnet, Inc.

Condensed Consolidated ~~Statement~~Statements of Stockholders' Equity

(in thousands, except share information)

~~(unaudited)~~

Accumulated

Common Stock

Treasury Stock

Additional

Other

Non-




Common



Paid-in

Comprehensive

Accumulated

controlling

Total

Shares

Amount

Shares

Amount

Capital

Income (Loss)

Deficit

Interest

Equity
Balance, December 31, 2016

55,642,686

$
278

(12,402,119)

$
(33,068)

$
516,675

$
(422)

$
(70,574)

$
398

$
413,287

Exercise of stock options

428,173

2

—

—

4,466

—

—

—

4,468
Issuance of common stock - vesting of restricted stock units

847,184

4

—

—

—

—

—

—

4
Stock-based compensation expense

—

—

—

—

23,754

—

—

—

23,754
Purchase of treasury stock for stock-based tax withholdings

—

—

(302,173)

(11,619)

—

—

—

—

(11,619)
Foreign currency translation gain

—

—

—

—

—

592

—

—

592
Net loss

—

—

—

—

—

—

(20,925)

—

(20,925)
Balance, September 30, 2017

56,918,043

$
284

(12,704,292)

$
(44,687)

$
544,895

$
170

$
(91,499)

$
398

$
409,561

~~See accompanying notes to unaudited Condensed Consolidated Financial Statements~~.

(unaudited)

~~Table of Contents~~


									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, 2023	71,129,801	$	355	(16,356,139)	$	(272,573)	$	1,206,627	$	(8,567)	$	(357,651)	$	6,315	$	574,506
Net income (loss)	—	—		—	—		—		—		2,513		(1,974)		539
Other comprehensive loss, net of tax	—	—		—	—		—		(4)		—		—		(4)
Stock-based compensation expense	—	—		—	—		18,572		—		—		326		18,898
Issuance of common stock, vesting of RSUs and PSUs	483,237	3		—	—		—		—		—		—		3
Net cash paid related to tax withholding for stock-based compensation	—	—		(177,932)	(8,449)		—		—		—		—		(8,449)
Proceeds from the exercise of stock options	20,033	—		—	—		71		—		—		—		71
Proceeds from capital contributions received by non-controlling interest	—	—		—	—		—		—		—		12,012		12,012
Other	—	—		—	—		—		—		—		(258)		(258)
Balance, March 31, 2024	71,633,071	$	358	(16,534,071)	$	(281,022)	$	1,225,270	$	(8,571)	$	(355,138)	$	16,421	$	597,318

~~Envestnet, Inc.~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(in thousands)~~

~~(unaudited)~~

Nine Months Ended

September 30,

2017

2016
OPERATING ACTIVITIES:

Net loss

$
(20,925)

$
(22,993)
Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

46,792

49,872
Deferred rent and lease incentive amortization

709

(324)
Provision for doubtful accounts

828

369
Deferred income taxes

6,646

(10,273)
Stock-based compensation expense

23,451

25,872
Non-cash interest expense

8,711

6,955
Accretion on contingent consideration and purchase liability

408

143
Fair market value adjustment on contingent consideration

—

838
Loss on disposal of fixed assets

69

220
Loss allocation from equity method investment

984

1,130
Changes in operating assets and liabilities, net of acquisitions:

Fees and other receivables

(6,286)

4,077
Prepaid expenses and other current assets

(5,316)

(4,960)
Other non-current assets

(1,784)

(4,271)
Accrued expenses and other liabilities

13,289

275
Accounts payable

1,435

124
Deferred revenue

740

1,959
Other non-current liabilities

1,852

4,337
Net cash provided by operating activities

71,603

53,350

INVESTING ACTIVITIES:

Purchase of property and equipment

(11,432)

(10,839)
Capitalization of internally developed software

(9,210)

(6,217)
Investment in private company

(1,450)

(738)
Purchase of ERS units

—

(1,500)
Acquisition of businesses, net of cash acquired

—

(18,394)
Net cash used in investing activities

(22,092)

(37,688)

FINANCING ACTIVITIES:

Payment of Term Notes

(35,862)

(6,000)
Proceeds from borrowings on revolving credit facility

35,000

25,000
Payments on revolving credit facility

(42,500)

(25,000)
Debt issuance costs

(94)

—
Payments of contingent consideration

(2,286)

(2,924)
Payments of definite consideration

(445)

—
Payments of purchase consideration liabilities

(235)

—
Proceeds from exercise of stock options

4,468

3,166
Purchase of treasury stock for stock-based tax withholdings

(11,619)

(9,517)
Common stock acquired under the share repurchase program

—

(1,448)
Issuance of restricted stock units

4

5
Net cash used in financing activities

(53,569)

(16,718)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

170

—

DECREASE IN CASH AND CASH EQUIVALENTS

(3,888)

(1,056)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

52,592

51,718

CASH AND CASH EQUIVALENTS, END OF PERIOD

$
48,704

$
50,662

Supplemental disclosure of cash flow information - net cash refunded (paid) during the period for income taxes

$
1,449

$
(175)
Supplemental disclosure of cash flow information - cash paid during the period for interest

4,887

5,390
Supplemental disclosure of non-cash operating, investing and financing activities:

Leasehold improvements funded by lease incentive

2,098

1,522
Non-cash debt issuance costs

2,230

—
Purchase liabilities included in accrued expenses and other liabilities

837

—
Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities

505

—
Contingent consideration issued in a business acquisition

—

1,929


									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

~~Table of Contents~~

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended
	March 31,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	539	$	(42,761)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	33,892		31,520
Deferred income taxes	(855)		5,221

Non-cash compensation expense	18,898		19,453
Non-cash interest expense	4,580		4,498
Loss allocations from equity method investments	2,283		2,940




Other	2,078		468
Changes in operating assets and liabilities:
Fees receivable, net	(18,841)		(21,579)
Prepaid expenses and other assets	(2,371)		(9,858)
Accounts payable, accrued expenses and other liabilities	(40,659)		(31,648)
Deferred revenue	2,400		8,073
Net cash provided by (used in) operating activities	1,944		(33,673)
Cash flows from investing activities:
Purchases of property and equipment	(1,900)		(4,402)
Capitalization of internally developed software	(19,953)		(23,664)

Investments in private companies	(2,805)		(950)
Acquisition of proprietary technology	—		(10,000)
Issuance of loan receivable to private company	—		(20,000)

Other	—		260
Net cash used in investing activities	(24,658)		(58,756)
Cash flows from financing activities:



Proceeds from exercise of stock options	71		367
Payments related to tax withholdings for stock-based compensation	(8,449)		(10,732)
Payments related to share repurchases	—		(9,289)
Proceeds from capital contributions received by non-controlling interest	12,012		—
Purchase of non-controlling units from third-party shareholders	—		(1,008)

Other	3		2
Net cash provided by (used in) financing activities	3,637		(20,660)
Effect of exchange rate on changes on cash and cash equivalents	(2)		3,580
Net change in cash and cash equivalents due to cash reclassified to assets held for deconsolidation	(11,073)		—
Net change in cash and cash equivalents	(30,152)		(109,509)
Cash and cash equivalents, beginning of period	91,378		162,173
Cash and cash equivalents, end of period	$	61,226	$	52,664
Supplemental disclosures of cash flow information
Net cash paid for income taxes	$	568	$	1,110
Cash paid for interest	$	1,509	$	1,822
Supplemental disclosure of non-cash activities
Conversion of equity method investee loan to shares	$	—	$	4,129
Right-of-use assets obtained in exchange for lease liabilities, net	$	—	$	206
Purchase of property and equipment included in accounts payable, accrued expenses and other liabilities	$	1,349	$	2,018

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

~~(in thousands, except share and per share amounts)~~

1.Organization and Description of Business

Envestnet, ~~Inc. (“Envestnet”) and~~through its subsidiaries, ~~(collectively,~~is transforming the ~~“Company”) provide intelligent systems for~~way financial advice and insight are delivered. Its mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet is a leader in helping transform wealth management, ~~and~~working towards its goal of expanding a holistic financial wellness. Envestnet’s unified technology enhances advisor productivity and strengthens the wealth management process, delivering unparalleled flexibility, accuracy, performance, and value. Envestnet enables a transparent, independent, objective, and fiduciary standard of care, and empowers enterprises and advisors to more fully understandwellness ecosystem so that its clients can better serve their clients. ~~Through a combination of platform enhancements, partnerships~~

Envestnet is organized around two business segments based on clients served and ~~acquisitions, Envestnet uniquely provides a~~products provided to meet those needs. Financial information about each business segment is contained in “Note 18—Segment Information” to the condensed consolidated financial ~~network connecting software, services and data, delivering better intelligence and enabling its customers to drive better outcomes.~~

~~The Company offers these solutions principally through the following product/services suites:~~

~~Envestnet | Enterprise~~ provides an end-to-end open architecture wealth management platform, through which advisors can construct portfolios for clients. It begins with aggregated household data which then leads to a financial plan, asset allocation, investment strategy, portfolio management, rebalancing and performance reporting. Advisors have access to over 17,000 investment products. Envestnet | Enterprise also sells data aggregation and reporting, data analytics, and digital advice capabilities to customers.

~~Envestnet | Tamarac~~TM ~~provides leading trading, rebalancing, portfolio accounting, performance reporting and client relationship management (“CRM”) software, principally to high~~‑~~end registered investment advisers (“RIA”).~~

~~Envestnet | Retirement Solutions (“ERS”)~~ offers a comprehensive suite of services for advisor-sold retirement plans. Leveraging integrated technology, ERS addresses the regulatory, data, and investment needs of retirement plans and delivers the information holistically.

~~Envestnet | PMC~~® ~~or Portfolio Management Consultants (“PMC”)~~ provides research due diligence and consulting services to assist advisors in creating investment solutions for their clients. These solutions include more than 4,000 vetted managed account products, multi-manager portfolios, fund strategist portfolios, as well as proprietary products, such as Quantitative Portfolios. PMC also offers an Overlay Service, which includes patented portfolio overlay and tax optimization services.

~~Envestnet | Yodlee~~ is a leading data aggregation and data intelligence platform. As a “big data” specialist, Yodlee gathers, refines and aggregates a massive set of end-user permissioned transaction level data, which it then provides to customers as data analytics solutions and market research services.

Envestnet operates three RIAs and a registered broker-dealer. The RIAs are registered with the Securities and Exchange Commission (“SEC”). The broker-dealer is registered with the SEC, all 50 states and the District of Columbiastatements and is described in detail within the Company's Annual Report.

For a ~~member~~summary of commonly used industry terms and abbreviations used in this Quarterly Report, see the ~~Financial Industry Regulatory Authority (“FINRA”).~~

Glossary of Terms.

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company as of ~~September 30, 2017~~March 31, 2024 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~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, ~~2016~~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 ~~September 30, 2017~~March 31, 2024 and ~~the~~ results of operations, equity, comprehensive ~~loss~~income (loss) and cash flows for the periods presented herein. The unaudited condensed consolidated financial statements include the accounts of ~~Envestnet and its subsidiaries.~~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 ~~| Yodlee~~Data & Analytics segment are recorded and measured in foreign currencies. The assets and liabilities for those subsidiaries with a ~~foreign~~functional currency ~~functional currency~~other than the U.S. dollar are translated at

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exchange rates in effect at the balance sheet date, and ~~revenues~~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’~~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 ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 are not necessarily indicative of the ~~operating~~ 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, 2016,~~ filed with the SEC on February 28, 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 ~~24, 2017.~~

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 ~~these unaudited condensed consolidated~~ financial statements in conformity with GAAP requires management to make estimates and assumptions ~~related to~~that affect the ~~reporting of assets, liabilities, revenues and expenses and~~amounts reported in the ~~disclosure of contingent assets and liabilities to prepare these unaudited~~ condensed consolidated financial statements ~~in conformity with GAAP. Areas requiring the use of management estimates relate to estimating uncollectible receivables, revenue recognition, valuations~~ and assumptions used for impairment testing of goodwill, intangible and other long-lived assets, fair value of restricted stock and stock options issued, fair value of contingent consideration, realization of deferred tax assets, uncertain tax positions, sales tax liabilities, fair value of the liability portion of the convertible debt and assumptions used to allocate purchase prices in business combinations.accompanying notes. Actual results could differ materially from these estimates under different assumptions or conditions.

~~Share repurchase program –~~ ~~On February 25, 2016,~~

Reclassifications

Certain amounts in the ~~Company announced that its Board~~condensed consolidated statements of Directors had authorized a share repurchase program under which the Company may repurchase up to 2,000,000 shares of its common stock. The timing and volume of share repurchases will be determined by the Company’s management based on its ongoing assessments of the capital needs of the business, the market price of its common stock and general market conditions. No time limit has been setcash flows for the ~~completion~~three months ended March 31, 2023 have been reclassified to conform to the current period presentation. These reclassifications did not change the previously reported net change in cash and cash equivalents and did not affect the condensed consolidated balance sheets, condensed consolidated statements of ~~the repurchase program, and the program may be suspended~~operations, condensed consolidated statements of comprehensive income (loss) or discontinued at any time. The repurchase program authorizes the Company to purchase its common stock from time to time in the open market (including pursuant to a “Rule 10b5-1 plan”), in block transactions, in privately negotiated transactions, through accelerated stock repurchase programs, through option or other transactions or otherwise, all in compliance with applicable laws and other restrictions. Ascondensed consolidated statements of ~~September 30, 2017, 1,956,390 shares could still be purchased under this program. For the nine month period ended September 30, 2017, the Company purchased no shares under this program.~~

~~Recent Accounting Pronouncements -~~ In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers,” which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers.

The original effective date for ASU 2014-09 would have required the Company to adopt beginning in its first quarter of 2017. However, in July 2015, the FASB voted to amend ASU 2014-09 by approving a one-year deferral of the effective date as well as providing the option to early adopt the standard on the original effective date. Accordingly, the Company will adopt the standard in its first quarter of 2018.

In 2016, the Company began evaluating the impact of the adoption of the new revenue standard on its consolidated financial statements, including enhanced disclosures, as well as assessing the impact on systems, processes and controls. The Company expects the new revenue standard to have an impact on the estimation of variable transaction considerations, the allocation of variable considerations across distinct services, and the tracking and amortization of contract costs. The new revenue standard may have an impact on the Company’s principal versus agent considerations. We expect to begin capitalizing certain costs to obtain a contract upon adoption of the new standard and are currently in the process of evaluating the period over which to amortize these capitalized costs. stockholders' equity.

Related Party Transactions

The Company has ~~made progress on its contract and business process reviews but has not yet quantified these amounts.~~

The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company plans to adopt the standardan approximate 3.7% membership interest in a private services company that it accounts for using the ~~modified retrospective approach with~~equity method of accounting and is considered to be a related party. Revenue from the ~~cumulative effect recognized as~~private services company totaled $2.6 million and $3.6 million in the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the ~~date~~Company recorded a net receivable from the private services company of ~~adoption.~~

$0.7 million and $1.7 million, respectively.

Recently Adopted Accounting Pronouncements

In ~~February 2016,~~March 2023, the FASB issued ASU ~~2016-02, “Leases.~~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 assets and liabilities recognized for all leases longer than twelve months. Lessees will be required to recognize a lease liability measured on a discounted basis, which is the lessee’s obligation to make lease payments arising from the lease, and a right-of-use asset, which is an asset that

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~~represents the lessee’s right to use, or control the use of, a specified asset for the lease term.~~segment disclosures. This standard ~~will be~~is effective for ~~financial statements issued by public companies for the annual and interim periods~~fiscal years beginning after December 15, ~~2018.~~2023, 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 ~~currently evaluating~~analyzing the ~~potential~~ impact of ~~this guidance on our consolidated financial statements.~~

~~In March 2016, The FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” This update is intended to reduce~~ the cost and complexity of accounting for share-based payments; however, some changes may also increase volatility in reported earnings. Under the new guidance, all excess tax benefits and deficiencies will be recorded as an income tax benefit or expense in the income statement and excess tax benefits will be recorded as an operating activity in the statements of cash flows. Upon adoption, we determined that we did not have previously unrecognized excess tax benefits to be recognized on a modified retrospective transition method as an adjustment to retained earnings. The new guidance also allows withholding up to the maximum individual statutory tax rate without classifying the awards as a liability. We did not elect an accounting policy change to withhold at the maximum individual statutory tax rate. The cash paid to satisfy the statutory income tax withholding obligation will continue to be classified as a financing activity in the statements of cash flows. Lastly, the update allows forfeitures to be estimated or recognized when they occur. The requirements for the excess tax effects related to share-based payments at settlement must be applied on a prospective basis, and the other requirements under this standard are to be applied on a retrospective basis. We did not elect an accounting policy change to record forfeitures as they occur and will continue to estimate forfeitures at each period. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2016. These changes became effective for the Company’s fiscal year beginning January 1, 2017 and have been reflected in these condensed consolidated financial statements. As a result of the retrospective adoption of ASU 2016-09, for the nine months ended September 30, 2016, net cash provided by operating activities increased by $1,470 with a corresponding offset to net cash used for financing activities.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,” which clarifies eight specific cash flow issues in an effort to reduce diversity in practice in how certain transactions are classified within the statement of cash flows. This ASU is effective for the Company January 1, 2018 with early adoption permitted. The ASU requires a retrospective application unless it is determined that it is impractical to do so for which it must be retrospectively applied at the earliest date practical. Upon adoption, the Companybut does not ~~anticipate significant changes~~expect it to ~~the Company’s existing accounting policies or presentation of the consolidated statements of cash flows.~~

~~In January 2017, the FASB issued ASU 2017-04, “Intangibles—Goodwill and Other (Topic 350),”~~which removes step two from the goodwill impairment test. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units’ fair value. This standard will be effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2019. Early adoption is permitted. The Company has adopted this standard as of April 1, 2017, however it did not have a material impact on the ~~Company’s~~Company's consolidated financial statements.

In ~~January 2017,~~March 2024, the FASB issued ASU 2017-01, Business Combinations: Clarifying the Definition of a Business (Topic 805), which provides a new framework for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This standard will be effective for public companies for annual and interim periods beginning after December 15, 2017. Early adoption is permitted effective for transactions not yet reported in financial statements issued or made available for issuance. The Company is currently evaluating the potential impact of this guidance on our consolidated financial statements.

~~In May 2017, the FASB issued ASU 2017-09, Compensation –~~2024-01, "Compensation - Stock Compensation (Topic 718): Scope Application of ~~Modification Accounting.~~Profits Interest and Similar Awards." This update clarifies ~~which changes~~how to ~~the terms~~account for profits interest and conditions of a share-based payment award require an entity to apply modification accounting. Specifically, an entity would not apply modification account if the fair value, vesting conditions, and classification as an equity or liability instrument are the same before and after the modification. The ASUsimilar awards. This standard is effective for ~~financial statements issued by public companies for the annual and interim periods~~fiscal years beginning after December 15, ~~2017.~~2024, and interim periods within those fiscal years. Early adoption of the standard is permitted. The ~~standard will be applied prospectively to awards modified on or after~~Company is analyzing the impact of the adoption, ~~date.~~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 ~~currently evaluating~~analyzing the ~~potential~~ impact of ~~our adoption~~these rules and has not yet determined the impact on the Company's consolidated financial statements and related disclosures.

3.Assets and Liabilities Held for Deconsolidation

As of March 31, 2024, the 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 accounting to include the private company’s assets, liabilities and results of operations within the Envestnet Wealth Solutions segment of the Company’s condensed consolidated financial statements.

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 company's board and therefore no longer holding a controlling financial interest in the private company as 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 ~~guidance~~private company were classified as held for deconsolidation in the Company's condensed consolidated balance sheets as of March 31, 2024.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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 ~~our consolidated~~the relative fair value of the private company and the Envestnet Wealth Solutions reporting unit prior to the private company being classified as held for deconsolidation.

Effective April 1, 2024, the Company no longer had a controlling financial ~~statements.~~ interest in the private company which will result in the derecognition of 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 June 30, 2024. This transaction does not represent a strategic shift and therefore does not meet the criteria to be classified as discontinued operations. The Company will apply the equity method to account for its noncontrolling investment in this private company starting April 1, 2024.

4.Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	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

Internally developed software, net consisted of the following:


		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,
	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.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The estimated future amortization expense of the Company's intangible assets as of March 31, 2024 was as follows (in thousands):



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,
		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

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, 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

3.~~Business Acquisitions~~

~~FolioDynamix~~

(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 ~~September 25, 2017,~~January 31, 2023, the Company entered into ~~an agreement and plan~~a Convertible Promissory Note with a customer of ~~merger (the “Merger Agreement”)~~the Company's business, a privately held company, whereby the Company was issued a convertible promissory note with ~~Folio Dynamics Holdings, Inc.,~~ a ~~Delaware corporation (“FolioDynamix”), FCD Merger Sub, Inc., a Delaware corporation~~principal amount of $20.0 million and a ~~wholly~~

~~Table~~stated interest rate of ~~Contents~~

~~owned subsidiary~~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 ~~Company (“Merger Sub”),~~privately held company upon qualified financing events or corporate transactions. During the three months ended March 31, 2024 and ~~Actua USA Corporation, a Delaware corporation, solely in its capacity as the representative of the stockholders of FolioDynamix. Pursuant~~2023, interest income related to the Merger Agreement, Merger Sub will merge with and into FolioDynamix, with FolioDynamix continuing as the surviving corporation (the “Acquisition”) and a wholly owned subsidiary of the Company. FolioDynamix will beConvertible Promissory Note included in ~~the Envestnet segment.~~

~~FolioDynamix provides financial institutions, registered investment advisors, and~~ other ~~wealth management clients with an end-to-end technology solution paired with a suite of advisory tools including model portfolios, research, and overlay management services.~~

The Company plans to acquire FolioDynamix to add complementary trading tools as well as commission and brokerage support to Envestnet’s existing suite of offerings. The Company expects to integrate the technology and operations of FolioDynamix into the Company’s wealth management channel, enabling the Company to further leverage its operating scale and data analytics capabilities.

Subject to the terms and conditions of the Merger Agreement, the Company will pay $195,000 in cash for all the outstanding shares of FolioDynamix, subject to certain post-closing adjustments. The Company will fund the Acquisition price with a combination of cash on the Company’s balance sheet and borrowings under its revolving credit facility. Either the Company or FolioDynamix may terminate the Agreement if the closing does not occur by March 31, 2018.

The applicable antitrust pre-clearance filings were made by the parties on October 10, 2017 and October 11, 2017. The Company is withdrawing its filing and plans to refile it immediately thereafter to allow the Department of Justice additional time to review the filing without having to issue a second request. The Company continues to expect the transaction to close in the first quarter of 2018, subject to satisfaction of the closing conditions. The Company and FolioDynamix will continue to operate separately until the transaction closes.

~~Wheelhouse Analytics LLC~~

On October 3, 2016, the Company acquired all of the issued and outstanding membership interests of Wheelhouse Analytics LLC (“Wheelhouse”). Wheelhouse is a technology company that provides data analytics, mobile sales solutions, and online education tools to financial advisors, asset managers and enterprises. Wheelhouse is included in the Envestnet | Yodlee segment.

The Company acquired Wheelhouse to be integrated with Yodlee’s industry-leading data and analytics solutions to strengthen Envestnet’s data-driven insights to financial advisors, asset managers and enterprises enabling them to better manage their businesses and client relationships and deliver better outcomes to their clients. Envestnet expects to deeply integrate Wheelhouse’s tools, delivering robust online dashboards and reporting that provides actionable intelligence.

In connection with the acquisition of Wheelhouse, the Company paid cash consideration of $13,299 and is required to pay contingent consideration with the aggregate amount not to exceed $4,000 and certain holdbacks upon release. Changes to the estimated fair value of the contingent consideration are recognized in earnings of the Company.

~~The estimated consideration transferred in the acquisition was as follows:~~

Measurement

Preliminary

Period

As of

Estimate

Adjustments

September 30, 2017
Cash consideration

$
13,299

$
—

$
13,299
Contingent consideration liability

2,582

(218)

2,364
Purchase consideration liability

887

—

887
Working capital adjustment

110

—

110
Cash acquired

(80)

—

(80)
Total

$
16,798

$
(218)

$
16,580

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

Measurement

Preliminary

Period

As of

Estimate

Adjustments

September 30, 2017
Total tangible assets acquired

$
399

$
(14)

$
385
Total liabilities assumed

(1,459)

39

(1,420)
Identifiable intangible assets

7,300

(700)

6,600
Goodwill

10,558

457

11,015
Total net assets acquired

$
16,798

$
(218)

$
16,580

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

AS

Measurement

Preliminary

Period

As of

Estimated

Amortization

Estimate

Adjustments

September 30, 2017

Useful Life in Years

Method
Customer list

$
4,100

$
(100)

$
4,000

15

Accelerated
Proprietary technology

3,000

(500)

2,500

6

Straight-line
Trade names and domains

200

(100)

100

2

Straight-line
Total

$
7,300

$
(700)

$
6,600

~~The results of Wheelhouse’s operations are included~~expense, net in the condensed consolidated statements of operations ~~beginning October 3, 2016,~~was $0.4 million and ~~are~~$0.3 million, respectively.

The Company accounts for this Convertible Promissory Note as a loan receivable in accordance with ASC 310 as it is not ~~considered material to~~a security and includes it in other assets in the ~~Company’s results~~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 ~~operations. As such,~~its expected future cash flows discounted at the effective interest rate. There was no ~~pro forma information is presented~~impairment for this investment during the three ~~and nine~~ months ended ~~September 30, 2016.~~

March 31, 2024.

~~Table of Contents~~

~~4. Cost of Revenues~~

~~The following table summarizes cost of revenues by revenue category for the periods presented herein:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Assets under management or administration

$
50,597

$
41,960

$
142,097

$
117,369
Subscription and licensing

5,076

5,110

14,832

11,934
Professional services and other

397

189

4,102

3,016
Total

$
56,070

$
47,259

$
161,031

$
132,319

~~5. Property and Equipment, Net~~

~~Property and equipment, net consists of the following:~~

September 30,

December 31,


Estimated Useful Life

2017

2016
Cost:

Computer equipment and software

3 years

$
60,073

$
52,921
Leasehold improvements

Shorter of the lease term or useful life of the asset

22,580

17,286
Office furniture and fixtures

3-7 years

8,048

6,911
Other office equipment

3-5 years

1,883

1,367

92,584

78,485
Less: accumulated depreciation and amortization

(57,310)

(45,485)
Property and equipment, net

$
35,274

$
33,000

~~Depreciation and amortization expense was as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Depreciation and amortization expense

$
3,724

$
3,740

$
11,668

$
11,147

~~6. Internally Developed Software, Net~~

~~Internally developed software, net consists of the following:~~

September 30,

December 31,


Estimated Useful Life

2017

2016
Internally developed software

5 years

$
42,928

$
33,718
Less: accumulated amortization

(22,649)

(18,858)
Internally developed software, net

$
20,279

$
14,860

~~Amortization expense was as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Amortization expense

$
1,391

$
917

$
3,791

$
2,569

~~Table of Contents~~

7.~~Goodwill & Intangible Assets, Net~~

~~Changes in the carrying amount of goodwill were as follows:~~

Envestnet

Envestnet | Yodlee

Total
Balance at December 31, 2016

$
163,751

$
268,185

$
431,936
Purchase accounting adjustments - Wheelhouse

—

457

457
Foreign currency translation

—

353

353
Balance at September 30, 2017

$
163,751

$
268,995

$
432,746

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

September 30, 2017

December 31, 2016





Gross




Net

Gross




Net

Estimated

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Useful Life

Amount

Amortization

Amount

Amount

Amortization

Amount
Customer lists

4
-
15
years

$
259,350

$
(72,743)

$
186,607

$
259,490

$
(54,861)

$
204,629
Proprietary technologies

2
-
8
years

57,328

(27,979)

29,349

57,770

(20,214)

37,556
Trade names

2
-
7
years

24,889

(8,766)

16,123

25,007

(6,178)

18,829
Backlog

4
years

11,000

(9,554)

1,446

11,000

(6,456)

4,544
Total intangible assets

$
352,567

$
(119,042)

$
233,525

$
353,267

$
(87,709)

$
265,558

~~Amortization expense was as follows:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Amortization expense

$
10,377

$
12,035

$
31,333

$
36,156

~~Future amortization expense of the intangible assets as of September 30, 2017, is expected to be as follows:~~

Years ending December 31:

Remainder of 2017
$
10,232
2018

35,657
2019

32,038
2020

28,344
2021

20,638
Thereafter

106,616

$
233,525

8.~~Prepaid~~11.Accounts Payable, Accrued Expensesand Other Current ~~Assets~~

~~Prepaid~~Liabilities

Accounts payable, accrued expenses and other current ~~assets consist~~liabilities consisted of the following:

September 30,

December 31,

2017

2016
Non-income tax receivable

$
4,952

$
3,879
FinaConnect escrow

2,000

429
Income tax receivable

2,267

1,864
Prepaid technology

1,827

1,318
Prepaid insurance

1,055

552
Other

11,898

8,182

$
23,999

$
16,224


	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)

9.~~Other Non-Current Assets~~

~~Other non-current assets consist of the following:~~

12.Debt

September 30,

December 31,

2017

2016
Assets to fund deferred compensation liability
$
5,122

$
2,738
Deposits:

Lease

4,548

4,262
Other

614

2,083
Unamortized issuance costs on revolving credit facility

3,320

—
Investments in private companies

3,216

2,750
Other

1,149

2,130

$
17,969

$
13,963

~~The Company owns 756,347 Class B Units in a privately held company at a historical purchase price of $1,250. The Company uses the cost method of accounting for this investment.~~

The Company previously owned 1,500,000 Class A units representing 21.4% of the outstanding membership interests of a privately held company for cash consideration of $1,500. During the third quarter of 2017, the Company purchased an additional 1,450,000 Class A units in this privately held company for cash consideration of $1,450. The additional investment increased the Company’s ownership interest to 34.5%.

The Company uses the equity method of accounting to record its portion of this privately held company’s net income or loss on a one quarter lag from the actual results of operations. The Company uses the equity method of accounting because of its less than 50 percent ownership. The Company’s interest in the earnings or losses of the privately held company is reflected in other expense, net on the condensed consolidated statements of operations.

~~10.Fair Value Measurements~~

The Company follows ASC 825-10, Financial Instruments, which provides companies the option to report selected financial assets and liabilities at fair value. ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect of the company’s choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet. The Company has not elected the ASC 825-10 option to report selected financial assets and liabilities at fair value.

~~Financial assets and liabilities at fair value are categorized based upon a fair value hierarchy established by GAAP, which prioritizes the inputs used to measure fair value into the following levels:~~

~~Level I:~~		~~Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.~~

~~Level II:~~		Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or inputs that are observable and can be corroborated by observable market data.

~~Level III:~~		Inputs reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

The following tables set forth the carrying value and estimated fair value of the ~~Company’s~~Company's debt obligations as of March 31, 2024 and December 31, 2023:


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

	(in thousands)

Revolving Credit Facility	$	—	$	—	$	—	$	—
Convertible Notes due 2025	317,500		(2,514)		314,986		309,404
Convertible Notes due 2027	575,000		(12,144)		562,856		609,500
Total debt	$	892,500	$	(14,658)	$	877,842	$	918,904


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

	(in thousands)

Revolving Credit Facility	$	—	$	—	$	—	$	—
Convertible Notes due 2025	317,500		(2,968)		314,532		294,958
Convertible Notes due 2027	575,000		(12,920)		562,080		571,746
Total debt	$	892,500	$	(15,888)	$	876,612	$	866,704

Revolving Credit Facility

The Revolving Credit 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 all other covenants in the Revolving Credit Facility as of March 31, 2024.

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Interest Expense

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:


	Three Months Ended
	March 31,
		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

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,
	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 Company's financial assets and liabilities measured at fair value on a recurring basis, ~~in the condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016,~~ based on the three-tier fair value ~~hierarchy.~~

hierarchy, as described in detail within the Company's Annual Report:


	March 31, 2024
	Fair Value		Level I		Level II		Level III

	(in thousands)
Assets:
Money market funds	$	30,347	$	30,347	$	—	$	—

Assets to fund deferred compensation liability	11,373		—		—		11,373
Total assets	$	41,720	$	30,347	$	—	$	11,373
Liabilities:

Deferred compensation liability	$	9,291	$	9,291	$	—	$	—
Total liabilities	$	9,291	$	9,291	$	—	$	—


	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)

September 30, 2017

Fair Value

Level I

Level II

Level III
Assets

Money market funds(1)
$
28,179

$
28,179

$
—

$
—
Assets to fund deferred compensation liability(2)

5,122

—

—

5,122
Total assets
$
33,301

$
28,179

$
—

$
5,122
Liabilities

Contingent consideration
$
2,696

$
—

$
—

$
2,696
Deferred compensation liability(3)

4,006

4,006

—

—
Total liabilities
$
6,702

$
4,006

$
—

$
2,696

December 31, 2016

Fair Value

Level I

Level II

Level III
Assets

Money market funds(1)
$
31,644

$
31,644

$
—

$
—
Assets to fund deferred compensation liability(2)

2,738

—

—

2,738
Total assets
$
34,382

$
31,644

$
—

$
2,738
Liabilities

Contingent consideration
$
4,868

$
—

$
—

$
4,868
Deferred compensation liability(3)

2,885

2,885

—

—
Total liabilities
$
7,753

$
2,885

$
—

$
4,868

~~(1)~~

~~The fair values of the Company’s investments in money-market funds are based on the daily quoted market prices for the net asset value of the various money market funds.~~

~~(2)~~

The fair value of assets to fund deferred compensation liability approximates the cash surrender value of the life insurance premiums and is included in other non-current assets in the condensed consolidated balance sheets.

~~(3)~~

The deferred compensation liability is included in other non-current liabilities in the condensed consolidated balance sheets and its fair market value is based on the daily quoted market prices for the net asset value of the various funds in which the participants have selected.

Level I assets and liabilities include money-market funds not insured by the FDIC and deferred compensation liability. The Company periodically invests excess cash in money-market funds not insured by the FDIC. The Company believes that the investments in money market funds are on deposit with creditworthy financial institutions and that the funds are highly liquid. These money-market funds are considered Level I and are included in cash and cash equivalents in the condensed consolidated balance sheets. The fair value of the deferred compensation liability is based upon the daily quoted market prices for net asset value on the various funds selected by participants.

Level III assets and liabilities consist of the estimated fair value of contingent consideration as well as the assets to fund deferred compensation liability. The fair market value of the assets to fund deferred compensation liability is based upon the cash surrender value of the life insurance premiums.

The fair value of the contingent consideration liabilities related to the FinaConnect and Wheelhouse acquisitions were estimated using a discounted cash flow method with significant inputs that are not observable in the market and thus represent a Level III fair value measurement as defined in ASC 820, ~~Fair Value Measurements and Disclosures~~. The significant inputs in the Level III measurement not supported by market activity included our assessments of expected future cash flows related to our acquisitions of FinaConnect and Wheelhouse during the subsequent periods from the date of acquisition, appropriately discounted considering the uncertainties associated with the obligation, and calculated in accordance with the terms of the agreement.

The Company utilized a discounted cash flow method with expected future performance of FinaConnect and Wheelhouse, and their ability to meet the target performance objectives as the main driver of the valuation, to arrive at the fair values of their respective contingent consideration. The Company will continue to reassess the fair value of the contingent consideration made subsequent to the measurement period for each acquisition at each reporting date until settlement. Changes to the estimated fair values

~~Table of Contents~~

~~of the contingent consideration will be recognized in earnings of the Company and included in general and administration on the condensed consolidated statements of operations.~~

The table below presents a reconciliation of contingent consideration liabilities of which the Company measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2016 to September 30, 2017:

Fair Value of

Contingent

Consideration

Liabilities
Balance at December 31, 2016

$
4,868
Settlement of contingent consideration liability

(2,286)
Contingent consideration adjustment

(218)
Accretion on contingent consideration

332
Balance at September 30, 2017

$
2,696

The table below presents a reconciliation of the assets to fund deferred compensation liability of which the Company measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, 2016 to September 30, 2017:

Fair Value of

Assets to Fund

Deferred

Compensation

Liability
Balance at December 31, 2016

$
2,738
Contributions and fair value adjustments

2,384
Balance at September 30, 2017

$
5,122

The asset value was increased due to funding of the plan as well as a gain on the underlying investment vehicles of $350, which resulted in an asset value as of September 30, 2017 of $5,122, which was included in other non-current assets on the condensed consolidated balance sheets.

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 ~~change~~when changes in circumstances ~~that 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 ~~nine~~three months ended ~~September 30, 2017.~~

~~On December 15, 2014,~~March 31, 2024.

Fair Value of Assets Used to Fund the ~~Company issued $172,500~~Deferred Compensation Liability

The table below presents a reconciliation of ~~Convertible Notes.~~ ~~As of September 30, 2017 and December 31, 2016,~~ the ~~carrying~~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):


	Fair Value of Assets Used to Fund Deferred Compensation Liability

	(in thousands)
Balance as of December 31, 2023	$	10,961

Fair value adjustments and fees	412
Balance as of March 31, 2024	$	11,373

The fair market value of the ~~2019 Convertible Notes equaled $157,353~~ ~~and $152,575, respectively, and represents~~assets used to fund the ~~aggregate principal amount outstanding less~~Company's deferred compensation liability is measured using the ~~unamortized discount and debt issuance costs. As of September 30, 2017 and December 31, 2016, the fair~~cash surrender value of the ~~Convertible Notes was $181,142~~Company's life insurance premiums and ~~$164,824, respectively.~~ is included in other assets in the condensed consolidated balance sheets. Changes in fair value, if any, are recognized in the Company's earnings and included in general and administrative expense in the condensed consolidated statements of operations.

Fair Value of Debt Agreements

The Company ~~considers the~~considered its Convertible Notes to be Level II liabilities as of March 31, 2024 and ~~uses~~December 31, 2023, and used a market approach to calculate ~~the~~their respective fair ~~value of the Convertible Notes.~~values. The estimated fair value for each convertible note was determined based on ~~the~~ estimated or actual bids and offers ~~of the Convertible Notes~~ in an over-the-counter market on ~~September 30, 2017 (see Note 14).~~

~~As of September 30, 2017~~March 31, 2024 and December 31, ~~2016, there was $0~~2023, respectively (See “Note 12—Debt”).

Fair Value of Other Financial Assets and $142,000, respectively, of Term Notes outstanding. As of December 31, 2016 the outstanding value of our Term Notes approximated fair value as the Term Notes bore interest at variable rates and we believed our credit risk quality was consistent with when the debt originated. ~~As of September 30, 2017 and December 31, 2016, the carrying value of the Term Notes equaled $~~0 ~~and $138,335, respectively, and represents the aggregate principal amount outstanding less the unamortized debt issuance costs.~~ Liabilities

The Company considered the ~~Term Notes as of December 31, 2016 to be Level II liability (See Note 14).~~

As of September 30, 2017 and December 31, 2016, there was $101,168 and $0, respectively, outstanding on the revolving credit facility under the Amended and Restated Credit Agreement. As of September 30, 2017 and December 31, 2016 the outstanding balance on our revolving credit facility approximated fair value as the revolving credit facility bore interest at variable rates and we believed our credit risk quality was consistent with when the debt originated. The Company considered the revolving credit facility as of December 31, 2016 and as of September 30, 2017 to be Level I liability (See Note 14).

~~Table of Contents~~

~~We consider the~~ recorded value of ~~our~~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 ~~at September 30, 2017~~as of March 31, 2024 and December 31, 2023, based upon the short-term nature of ~~the~~these assets and liabilities.

~~11.Accrued Expensesand Other Liabilities~~

~~Accrued expenses and other liabilities consist of the following:~~

September 30,

December 31,

2017

2016
Accrued investment manager fees

$
37,344

$
31,278
Accrued compensation and related taxes

37,882

35,287
Sales and use tax payable

12,914

10,108
Accrued professional services

4,646

3,213
Definite consideration

1,250

445
Other accrued expenses

8,841

7,432

$
102,877

$
87,763

~~12. Other Non-Current Liabilities~~

~~Other non-current liabilities consist of the following:~~

September 30,

December 31,

2017

2016
Uncertain tax positions

$
10,379

$
7,762
Accrued deferred compensation

4,006

2,885
Accrued purchase liability

—

1,250
Other

142

1,539

$
14,527

$
13,436

~~13.Income Taxes~~

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Income (loss) before income tax provision (benefit)

$
362

$
(5,725)

$
(10,101)

$
(33,595)

Income tax provision (benefit)

1,682

(1,668)

10,824

(10,602)

Effective tax rate

464.6
%

29.1
%

(107.2)
%

31.6
%

The Company's effective tax rate in the three and nine months ended September 30, 2017 differed from the effective tax rate in the three and nine months ended September 30, 2016, primarily due to the valuation allowance the Company has put on all U.S. deferreds with the exception of indefinite-lived intangibles and unrepatriated foreign earnings and profits, resulting in no benefit being recognized for the tax loss in the U.S.

Gross unrecognized tax benefits were $17,853 and $16,476 at September 30, 2017 and December 31, 2016, respectively. At September 30, 2017, the amount of unrecognized tax benefits that would benefit the Company’s effective tax rate, if recognized, was $17,853.

The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. The Company recorded interest and penalties of $371 and $1,261 for the three and nine months period ended September 30, 2017,

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

~~respectively.~~14.Revenue and Direct Expense

Disaggregation of Revenue

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


	Three Months Ended March 31,
	2024						2023
	Envestnet Wealth Solutions		Envestnet Data & Analytics		Total		Envestnet Wealth Solutions		Envestnet Data & Analytics		Total

	(in thousands)
Revenue:
Asset-based	$	202,616	$	—	$	202,616	$	176,932	$	—	$	176,932
Subscription-based	84,168		33,294		117,462		80,470		36,609		117,079
Total recurring revenue	286,784		33,294		320,078		257,402		36,609		294,011
Professional services and other revenue	3,026		1,846		4,872		3,247		1,449		4,696
Total revenue	$	289,810	$	35,140	$	324,950	$	260,649	$	38,058	$	298,707

The following table presents the Company’s revenue disaggregated by geography, based on the billing address of the customer:


	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, 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 $554.5 million. The Company ~~recorded interest~~expects to recognize approximately 31% of this revenue during the remainder of 2024, approximately 50% throughout 2025 and ~~penalties~~2026, with the balance recognized thereafter. These remaining performance obligations are not indicative of ~~$334~~revenue for future periods.

Contract Balances

Total deferred revenue as of March 31, 2024 decreased by $4.1 million from December 31, 2023, primarily the result of timing of cash receipts and ~~$723~~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 ~~and nine~~ months ~~period ended September 30, 2016, respectively.~~

The Company files a consolidated federal income tax return and separate tax returns with various states. Additionally, foreign subsidiaries of the Company file tax returns in foreign jurisdictions. The Company’s tax returns for the calendar years ended December 31, 2016, 2015, 2014, and 2013 remain open to examination by the Internal Revenue Service in their entirety. With respect to state taxing jurisdictions, the Company’s tax returns for calendar years ended December 31, 2011 through 2016 remain open to examination by various state revenue services.

~~The Company's Indian subsidiaries are currently under examination by the India Tax Authority for the fiscal years~~ ended March 31, ~~2006~~2024 and ~~forward. Based on the outcome of examinations of our subsidiaries or the result of the expiration of statutes of limitations it is reasonably possible~~2023 that ~~the related unrecognized tax benefits could change from those recorded~~was included in the ~~consolidated~~opening deferred revenue balance ~~sheet. It is possible that one or more~~was $15.9 million and $16.8 million, respectively. The majority of ~~these audits may be finalized within the next twelve months however, at~~ this ~~time, we have~~revenue consists of subscription-based services and professional services arrangements. The amount of revenue recognized from performance obligations satisfied in prior periods was not ~~been notified by the India Tax Authority of any audit scheduled for finalization within the next twelve months.~~

~~14. Debt~~

~~The Company’s outstanding debt obligations~~material.

Deferred Sales Incentive Compensation

Deferred sales incentive compensation was $11.3 million and $11.5 million as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016 were as follows:~~

September 30,

December 31,

2017

2016
Convertible Notes

$
172,500

$
172,500
Unaccreted discount on Convertible Notes

(13,075)

(17,149)
Unamortized issuance costs on Convertible Notes

(2,072)

(2,776)
Convertible Notes carrying value

$
157,353

$
152,575

Term Notes

$
—

$
142,000
Unamortized issuance costs on Term Notes

—

(3,665)
Term Notes carrying value

$
—

$
138,335

Revolving credit facility balance

$
101,168

$
—

~~Interest~~2023, respectively. Amortization expense for deferred sales incentive compensation was ~~comprised of~~$1.2 million and $1.1 million for the ~~following~~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 amortization expense ~~net~~is included in employee compensation expense in the condensed consolidated ~~statement~~statements of ~~operations:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Coupon interest

$
755

$
754

$
2,264

$
2,264
Amortization of issuance costs

483

737

2,529

2,169
Accretion of debt discount

1,393

1,323

4,074

3,901
Interest on credit agreement

1,088

1,255

3,543

3,792
Undrawn and other fees

139

53

261

219

$
3,858

$
4,122

$
12,671

$
12,345

~~Credit Agreement~~

~~On July 18, 2017,~~operations. No significant impairment loss for capitalized costs was recorded during the Company and certain of its subsidiaries entered into a Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”) with a group of banks (the “Banks”), for which Bank of Montreal is acting as administrative agent (the “Administrative Agent”). The Second Amended and Restated Credit Agreement amends and restates the Amended and Restated Credit Agreement, dated as of November 19, 2015, as amended, among the Company, the guarantors party thereto, the lenders party thereto and Bank of Montreal, as administrative agent (the “Prior Credit Facility”). Pursuant to the Second Amended and Restated Credit Agreement, the Banks have agreed to provide to the Company revolving credit commitments (the “Revolving Credit Facility”) in the aggregate amount of up to $350,000 which amount may be increased by $50,000. The Second Amended and Restated Credit Agreement also includes a $5,000 subfacility for the issuance of letters of credit.

~~Table of Contents~~

Obligations under the Second Amended and Restated Credit Agreement are guaranteed by substantially all of the Company’s U.S. subsidiaries. In accordance with the terms of the Amended and Restated Security Agreement, dated July 18, 2017 (the “Security Agreement”), among the Company, the Debtors party thereto and the Administrative Agent, obligations under the Second Amended and Restated Credit Agreement are secured by substantially all of the Company’s domestic assets and the Company’s pledge of 66% of the voting equity and 100% of the non-voting equity of certain of its first-tier foreign subsidiaries. Proceeds under the Second Amended and Restated Credit Agreement may be used to finance capital expenditures, working capital, permitted acquisitions and for general corporate purposes.

The Company will pay interest on borrowings made under the Second Amended and Restated Credit Agreement at rates between 1.50 percent and 3.25 percent above LIBOR based on the Company’s total leverage ratio. Borrowings under the Second Amended and Restated Credit Agreement are scheduled to mature on July 18, 2022.

The Second Amended and Restated Credit Agreement 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 senior leverage ratio, a maximum total leverage ratio, a minimum interest coverage ratio and minimum liquidity requirement, and provisions that limit the ability of the Company and its subsidiaries to incur debt, make investments, sell assets, create liens, engage in transactions with affiliates, engage in mergers and acquisitions, pay dividends and other restricted payments, grant negative pledges and change their business activities.

~~As of September 30, 2017, an amount of $101,168 was outstanding on the Revolving Credit Facility.~~

The July 18, 2017 amendment to the Prior Credit Facility replaced the Term Notes and related excess cash flow payment obligations with a revolving line of credit. The Company’s condensed consolidated balance sheets reflect these changes as of September 30, 2017 with no portion of debt related to the revolving credit facility being classified as short-term. As of September 30, 2017, the debt issuance costs related to the Second Amended and Restated Credit Agreement and the Prior Credit Facility are presented in other non-current assets and prepaid expenses and other current assets which have outstanding amounts of $3,320 and $855, respectively.

~~Convertible Notes~~

On December 15, 2014, the Company issued $172,500 of Convertible Notes. Net proceeds from the offering were $166,967. The Convertible Notes bear interest at a rate of 1.75 percent per annum payable semiannually in arrears on June 15 and December 15 of each year, beginning on June 15, 2015.

The Convertible Notes are general unsecured obligations, subordinated in right of payment to our obligations under our Credit Agreement. The Convertible Notes rank equally in right of payment with all of the Company’s existing and future senior indebtedness and will be senior in right of payment to any of the Company’s future subordinated indebtedness. The Convertible Notes will be structurally subordinated to the indebtedness and other liabilities of any of our subsidiaries, other than to the extent the Convertible Notes are guaranteed in the future by our subsidiaries as described in the indenture and will be effectively subordinated to and future secured indebtedness to the extent of the value of the assets securing such indebtedness. Certain of our subsidiaries guarantee our obligations under our Credit Agreement.

Upon the occurrence of a “fundamental change,” as defined in the indenture, the holders may require the Company to repurchase all or a portion of the Convertible Notes for cash at 100% of the principal amount of the Convertible Notes being purchased, plus any accrued and unpaid interest.

The Convertible Notes are convertible into shares of the Company’s common stock under certain circumstances prior to maturity at a conversion rate of 15.9022 shares per $1 principal amount of the Convertible Notes, which represents a conversion price of $62.88 per share, subject to adjustment under certain conditions. Holders may convert their Convertible Notes at their option at any time prior to the close of business on the business day immediately preceding July 1, 2019, only under the following circumstances: (a) during any calendar quarter commencing after the calendar quarter ending onthree months ended March 31, 2015 (and only during such calendar quarter), if the last reported sale price of our common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Convertible Notes in effect on each applicable trading day; (b) during the five consecutive business-day period2024 and 2023.

Direct Expense

The following ~~any five consecutive trading-day period in which the trading price for the Convertible~~

table summarizes direct expense by revenue category:


	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~~

Notes for each such trading day was less than 98% of the last reported sale price of our common stock on such date multiplied by the then-current conversion rate; or (c) upon the occurrence of specified corporate events as defined in the indenture.

Upon conversion, the Company may pay cash, shares of the Company’s common stock or a combination of cash and stock, as determined by the Company in its discretion. The Company’s stated policy is to settle the debt component of the Convertible Notes at least partially or wholly in cash. This policy is based both on the Company’s intent and the Company’s ability to settle these instruments in cash.

The Company has separately accounted for the liability and equity components of the Convertible Notes by allocating the proceeds from issuance of the Convertible Notes between the liability component and the embedded conversion option, or equity component. This allocation was done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. The Company allocated $26,618 to the equity component, net of offering costs of $882. The Company recorded a discount on the Convertible Notes of $27,500 which is being accreted and recorded as additional interest expense over the life of the Convertible Notes. During the three and nine month periods ended September 30, 2017, the Company recognized $1,393 and $4,074, respectively, in accretion related to the discount. During the three and nine month periods ended September 30, 2016, the Company recognized $1,323 and $3,901, respectively, in accretion related to the discount. The effective interest rate of the liability component of the Convertible Notes is equal to the stated interest rate plus the accretion of original issue discount. The effective interest rate on the liability component of the Convertible Notes for the three and nine month periods ended September 30, 2017 was 5.4%. The effective interest rate on the liability component of the Convertible Notes for the three and nine month periods ended September 30, 2016 was 6.0%.

~~See Note 16 for further discussion of the effect of conversion on net loss per common share.~~

15.Stock-Based Compensation

The Company has stock options, RSUs and ~~restricted stock units~~PSUs outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). On July 13, 2017, the shareholders approved the 2010 Long-Term Incentive Plan as Amended. The amendment increased the number of common shares of the Company reserved for delivery under the 2010 Plan ~~by 3,525,000 shares.~~

~~In connection with~~and the ~~Yodlee merger, the Company adopted the 2015 Acquisition~~2019 Equity Award Plan (the “2015 Plan”). The 2015 Plan provides for the grant of restricted common stock units for certain Envestnet | Yodlee employees. The maximum number of shares of stock which may be issued with respect to awards under the 2015 Plan is 1,052,000. These awards vest over a period of 43 months subsequent to the acquisition date of November 19, 2015.Plan. As of ~~September 30, 2017, the remaining amount of unrecognized expense totaled $6,070.~~

~~As of September 30, 2017,~~March 31, 2024, the maximum number of common shares ~~of the Company~~ available for future issuance under the ~~Company’s~~Company's plans is ~~3,945,537.~~

654,040.

Stock-based compensation expense under the Company’s plans was as follows:

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Stock-based compensation expense

$
8,048

$
7,554

$
23,451

$
25,872
Tax effect on stock-based compensation expense

(3,018)

(3,022)

(8,794)

(10,349)
Net effect on income

$
5,030

$
4,532

$
14,657

$
15,523


	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 ~~37.5%~~25.5% for each of the three ~~and nine~~ months ended ~~September 30, 2017. The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 40.0% for the three~~March 31, 2024 and nine months ended September 30, 2016. However, due to the valuation allowance recorded on domestic deferreds, there was no tax effect related to stock-based compensation expense for the three and nine months ended September 30, 2017.

2023.

Stock Options

~~Table of Contents~~

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

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016


2017

2016

Grant date fair value of options

$
—

$
14.46

$
14.51

$
9.56

Volatility

—
%

42.2
%

43.8
%

42.2
%
Risk-free interest rate

—
%

1.1
%

2.1
%

1.4
%
Dividend yield

—
%

—
%

—
%

—
%
Expected term (in years)

—

5.0

6.3

6.3

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
Outstanding as of December 31, 2016

3,033,194

$
16.33

4.3

$
63,264
  Granted

75,238

31.70

  Exercised

(208,334)

9.12

  Forfeited

(9,062)

45.81

Outstanding as of March 31, 2017

2,891,036

17.15

4.5

50,792
  Granted

—

—

  Exercised

(84,949)

8.46

  Forfeited

(1,667)

32.46

Outstanding as of June 30, 2017

2,804,420

17.41

4.3

66,206
  Granted

—

—

  Exercised

(134,890)

13.71

  Forfeited

(2,201)

30.33

Outstanding as of September 30, 2017

2,667,329

17.58

4.1

89,739
Options exercisable

2,435,815

16.11

3.7

85,448

~~Exercise prices~~


		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 ~~stock options outstanding as of September 30, 2017 range from $0.11 to $55.29. At September 30, 2017,~~March 31, 2024, there was ~~$2,414~~no amount of unrecognized stock-based compensation expense related to ~~unvested~~ stock ~~options,~~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, 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, 2024, there was $112.4 million of unrecognized stock-based compensation expense related to RSUs, which the Company expects to recognize over a weighted-average period of ~~1.8~~2.1 years.

~~Table~~ As of ~~Contents~~

~~Restricted Stock Units and Restricted Stock Awards~~

Periodically, the Company grants restricted stock unit awards to employees. Beginning with grants issued in February 2016, restricted stock units awards vest one-third on the first anniversary of the grant date and quarterly thereafter. For grants issued prior to February 2016, restricted stock units awards would vest ratably in three annual tranches from the date of grant. The following is a summary of the activity for unvested restricted stock units and awards granted under the Company’s plans:

Weighted-

Average Grant

Number of

Date Fair Value

Shares

per Share
Outstanding as of December 31, 2016

1,894,759

$
30.40
Granted

872,941

31.89
Vested

(526,572)

31.68
Forfeited

(20,084)

27.52
Outstanding as of March 31, 2017

2,221,044

31.98
Granted

47,700

35.05
Vested

(199,163)

30.59
Forfeited

(45,683)

30.11
Outstanding as of June 30, 2017

2,023,898

32.17
Granted

29,000

39.10
Vested

(121,449)

32.26
Forfeited

(30,369)

31.61
Outstanding as of September 30, 2017

1,901,080

32.28

~~At September 30, 2017,~~March 31, 2024, there was ~~$49,527~~$4.0 million of unrecognized stock-based compensation expense related to ~~unvested restricted stock units and awards,~~PSUs, which the Company expects to recognize over a weighted-average period of ~~2.0~~2.1 years.

16.~~Net Loss Per Share~~

~~Basic loss per common share~~Income Taxes

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


	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 ~~computed~~required to report income tax expense by ~~dividing net loss available~~applying a projected AETR to ~~common stockholders by the weighted average number of shares of common stock outstanding~~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 ~~calculation of diluted loss per share,~~three months ended March 31, 2024 and March 31, 2023, the ~~basic weighted average number of shares is increased by~~Company's effective tax rate differed from the ~~dilutive effect of stock options, restricted stock awards, restricted stock units and Convertible Notes using~~statutory rate primarily due to the ~~treasury stock method, if dilutive.No items were included~~increase in the ~~computation of diluted loss per share in the three and nine months ended September 30, 2016 and 2017 because~~valuation allowance the Company ~~incurred~~has placed on a ~~net loss attributable to Envestnet, Inc. in each~~portion of ~~these periods~~its U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, uncertain tax positions and ~~therefore these items were considered anti-dilutive.~~

~~The Company accounts for~~ the ~~effect~~impact of the Convertible Notes on diluted earnings per share using the treasury stock method since they may be settled in cash, shares or a combination thereof at the Company’s option. As a result, the Convertible Notes have no effect on diluted earnings per share until the Company’s stock price exceeds the conversion price of $62.88 per share, or if the trading price of the Convertible Notes meets certain criteria as described in Note 14 at which point, the effect of the conversion feature would be included in the Company’s calculation of diluted earnings per share. In the period of conversion, the Convertible Notes will have no impact on diluted earnings if the Convertible Notes are settled in cashstate and ~~will have an impact on dilutive earnings per share if the Convertible Notes are settled in shares upon conversion.~~

local taxes offset by federal and state R&D credits.

Table of Contents

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 ~~loss per share~~income (loss) attributable to Envestnet, Inc.:

, per share:

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016
Net loss attributable to Envestnet, Inc.

$
(1,320)

$
(4,057)

$
(20,925)

$
(22,993)

Basic number of weighted-average shares outstanding

44,044,527

42,843,103

43,604,869

42,704,383

Diluted number of weighted-average shares outstanding

44,044,527

42,843,103

43,604,869

42,704,383

Net loss per share attributable to Envestnet, Inc.

Basic

$
(0.03)

$
(0.09)

$
(0.48)

$
(0.54)

Diluted

$
(0.03)

$
(0.09)

$
(0.48)

$
(0.54)


	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 ~~for~~and therefore excluded from the ~~three and nine months ended September 30, 2017 and 2016~~computation of diluted net income (loss)per share were as follows:

As of

September 30,

2017

2016
Options to purchase common stock

2,667,329

3,283,331
Unvested restricted stock awards and units

1,901,080

1,981,775
Convertible Notes

2,743,321

2,743,321
Total

7,311,730

8,008,427

~~17.Major Customers~~

~~One customer accounted~~


	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

Envestnet is organized around two business 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 solutions to empower financial advisors and institutions to enable them to deliver holistic advice to their clients.

•Envestnet Data & Analytics– a leading provider of financial data aggregation, analytics and digital experiences to meet the needs of financial institutions, enterprise FinTech firms and market investment research firms worldwide.

The Company also incurs expenses not directly attributable to the segments listed above. These nonsegment operating expenses primarily consist of employee compensation for ~~more than 10%~~certain corporate officers, certain types of ~~the Company’s~~professional service expenses, insurance, acquisition related transaction costs, certain restructuring charges and other non-recurring and/or non-operationally related expenses.

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

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The following table presents a reconciliation from income (loss) from operations by segment to consolidated net income (loss) attributable to Envestnet, Inc.:


	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 ~~revenues:~~

assets by segment:

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

Fidelity

17
%
15
%

17
%
15
%

~~18.Commitments~~


	March 31,		December 31,
	2024		2023

	(in thousands)
Envestnet Wealth Solutions	$	1,550,105	$	1,562,600
Envestnet Data & Analytics	313,940		314,652
Consolidated total assets	$	1,864,045	$	1,877,252

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.

~~Litigation~~

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.

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Legal Proceedings

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

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

On October 30, 2019, the Company and Yodlee filed counterclaims against FinancialApps. Yodlee alleges that FinancialApps fraudulently induced it to enter into contracts with FinancialApps, then breached those contracts. FinancialApps has filed a motion to dismiss Yodlee’s counterclaims. On September 15, 2020, the District Court denied FinancialApps’ motion on all counts except for the breach-of-contract claim which was dismissed on a pleading technicality without prejudice. On that count, the Court granted Yodlee leave to amend its counterclaim, cure the technical deficiency, and reassert its claim. Yodlee and Envestnet filed amended counterclaims on September 30, 2020. The amended counterclaims (1) cure that technical deficiency and reassert Yodlee’s contract counterclaim; and (2) broaden the defamation counterclaims arising out of various defamatory statements FinancialApps disseminated in the trade press after filing the lawsuit. On January 14, 2021, the Court ordered that (i) FinancialApps' 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' 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' allegations are without merit and will continue to defend the claims against it and litigate the counterclaims vigorously.

The Company and Yodlee were 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). Plaintiffs 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)

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.

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 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 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 ~~litigation~~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

~~Table of Contents~~

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. ~~Litigation accruals are recorded when and if it is determined that a loss is both probable and reasonably estimable.~~ 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 ~~September 30, 2017.~~March 31, 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 ~~litigation~~legal proceedings could have a material adverse effect on ~~Envestnet’s~~the Company’s results of operations or cash flow in a particular quarter or year.

~~Contingencies~~

Certain of the Company’s revenues are subject to sales and use taxes in certain jurisdictions where it conducts business in the United States. As of September 30, 2017, the Company estimated a sales and use tax liability of $12,914. This amount is included in accrued expenses and other liabilities on the condensed consolidated balance sheet. The Company also estimated a sales and use tax receivable of $4,952 related to estimated recoverability of amounts due from customers. This amount is included in prepaid expenses and other current assets on the condensed consolidated balance sheet. As a result, a net sales and use tax liability of $7,962 related to multiple jurisdictions with respect to revenues in the nine month period ended September 30, 2017 and prior years was probable. Additional future information obtained from the applicable jurisdictions may affect the Company’s estimate of its sales and use tax liability, but such change in the estimate cannot currently be made.

~~Leases~~

~~The Company rents office space under leases that expire at various dates through 2030. Future minimum lease commitments under these operating leases, as of September 30, 2017, were as follows:~~

Years ending December 31:

Remainder of 2017

$
3,309
2018

13,640
2019

14,492
2020

14,343
2021

13,751
Thereafter

53,538
Total

$
113,073

~~19.Segment Information~~

~~Business segments are generally organized around our business services. Our business segments are:~~

~~Envestnet –~~ ~~a leading provider of unified wealth management software and services to empower financial advisors and institutions.~~

~~Envestnet | Yodlee –~~ ~~a leading data aggregation and data intelligence platform powering dynamic, cloud-based innovation for digital financial services.~~

The information in the following tables is derived from the Company’s internal financial reporting used for corporate management purposes. Nonsegment expenses include salary and benefits for certain corporate employees and officers, certain types of professional service expenses, insurance, acquisition related transaction costs, restructuring charges, and other non-recurring and/or non-operationally related expenses.

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~~The following table presents revenue by segment:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Revenue:

Envestnet

$
135,948

$
114,511

$
386,638

$
328,417

Envestnet | Yodlee

39,666

34,644

114,179

94,267

Consolidated revenue

$
175,614

$
149,155

$
500,817

$
422,684

Fidelity revenue as a percentage of Envestnet segment revenue:

22%

19%

22%

19%

~~No single customer amounts for Envestnet | Yodlee exceeded 10% of the segment total.~~

~~The following table presents a reconciliation from income (loss) from operations by segment to consolidated net loss attributable to Envestnet, Inc.:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Envestnet
$
18,955

$
12,361

$
48,277

$
32,425
Envestnet | Yodlee

(3,364)

(8,416)

(16,707)

(33,728)
  Total segment income (loss) from operations

15,591

3,945

31,570

(1,303)
Nonsegment operating expenses

(11,243)

(5,236)

(27,833)

(19,078)
Other expense, net

(3,986)

(4,434)

(13,838)

(13,214)
Consolidated income (loss) before income taxes (benefit)

362

(5,725)

(10,101)

(33,595)
Income tax provision (benefit)

1,682

(1,668)

10,824

(10,602)
Consolidated net loss

(1,320)

(4,057)

(20,925)

(22,993)
  Add: Net loss attributable to non-controlling interest

—

—

—

—
Consolidated net loss attributable to Envestnet, Inc.
$
(1,320)

$
(4,057)

$
(20,925)

$
(22,993)

Segment assets consist of cash, accounts receivable, prepaid expenses and other current assets, property, plant and equipment, net, internally developed software, net, goodwill, and other intangibles, net, and other non-current assets. Segment capital expenditures consist of property and equipment and internally developed software expenditures.

~~A summary of consolidated total assets, consolidated depreciation and amortization and consolidated capital expenditures follows:~~

September 30,

December 31,

2017

2016
Segment assets:

Envestnet
$
344,269

$
341,602
Envestnet | Yodlee

517,953

530,799
Consolidated total assets
$
862,222

$
872,401

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Segment depreciation and amortization:

Envestnet
$
6,414

$
6,362

$
19,196

$
18,786
Envestnet | Yodlee

9,078

10,330

27,596

31,086
Consolidated depreciation and amortization
$
15,492

$
16,692

$
46,792

$
49,872

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Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
Segment capital expenditures:

Envestnet
$
4,406

$
7,967

$
17,337

$
13,130
Envestnet | Yodlee

1,404

1,212

3,305

3,926
Consolidated capital expenditures
$
5,810

$
9,179

$
20,642

$
17,056

~~20. Geographical Information~~

~~Revenue by geography is based on the billing address of the customer. The following table sets forth revenue by geographic area:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016
United States
$
158,750

$
135,160

$
452,333

$
381,628
International (1)

16,864

13,995

48,484

41,056
Total
$
175,614

$
149,155

$
500,817

$
422,684

~~(1)~~

~~No foreign country accounted for more than 10% of total revenues.~~

~~The following table sets forth property, plant, and equipment, net by geographic area:~~

September 30,

December 31,

2017

2016
United States
$
29,927

$
28,713
India

4,886

3,596
Other

461

691
Total
$
35,274

$
33,000

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

~~Unless otherwise indicated,~~

Forward-Looking Statements

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and the ~~terms “Envestnet,” the “Company,” “we,” “us” and “our” refer to Envestnet, Inc. and its subsidiaries.~~

~~Unless otherwise indicated, all amounts are~~related notes included elsewhere in ~~thousands, except share and per share information, numbers of financial advisors and client accounts.~~

~~Forward-Looking Statements~~

~~This~~this quarterly report on Form 10-Q for the quarter ended March 31, 2024 and the consolidated financial statements and related notes included on Form 10-K for the year ended December 31, 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.”~~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. ~~Forward-looking statements may include, among others, statements relating to:~~

~~difficulty in sustaining rapid revenue growth, which may place significant demands on our administrative, operational and financial resources,~~

~~the concentration of nearly all of our revenues from the delivery of our solutions and services to clients in the financial services industry,~~

~~our reliance on a limited number of clients for a material portion of our revenue,~~

~~the renegotiation of fee percentages or termination of our services by our clients,~~

our ability to identify potential acquisition candidates, complete acquisitions, including our acquisition of FolioDynamix, successfully integrate acquired companies and realize the expected benefits of acquisitions,

~~the impact of market and economic conditions on revenues,~~

~~our inability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner,~~

our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytic solutions and market research services and premium financial applications (“FinApps”),

~~compliance failures,~~

~~adverse judicial or regulatory proceedings against us,~~

~~liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest,~~

~~changes in laws and regulations,~~

~~general economic conditions, political and regulatory conditions,~~

~~the impact of fluctuations in market condition and interest rates on the demand for our products and services and the value of assets under management or administration,~~

~~the impact of market conditions on our ability to issue debt and equity,~~

~~the impact of fluctuations in interest rates on our cost of borrowing,~~

~~our financial performance,~~

~~the results of our investments in research and development, our data center and other infrastructure,~~

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~~our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information,~~

~~failure of our systems to work properly,~~

~~our ability to realize operating efficiencies,~~

~~the advantages of our solutions as compared to those of others,~~

~~the failure to protect our intellectual property rights,~~

~~our ability to establish and maintain intellectual property rights,~~

~~our ability to retain and hire necessary employees and appropriately staff our operations, and~~

~~management’s response to these factors.~~

In addition, there may be other factors of which we are presently unaware or that we currently deem immaterial that could cause our actual results to be materially different from the results referenced in the forward‑~~looking statements. All forward~~‑~~looking statements contained in this quarterly report and documents incorporated herein by reference are qualified in their entirety by this cautionary statement. Forward~~‑~~looking statements speak only as of the date they are made, and we do not intend to update or otherwise revise the forward~~‑looking statements to reflect events or circumstances after the date of this quarterly report or to reflect the occurrence of unanticipated events, except as required by applicable law. If we do update one or more forward‑~~looking statements, no inference should be made that we will make additional updates with respect to those or other forward~~‑~~looking statements.~~

~~Although we believe that our plans, intentions and expectations are reasonable, we may not achieve our plans, intentions or expectations.~~

These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this ~~quarterly report~~Quarterly Report are set forth in Part I, ~~under “Risk~~Item 1A.“Risk Factors”; in our 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 on Form 10-Q~~Quarterly Report and ~~our annual report on Form 10-K for the year ended December 31, 2016 (the “2016 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.~~

~~The following discussion and analysis should also be read along with our condensed consolidated financial~~ statements, ~~and the related notes included elsewhere in this quarterly report and the consolidated financial statements and related notes included in our 2016 Form 10-K.~~ Except for the historical information contained herein, this discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed below.

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

Overview

Envestnet, through its subsidiaries, is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet is a ~~leading provider of intelligent systems for~~leader in helping transform wealth management, ~~and~~working towards its goal of expanding a holistic financial wellness. Envestnet’s unified technology enhances advisor productivity and strengthens the wealth management process, delivering unparalleled flexibility, accuracy, performance, and value. Envestnet enables a transparent, independent, objective, and fiduciary standard of care, and empowers enterprises andwellness ecosystem so that our clients can better serve their clients.

Envestnet's clients include more than 109,000 advisors, ~~to more fully understand their clients and deliver better outcomes.~~

~~More than 2,900 companies, including 16~~ 17of the 20 largest U.S. banks, 3948 of the 50 largest wealth management and brokerage firms, over 500 of the largest ~~registered investment advisers (“RIA”),~~RIAs, and hundreds of ~~Internet services~~FinTech companies, all of which leverage Envestnet technology and ~~services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences, and~~services that help drive better outcomes for enterprises, advisors and their clients.

Founded in 1999, Envestnet has been a leader in helping transform wealth management, working towards its goal of building a holistic, end-to-end wealth management platform that supports advisors and their clients.

~~Table of Contents~~

Through a combination of platform enhancements, partnerships and acquisitions, Envestnet uniquely provides a financial network connecting ~~software, services~~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 ~~Chicago, Illinois,~~Berwyn, Pennsylvania, as well as other locations throughout the United States, India and ~~internationally, primarily India.~~

other international locations.

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Recent ~~Events~~

Developments

Leadership Update

On ~~September 25, 2017,~~January 7, 2024, the Company entered into ana 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 ~~plan of merger (the “Merger Agreement”) with Folio Dynamics Holdings, Inc.,~~as a ~~Delaware corporation (“FolioDynamix”), FCD Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary~~member of the ~~Company (“Merger Sub”),~~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 ~~Actua USA Corporation,~~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 ~~Delaware corporation, solely in its capacity~~new chief executive officer. Mr. Fox has served as ~~the representative~~a member of our Board of Directors since February 2015 and Chair of the ~~stockholders~~Board of ~~FolioDynamix. Pursuant to~~Directors since March 2020.

Operating Results

Beginning in the ~~Merger Agreement, Merger Sub will merge~~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 ~~and into FolioDynamix, with FolioDynamix continuing as~~ the ~~surviving corporation (the “Acquisition”) and a wholly owned subsidiary~~exception of the ~~Company. FolioDynamix will be included~~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 ~~Envestnet segment.~~

~~FolioDynamix provides financial institutions, registered investment advisors,~~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 ~~other wealth management clients~~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 ~~end-to-end technology solution paired with a suite~~organizational realignment and entry into an outsourcing arrangement announced in the fourth quarter of ~~advisory tools including model portfolios, research, and overlay management services.~~

~~The Company plans to acquire FolioDynamix to add complementary trading tools~~2022, as well as commission and brokerage support to Envestnet’s existing suite of offerings. The Company expects to integrate the technology and operations of FolioDynamix into the Company’s wealth management business, enabling the Company to further leverage its operating scale and data analytics capabilities.

~~Subject to the terms and conditions of the Merger Agreement, the Company will pay $195,000~~severance expense for a reduction in cash for all the outstanding shares of FolioDynamix, subject to certain post-closing adjustments. The Company will fund the Acquisition price with a combination of cash on the Company’s balance sheet and borrowings under its revolving credit facility. Either the Company or FolioDynamix may terminate the Agreement if the closing does not occur by March 31, 2018.

The applicable antitrust pre-clearance filings were made by the parties on October 10, 2017 and October 11, 2017. The Company is withdrawing its filing and plans to refile it immediately thereafter to allow the Department of Justice additional time to review the filing without having to issue a second request. The Company continues to expect the transaction to closeforce initiative announced in the first quarter of ~~2018, subject~~2023 which continued throughout 2023.

Our business is directly and indirectly affected by macroeconomic conditions and the state of global financial markets.The return to ~~satisfaction~~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 capital market valuations, including asset flows and redemption rates, both of which are outside of the ~~closing conditions. The Company and FolioDynamix will continue to operate separately until~~Company’s control, as well as a reduction in future operating expenses, as a result of the ~~transaction closes.~~

actions taken by management as discussed above.

Segments

Envestnet is organized around two ~~primary, complementary~~ business ~~segments.~~segments based on clients served and products provided to meet those needs. Financial information about each business segment is contained in ~~Note 19~~"Note 18—Segment Information” to the ~~notes to~~ condensed consolidated financial statements. Our business segments are as follows:

~~Envestnet~~

•Envestnet Wealth Solutions – a leading provider of comprehensive and unified wealth management software, ~~and~~ services and solutions to empower ~~financial advisors and institutions.~~

~~Envestnet | Yodlee~~ ~~– a leading data aggregation and data intelligence platform powering dynamic, cloud-based innovation for digital financial services.~~

~~Envestnet Segment~~

~~Envestnet empowers~~ financial advisors ~~at broker-dealers, banks,~~ and ~~RIAs with all the tools they require~~institutions to enable them to deliver holistic ~~wealth management~~advice to their ~~end~~ clients. ~~In addition,~~

•Envestnet Data & Analytics – a leading provider of financial data aggregation, analytics and digital experiences to meet the ~~firm provides advisors with practice management support so that they can grow their practices~~needs of financial institutions, enterprise FinTech firms and ~~operate more efficiently. By September 30, 2017, Envestnet’s platform assets grew~~market investment research firms worldwide.

The Company also incurs expenses not directly attributable to ~~approximately $1.3 trillion in 6.7 million accounts overseen by more than 59,000 advisors.~~

~~Services provided to advisors include: financial planning, risk assessment~~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 selection of investment strategies and solutions, asset allocation models, research and due diligence, portfolio construction, proposal generation and paperwork preparation, model management and account rebalancing, account monitoring, customized fee billing, overlay services covering asset allocation,

other non-recurring and/or non-operationally related expenses.

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~~tax management~~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 ~~socially responsible investing, aggregated multi~~‑~~custodian performance reporting and communication tools, plus data analytics. Envestnet has access to a wide range of leading third~~‑~~party asset custodians.~~

~~We offer these solutions principally through~~allocates resources. All segment information presented within this Quarterly Report is presented in conjunction with the ~~following product/services suites:~~

current organizational structure, with prior periods adjusted accordingly.

Key Metrics

Envestnet Wealth Solutions Segment

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

As of

September 30,

December 31,

March 31,

June 30,

September 30,


2016

2016

2017

2017

2017

(in millions except accounts and advisors data)
Platform Assets










Assets Under Management (AUM)

$
101,924

$
105,178

$
113,544

$
122,543

$
131,809
Assets Under Administration (AUA)

231,831

241,682

248,445

271,450

293,963
Subtotal AUM/A

333,755

346,860

361,989

393,993

425,772
Licensing

721,690

748,125

763,372

825,829

867,967
Total Platform Assets

$
1,055,445

$
1,094,985

$
1,125,361

$
1,219,822

$
1,293,739
Platform Accounts

AUM

519,717

545,130

574,132

614,973

652,060
AUA

961,590

994,583

986,554

1,083,417

1,145,050
Subtotal AUM/A

1,481,307

1,539,713

1,560,686

1,698,390

1,797,110
Licensing

4,394,670

4,558,883

4,263,002

4,811,390

4,925,146
Total Platform Accounts

5,875,977

6,098,596

5,823,688

6,509,780

6,722,256
Advisors

AUM/A

35,861

36,483

36,985

38,498

40,379
Licensing

16,191

17,852

18,159

19,007

19,104
Total Advisors

52,052

54,335

55,144

57,505

59,483

accounts:


	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

~~Table of Contents~~

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

AUA:

Asset Rollforward - Three Months Ended September 30, 2017

As of

Gross

Net

Market

As of

6/30/2017

Sales

Redemptions

Flows

Impact

9/30/2017

(in millions except account data)
Assets under Management (AUM)

$
122,543

$
10,585

$
(5,178)

$
5,407

$
3,859

$
131,809
Assets under Administration (AUA)

271,450

24,279

(10,873)

13,406

9,107

293,963
Total AUM/A

$
393,993

$
34,864

$
(16,051)

$
18,813

$
12,966

$
425,772
Fee-Based Accounts

1,698,390

98,720

1,797,110


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

	(in millions, except account data)
AUM	$	416,001	$	32,127	$	(19,601)	$	12,526	$	22,694	$	1,243	$	452,464
AUA	430,846		45,596		(25,402)		20,194		22,683		(2,322)		471,401
Total AUM/A	$	846,847	$	77,723	$	(45,003)	$	32,720	$	45,377	$	(1,079)	$	923,865
Fee-Based Accounts	2,895,841						112,633				(4,988)		3,003,486

The above AUM/A gross sales figures for the three months ended March 31, 2024 include ~~$9.7~~$29.8 billion in new client conversions. ~~The Company~~We onboarded an additional ~~$12.4~~$31.1 billion in ~~licensing~~subscription conversions during the three months ended ~~September 30, 2017, bringing total conversions for the quarter to $22.1 billion.~~

Asset Rollforward - Nine Months Ended September 30, 2017

As of

Gross

Net

Market

Reclass to

As of

12/31/2016

Sales

Redemptions

Flows

Impact

Licensing

9/30/2017

(in millions except account data)
Assets under Management (AUM)

$
105,178

$
36,113

$
(19,889)

$
16,224

$
10,407

$
—

$
131,809
Assets under Administration (AUA)

241,682

74,044

(40,258)

33,786

23,386

(4,891)

293,963
Total AUM/A

$
346,860

$
110,157

$
(60,147)

$
50,010

$
33,793

$
(4,891)

$
425,772
Fee-Based Accounts

1,539,713

280,161

(22,764)

1,797,110

The above AUM/A gross sales figures include $20.9 billion in new client conversions. The Company onboarded an additional $34.7 billion in licensing conversions during the nine months ended September 30, 2017,March 31, 2024 bringing total conversions for the three ~~quarters~~months ended March 31, 2024 to ~~$55.6~~$60.9 billion.

~~The mix of AUM~~

Asset and ~~AUA was as follows for the periods indicated:~~

September 30,

December 31,

March 31,

June 30,

September 30,

2016


2016


2017


2017


2017

Assets under management (AUM)
31
%

30
%

31
%

31
%

31
%
Assets under administration (AUA)
69
%

70
%

69
%

69
%

69
%

100
%

100
%

100
%

100
%

100
%

~~Envestnet | Yodlee Segment~~

Envestnet | Yodlee is a leading data aggregation and data intelligence platform. As a “big data” specialist, Yodlee gathers, refines and aggregates a massive set of end-user permissioned transaction level data, which it then provides to customers as data analytics solutions and market research services.

More than 1,000 financial institutions, financial technology innovators and financial advisory firms, including 13 of the 20 largest U.S. banks, subscribe to the Envestnet | Yodlee platform to underpin personalized financial apps and services for over 21 million paid subscribers.

~~Yodlee serves two main customer groups: financial institutions (“FI”) and financial technology innovators, which we refer to as Yodlee Interactive (“YI”) customers.~~

~~The Financial Institutions~~ group provides customers with secure access to open application programming interfaces (“APIs”), end-user facing applications powered by our platform and APIs (“FinApps”), and also reports. Customers receive end user-permissioned transaction data elements that we aggregate and cleanse. Yodlee also enables customers to develop their own applications through its open APIs, which deliver secure data, money movement solutions, and other functionality. FinApps can be subscribed to individually or in combinations that include personal financial management, wealth management, card, payments and small-medium business solutions. They are targeted at the retail financial, wealth management, small business, card, lenders, and other financial services sectors. These FinApps help consumers and small businesses simplify and manage their finances, review their financial accounts, track their spending, calculate their net worth,

~~Table of Contents~~

and perform a variety of other activities. For example, Yodlee’s Expense FinApp helps consumers track their spending, and a Payroll FinApp from a third party helps small businesses process their payroll. The suite of reports is designed to supplement traditional credit reports by utilizing consumer permissioned aggregated data from over 16,000 sources, including banking, investment, loan, and credit card information.

~~The Yodlee Interactive~~ group enables customers to develop new applications and enhance existing solutions. These customers operate in a number of sub-vertical markets, including wealth management, personal financial management, small business accounting, small business lending and authentication. They use the Envestnet | Yodlee platform to build solutions that leverage our open APIs and access to a large end user base. In addition to aggregated transaction-level account data elements, we provide YI customers with secure access to account verification, money movement and risk assessment tools via our APIs. We play a critical role in transferring innovation from financial technology innovators to financial institutions. For example, YI customers use Yodlee applications to provide working capital to small businesses online; personalized financial management, planning and advisory services; e-commerce payment solutions; and online accounting systems for small businesses. We provide access to our solutions across multiple channels, including web, tablet and mobile.

Both FI and YI groups benefit customers by improving end-user satisfaction and retention, accelerating speed to market, creating technology savings and enhancing their data analytics solutions and market research capabilities. End users receive better access to their financial information and more control over their finances, leading to more informed and personalized decision making. For customers who are members of the developer community, Yodlee solutions provide access to critical data and payments solutions, faster speed to market and enhanced distribution.

~~Envestnet Analytics~~ provides data analytics, mobile sales solutions, and online education tools to financial advisors, asset managers and enterprises. These tools empower financial services firms to extract key business insights to run their business better and provide timely and focused support to advisors.

We believe that our brand leadership, innovative technology and intellectual property, large customer base, and unique data gathering and enrichment provide us with competitive advantages that have enabled us to generate strong growth.

~~We believe that our business model results in a high degree of recurring and predictable financial results.~~

~~Operational Highlights~~

~~Revenues from assets under management (“AUM”) or assets under administration (“AUA”) or collectively (“AUM/A”) increased 18% from $90,042~~account figures in the three months ended September 30, 2016 to $106,147 in the three months ended September 30, 2017. Subscription and licensing revenues increased 21% from $51,959 in the three months ended September 30, 2016 to $62,963 in the three months ended September 30, 2017. Total revenues, which include professional service and other fees, increased 18% from $149,155 in the three months ended September 30, 2016 to $175,614 in the three months ended September 30, 2017. The increase in total revenues was primarily a result of the positive effects of new account growth and positive net flows of AUM/A as well as an increase in subscription and licensing revenues related to Envestnet | Yodlee and Envestnet | Enterprise segments of $6,190 and $4,814, respectively.

Revenues from assets AUM/A increased 16% from $258,969 in the nine months ended September 30, 2016 to $299,268 in the nine months ended September 30, 2017. Subscription and licensing revenues increased 27% from $142,303 in the nine months ended September 30, 2016 to $180,675 in the nine months ended September 30, 2017. Total revenues, which include professional service and other fees, increased 18% from $422,684 in the nine months ended September 30, 2016 to $500,817 in the nine months ended September 30, 2017. The increase in total revenues was primarily a result of the positive effects of new account growth and positive net flows of AUM/A as well as an increase in subscription and licensing revenues related to Envestnet | Yodlee and Envestnet | Enterprise segments of $20,953 and $17,419, respectively.

~~The net loss attributable to Envestnet, Inc.~~“Reclassifications” column for the three months ended ~~September 30, 2017 was $1,320,~~March 31, 2024 represent immaterial amounts that were reclassified between AUM, AUA and subscription to reflect updated customer billing arrangements. These reclassifications have no impact on total platform assets or ~~$0.03 per diluted share,~~accounts.

Table of Contents

Envestnet Data & Analytics Segment

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


	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.

Table of Contents

Results of Operations

Three months ended March 31, 2024 compared to ~~net loss attributable to Envestnet, Inc. of $4,057~~three months ended March 31, 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	%

*Not meaningful

Asset-based recurring revenue

Asset-based recurring revenue increased $25.7 million, or ~~$0.09 per diluted share~~15%, for the three months ended ~~September 30, 2016. The net loss attributable to Envestnet, Inc. for the nine months ended September 30, 2017 was $20,925, or $0.48 per diluted share,~~March 31, 2024 compared to ~~net loss attributable to Envestnet, Inc. of $22,993 or $0.54 per diluted share for the nine months ended September 30, 2016.~~

~~Adjusted revenues for~~ the three months ended September 30, 2017 was $175,629, an increase of 17% from $149,486 in the prior year period. Adjusted EBITDA for the three months ended September 30, 2017 was $34,789, an increase of 26% from $27,505 in the

~~Table of Contents~~

prior year period. Adjusted net income for the three months ended September 30, 2017 was $17,283, or $0.37 per diluted share, compared to adjusted net income of $12,463, or $0.28 per diluted share in the prior year period.

Adjusted revenues for the nine months ended September 30, 2017 was $500,937, an increase of 18% from $423,465 in the prior year period. Adjusted EBITDA for the nine months ended September 30, 2017 was $90,152, an increase of 30% from $69,126 in the prior year period. Adjusted net income for the nine months ended September 30, 2017 was $41,948, or $0.91 per diluted share, compared to adjusted net income of $29,498, or $0.67 per diluted share in the prior year period.

Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are non-GAAP financial measures. See “Non-GAAP Financial Measures” for a discussion of non-GAAP measures and a reconciliation of such measures to the most directly comparable GAAP measures.

~~Results of Operations~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

Percent Change

2017

2016

Percent Change

(in thousands)

(in thousands)

Revenues:







Assets under management or administration
$
106,147

$
90,042

18
%

$
299,268

$
258,969

16
%
Subscription and licensing

62,963

51,959

21
%

180,675

142,303

27
%
Professional services and other

6,504

7,154

(9)
%

20,874

21,412

(3)
%
Total revenues

175,614

149,155

18
%

500,817

422,684

18
%
Operating expenses:

Cost of revenues

56,070

47,259

19
%

161,031

132,319

22
%
Compensation and benefits

68,551

60,345

14
%

199,079

180,625

10
%
General and administration

31,153

26,150

19
%

90,178

80,249

12
%
Depreciation and amortization

15,492

16,692

(7)
%

46,792

49,872

(6)
%
Total operating expenses

171,266

150,446

14
%

497,080

443,065

12
%
Income (loss) from operations

4,348

(1,291)

*
%

3,737

(20,381)

(118)
%
Other expense, net

(3,986)

(4,434)

(10)
%

(13,838)

(13,214)

5
%
Loss before income tax provision (benefit)

362

(5,725)

(106)
%

(10,101)

(33,595)

(70)
%
Income tax provision (benefit)

1,682

(1,668)

(201)

10,824

(10,602)

(202)
%
Net loss

(1,320)

(4,057)

(67)
%

(20,925)

(22,993)

(9)
%
Add: Net loss attributable to non-controlling interest

—

—

—
%

—

—

—
%
Net loss attributable to Envestnet, Inc.
$
(1,320)

$
(4,057)

(67)
%

$
(20,925)

$
(22,993)

(9)
%

*Not meaningful.

~~Three months ended September 30, 2017 compared to three months September 30, 2016~~

~~Revenues~~

Total revenues increased 18% from $149,155 in the three months ended September 30, 2016 to $175,614 in the three months ended September 30, 2017. The increase was primarily due to an increase in revenues from AUM/A and subscription and licensing of $16,105 and $11,004, respectively. Revenues from AUM/A remained consistent as a percentage of total revenues at 60% in the three months ended September 30, 2016 and 2017.

~~Assets under management or administration~~

~~Revenues earned from AUM/A increased 18% from $90,042 in the three months ended September 30, 2016 to $106,147 in the three months ended September 30, 2017. The increase was~~March 31, 2023 primarily due to an increase in asset values applicable to our quarterly billing ~~cycle in 2017, relative to~~cycles, which are based on the ~~corresponding period in 2016. In~~market value of the ~~third quarter~~customers' assets on our platforms as of ~~2017, revenues were also positively affected by new account growth and positive net flows~~the end of ~~AUM/A during~~ the ~~first and second quarters of 2017.~~

previous quarter.

~~Table of Contents~~

The number of financial advisors with ~~AUM/A~~asset-based recurring revenue on our technology platforms ~~increased from 35,861~~remained consistent at approximately 39,000 as of ~~September 30, 2016 to 40,379 as of September 30, 2017~~March 31, 2024 and 2023 and the number of AUM/A client accounts increased from approximately ~~1,500,000~~2.7 million as of ~~September 30, 2016~~March 31, 2023 to approximately ~~1,800,000~~3.0 million as of ~~September 30, 2017.~~

~~Subscription and licensing~~

~~Subscription and licensing revenues~~March 31, 2024.

As a percentage of total revenue, asset based recurring revenue increased ~~21% from $51,959 in~~3% points for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$62,963 in~~ the three months ended ~~September 30, 2017.This~~March 31, 2023 primarily due to the increase ~~was~~in asset-based recurring revenue period over period.

Subscription-based recurring revenue

Subscription-based recurring revenue increased $0.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 due to an increase of$3.7 million in theEnvestnet Wealth Solutionssegment, which can be attributed to new and existing customer growth, partially offset by a decrease of $3.3 million in the Envestnet Data & Analytics segment, which is primarily attributable to a loss in access to data in the research business and continued impact from the regional banking crisis.

Table of Contents

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 $0.2 million, or 4%, for the three months ended March 31, 2024 compared to the three months ended March 31, 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

Direct expense increased $17.0 million, or 15%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to an increase in ~~Envestnet related~~asset-based direct expense, which directly correlates with the increase to asset-based recurring revenue of $2,051, an increase in Envestnet | Tamarac related revenue of $2,763 and Envestnet | Yodlee contributing an additional $6,190. The increase in Envestnet and Envestnet | Tamarac revenue is a result of Envestnet and Envestnet | Tamarac continuing to add clients and selling additional services to existing clients. The increase in Envestnet | Yodlee revenue is primarily due to an increase in revenue from new and existing customers of $6,190.~~Approximately $4.8~~during the period.

Employee compensation

Employee compensation decreased $10.6 million, or ~~77% of this increase was attributed to our data analytics channel while the reminder was mainly driven by increases in our FI and YI groups.~~

~~Professional services and other~~

~~Professional services and other revenues decreased~~ 9% ~~from $7,154 in~~, for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$6,504 in~~ the three months ended ~~September 30, 2017,~~March 31, 2023 primarily due to Envestnet | Yodlee recognizing one-time onboarding of data analytic customers in the three months ended September 30, 2016 that did not repeat in the three months ended September 30, 2017, offset by an overall increase in existing customer revenue attributable to Envestnet | Tamarac.

~~Cost of revenues~~

Cost of revenues increased 19% from $47,259 in the three months ended September 30, 2016 to $56,070 in the three months ended September 30, 2017, primarily due to a corresponding increase in revenues from AUM/A, the mix of such revenues from AUM/A, and an increase in cost of revenues associated with subscription and licensing revenues. As a percentage of total revenues, cost of revenues remained consistent at 32% in the three months ended September 30, 2016 and 2017.

~~Compensation and benefits~~

~~Compensation and benefits increased 14% from $60,345 in the three months ended September 30, 2016 to $68,551 in the three months ended September 30, 2017, primarily due to an increase~~decreases in salaries, benefits and related payroll taxes of ~~$4,678,~~$6.7 million and severance expense of $2.8 million which are primarily a result of ~~an increase~~a reduction in ~~headcount to support organic growth. Also contributing to~~force initiative that began in the ~~growth were increases in incentive compensation~~first quarter of ~~$2,624, severance expense of $539 and stock-based compensation of $494.~~ 2023.

As a percentage of total ~~revenues,~~revenue, employee compensation ~~and benefits~~expense decreased ~~from 40% in~~6% points for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~39% in~~ the three months ended ~~September 30, 2017.~~

March 31, 2023 primarily due to a reduction in force initiative that began in the first quarter of 2023 and an increase in total revenue period over period.

General and ~~administration~~

administrative

General and ~~administration expenses increased 19% from $26,150 in~~administrative expense decreased $2.3 million, or 4%, for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$31,153 in~~ the three months ended September 30, 2017, primarily due to increases in acquisition costs of $2,360, audit and related fees of $520, website and systems costs of $868, non-income tax expense adjustments of $571, professional and legal fees of $508, occupancy costs of $493, external data and research services of $483 and marketing expenses of $380, offset by decreases in litigation related expense of $2,097 and fair market value adjustments on contingent consideration of $349. As a percentage of total revenues, general and administration expenses remained consistent at 18% in the three months ended September 30, 2016 and 2017.

~~Depreciation and amortization~~

~~Depreciation and amortization expense decreased 7% from $16,692 in the three months ended September 30, 2016 to $15,492 in the three months ended September 30, 2017,~~March 31, 2023 primarily due to a decrease in ~~intangible asset~~restructuring charges and transaction costs of $1.6 million and other immaterial decreases within general and administrative expense.

Depreciation and amortization ~~of $1,658, offset by~~

Depreciation and amortization expense increased $2.4 million, or 8%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to an increase in amortization ofrelated to internally developed software of ~~$474. As~~$4.8 million, partially offset by a ~~percentage~~decrease in amortization related to intangible assets of ~~total revenues, depreciation and amortization~~$2.2 million.

Other expense, net

Other expense, net decreased ~~from 11% in~~$1.3 million, or 16%, for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~9% in~~ the three months ended ~~September 30, 2017.~~

~~Other expense, net~~

~~Other expense, net decreased 10% from $4,434 in the three months ended September 30, 2016 to $3,986 in the three months ended September 30, 2017,~~March 31, 2023 primarily due to a decrease in net interest expense of ~~$264~~$0.9 million and ~~foreign exchange impact~~a decrease in loss allocations from equity method investments of ~~$283. Other income primarily consists of interest expense as well as impacts related to investments~~$0.7 million, partially offset by an increase in ~~private companies and~~ foreign currency ~~exchange.~~

expense of $0.2 million.

Table of Contents

Income tax provision ~~(benefit)~~

Three Months Ended

September 30,

2017

2016

Income (loss) before income tax provision (benefit)

$
362

$
(5,725)

Income tax provision (benefit)

1,682

(1,668)

Effective tax rate

464.6
%

29.1
%

For the three months ended ~~September 30, 2017,~~March 31, 2024 and 2023, our effective tax rate ~~differs~~of 73.6% and (125.2)%, respectively, differed from the statutory rate primarily due to the ~~book loss with no resulting benefit from net operating loss generation as a result of~~increase in the valuation allowance we have placed on ~~all domestic deferreds,~~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.

In December 2021, the 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%, calculated on a jurisdictional basis. Certain countries in which we operate have enacted legislation to implement many aspects of 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 on our consolidated financial statements, but we will continue to monitor future legislation and any additional guidance that is issued.

Segment Results

Envestnet Wealth Solutions

Three months ended March 31, 2024 compared to ~~the book loss in 2016 with the absence of a valuation allowance.~~

~~For~~three months ended March 31, 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

Asset-based recurring revenue increased $25.7 million, or 15%, for the three months ended ~~September 30, 2016, our effective tax rate differs from~~March 31, 2024 compared to the ~~statutory rate primarily due to various permanent items, accrual for reserves for uncertain tax positions and estimated research and development tax credit generation.~~

~~Nine~~three months ended ~~September 30, 2017 compared to nine months September 30, 2016~~

~~Revenues~~

Total revenues increased 18% from $422,684 in the nine months ended September 30, 2016 to $500,817 in the nine months ended September 30, 2017. The increase was primarily due to an increase in revenues from AUM/A and subscription and licensing of $40,299 and $38,372, respectively. Revenues from AUM/A decreased as a percentage of total revenues from 61% to 60% in the nine months ended September 30, 2016 and 2017, respectively, primarily because the growth in subscription and licensing revenue exceeded the growth in AUM/A.

~~Assets under management or administration~~

~~Revenues earned from AUM/AUA increased 16% from $258,969 in the nine months ended September 30, 2016 to $299,268 in the nine months ended September 30, 2017. The increase was~~March 31, 2023 primarily due to an increase in asset values applicable to our quarterly billing ~~cycle in 2017, relative to~~cycles, which are based on the ~~corresponding period in 2016. In~~market value of the ~~first three quarters~~customers' assets on our platforms as of ~~2017, revenues were also positively affected by new account growth and positive net flows~~the end of ~~AUM/A during 2016 and~~ the ~~first and second quarters of 2017.~~

previous quarter.

~~Subscription~~March 31, 2024.

Subscription-based recurring revenue

Subscription-based recurring revenue increased $3.7 million, or 5%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to new and ~~licensing~~

~~Subscription~~existing customer growth.

Table of Contents

Professional services and ~~licensing revenues~~other revenue

Professional services and other revenue decreased $0.2 million, or 7%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to timing of the completion of customer projects and deployments.

Direct expense

Direct expense increased ~~27% from $142,303~~$15.4 million, or 15%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due an increase in asset-based direct expense, which directly correlates with the increase in asset-based recurring revenue during the period.

Employee compensation

Employee compensation decreased $3.9 million, or 5%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to decreases in severance expense of $2.0 million and salaries, benefits and related payroll taxes of $1.8 million which are primarily a result of a reduction in force initiative that began in the ~~nine~~first quarter of 2023.

As a percentage of segment revenue, employee compensation expense decreased 4% points for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$180,675~~the three months ended March 31, 2023 primarily due to a reduction in force initiative that began in the ~~nine~~first quarter of 2023 and an increase in segment revenue period over period.

General and administrative

General and administrative expenses decreased $0.1 million for the three months ended ~~September 30, 2017.This increase was~~March 31, 2024 compared to the three months ended March 31, 2023 primarily due to immaterial movements within general and administrative expense.

Depreciation and amortization

Depreciation and amortization expense increased $1.3 million, or 5%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to an increase in amortization related to internally developed software of $3.4 million, partially offset by a decrease in amortization related to intangible assets of $2.0 million.

Table of Contents

Envestnet ~~related~~Data & Analytics

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


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

	(in thousands)			(in thousands)				(in thousands)
Revenue:
Subscription-based		$	33,294	95	%	$	36,609	96	%	$	(3,315)	(9)	%
Professional services and other revenue		1,846		5	%	1,449		4	%	397		27	%
Total revenue		35,140		100	%	38,058		100	%	(2,918)		(8)	%
Operating expenses:
Direct expense		6,799		19	%	5,274		14	%	1,525		29	%
Employee compensation		11,692		33	%	19,242		51	%	(7,550)		(39)	%
General and administrative		15,314		44	%	14,429		38	%	885		6	%
Depreciation and amortization		7,074		20	%	6,028		16	%	1,046		17	%
Total operating expenses		40,879		116	%	44,973		118	%	(4,094)		(9)	%
Loss from operations		$	(5,739)	(16)	%	$	(6,915)	(18)	%	$	1,176	17	%

Subscription-based recurring revenue ~~of $8,632, an increase~~

Subscription-based recurring revenue decreased $3.3 million, or 9%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to a loss in ~~Envestnet | Tamarac related~~access to data in the research business and continued impact from the regional banking crisis.

Professional services and other revenue ~~of $8,787~~

Professional services and ~~Envestnet | Yodlee contributing an additional $20,953. The increase in Envestnet and Envestnet | Tamarac~~other revenue ~~is a result of Envestnet and Envestnet | Tamarac continuing~~increased$0.4 million, or 27%, for the three months ended March 31, 2024 compared to ~~add clients and selling additional services to existing clients. The increase in Envestnet | Yodlee revenue is~~the three months ended March 31, 2023 primarily due to an increase in point in time revenue ~~from new and existing customers of $20,953.Approximately $16.1~~recognized on customer deployments.

Direct expense

Direct expense increased $1.5 million, or ~~77% of this increase was attributed to our data analytics channel while~~29%, for the ~~reminder was mainly driven by increases in our FI and YI groups.~~

~~Professional services and other~~

~~Professional services and other revenues decreased 3% from $21,412 in the nine~~three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$20,874 in~~ the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2023 primarily due to ~~Envestnet | Yodlee recognizing one-time onboarding of data analytic customers in~~increased costs related to migrating infrastructure to the ~~nine months ended September 30, 2016 that did not repeat in the nine months ended September 30, 2017, offset by an overall increase in existing customer revenue attributable to Envestnet | Tamarac.~~

cloud.

~~Table of Contents~~

~~Cost of revenues~~

Cost of revenues increased 22% from $132,319 in the nine months ended September 30, 2016 to $161,031 in the nine months ended September 30, 2017, primarily due to a corresponding increase in revenues from AUM or AUA, the mix of such revenues from AUM or AUA, and an increase in cost of revenues associated with subscription and licensing revenues. As a percentage of ~~total revenues, cost of revenues~~segment revenue, direct expense increased ~~from 31% in~~5% points for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~32% in~~ the ~~nine~~three months ended ~~September 30, 2017.~~

~~Compensation and benefits~~

~~Compensation and benefits increased 10% from $180,625 in the nine months ended September 30, 2016 to $199,079 in the nine months ended September 30, 2017,~~March 31, 2023 primarily due to anthe increase in direct expense and decrease in segment revenue period over period.

Employee compensation

Employee compensation decreased $7.6 million, or 39%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily due to decreases in salaries, benefits and related payroll taxes of ~~$16,859,~~$4.3 million and severance expense of $2.2 million which are primarily a result of ~~an increase~~a reduction in ~~headcount to support organic growth. Also contributing to~~force initiative that began in the ~~growth were increases in incentive compensation~~first quarter of ~~$3,320 and short-term variable compensation of $1,799, offset by decreases in stock-based compensation of $2,421 and severance of $844.~~ 2023.

As a percentage of ~~total revenues,~~segment revenue, employee compensation ~~and benefits~~expense decreased ~~from 43% in~~18% points for the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~40% in~~ the ~~nine~~three months ended ~~September 30, 2017. The decrease in the compensation and benefits as a percentage of total revenues is primarily due to a higher revenue increase compared to a lower compensation and benefit increase.~~

~~General and administration~~

General and administration expenses increased 12% from $80,249 in the nine months ended September 30, 2016 to $90,178 in the nine months ended September 30, 2017, primarily due to increases in audit and related fees of $3,308, acquisition related costs of $2,127, occupancy costs of $2,110, marketing of $1,788, non-income tax expense adjustments of $1,734, professional and legal fees of $1,583 and travel and entertainment of $828, offset by decreases in litigation related expense of $3,032 and fair market value adjustments on contingent consideration of $838. As a percentage of total revenues, general and administration expenses decreased from 19% in the nine months ended September 30, 2016 to 18% in the nine months ended September 30, 2017.

~~Depreciation and amortization~~

Depreciation and amortization expense decreased 6% from $49,872 in the nine months ended September 30, 2016 to $46,792 in the nine months ended September 30, 2017, primarily due to a decrease in intangible asset amortization of $4,823, offset by an increase in amortization of internally developed software of $1,222 and depreciation of fixed assets of $521. As a percentage of total revenues, depreciation and amortization expense decreased from 12% in the nine months ended September 30, 2016 to 9% in the nine months ended September 30, 2017.

~~Other expense, net~~

Other expense, net increased 5% from $13,214 in the nine months ended September 30, 2016 to $13,838 in the nine months ended September 30, 2017, due to an increase in interest expense of $326 primarily as a result of an increase in debt issuance cost amortization and debt discount accretion as well as foreign currency exchange impact of $284. Other income primarily consists of interest expense as well as impacts related to investments in private companies and foreign currency exchange.

~~Income tax provision (benefit)~~

Nine Months Ended

September 30,

2017

2016

Loss before income tax provision (benefit)

$
(10,101)

$
(33,595)

Income tax provision (benefit)

10,824

(10,602)

Effective tax rate

(107.2)
%

31.6
%

~~Table of Contents~~

~~For the nine months ended September 30, 2017, our effective tax rate differs from the statutory rate~~March 31, 2023 primarily due to the ~~book loss with no resulting benefit from net operating loss generation as~~reduction in force initiative that began in the first quarter of 2023, partially offset by a ~~result of the valuation allowance on all domestic deferreds, compared to the book loss~~decrease in ~~2016 with the absence of a valuation allowance.~~

For the nine months ended September 30, 2016, our effective tax rate differs from the statutory rate primarily due to various permanent items, accrual for reserves for uncertain tax positions and estimated research and development tax credit generation.

~~Segments~~

Business segments are generally organized around our service offerings. Financial information about each of our two business segments is contained in Note 19 to the notes to the condensed consolidated financial statements. Our business segments are as follows:

~~Envestnet~~ ~~– a leading provider of unified wealth management software and services to empower financial advisors and institutions.~~

~~Envestnet | Yodlee~~ ~~– a leading data aggregation and data intelligence platform powering dynamic, cloud-based innovation for digital financial services.~~

segment revenue period over period.

Table of Contents

~~The following table presents income (loss) from operations by segment:~~

General and administrative

~~Envestnet~~

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

~~Three months ended September 30, 2017 compared to three months September 30, 2016 for the Envestnet segment~~

~~Revenues~~

~~Total revenues~~General and administrative expenses increased ~~19% from $114,511 in~~$0.9 million, or 6%, for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$135,948 in~~ the three months ended ~~September 30, 2017. The increase was~~March 31, 2023 primarily due to an increase in ~~revenues from AUM/A~~restructuring charges and transaction costs of ~~$16,105~~$1.0 million, partially offset by other immaterial decreases within general and ~~an increase in revenues from subscription~~administrative expense.

As a percentage of segment revenue, general and ~~licensing of $4,814. Revenues from AUM/A were 79% and 78% of total revenues in~~administrative expense increased 6% points for the three months ended ~~September 30, 2016 and 2017, respectively.~~

~~Assets under management or administration~~

~~Revenues earned from AUM/AUA increased 18% from $90,042 in~~March 31, 2024 compared to the three months ended ~~September 30, 2016 to $106,147~~March 31, 2023 primarily due an increase in restructuring charges and transaction costs and a decrease in segment revenue period over period.

Depreciation and amortization

Depreciation and amortization expense increased $1.0 million, or 17%, for the three months ended ~~September 30, 2017. The increase was~~March 31, 2024 compared to the three months ended March 31, 2023 primarily due to an increase in ~~asset values applicable~~amortization related to ~~our quarterly billing cycle~~internally developed software of $1.4 million, partially offset by a decrease in ~~2017, relative~~amortization related to ~~the corresponding period in 2016. In the third quarter~~intangible assets of ~~2017, revenues were also positively affected by new account growth~~$0.2 million.

As a percentage of segment revenue, depreciation and ~~positive net flows of AUM or AUA during the first and second quarters of 2017.~~

~~Table of Contents~~

~~The number of financial advisors with AUM or AUA on our technology platforms~~amortization expense increased from 35,861 as of September 30, 2016 to 40,379 as of September 30, 2017 and the number of AUM or AUA client accounts increased from approximately 1,500,000 as of September 30, 2016 to approximately 1,800,000 as of September 30, 2017.

~~Subscription and licensing~~

~~Subscription and licensing revenues increased 22% from $22,198 in~~4% points for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$27,012 in~~ the three months ended ~~September 30, 2017,~~March 31, 2023 primarily due to an increase in ~~Envestnet | Enterprise related~~depreciation and amortization expense and a decrease in segment revenue ~~of $2,051 and an increase in Envestnet | Tamarac related revenue of $2,763.The increase in Envestnet | Enterprise and Envestnet | Tamarac revenue is a result of Envestnet | Enterprise and Envestnet | Tamarac continuing~~period over period.

Nonsegment

Three months ended March 31, 2024 compared to ~~add clients and selling additional services to existing clients.~~

~~Professional services and other~~

~~Professional services and other revenues~~three months ended March 31, 2023


	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)	%

Employee compensation

Employee compensation increased ~~23% from $2,271 in~~$0.8 million, or 5%, for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~$2,789 in~~ the three months ended ~~September 30, 2017,~~March 31, 2023 primarily due to an ~~overall~~ increase in ~~existing customer revenue attributable to Envestnet | Tamarac.~~

~~Cost~~severance expense of ~~revenues~~

Cost of revenues increased 21% from $43,806 in the three months ended September 30, 2016 to $52,957 in the three months ended September 30, 2017, primarily due to the corresponding increase in revenues from AUM or AUA, and the mix of such revenues. As$1.4 million, partially offset by a ~~percentage of total revenues, cost of revenues increased from 38% in the three months ended September 30, 2016 to 39% in the three months ended September 30, 2017.~~

~~Compensation and benefits~~

~~Compensation and benefits increased 11% from $37,067 in the three months ended September 30, 2016 to $41,158 in the three months ended September 30, 2017, primarily due to an increase~~decrease in salaries, benefits and related payroll taxes of ~~$1,663, primarily a result of an increase in headcount to support organic growth. An increase in incentive compensation of $1,796~~$0.7 million.

General and ~~severance of $529 also contributed to the increase in compensation~~administrative

General and ~~benefits. As a percentage of total revenues, compensation and benefits~~administrative expenses decreased ~~from 32% in~~$3.1 million, or 29%, for the three months ended ~~September 30, 2016~~March 31, 2024 compared to ~~30% in~~ the three months ended ~~September 30, 2017.~~

~~General and administration~~

General and administration expenses increased 10% from $14,915 in the three months ended September 30, 2016 to $16,464 in the three months ended September 30, 2017, primarily due to increases in external data and research services expenses of $913, non-income tax expense adjustments of $571 and marketing of $309. As a percentage of total revenues, general and administration expenses decreased from 13% in the three months ended September 30, 2016 to 12% in the three months ended September 30, 2017.

~~Depreciation and amortization~~

Depreciation and amortization expense increased from $6,362 in the three months ended September 30, 2016 to $6,414 in the three months ended September 30, 2017. As a percentage of total revenues, depreciation and amortization expense decreased from 6% in the three months ended September 30, 2016 to 5% in the three months ended September 30, 2017.

~~Nine months ended September 30, 2017 compared to nine months September 30, 2016 for the Envestnet segment~~

~~Revenues~~

Total revenues increased 18% from $328,417 in the nine months ended September 30, 2016 to $386,638 in the nine months ended September 30, 2017. The increase was primarily due to an increase in revenues from AUM/A of $40,299 and an increase in revenues from subscription and licensing of $17,419. Revenues from AUM/A were 79% and 77% of total revenues in the nine months ended September 30, 2016 and 2017, respectively.

~~Table of Contents~~

~~Assets under management or administration~~

Revenues earned from AUM/AUA increased 16% from $258,969 in the nine months ended September 30, 2016 to $299,268 in the nine months ended September 30, 2017. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycle in 2017, relative to the corresponding period in 2016. In the first three quarters of 2017, revenues were also positively affected by new account growth and positive net flows of AUM or AUA during 2016 and the first and second quarters of 2017.

The number of financial advisors with AUM or AUA on our technology platforms increased from 35,861 as of September 30, 2016 to 40,379 as of September 30, 2017 and the number of AUM or AUA client accounts increased from approximately 1,500,000 as of September 30, 2016 to approximately 1,800,000 as of September 30, 2017.

~~Subscription and licensing~~

Subscription and licensing revenues increased 29% from $60,301 in the nine months ended September 30, 2016 to $77,720 in the nine months ended September 30, 2017, primarily due to an increase in Envestnet | Enterprise related revenue of $8,632 and an increase in Envestnet | Tamarac related revenue of $8,787.The increase in Envestnet | Enterprise and Envestnet | Tamarac revenue is a result of Envestnet | Enterprise and Envestnet | Tamarac continuing to add clients and selling additional services to existing clients.

~~Professional services and other~~

Professional services and other revenues increased 5% from $9,147 in the nine months ended September 30, 2016 to $9,650 in the nine months ended September 30, 2017, primarily due to an overall increase in existing customer revenue attributable to Envestnet | Tamarac.

~~Cost of revenues~~

Cost of revenues increased 21% from $124,649 in the nine months ended September 30, 2016 to $151,430 in the nine months ended September 30, 2017, primarily due to the corresponding increase in revenues from AUM or AUA, and the mix of such revenues. As a percentage of total revenues, cost of revenues increased from 38% in the nine months ended September 30, 2016 to 39% in the nine months ended September 30, 2017.

~~Compensation and benefits~~

Compensation and benefits increased 12% from $106,648 in the nine months ended September 30, 2016 to $119,378 in the nine months ended September 30, 2017, primarily due to an increase in salaries, benefits and related payroll taxes of $7,066, primarily a result of an increase in headcount to support organic growth. Increases in non-cash compensation expense of $2,420, incentive compensation of $1,996 and short-term variable compensation of $1,224 also contributed to the growth. As a percentage of total revenues, compensation and benefits decreased from 32% in the nine months ended September 30, 2016 to 31% in the nine months ended September 30, 2017.

~~General and administration~~

General and administration expenses increased 5% from $45,909 in the nine months ended September 30, 2016 to $48,357 in the nine months ended September 30, 2017, primarily due to increases in external data and research services expenses of $1,791, non-income tax expense adjustments of $1,734, marketing expenses of $779, occupancy costs of $695, miscellaneous general and administrative expense of $364 and accretion of $265, offset by decreases in website and systems costs of $2,543 and legal fees of $226. As a percentage of total revenues, general and administration expenses decreased from 14% in the nine months ended September 30, 2016 to 13% in the nine months ended September 30, 2017.

~~Depreciation and amortization~~

Depreciation and amortization expense increased 2% from $18,786 in the nine months ended September 30, 2016 to $19,196 in the nine months ended September 30, 2017, primarily due to an increase in depreciation on fixed assets and internally developed software of $2,461, offset by a decrease in amortization of intangibles of $2,051. As a percentage of total revenues, depreciation and amortization expense decreased from 6% in the nine months ended September 30, 2016 to 5% in the nine months ended September 30, 2017.

~~Table of Contents~~

~~Envestnet | Yodlee~~

~~The following table presents loss from operations for the Envestnet | Yodlee segment:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

Percent
Change

2017

2016

Percent
Change

(in thousands)

(in thousands)

Revenues:

Subscription and licensing

$
35,951

$
29,761

21
%

$
102,955

$
82,002

26
%
Professional services and other

3,715

4,883

(24)
%

11,224

12,265

(8)
%
Total revenues

39,666

34,644

14
%

114,179

94,267

21
%

Operating expenses:

Cost of revenues

3,113

3,453

(10)
%

9,601

7,670

25
%
Compensation and benefits

23,463

20,936

12
%

70,055

65,386

7
%
General and administration

7,376

8,341

(12)
%

23,634

23,853

(1)
%
Depreciation and amortization

9,078

10,330

(12)
%

27,596

31,086

(11)
%
Total operating expenses

43,030

43,060

—
%

130,886

127,995

2
%
Loss from operations

$
(3,364)

$
(8,416)

(60)
%

$
(16,707)

$
(33,728)

(50)
%

~~Three months ended September 30, 2017 compared to three months ended September 30, 2016 for the Envestnet | Yodlee segment~~

~~Revenues~~

Total revenues increased 14% from $34,644 in the three months ended September 30, 2016 to $39,666 in the three months ended September 30, 2017. The increase was primarily due to an increase in revenues from subscription and licensing of $6,190, offset by a decrease in professional services and other revenue of $1,168. Revenues from professional services and other were 14% and 9% of total revenues in the three months ended September 30, 2016 and 2017, respectively.

~~Subscription and licensing~~

Subscription and licensing revenues increased 21% from $29,761 in the three months ended September 30, 2016 to $35,951 in the three months ended September 30, 2017, primarily due to an increase in revenue from new and existing customers of $6,190.~~Of this increase, approximately $4.8 million or 77% was attributed to our data analytics channel while the reminder primarily derived from our FI and YI groups.~~

~~Professional services and other~~

Professional services and other revenues decreased 24% from $4,883 in the three months ended September 30, 2016 to $3,715 in the three months ended September 30, 2017, primarily due to timing of new data analytics customer deployments.

~~Cost of revenues~~

Cost of revenues decreased 10% from $3,453 in the three months ended September 30, 2016 to $3,113 in the three months ended September 30, 2017, primarily due to decrease in third party consulting and professional services of $469 that was primarily associated with new data analytic customer deployments, offset by an increase in hosting and payment processing services of $181 to support our overall revenue growth.~~As a percentage of total revenues, cost of revenues decreased from 10% in the three months ended September 30, 2016 to 8% in the three months ended September 30, 2017.~~

~~Table of Contents~~

~~Compensation and benefits~~

Compensation and benefits increased 12% from $20,936 in the three months ended September 30, 2016 to $23,463 in the three months ended September 30, 2017, primarily due to an increase in salaries, benefits and related payroll taxes of $2,258, as a result of increased headcount to support organic growth and an increase related to the Wheelhouse acquisition, and an increase in incentive compensation of $724, offset by a decrease in non-cash compensation expense of $262. As a percentage of total revenues, compensation and benefits decreased from 60% in the three months ended September 30, 2016 to 59% in the three months ended September 30, 2017. The decrease in compensation and benefits as a percentage of total revenues is primarily due to a higher revenue increase compared to lower growth in compensation and benefit expenses.

~~General and administration~~

~~General and administration expenses decreased 12% from $8,341 in the three months ended September 30, 2016 to $7,376 in the three months ended September 30, 2017,~~March 31, 2023 primarily due to a decrease in ~~legal~~governance related expense of ~~$2,093, partially offset by increases in software purchase and maintenance~~$1.8 million as a result of ~~$647 and occupancy cost of $505. As a percentage of total revenues, general and administration expenses decreased from 24% in~~expense associated with activist shareholder activity during the three months ended September 30, 2016 to 19% in the three months ended September 30, 2017. The decrease in general and administration as a percentage of total revenues is primarily due to a higher revenue increase compared to lower growth in general and administration expenses.

~~Depreciation and amortization~~

Depreciation and amortization expense decreased 12% from $10,330 in the three months ended September 30, 2016 to $9,078 in the three months ended September 30, 2017, primarily due to a decrease in intangible asset amortization of $1,122 related to purchase accounting adjustments recorded in the prior year to the fair values of certain intangible assets from the Yodlee acquisitionMarch 31, 2023 and a decrease in ~~depreciation~~restructuring charges and transaction costs of ~~$50 related to the Yodlee acquisition recorded in the same period last year. The decrease was~~$1.4 million, partially offset by ~~an increase of $210 in intangible asset amortization as a result of the Wheelhouse acquisition. As a percentage of total revenues, depreciation~~other immaterial increases within general and amortization expense decreased from 30% in the three months ended September 30, 2016 to 23% in the three months ended September 30, 2017. The decrease in depreciation and amortization as a percentage of total revenues is primarily due to a higher revenue increase and a decrease in depreciation and amortization.

~~Nine months ended September 30, 2017 compared to nine months ended September 30, 2016 for the Envestnet | Yodlee segment~~

~~Revenues~~

Total revenues increased 21% from $94,267 in the nine months ended September 30, 2016 to $114,179 in the nine months ended September 30, 2017. The increase was primarily due to an increase in revenues from subscription and licensing of $20,953. Revenues from professional services and other were 13% and 10% of total revenues in the nine months ended September 30, 2016 and 2017, respectively.

~~Subscription and licensing~~

Subscription and licensing revenues increased 26% from $82,002 in the nine months ended September 30, 2016 to $102,955 in the nine months ended September 30, 2017, primarily due to an increase in revenue from new and existing customers of $20,953. Of this increase, approximately $16.1 million or 77% was attributed to our data analytics channel while the reminder primarily derived from our FI and YI groups.

~~Professional services and other~~

Professional services and other revenues decreased 8% from $12,265 in the nine months ended September 30, 2016 to $11,224 in the nine months ended September 30, 2017, primarily due to timing of new data analytics customer deployments.

~~Cost of revenues~~

Cost of revenues increased 25% from $7,670 in the nine months ended September 30, 2016 to $9,601 in the nine months ended September 30, 2017, primarily due to an increase in third party consulting and professional services of $802 and hosting and payment processing services of $1,213 to support our overall revenue growth. As a percentage of total revenues, cost of revenues remained consistent at 8% in the nine months ended September 30, 2016 and 2017.

administrative expense.

Table of Contents

~~Compensation and benefits~~

Compensation and benefits increased 7% from $65,386 in the nine months ended September 30, 2016 to $70,055 in the nine months ended September 30, 2017, primarily due to an increase in salaries, benefits and related payroll taxes of $7,976, as a result of increased headcount to support organicgrowth and an increase related to the Wheelhouse acquisition. Also contributing to the growth was an increase in incentive compensation of $1,292, offset by a decrease in non-cash compensation expense of $4,049 and severance of $444. As a percentage of total revenues, compensation and benefits decreased from 69% in the nine months ended September 30, 2016 to 61% in the nine months ended September 30, 2017.

~~General and administration~~

General and administration expenses decreased 1% from $23,853 in the nine months ended September 30, 2016 to $23,634 in the nine months ended September 30, 2017, primarily due to decreases in legal expense of $2,802 and realized losses on designated hedges of $486, offset by increases in software purchase and maintenance of $1,733 and occupancy cost of $1,416. As a percentage of total revenues, general and administration expenses decreased from 25% in the nine months ended September 30, 2016 to 21% in the nine months ended September 30, 2017. The decrease in general and administration as a percentage of total revenues is primarily due to a higher revenue increase compared to lower growth in general and administration expenses.

~~Depreciation and amortization~~

Depreciation and amortization expense decreased 11% from $31,086 in the nine months ended September 30, 2016 to $27,596 in the nine months ended September 30, 2017, primarily due to a decrease in intangible asset amortization of $3,365 related to purchase accounting adjustments recorded in the prior year to the fair values of certain intangible assets from the Yodlee acquisition and a decrease in depreciation of $635 related to the Yodlee acquisition recorded in the same period last year. The decrease was offset by an increase of $592 in intangible asset amortization as a result of the Wheelhouse acquisition. As a percentage of total revenues, depreciation and amortization expense decreased from 33% in the nine months ended September 30, 2016 to 24% in the nine months ended September 30, 2017. The decrease in depreciation and amortization as a percentage of total revenues is primarily due to a higher revenue increase and a decrease in depreciation and amortization.

~~Nonsegment~~

~~The following table presents nonsegment loss from operations:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

Percent Change

2017

2016

Percent Change

(in thousands)

(in thousands)

Operating expenses:

Compensation and benefits

$
3,930

$
2,342

68
%

$
9,646

$
8,591

12
%
General and administration

7,313

2,894

153
%

18,187

10,487

73
%
Total operating expenses

11,243

5,236

115
%

27,833

19,078

46
%
Loss from operations

$
(11,243)

$
(5,236)

115
%

$
(27,833)

$
(19,078)

46
%

~~Three months ended September 30, 2017 compared to three months ended September 30, 2016 for nonsegment~~

~~Compensation and benefits~~

Compensation and benefits increased 68% from $2,342 in the three months ended September 30, 2016 to $3,930 in the three months ended September 30, 2017, primarily due to an increase in salaries, benefits and related payroll taxes of $756 and non-cash compensation expense of $642.

~~Table of Contents~~

~~General and administration~~

General and administration expenses increased 153% from $2,894 in the three months ended September 30, 2016 to $7,313 in the three months ended September 30, 2017, primarily due to an increase in acquisition costs of $1,992, audit and related fees of $520 and professional and legal fees of $680, offset by a decrease in fair market value adjustments on contingent consideration of $349.

~~Nine months ended September 30, 2017 compared to nine months ended September 30, 2016 for nonsegment~~

~~Compensation and benefits~~

Compensation and benefits increased 12% from $8,591 in the nine months ended September 30, 2016 to $9,646 in the nine months ended September 30, 2017, primarily due to an increase in salaries, benefits and related payroll taxes of $1,816, offset by decreases in non-cash compensation expense of $792 and severance of $322.

~~General and administration~~

General and administration expenses increased 73% from $10,487 in the nine months ended September 30, 2016 to $18,187 in the nine months ended September 30, 2017, primarily due to increases in audit and related fees of $2,837, acquisition costs of $1,435, professional and legal fees of $1,782 and marketing expense of $509, offset by a decrease in fair market value adjustments on contingent consideration of $838.

Non-GAAP Financial Measures

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

“Adjusted revenues” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. Under U.S. GAAP, we record at fair value the acquired deferred revenue for contracts in effect at the time the entities were acquired. Consequently, revenue related to acquired entities for periods subsequent to the acquisition does not reflect the full amount of revenue that would have been recorded by these entities had they remained stand‑alone entities.

diluted share" and "free cash flow."

“Adjusted EBITDA” represents net ~~loss~~income (loss) before deferred revenue fair value adjustment, interest income, interest expense, ~~accretion on contingent consideration and purchase liability,~~ income tax provision, ~~(benefit),~~ depreciation and amortization, ~~non~~‑non‑cash compensation expense, restructuring charges and transaction costs, severance ~~fair market value adjustment on contingent consideration,~~expense, litigation, regulatory and other governance related ~~expense,~~expenses, foreign currency, ~~and related hedging activity,~~ non-income tax expense adjustment, loss ~~allocation~~allocations from equity method ~~investment~~investments and loss attributable to ~~non~~‑non‑controlling interest.

“Adjusted net income” represents net ~~loss~~income (loss) before income tax provision, deferred revenue fair value adjustment, ~~accretion on contingent consideration and purchase liability, non~~‑non‑cash interest expense, ~~non~~‑cash interest on our Convertible Notes, amortization of acquired intangibles, non‑cash compensation expense, restructuring charges and transaction costs, severance ~~amortization of acquired intangibles, fair~~‑~~market value adjustment on contingent consideration,~~expense, litigation, regulatory and other governance related ~~expense,~~expenses, foreign currency, ~~and related hedging activity,~~ non-income tax expense adjustment, loss ~~allocation~~allocations from equity method ~~investment~~investments and loss attributable to ~~non~~‑non‑controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income.

The normalized tax rate is based solely on the estimated blended statutory income tax rates in the jurisdictions in which we operate. We monitor the normalized tax rate based on events or trends that could materially impact the rate, including tax legislation changes and changes in the geographic mix of our operations.

“Adjusted net income per diluted share” represents adjusted net income attributable to common stockholders divided by the diluted number of ~~weighted~~‑~~average~~weighted-average shares outstanding.

~~Our Board~~ For purposes of ~~Directors and our management use adjusted revenues, adjusted EBITDA, adjusted net income and~~the adjusted net income per ~~share:~~

~~As measures of operating performance;~~

~~For planning purposes, including the preparation of annual budgets;~~

~~To allocate resources to enhance the financial performance of our business;~~

share calculation, we assume all potential shares to be issued in connection with our Convertible Notes are dilutive.

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

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

•As measures of ~~Contents~~

operating performance;

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

~~To evaluate the effectiveness of our business strategies; and~~

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

~~In communications with our Board of Directors concerning our financial performance.~~

•To evaluate the effectiveness of our business strategies; and

•In communications with our Board concerning our financial performance.

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

We also present ~~adjusted revenues,~~ adjusted EBITDA, adjusted net income, ~~and~~ adjusted net income per diluted share and free cash flow as supplemental performance measures because we believe that they provide our Board, ~~of Directors,~~ management and investors with additional information to assess our performance. Adjusted ~~revenues provide comparisons from period to period by excluding the effect of purchase accounting on the fair value of acquired deferred revenue. Adjusted~~ EBITDA, adjusted net income and adjusted net income per diluted share provide comparisons from period to period by excluding potential differences caused by changes in interest expense and interest income that are influenced by capital structure decisions and capital market conditions, income tax provision (benefit), variations in the age and book depreciation of fixed assets affecting relative depreciation expense and amortization of internally developed software, amortization of acquired intangible assets, ~~income tax provision, non-income tax expense,~~ restructuring charges and transaction costs, ~~accretion on contingent consideration, fair market value adjustments on contingent consideration,~~ severance expense, litigation, regulatory and other governance related expenses, foreign currency, non-income tax expense ~~pre-tax~~adjustment, loss allocations from equity method investments and loss attributable to ~~non-controlling interest, and changes in interest expense and interest income that are influenced by capital structure decisions and capital market conditions.~~non‑controlling interest. Our management also believes it is useful to exclude ~~non-cash stock-based~~non‑cash compensation expense from adjusted EBITDA, adjusted net income and adjusted net income per diluted share because ~~non-cash~~non‑cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time.

Free cash flow is useful to analyze cash flows generated from our business and our ability to fund our ongoing operations, debt service obligations and to fund potential acquisitions or other strategic activities.

Table of Contents

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

diluted share and free cash flow.

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

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

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

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

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

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

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

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

Due to either net losses before income tax expense or the use of federal and state net operating loss carryforwards we had net cash paid (refunds) of $1,449 and ($175) for the nine months ended September 30, 2017 and 2016, respectively. In the event that we begin to generate taxable income and our existing net operating loss carryforwards for federal and state income taxes have been fully utilized or have expired, income tax payments will be higher; and

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

•Adjusted EBITDA, adjusted net income, adjusted net income per diluted share and free cash flow do not reflect non‑cash components of employee compensation;

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

•Due to either net losses before income tax expense or the use of federal and state net operating loss carryforwards, net cash paid for income taxes was $0.6 million and $1.1 million for the three months ended March 31, 2024 and 2023, respectively. In the event that we generate taxable income and our existing net operating loss carryforwards for federal and state income taxes have been fully utilized or have expired, income tax payments will be higher; and

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

Management compensates for the inherent limitations associated with using adjusted ~~revenues, adjusted~~ EBITDA, adjusted ~~operating~~net income, adjusted net income per diluted share and ~~adjusted net income per share~~free cash flow through disclosure of such limitations, presentation of our financial statements in accordance with ~~U.S.~~ GAAP ~~and reconciliation of adjusted revenues to revenues, the most directly comparable~~

~~Table of Contents~~

~~U.S. GAAP measure~~ and adjusted EBITDA, adjusted net income, ~~and~~ adjusted net income per diluted share and free cash flow to net income (loss), net income (loss) per share and net ~~income per share,~~cash provided by (used in) operating activities, the most directly comparable ~~U.S.~~ GAAP ~~measure.~~measures. Further, our management also reviews ~~U.S.~~ GAAP measures and evaluates individual measures that are not included in some or all of our ~~non-U.S.~~ non‑GAAP financial measures, such as our level of capital expenditures and interest income, among other measures.

The following ~~table sets~~tables set forth ~~a reconciliation~~reconciliations of ~~total revenues~~GAAP financial measures to ~~adjusted revenues based~~non-GAAP financial measures. See "Footnotes to GAAP to Non-GAAP Reconciliations" below for further detail on ~~our historical results:~~

adjustments.

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

(in thousands)

(in thousands)
Total revenues

$
175,614

$
149,155

$
500,817

$
422,684
Deferred revenue fair value adjustment

15

331

120

781
Adjusted revenues

$
175,629

$
149,486

$
500,937

$
423,465

Table of Contents

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

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

(in thousands)

(in thousands)

Net income (loss)

$
(1,320)

$
(4,057)

$
(20,925)

$
(22,993)

Add (deduct):

Deferred revenue fair value adjustment

15

331

120

781

Interest income

(58)

(6)

(108)

(28)

Interest expense

3,858

4,122

12,671

12,345

Accretion on contingent consideration and purchase liability

104

23

408

143

Income tax provision (benefit)

1,682

(1,668)

10,824

(10,602)

Depreciation and amortization

15,492

16,692

46,792

49,872

Non-cash compensation expense

8,048

7,554

23,451

25,872

Restructuring charges and transaction costs

4,608

998

10,235

4,484

Severance

1,597

1,058

2,260

3,104

Fair market value adjustment on contingent consideration

—

349

—

838

Litigation related expense

—

2,097

1,033

4,065

Foreign currency and related hedging activity

(116)

(383)

296

(672)

Non-income tax expense adjustment

571

—

1,734

—

Loss allocation from equity method investment

282

250

984

1,130

Loss attributable to non-controlling interest

26

145

377

787

Adjusted EBITDA

$
34,789

$
27,505

$
90,152

$
69,126

EBITDA:


	Three Months Ended
	March 31,
		2024		2023

		(in thousands)
Net income (loss)		$	539	$	(42,761)
Add (deduct):
Deferred revenue fair value adjustment (1)		—		52
Interest income		(1,983)		(1,358)
Interest expense		6,089		6,320
Income tax provision (2)(3)		1,505		23,769
Depreciation and amortization		33,892		31,520
Non-cash compensation expense (4)		18,898		19,453
Restructuring charges and transaction costs (5)		2,056		4,163
Severance expense (6)		3,425		6,188
Litigation, regulatory and other governance related expenses (7)		2,288		3,074
Foreign currency (8)		275		33
Non-income tax expense adjustment (9)		(49)		(168)


Loss allocations from equity method investments (10)		2,283		2,940
Loss attributable to non-controlling interest (11)		1,160		778
Adjusted EBITDA		$	70,378	$	54,003

Table of Contents

The following table sets forth ~~the~~a reconciliation of net ~~loss~~income (loss) to adjusted net income and adjusted net income per diluted ~~share based~~share:


	Three Months Ended
	March 31,
		2024		2023

		(in thousands, except share and per share information)
Net income (loss)		$	539	$	(42,761)
Income tax provision (2)(3)		1,505		23,769
Income (loss) before income tax provision		2,044		(18,992)
Add (deduct):
Deferred revenue fair value adjustment (1)		—		52
Non-cash interest expense (12)		1,405		1,442
Cash interest - Convertible Notes (13)		4,369		4,565
Amortization of acquired intangibles (14)		14,742		16,940
Non-cash compensation expense (4)		18,898		19,453
Restructuring charges and transaction costs (5)		2,056		4,163
Severance expense (6)		3,425		6,188
Litigation, regulatory and other governance related expenses (7)		2,288		3,074
Foreign currency (8)		275		33
Non-income tax expense adjustment (9)		(49)		(168)


Loss allocations from equity method investments (10)		2,283		2,940
Loss attributable to non-controlling interest (11)		1,160		778
Adjusted net income before income tax effect		52,896		40,468
Income tax effect (15)		(13,489)		(10,319)
Adjusted net income		$	39,407	$	30,149

Basic number of weighted average shares outstanding		54,884,074		54,143,259
Effect of dilutive shares:
Convertible Notes		10,811,884		11,470,645
Non-vested RSUs and PSUs		473,738		463,719
Options to purchase common stock		27,254		88,323

Diluted number of weighted average shares outstanding		66,196,950		66,165,946
Adjusted net income per diluted share		$	0.60	$	0.46

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


		Three Months Ended
		March 31,
		2024		2023

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

Table of Contents

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


	Three Months Ended March 31, 2024
	Envestnet Wealth 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

Table of Contents

Footnotes to GAAP to Non-GAAP Reconciliations

(1)Deferred revenue fair value adjustment represents the effect of purchase accounting on ~~our historical results:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,


2017

2016

2017

2016

(in thousands)

(in thousands)

Net income (loss)

$
(1,320)

$
(4,057)

$
(20,925)

$
(22,993)

Income tax provision (benefit) (1)

1,682

(1,668)

10,824

(10,602)

Income (loss) before income tax provision (benefit)

362

(5,725)

(10,101)

(33,595)

Add (deduct):

Deferred revenue fair value adjustment

15

331

120

781

Accretion on contingent consideration and purchase liability

104

23

408

143

Non-cash interest expense

2,931

2,039

7,784

6,070

Non-cash compensation expense

8,048

7,554

23,451

25,872

Restructuring charges and transaction costs

4,608

998

10,235

4,484

Severance

1,597

1,058

2,260

3,104

Amortization of acquired intangibles

10,377

12,035

31,333

36,156

Fair market value adjustment on contingent consideration

—

349

—

838

Litigation related expense

—

2,097

1,033

4,065

Foreign currency and related hedging activity

(116)

(383)

296

(672)

Non-income tax expense adjustment

571

—

1,734

—

Loss allocation from equity method investment

282

250

984

1,130

Loss attributable to non-controlling interest

26

145

377

787

Adjusted net income before income tax effect

28,805

20,771

69,914

49,163

Income tax effect (2)

(11,522)

(8,308)

(27,966)

(19,665)

Adjusted net income

$
17,283

$
12,463

$
41,948

$
29,498

Basic number of weighted-average shares outstanding

44,044,527

42,843,103

43,604,869

42,704,383

Effect of dilutive shares:

Options to purchase common stock

1,664,351

1,331,256

1,669,092

1,286,968

Unvested restricted stock units

736,657

350,169

637,580

272,205

Diluted number of weighted-average shares outstanding

46,445,535

44,524,528

45,911,541

44,263,556

Adjusted net income per share - diluted

$
0.37

$
0.28

$
0.91

$
0.67

the fair value of acquired deferred revenue in accordance with ASC 606.

~~(1)~~

For the three months ended September 30, 2017 and 2016, the effective tax rate computed in accordance with US GAAP equaled 464.6% and 29.1%, respectively. For the nine months ended September 30, 2017 and 2016, the effective tax rate computed in accordance with US GAAP equaled (107.2%) and 31.6%, respectively.

(2)For the three months ended March 31, 2024 and 2023, the effective tax rate computed in accordance with GAAP equaled 73.6% and (125.2)%, respectively.

~~(2)~~

~~An estimated normalized effective tax rate of 40% has been used to compute adjusted net income.~~

~~Note on Income Taxes:~~ (3)As of ~~September 30, 2017 the Company~~December 31, 2023, we had net operating loss carryforwards, before any uncertain tax position reserves, of ~~$261,475~~approximately $64 million and ~~$164,397~~$225 million for federal and state income tax purposes, respectively, available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes ~~the Company pays~~we pay for federal, state and foreign income taxes differs significantly from both the amount calculated in accordance with GAAP using the effective income tax rate ~~computed~~and from the income tax effect amount calculated using the normalized effective tax rate.

(4)Non-cash compensation expense represents expense related to stock-based awards made to employees and directors. We exclude stock-based compensation because the Company does not view it as reflective of our core operating performance as it is a non-cash expense.

(5)Restructuring charges and transaction costs represent third-party costs incurred related to significant, distinct enterprise-wide strategic initiatives such as the closure of certain offices in the United States, acquisition and transaction related expenditures and system integration costs related to implementation of a new Enterprise Resource Planning System. These third-party costs are infrequent and outside the ordinary course of our continuing operations. We exclude these costs to facilitate a more meaningful evaluation of our current operating performance and comparisons to our past operating performance.

(6)Severance expense represents severance and related costs associated with certain strategic initiatives that have reshaped our workforce such as an organizational realignment in the fourth quarter of 2022, post-acquisition integration activity and a reduction in force initiative in 2023. These are not reflective of future ongoing operations and affect comparability of the Company’s operational results across reporting periods.

(7)Litigation, regulatory and other governance related expenses represent certain third-party non-recurring litigation fees primarily related to litigation matters discussed in Note 19—Commitments and Contingencies as well as governance related expenses associated with activist shareholder activity. The litigation costs relate to two matters over a three-year time period and are not reoccurring expenditures.

(8)Foreign currency represents gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts. These adjustments can vary significantly from period to period and are not indicative of our core operating performance.

(9)Non-income tax expense adjustments relate to the remediation of historical sales and use tax issues and are not indicative of our core operating performance.

(10)Loss allocations from equity method investments represents gains and losses from our various equity method investments. These investments are not part of our core business and the ventures associated with these investments generally are start-up or early-stage businesses where we have limited influence over their operational and financial policies. The results of operations for each of these investments can vary significantly from period to period and do not represent the Company’s ongoing operations.

(11)Loss attributable to non-controlling interest represents the loss attributable to the Company’s minority economic interest in a private company excluding the impact of non-cash or non-recurring items included within other line items. Although the Company consolidates its minority interest in a private company as a result of its ability to control this private company interest through majority representation on the board, the Company has excluded loss attributable to non-controlling interest as it owns a minority economic interest in the private company. This private company is a start-up business and the results of its operations vary significantly from period to period and are not representative of the Company’s financial performance.

(12)Non-cash interest expense represents third-party costs incurred in securing debt and are amortized over the term of the debt. We exclude non-cash interest expense because the Company does not view this expense as reflective of our core operating performance as it is a non-cash expense.

(13)For purposes of computing adjusted net income and adjusted net income per share, the Company always assumes the convertible notes to be fully converted for all periods presented. Therefore, cash interest for convertible notes is added to adjusted net income in accordance with ~~U.S. GAAP,~~the if-converted method.

(14)Amortization of acquired intangibles represents non-cash amortization expense from intangible assets acquired through acquisitions. The fair value of these acquired intangible assets are estimates and ~~from~~ the Company does not view it as reflective of our core operating performance as it is a non-cash expense.

(15)Income tax effect represents the tax effect of Non-GAAP adjustments as described above and is calculated using an estimated normalized tax rate ~~shown above.~~

~~Table~~ of ~~Contents~~

~~The following tables set forth the reconciliation of revenues to adjusted revenues and income (loss) from operations to adjusted EBITDA based on our historical results~~25.5% for ~~each segment for~~both the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016:~~

Three Months Ended September 30, 2017

Envestnet

Envestnet | Yodlee

Nonsegment

Total

(in thousands)
Revenues
$
135,948

$
39,666

$
—

$
175,614
  Deferred revenue fair value adjustment

—

15

—

15
Adjusted revenues
$
135,948

$
39,681

$
—

$
175,629

Income (loss) from operations
$
18,955

$
(3,364)

$
(11,243)

$
4,348
Add (deduct):

  Deferred revenue fair value adjustment

—

15

—

15
  Accretion on contingent consideration and purchase liability

104

—

—

104
  Depreciation and amortization

6,414

9,078

—

15,492
  Non-cash compensation expense

3,679

2,675

1,694

8,048
  Restructuring charges and transaction costs

73

—

4,535

4,608
  Non-income tax expense adjustment

571

—

—

571
  Severance

1,519

78

—

1,597
  Litigation related expense

—

—

—

—
  Other gain

—

—

(20)

(20)
  Loss attributable to non-controlling interest

26

—

—

26
Adjusted EBITDA
$
31,341

$
8,482

$
(5,034)

$
34,789

Three Months Ended September 30, 2016

Envestnet

Envestnet | Yodlee

Nonsegment

Total

(in thousands)
Revenues
$
114,511

$
34,644

$
—

$
149,155
  Deferred revenue fair value adjustment

109

222

—

331
Adjusted revenues
$
114,620

$
34,866

$
—

$
149,486

Income (loss) from operations
$
12,361

$
(8,416)

$
(5,236)

$
(1,291)
Add (deduct):

  Deferred revenue fair value adjustment

109

222

—

331
  Accretion on contingent consideration and purchase liability

23

—

—

23
  Depreciation and amortization

6,362

10,330

—

16,692
  Non-cash compensation expense

3,565

2,937

1,052

7,554
  Restructuring charges and transaction costs

34

3

961

998
  Severance

990

68

—

1,058
  Fair market value adjustment on contingent consideration

—

—

349

349
  Litigation related expense

—

2,086

11

2,097
  Foreign currency and related hedging activity

—

(462)

—

(462)
  Other loss

—

—

11

11
  Loss attributable to non-controlling interest

145

—

—

145
Adjusted EBITDA
$
23,589

$
6,768

$
(2,852)

$
27,505

2023.

~~Table of Contents~~

Nine Months Ended September 30, 2017

Envestnet

Envestnet | Yodlee

Nonsegment

Total

(in thousands)
Revenues
$
386,638

$
114,179

$
—

$
500,817
  Deferred revenue fair value adjustment

36

84

—

120
Adjusted revenues
$
386,674

$
114,263

$
—

$
500,937

Income (loss) from operations
$
48,277

$
(16,707)

$
(27,833)

$
3,737
Add:

  Deferred revenue fair value adjustment

36

84

—

120
  Accretion on contingent consideration and purchase liability

408

—

—

408
  Depreciation and amortization

19,196

27,596

—

46,792
  Non-cash compensation expense

11,571

8,137

3,743

23,451
  Restructuring charges and transaction costs

768

—

9,467

10,235
  Non-income tax expense adjustment

1,734

—

—

1,734
  Severance

1,942

302

16

2,260
  Litigation related expense

—

1,033

—

1,033
  Other loss

—

—

5

5
  Loss attributable to non-controlling interest

377

—

—

377
Adjusted EBITDA
$
84,309

$
20,445

$
(14,602)

$
90,152

��

Nine Months Ended September 30, 2016

Envestnet

Envestnet | Yodlee

Nonsegment

Total

(in thousands)
Revenues
$
328,417

$
94,267

$
—

$
422,684
  Deferred revenue fair value adjustment

114

667

—

781
Adjusted revenues
$
328,531

$
94,934

$
—

$
423,465

Income (loss) from operations
$
32,425

$
(33,728)

$
(19,078)

$
(20,381)
Add (deduct):

  Deferred revenue fair value adjustment

114

667

—

781
  Accretion on contingent consideration and purchase liability

143

—

—

143
  Depreciation and amortization

18,786

31,086

—

49,872
  Non-cash compensation expense

9,151

12,186

4,535

25,872
  Restructuring charges and transaction costs

361

34

4,089

4,484
  Severance

2,019

747

338

3,104
  Fair market value adjustment on contingent consideration

—

—

838

838
  Litigation related expense

—

3,824

241

4,065
  Foreign currency and related hedging activity

—

(462)

—

(462)
  Other loss

—

—

23

23
  Loss attributable to non-controlling interest

787

—

—

787
Adjusted EBITDA
$
63,786

$
14,354

$
(9,014)

$
69,126

Liquidity and Capital Resources

Our primary sources of ~~September 30, 2017, we had total~~liquidity include cash provided by operating activities, including fluctuations in working capital, and access to external capital. Our working capital is affected by the timing of payments related to fees receivable, investment manager fees, employee compensation, income tax, our annual Advisor Summit and various other items. Historically the first quarter of the year is our lowest quarter of cash provided by operating activities primarily due to the payment of annual bonuses during the first quarter of the year following the year they were incurred and prepayments made during the first quarter of the year associated with our Advisor Summit which is held during the second quarter of the year.

We believe our existing cash and cash equivalents ~~of $48,704 compared to $52,592 as of December 31, 2016. We plan to use existing cash as of September 30, 2017~~ and cash generated in the ongoing operations of our businesswill be sufficient to fund our current operations, including capital ~~expenditures, repay~~expenditure needs and debt service obligations, over the next twelve months and ~~for possible acquisitions or other strategic activity.~~beyond. If the cash generated in the ongoing operations of our business is insufficient to fund these requirements, we may be required to borrow under our ~~bank credit agreement~~Revolving Credit Facility or incur additional debt to fund our ongoing operations or to fund potential acquisitions or other strategic activities. ~~The Company~~

We will ~~fund~~continue to actively manage our cash balances by making decisions regarding the ~~FolioDynamix acquisition with a combination of~~amounts, timing and manner in which cash onis generated and used in order to ensure we are able to meet our cash, capital and liquidity requirements and maintain operations for both the ~~Company’s balance sheet~~short and ~~borrowings under its revolving credit facility.~~

long term.

~~Table of Contents~~

~~Credit Agreement~~

On July 18, 2017, the Company and certain of its subsidiaries entered into a Second Amended and Restated Credit Agreement (the “Second Amended and Restated Credit Agreement”) with a group of banks (the “Banks”), for which Bank of Montreal is acting as administrative agent (the “Administrative Agent”). The Second Amended and Restated Credit Agreement amends and restates the Amended and Restated Credit Agreement, dated as of November 19, 2015, as amended, among the Company, the guarantors party thereto, the lenders party thereto and Bank of Montreal, as administrative agent (the “Prior Credit Facility”). Pursuant to the Second Amended and Restated Credit Agreement, the Banks have agreed to provide to the Company revolving credit commitments (the “Revolving Credit Facility”) in the aggregate amount of up to $350,000 which amount may be increased by $50,000. The Second Amended and Restated Credit Agreement also includes a $5,000 subfacility for the issuance of letters of credit.

As of ~~September 30, 2017, an amount~~March 31, 2024, we had total cash and cash equivalents of ~~$101,168 was~~$61.2 million, no amounts outstanding onunder the Revolving Credit ~~Facility.~~

~~The July 18, 2017 amendment~~Facility and $500.0 million available to borrow under the ~~Prior~~Revolving Credit Facility, replaced the Term Notes and related excess cash flow payment obligations with a revolving line of credit. The Company’s condensed consolidated balance sheets reflect these changes as of September 30, 2017 with no resulting portion of debt relatedsubject to ~~the revolving credit facility being classified as short-term, in accordance with the term of the amended and restated Credit Agreement.~~

covenant compliance.

Cash Flows

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

flows:

Nine Months Ended

September 30,



2017

2016

(in thousands)
Net cash provided by operating activities

$
71,603

$
53,350
Net cash used in investing activities

(22,092)

(37,688)
Net cash used in financing activities

(53,569)

(16,718)
Effect of exchange rate on changes on cash

170

—
Net decrease in cash and cash equivalents

(3,888)

(1,056)
Cash and cash equivalents, end of period

48,704

50,662


	Three Months Ended
	March 31,
	2024		2023

	(in thousands)
Net cash provided by (used in) operating activities	$	1,944	$	(33,673)
Net cash used in investing activities	(24,658)		(58,756)
Net cash provided by (used in) financing activities	3,637		(20,660)
Effect of exchange rate on changes on cash	(2)		3,580
Net change in cash and cash equivalents due to cash reclassified to assets held for deconsolidation	(11,073)		—
Net change in cash and cash equivalents	$	(30,152)	$	(109,509)

Operating Activities

Net cash provided by operating activities increased $35.6 million for the ~~nine~~three months ended ~~September 30, 2017 increased by $18,253~~March 31, 2024 compared to the ~~same period in 2016,~~three months ended March 31, 2023 primarily due to ~~increases~~an increase of $40.1 million in ~~deferred income taxes of $16,919, changes in operating assets and liabilities of $2,389 and net income of $2,068,~~cash provided by our business operations, partially offset by ~~decreases~~a decrease of $4.5 million in ~~depreciation~~cash provided due to timing of payments within our working capital accounts. Our working capital is affected by the timing of payments related to several items, including but not limited to, employee incentives, income tax payments and ~~amortization~~cash collections from our clients. For the three months ended March 31, 2024 compared to the three months ended March 31, 2023, the decrease of ~~$3,080~~$4.5 million in cash provided within our working capital accounts is primarily related to timing of cash collections from our clients and ~~stock-based compensation expense of $2,421.~~

cash payment timing differences within accounts payable and accrued expenses and prepaid expenses and other assets.

~~Table of Contents~~

Investing Activities

Net cash used in investing activities decreased $34.1 million for the ~~nine~~three months ended ~~September 30, 2017 decreased by $15,596~~March 31, 2024 compared to the ~~same period in 2016. The decrease is~~three months ended March 31, 2023 primarily ~~a result of~~due to a decrease in cash ~~disbursements for acquisitions~~used related to an issuance of ~~$18,394, offset by increases~~loan receivable to a private company of $20.0 million, a decrease in cash used to acquire proprietary technology of $10.0 million, a decrease in capitalization of internally developed software of ~~$2,993.~~

$3.7 million and a decrease in cash used to purchase property and equipment of $2.5 million.

Financing Activities

Net cash ~~used in~~provided by financing activities increased $24.3 million for the ~~nine~~three months ended ~~September 30, 2017 increased $36,851~~March 31, 2024 compared to the ~~same period in 2016. The change was~~three months ended March 31, 2023 primarily ~~the result of increases in payments on Term Notes of $29,862 and payments on the revolving credit facility of $17,500, offset by an increase in~~due to cash proceeds from ~~borrowings on the revolving credit facility~~capital contributions received by non-controlling interest of ~~$10,000.~~

$12.0 million, a decrease in cash used for share repurchases of $9.8 million and a decrease in cash paid related to tax withholdings for stock-based compensation of $2.3 million.

Commitments and Off-Balance Sheet Arrangements

Purchase Obligations and Indemnifications

See “Part I, Item 1, Note 19—Commitments and Contingencies,Purchase Obligations and Indemnifications.”

Acquisition of Redi2 Technologies

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

Legal Proceedings

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

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with ~~U.S.~~ GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements and accompanying notes. ~~Note 2,~~ See "Note 2—Summary of Significant Accounting ~~Policies,~~Policies" to the ~~Consolidated Financial Statements~~consolidated financial statements in our ~~most recent Form 10-K describes the~~Annual Report for significant accounting policies and methods used in the preparation of the ~~Consolidated Financial Statements.~~consolidated financial statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our ~~most recent Form 10-K~~Annual Report include, but are not limited to, the discussion of estimates used for recognition of ~~revenues, purchase accounting, internally developed software, non-cash stock-based compensation expense,~~revenue, impairment of goodwill and acquired intangible assets and income taxes. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the ~~Condensed Consolidated Financial Statements,~~condensed consolidated financial statements, and actual results could differ materially from the amounts reported.

~~Commitments and Off-Balance Sheet Arrangements~~

~~Purchase Obligations and Indemnifications~~

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

~~Litigation~~

In December 2014, Yodlee filed a complaint in the United States District Court for the District of Delaware alleging that Plaid Technologies Inc. (“Plaid”) had and was continuing to infringe on seven of Yodlee’s U.S. patents. The complaint sought unspecified monetary damages, enhanced damages, interest, fees, expenses, costs and injunctive relief against Plaid. In May 2016, Plaid filed its answer to Yodlee’s complaint as well as counterclaims seeking declaratory judgment that Yodlee’s patents were not infringed and were invalid and unenforceable. In addition, Plaid’s counterclaims also alleged, among other things, violation of federal antitrust and false advertising laws and unfair competition under California state law and common law. The counterclaims sought unspecified monetary damages, enhanced damages, interest, fees, expenses, costs and injunctive relief against Yodlee. During the course of the litigation, Plaid also filed petitions for review before the Patent Office’s Board of Patent Trials and Appeals against the seven Yodlee patents that were the subject of the lawsuit as well as a petition for reexamination against one of the patents.

On January 31, 2017, Yodlee and Plaid agreed to resolve the lawsuit brought by Yodlee, the counterclaims brought by Plaid and the review petitions brought by Plaid before the Patent Office. Plaid also agreed not to participate further in the reexamination proceedings which the Patent Office may elect to continue without Plaid’s participation. As part of the resolution of the lawsuit, Plaid will license Envestnet’s worldwide patent portfolio.

The Company is involved in litigation 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

~~Table of Contents~~

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. Litigation accruals are recorded when and if it is determined that a loss is both probable and reasonably estimable. 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 September 30, 2017. 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 litigation could have a material adverse effect on Envestnet’s results of operations or cash flow in a particular quarter or year.

~~Leases~~

~~The Company rents office space under leases that expire at various dates through 2030. Future minimum lease commitments under these operating leases, as of September 30, 2017, were as follows:~~

Years ending December 31:

Remainder of 2017

$
3,309
2018

13,640
2019

14,492
2020

14,343
2021

13,751
Thereafter

53,538
Total

$
113,073

Item 3.Quantitative and Qualitative Disclosures About Market Risk

~~Market risk~~

~~Our exposure~~

There have been no material changes to our market, ~~risk is directly related to revenues from asset management~~foreign currency or ~~administration services earned based upon a contractual percentage of AUM or AUA. In the three and nine months ended September 30, 2017, 60%~~interest rate risks as discussed in Part II, Item 7A of our revenues were derived from revenues based on the market value of AUM or AUA. We expect this percentage to vary over time. A decrease in the aggregate value of AUM or AUA may cause our revenue to decline and our net loss to increase.

~~Foreign currency risk~~

The expenses of our India subsidiary, which primarily consist of expenditures related to compensation and benefits, are paid using the Indian Rupee. We are directly exposed to changes in foreign currency exchange rates through the translation of these monthly expenditures into U.S. dollars. For the three and nine months ended September 30, 2017, we estimate that a hypothetical 10% increase in the value of the Indian Rupee to the U.S. dollar would result in a decrease of $991 and $2,101, respectively, to pre‑~~tax earnings and a hypothetical 10% decrease in the value of the Indian Rupee to the U.S. dollar would result in an increase of $811 and $1,719, respectively, to pre~~‑~~tax earnings.~~

A portion of our revenues are billed in various foreign currencies. We are directly exposed to changes in foreign currency exchange rates through the translation of these monthly revenues into U.S. dollars. For the three and nine months ended September 30, 2017, we estimate that a hypothetical 10% increase in the value of various foreign currencies to the U.S. dollar would result in a corresponding increase or decrease of $742 and $2,121, respectively, to pre‑tax earnings. For the three and nine months ended September 30, 2017, we estimate that a hypothetical 10% decrease in the value of various foreign currencies to the U.S. dollar would result in a corresponding increase or decrease of $724 and $2,065, respectively, to pre‑~~tax earnings.~~

~~Interest rate risk~~

We are subject to market risk from changes in interest rates. The Company has a revolving credit facility that bears interest at LIBOR plus an applicable margin between 1.50 percent and 3.25 percent. As the LIBOR rates fluctuate, so too will the interest expense on amounts borrowed under the Amended and Restated Credit Agreement. Interest charged on the revolving credit facility for

Annual Report.

~~Table of Contents~~

the majority of the third quarter of 2017 was 3.6%. As of September 30, 2017, there was $101,168 of revolving credit amounts outstanding under the Amended and Restated Credit Agreement. The Company incurred interest expense of $3,795 and $5,368 for the three and nine months ended September 30, 2017, respectively, related to the Amended and Restated Credit Agreement. A sensitivity analysis performed on the interest expense indicated that a hypothetical 0.25% increase or decrease in our interest rate would increase or decrease interest expense on an annual basis by approximately $286.

Item 4.Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, ~~means~~are controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that ~~any~~ controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~Our management is responsible for establishing~~

Based on this evaluation of our disclosure controls and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Management concluded there were material weaknesses as identified below in internal control over financial reportingprocedures as of ~~September 30, 2017. The control deficiencies identified below were previously identified by management as of December~~March 31, ~~2016.~~

~~The following control deficiencies were identified as material weaknesses:~~

Ineffective design and operation of internal controls over the accounting for non-routine transactions and the relevance and reliability of data used to prepare financial statement disclosures. This material weakness was caused by an ineffective risk assessment process that failed to appropriately identify new employee resource needs and necessary internal controls over non-routine transactions and financial statement disclosures.

Ineffective design and operation of management review controls over certain assumptions used to measure the fair value of intangible assets purchased in acquisitions. This material weakness was caused by an ineffective risk assessment process that failed to appropriately identify new employee resource needs and necessary internal controls over the acquisitions.

Ineffective design and operation of internal controls related to our state and local tax compliance process. Specifically, it was determined that we did not have adequate procedures and controls to appropriately determine compliance with, and accounting for, certain state and local non-income tax regulations.

These control deficiencies create a reasonable possibility that a material misstatement to the condensed consolidated financial statements will not be prevented or detected on a timely basis. Due to the material weaknesses described above, our management, including2024, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were ~~not effective as of September 30, 2017.~~

~~Remediation Plans~~

Management, under the supervision of our Audit Committee, is committed to remediating these material weaknesses in a timely fashion. We have begun executing remediation plans that address the material weaknesses in internal control over financial reporting. Specifically, we have hired and continue to actively recruit additional resources including personnel dedicated to providing additional management oversight over the documentation of non-routine accounting matters and accounting for acquisitions and to enhance our expertise in determining the appropriate accounting and reporting in these areas.

~~In addition, management’s planned actions to further address the material weaknesses include:~~

effective.

~~Table of Contents~~

~~Review of the quarterly and annual financial reporting processes to identify and implement enhanced accounting processes and related internal control procedures;~~

Enhancement of our process and internal controls related to the preparation of accounting position papers documenting our analysis and conclusions for all non-routine accounting matters including purchase accounting over acquisitions;

Establishment of training and education programs for financial personnel responsible for the drafting of our consolidated financial statements and disclosures and accounting for newly acquired businesses and non-routine accounting matters; and

~~Update of our systems in order to collect the necessary data to comply with all required tax obligations.~~

The Audit Committee has directed management to develop a detailed plan and timetable for the implementation of the foregoing remedial measures and will monitor their implementation. In addition, under the direction of the Audit Committee, management will continue to review and make necessary changes to the overall design of our internal control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting.

Management believes the measures described above and others that may be implemented will remediate the control deficiencies identified and will strengthen our internal control over financial reporting. Management is committed to continuous improvement of our internal control processes and will continue to diligently review our financial reporting controls and procedures. As management continues to evaluate and work to improve internal control over financial reporting, we may take additional measures to address control deficiencies or determine to modify, or in appropriate circumstances not to complete, certain of the remediation measures described above. Subject to the foregoing, we expect these remedial actions and or other remedial actions related to these material weaknesses will be completed in 2017.

If the remedial measures described above are insufficient to address the identified material weaknesses or are not implemented effectively, or additional deficiencies arise in the future, material misstatements in our interim or annual consolidated financial statements may occur in the future. Among other things, any unremediated material weakness could result in material post-closing adjustments in future financial statements. Furthermore, any such unremediated material weakness could have the effects described in “Risk Factors” in Part I, Item 1A of our 2016 Form 10-K that was filed with the Securities and Exchange Commission on March 24, 2017.

Changes in Internal Control Over Financial Reporting

~~During~~

There were no changes to our internal control over financial reporting during the ~~nine~~three months ended ~~September 30, 2017, improvements~~March 31, 2024, that have materially affected, or are reasonably likely to the processes of financial reporting have been implemented which include enhanced disclosure preparation and review controls, a condensed financial close process providing an increased time frame to prepare and review financial reporting documents, as well as streamlined financial data aggregation which increases reliance on system driven reports, thereby decreasing the likelihood of human error. In addition, management has reorganized the accounting department as well as increased its overall staffing levels.

During the remainder of the year, the Company will test the design and operating effectiveness of controls designed to remediate certain material weaknesses as discussed above in an effort to remediate the material weaknesses prior to the filing of the 2017 Form 10-K.

~~During the nine months ended September 30, 2017, the material weakness related to the ineffective design and operation of management review~~materially affect, our internal controls over ~~certain assumptions used to measure the fair value of intangible assets purchased in acquisitions has been remediated and the impacted controls were effective at September 30, 2017.~~

~~The remedial actions that management undertook in the nine months ended September 30, 2017 to address this material weakness included the following:~~

~~•Revised existing controls over certain assumptions used to measure the fair value of intangible assets purchased in acquisitions~~

~~•Added specific controls over certain assumptions used to measure the fair value of intangible assets purchased in acquisitions.~~

financial reporting.

~~Table of Contents~~

PART II — OTHER INFORMATION

Item 1.Legal Proceedings

The ~~Company~~information in Part I, Note 19—Commitments and Contingencies, Legal Proceedings is involved in litigation 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. Litigation accruals are recorded when and if it is determined that a loss is both probable and reasonably estimable. 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 September 30, 2017. 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 litigation could have a material adverse effect on Envestnet’s results of operations or cash flow in a particular quarter or year.

incorporated herein by reference.

Item 1A. Risk Factors

Investment in our securities involves risk. An investor or potential investor should consider the risks summarized below and under the caption “Risk Factors” in Part I, Item 1A of our ~~2016 Form 10-K,~~Annual Report when making investment decisions regarding our securities. The risk factors that were disclosed in our ~~2016 Form 10-K~~Annual Report have not materially changed since the date ~~our 2016 Form 10-K~~the Annual Report was filed.

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

(c)Issuer Purchases of Equity Securities

Maximum number (or

Total number of

approximate dollar

shares purchased

value) of shares

Total number

Average

as part of publically

that may yet be

of shares

price paid

announced plans

purchased under the


purchased

per share

or programs

plans or programs
July 1, 2017 through July 31, 2017

2,531
$
39.16

—

1,956,390
August 1, 2017 through August 31, 2017

29,134

40.99

—

1,956,390
September 1, 2017 through September 30, 2017

9,022

43.94

—

1,956,390

~~On February 25,~~

In 2016, the Company announced that ~~its~~our Board ~~of Directors~~ had authorized a share repurchase program under which the Company may repurchase up to ~~2,000,000~~2.0 million shares of its common stock. The timing and volume of share repurchases will be determined by the ~~Company’s~~Company's management based on its ongoing assessments of the capital needs of the business, the market price of ~~its~~our common stock and general market conditions. No time limit has been set for the completion of the repurchase program, and the program may be suspended or discontinued at any time. The repurchase program authorizes the Company to purchase its common stock from time to time in the open market (including pursuant to a “Rule 10b5-1 plan”), in block transactions, in privately negotiated transactions, through accelerated stock repurchase programs, through option or other forward transactions or otherwise, all in compliance with applicable laws and other restrictions.

There were no purchases of equity securities made under the share repurchase program during the three months ended March 31, 2024. As of ~~September 30, 2017, 1,956,390 of~~March 31, 2024, 0.3 million shares ~~could~~are still available to be purchased under this program.

Item 3.Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

Not applicable.

Item 5.Other Information

~~None.~~

None.

~~Table of Contents~~

Item 6.Exhibits

(a)Exhibits

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

INDEX TO EXHIBITS


Exhibit No.						Description
~~31.1~~
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						Interim Executive Agreement 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 15 , 2024 and incorporated by reference herein).*
10.4						Empl oyment Agreement with William Crager (filed as Exhibit 10.1 to the Company's Form 8-K filed March 28 , 2024 and incorporated by reference herein).*
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002.~~2002
~~32.1(1)~~ 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)~~ 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

~~(1)~~

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

101)

*Attached as

(1) The material contained in Exhibit ~~101~~32.1 and 32.2 is not deemed “filed” with the SEC and is not to ~~this Quarterly Report on Form 10-Q are~~be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

* Management contract or compensation plan.

** The following materials are formatted in Inline XBRL (Extensible Business Reporting Language): (i) the cover page; (ii) the Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016; (ii)~~2023; (iii) the Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016; (iii)~~2023; (iv) the Condensed Consolidated Statement of Comprehensive ~~Loss~~Income (Loss) for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2024 and ~~2016; (iv)~~2023; (v) the Condensed Consolidated ~~Statement~~Statements of Stockholders' Equity for the ~~nine~~three months ended ~~September 30, 2017; (v)~~March 31, 2024 and 2023; (vi) the Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2024 and ~~2016; (vi)~~2023; (vii) Notes to Condensed Consolidated Financial Statements tagged as blocks of text.

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Quarterly Report are defined below:


Abbreviations or Acronyms						Definition
2010 Plan						2010 Long-Term Incentive Plan
2019 Equity Plan						2019 Acquisition Equity Incentive Plan
AETR						Annual effective tax rate
Annual Report						Form 10-K for the year ended December 31, 2023
ASC						Accounting Standards Codification™
ASC 310						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

Board						Board of Directors
Company						Envestnet, Inc. and its subsidiaries
Convertible Notes due 2023						$45.0 million of remaining aggregate principal amount of convertible notes with an interest rate of 1.75% per year that matured and were settled on June 1, 2023.
Convertible Notes due 2025						$317.5 million of remaining aggregate principal amount of convertible notes with an interest rate of 0.75% per year that mature on August 15, 2025.
Convertible Notes due 2027						$575.0 million aggregate principal amount of convertible notes with an interest rate of 2.625% per year that mature on December 1, 2027.
Envestnet						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, 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
TCS						Tata Consultancy Services
Truelytics						Truelytics, Inc.
U.S.						United States
Waiver						Waiver with respect to the Revolving Credit Facility
Yodlee						Yodlee, Inc.

~~Table of Contents~~

SIGNATURES

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly ~~authorized on November 9, 2017.~~

authorized.


	ENVESTNET, INC.

Date: May 8, 2024	By:	/s/ ~~Judson Bergman~~ James L. Fox
		~~Judson Bergman~~ James L. Fox
		~~Chairman and~~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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Revenues:
Assets under management or administration	$	106,147	$	90,042	$	299,268	$	258,969
Subscription and licensing		62,963		51,959		180,675		142,303
Professional services and other		6,504		7,154		20,874		21,412
Total revenues		175,614		149,155		500,817		422,684

Operating expenses:
Cost of revenues		56,070		47,259		161,031		132,319
Compensation and benefits		68,551		60,345		199,079		180,625
General and administration		31,153		26,150		90,178		80,249
Depreciation and amortization		15,492		16,692		46,792		49,872
Total operating expenses		171,266		150,446		497,080		443,065

Income (loss) from operations		4,348		(1,291)		3,737		(20,381)
Other expense, net		(3,986)		(4,434)		(13,838)		(13,214)
Income (loss) before income tax provision (benefit)		362		(5,725)		(10,101)		(33,595)

Income tax provision (benefit)		1,682		(1,668)		10,824		(10,602)

Net loss		(1,320)		(4,057)		(20,925)		(22,993)
Add: Net loss attributable to non-controlling interest		—		—		—		—
Net loss attributable to Envestnet, Inc.	$	(1,320)	$	(4,057)	$	(20,925)	$	(22,993)

Net loss per share attributable to Envestnet, Inc.:
Basic	$	(0.03)	$	(0.09)	$	(0.48)	$	(0.54)

Diluted	$	(0.03)	$	(0.09)	$	(0.48)	$	(0.54)

Weighted average common shares outstanding:
Basic		44,044,527		42,843,103		43,604,869		42,704,383

Diluted		44,044,527		42,843,103		43,604,869		42,704,383


			Measurement
	Preliminary		Period		As of
	Estimate		Adjustments		September 30, 2017
Cash consideration	$	13,299	$	—	$	13,299
Contingent consideration liability		2,582		(218)		2,364
Purchase consideration liability		887		—		887
Working capital adjustment		110		—		110
Cash acquired		(80)		—		(80)
Total	$	16,798	$	(218)	$	16,580


	Envestnet		Envestnet \| Yodlee		Total
Balance at December 31, 2016	$	163,751	$	268,185	$	431,936
Purchase accounting adjustments - Wheelhouse		—		457		457
Foreign currency translation		—		353		353
Balance at September 30, 2017	$	163,751	$	268,995	$	432,746


					September 30, 2017						December 31, 2016
					Gross				Net		Gross				Net
	Estimated				Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Useful Life				Amount		Amortization		Amount		Amount		Amortization		Amount
Customer lists	4	-	15	years	$	259,350	$	(72,743)	$	186,607	$	259,490	$	(54,861)	$	204,629
Proprietary technologies	2	-	8	years		57,328		(27,979)		29,349		57,770		(20,214)		37,556
Trade names	2	-	7	years		24,889		(8,766)		16,123		25,007		(6,178)		18,829
Backlog			4	years		11,000		(9,554)		1,446		11,000		(6,456)		4,544
Total intangible assets					$	352,567	$	(119,042)	$	233,525	$	353,267	$	(87,709)	$	265,558


Years ending December 31:
Remainder of 2017	$	10,232
2018		35,657
2019		32,038
2020		28,344
2021		20,638
Thereafter		106,616
	$	233,525


	Fair Value of
	Contingent
	Consideration
	Liabilities
Balance at December 31, 2016	$	4,868
Settlement of contingent consideration liability		(2,286)
Contingent consideration adjustment		(218)
Accretion on contingent consideration		332
Balance at September 30, 2017	$	2,696


	Fair Value of
	Assets to Fund
	Deferred
	Compensation
	Liability
Balance at December 31, 2016	$	2,738
Contributions and fair value adjustments		2,384
Balance at September 30, 2017	$	5,122


		Weighted-
		Average Grant
	Number of	Date Fair Value
	Shares	per Share
Outstanding as of December 31, 2016	1,894,759	$	30.40
Granted	872,941		31.89
Vested	(526,572)		31.68
Forfeited	(20,084)		27.52
Outstanding as of March 31, 2017	2,221,044		31.98
Granted	47,700		35.05
Vested	(199,163)		30.59
Forfeited	(45,683)		30.11
Outstanding as of June 30, 2017	2,023,898		32.17
Granted	29,000		39.10
Vested	(121,449)		32.26
Forfeited	(30,369)		31.61
Outstanding as of September 30, 2017	1,901,080		32.28


Years ending December 31:
Remainder of 2017	$	3,309
2018		13,640
2019		14,492
2020		14,343
2021		13,751
Thereafter		53,538
Total	$	113,073


	Three Months Ended September 30, 2017
		Envestnet		Envestnet \| Yodlee		Nonsegment		Total
	(in thousands)
Revenues	$	135,948	$	39,666	$	—	$	175,614
Deferred revenue fair value adjustment		—		15		—		15
Adjusted revenues	$	135,948	$	39,681	$	—	$	175,629

Income (loss) from operations	$	18,955	$	(3,364)	$	(11,243)	$	4,348
Add (deduct):
Deferred revenue fair value adjustment		—		15		—		15
Accretion on contingent consideration and purchase liability		104		—		—		104
Depreciation and amortization		6,414		9,078		—		15,492
Non-cash compensation expense		3,679		2,675		1,694		8,048
Restructuring charges and transaction costs		73		—		4,535		4,608
Non-income tax expense adjustment		571		—		—		571
Severance		1,519		78		—		1,597
Litigation related expense		—		—		—		—
Other gain		—		—		(20)		(20)
Loss attributable to non-controlling interest		26		—		—		26
Adjusted EBITDA	$	31,341	$	8,482	$	(5,034)	$	34,789


	Three Months Ended September 30, 2016
		Envestnet		Envestnet \| Yodlee		Nonsegment		Total
	(in thousands)
Revenues	$	114,511	$	34,644	$	—	$	149,155
Deferred revenue fair value adjustment		109		222		—		331
Adjusted revenues	$	114,620	$	34,866	$	—	$	149,486

Income (loss) from operations	$	12,361	$	(8,416)	$	(5,236)	$	(1,291)
Add (deduct):
Deferred revenue fair value adjustment		109		222		—		331
Accretion on contingent consideration and purchase liability		23		—		—		23
Depreciation and amortization		6,362		10,330		—		16,692
Non-cash compensation expense		3,565		2,937		1,052		7,554
Restructuring charges and transaction costs		34		3		961		998
Severance		990		68		—		1,058
Fair market value adjustment on contingent consideration		—		—		349		349
Litigation related expense		—		2,086		11		2,097
Foreign currency and related hedging activity		—		(462)		—		(462)
Other loss		—		—		11		11
Loss attributable to non-controlling interest		145		—		—		145
Adjusted EBITDA	$	23,589	$	6,768	$	(2,852)	$	27,505


	Nine Months Ended September 30, 2017
		Envestnet		Envestnet \| Yodlee		Nonsegment		Total
	(in thousands)
Revenues	$	386,638	$	114,179	$	—	$	500,817
Deferred revenue fair value adjustment		36		84		—		120
Adjusted revenues	$	386,674	$	114,263	$	—	$	500,937

Income (loss) from operations	$	48,277	$	(16,707)	$	(27,833)	$	3,737
Add:
Deferred revenue fair value adjustment		36		84		—		120
Accretion on contingent consideration and purchase liability		408		—		—		408
Depreciation and amortization		19,196		27,596		—		46,792
Non-cash compensation expense		11,571		8,137		3,743		23,451
Restructuring charges and transaction costs		768		—		9,467		10,235
Non-income tax expense adjustment		1,734		—		—		1,734
Severance		1,942		302		16		2,260
Litigation related expense		—		1,033		—		1,033
Other loss		—		—		5		5
Loss attributable to non-controlling interest		377		—		—		377
Adjusted EBITDA	$	84,309	$	20,445	$	(14,602)	$	90,152

			��
	Nine Months Ended September 30, 2016
		Envestnet		Envestnet \| Yodlee		Nonsegment		Total
	(in thousands)
Revenues	$	328,417	$	94,267	$	—	$	422,684
Deferred revenue fair value adjustment		114		667		—		781
Adjusted revenues	$	328,531	$	94,934	$	—	$	423,465

Income (loss) from operations	$	32,425	$	(33,728)	$	(19,078)	$	(20,381)
Add (deduct):
Deferred revenue fair value adjustment		114		667		—		781
Accretion on contingent consideration and purchase liability		143		—		—		143
Depreciation and amortization		18,786		31,086		—		49,872
Non-cash compensation expense		9,151		12,186		4,535		25,872
Restructuring charges and transaction costs		361		34		4,089		4,484
Severance		2,019		747		338		3,104
Fair market value adjustment on contingent consideration		—		—		838		838
Litigation related expense		—		3,824		241		4,065
Foreign currency and related hedging activity		—		(462)		—		(462)
Other loss		—		—		23		23
Loss attributable to non-controlling interest		787		—		—		787
Adjusted EBITDA	$	63,786	$	14,354	$	(9,014)	$	69,126


					Maximum number (or
				Total number of	approximate dollar
				shares purchased	value) of shares
	Total number		Average	as part of publically	that may yet be
	of shares		price paid	announced plans	purchased under the
	purchased		per share	or programs	plans or programs
July 1, 2017 through July 31, 2017	2,531	$	39.16	—	1,956,390
August 1, 2017 through August 31, 2017	29,134		40.99	—	1,956,390
September 1, 2017 through September 30, 2017	9,022		43.94	—	1,956,390