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, 2020

☐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~~



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



35 East Wacker Drive, Suite 2400 ~~Chicago, IL~~	Chicago,	Illinois	60601
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code:

~~(312)~~

(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 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 ☒	ý	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. ☐

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 1, 2020, Envestnet, Inc. had 53,513,623 shares of ~~the~~ common stock ~~with a par value of $0.005 per share were~~ outstanding.

~~Table of Contents~~

TABLE OF CONTENTS

		~~Page~~

	Page

PART I - FINANCIAL INFORMATION	3

Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016~~2019	3 3
Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	4 4
Condensed Consolidated Statements of Comprehensive Loss for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	5 5
Condensed Consolidated ~~Statement~~Statements of Stockholders' Equity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and 2019	6 6
Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	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	24 28
Overview	26 29
Results of Operations	32 34
Liquidity and Capital Resources	43 50

Item 3. Quantitative and Qualitative Disclosures About Market Risk	44 53

Item 4. Controls and Procedures	45 54

PART II - OTHER INFORMATION	56

Item 1. Legal Proceedings	45 56

Item 1A. Risk Factors	45 56

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46 56

Item 3. Defaults Upon Senior Securities	46 56

Item 4. Mine Safety Disclosures	46 56

Item 5. Other Information	46 56

Item 6. Exhibits	46 57

Index to Exhibits	47

Signatures	48

~~Table of Contents~~

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)

September 30,

December 31,

2017

2016
Assets

Current assets:

Cash and cash equivalents

$
48,704

$
52,592
Fees and other receivables, net

49,726

44,268
Prepaid expenses and other current assets

23,999

16,224
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
Total assets

$
862,222

$
872,401

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
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
Deferred tax liabilities, net

12,216

5,555
Other non-current liabilities

14,527

13,436
Total liabilities

451,761

458,214

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
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
Non-controlling interest

398

398
Total equity

409,561

413,287
Total liabilities and equity

$
862,222

$
872,401



	March 31,			December 31,
	2020			2019
Assets
Current assets:
Cash and cash equivalents	$	68,601		$	82,505
Fees receivable, net	81,133			67,815
Prepaid expenses and other current assets	37,699			32,183
Total current assets	187,433			182,503

Property and equipment, net	53,190			53,756
Internally developed software, net	68,227			60,263
Intangible assets, net	489,840			505,589
Goodwill	906,501			879,850
Operating lease right-of-use assets, net	78,860			82,796
Other non-current assets	46,407			37,127
Total assets	$	1,830,458		$	1,801,884

Liabilities and Equity
Current liabilities:
Accrued expenses and other liabilities	$	132,142		$	137,944
Accounts payable	14,294			17,277
Operating lease liabilities	13,736			13,816
Contingent consideration	2,569			—
Deferred revenue	40,177			34,753
Total current liabilities	202,918			203,790

Convertible Notes due 2023	308,262			305,513
Revolving credit facility	290,000			260,000
Contingent consideration	12,222			9,045
Deferred revenue	6,277			5,754
Non-current operating lease liabilities	84,935			88,365
Deferred tax liabilities, net	26,680			29,481
Other non-current liabilities	34,967			32,360
Total liabilities	966,261			934,308

Commitments and contingencies

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; 67,077,561 and 66,320,706 shares issued as of March 31, 2020 and December 31, 2019, respectively; 53,468,397 and 52,841,706 shares outstanding as of March 31, 2020 and December 31, 2019, respectively	335			331
Additional paid-in capital	1,054,312			1,037,141
Accumulated deficit	(84,141		)	(75,664		)
Treasury stock at cost, 13,609,164 and 13,479,000 shares as of March 31, 2020 and December 31, 2019, respectively	(100,164		)	(90,965		)
Accumulated other comprehensive loss	(4,773		)	(1,749		)
Total stockholders’ equity	865,569			869,094
Non-controlling interest	(1,372		)	(1,518		)
Total equity	864,197			867,576
Total liabilities and equity	$	1,830,458		$	1,801,884

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,
	2020			2019
Revenues:
Asset-based	$	134,811		$	108,934
Subscription-based	104,551			83,087
Total recurring revenues	239,362			192,021
Professional services and other revenues	7,177			7,645
Total revenues	246,539			199,666

Operating expenses:
Cost of revenues	74,933			61,645
Compensation and benefits	110,430			86,717
General and administration	41,110			40,524
Depreciation and amortization	27,683			19,517
Total operating expenses	254,156			208,403

Loss from operations	(7,617		)	(8,737		)
Other expense, net	(1,537		)	(5,763		)
Loss before income tax provision (benefit)	(9,154		)	(14,500		)

Income tax provision (benefit)	(1,964		)	3,768

Net loss	(7,190		)	(18,268		)
Add: Net (income) loss attributable to non-controlling interest	(146		)	83
Net loss attributable to Envestnet, Inc.	$	(7,336	)	$	(18,185	)

Net loss per share attributable to Envestnet, Inc.:
Basic	$	(0.14	)	$	(0.38	)
Diluted	$	(0.14	)	$	(0.38	)

Weighted average common shares outstanding:
Basic	53,016,511			48,237,265
Diluted	53,016,511			48,237,265

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

~~Table of Contents~~

Envestnet, Inc.

Condensed Consolidated Statements of Comprehensive 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,
	2020			2019
Net loss attributable to Envestnet, Inc.	$	(7,336	)	$	(18,185	)
Other comprehensive loss, net of taxes:
Foreign currency translation gains (losses), net	(3,024		)	222
Comprehensive loss attributable to Envestnet, Inc.	$	(10,360	)	$	(17,963	)

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)



											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, 2019	66,320,706	$	331	(13,479,000	)	$	(90,965	)	$	1,037,141	$	(1,749	)	$	(75,664	)	$	(1,518	)	$	867,576
Adoption of ASC 326	—	—		—		—			—		—			(1,141		)	—			$	(1,141	)
Exercise of stock options	357,974	2		—		—			3,406		—			—			—			3,408
Issuance of common stock - vesting of restricted stock units	398,881	2		—		—			—		—			—			—			2
Stock-based compensation expense	—	—		—		—			13,765		—			—			—			13,765
Purchase of treasury stock for stock-based tax withholdings	—	—		(130,164	)	(9,199		)	—		—			—			—			(9,199		)
Foreign currency translation loss	—	—		—		—			—		(3,024		)	—			—			(3,024		)
Net income (loss)	—	—		—		—			—		—			(7,336		)	146			(7,190		)
Balance, March 31, 2020	67,077,561	$	335	(13,609,164	)	$	(100,164	)	$	1,054,312	$	(4,773	)	$	(84,141	)	$	(1,372	)	$	864,197

~~Table of Contents~~

~~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



Balance, December 31, 2018	61,238,898	$	306	(13,117,098	)	$	(67,858	)	$	761,128	$	(994	)	$	(58,882	)	$	(1,098	)	$	632,602
Exercise of stock options	200,326	1		—		—			3,162		—			—			—			3,163
Issuance of common stock - vesting of restricted stock units	479,479	2		—		—			—		—			—			—			2
Acquisition of business	15,755	—		—		—			772		—			—			—			772
Stock-based compensation expense	—	—		—		—			12,864		—			—			—			12,864
Purchase of treasury stock for stock-based tax withholdings	—	—		(160,456	)	(9,819		)	—		—			—			—			(9,819		)
Foreign currency translation gain	—	—		—		—			—		222			—			—			222
Net loss	—	—		—		—			—		—			(18,185		)	(83		)	(18,268		)
Balance, March 31, 2019	61,934,458	$	309	(13,277,554	)	$	(77,677	)	$	777,926	$	(772	)	$	(77,067	)	$	(1,181	)	$	621,538

~~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,
	2020			2019
OPERATING ACTIVITIES:
Net loss	$	(7,190	)	$	(18,268	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	27,683			19,517
Provision for doubtful accounts	1,026			451
Deferred income taxes	(1,587		)	169
Non-cash compensation expense	15,985			12,864
Non-cash interest expense	4,463			6,880
Accretion on contingent consideration and purchase liability	599			240
Gain on acquisition of equity method investment	(4,230		)	—
Loss allocation from equity method investments	2,030			203
Changes in operating assets and liabilities, net of acquisitions:
Fees receivable, net	(14,333		)	1,198
Prepaid expenses and other current assets	(6,793		)	(13,346		)
Other non-current assets	641			(1,060		)
Accrued expenses and other liabilities	(11,554		)	(34,495		)
Accounts payable	(3,205		)	5,179
Deferred revenue	5,598			7,039
Other non-current liabilities	(145		)	854
Net cash provided by (used in) operating activities	8,988			(12,575		)

INVESTING ACTIVITIES:
Purchases of property and equipment	(2,160		)	(5,247		)
Capitalization of internally developed software	(11,572		)	(7,185		)
Investments in private companies	(11,700		)	(1,000		)
Acquisitions of businesses, net of cash acquired	(20,257		)	(11,061		)
Net cash used in investing activities	(45,689		)	(24,493		)

FINANCING ACTIVITIES:
Proceeds from borrowings on revolving credit facility	45,000			—
Payments on revolving credit facility	(15,000		)	—
Proceeds from exercise of stock options	3,408			3,163
Purchase of treasury stock for stock-based tax withholdings	(9,199		)	(9,819		)
Issuance of restricted stock units	2			2
Net cash provided by (used in) financing activities	24,211			(6,654		)

EFFECT OF EXCHANGE RATE CHANGES ON CASH	(1,496		)	112

DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(13,986		)	(43,610		)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	82,755			289,671

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (See Note 2)	$	68,769		$	246,061

Supplemental disclosure of cash flow information - net cash paid during the period for income taxes	$	814		$	4,998
Supplemental disclosure of cash flow information - cash paid during the period for interest	2,740			216
Supplemental disclosure of non-cash operating, investing and financing activities:
Contingent consideration issued in acquisition of businesses	5,239			7,580
Purchase liabilities included in accrued expenses and other liabilities	375			—
Purchase liabilities included in other non-current liabilities	257			5,468
Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities	1,752			359
Membership interest liabilities included in other non-current liabilities	2,220			—
Common stock issued to settle purchase liability	—			772
Leasehold improvements funded by lease incentive	894			489

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands, except share and per share amounts)

1.~~Organization and Description of Business~~

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 Columbia and is a member of the Financial Industry Regulatory Authority (“FINRA”).

The accompanying unaudited condensed consolidated financial statements of the Company as of ~~September 30, 2017~~March 31, 2020 and for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 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 audited consolidated financial statements for the year ended December 31, ~~2016~~2019 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, 2020 and the results of operations, equity, comprehensive 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

~~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~~‑forward‑looking statements. All ~~forward~~‑forward‑looking statements contained in this quarterly report and documents incorporated herein by reference are qualified in their entirety by this cautionary statement. ~~Forward~~‑Forward‑looking statements speak only as of the date they are made, and we do not intend to update or otherwise revise the ~~forward~~‑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~~‑forward‑looking statements, no inference should be made that we will make additional updates with respect to those or other ~~forward~~‑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 are set forth in Part I, ~~under “Risk~~Item 1A.“Risk Factors”; in our annual report on Form 10-K for the year ended December 31, 2019 (the “2019 Form 10-K”), as updated in Part II, Item 1A.“Risk Factors” of this Form 10-Q; 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 and ~~our annual report on~~the 2019 Form 10-K ~~for the year ended December 31, 2016 (the “2016 Form 10-K”)~~ completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material. We qualify all of our forward-looking statements by these cautionary statements.

The following discussion and analysis should also be read along with our 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~~2019 Form 10-K. Except for the historical information contained herein, this discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed below.

~~Overview~~

Overview

Envestnet is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet’s unified technology enhances advisor productivity and strengthens the wealth management ~~process, delivering unparalleled flexibility, accuracy, performance, and value.~~process. Envestnet ~~enables a transparent, independent, objective, and fiduciary standard of care, and~~ empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.

More than ~~2,900~~4,900 companies, including 16of the 20 largest U.S. banks, 3946 of the 50 largest wealth management and brokerage firms, over 500 of the largest registered investment advisers (“~~RIA”~~RIAs”), and hundreds of ~~Internet~~internet services companies, leverage Envestnet technology and services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences, and 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~~financial wellness network 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 and data, delivering better intelligence and enabling its customers to drive better outcomes.

Envestnet serves clients from its headquarters based in Chicago, Illinois, as well as other locations throughout the United States, India and ~~internationally,~~other international locations.

Envestnet also operates five registered investment advisers (“RIAs”) registered with the U.S. Securities and Exchange Commission (“SEC”). We believe that our business model results in a high degree of recurring and predictable financial results.

Recent Developments

Uncertainties Related to COVID-19

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic disease. We are closely monitoring developments with the COVID-19 pandemic and are taking proactive measures to ensure business continuity. Our priority is to protect the well-being of our employees, while we continue to provide uninterrupted service and support to our clients. As part of our existing business continuity protocol, we created a pandemic steering committee that meets regularly and communicates information or guidance to our employees and customers.

We have instituted travel bans and are following mandatory stay-at-home orders where applicable. A majority of our employees are working from home as a result of these mandatory stay-at-home orders. Where permissible, we have also implemented in-office work rotations. For employees working at our offices, preventative measures have been taken, including the adapting of work spaces to allow for appropriate social distancing and enhanced cleaning regimens. We have also canceled our 2020 annual Advisor Summit Conference, which was set to take place in May 2020. We continue to monitor developments related to COVID-19 and, as the situation evolves, will continue to coordinate our operations response based on existing business continuity plans and on guidance from global health organizations, relevant governments and general response pandemic best practices.

The COVID-19 pandemic has resulted in significant declines within the equity markets. This is significant to us as we provide asset-based, subscription-based and professional services on a business-to-business-to-consumer basis to financial services clients, whereby customers offer solutions based on our platform to their end users. For the three months ended March 31, 2020, approximately 55% of our revenues result from asset-based fee billing arrangements. Asset-based recurring revenues primarily ~~India.~~

~~Recent Events~~

consist of fees for providing customers access to our platforms. These fees are generally based upon variable percentages of assets managed or administered under our platforms. Our fee percentages vary based on the level and type of services that we provide to our customers, as well as the values of existing customer accounts. The values of our customer accounts are affected by inflows or outflows of customer funds and market fluctuations. Approximately 90% of our asset-based fee arrangements are billed at the beginning of each quarter based on the market value of customer assets on our platforms as of the end of the prior quarter.

For the three months ended March 31, 2020, approximately 42% of revenues are subscription-based. These revenues primarily consist of fees for providing customers continuous access to our platforms. These subscription-based fees generally include fixed fees or usage-based fees. These fees vary based on the services being offered. Our subscription-based fee arrangements are typically established through multi-year contracts.

Our customers are primarily banks, financial institutions, financial advisors at broker-dealers and RIAs. As a result of the structure of our revenue arrangements and our customer-types, our revenues during the three months ended March 31, 2020 were not materially impacted by COVID-19. During the three months ended March 31, 2020, we experienced no business interruptions, nor did we lose any significant customers. In March 2020, our wealth management platform saw its highest use in our history.

Our revenues are expected to be negatively impacted by COVID-19 over the remainder of fiscal 2020, primarily due to market impacts and lower than expected customer growth. Based on forecasts and other qualitative factors, we have determined that we currently have no impairments to our assets as of March 31, 2020. We have also not modified our debt agreement in connection with the COVID-19 pandemic.

On ~~September 25,~~March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law. One provision of the CARES Act provides a five-year carryback of Net Operating Losses (“NOLs”) generated in tax years beginning after December 31, 2017 and before January 1, 2021. We estimate a refund of approximately $1,200 from the carryback of NOLs. The CARES Act also provides for a payment delay of employer payroll taxes, which we plan on utilizing.

Investment in Private Services Company

On January 8, 2020, we acquired a 4.25% membership interest in a private services company for cash consideration of $11,000. The private services company partners with independent network advisory firms to help them grow, become more profitable and run more efficiently. We will account for this investment under the equity method basis of accounting.

Acquisition of Private Technology Company

On February 18, 2020, through our wholly owned subsidiary Yodlee, Inc. (“Yodlee”), we acquired a private technology company (the “Private Technology Company Acquisition”). The private technology company enables the consent generation and data flow between financial information providers, such as banks and financial institutions, and financial information users, such as financial technology lenders and other financial services agencies, through a network of cloud-based interoperable interfaces or application programming interfaces. The technology and operations of the private technology company have been integrated into our Envestnet Data & Analytics segment.

In connection with the Private Technology Company Acquisition, we acquired all of the outstanding shares and paid cash consideration of $2,343, net of cash acquired, subject to certain closing and post-closing adjustments, plus up to an additional $6,750 in contingent consideration, based upon achieving certain performance targets. We recorded a liability as of the date of acquisition of approximately $5,239, which represented the estimated fair value of contingent consideration on the date of acquisition. Future changes to the estimated fair value of the contingent consideration, if any, are recognized in earnings of the Company.

We recorded estimated goodwill of $7,017, which is not deductible for income tax purposes, and estimated identifiable intangible assets for proprietary technologies of $1,000. The tangible assets acquired and liabilities assumed were not material.

Acquisition of Private Cloud Technology Company

On March 2, 2020, we acquired certain assets of a private cloud technology company (the “Private Cloud Technology Company Acquisition”). The private cloud technology company enables enterprises to design and implement the digital transition from legacy systems and applications to a modern cloud computing platform. The technology and operations of the private cloud technology company have been integrated into our Envestnet Wealth Solutions segment.

In connection with the Private Cloud Technology Company Acquisition, we paid estimated consideration of $11,968, net of cash acquired. In connection with the acquisition, we recorded estimated goodwill of $10,932, which is deductible for income tax purposes. The tangible assets acquired and liabilities assumed were not material.

Acquisition of Private Financial Technology Design Company

On March 3, 2020, we acquired the outstanding units of a private financial technology design company that were not owned by the Company ~~entered~~and merged the acquired company into ~~an agreement and plan of merger (the “Merger Agreement”) with Folio Dynamics Holdings, Inc., a Delaware corporation (“FolioDynamix”), FCD Merger Sub, Inc., a Delaware corporation and~~ a wholly owned subsidiary of ~~the~~ours (the “Private Financial Technology Design Company ~~(“Merger Sub”~~Acquisition”), and Actua USA Corporation, a Delaware corporation, solely in its capacity as the representative of the stockholders of FolioDynamix. Pursuant 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 be included in the Envestnet segment.

~~FolioDynamix provides~~. The private financial ~~institutions, registered investment advisors, and other~~technology design company designs integrated, intuitive digital technology applications for institutional financial services firms, bank wealth management ~~clients with an end-to-end technology solution paired with a suite of advisory tools including model portfolios, research,~~organizations, independent

advisor networks, and ~~overlay management services.~~

broker-dealers. 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~~the private financial technology design company have been integrated into our Envestnet Wealth Solutions segment.

We previously owned approximately 45% of the ~~Company’s wealth management business, enabling~~outstanding units in this private financial technology design company, and accounted for it as an equity method investment. Based upon the estimated value of the private financial technology design company of $11,026, we paid estimated consideration of $5,946, net of cash acquired, for the remaining outstanding units. As a result of the acquisition, we recognized a gain of $4,230 on the re-measurement to fair value of its previously held interest, which is included in other expense, net in the condensed consolidated statements of operations

In connection with the Private Financial Technology Design Company Acquisition, we recorded estimated total goodwill of $9,241, of which approximately $1,800 is deductible for income tax purposes, and estimated identifiable intangible assets for proprietary technologies of $2,000. The tangible assets acquired and liabilities assumed were not material.

Executive Leadership Appointments

On October 3, 2019, Jud Bergman, our Chairman and Chief Executive Officer, died in an automobile accident. At that time, Bill Crager, President of Envestnet and Chief Executive of Envestnet Wealth Solutions, was named our interim Chief Executive Officer, and Ross Chapin, our lead independent director, was named interim non-executive Chairman of our Board of Directors (the “Board”). On March 30, 2020, Mr. Crager was named Chief Executive Officer of Envestnet and a member of the Board and Stuart DePina, whom has served as Chief Executive of Envestnet Data & Analytics since January 2019, was named President of Envestnet. James Fox, a current member of the Board, was named Chairman and Charles Roame, a current member of the Board, was named Vice Chairman of the Board.

Early Retirement Program

In the fourth quarter of 2019, we offered a voluntary early retirement program (the “Early Retirement Program”) to employees over a certain age, who have a combined age and years of experience with the Company of at least 65 years. Employees had until January 31, 2020 to ~~further leverage its operating scale and data analytics capabilities.~~

~~Subject to~~voluntarily accept the ~~terms and conditions~~program with separation 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 byservice no later than March 31, ~~2018.~~

~~The applicable antitrust pre-clearance filings were made by~~2020. In connection with this program, we recorded $11,966 of severance expense during the ~~parties on October 10, 2017~~three months ended March 31, 2020. As of March 31, 2020, we have accrued approximately $10,670 in accrued compensation and ~~October 11, 2017. The Company is withdrawing its filing~~related taxes and ~~plans to refile it immediately thereafter to allow~~$2,336 recorded in other non-current liabilities. As of December 31, 2019, we had accrued approximately $1,733 in accrued compensation and related taxes and $599 recorded in other non-current liabilities. We anticipate approximately $12,000 of payments in 2020 with 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.

remainder paid through 2030.

Segments

Envestnet is organized around two primary, complementary business segments. Financial information about each business segment is contained in ~~Note 19~~Part I, Item 1, “Note 16—Segment Information” to the ~~notes to~~ condensed consolidated financial ~~statements.~~statements included in Item 1 of this Quarterly Report on Form 10-Q. Our business segments are as follows:

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

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

Envestnet Wealth Solutions Segment

Envestnet empowers financial advisors at broker-dealers, banks, and RIAs with all the tools they require to deliver holistic wealth management to their end clients. In addition, the firm provides advisors with practice management support so that they can grow their practices and operate more efficiently. By ~~September 30, 2017,~~March 31, 2020, Envestnet’s platform assets grew to approximately ~~$1.3~~$3 trillion in ~~6.7~~12.3 million accounts overseen by more than ~~59,000~~103 thousand advisors.

Services provided to advisors include: financial planning, risk assessment ~~and selection of~~tools, 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,

~~Table of Contents~~

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

We offer these solutions principally through the following ~~product/~~product and 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 the creation of a financial plan, asset allocation, investment strategy, portfolio management, rebalancing and performance reporting. Advisors have access to over ~~17,000~~20,000 investment products. Envestnet \| Enterprise also sells data aggregation and reporting, data analytics and digital advice capabilities to customers.

	·
•		Envestnet \| TamaracTM™ provides leading trading, rebalancing, portfolio accounting, performance reporting and client relationship management ~~(“CRM”)~~ software, principally to ~~high~~‑high‑end RIAs.

	·
•	Envestnet \| MoneyGuide provides leading goals-based financial planning solutions to the financial services industry. The highly adaptable software helps financial advisors add significant value for their clients using best-in-class technology with enhanced integrations to generate financial plans.


•	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~~nearly 4,500 vetted third party managed account products, multi-manager portfolios, fund strategist portfolios, as well as approximately 1,000 proprietary products, such as ~~Quantitative Portfolios.~~quantitative portfolios and fund strategist portfolios. PMC also offers ~~an Overlay Service, which includes patented~~ portfolio overlay and tax optimization services.

Key Metrics

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

indicated:



	As of
	March 31,		June 30,		September 30,		December 31,		March 31,
	2019		2019		2019		2019		2020
	(in millions, except accounts and advisors data)
Platform Assets
Assets under Management (“AUM”)	$	176,144	$	182,143	$	188,739	$	207,083	$	185,065
Assets under Administration (“AUA”)	319,129		330,226		316,742		343,505		312,472
Total AUM/A	495,273		512,369		505,481		550,588		497,537
Subscription	2,546,483		2,835,780		2,947,582		3,205,281		2,875,394
Total Platform Assets	$	3,041,756	$	3,348,149	$	3,453,063	$	3,755,869	$	3,372,931
Platform Accounts
AUM	874,574		907,034		934,811		935,039		970,896
AUA	1,187,589		1,196,114		1,136,430		1,193,882		1,254,856
Total AUM/A	2,062,163		2,103,148		2,071,241		2,128,921		2,225,752
Subscription	8,909,581		9,492,653		9,692,714		9,793,175		10,090,172
Total Platform Accounts	10,971,744		11,595,801		11,763,955		11,922,096		12,315,924
Advisors
AUM/A	39,035		39,727		39,735		40,563		40,971
Subscription	57,594		59,292		60,319		61,180		62,077
Total Advisors	96,629		99,019		100,054		101,743		103,048

~~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.~~

indicated:

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, 2020
	As of		Gross					Net		Market			Reclass to			As of
	12/31/2019		Sales		Redemptions			Flows		Impact			Subscription			3/31/2020
	(in millions, except account data)
AUM	$	207,083	$	20,986	$	(11,099	)	$	9,887	$	(31,905	)	$	—		$	185,065
AUA	343,505		39,934		(18,878		)	21,056		(50,144		)	(1,945		)	312,472
Total AUM/A	$	550,588	$	60,920	$	(29,977	)	$	30,943	$	(82,049	)	$	(1,945	)	$	497,537
Fee-Based Accounts	2,128,921							117,673					(20,842		)	2,225,752

The above AUM/A gross sales figures include ~~$9.7~~$20.1 billion in new client conversions. ~~The Company~~We onboarded an additional ~~$12.4~~$25.0 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, 2020 bringing total conversions for the three ~~quarters~~months ended March 31, 2020 to ~~$55.6~~$45.1 billion.

~~The mix of AUM~~

Asset and ~~AUA was as follows~~account figures in the “Reclass to Subscription” columns for the three months ended March 31, 2020 represent enterprise customers whose billing arrangements in future periods ~~indicated:~~

are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, with no impact on total platform assets or accounts. Periodically clients have chosen to change the way they pay for our solution, whereby they switch from an asset-based pricing model to a subscription-based model, which has increased our subscription-based metrics.

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~~Data & Analytics Segment

Envestnet ~~| Yodlee~~Data & Analytics is a leading data aggregation and data intelligence platform. As ~~a “big data”~~an artificial intelligence (“AI”) and data specialist, ~~Yodlee~~Envestnet Data & Analytics 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 combines them with financial applications, reports, market research ~~services.~~

~~More than 1,000~~analysis and application programming interfaces (“APIs”) for its customers.

Over 1,300 financial institutions, financial technology innovators and financial advisory firms, including 1316 of the 20 largest U.S. banks, subscribe to the Envestnet ~~| Yodlee~~Data & Analytics platform to underpin personalized financial apps and services for over 2126 million paid subscribers.

~~Yodlee~~

Envestnet Data & Analytics 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,

The Financial Institutions group provides customers with secure access to open APIs, end-user facing applications powered by our platform and APIs (“FinApps”), and reports. Customers receive end user-permissioned transaction data elements that we aggregate and cleanse. Envestnet Data & Analytics 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, credit card, payments and small-medium business solutions. They are targeted at the retail financial, wealth management, small business, credit 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, and perform a variety of other activities. For example, Yodlee Expense and Income Analysis 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 22,000 sources, including banking, investment, loan and credit card information.

~~Table~~The Yodlee Interactive group enables customers to develop new applications and enhance existing solutions. These customers operate in a number of ~~Contents~~

sub-vertical markets, including wealth management, personal financial management, small business accounting, small business lending and authentication. They use the Envestnet Data & Analytics platform to build solutions that leverage our open APIs and provide 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

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~~channels 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 have more control over their finances, leading to more informed and personalized decision making. For customers who are members of the developer community, ~~Yodlee~~Envestnet Data & Analytics 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.

Envestnet Analytics provides data analytics, mobile sales solutions, and online educational 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. Our dashboards deliver segmentation analytics, multi-dimensional benchmarking, and practice pattern analyses that provide critical insights to clients.

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~~

Operational Highlights

Asset-based recurring ~~and predictable financial results.~~

~~Operational Highlights~~

~~Revenues~~revenues increased 24% from ~~assets under management (“AUM”) or assets under administration (“AUA”) or collectively (“AUM/A”) increased 18% from $90,042~~$108,934 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$106,147~~$134,811 in the three months ended ~~September 30, 2017. Subscription and licensing~~March 31, 2020. Subscription-based recurring revenues increased ~~21%~~26% from ~~$51,959~~$83,087 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$62,963~~$104,551 in the three months ended ~~September 30, 2017.~~March 31, 2020. Total revenues, which include professional ~~service~~services and other ~~fees,~~revenues, increased ~~18%~~23% from ~~$149,155~~$199,666 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$175,614~~$246,539 in the three months ended ~~September 30, 2017.~~March 31, 2020. The ~~increase~~acquisitions of PortfolioCenter and PIEtech, both of which occurred during the second quarter of 2019 (the “2019 Acquisitions”), contributed additional revenues of $16,526 in the three months ended March 31, 2020. The Envestnet Wealth Solutions segment's total revenues ~~was~~excluding the revenue contributed from the 2019 acquisitions, increased by $29,189 primarily ~~a result of the positive effects of new account growth and positive net flows of AUM/A as well as~~due an increase in ~~subscription~~asset-based revenues of $25,877 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~~subscription-based revenues of $3,778. The Envestnet Data & Analytics segment's total revenues increased by $1,158 primarily due to an increase in subscription-based revenues of $2,167, partially offset by a decrease in professional services and ~~licensing~~other revenues ~~related to Envestnet | Yodlee and Envestnet | Enterprise segments~~ of ~~$20,953 and $17,419, respectively.~~

~~The net~~$1,009.

Net loss attributable to Envestnet, Inc. for the three months ended ~~September 30, 2017~~March 31, 2020 was ~~$1,320,~~$7,336, or ~~$0.03~~$0.14 per diluted share, compared to net loss attributable to Envestnet, Inc. of ~~$4,057~~$18,185, or ~~$0.09~~$0.38 per diluted share, 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, 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.

March 31, 2019.

Adjusted revenues for the three months ended ~~September 30, 2017 was $175,629, an increase~~March 31, 2020 were $246,978, compared to adjusted revenues of ~~17% from $149,486~~$199,672 in the prior year period. Adjusted net revenues were $178,386 for the three months ended March 31, 2020, compared to adjusted net revenues of $145,830 in the prior year period. Adjusted EBITDA for the three months ended ~~September 30, 2017~~March 31, 2020 was ~~$34,789, an increase~~$54,578, compared to adjusted EBITDA of ~~26% from $27,505~~$34,002 in the

~~Table of Contents~~

prior year period. Adjusted net income for the three months ended ~~September 30, 2017~~March 31, 2020 was ~~$17,283,~~$31,202, or ~~$0.37~~$0.57 per diluted share, compared to adjusted net income of ~~$12,463,~~$19,411, or ~~$0.28~~$0.39 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)
%



	Three Months Ended
	March 31,						Percent
	2020			2019			Change
	(in thousands)
Revenues:
Asset-based	$	134,811		$	108,934		24	%
Subscription-based	104,551			83,087			26	%
Total recurring revenues	239,362			192,021			25	%
Professional services and other revenues	7,177			7,645			(6	)%
Total revenues	246,539			199,666			23	%
Operating expenses:
Cost of revenues	74,933			61,645			22	%
Compensation and benefits	110,430			86,717			27	%
General and administration	41,110			40,524			1	%
Depreciation and amortization	27,683			19,517			42	%
Total operating expenses	254,156			208,403			22	%
Loss from operations	(7,617		)	(8,737		)	(13	)%
Other expense, net	(1,537		)	(5,763		)	(73	)%
Loss before income tax provision (benefit)	(9,154		)	(14,500		)	(37	)%
Income tax provision (benefit)	(1,964		)	3,768			(152	)%
Net Loss	(7,190		)	(18,268		)	(61	)%
Add: Net (income) loss attributable to non-controlling interest	(146		)	83			*
Net Loss attributable to Envestnet, Inc.	$	(7,336	)	$	(18,185	)	(60	)%

*Not meaningful.

Three months ended ~~September 30, 2017~~March 31, 2020 compared to three months ~~September 30, 2016~~

~~Revenues~~

~~Total~~ended March 31, 2019

Asset-based recurring revenues

Asset-based recurring revenues increased ~~18%~~24% from ~~$149,155~~$108,934 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$175,614~~$134,811 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.~~March 31, 2020. The increase was primarily due to an increase in asset values applicable to our quarterly billing ~~cycle~~cycles in ~~2017, relative~~the three months ended March 31, 2020 compared to the ~~corresponding period~~three months ended March 31, 2019, due to an upturn in ~~2016. In~~ the ~~third~~equity markets during the fourth quarter of ~~2017, revenues were~~2019 as compared to the prior year period. The increase also ~~positively affected by~~includes the impact of new account growth and positive net flows of AUM/A ~~during~~in the first ~~and second quarters~~quarter of ~~2017.~~

2020.

Excluding $16,526 of total revenue from the 2019 Acquisitions, asset-based recurring revenues increased from 55% of total revenue in the three months ended March 31, 2019 to 59% of total revenue in the three months ended March 31, 2020.

~~Table of Contents~~

The number of financial advisors with ~~AUM/A~~asset-based recurring revenue on our technology platforms increased from ~~35,861~~39,035 as of ~~September 30, 2016~~March 31, 2019 to ~~40,379~~40,971 as of ~~September 30, 2017~~March 31, 2020 and the number of AUM/A client accounts increased from approximately ~~1,500,000~~2,100,000 as of ~~September 30, 2016~~March 31, 2019 to approximately ~~1,800,000~~2,200,000 as of ~~September 30, 2017.~~

~~Subscription and licensing~~

~~Subscription and licensing~~March 31, 2020.

Subscription-based recurring revenues

Subscription-based recurring revenue increased ~~21%~~26% from ~~$51,959~~$83,087 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$62,963~~$104,551 in the three months ended ~~September 30, 2017.~~March 31, 2020. This increase was primarily due to an increase of$19,297 in theEnvestnet ~~related revenue of $2,051,~~Wealth Solutionssegment and an increase of $2,167 in the Envestnet ~~| Tamarac related revenue of $2,763 and Envestnet | Yodlee contributing an additional $6,190.~~ Data & Analytics segment.

The increase in the Envestnet ~~and~~Wealth Solutions segment was primarily due to the 2019 Acquisitions, which contributed revenues of $15,519 to subscription-based recurring revenues in the three months ended March 31, 2020. The remaining increase of $3,778 within the Envestnet ~~| Tamarac revenue~~Wealth Solutions segment is a result of ~~Envestnet and Envestnet | Tamarac~~ continuing to add clients and selling additional services to existing clients.

The increase in Envestnet ~~| Yodlee~~Data & Analytics revenue is primarily due to broad increases in revenue from new and existing customers.

Professional services and other revenues

Professional services and other revenues decreased 6% from $7,645 in the three months ended March 31, 2019 to $7,177 in the three months ended March 31, 2020. The decrease was primarily due to a decrease in revenues from existing customers.

Cost of revenues

Cost of revenues increased 22% from $61,645 in the three months ended March 31, 2019 to $74,933 in the three months ended March 31, 2020. The increase was primarily due to an increase in ~~revenue from new and existing customers~~asset-based cost of ~~$6,190.Approximately $4.8 million or 77%~~revenues of ~~this increase was attributed~~$14,750, partially offset by a decrease in subscription-based cost of revenues of $1,400. The 2019 Acquisitions had an immaterial impact 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~~cost of revenues ~~decreased 9% from $7,154~~ in the three months ended September 30, 2016 to $6,504 in the three months ended September 30, 2017, 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.March 31, 2020. As a percentage of total revenues, cost of revenues ~~remained consistent at 32%~~decreased from 31% in the three months ended ~~September 30, 2016 and 2017.~~

March 31, 2019 to 30% in three months ended March 31, 2020.

Compensation and benefits

Compensation and benefits increased ~~14%~~27% from ~~$60,345~~$86,717 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$68,551~~$110,430 in the three months ended ~~September 30, 2017,~~March 31, 2020. The increase was primarily due to ~~an increase~~increases in severance expense of $11,502, salaries, benefits and related payroll taxes of ~~$4,678, primarily a result of an increase in headcount to support organic growth. Also contributing to the growth were increases in~~$4,792, incentive compensation of ~~$2,624,~~$3,575 and non-cash compensation expense of $3,167. The increase in severance expense is primarily related to the Early Retirement Program in the three months ended March 31, 2020. The 2019 Acquisitions contributed compensation and benefit expenses of ~~$539~~$8,630 to total compensation and ~~stock-based compensation of $494.~~benefits expense in the three months ended March 31, 2020. As a percentage of total revenues, compensation and benefits ~~decreased~~increased from ~~40%~~43% in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~39%~~45% in the three months ended ~~September 30, 2017.~~

March 31, 2020.

General and administration

General and administration expenses increased ~~19%~~1% from ~~$26,150~~$40,524 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$31,153~~$41,110 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, primarily due to a decrease in intangible asset amortization of $1,658, offset by an increase in amortization of internally developed software of $474. As a percentage of total revenues, depreciation and amortization expense decreased from 11% in the three months ended September 30, 2016 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, primarily due to a decrease in interest expense of $264 and foreign exchange impact of $283. Other income primarily consists of interest expense as well as impacts related to investments in private companies and foreign currency exchange.

~~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, our effective tax rate differs from the statutory rate primarily due to the book loss with no resulting benefit from net operating loss generation as a result of the valuation allowance on all domestic deferreds, compared to the book loss in 2016 with the absence of a valuation allowance.

For the three 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.

~~Nine 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.~~March 31, 2020. 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 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/A during 2016 and the first and second quarters of 2017.

The number of financial advisors with AUM/A 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/A 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 27% from $142,303 in the nine months ended September 30, 2016 to $180,675 in the nine months ended September 30, 2017.~~This increase was primarily due to an increase in Envestnet related revenue of $8,632, an increase in Envestnet | Tamarac related revenue of $8,787 and Envestnet | Yodlee contributing an additional $20,953. 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 $20,953.~~Approximately $16.1 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 3% from $21,412 in the nine months ended September 30, 2016 to $20,874 in the nine months ended September 30, 2017, primarily due to Envestnet | Yodlee recognizing one-time onboardingtrade errors expense of data analytic customers in 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.

~~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 increased from 31% in the nine months ended September 30, 2016 to 32% in the nine 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, primarily due to an increase in salaries, benefits and related payroll taxes of $16,859, primarily a result of an increase in headcount to support organic growth. Also contributing to the growth were increases in incentive compensation 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. As a percentage of total revenues, compensation and benefits decreased from 43% in the nine months ended September 30, 2016 to 40% in the nine 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$1,585, permits, licenses & 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,~~$650, professional and legal fees of ~~$1,583~~$627, systems development costs of $582, bad debt expense of $575 and ~~travel and entertainment~~other increases primarily related to the cancellation of ~~$828,~~our 2020 Advisor Summit, partially offset by ~~decreases~~a decrease in ~~litigation~~transaction related expenses of $4,760. The 2019 Acquisitions contributed general and administration expenses of $1,660 to general and administrative expense ~~of $3,032 and fair market value adjustments on contingent consideration of $838.~~in the three months ended March 31, 2020. As a percentage of total revenues, general and administration expenses decreased from ~~19%~~20% in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 to ~~18%~~17% in the ~~nine~~three months ended ~~September 30, 2017.~~

March 31, 2020. This decrease is primarily a result of the decrease in transaction related expenses partially offset by the increase in trade errors expense.

Depreciation and amortization

Depreciation and amortization expense ~~decreased 6%~~increased 42% from ~~$49,872~~$19,517 in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 to ~~$46,792~~$27,683 in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020. The increase was primarily due to ~~a decrease~~an increase in intangible asset amortization expense of ~~$4,823, offset by~~$6,230, the direct result of amortizing additional intangible assets related to our 2019 Acquisitions, an increase in ~~amortization of~~ internally developed software amortization expense of ~~$1,222~~$985 and an increase in property and equipment depreciation expense of ~~fixed assets of $521.~~$951. As a percentage of total revenues, depreciation and amortization expense ~~decreased~~increased from ~~12%~~10% in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 to 9%11% in the ~~nine~~three months ended ~~September 30, 2017.~~

March 31, 2020.

Other expense, net

Other expense, net ~~increased 5%~~decreased 73% from ~~$13,214~~$5,763 in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 to ~~$13,838~~$1,537 in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020. The decrease was primarily due to ~~an increase~~a gain of $4,230 recognized in the three months ended March 31, 2020 on the remeasurement of our previously held interest ~~expense~~in the private financial technology design company combined with a gain of ~~$326 primarily~~$2,524 recorded in the three months ended March 31, 2020 as a result of ~~an increase~~a fair value adjustment upon settlement of our former Chief Executive Officer's stock options, partially offset by increased losses recorded for our equity method investees in ~~debt issuance cost amortization and debt discount accretion~~the three months ended March 31, 2020 as ~~well as foreign currency exchange impact of $284. Other income primarily consists of interest expense as well as impacts related~~compared to ~~investments in private companies and foreign currency exchange.~~

the comparable prior year period.

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
%



	Three Months Ended
	March 31,
	2020			2019
Loss before income tax benefit	$	(9,154	)	$	(14,500	)
Income tax benefit	(1,964		)	3,768
Effective tax rate	21.5		%	(26.0		)%

~~Table of Contents~~

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, our effective tax rate ~~differs~~differed from the statutory rate primarily due to increases in the valuation allowance we had placed on a portion of US deferred tax assets, the windfall from shared based compensation and the CARES Act net operating loss (“NOL”) carryback.

For the three months ended March 31, 2019, our effective tax rate differed from the statutory rate primarily due to the ~~book loss with no resulting benefit from net operating loss generation as a result~~impact of the Base Erosion Anti-Abuse Tax (“BEAT”) and increases in the valuation allowance we had placed on all ~~domestic deferreds, compared to the book loss in 2016~~US deferred tax assets with the ~~absence~~exception 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~~

indefinite-lived intangibles.

Segment Results

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~~“Note 16—Segment Information” 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.~~

~~Table of Contents~~

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

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)



	Three Months Ended
	March 31,
	2020			2019
Envestnet Wealth Solutions	$	11,340		$	16,844
Envestnet Data & Analytics	(4,585		)	(7,928		)
Nonsegment operating expenses	(14,372		)	(17,653		)
Loss from operations	(7,617		)	(8,737		)
Other expense, net	(1,537		)	(5,763		)
Consolidated loss before income tax provision (benefit)	(9,154		)	(14,500		)
Income tax provision (benefit)	(1,964		)	3,768
Consolidated net loss	(7,190		)	(18,268		)
Add: Net (income) loss attributable to non-controlling interest	(146		)	83
Consolidated net loss attributable to Envestnet, Inc.	$	(7,336	)	$	(18,185	)

Envestnet

Wealth Solutions

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



	Three Months Ended
	March 31,				Percent
	2020		2019		Change
	(in thousands)
Revenues:
Asset-based	$	134,811	$	108,934	24	%
Subscription-based	60,323		41,026		47	%
Total recurring revenues	195,134		149,960		30	%
Professional services and other revenues	3,286		2,745		20	%
Total revenues	198,420		152,705		30	%
Operating expenses:
Cost of revenues	69,792		55,855		25	%
Compensation and benefits	72,588		48,555		49	%
General and administration	25,280		20,184		25	%
Depreciation and amortization	19,420		11,267		72	%
Total operating expenses	187,080		135,861		38	%
Income from operations	$	11,340	$	16,844	(33	)%

Three months ended ~~September 30, 2017~~March 31, 2020 compared to three months ~~September 30, 2016~~ended March 31, 2019 for the Envestnet Wealth Solutions segment

~~Revenues~~

~~Total~~

Asset-based recurring revenues

Asset-based recurring revenues increased ~~19%~~24% from ~~$114,511~~$108,934 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$135,948~~$134,811 in the three months ended September 30, 2017. The increase was primarily due to an increase in revenues from AUM/A of $16,105 and an increase in revenues from subscription and licensing of $4,814. Revenues from AUM/A were 79% and 78% of total revenues in 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 the three months ended September 30, 2016 to $106,147 in the three months ended September 30, 2017.~~March 31, 2020. The increase was primarily due to an increase in asset values applicable to our quarterly billing ~~cycle~~cycles in ~~2017, relative~~the three months ended March 31, 2020 compared to the ~~corresponding period~~three months ended March 31, 2019, resulting from an upturn in ~~2016. In~~ the ~~third~~equity markets during the fourth quarter of ~~2017, revenues were also positively affected by new account growth and positive net flows~~2019 as compared to the prior year period.

Excluding $16,526 of ~~AUM or AUA during~~total revenue from the ~~first and second quarters~~2019 Acquisitions, asset-based recurring revenue increased from 71% of ~~2017.~~

total revenue in the three months ended March 31, 2019 to 74% of total revenue in the three months ended March 31, 2020.

~~Table of Contents~~

The number of financial advisors with ~~AUM or AUA~~asset-based recurring revenue on our technology platforms increased from ~~35,861~~39,035 as of ~~September 30, 2016~~March 31, 2019 to ~~40,379~~40,971 as of ~~September 30, 2017~~March 31, 2020 and the number of ~~AUM or AUA~~AUM/A client accounts increased from approximately ~~1,500,000~~2,100,000 as of ~~September 30, 2016~~March 31, 2019 to approximately ~~1,800,000~~2,200,000 as of ~~September 30, 2017.~~

~~Subscription and licensing~~

~~Subscription and licensing~~March 31, 2020.

Subscription-based recurring revenues

Subscription-based recurring revenues increased ~~22%~~47% from ~~$22,198~~$41,026 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$27,012~~$60,323 in the three months ended ~~September 30, 2017, primarily due~~March 31, 2020.

The 2019 Acquisitions contributed revenues of $15,519 to ansubscription-based recurring revenues in the three months ended March 31, 2020. The remaining increase ~~in Envestnet | Enterprise related revenue~~ of ~~$2,051 and an increase in Envestnet | Tamarac related revenue of $2,763.The increase in Envestnet | Enterprise and Envestnet | Tamarac revenue~~$3,778 is a result of ~~Envestnet | Enterprise and Envestnet | Tamarac~~ continuing to add clients and selling additional services to existing clients.

Professional services and other

revenues

Professional services and other revenues increased ~~23%~~20% from ~~$2,271~~$2,745 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$2,789~~$3,286 in the three months ended ~~September 30, 2017,~~March 31, 2020. The increase was primarily due to an ~~overall~~ increase of $1,007 contributed from the 2019 Acquisitions offset by a decrease in revenues from existing ~~customer revenue attributable to Envestnet | Tamarac.~~

customers.

Cost of revenues

Cost of revenues increased ~~21%~~25% from ~~$43,806~~$55,855 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$52,957~~$69,792 in the three months ended ~~September 30, 2017,~~March 31, 2020, primarily ~~due to the corresponding~~as a result of an increase in asset-based cost of revenues. The 2019 Acquisitions had an immaterial impact to cost of revenues ~~from AUM or AUA, and~~in the ~~mix of such revenues.~~three months ended March 31, 2020. As a percentage of total revenues, cost of revenues ~~increased~~decreased from ~~38%~~37% in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~39%~~35% in the three months ended ~~September 30, 2017.~~

March 31, 2020.

Compensation and benefits

Compensation and benefits increased ~~11%~~49% from ~~$37,067~~$48,555 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$41,158~~$72,588 in the three months ended ~~September 30, 2017,~~March 31, 2020. The increase is primarily due to ~~an increase~~increases in severance expense of $10,652, salaries, benefits and related payroll taxes of ~~$1,663,~~$6,226, non-cash compensation expense of $4,036 and incentive compensation of $2,641. The increase in severance expense is primarily related to the Early Retirement Program in the three months ended March 31, 2020. The 2019 Acquisitions contributed compensation and benefit expenses of $8,630 to total compensation and benefits expense in the three months ended March 31, 2020. As a ~~result~~percentage of total revenues, compensation and benefits increased from 32% in the three months ended March 31, 2019 to 37% in the three months ended March 31, 2020, primarily related to the increase in severance expense related to the Early Retirement Program.

General and administration

General and administration expenses increased 25% from $20,184 in the three months ended March 31, 2019 to $25,280 in the three months ended March 31, 2020. The increase was primarily due to increases in trade errors expense of $1,540, systems development costs of $793, occupancy costs of $494, insurance and bank charges of $453, bad debt expense of $368 and other miscellaneous increases, partially offset by a decrease in marketing expense of $281. The 2019 Acquisitions contributed general and administration expenses of $1,660 to general and administrative expense in the three months ended March 31, 2020. As a percentage of total revenues, general and administration expenses remained consistent at 13% in the three months ended March 31, 2019 and 2020.

Depreciation and amortization

Depreciation and amortization expense increased 72% from $11,267 in the three months ended March 31, 2019 to $19,420 in the three months ended March 31, 2020. The increase was primarily due to an increase in ~~headcount~~intangible asset amortization expense of $6,428, the direct result of amortizing additional intangible assets related to ~~support organic growth. An~~our 2019 Acquisitions, an increase in internally developed software amortization expense of $908 and an increase in property and equipment depreciation expense of $816. As a percentage of revenues, depreciation and amortization expense increased from 7% in the three months ended March 31, 2019 to 10% in the three months ended March 31, 2020. The increase in depreciation and amortization as a percentage of total revenues is primarily due to amortization related to finite-lived intangibles acquired from the 2019 Acquisitions.

Envestnet Data & Analytics

The following table presents loss from operations for the Envestnet Data & Analytics segment:



	Three Months Ended
	March 31,						Percent
	2020			2019			Change
	(in thousands)
Revenues:
Subscription-based	$	44,228		$	42,061		5	%
Professional services and other revenues	3,891			4,900			(21	)%
Total revenues	48,119			46,961			2	%
Operating expenses:
Cost of revenues	5,141			5,790			(11	)%
Compensation and benefits	30,113			31,364			(4	)%
General and administration	9,187			9,485			(3	)%
Depreciation and amortization	8,263			8,250			—	%
Total operating expenses	52,704			54,889			(4	)%
Loss from operations	$	(4,585	)	$	(7,928	)	(42	)%

Three months ended March 31, 2020 compared to three months ended March 31, 2019 for the Envestnet Data & Analytics segment

Subscription-based recurring revenues

Subscription-based recurring revenues increased 5% from $42,061 in the three months ended March 31, 2019 to $44,228 in the three months ended March 31, 2020, primarily due to broad increases in revenue from new and existing customers.

Professional services and other revenues

Professional services and other revenues decreased21% from $4,900 in the three months ended March 31, 2019 to $3,891 in the three months ended March 31, 2020 due to timing of the completion of customer projects and deployments.

Cost of revenues

Cost of revenues decreased 11% from $5,790 in the three months ended March 31, 2019 to $5,141 in the three months ended March 31, 2020, primarily due to a decrease in third party vendor expense. As a percentage of total revenues, cost of revenues decreased from 12% in the three months ended March 31, 2019 to 11% in the three months ended March 31, 2020.

Compensation and benefits

Compensation and benefits decreased 4% from $31,364 in the three months ended March 31, 2019 to $30,113 in the three months ended March 31, 2020, primarily due to decreases in salaries, benefits, incentive compensation and related payroll taxes of $2,570 and severance expense of $387, partially offset by an increase in incentive compensation of ~~$1,796 and~~$1,382. The decrease in severance expense is primarily due to severance paid to a former executive of ~~$529 also contributed to~~ the ~~increase~~company in ~~compensation and benefits.~~the three months ended March 31, 2019, partially offset by severance associated with the Early Retirement Program in the three months ended March 31, 2020. As a percentage of total revenues, compensation and benefits decreased from ~~32%~~67% in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~30%~~63% 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.March 31, 2020. The decrease in compensation and benefits as a percentage of total revenues is primarily ~~due to a higher revenue increase~~driven by lower headcount as of March 31, 2020 compared to ~~lower growth in compensation and benefit expenses.~~

March 31, 2019.

General and administration

General and administration expenses decreased ~~12%~~3% from ~~$8,341~~$9,485 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~$7,376~~$9,187 in the three months ended ~~September 30, 2017,~~March 31, 2020, primarily due to ~~a decrease~~decreases in ~~legal~~travel and entertainment expense of ~~$2,093, partially~~$337, transaction related expenses of $149, occupancy expenses of $154 and marketing expense of $149, offset by ~~increases in software purchase~~expenses incurred for legal and ~~maintenance~~regulatory matters of ~~$647~~$703 (see “Part I, Note 18—Commitments and ~~occupancy cost of $505.~~Contingencies”). As a percentage of total revenues, general and administration expenses decreased from ~~24%~~20% to 19% for the three months ended March 31, 2019 and 2020.

Depreciation and amortization

Depreciation and amortization expense increased from $8,250 in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~19%~~$8,263 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 acquisition and a decrease in depreciation of $50 related to the Yodlee acquisition recorded in the same period last year. The decrease was partially offset by an increase of $210 in intangible asset amortization as a result of the Wheelhouse acquisition.March 31, 2020. As a percentage of total revenues, depreciation and amortization expense decreased from ~~30%~~18% in the three months ended ~~September 30, 2016~~March 31, 2019 to ~~23%~~17% in the three months ended ~~September 30, 2017.~~ March 31, 2020.

Nonsegment

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~~following table presents nonsegment operating expenses:



	Three Months Ended
	March 31,				Percent
	2020		2019		Change
	(in thousands)
Operating expenses:
Compensation and benefits	$	7,729	$	6,798	14	%
General and administration	6,643		10,855		(39	)%
Nonsegment operating expenses	$	14,372	$	17,653	(19	)%

Three months ended ~~September 30, 2017~~March 31, 2020 compared to ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 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.

Nonsegment

~~Table of Contents~~

Compensation and benefits

Compensation and benefits increased 7%14% from ~~$65,386~~$6,798 in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 to ~~$70,055~~$7,729 in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, primarily due to ~~an increase~~increases in severance expense of $1,237 and salaries, benefits and related payroll taxes of ~~$7,976, as a result of increased headcount to support organic~~growth 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,$1,136, partially offset by decreases in non-cash compensation expense of ~~$792~~$919 and incentive compensation of $447. The increase in severance ~~of $322.~~

expense is primarily related to the Early Retirement Program in the three months ended March 31, 2020.

General and administration

General and administration expenses ~~increased 73%~~decreased 39% from ~~$10,487~~$10,855 in the ~~nine~~three months ended ~~September 30, 2016~~March 31, 2019 to ~~$18,187~~$6,643 in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, primarily due to a decrease in transaction related expenses of $4,692, partially offset by increases in ~~audit~~permits, licenses and ~~related~~ fees of ~~$2,837, acquisition costs of $1,435,~~$548 and 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.~~

$482.

Non-GAAP Financial Measures

In addition to reporting results according to U.S. ~~GAAP,~~generally accepted accounting principles (“GAAP”), we also disclose certain non-GAAP financial measures to enhance the understanding of our operating performance. Those measures include “adjusted ~~revenues”, “adjusted EBITDA”,~~revenues,” “adjusted net revenues,” “adjusted EBITDA,” “adjusted net income”, and “adjusted net income per ~~share”.~~

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.

“Adjusted net revenues” represents adjusted revenues less asset-based costs of revenues. Under GAAP, we are required to recognize as revenue certain fees paid to investment managers and other third parties needed for implementation of investment solutions included in our assets under management. Those fees also are required to be recorded as cost of revenues. This non-GAAP metric presents adjusted revenues without such fees included, as they have no impact on our profitability. Adjusted revenues and Adjusted net revenues have limitations as financial measures, should be considered as supplemental in nature and are not meant as a substitute for revenue prepared in accordance with GAAP.

“Adjusted EBITDA” represents net 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,~~ litigation and regulatory related ~~expense,~~expenses, foreign currency, ~~and related hedging activity,~~ non-income tax expense adjustment, gain on acquisition of equity method investment, loss allocation from equity method ~~investment~~investments and (income) loss attributable to ~~non~~‑non‑controlling interest.

“Adjusted net income” represents net loss before deferred revenue fair value adjustment, accretion on contingent consideration and purchase liability, ~~non~~‑non‑cash interest expense, ~~non~~‑non‑cash compensation expense, restructuring charges and transaction costs, severance, amortization of acquired intangibles, ~~fair~~‑~~market value adjustment on contingent consideration,~~ litigation and regulatory related ~~expense,~~expenses, foreign currency, ~~and related hedging activity,~~ non-income tax expense adjustment, gain on acquisition of equity method investment, loss allocation from equity method ~~investment~~investments and (income) 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 share” represents adjusted net income attributable to common stockholders divided by the diluted number of ~~weighted~~‑weighted‑average shares outstanding.

Our Board ~~of Directors~~ and ~~our~~ management use ~~adjusted revenues, adjusted EBITDA, adjusted net income~~these non-GAAP financial measures:

As measures of operating performance;

For planning purposes, including the preparation of annual budgets;

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

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

In communications with our Board concerning our financial performance.

~~Table of Contents~~

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

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

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

We also present adjusted revenues, adjusted net revenues, adjusted EBITDA, adjusted net income and adjusted net income per share as supplemental performance measures because we believe that they provide our Board, ~~of Directors,~~ management and investors with additional information to assess our performance. Adjusted revenues provide comparisons from period to period by excluding the effect of purchase accounting on the fair value of acquired deferred revenue. Adjusted net revenues provide comparisons from period to period by excluding the effects of asset-based costs of revenue. While the amounts included in the calculation of adjusted net revenues are disclosed in our condensed consolidated financial statements and footnotes, management believes providing more transparency into this metric is beneficial to investors who wish to evaluate our performance in this fashion. Adjusted EBITDA ~~provide~~provides comparisons from period to period by excluding potential differences caused by variations in the age and book depreciation of fixed assets affecting relative depreciation expense and amortization of internally developed software, amortization of acquired intangible assets, income tax provision (benefit), non-income tax expense, restructuring charges and transaction costs, accretion on contingent consideration ~~fair market value adjustments on contingent consideration,~~and purchase liability, severance, litigation and regulatory related ~~expense,~~expenses, pre-tax 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. Our management also believes it is useful to exclude non-cash stock-based compensation expense from adjusted EBITDA and adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time.

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

Adjusted revenues, adjusted net revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are not measurements of our financial performance under ~~U.S.~~ GAAP and should not be considered as an alternative to revenues, 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 net revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are frequently used by securities analysts and others in their evaluation of companies, these measures have limitations as 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 revenues, adjusted net 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 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 revenues, adjusted net 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;

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

Due to either net losses before income tax expense or the use of federal and state net operating loss carryforwards, we made net tax payments of $814 and $4,998 for the three months ended March 31, 2020 and 2019, 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 net revenues, adjusted EBITDA, adjusted net income and adjusted net income per share differently than we do, limiting their usefulness as a comparative measure.

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

The following table sets forth a reconciliation of total revenues to adjusted revenues and adjusted net revenues based on our historical results:

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



	Three Months Ended
	March 31,
	2020			2019
	(in thousands)
Total revenues	$	246,539		$	199,666
Deferred revenue fair value adjustment	439			6
Adjusted revenues	246,978			199,672
Less: Asset-based cost of revenues	(68,592		)	(53,842		)
Adjusted net revenues	$	178,386		$	145,830

The following table sets forth a reconciliation of net 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



	Three Months Ended
	March 31,
	2020			2019
	(in thousands)
Net loss	$	(7,190	)	$	(18,268	)
Add (deduct):
Deferred revenue fair value adjustment	439			6
Interest income	(391		)	(1,510		)
Interest expense	7,134			7,096
Accretion on contingent consideration and purchase liability	599			240
Income tax provision (benefit)	(1,964		)	3,768
Depreciation and amortization	27,683			19,517
Non-cash compensation expense	13,470			12,864
Restructuring charges and transaction costs	2,820			7,366
Severance	13,982			2,480
Litigation and regulatory related expenses	703			—
Foreign currency	(494		)	(1		)
Non-income tax expense adjustment	188			210
Gain on acquisition of equity method investment	(4,230		)	—
Loss allocation from equity method investments	2,030			203
(Income) loss attributable to non-controlling interest	(201		)	31
Adjusted EBITDA	$	54,578		$	34,002

~~Table of Contents~~

The following table sets forth the reconciliation of net loss to adjusted net income and adjusted net income per diluted share 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)

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



	Three Months Ended
	March 31,
	2020			2019
	(in thousands)
Net loss	$	(7,190	)	$	(18,268	)
Income tax provision (benefit) ⁽¹⁾	(1,964		)	3,768
Loss before income tax provision (benefit)	(9,154		)	(14,500		)
Add (deduct):
Deferred revenue fair value adjustment	439			6
Accretion on contingent consideration and purchase liability	599			240
Non-cash interest expense	2,962			4,616
Non-cash compensation expense	13,470			12,864
Restructuring charges and transaction costs	2,820			7,366
Severance	13,982			2,480
Amortization of acquired intangibles	18,758			12,528
Litigation and regulatory related expenses	703			—
Foreign currency	(494		)	(1		)
Non-income tax expense adjustment	188			210
Gain on acquisition of equity method investment	(4,230		)	—
Loss allocation from equity method investments	2,030			203
(Income) Loss attributable to non-controlling interest	(201		)	31
Adjusted net income before income tax effect	41,872			26,043
Income tax effect ⁽²⁾	(10,670		)	(6,632		)
Adjusted net income	$	31,202		$	19,411

Basic number of weighted-average shares outstanding	53,016,511			48,237,265
Effect of dilutive shares:
Options to purchase common stock	664,796			1,198,197
Unvested restricted stock units	600,567			656,798
Convertible notes	235,182			—
Warrants	42,551			—
Diluted number of weighted-average shares outstanding	54,559,607			50,092,260
Adjusted net income per share - diluted	$	0.57		$	0.39


(1)		For the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, the effective tax rate computed in accordance with US GAAP equaled ~~464.6%~~21.5% and ~~29.1%~~(26.0)%, 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)		An estimated normalized effective tax rate of ~~40%~~25.5% has been used to compute adjusted net ~~income.~~ income for the three months ended March 31, 2020 and 2019.

Note on Income Taxes: As of ~~September 30, 2017 the Company~~December 31, 2019 we had ~~net operating loss~~NOL carryforwards of ~~$261,475~~approximately $258,000 and ~~$164,397~~$208,000 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 the effective income tax rate computed in accordance with ~~U.S.~~ GAAP, and from the normalized 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 for each segment for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~

2019:

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

~~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								Three months ended March 31, 2020
		Envestnet		Envestnet \| Yodlee		Nonsegment		Total	Envestnet Wealth Solutions			Envestnet Data & Analytics			Nonsegment			Total
	(in thousands)								(in thousands)
Revenues	$	328,417	$	94,267	$	—	$	422,684	$	198,420		$	48,119		$	—		$	246,539
Deferred revenue fair value adjustment		114		667		—		781	439			—			—			439
Adjusted revenues	$	328,531	$	94,934	$	—	$	423,465	198,859			48,119			—			246,978
Less: Asset-based cost of revenues									(68,592		)	—			—			(68,592		)
Adjusted net revenues									$	130,267		$	48,119		$	—		$	178,386

Income (loss) from operations	$	32,425	$	(33,728)	$	(19,078)	$	(20,381)	$	11,340		$	(4,585	)	$	(14,372	)	$	(7,617	)
Add (deduct):
Add:
Deferred revenue fair value adjustment		114		667		—		781	439			—			—			439
Accretion on contingent consideration and purchase liability		143		—		—		143	373			226			—			599
Depreciation and amortization		18,786		31,086		—		49,872	19,420			8,263			—			27,683
Non-cash compensation expense		9,151		12,186		4,535		25,872	9,697			4,226			2,071			15,994
Restructuring charges and transaction costs		361		34		4,089		4,484	1,189			185			1,446			2,820
Non-income tax expense adjustment									250			(62		)	—			188
Severance		2,019		747		338		3,104	11,002			1,660			1,320			13,982
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
Litigation and regulatory related expenses									—			703			—			703
Income attributable to non-controlling interest									(201		)	—			—			(201		)
Other									(12		)	—			—			(12		)
Adjusted EBITDA	$	63,786	$	14,354	$	(9,014)	$	69,126	$	53,497		$	10,616		$	(9,535	)	$	54,578



	Three Months Ended March 31, 2019
	Envestnet Wealth Solutions			Envestnet Data & Analytics			Nonsegment			Total
	(in thousands)
Revenues	$	152,705		$	46,961		$	—		$	199,666
Deferred revenue fair value adjustment	6			—			—			6
Adjusted revenues	152,711			46,961			—			199,672
Less: Asset-based cost of revenues	(53,842		)	—			—			(53,842		)
Adjusted net revenues	$	98,869		$	46,961		$	—		$	145,830

Income (loss) from operations	$	16,844		$	(7,928	)	$	(17,653	)	$	(8,737	)
Add:
Deferred revenue fair value adjustment	6			—			—			6
Accretion on contingent consideration and purchase liability	240			—			—			240
Depreciation and amortization	11,267			8,250			—			19,517
Non-cash compensation expense	5,677			4,188			2,999			12,864
Restructuring charges and transaction costs	262			965			6,139			7,366
Non-income tax expense adjustment	200			10			—			210
Severance	350			2,048			82			2,480
Loss attributable to non-controlling interest	31			—			—			31
Other	22			1			2			25
Adjusted EBITDA	$	34,899		$	7,534		$	(8,431	)	$	34,002

Liquidity and Capital Resources

As of ~~September 30, 2017,~~March 31, 2020, we had total cash and cash equivalents of ~~$48,704~~$68,601 compared to ~~$52,592~~$82,505 as of December 31, ~~2016.~~2019. We plan to use existing cash, ~~as of September 30, 2017 and~~ cash generated in the ongoing operations of our business and amounts under our revolving credit facility to fund our current operations, capital expenditures ~~repay debt~~ and ~~for~~ possible acquisitions or other strategic ~~activity.~~activity, and to meet our debt service obligations. 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~~revolving credit ~~agreement~~facility or incur additional debt to fund our ongoing operations or to fund potential acquisitions or other strategic activities. ~~The Company will fund the FolioDynamix acquisition with a combination of cash on the Company’s balance sheet and borrowings under its revolving credit facility.~~

~~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.

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~~March 31, 2020, we had $210,000 available 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 resulting portion of debt related to theborrow under our revolving credit facility, ~~being classified as short-term, in accordance with the term of the amended and restated Credit Agreement.~~

subject to covenant compliance.

Cash Flows

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

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,
	2020			2019
	(in thousands)
Net cash provided by (used in) operating activities	$	8,988		$	(12,575	)
Net cash used in investing activities	(45,689		)	(24,493		)
Net cash provided by (used in) financing activities	24,211			(6,654		)
Effect of exchange rate on changes on cash	(1,496		)	112
Net decrease in cash, cash equivalents and restricted cash	(13,986		)	(43,610		)
Cash, cash equivalents and restricted cash, end of period	68,769			246,061

Operating Activities

Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30, 2017 increased by $18,253~~March 31, 2020 was $8,988 compared to net cash used in operating activities of $12,575 for the same period in ~~2016,~~2019. The increase was primarily due to ~~increases~~a decrease in ~~deferred income taxes~~net losses from $18,268 for the three months ended March 31, 2019 to a net loss of ~~$16,919, changes~~$7,190 in the three months ended March 31, 2020. An increase period over period for noncash addbacks for depreciation and amortization expense of $8,166 were partially offset by a non-cash gain of $4,230. Also contributing to the increase in net cash provided by operating activities is an increase in the change in operating assets and liabilities of ~~$2,389 and net income of $2,068, offset by decreases in depreciation and amortization of $3,080 and stock-based compensation expense of $2,421.~~

$4,840, which is primarily timing related.

~~Table of Contents~~

Investing Activities

Net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2017 decreased by $15,596~~March 31, 2020 was $45,689 compared to net cash used in investing activities of $24,493 for the same period in ~~2016.~~2019. The ~~decrease is~~change was primarily a result of ~~a decrease~~an increase in cash disbursements for business acquisitions of ~~$18,394, offset~~$9,196. We also used $11,000 to acquire a 4.25% interest in a privately held company.

Financing Activities

Net cash provided by ~~increases in capitalization of internally developed software of $2,993.~~

~~Financing Activities~~

~~Net~~financing activities for the three months ended March 31, 2020 was $24,211 compared to net cash used in financing activities of $6,654 for ~~the nine months ended September 30, 2017 increased $36,851 compared to~~ the same period in ~~2016.~~2019. The change was primarily the result of ~~increases in payments~~increased borrowings on ~~Term Notes of $29,862 and payments on the~~our revolving credit facility of ~~$17,500,~~$45,000, partially offset by an increase in ~~proceeds from borrowings~~payments on ~~the~~our revolving credit facility of ~~$10,000.~~

$15,000.

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,~~ “Note 2—Summary of Significant Accounting ~~Policies,~~Policies” to the ~~Consolidated Financial Statements~~consolidated financial statements in our ~~most recent~~2019 Form 10-K describes the 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~~2019 Form 10-K include, but are not limited to, the discussion of estimates used for recognition of revenues, the determination of the period of benefit for deferred sales incentive commissions, purchase

accounting, ~~internally developed software, non-cash stock-based compensation expense,~~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 includes various types of indemnification~~

See “Part I, Note 18—Commitments 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 in the condensed consolidated balance sheets.

~~The Company enters into unconditional~~Contingencies, Legal Proceedings” for purchase obligations ~~arrangements~~and indemnifications details.

Legal Proceedings

See “Part I, Note 18—Commitments and Contingencies, Legal Proceedings” 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 reexaminationlegal 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.~~

details.

~~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~~

Risk

Our exposure to market risk is directly related to asset-based recurring revenues ~~from asset management or administration services~~ earned based upon a contractual percentage of AUM or AUA. In the three ~~and nine~~ months ended ~~September 30, 2017, 60%~~March 31, 2020, 55% 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.

If there are continued financial market declines for COVID-19 or any other matter, our asset-based revenues may negatively be impacted in future periods.

Foreign Currency Risk

A portion of our revenues are billed in various foreign currencies. We are directly exposed to changes in foreign currency ~~risk~~

exchange rates through the translation of these monthly revenues into U.S. dollars. For the three months ended March 31, 2020, we estimate that a hypothetical 10% change in the value of various foreign currencies to the U.S. dollar would result in a corresponding increase or decrease of approximately $519 to pre‑tax earnings.

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,~~March 31, 2020, 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,~~approximately $1,451 to ~~pre~~‑pre‑tax earnings, respectively, and a hypothetical 10% decrease in the value of the Indian Rupee to the U.S. dollar would result in an increase of ~~$811 and $1,719, respectively,~~approximately $1,187 to ~~pre~~‑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~~

Rate Risk

We are subject to market risk from changes in interest rates. ~~The Company has~~We have a revolving credit facility that bears interest at LIBOR plus an applicable margin between ~~1.50 percent~~1.50% and ~~3.25 percent.~~3.25%. 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

~~Table of Contents~~

the ~~majority of the third~~first quarter of ~~2017~~2020 was approximately 3.6%. As of ~~September 30, 2017,~~March 31, 2020, there was ~~$101,168~~$290,000 of revolving credit amounts outstanding under the Amended ~~and Restated~~ Credit Agreement. ~~The Company~~We incurred interest expense of ~~$3,795 and $5,368~~$2,671 for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020, 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 by approximately $497 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, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means 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 their 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, including2020, 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, 2020, 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 information in Part I, Note 18—Commitments and Contingencies - Legal Proceedings is incorporated herein by reference.

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 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.

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~~2019 Form 10-K when making investment decisions regarding our securities. ~~The~~Other than as provided below, the risk factors that were disclosed in our ~~2016~~2019 Form 10-K have not materially changed since the date our ~~2016~~2019 Form 10-K was filed.

The COVID-19 pandemic has caused, and is causing, significant harm to the global economy and may adversely affect our business, including our operations and financial condition, and may cause our assets under management or administration, revenue and earnings to decline.

On March 11, 2020, the World Health Organization declared Coronavirus Disease 2019 (“COVID-199”) a pandemic disease. The COVID-19 pandemic has resulted in authorities implementing numerous measures attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, and limitations on business activity, including closures. These measures are, among other things, severely restricting global economic activity, which is disrupting supply chains, lowering asset and equity market valuations, significantly increasing unemployment and underemployment levels, decreasing liquidity in markets for certain securities and causing significant volatility and disruption in the financial markets.

In response to COVID-19 concerns, the Company has instituted a travel ban for all of its domestic and international employees and is following mandatory stay-at-home orders where applicable. A majority of the Company's employees are working from home as a result of these mandatory stay-at-home orders. Remote work-from-home restrictions makes us more dependent on certain technologies that allow us to operate our business remotely and collaborate without face-to-face meetings both internally and with our customers. To the extent we experience a technological disruption in our work-from-home capabilities, we would anticipate a negative impact on our business operations. Further, to the extent supply chains are disrupted, it may become more difficult to provide necessary technology to our employees working from remote locations.

For the three months ended March 31, 2020, approximately 55% of the Company's revenues result from asset-based fee billing arrangements. These fees are generally based upon variable percentages of assets managed or administered under the Company's platforms. Approximately 90% of the Company's asset-based fee arrangements are billed at the beginning of each quarter based on the market value of customer assets on its platforms as of the end of the prior quarter. While we experienced minimal impact on our asset-based revenues in the first quarter of 2020, we expect the impact of the pandemic to be more significant in the second quarter of 2020 as a result of declines within the equity markets. Should current economic conditions persist or deteriorate, there may be an ongoing adverse effect on our business, including our results of operations and financial condition, as a result of, among other things:

adverse equity market conditions, volatility in the financial markets and unforeseen investment trends resulting in a reduction in our asset-based fees;

a decline in new client conversions as a result of extended sales cycles and longer implementation periods as clients work remotely;

the negative impact of the pandemic on our clients and key vendors, market participants and other third-parties with whom we do business;

the disruption to our workforce due to illness and health concerns, potential limitations on our remote work environment, and government-imposed restrictions, laws and regulations.

The extent to which COVID-19, and the related global economic crisis, affect our business, results of operations and financial condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and any recovery period, future actions taken by governmental authorities, central banks and other third parties in response to the pandemic, and the effects on our products, clients, employees and vendors. If we are not able to respond to and manage the impact of such events effectively, our business, results of operations and financial condition may be materially and adversely affected.

The COVID-19 pandemic, and the related global economic crisis, could also precipitate or aggravate the other risk factors discussed in our Annual Report on Form 10-K, which could materially and adversely affect our business, results of operations and financial condition. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not consider to present significant risks. For additional discussion of the impacts of the COVID-19 pandemic, which could be materially adverse to our operations and financial results, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations, Recent Developments, Uncertainties Related to COVID-19” section in Item 2 of Part I of this Quarterly Report on Form 10-Q.

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, 2016, the Company announced that its Board~~

There were no purchases of ~~Directors had authorized a~~equity securities made under our 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 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.three months ended March 31, 2020. As of ~~September 30, 2017,~~March 31, 2020, 1,956,390 of shares could still be purchased under this program.

Item 3.Defaults Upon Senior Securities

None.

~~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~~
Exhibit No.		Description
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		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		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 Exhibit 101 to this Quarterly Report on Form 10-Q are the~~ 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, 2020 and December 31, ~~2016; (ii)~~2019; (iii) the Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016; (iii)~~2019; (iv) the Condensed Consolidated Statement of Comprehensive Loss for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016; (iv)~~2019; (v) the Condensed Consolidated ~~Statement~~Statements of Stockholders' Equity for the ~~nine~~three months ended ~~September 30, 2017; (v)~~March 31, 2020 and 2019; (vi) the Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016; (vi)~~2019; (vii) Notes to Condensed Consolidated Financial Statements tagged as blocks of text.

~~Table of Contents~~

SIGNATURES

~~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.~~

May 8, 2020.

		~~ENVESTNET, INC.~~

~~By:~~		~~/s/ Judson Bergman~~ ENVESTNET, INC.
	~~Judson Bergman~~
By:	~~Chairman and~~ /s/ William C. Crager
	William C. Crager
	Chief Executive Officer
	Principal Executive Officer

By:	/s/ Peter H. D’Arrigo
	Peter H. D’Arrigo
	Chief Financial Officer
	Principal Financial Officer

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


			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


			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

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


		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


					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


	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

	·
2.		~~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. Basis of Presentation


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



	Three Months Ended March 31,
	2019
Revenues	$	214,753
Net loss attributable to Envestnet, Inc.	(11,245		)
Net loss per share attributable to Envestnet, Inc.:
Basic	$	(0.22	)
Diluted	$	(0.22	)



		March 31, 2020							December 31, 2019
		Gross					Net		Gross					Net
	Estimated	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Useful Life	Amount		Amortization			Amount		Amount		Amortization			Amount
Customer lists	7-16 years	$	591,520	$	(161,339	)	$	430,181	$	591,520	$	(148,517	)	$	443,003
Proprietary technologies	4-8 years	90,719		(48,865		)	41,854		87,714		(44,165		)	43,549
Trade names	2-7 years	33,700		(15,895		)	17,805		33,700		(14,663		)	19,037
Total intangible assets		$	715,939	$	(226,099	)	$	489,840	$	712,934	$	(207,345	)	$	505,589

~~Level I:~~		~~Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.~~
10.
~~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. Fair Value Measurements



	March 31, 2020
	Fair Value		Level I		Level II		Level III
Assets:
Money market funds	$	29,076	$	29,076	$	—	$	—
Assets to fund deferred compensation liability	7,173		—		—		7,173
Total assets	$	36,249	$	29,076	$	—	$	7,173
Liabilities:
Contingent consideration	$	14,791	$	—	$	—	$	14,791
Deferred compensation liability	6,911		6,911		—		—
Total liabilities	$	21,702	$	6,911	$	—	$	14,791


	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 Contingent Consideration Liabilities
Balance at December 31, 2019	$	9,045
Private technology company acquisition	5,239
Accretion on contingent consideration	507
Balance at March 31, 2020	$	14,791


	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



	Fair Value of Assets to Fund Deferred Compensation Liability
Balance at December 31, 2019	$	8,390
Fair value adjustments	(1,217		)
Balance at March 31, 2020	$	7,173



	Three Months Ended March 31,
	2020						2019
	Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated
Revenues:
Asset-based	$	134,811	$	—	$	134,811	$	108,934	$	—	$	108,934
Subscription-based	60,323		44,228		104,551		41,026		42,061		83,087
Total recurring revenues	195,134		44,228		239,362		149,960		42,061		192,021
Professional services and other revenues	3,286		3,891		7,177		2,745		4,900		7,645
Total revenues	$	198,420	$	48,119	$	246,539	$	152,705	$	46,961	$	199,666


⁽¹⁾	No foreign country accounted for more than 10% of the Company's total revenues.



Years ending December 31,
Remainder of 2020	$	169,680
2021	166,469
2022	121,386
2023	57,523
2024	32,908
Thereafter	27,043
Total	$	575,009


				Weighted-Average
		Weighted-		Remaining							Weighted-Average
		Average		Contractual Life	Aggregate				Weighted-		Remaining
	Options	Exercise Price		(Years)	Intrinsic Value				Average		Contractual Life	Aggregate
Outstanding as of December 31, 2016	3,033,194	$	16.33	4.3	$	63,264
							Options		Exercise Price		(Years)	Intrinsic Value
Outstanding as of December 31, 2019							1,150,586		$	25.66	3.4	$	50,590
Granted	75,238		31.70				—		—
Exercised	(208,334)		9.12				(357,974	)	16.57
Forfeited	(9,062)		45.81				(7,213	)	48.70
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
Outstanding as of March 31, 2020							785,399		29.60		3.6	19,010
Options exercisable	2,435,815		16.11	3.7		85,448	745,220		$	28.55	3.4	$	18,819


		Weighted-
		Average Grant		RSUs				PSUs
	Number of	Date Fair Value		Number of Shares		Weighted- Average Grant Date Fair Value per Share		Number of Shares		Weighted- Average Grant Date Fair Value per Share
	Shares	per Share
Outstanding as of December 31, 2016	1,894,759	$	30.40
Outstanding as of December 31, 2019				1,318,870		$	58.88	254,118		$	67.96
Granted	872,941		31.89	907,042		75.53		67,793		81.42
Vested	(526,572)		31.68	(398,881	)	55.93		—		—
Forfeited	(20,084)		27.52	(41,175	)	59.74		(33,010	)	64.70
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
Outstanding as of March 31, 2020				1,785,856		67.98		288,901		71.49


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

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


	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


					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