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, ~~2020~~2021

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

For the transition period from __________ to __________

Commission file number 001-34835

Envestnet, Inc.

(Exact name of registrant as specified in its charter)


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

35 East Wacker Drive, Suite 2400, Chicago, Illinois

60601

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(312) 827-2800

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


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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T ~~(232.405~~(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ☐

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

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of ~~October 30, 2020,~~November 1, 2021, Envestnet, Inc. had ~~53,949,796~~54,644,263 shares of common stock outstanding.

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020			3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			4
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			5
Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			6
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020			89
Notes to Unaudited Condensed Consolidated Financial Statements			1011

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements			2932
Overview			3134
Results of Operations			3839
Liquidity and Capital Resources			5456

Item 3. Quantitative and Qualitative Disclosures About Market Risk			5557

Item 4. Controls and Procedures			5657

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			5658

Item 1A. Risk Factors			5658

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5758

Item 3. Defaults Upon Senior Securities			5758

Item 4. Mine Safety Disclosures			5758

Item 5. Other Information			5758

Item 6. Exhibits			5758

Index to Exhibits			5859

Signatures			5960

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)


		September 30,		December 31,			September 30,		December 31,
		2020		2019			2021		2020
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	362,918	$	82,505	Cash and cash equivalents	$	393,799	$	384,565
Fees receivable, net	Fees receivable, net	76,328		67,815		Fees receivable, net	116,137		80,064
Prepaid expenses and other current assets	Prepaid expenses and other current assets	41,966		32,183		Prepaid expenses and other current assets	39,585		40,570
Total current assets	Total current assets	481,212		182,503		Total current assets	549,521		505,199

Property and equipment, net	Property and equipment, net	48,983		53,756		Property and equipment, net	48,158		47,969
Internally developed software, net	Internally developed software, net	87,478		60,263		Internally developed software, net	125,590		96,501
Intangible assets, net	Intangible assets, net	452,583		505,589		Intangible assets, net	417,644		435,041
Goodwill	Goodwill	906,697		879,850		Goodwill	924,504		906,773
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	76,090		82,796		Operating lease right-of-use assets, net	93,204		105,249
Other non-current assets	Other non-current assets	48,218		37,127		Other non-current assets	58,724		47,558
Total assets	Total assets	$	2,101,261	$	1,801,884	Total assets	$	2,217,345	$	2,144,290

Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accrued expenses and other liabilities	Accrued expenses and other liabilities	$	141,290	$	137,944	Accrued expenses and other liabilities	$	200,206	$	158,548
Accounts payable	Accounts payable	29,609		17,277		Accounts payable	21,763		18,003
Operating lease liabilities	Operating lease liabilities	13,835		13,816		Operating lease liabilities	12,021		13,649
Contingent consideration	Contingent consideration	1,549		0		Contingent consideration	806		11,251
Deferred revenue	Deferred revenue	40,037		34,753		Deferred revenue	34,609		34,918
Total current liabilities	Total current liabilities	226,320		203,790		Total current liabilities	269,405		236,369

Convertible Notes		749,918		305,513
Revolving credit facility		0		260,000
Contingent consideration		11,741		9,045
Deferred revenue		2,307		5,754
Long-term debt						Long-term debt	847,633		756,503
Non-current operating lease liabilities	Non-current operating lease liabilities	83,820		88,365		Non-current operating lease liabilities	107,852		112,182
Deferred tax liabilities, net	Deferred tax liabilities, net	36,088		29,481		Deferred tax liabilities, net	27,754		34,740
Other non-current liabilities	Other non-current liabilities	37,700		32,360		Other non-current liabilities	17,626		28,678
Total liabilities	Total liabilities	1,147,894		934,308		Total liabilities	1,270,270		1,168,472

Commitments and contingencies	Commitments and contingencies					Commitments and contingencies	0		0

Equity:	Equity:					Equity:
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, par value $0.005, 50,000,000 shares authorized		0		0
Common stock, par value $0.005, 500,000,000 shares authorized; 67,584,956 and 66,320,706 shares issued as of September 30, 2020 and December 31, 2019, respectively; 53,884,899 and 52,841,706 shares outstanding as of September 30, 2020 and December 31, 2019, respectively		337		331
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and December 31, 2020						Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and December 31, 2020	—		—
Common stock, par value $0.005, 500,000,000 shares authorized; 68,636,215 and 67,832,706 shares issued as of September 30, 2021 and December 31, 2020, respectively; 54,617,904 and 54,093,535 shares outstanding as of September 30, 2021 and December 31, 2020, respectively						Common stock, par value $0.005, 500,000,000 shares authorized; 68,636,215 and 67,832,706 shares issued as of September 30, 2021 and December 31, 2020, respectively; 54,617,904 and 54,093,535 shares outstanding as of September 30, 2021 and December 31, 2020, respectively	343		339
Additional paid-in capital	Additional paid-in capital	1,150,198		1,037,141		Additional paid-in capital	1,108,864		1,166,774
Accumulated deficit	Accumulated deficit	(87,155)		(75,664)		Accumulated deficit	(32,879)		(79,912)
Treasury stock at cost, 13,700,057 and 13,479,000 shares as of September 30, 2020 and December 31, 2019, respectively		(107,248)		(90,965)
Treasury stock at cost, 14,018,311 and 13,739,171 shares as of September 30, 2021 and December 31, 2020, respectively						Treasury stock at cost, 14,018,311 and 13,739,171 shares as of September 30, 2021 and December 31, 2020, respectively	(129,877)		(110,466)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,459)		(1,749)		Accumulated other comprehensive loss	(2,016)		(398)
Total stockholders’ equity	Total stockholders’ equity	954,673		869,094		Total stockholders’ equity	944,435		976,337
Non-controlling interest	Non-controlling interest	(1,306)		(1,518)		Non-controlling interest	2,640		(519)
Total equity	Total equity	953,367		867,576		Total equity	947,075		975,818
Total liabilities and equity	Total liabilities and equity	$	2,101,261	$	1,801,884	Total liabilities and equity	$	2,217,345	$	2,144,290

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

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,
2020 2019 2020 2019
Revenues:
Asset-based $ 137,744 $ 126,591 $ 394,801 $ 355,595
Subscription-based 107,897 100,583 317,427 275,928
Total recurring revenues 245,641 227,174 712,228 631,523
Professional services and other revenues 6,918 8,906 22,183 28,668
Total revenues 252,559 236,080 734,411 660,191
Operating expenses:
Cost of revenues 78,545 71,870 222,327 205,595
Compensation and benefits 94,428 95,587 300,423 285,590
General and administration 38,979 42,016 118,537 124,961
Depreciation and amortization 28,951 26,735 85,077 73,167
Total operating expenses 240,903 236,208 726,364 689,313
Income (loss) from operations 11,656 (128) 8,047 (29,122)
Other expense, net (8,836) (9,813) (18,546) (23,088)
Income (loss) before income tax provision (benefit) 2,820 (9,941) (10,499) (52,210)
Income tax provision (benefit) 497 (6,977) (161) (31,591)
Net income (loss) 2,323 (2,964) (10,338) (20,619)
Add: Net (income) loss attributable to non-controlling interest (413) (116) (12) 247
Net income (loss) attributable to Envestnet, Inc. $ 1,910 $ (3,080) $ (10,350) $ (20,372)
Net income (loss) per share attributable to Envestnet, Inc.:
Basic $ 0.04 $ (0.06) $ (0.19) $ (0.40)
Diluted $ 0.03 $ (0.06) $ (0.19) $ (0.40)
Weighted average common shares outstanding:
Basic 53,800,048 52,215,469 53,464,101 50,414,427
Diluted 55,558,983 52,215,469 53,464,101 50,414,427


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenues:
Asset-based	$	184,008	$	137,744	$	513,458	$	394,801
Subscription-based	113,572		107,897		335,905		317,427
Total recurring revenues	297,580		245,641		849,363		712,228
Professional services and other revenues	5,473		6,918		17,533		22,183
Total revenues	303,053		252,559		866,896		734,411

Operating expenses:
Cost of revenues	109,836		78,545		303,199		222,327
Compensation and benefits	109,839		94,428		316,101		300,423
General and administration	39,393		38,979		117,463		118,537
Depreciation and amortization	29,850		28,951		88,252		85,077
Total operating expenses	288,918		240,903		825,015		726,364

Income from operations	14,135		11,656		41,881		8,047
Other expense, net	(3,551)		(8,836)		(14,803)		(18,546)
Income (loss) before income tax provision (benefit)	10,584		2,820		27,078		(10,499)

Income tax provision (benefit)	(854)		497		9,074		(161)

Net income (loss)	11,438		2,323		18,004		(10,338)
Add: Net (income) loss attributable to non-controlling interest	302		(413)		401		(12)
Net income (loss) attributable to Envestnet, Inc.	$	11,740	$	1,910	$	18,405	$	(10,350)

Net income (loss) per share attributable to Envestnet, Inc.:
Basic	$	0.22	$	0.04	$	0.34	$	(0.19)
Diluted	$	0.21	$	0.03	$	0.33	$	(0.19)

Weighted average common shares outstanding:
Basic	54,547,858		53,800,048		54,400,247		53,464,101
Diluted	55,388,627		55,558,983		55,287,972		53,464,101

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2020		2019		2020		2019			2021		2020		2021		2020
Net income (loss) attributable to Envestnet, Inc.	Net income (loss) attributable to Envestnet, Inc.	$	1,910	$	(3,080)	$	(10,350)	$	(20,372)	Net income (loss) attributable to Envestnet, Inc.	$	11,740	$	1,910	$	18,405	$	(10,350)
Foreign currency translation gains (losses), net of taxes	Foreign currency translation gains (losses), net of taxes	1,739		(1,458)		290		(1,124)		Foreign currency translation gains (losses), net of taxes	270		1,739		(1,618)		290
Comprehensive income (loss) attributable to Envestnet, Inc.	Comprehensive income (loss) attributable to Envestnet, Inc.	$	3,649	$	(4,538)	$	(10,060)	$	(21,496)	Comprehensive income (loss) attributable to Envestnet, Inc.	$	12,010	$	3,649	$	16,787	$	(10,060)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share information)

(unaudited)


										Accumulated																	Accumulated
		Common Stock			Treasury Stock			Additional		Other				Non-					Common Stock			Treasury Stock			Additional		Other				Non-
					Common			Paid-in		Comprehensive		Accumulated		controlling		Total						Common			Paid-in		Comprehensive		Accumulated		controlling		Total
		Shares	Amount		Shares	Amount		Capital		Income (Loss)		Deficit		Interest		Equity			Shares	Amount		Shares	Amount		Capital		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)
Balance, December 31, 2020																		Balance, December 31, 2020	67,832,706	$	339	(13,739,171)	$	(110,466)	$	1,166,774	$	(398)	$	(79,912)	$	(519)	$	975,818
Adoption of ASU 2020-06, net of taxes of $7,641 (See Note 2)																		Adoption of ASU 2020-06, net of taxes of $7,641 (See Note 2)	—	—		—	—		(108,470)		—		28,628		—		(79,842)
Exercise of stock options	Exercise of stock options	357,974	2		—	—		3,406		—		—		—		3,408		Exercise of stock options	27,043	—		—	—		522		—		—		—		522
Issuance of common stock - vesting of restricted stock units	Issuance of common stock - vesting of restricted stock units	398,881	2		—	—		—		—		—		—		2		Issuance of common stock - vesting of restricted stock units	455,349	2		—	—		—		—		—		—		2
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		13,765		—		—		—		13,765		Stock-based compensation expense	—	—		—	—		14,013		—		—		—		14,013
Shares withheld to satisfy tax withholdings	Shares withheld to satisfy tax withholdings	—	—		(130,164)	(9,199)		—		—		—		—		(9,199)		Shares withheld to satisfy tax withholdings	—	—		(147,041)	(9,541)		—		—		—		—		(9,541)
Foreign currency translation gain (loss), net of taxes		—	—		—	—		—		(3,024)		—		—		(3,024)
Share repurchase																		Share repurchase	—	—		(24,227)	(1,672)		—		—		—		—		(1,672)
Foreign currency translation loss, net of taxes																		Foreign currency translation loss, net of taxes	—	—		—	—		—		(624)		—		—		(624)
Other																		Other	—	—		—	—		—		—		—		118		118
Net income (loss)	Net income (loss)	—	—		—	—		—		—		(7,336)		146		(7,190)		Net income (loss)	—	—		—	—		—		—		14,946		(11)		14,935
Balance, March 31, 2020		67,077,561	$	335	(13,609,164)	$	(100,164)	$	1,054,312	$	(4,773)	$	(84,141)	$	(1,372)	$	864,197
Balance, March 31, 2021																		Balance, March 31, 2021	68,315,098	$	341	(13,910,439)	$	(121,679)	$	1,072,839	$	(1,022)	$	(36,338)	$	(412)	$	913,729
Exercise of stock options	Exercise of stock options	184,475	1		—	—		3,274		—		—		—		3,275		Exercise of stock options	4,082	—		—	—		51		—		—		—		51
Issuance of common stock - vesting of restricted stock units	Issuance of common stock - vesting of restricted stock units	134,207	1		—	—		—		—		—		—		1		Issuance of common stock - vesting of restricted stock units	140,082	1		—	—		—		—		—		—		1
Stock-based compensation expense	Stock-based compensation expense	—	—		—	—		13,006		—		—		—		13,006		Stock-based compensation expense	—	—		—	—		17,161		—		—		—		17,161
Shares withheld to satisfy tax withholdings	Shares withheld to satisfy tax withholdings	—	—		(43,697)	(3,617)		—		—		—		—		(3,617)		Shares withheld to satisfy tax withholdings	—	—		(46,699)	(3,479)		—		—		—		—		(3,479)
Transfer of non-controlling units		—	—		—	—		910		—		—		(139)		771
Foreign currency translation gain (loss), net of taxes		—	—		—	—		—		1,575		—		—		1,575
Net income (loss)		—	—		—	—		—		—		(4,924)		(547)		(5,471)
Balance, June 30, 2020		67,396,243	$	337	(13,652,861)	$	(103,781)	$	1,071,502	$	(3,198)	$	(89,065)	$	(2,058)	$	873,737
Exercise of stock options		44,672	—		—	—		1,370		—		—		—		1,370
Issuance of common stock - vesting of restricted stock units		144,041	—		—	—		—		—		—		—		—
Stock-based compensation expense		—	—		—	—		15,729		—		—		—		15,729
Shares withheld to satisfy tax withholdings		—	—		(47,196)	(3,467)		—		—		—		—		(3,467)
Share repurchase																		Share repurchase	—	—		(6,261)	(425)		—		—		—		—		(425)
Capital contribution - non-controlling interest	Capital contribution - non-controlling interest	—	—		—	—		(339)		—		—		339		—		Capital contribution - non-controlling interest	—	—		—	—		(788)		—		—		811		23
Issuance of Convertible Notes due 2025, net of offering costs and taxes of $8,617		—	—		—	—		61,936		—		—		—		61,936
Foreign currency translation gain (loss), net of taxes		—	—		—	—		—		1,739		—		—		1,739
Net income (loss)		—	—		—	—		—		—		1,910		413		2,323
Balance, September 30, 2020		67,584,956	$	337	(13,700,057)	$	(107,248)	$	1,150,198	$	(1,459)	$	(87,155)	$	(1,306)	$	953,367
Foreign currency translation loss, net of taxes																		Foreign currency translation loss, net of taxes	—	—		—	—		—		(1,264)		—		—		(1,264)
Other																		Other	—	—		—	—		—		—		—		38		38
Net loss																		Net loss	—	—		—	—		—		—		(8,281)		(88)		(8,369)
Balance, June 30, 2021																		Balance, June 30, 2021	68,459,262	$	342	(13,963,399)	$	(125,583)	$	1,089,263	$	(2,286)	$	(44,619)	$	349	$	917,466

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

-continued-

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity (continued)

(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, 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
Shares withheld to satisfy tax withholdings — — (160,456) (9,819) — — — — (9,819)
Foreign currency translation gain (loss) — — — — — 222 — — 222
Net income (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
Exercise of stock options 114,109 1 — — 1,750 — — — 1,751
Issuance of common stock - vesting of restricted stock units 182,390 1 — — — — — — 1
Acquisition of business 3,184,713 16 — — 222,468 — — — 222,484
Stock-based compensation expense — — — — 13,434 — — — 13,434
Shares withheld to satisfy tax withholdings — — (67,960) (6,143) — — — — (6,143)
Foreign currency translation gain (loss) — — — — — 112 — — 112
Net income (loss) — — — — — — 893 (280) 613
Balance, June 30, 2019 65,415,670 327 (13,345,514) (83,820) 1,015,578 (660) (76,174) (1,461) 853,790
Exercise of stock options 225,414 1 — — 2,114 — — — 2,115
Issuance of common stock - vesting of restricted stock units 242,789 1 — — — — — — 1
Stock-based compensation expense — — — — 13,169 — — — 13,169
Shares withheld to satisfy tax withholdings — — (84,538) (3,735) — — — — (3,735)
Foreign currency translation gain (loss) — — — — — (1,458) — — (1,458)
Net income (loss) — — — — — — (3,080) 116 (2,964)
Balance, September 30, 2019 65,883,873 $ 329 (13,430,052) $ (87,555) $ 1,030,861 $ (2,118) $ (79,254) $ (1,345) $ 860,918


									Accumulated
	Common Stock			Treasury Stock			Additional		Other				Non-
				Common			Paid-in		Comprehensive		Accumulated		controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, June 30, 2021	68,459,262	$	342	(13,963,399)	$	(125,583)	$	1,089,263	$	(2,286)	$	(44,619)	$	349	$	917,466
Exercise of stock options	12,954	—		—	—		347		—		—		—		347
Issuance of common stock - vesting of restricted stock units	163,999	1		—	—		—		—		—		—		1
Stock-based compensation expense	—	—		—	—		18,760		—		—		—		18,760
Shares withheld to satisfy tax withholdings	—	—		(54,912)	(4,294)		—		—		—		—		(4,294)
Capital contribution - non-controlling interest	—	—		—	—		661		—		—		2,517		3,178
Foreign currency translation gain, net of taxes	—	—		—	—		—		270		—		—		270
Other	—	—		—	—		(167)		—		—		76		(91)
Net income (loss)	—	—		—	—		—		—		11,740		(302)		11,438
Balance, September 30, 2021	68,636,215	$	343	(14,018,311)	$	(129,877)	$	1,108,864	$	(2,016)	$	(32,879)	$	2,640	$	947,075

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity (continued)

(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		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, net of taxes	—	—		—	—		—		—		(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
Shares withheld to satisfy tax withholdings	—	—		(130,164)	(9,199)		—		—		—		—		(9,199)
Foreign currency translation loss, net of taxes	—	—		—	—		—		(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
Exercise of stock options	184,475	1		—	—		3,274		—		—		—		3,275
Issuance of common stock - vesting of restricted stock units	134,207	1		—	—		—		—		—		—		1
Stock-based compensation expense	—	—		—	—		13,006		—		—		—		13,006
Shares withheld to satisfy tax withholdings	—	—		(43,697)	(3,617)		—		—		—		—		(3,617)
Transfer of non-controlling units	—	—		—	—		910		—		—		(139)		771
Foreign currency translation gain (loss)	—	—		—	—		—		1,575		—		—		1,575
Net loss	—	—		—	—		—		—		(4,924)		(547)		(5,471)
Balance, June 30, 2020	67,396,243	$	337	(13,652,861)	$	(103,781)	$	1,071,502	$	(3,198)	$	(89,065)	$	(2,058)	$	873,737
Exercise of stock options	44,672	—		—	—		1,370		—		—		—		1,370
Issuance of common stock - vesting of restricted stock units	144,041	—		—	—		—		—		—		—		—
Stock-based compensation expense	—	—		—	—		15,729		—		—		—		15,729
Shares withheld to satisfy tax withholdings	—	—		(47,196)	(3,467)		—		—		—		—		(3,467)
Capital contribution - non-controlling interest	—	—		—	—		(339)		—		—		339		—
Issuance of Convertible Notes due 2025, net of offering costs and taxes of $8,617	—	—		—	—		61,936		—		—		—		61,936
Foreign currency translation gain (loss), net of taxes	—	—		—	—		—		1,739		—		—		1,739
Net income (loss)	—	—		—	—		—		—		1,910		413		2,323
Balance, September 30, 2020	67,584,956	$	337	(13,700,057)	$	(107,248)	$	1,150,198	$	(1,459)	$	(87,155)	$	(1,306)	$	953,367

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
		2020		2019			2021		2020
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net loss		$	(10,338)	$	(20,619)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income (loss)						Net income (loss)	$	18,004	$	(10,338)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:						Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	85,077		73,167		Depreciation and amortization	88,252		85,077
Provision for doubtful accounts	Provision for doubtful accounts	2,323		1,243		Provision for doubtful accounts	2,051		2,323
Deferred income taxes	Deferred income taxes	79		(37,626)		Deferred income taxes	7,078		79
Non-cash compensation expense	Non-cash compensation expense	45,721		43,167		Non-cash compensation expense	50,307		45,721
Non-cash interest expense	Non-cash interest expense	12,255		17,195		Non-cash interest expense	4,889		12,255
Accretion on contingent consideration and purchase liability	Accretion on contingent consideration and purchase liability	1,308		1,240		Accretion on contingent consideration and purchase liability	656		1,308
Payments of contingent consideration	Payments of contingent consideration	0		(578)		Payments of contingent consideration	(2,360)		—
Fair market value adjustment to contingent consideration liability	Fair market value adjustment to contingent consideration liability	(2,056)		0		Fair market value adjustment to contingent consideration liability	(1,067)		(2,056)
Fair market value adjustment to investment in private company						Fair market value adjustment to investment in private company	(758)		—
Gain on settlement of liability						Gain on settlement of liability	(1,206)		—
Gain on acquisition of equity method investment	Gain on acquisition of equity method investment	(4,230)		0		Gain on acquisition of equity method investment	—		(4,230)
Loss allocation from equity method investments	Loss allocation from equity method investments	4,280		1,507		Loss allocation from equity method investments	5,553		4,280
Impairment of right of use assets	Impairment of right of use assets	1,426		0		Impairment of right of use assets	1,537		1,426
Other	Other	556		0		Other	249		556
Changes in operating assets and liabilities, net of acquisitions:	Changes in operating assets and liabilities, net of acquisitions:					Changes in operating assets and liabilities, net of acquisitions:
Fees receivable, net	Fees receivable, net	(10,825)		6,164		Fees receivable, net	(38,030)		(10,825)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(11,139)		(4,784)		Prepaid expenses and other current assets	569		(11,139)
Other non-current assets	Other non-current assets	(1,807)		(6,113)		Other non-current assets	4,854		(1,807)
Accrued expenses and other liabilities	Accrued expenses and other liabilities	3,393		(9,732)		Accrued expenses and other liabilities	26,637		3,393
Accounts payable	Accounts payable	12,084		(6,859)		Accounts payable	4,122		12,084
Deferred revenue	Deferred revenue	1,488		1,231		Deferred revenue	(1,065)		1,488
Other non-current liabilities	Other non-current liabilities	2,084		3,242		Other non-current liabilities	(298)		2,084
Net cash provided by operating activities	Net cash provided by operating activities	131,679		61,845		Net cash provided by operating activities	169,974		131,679

INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Purchases of property and equipment	Purchases of property and equipment	(8,824)		(16,098)		Purchases of property and equipment	(15,779)		(8,824)
Capitalization of internally developed software	Capitalization of internally developed software	(40,257)		(23,649)		Capitalization of internally developed software	(49,024)		(40,257)
Investments in private companies	Investments in private companies	(13,875)		(3,200)		Investments in private companies	(8,926)		(13,875)
Acquisition of proprietary technology						Acquisition of proprietary technology	(25,517)		—
Acquisitions of businesses, net of cash acquired	Acquisitions of businesses, net of cash acquired	(20,257)		(321,571)		Acquisitions of businesses, net of cash acquired	(32,794)		(20,257)

Advance for technology solutions						Advance for technology solutions	(3,000)		—
Net cash used in investing activities	Net cash used in investing activities	(83,213)		(364,518)		Net cash used in investing activities	(135,040)		(83,213)

-continued-

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows (continued)

(in thousands)

(unaudited)


		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
		2020		2019			2021		2020
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Proceeds from issuance of Convertible Notes due 2025	Proceeds from issuance of Convertible Notes due 2025	517,500		0		Proceeds from issuance of Convertible Notes due 2025	—		517,500
Convertible Notes due 2025 issuance costs	Convertible Notes due 2025 issuance costs	(14,540)		0		Convertible Notes due 2025 issuance costs	—		(14,540)
Proceeds from borrowings on revolving credit facility	Proceeds from borrowings on revolving credit facility	45,000		175,000		Proceeds from borrowings on revolving credit facility	—		45,000
Payments on revolving credit facility	Payments on revolving credit facility	(305,000)		(75,000)		Payments on revolving credit facility	—		(305,000)
Revolving credit facility issuance costs		0		(2,103)
Capital contributions - non-controlling shareholders						Capital contributions - non-controlling shareholders	3,201		—
Payments of deferred consideration on prior acquisitions	Payments of deferred consideration on prior acquisitions	(1,879)		0		Payments of deferred consideration on prior acquisitions	—		(1,879)
Payments of contingent consideration	Payments of contingent consideration	0		(171)		Payments of contingent consideration	(9,200)		—
Proceeds from exercise of stock options	Proceeds from exercise of stock options	8,053		7,029		Proceeds from exercise of stock options	920		8,053
Taxes paid in lieu of shares issued for stock-based compensation	Taxes paid in lieu of shares issued for stock-based compensation	(16,283)		(19,697)		Taxes paid in lieu of shares issued for stock-based compensation	(17,314)		(16,283)
Issuance of restricted stock units		3		4
Net cash provided by financing activities		232,854		85,062
Share repurchases						Share repurchases	(2,097)		—
Other						Other	(666)		3
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(25,156)		232,854

EFFECT OF EXCHANGE RATE CHANGES ON CASH	EFFECT OF EXCHANGE RATE CHANGES ON CASH	(1,009)		(178)		EFFECT OF EXCHANGE RATE CHANGES ON CASH	(544)		(1,009)

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		280,311		(217,789)
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH						INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	9,234		280,311

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	82,755		289,671		CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	384,714		82,755

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (See Note 2)	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (See Note 2)	$	363,066	$	71,882	CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD (See Note 2)	$	393,948	$	363,066

Supplemental disclosure of cash flow information - net cash paid during the period for income taxes	Supplemental disclosure of cash flow information - net cash paid during the period for income taxes	$	5,349	$	7,826	Supplemental disclosure of cash flow information - net cash paid during the period for income taxes	$	5,895	$	5,349
Supplemental disclosure of cash flow information - cash paid during the period for interest	Supplemental disclosure of cash flow information - cash paid during the period for interest	9,652		7,813		Supplemental disclosure of cash flow information - cash paid during the period for interest	7,794		9,652

Supplemental disclosure of non-cash operating, investing and financing activities:	Supplemental disclosure of non-cash operating, investing and financing activities:					Supplemental disclosure of non-cash operating, investing and financing activities:
Common stock issued in acquisition of business		0		222,484

Contingent consideration issued in acquisition of businesses	Contingent consideration issued in acquisition of businesses	5,239		15,880		Contingent consideration issued in acquisition of businesses	—		5,239
Accrued payment to fund deferred compensation liability included in accounts payable		0		0
Purchase liabilities included in accrued expenses and other liabilities						Purchase liabilities included in accrued expenses and other liabilities	—		632
Purchase liabilities included in other non-current liabilities	Purchase liabilities included in other non-current liabilities	0		5,468		Purchase liabilities included in other non-current liabilities	2,951		—
Purchase liabilities included in accrued expenses and other liabilities		632		0
Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities	Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities	1,104		2,262		Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities	449		1,104
Internally developed software costs included in accrued expenses and other liabilities						Internally developed software costs included in accrued expenses and other liabilities	1,060		—
Membership interest liabilities included in other non-current liabilities	Membership interest liabilities included in other non-current liabilities	3,221		3,700		Membership interest liabilities included in other non-current liabilities	373		3,221
Common stock issued to settle purchase liability		0		772

Leasehold improvements funded by lease incentive	Leasehold improvements funded by lease incentive	1,766		0		Leasehold improvements funded by lease incentive	164		1,766
Assets obtained in exchange for lease liabilities						Assets obtained in exchange for lease liabilities	4,387		—
Transfer of non-controlling units	Transfer of non-controlling units	771		0		Transfer of non-controlling units	—		771

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

910

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

1.Organization and Description of Business

Envestnet, Inc. (“Envestnet”) ~~and~~through its subsidiaries (collectively, the “Company”) ~~provide intelligent systems for wealth management~~is transforming the way financial advice and wellness are delivered. Its mission is to empower advisors and financial ~~wellness. Envestnet’s unified~~service providers with innovative technology, ~~enhances advisor productivity~~solutions and ~~strengthens the wealth management process.~~intelligence to make financial wellness a reality for everyone. Through a combination of platform enhancements, partnerships and acquisitions, Envestnet ~~empowers enterprises~~provides a unique financial network connecting technology, solutions and ~~advisors~~data, delivering better intelligence and enabling its customers to ~~more fully understand their clients and deliver~~drive better outcomes.

Envestnet is organized around 2 primary, complementary business segments. Financial information about each business segment is contained in “Note 15—Segment Information” to the condensed consolidated financial statements.

2.Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company as of September 30, ~~2020~~2021 and for the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 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, ~~2019~~2020 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, ~~2020~~2021 and the results of operations, equity, comprehensive income (loss) and cash flows for the periods presented herein. The unaudited condensed consolidated financial statements include the accounts of the Company. All significant intercompany transactions and balances have been eliminated in consolidation. Accounts for the Envestnet Wealth Solutions segment that are denominated in a non-U.S. currency have been re-measured using the U.S. dollar as the functional currency. Certain accounts within the Envestnet Data & Analytics segment are recorded and measured in foreign currencies. The assets and liabilities for those subsidiaries with a functional currency other than the U.S. dollar are translated at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at average exchange rates. Differences arising from these foreign currency translations are recorded in the unaudited condensed consolidated balance sheets as accumulated other comprehensive income (loss) within stockholders' equity. The Company is also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other expense, net in the condensed consolidated statements of operations.

The results of operations for the three and nine months ended September 30, ~~2020~~2021 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. References to GAAP in these notes are to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification™, sometimes referred to as the codification or “ASC.” These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the SEC on February ~~28, 2020.~~26, 2021.

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

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The following table reconciles cash, cash equivalents and restricted cash from the condensed consolidated balance sheets to amounts reported within the condensed consolidated statements of cash flows:


							September 30,		September 30,
							2021		2020
		September 30,		September 30,
		2020		2019			(in thousands)
Cash and cash equivalents	Cash and cash equivalents	$	362,918	$	71,632	Cash and cash equivalents	$	393,799	$	362,918
Restricted cash included in prepaid expenses and other current assets	Restricted cash included in prepaid expenses and other current assets	0		82		Restricted cash included in prepaid expenses and other current assets	149		—
Restricted cash included in other non-current assets	Restricted cash included in other non-current assets	148		168		Restricted cash included in other non-current assets	—		148
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	363,066	$	71,882	Total cash, cash equivalents and restricted cash	$	393,948	$	363,066

~~Table of Contents~~

~~Envestnet, Inc.~~

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

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

Financial Impacts Related To COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak ~~is causing major~~continues to cause disruptions to businesses and markets worldwide as the virus spreads. The extent of the effect on the Company’s operational and financial performance will continue to depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. Although the Company is unable to estimate the overall financial effect of the pandemic at this time, ifas the pandemic continues, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. As of September 30, ~~2020,~~2021, these condensed consolidated financial statements do not reflect any adjustments as a result of the pandemic.

Related Party Transactions

The Company has a 4.3% membership interest in a private services company that it accounts for using the equity method of accounting and is considered to be a related party. Revenues from the private services company totaled $4.2 million and $2.9 million in the three months ended September 30, 2021 and 2020, respectively. Revenues from the private services company totaled $11.9 million and $8.0 million in the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021 and December 31, 2020, the Company had recorded a net receivable of $3.3 million and $2.1 million, respectively, from the private services company.

Recent Accounting Pronouncements

Recently ~~Adopted Accounting Pronouncements—In June 2016, the FASB issued~~ ~~ASU 2016-13~~, “Financial Instruments—Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326).” This update significantly changes the way that entities will be required to measure credit losses. This standard requires that entities estimate credit losses based upon an “expected credit loss” approach rather than the “incurred loss” approach, which is currently used. The new approach will require entities to measure all expected credit losses for financial assets based on historical experience, current conditions and reasonable forecasts of collectability. The change in approach is anticipated to impact the timing of recognition of credit losses. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2019. ~~These changes became effective for the~~ ~~Company's fiscal year beginning January 1, 2020.~~ The Company recognized the cumulative effect of the initial application of ASU 2016-13 as an adjustment of $1,141, net of tax, to the opening balance of accumulated deficit. The Company does not expect the adoption of ASU 2016-13 to have a material impact to the results of its operations on an ongoing basis.

~~Not Yet~~ Adopted Accounting Pronouncements—In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income ~~Taxes~~.Taxes.” This update aims to reduce complexity within the accounting for income taxes as part of the simplification ~~initiative~~.initiative. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2020. ~~Early adoption of~~These changes became effective for the Company's fiscal year beginning January 1, 2021. This standard ~~is permitted. The Company is currently evaluating the potential impact~~will be applied prospectively. Adoption of this ~~guidance~~standard did not have a material impact on ~~its condensed~~the Company's consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.” This update simplifies the accounting for certain convertible instruments ~~amends~~by reducing the number of accounting models available for convertible debt instruments and revises Topic 815-40, which provides guidance on how an entity must determine whether a contract qualifies for a scope exception from derivative ~~scope exceptions~~accounting. Under the new guidance, the embedded conversion features are no longer separated from the host contract for ~~contracts~~convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in ~~an entity's own equity, and modifies the guidance on diluted earnings per share calculations~~substantial premiums accounted for as paid-in capital. The convertible debt instruments will be accounted for as a ~~result of these changes.~~single liability measured at amortized cost. In addition, the new guidance requires the if-converted method to be applied for all convertible instruments. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2021. Early adoption of the standard is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. ~~The Company is currently evaluating~~Adoption of the ~~potential impact of this guidance on its condensed consolidated financial statements.~~ standard requires using either a modified retrospective or a full retrospective approach.

3. ~~Business Acquisitions~~

~~Investment in Private Services Company~~

On January 8, 2020, the Company 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. The Company will use the equity method of accounting to record its portion of the private services company’s net income or loss on a one quarter lag from the actual results of operations. The Company uses the equity method of accounting because of its less than 50% ownership and lack of control and does not otherwise exercise control over the significant economic decisions of the private services company.

The private services company is and remains a client of the Company and has thus been determined to be a related party. Revenues from the private services company totaled $2,883 and $7,956 in the three and nine months ended September 30, 2020. As of September 30, 2020, the Company had recorded a net receivable of $1,803 from the private services company.

~~Table of Contents~~

~~Envestnet, Inc.~~

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

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

~~Acquisition of Private Technology Company~~

On February 18, 2020, the Company, through it's wholly owned subsidiary Yodlee, Inc. (“Yodlee”), 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 the Envestnet Data & Analytics segment.

In connection with the Private Technology Company Acquisition, the Company 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. The Company recorded a liability as of the date of acquisition of $5,239, which represented the estimated fair value of contingent consideration on the date of acquisition.

In June 2020, the Company determined that certain performance targets for this acquisition would not be met. As a result, the Company reduced the contingent consideration liability plus accrued interest associated with this acquisition by $1,982 and recorded this as a reduction to general and administration expenses. In September 2020, the Company further reduced the contingent consideration liability associated with this acquisition by an immaterial amount. Future changes to the estimated fair value of the contingent consideration, if any, will be recognized in earnings of the Company.

The Company recorded estimated goodwill of $7,017, which is 0t 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.

The results of the private technology company's operations are included in the condensed consolidated statements of operations beginning February 18, 2020 and were not considered material to the Company’s results of operations.

~~Acquisition of Private Cloud Technology Company~~

On March 2, 2020, the Company 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, the Company paid estimated consideration of $11,968, net of cash acquired. In connection with the acquisition, the Company recorded estimated goodwill of $10,932, which is deductible for income tax purposes. The tangible assets acquired and liabilities assumed were not material.

The results of the private cloud technology company's operations are included in the condensed consolidated statements of operations beginning March 2, 2020 and were not considered material to the Company’s results of operations.

~~Acquisition of Private Financial Technology Design Company~~

On March 3, 2020, the Company acquired the outstanding units of a private financial technology design company that were not owned by the Company and merged the acquired company into a wholly owned subsidiary of the Company (the “Private Financial Technology Design Company Acquisition”). The private financial technology design company designs integrated, intuitive digital technology applications for institutional financial services firms, bank wealth management organizations, independent advisor networks, and broker-dealers. The technology and operations of the private financial technology design company have been integrated into the Envestnet Wealth Solutions segment.

The Company previously owned approximately 45% of the 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, the Company paid estimated consideration of $5,946, net of cash acquired, for the remaining outstanding units. As a result of the acquisition, the Company recognized a gain of $4,230 in the first quarter of 2020

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Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(The Company has early adopted this standard as of January 1, 2021 using the modified retrospective approach. Adoption of this standard resulted in ~~thousands, except share~~a decrease to accumulated deficit of $28.6 million (net of $0.9 million in taxes), a decrease to paid-in capital of $108.5 million (net of $6.7 million in taxes) and ~~per share amounts)~~

an increase to Convertible Notes of $87.5 million. Interest expense recognized in future periods is expected to be reduced as a result of accounting for the convertible debt instrument as a single liability measured at its amortized cost, with an expected decrease of approximately $22.1 million in 2021 as a result of the adoption. The adoption of ASU 2020-06 had no impact on the ~~re-measurement to fair value of its previously held interest, which is included in other expense, net in the condensed~~Company's consolidated statements of ~~operations~~cash flows.

3.Acquisitions

Acquisition of Proprietary Technology

The Company previously owned approximately 29% of the outstanding units in a privately held company and accounted for it as an equity method investment. On March 11, 2021, the Company entered into an intellectual property purchase agreement with this privately held company to acquire all of the proprietary technology developed by the privately held company for approximately $35.5 million. Concurrent with the intellectual property purchase agreement, the Company also entered into a redemption agreement with the same privately held company to redeem the Company's previously held equity interest for approximately $10.0 million. The Company accounted for these two arrangements as a single unit of account. As of the acquisition date, the net cost of the proprietary technology acquired, including capitalized transaction costs, was approximately $24.5 million, which will be amortized over a five-year period on a straight-line basis. The proprietary technology has been integrated into the Envestnet Wealth Solutions segment.

Acquisition of Harvest

On April 7, 2021, pursuant to an agreement and plan of merger (the “Merger Agreement”), dated as of March 31, 2021, between, among others, Harvest Savings & Wealth Technologies (“Harvest”), a Delaware corporation, and Bounty Merger Sub, Inc, a wholly-owned subsidiary of the Company (“Merger Sub”), the Company completed the merger of Harvest with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Harvest Acquisition”) and operating as a wholly-owned subsidiary of Envestnet. Harvest has been integrated into the Envestnet Wealth Solutions segment.

Harvest provides automated goals-based saving and wealth solutions tools to customers of banks, credit unions, trust companies, and other financial institutions. The acquisition optimizes the Company's API-based financial wellness ecosystem, and also helps strengthen the Company's foothold to enable embedded finance, which the Company sees as a key driver of the future of financial services.

In connection with the ~~Private Financial Technology Design Company~~Harvest Acquisition, the Company ~~recorded~~paid estimated ~~total goodwill~~consideration of ~~$9,241,~~$32.8 million (of which $3.0 million is being held in escrow for 18 months after the closing date), net of ~~which approximately $6,658 is deductible for income tax purposes, and~~cash acquired, subject to certain post-closing adjustments. The Company funded the acquisition with cash on hand.

The following table summarizes the estimated ~~identifiable intangible assets for proprietary technologies~~fair values of ~~$2,000. The tangible~~the assets acquired and liabilities assumed ~~were not material.~~at the date of acquisition:

The results of the private financial technology design company's operations are included in the condensed consolidated statements of operations beginning March 3, 2020 and were not considered material to the Company’s results of operations.


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate
	(in thousands)
Tangible assets acquired, net of cash(1)	$	2,032	$	3,938	$	5,970
Total liabilities assumed	(596)		54		(542)
Identifiable intangible assets	9,500		—		9,500
Goodwill	21,858		(3,992)		17,866
Total net assets acquired	$	32,794	$	—	$	32,794

~~For~~(1) The Company recorded measurement period adjustments of $4.0 million primarily due to the establishment of deferred tax assets in the three ~~and nine~~ months ended September 30, 2020, acquisition related costs for the Company's 2020 acquisitions were not material, and are included in general and administration expenses. The Company may incur additional acquisition related costs over the remainder of 2020.2021.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The goodwill arising from ~~these acquisitions~~the acquisition represents the expected synergistic benefits of ~~these transactions,~~the transaction, primarily related to an increase in future revenues as a result of potential ~~new business and~~ cross selling opportunities, as well as enhancements to ~~our~~the Company's existing technologies. The goodwill is not deductible for income tax purposes.

~~For the Company's 2020 acquisitions, the~~A summary of estimated intangible assets acquired, estimated useful lives and amortization method is as follows:


	Preliminary Estimate (in thousands)		Estimated Useful Life in Years	Amortization Method
Proprietary technology	$	6,900	6	Straight-line
Customer list	2,600		14	Accelerated
Total intangible assets acquired	$	9,500

The estimated fair values of certain of the assets and liabilities acquired are provisional and based on ~~the~~ information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation and other studies ~~and~~that are in progress and not yet at the point where there is sufficient information for a definitive measurement. The Company believes the preliminary information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize those fair values. Therefore, provisional measurements of fair values reflected herein are subject to change and such changes could be significant. The Company expects to finalize the valuation of ~~these estimated~~tangible assets acquired, liabilities assumed, identifiable intangible assets and ~~liabilities~~goodwill balances and complete the acquisition accounting as soon as reasonably practicable but no later than ~~one year from the acquisition date.~~April 7, 2022.

~~Pro Forma Financial Information~~

On April 1, 2019, the Company acquired certain of the assets, primarily consisting of intangible assets, and the assumption of certain liabilities of the PortfolioCenter business (“PortfolioCenter”) from Performance Technologies, Inc., a wholly-owned subsidiary of The Charles Schwab Corporation. On May 1, 2019, the Company acquired all of the outstanding shares of capital stock of PIEtech, Inc. (“PIEtech”). The following pro forma financial information presents the combined results of operations of Envestnet, PortfolioCenter and PIEtech for the nine months ended September 30, 2019 and assumes the acquisitions of PortfolioCenter and PIEtech had occurred as of the beginning of 2018. The results of ~~the Company's other acquisitions since January 1, 2019~~Harvest’s operations are ~~not~~ included in the ~~pro forma financial information presented below as they~~condensed consolidated statements of operations beginning April 7, 2021 and were not considered material to the ~~Company's~~Company’s results of operations.

For the three and nine months ended September 30, 2021, the Company’s acquisition related costs were not material, and are included in general and administration expenses. The unaudited pro forma results presented below include amortization charges for acquired intangible assets, interest expense, stock-based compensation expense and income tax. The Company's pro forma information below includesCompany may incur additional acquisition related costs over the ~~reversal~~remainder of a valuation allowance on its deferred tax assets as of January 1, 2018 and the reversal of transaction costs that were incurred in 2019 as a result of these acquisitions and reverses these amounts from the appropriate periods in 2019. All intercompany revenues have been eliminated within this pro forma information.2021.

Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisitions had taken place as of the beginning of 2018.

~~Nine Months Ended September 30,~~

~~2019~~

~~Revenues~~

~~679,355~~

~~Net loss attributable to Envestnet, Inc.~~

~~(22,754)~~

~~Net loss per share attributable to Envestnet, Inc.:~~

~~Basic~~

~~(0.44)~~

~~Diluted~~

~~(0.44)~~

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~~Envestnet, Inc.~~

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

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

4.Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


							September 30,		December 31,
							2021		2020
		September 30,		December 31,
		2020		2019			(in thousands)
Prepaid technology	Prepaid technology	$	9,882	$	8,178	Prepaid technology	$	14,825	$	13,165
Non-income tax receivables						Non-income tax receivables	7,031		6,571
Income tax prepayments and receivables	Income tax prepayments and receivables	7,917		0		Income tax prepayments and receivables	4,012		1,684
Prepaid insurance						Prepaid insurance	3,035		1,777
Advance payroll taxes and benefits	Advance payroll taxes and benefits	5,967		5,446		Advance payroll taxes and benefits	1,449		6,429
Non-income tax receivables		5,142		5,555
Prepaid insurance		2,179		1,919
Prepaid outside information services		2,121		2,209
Other	Other	8,758		8,876		Other	9,233		10,944
Total prepaid expenses and other current assets	Total prepaid expenses and other current assets	$	41,966	$	32,183	Total prepaid expenses and other current assets	$	39,585	$	40,570

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

5.Property and Equipment, Net

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


									September 30,		December 31,
								Estimated Useful Life	2021		2020
			September 30,		December 31,
		Estimated Useful Life	2020		2019				(in thousands)
Cost:	Cost:						Cost:
Computer equipment and software	Computer equipment and software	3 years	$	72,572	$	72,190	Computer equipment and software	3 years	$	72,415	$	72,443
Leasehold improvements	Leasehold improvements	Shorter of the lease term or useful life of the asset	37,840		34,645		Leasehold improvements	Shorter of the lease term or useful life of the asset	43,860		37,671
Office furniture and fixtures	Office furniture and fixtures	3-7 years	11,036		10,832		Office furniture and fixtures	3-7 years	12,243		11,249
Office equipment and other	Office equipment and other	3-5 years	7,016		6,850		Office equipment and other	3-5 years	5,810		7,151
Building and building improvements	Building and building improvements	7-39 years	2,669		2,647		Building and building improvements	7-39 years	2,669		2,669
Land	Land	Not applicable	940		940		Land	Not applicable	940		940
			132,073		128,104				137,937		132,123
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization		(83,090)		(74,348)		Less: accumulated depreciation and amortization		(89,779)		(84,154)
Total property and equipment, net	Total property and equipment, net		$	48,983	$	53,756	Total property and equipment, net		$	48,158	$	47,969

During the three and nine months ended September 30, 2021, the Company retired property and equipment that was no longer in service for the Envestnet Wealth Solutions segment with an historical cost of $1.8 million and $9.6 million, respectively. During the three and nine months ended September 30, 2021, the Company retired property and equipment that was no longer in service for the Envestnet Data & Analytics segment with an historical cost of $0.4 million and $1.0 million million, respectively.

During the three and nine months ended September 30, 2020, the Company retired property and equipment that was no longer in service for the Envestnet Wealth Solutions segment with an historical cost of ~~$964~~$1.0 million and ~~$5,459,~~$5.5 million, respectively. During the three and nine months ended September 30, 2020, the Company retired property and equipment that was no longer in service for the Envestnet Data & Analytics segment with an historical cost of ~~$1,413~~$1.4 million and ~~$2,097, respectively.~~

During the three and nine months ended September 30, 2019, the Company retired property and equipment that was no longer in service for the Envestnet Wealth Solutions segment with an historical cost of $1,355 and $4,997, respectively. During the three and nine months ended September 30, 2019, the Company retired property and equipment that was no longer in service for the Envestnet Data & Analytics segment with an historical cost of $174 and $4,295,$2.1 million, respectively.

Gains and losses on asset retirements during the three and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020 were not material.

Depreciation and amortization expense was as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Depreciation and amortization expense $ 5,341 $ 4,693 $ 16,021 $ 15,810


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Depreciation and amortization expense	$	4,998	$	5,341	$	15,887	$	16,021

6.Internally Developed Software

Internally developed software, net consisted of the following:


		September 30,		December 31,
	Estimated Useful Life	2021		2020

		(in thousands)
Internally developed software	5 years	$	209,703	$	159,619
Less: accumulated amortization		(84,113)		(63,118)
Internally developed software, net		$	125,590	$	96,501

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Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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

6.~~Internally Developed Software~~

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

September 30, December 31,
Estimated Useful Life 2020 2019
Internally developed software 5 years $ 144,968 $ 104,703
Less: accumulated amortization (57,490) (44,440)
Internally developed software, net $ 87,478 $ 60,263

Amortization expense was as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Amortization expense $ 5,100 $ 2,800 $ 13,042 $ 8,533


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Amortization expense	$	7,462	$	5,100	$	20,995	$	13,042

7.Goodwill and Intangible Assets, Net

Changes in the carrying amount of goodwill were as follows:

Envestnet
Wealth Solutions Envestnet
Data & Analytics Total
Balance at December 31, 2019 $ 583,247 $ 296,603 $ 879,850
Acquisitions 20,173 7,017 27,190
Foreign currency and other (70) (273) (343)
Balance at September 30, 2020 $ 603,350 $ 303,347 $ 906,697


	Envestnet Wealth Solutions		Envestnet Data & Analytics		Total

	(in thousands)
Balance at December 31, 2020	$	603,350	$	303,423	$	906,773
Harvest Acquisition	17,866		—		17,866
Foreign exchange rates	—		(135)		(135)
Balance at September 30, 2021	$	621,216	$	303,288	$	924,504

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


															September 30, 2021						December 31, 2020
															Gross				Net		Gross				Net
		September 30, 2020						December 31, 2019							Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
		Gross				Net		Gross				Net			Amount		Amortization		Amount		Amount		Amortization		Amount
		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
		Amount		Amortization		Amount		Amount		Amortization		Amount			(in thousands)
Customer lists	Customer lists	$	591,520	$	(186,296)	$	405,224	$	591,520	$	(148,517)	$	443,003	Customer lists	$	593,820	$	(233,477)	$	360,343	$	591,520	$	(198,555)	$	392,965
Proprietary technologies	Proprietary technologies	89,914		(57,897)		32,017		87,714		(44,165)		43,549		Proprietary technologies	85,324		(38,439)		46,885		54,914		(26,949)		27,965
Trade names	Trade names	33,700		(18,358)		15,342		33,700		(14,663)		19,037		Trade names	33,700		(23,284)		10,416		33,700		(19,589)		14,111
Total intangible assets	Total intangible assets	$	715,134	$	(262,551)	$	452,583	$	712,934	$	(207,345)	$	505,589	Total intangible assets	$	712,844	$	(295,200)	$	417,644	$	680,134	$	(245,093)	$	435,041

There were no material retirements of intangible assets during the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

Amortization expense was as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Amortization expense $ 18,510 $ 19,242 $ 56,014 $ 48,824


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Amortization expense	$	17,390	$	18,510	$	51,370	$	56,014

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Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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

8.Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following:


		September 30,		December 31,			September 30,		December 31,
		2020		2019			2021		2020

							(in thousands)
Accrued investment manager fees						Accrued investment manager fees	$	88,963	$	57,894
Accrued compensation and related taxes	Accrued compensation and related taxes	$	55,286	$	53,627	Accrued compensation and related taxes	80,549		71,039
Accrued investment manager fees		54,127		48,720
Non-income tax payables		8,816		11,040
Accrued professional services	Accrued professional services	5,696		3,833		Accrued professional services	8,453		9,240
Accrued technology	Accrued technology	4,020		3,042		Accrued technology	7,032		4,701
Accrued transaction costs		2,970		2,482
Accrued charitable contribution		0		5,020
Non-income tax payables						Non-income tax payables	4,615		8,398
Accrued purchase consideration						Accrued purchase consideration	4,008		—
Other accrued expenses	Other accrued expenses	10,375		10,180		Other accrued expenses	6,586		7,276
Total accrued expenses and other liabilities	Total accrued expenses and other liabilities	$	141,290	$	137,944	Total accrued expenses and other liabilities	$	200,206	$	158,548

In the fourth quarter of ~~2019,~~2020, as part of an organizational realignment, the Company ~~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~~entered into separation agreements with ~~the Company of at least 65 years. Employees had until January 31, 2020 to voluntarily accept the program with separation of service no later than March 31, 2020.~~several employees. In connection with this ~~program,~~realignment, the Company ~~recorded approximately $12,000~~recognized a net credit of $0.1 million of severance expense ~~during~~in the three months ended September 30, 2021. Total severance expense related to this program for the nine months ended September 30, ~~2020. As of September 30, 2020, the~~2021 was $5.1 million. The Company has ~~accrued~~ approximately ~~$868~~$1.6 million and $5.1 million in accrued compensation and related taxes associated with these separation agreements as of September 30, 2021 and ~~$2,336 recorded in other non-current liabilities. As of~~ December 31, ~~2019, the Company had accrued approximately $1,733 in accrued compensation and related taxes and $599 recorded in other non-current liabilities. These payments will extend through 2030.~~2020, respectively.

9.Debt

The Company’s outstanding debt obligations as of September 30, ~~2020~~2021 and December 31, ~~2019~~2020 were as follows:


							September 30,		December 31,
							2021		2020
		September 30,		December 31,
		2020		2019			(in thousands)
Revolving credit facility balance	Revolving credit facility balance	$	0	$	260,000	Revolving credit facility balance	$	—	$	—

Convertible Notes due 2023	Convertible Notes due 2023	$	345,000	$	345,000	Convertible Notes due 2023	$	345,000	$	345,000
Unamortized issuance costs on Convertible Notes due 2023						Unamortized issuance costs on Convertible Notes due 2023	(3,491)		(4,306)
Unaccreted discount on Convertible Notes due 2023	Unaccreted discount on Convertible Notes due 2023	(26,444)		(33,491)		Unaccreted discount on Convertible Notes due 2023	—		(24,058)
Unamortized issuance costs on Convertible Notes due 2023		(4,733)		(5,996)
Convertible Notes due 2023 carrying value(1)		$	313,823	$	305,513
Convertible Notes due 2023 carrying value						Convertible Notes due 2023 carrying value	$	341,509	$	316,636

Convertible Notes due 2025	Convertible Notes due 2025	$	517,500	$	0	Convertible Notes due 2025	$	517,500	$	517,500
Unamortized issuance costs on Convertible Notes due 2025						Unamortized issuance costs on Convertible Notes due 2025	(11,376)		(11,731)
Unaccreted discount on Convertible Notes due 2025	Unaccreted discount on Convertible Notes due 2025	(69,104)		0		Unaccreted discount on Convertible Notes due 2025	—		(65,902)
Unamortized issuance costs on Convertible Notes due 2025		(12,301)		0
Convertible Notes due 2025 carrying value(2)		$	436,095	$	0
Convertible Notes due 2025 carrying value						Convertible Notes due 2025 carrying value	$	506,124	$	439,867

~~(1)~~

Amended Credit Agreement

~~The effective interest rate on the liability component of the Convertible Notes due 2023 was 6% for the three and nine months ended~~

At September 30, ~~2020~~2021, the Company was not in compliance with a covenant in its revolving credit agreement (the “Amended Credit Agreement”) that limits the Company's ability to make investments in an aggregate amount not to exceed $25.0 million, unless specifically identified in the Amended Credit Agreement. The banks have waived this non-compliance. Furthermore, on October 29, 2021, the banks and ~~2019.~~the Company entered into a Third Amendment to the Amended Credit Agreement whereby the investment threshold was increased from $25.0 million to $50.0 million. The Company was in compliance with all other covenants in the Amended Credit Agreement as of September 30, 2021.

As of September 30, 2021, the Company had all $500.0 million available to borrow under the revolving credit facility, subject to covenant compliance.

~~(2)~~ ~~The effective interest rate on the liability component of the Convertible Notes due 2025 was 4% for the three months ended September 30, 2020.~~

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Notes to Unaudited Condensed Consolidated Financial Statements (continued)

~~(in thousands, except share~~Convertible Notes due 2023

Upon adoption of ASU 2020-06, effective January 1, 2021, the embedded conversion option, or equity component, is no longer separated from the host contract and ~~per share amounts)~~

~~Interest expense was comprised of the following~~recognized within additional paid-in capital and is ~~included in other expense, net~~instead now accounted for as a single liability measured at amortized cost within Long-term debt in the condensed consolidated ~~statement~~balance sheets. Accordingly, as of ~~operations:~~September 30, 2021, the Convertible Notes due 2023 are presented at their gross proceeds of $345.0 million less unamortized debt issuance costs of $3.5 million with no future accretion of the original issue discount necessary.

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Accretion of debt discount $ 3,816 $ 3,846 $ 8,496 $ 11,388
Interest on revolving credit facility 1,259 1,529 5,786 2,725
Coupon interest 1,951 2,264 4,962 6,792
Amortization of issuance costs 922 1,160 2,186 2,880
Undrawn and other fees 191 187 477 560
Total interest expense $ 8,139 $ 8,986 $ 21,907 $ 24,345

In connection with the issuance of the Convertible Notes due 2023, the Company incurred $10.0 million of issuance costs in 2018, of which $8.6 million was originally allocated to the debt component and presented net in Long-term debt and $1.4 million was originally allocated to the equity component and presented within additional paid-in capital in the condensed consolidated balance sheets. Upon adoption of ASU 2020-06, effective January 1, 2021, the costs originally allocated to the equity component are reflected within Long-term debt and are being amortized and recorded as additional interest expense over the life of the Convertible Notes due 2023.

The effective interest rate of the Convertible Notes due 2023 was approximately 2.4% for the three and nine months ended September 30, 2021. The effective interest rate of the Convertible Notes due 2023 was approximately 6% for the three and nine months ended September 30, 2020. The effective interest rate of the Convertible Notes due 2023 is equal to the stated interest rate plus the amortization of the debt issuance costs subsequent to adoption of ASU 2020-06. Prior to the adoption of ASU 2020-06, the effective interest rate calculation also included the amortization of the original issue discount.

Convertible Notes due 2025

~~In August 2020,~~Upon adoption of ASU 2020-06, effective January 1, 2021, the ~~Company issued $517,500~~embedded conversion option, or equity component, is no longer separated from the host contract and recognized within additional paid-in capital and is instead now accounted for as a single liability measured at amortized cost within Long-term debt in the condensed consolidated balance sheets. Accordingly, as of Convertible Notes due 2025 that mature on August 15, 2025. The Convertible Notes due 2025 bear interest at a rate of 0.75 percent per annum payable semiannually in arrears in cash on February 15 and August 15 of each year, beginning on February 15, 2021. TheSeptember 30, 2021, the Convertible Notes due 2025 are ~~general unsecured obligations, subordinated in right~~presented at their gross proceeds of ~~payment to our obligations under the Company's revolving credit facility. The notes are structurally subordinated to the indebtedness and other liabilities~~$517.5 million less unamortized debt issuance costs of ~~any~~$11.4 million with no future accretion of the Company's subsidiaries, other than its wholly owned subsidiary, Envestnet Asset Management, Inc., which will fully and unconditionally guarantee the notes on an unsecured basis. The Convertible Notes due 2025 rank equally in right of payment with all of the Company's other existing and future senior indebtedness.original issue discount necessary.

~~Upon~~In connection with the occurrence of a “fundamental change,” as defined in the indenture, the holders may require the Company to repurchase all or a portion of the Convertible Notes due 2025 for cash at 100% of the principal amount of the Convertible Notes due 2025 being purchased, plus any accrued and unpaid interest. The Company may redeem for cash all or any portion of the notes, at our option, on or after August 15, 2023 if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, consecutive or non-consecutive, within a 30 consecutive trading day period ending on, and including, any of the 5 trading days immediately preceding the date on which the Company provides notice of redemption.

The Convertible Notes due 2025 are convertible into shares of the Company’s common stock under certain circumstances prior to maturity at a conversion rate of 9.3682 shares per one thousand principal amount of the Convertible Notes due 2025, which represents a conversion price of $106.74 per share, subject to adjustment under certain conditions. Holders may convert their Convertible Notes due 2025 at their option at any time prior to the close of business on the business day immediately preceding February 15, 2025, under certain circumstances. The Company’s stated policy is to settle the debt component of the Convertible Notes due 2025 at least partially or wholly in cash. This policy is based both on the Company’s intent and its ability to settle these instruments in cash.

~~The Company has separately accounted for the liability and equity components of the Convertible Notes due 2025 by allocating the proceeds from~~ issuance of the Convertible Notes due 2025, ~~between~~ the ~~liability~~Company incurred a total of $14.5 million of issuance costs in 2020, of which $12.6 million was originally allocated to the debt component and ~~the embedded conversion option, or equity component. This allocation~~presented net in Long-term debt and $1.9 million was ~~done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. The Company~~originally allocated ~~$61,936~~ to the equity component ~~net~~and presented within additional paid-in capital in the condensed consolidated balance sheets. Upon adoption of ~~offering~~ASU 2020-06, effective January 1, 2021, the costs ~~of $1,982~~originally allocated to the equity component are reflected within Long-term debt and ~~taxes of $6,634. The Company recorded a discount on the Convertible Notes due 2025 of $70,552 which will be accreted~~are being amortized and recorded as additional interest expense over the life of the Convertible Notes due 2025.

~~Amended Credit Agreement~~

The ~~credit agreement under which~~effective interest rate of the ~~Company's revolving credit facility~~Convertible Notes due 2025 was ~~issued (the “Amended Credit Agreement”) includes certain financial covenants~~approximately 1.3% for the three and ~~as of~~nine months ended September 30, ~~2020,~~2021. The effective interest rate of the ~~Company~~Convertible Notes due 2025 was ~~in compliance with these requirements.~~approximately 4.0% for the three months ended September 30, 2020. The effective interest rate of the Convertible Notes due 2025 was equal to the stated interest rate plus the amortization of the debt issuance costs subsequent to adoption of ASU 2020-06. Prior to the adoption of ASU 2020-06, the effective interest rate calculation also included the amortization of the original issue discount.

See “Note 14—Net Income (Loss) Per Share” for further discussion of the effect of conversion on net income per share.

1718

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

(Interest Expense

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Coupon interest	$	2,479	$	1,951	$	7,439	$	4,962
Amortization of issuance costs	1,443		922		4,295		2,186
Undrawn and other fees	320		191		948		477
Interest on revolving credit facility	—		1,259		—		5,786
Accretion of debt discount	—		3,816		—		8,496
Total interest expense	$	4,242	$	8,139	$	12,682	$	21,907

For the three and ~~per share amounts)~~nine months ended September 30, 2021, total interest expense related to the Convertible Notes due 2023 and the Convertible Notes due 2025 (collectively, the "Convertible Notes") was $3.7 million and $11.1 million, respectively, with coupon interest expense of $2.5 million and $7.4 million and the amortization of debt discount and issuance costs of $1.2 million and $3.7 million, respectively.

For the three and nine months ended September 30, 2020, total interest expense related to the Convertible Notes was $6.5 million and $15.0 million, respectively, with coupon interest expense of $2.0 million and $5.0 million and the amortization of debt discount and issuance costs of $4.5 million and $10.0 million, respectively.

10.Fair Value Measurements

The following tables set forth the fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, based on the three-tier fair value ~~hierarchy:~~ hierarchy, as defined in ASC 820, “Fair Value Measurements and Disclosures”:


											September 30, 2021
											Fair Value		Level I		Level II		Level III
		September 30, 2020
		Fair Value		Level I		Level II		Level III			(in thousands)
Assets:	Assets:									Assets:
Money market funds	Money market funds	$	319,489	$	319,489	$	0	$	0	Money market funds	$	1,720	$	1,720	$	—	$	—
Investment in private company										Investment in private company	1,508		—		1,508		—
Assets to fund deferred compensation liability	Assets to fund deferred compensation liability	9,391		0		0		9,391		Assets to fund deferred compensation liability	10,753		—		—		10,753
Total assets	Total assets	$	328,880	$	319,489	$	0	$	9,391	Total assets	$	13,981	$	1,720	$	1,508	$	10,753
Liabilities:	Liabilities:									Liabilities:
Contingent consideration	Contingent consideration	$	13,290	$	0	$	0	$	13,290	Contingent consideration	$	806	$	—	$	—	$	806
Deferred compensation liability	Deferred compensation liability	8,178		8,178		0		0		Deferred compensation liability	9,645		9,645		—		—
Total liabilities	Total liabilities	$	21,468	$	8,178	$	0	$	13,290	Total liabilities	$	10,451	$	9,645	$	—	$	806

December 31, 2019
Fair Value Level I Level II Level III
Assets:
Money market funds $ 37,730 $ 37,730 $ 0 $ 0
Assets to fund deferred compensation liability 8,390 0 0 8,390
Total assets $ 46,120 $ 37,730 $ 0 $ 8,390
Liabilities:
Contingent consideration $ 9,045 $ 0 $ 0 $ 9,045
Deferred compensation liability 8,208 8,208 0 0
Total liabilities $ 17,253 $ 8,208 $ 0 $ 9,045

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)


	December 31, 2020
	Fair Value		Level I		Level II		Level III

	(in thousands)
Assets:
Money market funds	$	84,110	$	84,110	$	—	$	—
Assets to fund deferred compensation liability	9,961		—		—		9,961
Total assets	$	94,071	$	84,110	$	—	$	9,961
Liabilities:
Contingent consideration	$	12,559	$	—	$	—	$	12,559
Deferred compensation liability	8,720		8,720		—		—
Total liabilities	$	21,279	$	8,720	$	—	$	12,559

The Company assesses the categorization of assets and liabilities by level at each measurement date, and transfers between levels are recognized on the actual date of the event or when changes in circumstances caused the transfer, in accordance with the Company’s accounting policy regarding the recognition of transfers between levels of the fair value hierarchy. There were no transfers between Levels I, II and III during the nine months ended September 30, 2021.

Fair Value of Investment in Private Company

The Company has an investment of $1.5 million in a privately held company that it does not have the ability to exercise significant influence. The Company elected the measurement alternative for this investment as it did not have a readily determinable fair value. The investment is included in other non-current assets on the condensed consolidated balance sheets and measured at cost, less impairment, adjusted by observable price changes. Any adjustments resulting from impairment or observable price changes in orderly transactions for identical or similar investment of the same issuer are recorded within other expense, net in the condensed consolidated statements of operations and are considered to be a Level II fair value measurement. During the nine months ended September 30, 2021, the Company recorded a $0.8 million adjustment to the carrying value of the investment, resulting from observable price changes.

Fair Value of Contingent Consideration Liabilities

The fair value of the contingent consideration liabilities related to certain of the Company's acquisitions were estimated using a discounted cash flow method with significant inputs that are not observable in the market and thus represents a Level III fair value ~~measurement as defined in~~ ~~ASC~~ ~~820, “Fair Value Measurements and Disclosures.”~~measurement. The significant inputs in the Company's Level III fair value measurement not supported by market activity included its assessments of expected future cash flows related to these acquisitions and their ability to meet the target performance objectives during the subsequent periods from the date of acquisition, which management believes are appropriately discounted considering the uncertainties associated with these obligations, and are calculated in accordance with the terms of their respective agreements.

The Company will continue to reassess the fair values of the contingent consideration liabilities at each reporting date until settlement. Changes to these estimated fair values will be recognized in the Company's earnings and included in general and administration expenses in the condensed consolidated statements of operations.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The table below presents a reconciliation of the Company's contingent consideration liabilities, which were measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, ~~2019~~2020 to September 30, ~~2020:~~2021:


	Fair Value of Contingent Consideration Liabilities
	(in thousands)
Balance at December 31, ~~2019~~2020	$	~~9,045~~
~~Private technology company acquisition~~	~~5,239~~12,559
Fair market value adjustment on contingent consideration liability	~~(2,056)~~(667)
Accretion on contingent consideration	~~1,062~~ 474
Payments of contingent consideration	(11,560)
Balance at September 30, ~~2020~~2021	$	~~13,290~~806

~~Table of Contents~~

~~Envestnet, Inc.~~Fair Value of Deferred Compensation Liability

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

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

The table below presents a reconciliation of the assets used to fund deferred the Company's deferred compensation liability, which is measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, ~~2019~~2020 to September 30, ~~2020:~~2021:


	Fair Value of Assets to Fund Deferred Compensation Liability
	(in thousands)
Balance at December 31, ~~2019~~2020	$	~~8,390~~9,961
Contributions	~~1,060~~215
Fair value adjustments	~~(59)~~577
Balance at September 30, ~~2020~~2021	$	~~9,391~~10,753

The fair market value of the assets used to fund the Company's deferred compensation liability is based upon the cash surrender value of the Company's life insurance premiums. The value of the assets used to fund the Company's deferred compensation liability, which are included in other non-current assets in the condensed consolidated balance sheets, increased due to funding of the plan ~~partially offset by losses~~and gains on the underlying investment vehicles. These ~~losses~~gains are recognized in the Company's earnings and included in general and administration expenses in the condensed consolidated statements of operations.

Fair Value of Debt Agreements ~~and Other Financial Assets and Liabilities~~

The Company considered the Convertible Notes due 2023 and the Convertible Notes due 2025 to be Level II liabilities at September 30, ~~2020~~2021 and used a market approach to calculate their respective fair values. The estimated fair value for each convertible note was determined based on estimated or actual bids and offers in an over-the-counter market on September 30, ~~2020~~2021 (See “Note 9—Debt”).

As of September 30, ~~2020 and December 31, 2019,~~2021, the carrying value of the Convertible Notes due 2023 equaled ~~$313,823~~$341.5 million and ~~$305,513, respectively,~~represented the aggregate principal amount outstanding less the unamortized debt issuance costs. As of December 31, 2020, the carrying value of the Convertible Notes due 2023 equaled $316.6 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the estimated fair value of the Convertible Notes due 2023 was ~~$442,104~~$434.7 million and ~~$414,852,~~$460.8 million, respectively.

As of September 30, 2021, the carrying value of the Convertible Notes due 2025 equaled $506.1 million and represented the aggregate principal amount outstanding less the unamortized debt issuance costs. As of December 31, 2020, the carrying value of the Convertible Notes due 2025 equaled ~~$436,095,~~$439.9 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of September 30, 2021 and December 31, 2020, the estimated fair value of the Convertible Notes due 2025 was ~~$520,486.~~$523.0 million and $540.8 million, respectively.

Table of ~~September 30, 2020~~Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Fair Value of Other Financial Assets and December 31, 2019, there was $0 and $260,000, respectively, outstanding on the revolving credit facility under the Amended Credit Agreement. The Company considered the revolving credit facility to be a Level I liability as of September 30, 2020 and December 31, 2019 (See “Note 9—Debt”).Liabilities

The Company considered the recorded value of ~~our~~its other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at September 30, ~~2020~~2021 based upon the short-term nature of these assets and liabilities.

~~Table of Contents~~

~~Envestnet, Inc.~~

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

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

11.Revenues and Cost of Revenues

Disaggregation of Revenue

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


															Three Months Ended September 30,
															2021						2020
		Three Months Ended September 30,													Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated
		2020						2019
		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated			(in thousands)
Revenues:	Revenues:													Revenues:
Asset-based	Asset-based	$	137,744	$	0	$	137,744	$	126,591	$	0	$	126,591	Asset-based	$	184,008	$	—	$	184,008	$	137,744	$	—	$	137,744
Subscription-based	Subscription-based	62,783		45,114		107,897		57,353		43,230		100,583		Subscription-based	66,988		46,584		113,572		62,783		45,114		107,897
Total recurring revenues	Total recurring revenues	200,527		45,114		245,641		183,944		43,230		227,174		Total recurring revenues	250,996		46,584		297,580		200,527		45,114		245,641
Professional services and other revenues	Professional services and other revenues	3,767		3,151		6,918		4,280		4,626		8,906		Professional services and other revenues	3,738		1,735		5,473		3,767		3,151		6,918
Total revenues	Total revenues	$	204,294	$	48,265	$	252,559	$	188,224	$	47,856	$	236,080	Total revenues	$	254,734	$	48,319	$	303,053	$	204,294	$	48,265	$	252,559


															Nine Months Ended September 30,
															2021						2020
		Nine Months Ended September 30,													Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated
		2020						2019
		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated			(in thousands)
Revenues:	Revenues:													Revenues:
Asset-based	Asset-based	$	394,801	$	0	$	394,801	$	355,595	$	0	$	355,595	Asset-based	$	513,458	$	—	$	513,458	$	394,801	$	—	$	394,801
Subscription-based	Subscription-based	184,516		132,911		317,427		148,457		127,471		275,928		Subscription-based	197,663		138,242		335,905		184,516		132,911		317,427
Total recurring revenues	Total recurring revenues	579,317		132,911		712,228		504,052		127,471		631,523		Total recurring revenues	711,121		138,242		849,363		579,317		132,911		712,228
Professional services and other revenues	Professional services and other revenues	11,082		11,101		22,183		13,767		14,901		28,668		Professional services and other revenues	10,320		7,213		17,533		11,082		11,101		22,183
Total revenues	Total revenues	$	590,399	$	144,012	$	734,411	$	517,819	$	142,372	$	660,191	Total revenues	$	721,441	$	145,455	$	866,896	$	590,399	$	144,012	$	734,411

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

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Fidelity 15 % 15 % 15 % 15 %


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Fidelity	17	%	15	%	17	%	15	%

Fidelity accounted for 18% of the Envestnet Wealth Solutions segment's revenues for each of the three and nine months ended September 30, 2020. Fidelity accounted for 19% of the Envestnet Wealth Solutions segment's revenues for each of the three and nine months ended September 30, 2019.

~~No single customer accounted for over 10% of the Envestnet Data & Analytics segment's revenue for any period presented.~~

2022

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

~~(in thousands, except share and per share amounts)~~One customer accounted for more than 10% of the Envestnet Wealth Solutions segment’s revenues:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Fidelity	21	%	18	%	20	%	18	%

No single customer accounted for more than 10% of the Envestnet Data & Analytics segment’s revenue for any period presented.

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

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
United States $ 247,692 $ 228,427 $ 718,246 $ 638,008
International (1)
4,867 7,653 16,165 22,183
Total revenues $ 252,559 $ 236,080 $ 734,411 $ 660,191

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
United States	$	298,022	$	247,692	$	851,683	$	718,246
International	5,031		4,867		15,213		16,165
Total revenues	$	303,053	$	252,559	$	866,896	$	734,411

Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, ~~2020:~~2021:


Years ending December 31,	Years ending December 31,			Years ending December 31,	(in thousands)
Remainder of 2020		$	62,167
2021		198,655
Remainder of 2021				Remainder of 2021	$	72,598
2022	2022	141,388		2022	236,203
2023	2023	74,195		2023	150,088
2024	2024	39,180		2024	79,617
2025				2025	42,978
Thereafter	Thereafter	31,013		Thereafter	22,606
Total	Total	$	546,598	Total	$	604,090

Only fixed consideration from significant contracts with customers is included in the amounts presented above.

The Company has applied the practical expedients and exemption and therefore does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less; (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed; and (iii) contracts for which the variable consideration is allocated entirely to a wholly unsatisfied performance obligations or to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.

Contract Balances

Total deferred revenue as of September 30, ~~2020 increased~~2021 decreased by ~~$1,837~~$1.0 million during the nine months ended September 30, ~~2020,~~2021, primarily the result of revenue growth, timing of cash receipts and revenue recognition. The majority of the Company's deferred revenue will be recognized over the course of the next twelve months.

The amount of revenue recognized that was included in the opening deferred revenue balance was ~~$5,209~~$5.3 million and ~~$4,434~~$5.2 million for the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The amount of revenue recognized that was included in the opening deferred revenue balance was ~~$31,038~~$31.6 million and ~~$21,022~~$31.0 million for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The majority of this revenue consists of subscription-based services and professional services arrangements. The amount of revenue recognized from performance obligations satisfied in prior periods was not material.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Deferred Sales Incentive Compensation

Deferred sales incentive compensation was ~~$10,326~~$11.1 million and ~~$9,387~~$10.8 million as of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. Amortization expense for the deferred sales incentive compensation was ~~$861~~$1.2 million and ~~$1,099~~$0.9 million for the three months ended September 30, ~~2020,~~2021 and ~~2019,~~2020, respectively. Amortization expense for the deferred sales incentive compensation was ~~$2,933~~$3.3 million and ~~$2,503~~$2.9 million for the nine months ended September 30, ~~2020,~~2021 and ~~2019,~~2020, respectively. Deferred sales incentive compensation is included in other non-current assets on the condensed consolidated balance sheets and amortization expense is included in compensation and benefits expenses on the condensed consolidated statements of operations. ~~NaN~~No significant impairment loss for capitalized costs was recorded during the periods.

~~Table of Contents~~

~~Envestnet, Inc.~~

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

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

The Company has applied the practical expedient to recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period would have been one year or less. These costs are included in compensation and benefits expenses in the condensed consolidated statements of operations.

Cost of Revenues

The following table summarizes cost of revenues by revenue category:


											Three Months Ended				Nine Months Ended
											September 30,				September 30,
		Three Months Ended				Nine Months Ended					2021		2020		2021		2020
		September 30,				September 30,
		2020		2019		2020		2019			(in thousands)
Asset-based	Asset-based	$	71,133	$	64,339	$	201,600	$	178,474	Asset-based	$	102,298	$	71,133	$	281,829	$	201,600
Subscription-based	Subscription-based	7,291		7,278		20,375		21,652		Subscription-based	7,355		7,291		20,986		20,375
Professional services and other	Professional services and other	121		253		352		5,469		Professional services and other	183		121		384		352
Total cost of revenues	Total cost of revenues	$	78,545	$	71,870	$	222,327	$	205,595	Total cost of revenues	$	109,836	$	78,545	$	303,199	$	222,327

12.Stock-Based Compensation

The Company has stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding under the ~~2004 Stock Incentive Plan (the “2004 Plan”), the~~ 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. 2019 Acquisition Equity Incentive Plan (the “2019 Equity Plan”).

As approved by the Company's shareholders at the Company's 2021 Annual Meeting of Shareholders, the 2010 Plan was amended whereby the maximum number of shares of common stock that may be delivered under the 2010 Plan was increased from 8,925,000 to 12,375,000. As of September 30, ~~2020,~~2021, the maximum number of common shares available for future issuance under the Company’s plans is ~~1,385,029.~~ 3,747,932.

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


											Three Months Ended				Nine Months Ended
											September 30,				September 30,
		Three Months Ended				Nine Months Ended					2021		2020		2021		2020
		September 30,				September 30,
		2020		2019		2020		2019			(in thousands)
Stock-based compensation expense	Stock-based compensation expense	$	15,729	$	13,169	$	42,500	$	39,467	Stock-based compensation expense	$	18,512	$	15,729	$	49,934	$	42,500
Tax effect on stock-based compensation expense	Tax effect on stock-based compensation expense	(4,011)		(3,438)		(10,837)		(10,305)		Tax effect on stock-based compensation expense	(4,720)		(4,011)		(12,733)		(10,837)
Net effect on income	Net effect on income	$	11,718	$	9,731	$	31,663	$	29,162	Net effect on income	$	13,792	$	11,718	$	37,201	$	31,663

The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% ~~and 26.1%~~ for each of the three and nine months ended September 30, ~~2020~~2021 and ~~2019, respectively.~~

~~Stock Options~~

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

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Grant date fair value of options $ 0 $ 0 $ 0 $ 21.55
Volatility 0 % 0 % 0 % 40.0 %
Risk-free interest rate 0 % 0 % 0 % 2.5 %
Dividend yield 0 % 0 % 0 % 0 %
Expected term (in years) 0.0 0.0 0.0 6.5

2020.

2224

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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

Stock Options

The Company has not granted any stock options since January 2019. The following table summarizes option activity under the Company’s plans:


					Weighted-Average							Weighted-Average
			Weighted-		Remaining					Weighted-		Remaining
			Average		Contractual Life	Aggregate				Average		Contractual Life	Aggregate
		Options	Exercise Price		(Years)	Intrinsic Value			Options	Exercise Price		(Years)	Intrinsic Value
Outstanding as of December 31, 2019		1,150,586	$	25.66	3.4	$	50,590
Granted		0	0
													(in thousands)
Outstanding as of December 31, 2020								Outstanding as of December 31, 2020	438,040	$	36.28	4.1	$	20,156

Exercised	Exercised	(587,121)	18.02					Exercised	(44,079)	20.87
Forfeited	Forfeited	(7,213)	48.70					Forfeited	(1,277)	49.02
Outstanding as of September 30, 2020		556,252	33.44		3.9	24,324
Outstanding as of September 30, 2021								Outstanding as of September 30, 2021	392,684	37.97		3.6	16,601

Options exercisable	Options exercisable	516,073	$	32.22	3.5	$	23,191	Options exercisable	353,781	$	36.75	3.2	$	15,384

Exercise prices of stock options outstanding as of September 30, ~~2020~~2021 range from $10.40 to $55.29. At September 30, ~~2020,~~2021, there was an immaterial amount of unrecognized stock-based compensation expense related to unvested stock options, which the Company expects to recognize over a weighted-average period of ~~1.3~~0.3 years.

Restricted Stock Units

The Company has granted restricted stock units and performance-based stock units to employees that are unvested. Performance-based stock units vest upon the achievement of certain pre-established business and financial metrics as well as a subsequent service condition. The business and financial metrics governing the vesting of these performance-based stock units provide thresholds that dictate the number of shares to vest upon each evaluation date, which range from 50% to 150%. If these metrics are achieved, as defined in the individual grant terms, these shares would cliff vest three years from the grant date.

The following is a summary of the activity for unvested restricted stock units and performance stock units granted under the Company’s plans:


		RSUs			PSUs				RSUs			PSUs
		Number of Shares	Weighted- Average Grant Date Fair Value per Share		Number of Shares	Weighted- Average Grant Date Fair Value per Share			Number of Shares	Weighted- Average Grant Date Fair Value per Share		Number of Shares	Weighted- Average Grant Date Fair Value per Share
Outstanding as of December 31, 2019		1,318,870	$	58.88	254,118	$	67.96
Outstanding as of December 31, 2020								Outstanding as of December 31, 2020	1,345,347	$	70.56	302,797	$	72.50
Granted	Granted	956,494	74.55		67,793	81.42		Granted	1,140,358	70.43		119,699	69.66
Vested	Vested	(677,129)	57.51		0	0		Vested	(696,906)	69.58		(62,524)	61.53
Forfeited	Forfeited	(120,421)	61.04		(33,010)	64.70		Forfeited	(170,011)	70.57		(10,954)	78.97
Outstanding as of September 30, 2020		1,477,814	69.48		288,901	71.49
Outstanding as of September 30, 2021								Outstanding as of September 30, 2021	1,618,788	70.89		349,018	73.28

At September 30, ~~2020,~~2021, there was ~~$85,651~~$97.2 million of unrecognized stock-based compensation expense related to unvested restricted stock units, which the Company expects to recognize over a weighted-average period of 2.0 years. At September 30, ~~2020,~~2021, there was ~~$11,153~~$11.2 million of unrecognized stock-based compensation expense related to unvested performance-based restricted stock units, which the Company expects to recognize over a weighted-average period of 1.9 years.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

13. Income Taxes

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


															Three Months Ended						Nine Months Ended
															September 30,						September 30,
		Three Months Ended						Nine Months Ended							2021			2020			2021			2020
		September 30,						September 30,
		2020			2019			2020			2019				(in thousands, except for effective tax rate)
Income (loss) before income tax provision (benefit)	Income (loss) before income tax provision (benefit)	$	2,820		$	(9,941)		$	(10,499)		$	(52,210)		Income (loss) before income tax provision (benefit)	$	10,584		$	2,820		$	27,078		$	(10,499)
Income tax provision (benefit)	Income tax provision (benefit)	497			(6,977)			(161)			(31,591)			Income tax provision (benefit)	(854)			497			9,074			(161)
Effective tax rate	Effective tax rate	17.6		%	70.2		%	1.5		%	60.5		%	Effective tax rate	(8.1)		%	17.6		%	33.5		%	1.5		%

~~Table of Contents~~

~~Envestnet, Inc.~~Under ASC 740-270-25, the Company is required to report income tax expense by applying a projected annual effective tax rate (“AETR”) to ordinary pre-tax book income for the interim period. The tax impact of discrete items is accounted for separately in the period in which they occur. The effective tax rate (“ETR”) for the quarter is the result of the projected AETR applied to actual pre-tax book income plus discrete items as a percentage of actual pre-tax book income. Therefore, a change in pre-tax book income, either forecasted or actual year-to-date, from one period to the next will cause the ETR to change. For the three and nine months ended September 30, 2021 and 2020, the Company’s ETR was impacted by the change in forecasted and actual year-to-date pre-tax book income.

~~Notes~~

For the three months ended September 30, 2021, the Company’s effective tax rate differed from the statutory rate primarily due to ~~Unaudited Condensed Consolidated Financial Statements (continued)~~the increase in forecasted book income for the year, the decrease in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets, including the valuation allowance impact of the Harvest acquisition, and the windfall from stock-based compensation.

(

For the nine months ended September 30, 2021, the Company’s effective tax rate differed from the statutory rate primarily due to the increase in ~~thousands, except share~~the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets, including the valuation allowance impact of the Harvest acquisition, permanent book-tax differences, and ~~per share amounts)~~

the impact of state and local taxes offset by federal and state research and development (“R&D”) credits.

For the three and nine months ended September 30, 2020, the ~~Company’s~~Company's effective tax rate differed from the statutory rate primarily due to the change in the valuation allowance the Company has placed on a portion of its USU.S. deferred tax assets and the impact of state and local taxes, partially offset by the permanent ~~book-tax~~book tax differences, the windfall from stock-based compensation, the impact of the Coronavirus Aid, Relief, and Economic Security Act (“("CARES ~~Act”~~Act") related to net operating loss ("NOL") carryback, and federal and state ~~research and development (“R&D”) credits.~~

For the three months ended September 30, 2019, the Company's effective tax rate differed from the statutory rate primarily due to the windfall from stock-based compensation, the executive compensation deduction limitation, additional accruals for uncertain tax positions and differences between the foreign tax rates and statutory US tax rate.

For the nine months ended September 30, 2019, the Company's effective tax rate differed from the statutory rate primarily due to the release of the Company's valuation allowance of $21,907 as a result of additional deferred tax liabilities recorded from the PIEtech acquisition, the windfall from stock-based compensation, federal and state R&D ~~credits and additional accruals for uncertain tax positions.~~

The Company's total gross liability for unrecognized tax benefits, exclusive of interest and penalties, was $20,782 and $18,939 at September 30, 2020 and December 31, 2019, respectively. Of this amount, a portion of the unrecognized tax benefits was recorded as a reduction of deferred tax assets instead of a non-current liability. The portion of the unrecognized tax benefits, exclusive of interest and penalties, recorded as a non-current liability was $7,149 and $6,504 at September 30, 2020 and December 31, 2019, respectively.

At September 30, 2020, the amount of unrecognized tax benefits, including interest and penalties, that would benefit the Company's effective tax rate, if recognized, was $15,683. The Company estimates that the liability for unrecognized tax benefits could decrease by $10,690 in the next twelve months as it is anticipated that reviews by tax authorities will be completed.

The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. These amounts were not material for the three and nine months ended September 30, 2020 and 2019. The Company had accrued interest and penalties of $8,773 and $7,336 as of September 30, 2020 and December 31, 2019, respectively.credits.

14.Net Income (Loss) Per Share

Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of shares of common stock outstanding for the period. For the calculation of diluted net income (loss) per share, the basic weighted average number of shares is increased by the dilutive effect of stock options, common warrants, restricted stock awards and restricted stock units and convertible notes, if dilutive, using either the treasury ~~stock~~ method ~~if dilutive.~~ or if-converted method, as appropriate.

~~The~~

Prior to January 1, 2021, the Company ~~accounts~~accounted for the effect of its convertible notes ~~(See “Note 9—Debt”) on diluted net income per share~~ using the treasury stock method since they may be settled in cash, shares or a combination thereof at the ~~Company’s~~Company's option. ~~As a result,~~Pursuant to the ~~Convertible Notes due 2023 and Convertible Notes due 2025 will have no~~adoption of ASU 2020-06 on January 1, 2021, the Company now accounts for the effect of its convertible notes on diluted net income per share ~~until~~using the ~~Company’s stock price exceeds the conversion price~~if-converted method (See “Note 2—Basis of ~~$68.31 per share~~Presentation” and $106.74 per share, respectively, and certain other criteria are met, or if the trading price of the convertible notes meets certain criteria. In the period of conversion, the convertible notes will have no impact on diluted net income per share if they are settled in cash and will have an impact on dilutive net income per share if they are settled in shares upon conversion.“Note 9—Debt”).

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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

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

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Basic net income (loss) per share calculation:
Net income (loss) attributable to Envestnet, Inc. $ 1,910 $ (3,080) $ (10,350) $ (20,372)
Basic number of weighted-average shares outstanding 53,800,048 52,215,469 53,464,101 50,414,427
Basic net income (loss) per share $ 0.04 $ (0.06) $ (0.19) $ (0.40)
Diluted net income (loss) per share calculation:
Net income (loss) attributable to Envestnet, Inc. $ 1,910 $ (3,080) $ (10,350) $ (20,372)
Basic number of weighted-average shares outstanding 53,800,048 52,215,469 53,464,101 50,414,427
Effect of dilutive shares:
Options to purchase common stock 331,728 0 0 0
Unvested restricted stock units 610,442 0 0 0
Convertible notes 730,267 0 0 0
Warrants 86,498 0 0 0
Diluted number of weighted-average shares outstanding 55,558,983 52,215,469 53,464,101 50,414,427
Diluted net income (loss) per share
$ 0.03 $ (0.06) $ (0.19) $ (0.40)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands, except share and per share data)







Net income (loss) attributable to Envestnet, Inc. (a)	$	11,740	$	1,910	$	18,405	$	(10,350)



Weighted-average common shares outstanding:
Basic (b)	54,547,858		53,800,048		54,400,247		53,464,101
Effect of dilutive shares:
Options to purchase common stock	201,103		331,728		207,281		—
Unvested restricted stock units	570,515		610,442		614,005		—
Convertible Notes	—		730,267		—		—
Warrants	69,151		86,498		66,439		—
Diluted (c)	55,388,627		55,558,983		55,287,972		53,464,101

Net income (loss) per share attributable to Envestnet, Inc common stock:
Basic (a/b)	$	0.22	$	0.04	$	0.34	$	(0.19)
Diluted (a/c)	$	0.21	$	0.03	$	0.33	$	(0.19)

Securities that were anti-dilutive and therefore excluded from the computation of diluted net income (loss) per share were as follows:


		Three Months Ended		Nine Months Ended			Three Months Ended		Nine Months Ended
		September 30,		September 30,			September 30,		September 30,
		2020	2019	2020	2019		2021	2020	2021	2020
Options to purchase common stock	Options to purchase common stock	0	1,394,009	556,252	1,394,009	Options to purchase common stock	—	—	—	556,252
Unvested RSUs and PSUs	Unvested RSUs and PSUs	0	1,787,608	1,766,715	1,787,608	Unvested RSUs and PSUs	—	—	—	1,766,715
Warrants	Warrants	0	470,000	470,000	470,000	Warrants	—	—	—	470,000
Convertible Notes	Convertible Notes	4,848,044	7,793,826	9,898,734	7,793,826	Convertible Notes	9,898,549	4,848,044	9,898,549	9,898,549
Total anti-dilutive securities	Total anti-dilutive securities	4,848,044	11,445,443	12,691,701	11,445,443	Total anti-dilutive securities	9,898,549	4,848,044	9,898,549	12,691,516

15.Segment Information

Business segments are generally organized around the Company's business services. The Company's business segments are:

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

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

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020

	(in thousands)
Envestnet Wealth Solutions	$	34,386	$	29,683	$	101,042	$	60,890
Envestnet Data & Analytics	1,265		(1,238)		3,896		(6,764)
Nonsegment operating expenses	(21,516)		(16,789)		(63,057)		(46,079)
Income from operations	14,135		11,656		41,881		8,047
Other expense, net	(3,551)		(8,836)		(14,803)		(18,546)
Consolidated income (loss) before income tax benefit	10,584		2,820		27,078		(10,499)
Income tax provision (benefit)	(854)		497		9,074		(161)
Consolidated net income (loss)	11,438		2,323		18,004		(10,338)
Add: Net (income) loss attributable to non-controlling interest	302		(413)		401		(12)
Consolidated net income (loss) attributable to Envestnet, Inc.	$	11,740	$	1,910	$	18,405	$	(10,350)

The information in the ~~following tables~~above table is derived from the Company’s internal financial reporting used for corporate management purposes. Nonsegment operating expenses may include salary and benefits for certain corporate officers, certain types of professional service expenses and insurance, acquisition related transaction costs, restructuring charges and other non-recurring and/or non-operationally related expenses. Intersegment revenues were not material for the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

A summary of consolidated total assets follows:


	September 30,		December 31,
	2021		2020

	(in thousands)
Envestnet Wealth Solutions	$	1,704,660	$	1,634,153
Envestnet Data & Analytics	512,685		510,137
Consolidated total assets	$	2,217,345	$	2,144,290

See “Note 11—Revenues and Cost of Revenues” for detail of revenues by segment.

~~Table of Contents~~

~~Envestnet, Inc.~~

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

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

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

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Envestnet Wealth Solutions $ 29,683 $ 17,746 $ 60,890 $ 46,969
Envestnet Data & Analytics (1,238) (7,112) (6,764) (24,000)
Nonsegment operating expenses (16,789) (10,762) (46,079) (52,091)
Income (loss) from operations 11,656 (128) 8,047 (29,122)
Other expense, net (8,836) (9,813) (18,546) (23,088)
Consolidated income (loss) before income tax provision (benefit) 2,820 (9,941) (10,499) (52,210)
Income tax provision (benefit) 497 (6,977) (161) (31,591)
Consolidated net income (loss) 2,323 (2,964) (10,338) (20,619)
Add: Net (income) loss attributable to non-controlling interest (413) (116) (12) 247
Consolidated net income (loss) attributable to Envestnet, Inc. $ 1,910 $ (3,080) $ (10,350) $ (20,372)

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

September 30, December 31,
2020 2019
Segment assets:
Envestnet Wealth Solutions $ 1,599,797 $ 1,297,891
Envestnet Data & Analytics 501,464 503,993
Consolidated assets $ 2,101,261 $ 1,801,884

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Segment depreciation and amortization:
Envestnet Wealth Solutions $ 20,406 $ 18,414 $ 59,907 $ 46,057
Envestnet Data & Analytics 8,545 8,321 25,170 27,110
Consolidated depreciation and amortization $ 28,951 $ 26,735 $ 85,077 $ 73,167

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Segment capital expenditures:
Envestnet Wealth Solutions $ 12,676 $ 12,926 $ 34,066 $ 33,791
Envestnet Data & Analytics 6,373 2,423 15,015 5,956
Consolidated capital expenditures $ 19,049 $ 15,349 $ 49,081 $ 39,747

~~Table of Contents~~

~~Envestnet, Inc.~~

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

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

16.Geographical Information

The following table sets forth certain long-lived assets including property and equipment, net and internally developed software, net by geographic area:


							September 30,		December 31,
							2021		2020
		September 30,		December 31,
		2020		2019			(in thousands)
United States	United States	$	131,884	$	108,992	United States	$	170,812	$	140,651
India	India	3,549		3,988		India	2,603		2,970
Other	Other	1,028		1,039		Other	333		849
Total long-lived assets, net	Total long-lived assets, net	$	136,461	$	114,019	Total long-lived assets, net	$	173,748	$	144,470

See “Note 11—Revenues and Cost of Revenues” for detail of revenues by geographic area.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

17.Commitments and Contingencies

Purchase Obligations and Indemnifications

The Company includes various types of indemnification and guarantee clauses in certain arrangements. These indemnifications and guarantees may include, but are not limited to, infringement claims related to intellectual property, direct or consequential damages and guarantees to certain service providers and service level requirements with certain customers. The type and amount of any potential indemnification or guarantee varies substantially based on the nature of each arrangement. The Company has experienced 0no previous claims and cannot determine the maximum amount of potential future payments, if any, related to such indemnification and guarantee provisions. The Company believes that it is unlikely it will have to make material payments under these arrangements and therefore has not recorded a contingent liability associated with these arrangements in the condensed consolidated balance sheets.

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

Procurement of Technology Solutions

On June 21, 2021, the Company entered into a purchase agreement with a privately held company to acquire the technology solutions being developed by this privately held company for a purchase price of $18.0 million, including an advance of $3.0 million. The transaction is expected to close no later than December 31, 2022. In addition, the agreement includes an earn-out payment of $10.0 million based upon achievement of certain target metrics within five years after the date of the Company’s launch of the technology solutions.

Legal Proceedings

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

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

On October 30, 2019, the Company and Yodlee filed counterclaims against FinancialApps. Yodlee alleges that FinancialApps fraudulently induced it to enter into contracts with FinancialApps, then breached those contracts. FinancialApps has filed a motion to dismiss Yodlee’s counterclaims. On September 15, 2020, the District Court denied FinancialApps’ motion on all counts except for the breach-of-contract claim which was dismissed on a pleading technicality without prejudice. On that count, the Court granted Yodlee leave to amend its counterclaim, cure the technical deficiency, and reassert its claim. Yodlee and Envestnet filed amended counterclaims on September 30, 2020. The amended counterclaims (1) cure that technical deficiency and reassert Yodlee’s contract counterclaim; and (2) broaden the defamation counterclaims arising out of various defamatory statements FinancialApps disseminated in the trade press after filing the lawsuit. On January 14, 2021, the Court ordered that (i) FinancialApps’s claims against Yodlee—as well as Yodlee’s counterclaims against FinancialApps—must be tried before the judge instead of a jury pursuant to a jury waiver provision in the parties’ agreement; and (ii) FinancialApps’s claims against Envestnet (and Envestnet’s counterclaim) must be heard by a jury. The Court has scheduled the Envestnet jury

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

~~(in thousands, except share~~trial to take place before the Yodlee bench trial. Fact discovery closed on April 23, 2021, other than a few outstanding matters, and ~~per share amounts)~~

expert discovery is underway.

~~defamatory statements FinancialApps disseminated in the trade press after filing the lawsuit.~~

The Company believes FinancialApps’s allegations are without merit and ~~intends~~will continue to defend the ~~action~~claims against it and litigate the counterclaims vigorously.

The Company and Yodlee were also named as defendants in a putative class action lawsuit filed on August 25, 2020, by Plaintiff Deborah Wesch in the United States District Court for the Northern District of California. On October 21, 2020, an amended class action complaint was filed by Plaintiff Wesch and nine additional named plaintiffs. The case caption is Deborah Wesch, et al., v. Yodlee, Inc., et al., Case No. 3:20-cv-05991-SK. Plaintiffs allege that Yodlee unlawfully collected their financial transaction data when plaintiffs linked their bank accounts to a mobile application that uses Yodlee’s API, and plaintiffs further allege that Yodlee unlawfully sold the transaction data to third parties. The complaint alleges violations of certain California statutes and common law, including the Unfair Competition Law, and federal statutes, including the Stored Communications Act. Plaintiffs are seeking monetary damages and equitable and injunctive relief on behalf of themselves and a putative nationwide class and California subclass of persons who provided their log-in credentials to a Yodlee-powered app in an allegedly similar manner from 2014 to the present. The Company believes that it is not properly named as a defendant in the lawsuit and it further believes, along with Yodlee, that plaintiffs’ claims are without merit. On November 4, 2020, the Company and Yodlee filed separate motions to dismiss all of the claims in the complaint. On February 16, 2021, the district court granted in part and denied in part Yodlee’s motion to dismiss the amended complaint and ~~they intend~~granted the plaintiffs leave to further amend. The Court reserved ruling on the Company’s motion to dismiss and granted limited jurisdictional discovery to the plaintiffs. On March 15, 2021, Plaintiffs filed a second amended class action complaint re-alleging, among others, the claims the district court had dismissed. The second amended complaint did not allege any claims against the Company or Yodlee that were not previously alleged in first amended complaint. On May 5, 2021, the Company filed a motion to dismiss all claims asserted against it in the second amended complaint, and Yodlee filed a motion to dismiss most claims asserted against it in the second amended complaint. On July 19, 2021, the Court granted in part Yodlee’s motion, resulting in the dismissal of all federal law claims and two of the state-law claims. On August 5, 2021, the Court granted the Company's motion to dismiss, and dismissed the Company from the lawsuit. Discovery has begun on the remaining state law claims against Yodlee. On October 9, 2021, Yodlee filed a motion for summary judgment, which is currently scheduled for a hearing in late January 2022. Yodlee will continue to vigorously defend the claims against it.

The Company’s subsidiary, Envestnet Asset Management, Inc. (“EAM”), has been named as a defendant in two putative class action lawsuits filed on December 28, 2020 and March 4, 2021, respectively, in the United States District Court for the Northern District of Alabama. The case captions are Drake v. BBVA USA Bancshares, Inc. et al., No. 2:20-CV-02076-ACA (“Drake”) and Ferguson v. BBVA Compass Bancshares, Inc. et al, No. 2:19-CV-01135-MHH (“Ferguson”). The material allegations of both cases are identical. The plaintiff alleges that EAM, acting as investment advisor to BBVA USA Bancshares, Inc.’s Compass SmartInvestor 401(k) Plan (the “SmartInvestor Plan”), along with BBVA and others, breached its fiduciary duties under the Employee Retirement Income Security Act of 1974 (“ERISA”) in connection with the selection and maintenance of the SmartInvestor Plan’s investment options. The plaintiff seeks unspecified damages on behalf of a class of SmartInvestor Plan participants from July 17, 2013 through December 28, 2020. On August 27, 2021, the Court granted EAM’s motion to dismiss the Drake lawsuit. On September 3, 2021, the Court granted EAM’s motion to dismiss the Ferguson lawsuit.

In addition, the Company is involved in legal proceedings arising in the ordinary course of its business. Legal fees and other costs associated with such actions are expensed as incurred. The Company will record a provision for these claims when it is both probable that a liability has been incurred and the amount of the loss, or a range of the potential loss, can be reasonably estimated. These provisions are reviewed regularly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information or events pertaining to a particular case. For litigation matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established, but if the matter is material, it is subject to disclosures. The Company believes that liabilities associated with any claims, while possible, are not probable, and therefore has not recorded an accrual for any claims as of September 30, ~~2020.~~2021. Further, while any possible range of loss cannot be reasonably estimated at this time, the Company does not believe that the outcome of any of these proceedings, individually or in the aggregate, would, if determined adversely to it, have a material adverse effect on its financial condition or business, although an adverse resolution of legal proceedings could have a material adverse effect on the Company's results of operations or cash flow in a particular quarter or year.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Contingencies

Certain of the Company’s revenues are subject to sales and use taxes in certain jurisdictions where it conducts business in the United States. As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company estimated a sales and use tax liability of ~~$7,729~~$3.8 million and ~~$10,220,~~$6.6 million, respectively, related to revenues in multiple jurisdictions. This amount is included in accrued expenses and other liabilities in the condensed consolidated balance sheets.

As of September 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company also estimated a sales and use tax receivable of ~~$1,825~~$2.8 million and ~~$3,346,~~$2.1 million, respectively, related to the estimated recoverability of a portion of the liability from customers. This amount is included in prepaid expenses and other current assets in the condensed consolidated balance sheets.

Additional future information obtained from the applicable jurisdictions may affect the Company's estimate of its sales and use tax liability, but such change in the estimate cannot currently be made.

18.Subsequent Events

Investment in YieldX

On October 1, 2021, the Company acquired a 6.8% ownership interest in YieldX Inc. ("YieldX"), a Delaware corporation, for cash consideration of $15.0 million. YieldX provides an end-to-end digital platform with smart workflows, artificial intelligence powered analytics and a reimagined user experience for financial professionals and investors in the fixed income markets. The Company elected the measurement alternative for this investment as it did not have a readily determinable fair value. The investment is measured at cost, less impairment, adjusted by observable price changes.

In connection with this investment, the Company also entered into a commercial agreement with YieldX to integrate the products and solutions of YieldX into the Company’s platform offering. The consideration under the commercial agreement includes a warrant and quarterly cash payments subject to the satisfaction of certain performance targets.

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

Forward-Looking Statements

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

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

This quarterly report on Form 10-Q contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, in particular, statements about our plans, strategies and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These statements are based on our current expectations and projections about future events and are identified by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “expected,” “intend,” “will,” “may,” ~~“should”~~ or ~~“will,”~~“should” or the negative of those terms or variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business and other characteristics of future events or circumstances are forward-looking statements. TheThe potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this quarterly report include, but are not limited to,

•a pandemic or health crisis, including the Coronavirus Disease 2019 (“COVID-19”) pandemic, and its impact on the global economy and capital markets, as well as our products, clients, vendors and employees, and our results of operations, the full extent of which may be unknown;

•~~difficulty~~the concentration of our revenues from the delivery of our solutions and services to clients in ~~sustaining rapid revenue growth, which may place significant demands on our administrative, operational and~~the financial ~~resources;~~services industry;

•our ~~ability to successfully identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies;~~reliance on a limited number of clients for a material portion of our revenue;

•the ~~possibility that the anticipated benefits~~renegotiation of ~~acquisitions will not be realized to the extent or when expected;~~fees by our clients;

•~~our ability to successfully execute~~changes in the ~~conversion~~estimates of ~~clients’ assets from their technology platform to our technology platforms in a timely and accurate manner;~~fair value of reporting units or of long-lived assets;

•the amount of our debt and our ability to service our debt;

•~~the variability of~~limitations on our ~~revenue~~ability to access information from ~~period to period;~~third parties or charges for accessing such information;

•the targeting of some of our sales efforts at large financial institutions and large internet services companies which prolongs sales cycles, requires substantial upfront sales costs and results in less predictability in completing some of our sales;

•changes in investing patterns on the ~~deployment~~assets on which we derive revenue and the freedom of ~~our solutions by customers and potential delays and risks inherent in the process;~~

•~~the competitiveness of our solutions and services as compared~~investors to ~~those of others;~~

•~~the concentration of our revenues from the delivery of our solutions and services to clients in the financial services industry;~~

•~~our reliance on a limited number of clients for a material portion of our revenue;~~redeem or withdraw investments generally at any time;

•the impact of fluctuations in market conditions and interest rates on the demand for our products and services and the value of assets under management or administration;

•~~changes in investing patterns on the assets on which we derive revenue and the freedom of investors to redeem or withdraw investments generally at any time;~~

•~~the renegotiation of fees by our clients;~~

•our ability to keep up with rapid technological change, evolving industry standards or changing requirements of clients;

•risks associated with our international operations;

•the competitiveness of our solutions and services as compared to those of others;

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

•harm to our reputation;

•our ability to successfully identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies;

•our ability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner;

•the failure to protect our intellectual property rights;

•our ability to introduce new solutions and services and enhancements;

•our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information and potential liabilities for data security breaches;

•the effect of privacy laws and regulations, industry standards and contractual obligations and changes to these laws, regulations, standards and obligations on how we operate our business and the negative effects of failure to comply with these ~~requirements on how we operate our business;~~requirements;

•~~liabilities associated with potential, perceived~~regulatory compliance failures;

•failure by our customers to obtain proper permissions or ~~actual breaches~~waivers for our use of ~~fiduciary duties and/~~disclosure of information;

•adverse judicial or ~~conflicts of interest;~~regulatory proceedings against us;

•failure of our solutions, services or systems, or those of third parties on which we rely, to work properly;

•~~harm to our reputation;~~

•~~our failure to process transactions effectively or fail to adequately protect against disputed or potential fraudulent activities;~~

•~~our inability to maintain our payment network with third-party service providers, or difficulties encountered by our disbursement partners;~~

•~~limitations on our ability to access information from third parties or charges for accessing such information;~~

•potential liability for use of inaccurate information by third parties provided by us;

•the ~~failure of our insurance to adequately protect us;~~

•~~our dependence on our senior management team;~~

•~~our ability to recruit and retain qualified employees;~~

•~~regulatory compliance failures;~~

•~~changes in laws and regulations, including tax laws and regulations, or the inability to continue to rely on exemptions from the applicability of certain laws or regulations;~~

•~~the~~ occurrence of a deemed ~~“change~~“change of ~~control”~~control”;

•~~adverse judicial or regulatory proceedings against us;~~

•~~the failure to protect our intellectual property rights;~~

•~~potential claims by third parties for infringement of their intellectual property rights;~~

•~~our use of open source coding;~~

•~~protection of trade secrets and other proprietary information;~~

•~~risks associated with our international operations;~~

•~~the impact of fluctuations in foreign currency exchange rates;~~

•the uncertainty of the application and interpretation of certain tax laws;

•~~changes in accounting principles and standards;~~

•~~changes in the estimates of fair value of reporting units or of long-lived assets;~~

•issuances of additional shares of common stock or issuances of shares of preferred stock or convertible ~~securities;~~securities on our existing stockholders;

•general economic conditions, political and regulatory conditions;

•global events, natural disasters, environmental disasters, terrorist attacks and pandemics, including their impact on the economy and trading markets; and

•management’s response to these factors.

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

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

These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this quarterly report are set forth in Part I, Item 1A.“Risk Factors” in our annual report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~“2019~~“2020 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 the ~~2019~~2020 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 ~~2019~~2020 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.

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Overview

Envestnet, through its subsidiaries, is transforming the way financial advice and wellness are delivered. Our mission is to empower advisors and financial service providers with innovative technology, solutions and intelligence to make financial wellness a ~~leading provider of intelligent systems~~reality for everyone. Envestnet has been a leader in helping transform wealth management, ~~and~~working towards our goal of building a holistic financial ~~wellness. Envestnet’s unified technology enhances advisor productivity and strengthens~~wellness ecosystem to improve the ~~wealth management process. Envestnet empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.~~financial lives of millions of consumers.

More than ~~5,100~~6,000 companies, including 17 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest registered investment advisers (“RIAs”), and hundreds of internet services companies, leverage Envestnet technology and ~~services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences, and~~services that help drive better outcomes for enterprises, advisors and their clients.

Founded in 1999, Envestnet has been a leader in helping transform wealth management, working towards its goal of building a holistic financial wellness network that supports advisors and their clients.

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

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

~~Envestnet~~We also ~~operates~~operate 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-beingAcquisition 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.Proprietary Technology

We ~~have instituted travel bans~~previously owned approximately 29% of the outstanding units in a privately held company and ~~are following mandatory stay-at-home orders where applicable. A majority~~accounted for it as an equity method investment. On March 11, 2021, we entered into an intellectual property purchase agreement with this privately held company to acquire all of ~~our employees are working from home~~the proprietary technology developed by the privately held company for approximately $35.5 million. Concurrent with the intellectual property purchase agreement, we also entered into a redemption agreement with the same privately held company to redeem its previously held equity interest in the privately held company for approximately $10.0 million. We accounted for these two arrangements as a ~~result~~single unit 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 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.

~~At the start~~account. As of the ~~COVID-19 pandemic, significant declines occurred within~~acquisition date, the ~~equity markets. This is significant to us as we provide asset-based, subscription-based and professional services~~net cost of the proprietary technology acquired, including capitalized transaction costs, was approximately $24.5 million, which will be amortized over a five-year period 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~~straight-line basis. The proprietary technology has been integrated into the three and nine months ended September 30, 2020, approximately 55% and 54% of our revenues resulted from asset-based fee billing arrangements. Asset-based recurring revenues primarily consisted 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.

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. While we experienced a decrease to our asset-based revenues in the second quarter of 2020 compared to the first quarter of 2020 as a result of the decline in the equity markets as of March 31, 2020, our asset-based revenues were minimally impacted in the third quarter of 2020 as the equity markets generally

recovered to pre-pandemic levels as of June 30, 2020 and have continued to remain stable. We have experienced no business interruptions, nor did we lose any significant customers as a result of the COVID-19 pandemic.

For the three and nine months ended September 30, 2020, approximately 43% of revenues were subscription-based. These revenues primarily consisted 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.

~~In the event that the equity markets fall again as a result of COVID-19 or for any other reason, our~~ revenues will be negatively impacted. Based on our most recent internal forecasts and other qualitative factors, we have determined that we currently have no impairments to our assets as of September 30, 2020. We have also not modified our revolving credit agreement in connection with the COVID-19 pandemic.

On 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.

~~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 account for this investment under the equity method basis of accounting.Envestnet Wealth Solutions segment.

Acquisition of ~~Private Technology Company~~Harvest

On ~~February 18, 2020, through our wholly owned subsidiary Yodlee, Inc. (“Yodlee”),~~April 7, 2021, we acquired Harvest Savings & Wealth Technologies (“Harvest”), a ~~private technology company~~Delaware corporation (the ~~“Private Technology Company~~“Harvest Acquisition”). ~~The private technology company enables the consent generation~~Harvest provides automated goals-based saving tools and ~~data flow between financial information providers, such as~~wealth solutions to banks, ~~and financial institutions, and financial information users, such as financial technology lenders~~credit unions, trust companies, 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~~institutions. Harvest has been integrated into the Envestnet Wealth Solutions segment. The acquisition optimizes our ~~Envestnet Data & Analytics segment.~~API-based financial wellness ecosystem and also helps strengthen our foothold to enable embedded finance, which we see as a key driver of the future of financial services.

In connection with the ~~Private Technology Company~~Harvest Acquisition, we ~~acquired all of the outstanding shares and~~ paid ~~cash~~estimated consideration of ~~$2,343,~~$32.8 million (of which $3.0 million is being held in escrow for 18 months after the closing date), 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.~~adjustments. We ~~recorded a liability as of~~funded the ~~date of~~ acquisition ~~of approximately $5,239, which represented the estimated fair value of contingent consideration~~with cash on ~~the date of acquisition.~~

In June 2020, we determined that certain performance targets for this acquisition would not be met. As a result, we reduced the contingent consideration liability plus accrued interest associated with this acquisition by $1,982 and recorded this as a reduction to general and administration expenses. In September 2020, we further reduced the contingent consideration liability associated with this acquisition by an immaterial amount. Future changes to the estimated fair value of the contingent consideration, if any, will be recognized in our earnings.hand.

We recorded estimated goodwill of ~~$7,017,~~$17.9 million, which is not deductible for income tax purposes, and estimated identifiable intangible assets for proprietary technologies of ~~$1,000.~~$9.5 million. 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 and merged the acquired company into a wholly owned subsidiary of ours (the “Private Financial Technology Design Company Acquisition”). The private financial technology design company designs integrated, intuitive digital technology applications for institutional financial services firms, bank wealth management organizations, independent advisor networks, and broker-dealers. The technology and operations of the private financial technology design company have been integrated into our Envestnet Wealth Solutions segment.

We previously owned approximately 45% of the 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 $6,658 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.

~~Private Offering of Convertible Notes due 2025~~

In August 2020, we issued $517,500 of convertible notes maturing on August 15, 2025 ("Convertible Notes due 2025"). Net proceeds from the offering were approximately $503,000. The Convertible Notes due 2025 bear interest at a rate of 0.75 percent per annum payable semiannually in arrears in cash on February 15 and August 15 of each year, beginning on February 15, 2021.

The Convertible Notes due 2025 are general unsecured obligations, subordinated in right of payment to our obligations under our revolving credit facility. The Convertible Notes due 2025 are convertible into shares of our common stock under certain circumstances prior to maturity at a conversion rate of 9.3682 shares per one thousand principal amount of the Convertible Notes due 2025, which represents a conversion price of $106.74 per share, subject to adjustment under certain conditions. See “Part I, Note 9—Debt, Convertible Notes due 2025” for more details regarding the issuance of these convertible notes.

~~Early Retirement Program~~Organizational Realignment

In the fourth quarter of ~~2019,~~2020, as part of an organizational realignment, 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~~entered into separation agreements with ~~the Company of at least 65 years. Employees had until January 31, 2020 to voluntarily accept the program with separation of service no later than March 31, 2020.~~several employees. In connection with this ~~program,~~realignment, we ~~have recorded approximately $12,000~~recognized a net credit of $0.1 million of severance expense ~~during~~in the three months ended September 30, 2021. Total severance expense related to this program for the nine months ended September 30, ~~2020.~~2021 was $5.1 million. As of September 30, ~~2020,~~2021, we ~~have accrued~~had approximately ~~$868~~$1.6 million in accrued compensation and related taxes and $2,336 recorded in other non-current liabilities. These payments will extend through 2030. As of December 31, 2019, we accrued approximately $1,733 in accrued compensation and related taxes and $599 recorded in other non-current liabilities.

~~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 our Board, was named Chairman of the Board.associated with these separation agreements.

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Accelerated Investment Plan

In February 2021, we announced that we would be accelerating our investment in our ecosystem, whereby we will be:

•Enhancing and streamlining our platforms to make it easier for our customers to work with us;

•Redefining the way data is used in an effort to create better intelligence, insight and guidance for advisors to better assist their clients;

•Improving the digital experience in a manner that we believe will empower advisors to offer their clients a platform to make impactful decisions in ways that they haven't experienced before; and

•Opening the platform for expansion to more solutions providers and developers.

These investments, which began in the second quarter of 2021 and will increase as the year progresses, are expected to approximate $30 million of additional operating expenses in 2021.

Uncertainties Related to COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak continues to cause disruptions to businesses and markets worldwide as the virus spreads. The extent of the effect on our operational and financial performance will continue to depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. Although we are unable to estimate the overall financial effect of the pandemic at this time, as the pandemic continues, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. As of September 30, 2021, these condensed consolidated financial statements do not reflect any adjustments as a result of the pandemic.

Segments

Envestnet is organized around two primary, complementary business segments. Financial information about each business segment is contained in Part I, Item 1, “Note 15—Segment Information” to the condensed consolidated financial 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 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, ~~2020,~~2021, Envestnet’s platform assets grew to more than ~~$4.1~~$5.4 trillion in approximately 1317 million accounts overseen by more than ~~105 thousand~~108,000 advisors.

Services provided to advisors include: financial planning, risk assessment tools, investment strategies and solutions, asset allocation models, research, portfolio construction, proposal generation and paperwork preparation, model management and account rebalancing, account monitoring, customized fee billing, overlay services covering asset allocation, tax management and socially responsible investing, aggregated multi-custodian performance reporting and communication tools, plus data analytics. We have access to a wide range of leading third-party asset custodians.

We offer these solutions principally through the following 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 20,000~~more than 22,000 investment products. Envestnet | Enterprise also sells data aggregation and reporting, data analytics and digital advice capabilities to customers.

•Envestnet | Tamarac™provides leading trading, rebalancing, portfolio accounting, performance reporting and client relationship management software, principally to 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 and consulting services to assist advisors in creating investment solutions for their clients. These solutions include ~~over 4,600~~more than 4,900 vetted third party managed account products, multi-manager portfolios, fund strategist portfolios, as well as ~~nearly~~more than 900 proprietary products, such as quantitative portfolios and fund strategist portfolios. PMC also offers 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
		As of											September 30,		December 31,		March 31,		June 30,		September 30,
		September 30,		December 31,		March 31,		June 30,		September 30,			2020		2020		2021		2021		2021
		2019		2019		2020		2020		2020
		(in millions, except accounts and advisors data)											(in millions, except accounts and advisors data)
Platform Assets	Platform Assets											Platform Assets
Assets under Management (“AUM”)	Assets under Management (“AUM”)	$	188,739	$	207,083	$	185,065	$	215,994	$	228,905	Assets under Management (“AUM”)	$	228,905	$	263,043	$	286,039	$	315,422	$	327,279
Assets under Administration (“AUA”)	Assets under Administration (“AUA”)	316,742		343,505		312,472		344,957		375,860		Assets under Administration (“AUA”)	375,860		405,365		408,858		426,416		431,040
Total AUM/A	Total AUM/A	505,481		550,588		497,537		560,951		604,765		Total AUM/A	604,765		668,408		694,897		741,838		758,319
Subscription	Subscription	2,947,582		3,205,281		2,875,394		3,247,400		3,498,353		Subscription	3,498,353		3,892,814		4,132,917		4,447,733		4,670,827
Total Platform Assets	Total Platform Assets	$	3,453,063	$	3,755,869	$	3,372,931	$	3,808,351	$	4,103,118	Total Platform Assets	$	4,103,118	$	4,561,222	$	4,827,814	$	5,189,571	$	5,429,146
Platform Accounts	Platform Accounts											Platform Accounts
AUM	AUM	934,811		935,039		970,896		1,007,386		1,018,817		AUM	1,018,817		1,073,122		1,138,183		1,209,761		1,276,066
AUA	AUA	1,136,430		1,193,882		1,254,856		1,252,247		1,318,730		AUA	1,318,730		1,276,975		1,192,668		1,163,991		1,193,069
Total AUM/A	Total AUM/A	2,071,241		2,128,921		2,225,752		2,259,633		2,337,547		Total AUM/A	2,337,547		2,350,097		2,330,851		2,373,752		2,469,135
Subscription	Subscription	9,692,714		9,793,175		10,090,172		10,003,156		10,639,399		Subscription	10,639,399		11,079,048		11,453,434		11,712,573		14,810,664
Total Platform Accounts	Total Platform Accounts	11,763,955		11,922,096		12,315,924		12,262,789		12,976,946		Total Platform Accounts	12,976,946		13,429,145		13,784,285		14,086,325		17,279,799
Advisors	Advisors											Advisors
AUM/A	AUM/A	39,735		40,563		40,971		41,206		41,450		AUM/A	41,450		41,206		41,177		41,259		41,696
Subscription	Subscription	60,319		61,180		62,077		62,404		63,862		Subscription	63,862		65,104		65,724		66,597		66,489
Total Advisors	Total Advisors	100,054		101,743		103,048		103,610		105,312		Total Advisors	105,312		106,310		106,901		107,856		108,185

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


																Asset Rollforward - Three Months Ended September 30, 2021
		Asset Rollforward - Three Months Ended September 30, 2020												As of		Gross				Net		Market				As of
		As of		Gross				Net		Market		As of				6/30/2021		Sales		Redemptions		Flows		Impact			9/30/2021
		6/30/2020		Sales		Redemptions		Flows		Impact		9/30/2020
		(in millions, except account data)												(in millions, except account data)
AUM	AUM	$	215,994	$	12,526	$	(10,151)	$	2,375	$	10,536	$	228,905		AUM	$	315,422	$	27,197	$	(12,703)	$	14,494	$	(2,637)		$	327,279
AUA	AUA	344,957		33,944		(19,618)		14,326		16,577		375,860			AUA	426,416		32,375		(22,274)		10,101		(5,477)			431,040
Total AUM/A	Total AUM/A	$	560,951	$	46,470	$	(29,769)	$	16,701	$	27,113	$	604,765		Total AUM/A	$	741,838	$	59,572	$	(34,977)	$	24,595	$	(8,114)		$	758,319
Fee-Based Accounts	Fee-Based Accounts	2,259,633						77,914				2,337,547			Fee-Based Accounts	2,373,752						95,383					2,469,135

The above AUM/A gross sales figures include ~~$8.4~~$6.1 billion in new client conversions. We onboarded an additional ~~$33.9~~$149.5 billion in subscription conversions during the three months ended September 30, ~~2020~~ bringing total conversions for the three months ended September 30, ~~2020~~ to ~~$42.3~~$155.6 billion.


																	Asset Rollforward - Nine Months Ended September 30, 2021
		Asset Rollforward - Nine Months Ended September 30, 2020															As of		Gross				Net		Market		Reclass to		As of
		As of		Gross				Net		Market		Reclass to		As of			12/31/2020		Sales		Redemptions		Flows		Impact		Subscription		9/30/2021
		12/31/2019		Sales		Redemptions		Flows		Impact		Subscription		6/30/2020
		(in millions, except account data)															(in millions, except account data)
AUM	AUM	$	207,083	$	50,356	$	(31,111)	$	19,245	$	2,577	$	—	$	228,905	AUM	$	263,043	$	82,952	$	(38,353)	$	44,599	$	19,637	$	—	$	327,279
AUA	AUA	343,505		90,403		(61,520)		28,883		5,417		(1,945)		375,860		AUA	405,365		85,798		(68,994)		16,804		22,200		(13,329)		431,040
Total AUM/A	Total AUM/A	$	550,588	$	140,759	$	(92,631)	$	48,128	$	7,994	$	(1,945)	$	604,765	Total AUM/A	$	668,408	$	168,750	$	(107,347)	$	61,403	$	41,837	$	(13,329)	$	758,319
Fee-Based Accounts	Fee-Based Accounts	2,128,921						229,468				(20,842)		2,337,547		Fee-Based Accounts	2,350,097						227,018				(107,980)		2,469,135

The above AUM/A gross sales figures include ~~$30.1~~$23.7 billion in new client conversions. We onboarded an additional ~~$83.0~~$266.8 billion in subscription conversions during the nine months ended September 30, ~~2020~~2021 bringing total conversions for the nine months ended September 30, ~~2020~~2021 to ~~$113.2~~$290.5 billion.

Asset and account figures in the “Reclass to Subscription” columns for the nine months ended September 30, ~~2020~~2021 represent enterprise customers whose billing arrangements in future periods are subscription-based, rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which the reclassification occurred, with no impact on total platform assets or accounts. Periodically clients choose 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.

Envestnet Data & Analytics Segment

Envestnet Data & Analytics is a leading data aggregation and data intelligence platform. As an artificial intelligence (“AI”) and data specialist, Envestnet Data & Analytics gathers, refines and aggregates a massive set of end-user permissioned transaction level data and combines them with financial applications, reports, market research analysis and application programming interfaces (“APIs”) for its customers.

Over ~~1,400~~1,500 financial institutions, financial technology innovators and financial advisory firms, including 15 of the 20 largest U.S. banks, subscribe to the Envestnet Data & Analytics platform to underpin personalized financial apps and services for over 3330 million paid subscribers.

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 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 17,000 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 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 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 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, 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 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.~~

grow.

Operational Highlights

Asset-based recurring revenues increased 9%34% from ~~$126,591~~$137.7 million in the three months ended September 30, ~~2019~~2020 to ~~$137,744~~$184.0 million in the three months ended September 30, ~~2020.~~2021. Subscription-based recurring revenues increased 7%5% from ~~$100,583~~$107.9 million in the three months ended September 30, ~~2019~~2020 to ~~$107,897~~$113.6 million in the three months ended September 30, ~~2020.~~2021. Total revenues, which ~~include~~also includes professional services and other revenues, increased 7%20% from ~~$236,080~~$252.6 million in the three months ended September 30, ~~2019~~2020 to ~~$252,559~~$303.1 million in the three months ended September 30, ~~2020.~~ 2021.

The Envestnet Wealth Solutions segment's total revenues increased ~~by $16,070~~25% from $204.3 million in the three months ended September 30, 2020 to $254.7 million in the three months ended September 30, 2021 primarily due to an increase in asset-based revenues of ~~$11,153~~$46.3 million and an increase in subscription-based revenues of ~~$5,430.~~$4.2 million. The Envestnet Data & Analytics segment's total revenues remained ~~consistent~~flat as increases in subscription-based revenues were offset by decreases in professional services and other revenues.

Asset-based recurring revenues increased ~~11%~~30% from ~~$355,595~~$394.8 million in the nine months ended September 30, ~~2019~~2020 to ~~$394,801~~$513.5 million in the nine months ended September 30, ~~2020.~~2021. Subscription-based recurring revenues increased ~~15%~~6% from ~~$275,928~~$317.4 million in the nine months ended September 30, ~~2019~~2020 to ~~$317,427~~$335.9 million in the nine months ended September 30, ~~2020.~~2021. Total revenues, which ~~include~~also includes professional services and other revenues, increased ~~11%~~18% from ~~$660,191~~$734.4 million in the nine months ended September 30, ~~2019~~2020 to ~~$734,411~~$866.9 million in the nine months ended September 30, ~~2020.~~ 2021.

The ~~acquisitions of PortfolioCenter on April 1, 2019 and PIEtech on May 1, 2019 (collectively, the "2019 Acquisitions"), contributed~~Envestnet Wealth Solutions segment's total revenues ~~of $22,509 and $51,006~~increased 22% from $590.4 million in the nine months ended September 30, ~~2019 and~~ 2020 ~~respectively. The Envestnet Wealth Solutions segment's total revenues, excluding~~to $721.4 million in the ~~revenues contributed from the 2019 acquisitions, increased by $44,083~~nine months ended September 30, 2021 primarily due to an increase in asset-based revenues of ~~$39,206,~~$118.7 million and an increase in subscription-based revenues of ~~$8,530,~~$13.1 million. The Envestnet Data & Analytics segment's total revenues increased 1% from $144.0 million in the nine months ended September 30, 2020 to $145.5 million in the nine months ended September 30, 2021 primarily due to an increase in subscription-based revenues of $5.3 million, partially offset by a decrease in professional services and other revenues of $3,653. The Envestnet Data & Analytics segment's total revenues increased by $1,640 primarily due to an increase in subscription-based revenues of $5,440, partially offset by a decrease in professional services and other revenues of $3,800.$3.9 million.

Net income attributable to Envestnet, Inc. for the three months ended September 30, ~~2020~~2021 was ~~$1,910,~~$11.7 million, or $0.21 per diluted share, compared to net income attributable to Envestnet, Inc. of $1.9 million, or $0.03 per diluted share, for the three months ended September 30, 2020.

Net income attributable to Envestnet, Inc. for the nine months ended September 30, 2021 was $18.4 million, or $0.33 per diluted share, compared to net loss attributable to Envestnet, Inc. of ~~$3,080,~~$10.4 million, or ~~$0.06 per diluted share, for the three months ended September 30, 2019.~~

~~Net loss attributable to Envestnet, Inc. for the nine months ended September 30, 2020 was $10,350, or~~ $0.19 ~~per diluted share, compared to net loss attributable to Envestnet, Inc. of $20,372, or $0.40~~ per diluted share, for the nine months ended September 30, ~~2019.~~2020.

Adjusted revenues for the three months ended September 30, ~~2020~~2021 were ~~$252,650,~~$303.1 million, compared to adjusted revenues of ~~$239,330 in the prior year period. Adjusted net revenues were $181,517 for the three months ended September 30, 2020, compared to adjusted net revenues of $174,991~~$252.7 million in the prior year period. Adjusted EBITDA for the three months ended September 30, ~~2020~~2021 was ~~$67,581,~~$66.2 million, compared to adjusted EBITDA of ~~$54,544~~$67.6 million in the prior year period. Adjusted net income for the three months ended September 30, ~~2020~~2021 was ~~$40,229,~~$39.9 million, or ~~$0.72~~$0.61 per diluted share, compared to adjusted net income of ~~$32,422,~~$40.2 million, or ~~$0.60~~$0.72 per diluted share in the prior year period.

Adjusted revenues for the nine months ended September 30, ~~2020~~2021 were ~~$735,018,~~$867.1 million, compared to adjusted revenues of ~~$666,861 in the prior year period. Adjusted net revenues were $533,418 for the nine months ended September 30, 2020, compared to adjusted net revenues of $488,387~~$735.0 million in the prior year period. Adjusted EBITDA for the nine months ended September 30, ~~2020~~2021 was ~~$177,967,~~$205.5 million, compared to adjusted EBITDA of ~~$131,757~~$178.0 million in the prior year period. Adjusted net income for the nine months ended September 30, ~~2020~~2021 was ~~$103,204,~~$125.3 million, or ~~$1.88~~$1.92 per diluted share, compared to adjusted net income of ~~$76,303,~~$103.2 million, or ~~$1.46~~$1.88 per diluted share in the prior year period.

Adjusted ~~revenues, adjusted net~~ 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 our 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
		Three Months Ended						Nine Months Ended							September 30,				Percent		September 30,				Percent
		September 30,				Percent		September 30,				Percent			2021		2020		Change		2021		2020		Change
		2020		2019		Change		2020		2019		Change
		(in thousands)						(in thousands)							(in thousands)						(in thousands)
Revenues:	Revenues:													Revenues:
Asset-based	Asset-based	$	137,744	$	126,591	9	%	$	394,801	$	355,595	11	%	Asset-based	$	184,008	$	137,744	34	%	$	513,458	$	394,801	30	%
Subscription-based	Subscription-based	107,897		100,583		7	%	317,427		275,928		15	%	Subscription-based	113,572		107,897		5	%	335,905		317,427		6	%
Total recurring revenues	Total recurring revenues	245,641		227,174		8	%	712,228		631,523		13	%	Total recurring revenues	297,580		245,641		21	%	849,363		712,228		19	%
Professional services and other revenues	Professional services and other revenues	6,918		8,906		(22)	%	22,183		28,668		(23)	%	Professional services and other revenues	5,473		6,918		(21)	%	17,533		22,183		(21)	%
Total revenues	Total revenues	252,559		236,080		7	%	734,411		660,191		11	%	Total revenues	303,053		252,559		20	%	866,896		734,411		18	%
Operating expenses:	Operating expenses:													Operating expenses:
Cost of revenues	Cost of revenues	78,545		71,870		9	%	222,327		205,595		8	%	Cost of revenues	109,836		78,545		40	%	303,199		222,327		36	%
Compensation and benefits	Compensation and benefits	94,428		95,587		(1)	%	300,423		285,590		5	%	Compensation and benefits	109,839		94,428		16	%	316,101		300,423		5	%
General and administration	General and administration	38,979		42,016		(7)	%	118,537		124,961		(5)	%	General and administration	39,393		38,979		1	%	117,463		118,537		(1)	%
Depreciation and amortization	Depreciation and amortization	28,951		26,735		8	%	85,077		73,167		16	%	Depreciation and amortization	29,850		28,951		3	%	88,252		85,077		4	%
Total operating expenses	Total operating expenses	240,903		236,208		2	%	726,364		689,313		5	%	Total operating expenses	288,918		240,903		20	%	825,015		726,364		14	%
Income (loss) from operations		11,656		(128)		*		8,047		(29,122)		(128)	%
Income from operations														Income from operations	14,135		11,656		21	%	41,881		8,047		*
Other expense, net	Other expense, net	(8,836)		(9,813)		(10)	%	(18,546)		(23,088)		(20)	%	Other expense, net	(3,551)		(8,836)		(60)	%	(14,803)		(18,546)		(20)	%
Income (loss) before income tax provision (benefit)	Income (loss) before income tax provision (benefit)	2,820		(9,941)		(128)	%	(10,499)		(52,210)		(80)	%	Income (loss) before income tax provision (benefit)	10,584		2,820		*		27,078		(10,499)		*
Income tax provision (benefit)	Income tax provision (benefit)	497		(6,977)		(107)	%	(161)		(31,591)		(99)	%	Income tax provision (benefit)	(854)		497		*		9,074		(161)		*
Net income (loss)	Net income (loss)	2,323		(2,964)		(178)	%	(10,338)		(20,619)		(50)	%	Net income (loss)	11,438		2,323		*		18,004		(10,338)		*
Add: Net (income) loss attributable to non-controlling interest	Add: Net (income) loss attributable to non-controlling interest	(413)		(116)		*		(12)		247		(105)	%	Add: Net (income) loss attributable to non-controlling interest	302		(413)		*		401		(12)		*
Net income (loss) attributable to Envestnet, Inc.	Net income (loss) attributable to Envestnet, Inc.	$	1,910	$	(3,080)	(162)	%	$	(10,350)	$	(20,372)	(49)	%	Net income (loss) attributable to Envestnet, Inc.	$	11,740	$	1,910	*		$	18,405	$	(10,350)	*

*Not meaningful.

Three months ended September 30, ~~2020~~2021 compared to three months ended September 30, ~~2019~~2020

Asset-based recurring revenues

Asset-based recurring revenues increased 9%34% from ~~$126,591~~$137.7 million in the three months ended September 30, ~~2019~~2020 to ~~$137,744~~$184.0 million in the three months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in the three months ended September 30, ~~2020~~2021 compared to the three months ended September 30, ~~2019,~~2020, the impact of new account growth and positive net flows of AUM/A in the third quarter of ~~2020.~~2021.

The number of financial advisors with asset-based recurring revenue on our technology platforms increased from ~~39,735~~approximately 41,000 as of September 30, ~~2019~~2020 to ~~41,450~~approximately 42,000 as of September 30, ~~2020~~2021, and the number of AUM/A client accounts increased from approximately ~~2,100,000~~2.3 million as of September 30, ~~2019~~2020 to approximately ~~2,300,000~~2.5 million as of September 30, ~~2020.~~2021.

~~As a percentage of total revenues, asset-based~~Asset-based recurring revenues increased from ~~54%~~55% of total revenue in the three months ended September 30, ~~2019~~2020 to ~~55%~~61% of total revenue in the three months ended September 30, ~~2020.~~2021, primarily due to a higher increase in asset-based recurring revenues as compared to subscription-based recurring revenues.

Subscription-based recurring revenues

Subscription-based recurring revenue increased 7%5% from ~~$100,583~~$107.9 million in the three months ended September 30, ~~2019~~2020 to ~~$107,897~~$113.6 million in the three months ended September 30, ~~2020.~~2021. This increase was ~~primarily~~ due to an increase of ~~$5,430~~$4.2 million in the Envestnet Wealth Solutions segment and an increase of ~~$1,884~~$1.5 million in the Envestnet Data & Analytics ~~segment.~~segment which are primarily due to new and existing customer growth.

~~The increase in the Envestnet Wealth Solutions segment was primarily due to growth from new and existing customers.~~

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

Professional services and other revenues

Professional services and other revenues decreased ~~22%~~21% from ~~$8,906~~$6.9 million in the three months ended September 30, ~~2019~~2020 to ~~$6,918~~$5.5 million in the three months ended September 30, ~~2020.~~2021. The decrease was ~~primarily~~ due to timing of the completion of customer projects and deployments.

Cost of revenues

Cost of revenues increased 9%40% from ~~$71,870~~$78.5 million in the three months ended September 30, ~~2019~~2020 to ~~$78,545~~$109.8 million in the three months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in asset-based cost of revenues of ~~$6,794,~~$31.2 million, which correlates directly ~~correlated~~ with the increase to asset-based recurring revenues during the period. As a percentage of total revenues, cost of revenues increased from ~~30%~~31% in the three months ended September 30, ~~2019~~2020 to ~~31%~~36% in three months ended September 30, ~~2020.~~2021, primarily due to shifts in pricing and product mix for asset-based revenues.

Compensation and benefits

Compensation and benefits ~~remained consistent~~increased 16% from ~~$95,587~~$94.4 million in the three months ended September 30, ~~2019~~2020 to ~~$94,428~~$109.8 million in the three months ended September 30, ~~2020. Decreases~~2021. The increase was primarily due to increases in ~~salary,~~salaries, benefits and related payroll taxes of ~~$4,878 were offset by increased~~$8.8 million, incentive compensation of ~~$2,096,~~$5.0 million, non-cash compensation expense of ~~$1,206~~$3.0 million and other ~~miscellaneous increases.~~immaterial increases within compensation and benefits. These increases were partially offset by a decrease in severance expense of $2.5 million. As a percentage of total revenues, compensation and benefits decreased from ~~40% in the three months ended September 30, 2019 to~~ 37% in the three months ended September 30, 2020 ~~primarily due~~ to ~~lower healthcare related expenses and increased capitalized labor costs related to internally developed software~~36% in the three months ended September 30, ~~2020 as compared to the prior year period.~~2021.

General and administration

General and administration expenses ~~decreased 7%~~increased 1% from ~~$42,016~~$39.0 million in the three months ended September 30, ~~2019~~2020 to ~~$38,979~~$39.4 million in the three months ended September 30, ~~2020.~~2021. The ~~decrease~~increase was primarily due to ~~decreases~~increases in ~~travel and entertainment of $4,299, occupancy~~systems development costs of ~~$1,729 and~~$3.6 million, marketing expense of ~~$1,269.~~$3.0 million and other immaterial increases within general and administration. These ~~decreases~~increases were partially offset by ~~increases~~decreases in non-income tax expense of ~~$1,433, system development~~$2.6 million, restructuring charges and transaction costs of ~~$1,284~~$2.4 million and ~~trade errors~~miscellaneous general and administration expense of ~~$1,231.~~$1.5 million. As a percentage of total revenues, general and administration expenses decreased from ~~18% in the three months ended September 30, 2019 to~~ 15% in the three months ended September 30, 2020 ~~primarily due~~ to ~~decreased travel and entertainment expense as a result of actions taken by~~13% in the ~~Company as a result of COVID-19.~~three months ended September 30, 2021.

Depreciation and amortization

Depreciation and amortization expense increased 8%3% from ~~$26,735~~$29.0 million in the three months ended September 30, ~~2019~~2020 to ~~$28,951~~$29.9 million in the three months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in internally developed software amortization expense of ~~$2,300.~~$2.4 million, partially offset by a decrease in intangible asset amortization expense of $1.1 million. As a percentage of total revenues, depreciation and amortization expense ~~remained consistent at~~decreased from 11% in the three months ended September 30, ~~2019 and 2020.~~2020 to 10% in the three months ended September 30, 2021.

Other expense, net

Other expense, net decreased ~~10%~~ from ~~$9,813 in the three months ended September 30, 2019 to $8,836 in the three months ended September 30, 2020. The decrease was primarily due to decreased interest expense of $661~~$8.8 million in the three months ended September 30, 2020 ~~as compared~~to $3.6 million in the three months ended September 30, 2021. The decrease was primarily due to decreased non-cash interest expense charges of $3.3 million primarily due to the ~~same prior year period.~~adoption of ASU 2020-06 on January 1, 2021, as well as a one-time gain of $1.2 million related to the settlement of a liability and a one-time gain of $1.0 million related to an insurance reimbursement in the three months ended September 30, 2021.

Income tax provision (benefit)


		Three Months Ended							Three Months Ended
		September 30,							September 30,
		2020			2019				2021			2020
Income (loss) before income tax provision (benefit)		$	2,820		$	(9,941)

									(in thousands)
Income before income tax provision (benefit)								Income before income tax provision (benefit)	$	10,584		$	2,820
Income tax provision (benefit)	Income tax provision (benefit)	497			(6,977)			Income tax provision (benefit)	(854)			497
Effective tax rate	Effective tax rate	17.6		%	70.2		%	Effective tax rate	(8.1)		%	17.6		%

Under Accounting Standards Codification (“ASC”) 740-270-25, we are required to report income tax expense by applying a projected annual effective tax rate (“AETR”) to ordinary pre-tax book income for the interim period. The tax impact of discrete items is accounted for separately in the period in which they occur. The effective tax rate (“ETR”) for the quarter is the result of the projected AETR applied to actual pre-tax book income plus discrete items as a percentage of actual pre-tax book income. Therefore, a change in pre-tax book income, either forecasted or actual year-to-date, from one period to the next will cause the ETR to change. For the three months ended September 30, 2021 and 2020, our ETR was impacted by the change in forecasted and actual year-to-date pre-tax book income.

For the three months ended September 30, 2021, our effective tax rate differed from the statutory rate primarily due to the increase in forecasted book income for the year, the decrease in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets, including the valuation allowance impact of the Harvest acquisition, and the windfall from stock-based compensation.

For the three months ended September 30, 2020, our effective tax rate differed from the statutory rate primarily due to the decrease in the valuation allowance ~~we had~~the Company has placed on a portion of USits U.S. deferred tax assets and the impact of state and local taxes, partially offset by permanent book-tax differences, the windfall from stock-based compensation, the impact of the CARES Act related to ~~net operating loss~~NOL carryback, and federal and state ~~research and development (“~~R~~&D”)~~&D credits.

For the three months ended September 30, 2019, our effective tax rate differed from the statutory rate primarily due to the windfall from stock-based compensation, the executive compensation deduction limitation, additional accruals for uncertain tax positions and differences between the foreign tax rates and statutory US tax rate.

Nine months ended September 30, ~~2020~~2021 compared to nine months ended September 30, ~~2019~~2020

Asset-based recurring revenues

Asset-based recurring revenues increased ~~11%~~30% from ~~$355,595~~$394.8 million in the nine months ended September 30, ~~2019~~2020 to ~~$394,801~~$513.5 million in the nine months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in the nine months ended September 30, ~~2020~~2021 compared to the nine months ended September 30, ~~2019, due to~~2020, the impact of new account growth and positive net flows of AUM/A in the first nine months of ~~2020.~~2021.

Asset-based recurring revenues ~~remained consistent at~~increased from 54% of total revenue in the nine months ended September 30, ~~2019 and 2020.~~2020 to 59% of total revenue in the nine months ended September 30, 2020, primarily due to a higher increase in asset-based recurring revenues as compared to subscription-based recurring revenues.

Subscription-based recurring revenues

Subscription-based recurring revenue increased ~~15%~~6% from ~~$275,928~~$317.4 million in the nine months ended September 30, ~~2019~~2020 to ~~$317,427~~$335.9 million in the nine months ended September 30, ~~2020.~~2021. This increase was primarily due to an increase of $~~36,059~~13.1 million in the Envestnet Wealth Solutions segment and an increase of ~~$5,440~~$5.3 million in the Envestnet Data & Analytics ~~segment.~~

~~The increase in the Envestnet Wealth Solutions~~ segment, ~~was primarily due~~both of which can be attributed to the 2019 Acquisitions, which contributed incremental revenues of $27,529 to subscription-based recurring revenues in the nine months ended September 30, 2020. The remaining increase of $8,530 within the Envestnet Wealth Solutions segment is a result of growth from new and existing ~~customers.~~

~~The increase in Envestnet Data & Analytics revenue was primarily due to broad increases in revenue from new and existing customers.~~customer growth.

Professional services and other revenues

Professional services and other revenues decreased ~~23%~~21% from ~~$28,668~~$22.2 million in the nine months ended September 30, ~~2019~~2020 to ~~$22,183~~$17.5 million in the nine months ended September 30, ~~2020.~~2021. The decrease was due to timing of the completion of customer projects and ~~deployments, as well as a decrease in revenues resulting from the cancellation of our 2020 Advisor Summit.~~deployments.

Cost of revenues

Cost of revenues increased 8%36% from ~~$205,595~~$222.3 million in the nine months ended September 30, ~~2019~~2020 to ~~$222,327~~$303.2 million in the nine months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in asset-based cost of revenues of ~~$23,126,~~$80.2 million, which directly ~~correlated~~correlates with the increase to asset-based recurring revenues during the period. This increase was partially offset by a decrease in professional services and other cost of revenues of $5,117, primarily a result of the cancellation of our 2020 Advisor Summit. The 2019 Acquisitions had an immaterial impact to cost of revenues in the nine months ended September 30, 2020. As a percentage of total revenues, cost of revenues ~~decreased~~increased from ~~31%~~30% in the nine months ended September 30, ~~2019~~2020 to ~~30%~~35% in nine months ended September 30, ~~2020.~~2021, primarily due to shifts in pricing and product mix for asset-based revenues.

Compensation and benefits

Compensation and benefits increased 5% from ~~$285,590~~$300.4 million in the nine months ended September 30, ~~2019~~2020 to ~~$300,423~~$316.1 million in the nine months ended September 30, ~~2020.~~2021. The increase ~~was primarily due to~~is comprised of increases in incentive compensation of $11.6 million, salaries, benefits and related payroll taxes of $9.2 million, non-cash compensation expense of $4.6 million and other immaterial increases within compensation and benefit accounts. These increases were partially offset by decreases in severance expense of ~~$10,421, non-cash compensation expense~~$8.1 million and miscellaneous employee expenses of ~~$2,481 and short-term incentive compensation of $1,266.~~$3.1 million. The ~~increase~~decrease in severance expense is primarily related to charges ~~connected~~incurred in connection with the Early Retirement Program that was offered to eligible employees through January 31, 2020. The 2019 Acquisitions contributed compensation and benefit expenses of $14,339 and $22,165 to total compensation and benefits expense induring the nine months ended September 30, ~~2019 and 2020, respectively.~~2020. As a percentage of

total revenues, compensation and benefits decreased from ~~43% in the nine months ended September 30, 2019 to~~ 41% in the nine months ended September 30, ~~2020.~~2020 to 36% in the nine months ended September 30, 2021, due to a higher revenue increase compared to a lower compensation and benefits increase.

General and administration

General and administration expenses decreased 5%1% from ~~$124,961~~$118.5 million in the nine months ended September 30, ~~2019~~2020 to ~~$118,537~~$117.5 million in the nine months ended September 30, ~~2020.~~2021. The decrease was primarily due to decreases in restructuring charges and transaction costs of $5.4 million, miscellaneous general and administration expense of $4.1 million, non-income tax expense of $2.4 million, travel and entertainment expense of ~~$9,129, occupancy costs~~$2.3 million, communications, research and data services of ~~$2,829, marketing expenses of $2,443, a decrease of $2,056 to contingent consideration liability related to fair value adjustments~~$1.1 million and ~~professional~~other immaterial decreases within general and ~~legal fees of $1,095.~~administration expense. These decreases were partially offset by increases in ~~system~~systems development costs of ~~$3,431, trade errors~~$7.6 million, marketing expense of ~~$3,045, litigation~~$4.0 million and ~~regulatory related expenses~~professional and legal fees of $1,380, miscellaneous general and administration expense of $1,278 and bad debt expense of $1,080. The 2019 Acquisitions contributed general and administration expenses of $6,442 and $4,878 in the nine months ended September 30, 2019 and 2020, respectively.$3.5 million. As a percentage of total revenues, general and administration expenses decreased from ~~19% in the nine months ended September 30, 2019 to~~ 16% in the nine months ended September 30, 2020 ~~primarily due~~ to ~~decreased travel and entertainment expense as a result of actions taken by~~14% in the ~~Company as a result of COVID-19.~~nine months ended September 30, 2021.

Depreciation and amortization

Depreciation and amortization expense increased ~~16%~~4% from ~~$73,167~~$85.1 million in the nine months ended September 30, ~~2019~~2020 to ~~$85,077~~$88.3 million in the nine months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in ~~intangible asset amortization expense of $7,190, the direct result of amortizing additional intangible assets related to our 2019 Acquisitions, and an increase in~~ internally developed software amortization expense of ~~$4,509.~~$8.0 million, partially offset by a decrease in intangible asset amortization expense of $4.6 million. As a percentage of total revenues, depreciation and amortization expense ~~increased~~decreased from ~~11% in the nine months ended September 30, 2019 to~~ 12% in the nine months ended September 30, ~~2020.~~2020 to 10% in the nine months ended September 30, 2021.

Other expense, net

Other expense, net decreased ~~20%~~ from $23,088 in the nine months ended September 30, 2019 to $18,546 in the nine months ended September 30, 2020. The decrease was primarily due to a gain of $4,230 recognized in the three months ended March 31, 2020 on the remeasurement of our previously held interest in the private financial technology design company combined with a gain of $2,524 recorded in the three months ended March 31, 2020 as a result of 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$18.5 million in the nine months ended September 30, 2020 ~~as compared~~ to $14.8 million in the nine months ended September 30, ~~2019.~~2021. The decrease was primarily due to reduced interest expense of $9.2 million in the current year period primarily due to the adoption of ASU 2020-06 on January 1, 2021 and no outstanding borrowings on our revolving credit facility during fiscal year 2021. During the nine months ended September 30, 2021, we recorded a one-time gain of $1.2 million related to the settlement of a liability and a one-time gain of $1.0 million related to an insurance reimbursement. During the nine months ended September 30, 2020, we recorded a one-time gain of $4.2 million related to the remeasurement of a previously held interest in an equity method investee that we acquired the remaining outstanding equity for and a one-time gain of $2.5 million related to a fair value adjustment upon the settlement of a former Chief Executive Officer's stock options during the nine months ended September 30, 2020.

Income tax provision (benefit)


									Nine Months Ended
									September 30,
		Nine Months Ended							2021			2020
		September 30,
		2020			2019				(in thousands)
Income (loss) before income tax provision (benefit)	Income (loss) before income tax provision (benefit)	$	(10,499)		$	(52,210)		Income (loss) before income tax provision (benefit)	$	27,078		$	(10,499)
Income tax provision (benefit)	Income tax provision (benefit)	(161)			(31,591)			Income tax provision (benefit)	9,074			(161)
Effective tax rate	Effective tax rate	1.5		%	60.5		%	Effective tax rate	33.5		%	1.5		%

Under ASC 740-270-25, we are required to report income tax expense by applying a projected AETR to ordinary pre-tax book income for the interim period. The tax impact of discrete items is accounted for separately in the period in which they occur. The ETR for the quarter is the result of the projected AETR applied to actual pre-tax book income plus discrete items as a percentage of actual pre-tax book income. Therefore, a change in pre-tax book income, either forecasted or actual year-to-date, from one period to the next will cause the ETR to change. For the nine months ended September 30, 2021 and 2020, our ETR was impacted by the change in forecasted and actual year-to-date pre-tax book income.

For the nine months ended September 30, 2021, our effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets, including the valuation allowance impact of the Harvest acquisition, permanent book-tax differences, and the impact of state and local taxes offset by federal and state R&D credits.

For the nine months ended September 30, 2020, our effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance ~~we had~~the Company has placed on a portion of USits U.S. deferred tax assets and the impact of state and local taxes, partially offset by permanent book-tax differences, the windfall from stock-based compensation, the impact of the CARES Act related to ~~net operating loss~~NOL carryback, and federal and state R&D credits.

For the nine months ended September 30, 2019, our effective tax rate differed from the statutory rate primarily due to the release of our valuation allowance of $21,907 as a result of additional deferred tax liabilities recorded from the PIEtech Acquisition, the windfall from stock-based compensation, federal and state R&D credits, executive compensation deduction limitation and additional accruals for uncertain tax positions.

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Segment Results

Business segments are generally organized around our service offerings. Financial information about each of our two business segments is contained in “Note 15—Segment Information” to the condensed consolidated financial statements.

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


											Three Months Ended				Nine Months Ended
											September 30,				September 30,
		Three Months Ended				Nine Months Ended					2021		2020		2021		2020
		September 30,				September 30,
		2020		2019		2020		2019			(in thousands)
Envestnet Wealth Solutions	Envestnet Wealth Solutions	$	29,683	$	17,746	$	60,890	$	46,969	Envestnet Wealth Solutions	$	34,386	$	29,683	$	101,042	$	60,890
Envestnet Data & Analytics	Envestnet Data & Analytics	(1,238)		(7,112)		(6,764)		(24,000)		Envestnet Data & Analytics	1,265		(1,238)		3,896		(6,764)
Nonsegment operating expenses	Nonsegment operating expenses	(16,789)		(10,762)		(46,079)		(52,091)		Nonsegment operating expenses	(21,516)		(16,789)		(63,057)		(46,079)
Income (loss) from operations		11,656		(128)		8,047		(29,122)
Income from operations										Income from operations	14,135		11,656		41,881		8,047
Other expense, net	Other expense, net	(8,836)		(9,813)		(18,546)		(23,088)		Other expense, net	(3,551)		(8,836)		(14,803)		(18,546)
Consolidated income (loss) before income tax provision (benefit)		2,820		(9,941)		(10,499)		(52,210)
Consolidated income (loss) before income tax benefit										Consolidated income (loss) before income tax benefit	10,584		2,820		27,078		(10,499)
Income tax provision (benefit)	Income tax provision (benefit)	497		(6,977)		(161)		(31,591)		Income tax provision (benefit)	(854)		497		9,074		(161)
Consolidated net income (loss)	Consolidated net income (loss)	2,323		(2,964)		(10,338)		(20,619)		Consolidated net income (loss)	11,438		2,323		18,004		(10,338)
Add: Net (income) loss attributable to non-controlling interest	Add: Net (income) loss attributable to non-controlling interest	(413)		(116)		(12)		247		Add: Net (income) loss attributable to non-controlling interest	302		(413)		401		(12)
Consolidated net income (loss) attributable to Envestnet, Inc.	Consolidated net income (loss) attributable to Envestnet, Inc.	$	1,910	$	(3,080)	$	(10,350)	$	(20,372)	Consolidated net income (loss) attributable to Envestnet, Inc.	$	11,740	$	1,910	$	18,405	$	(10,350)

Envestnet Wealth Solutions

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


															Three Months Ended						Nine Months Ended
		Three Months Ended						Nine Months Ended							September 30,				Percent		September 30,				Percent
		September 30,				Percent		September 30,				Percent			2021		2020		Change		2021		2020		Change
		2020		2019		Change		2020		2019		Change
		(in thousands)						(in thousands)							(in thousands)						(in thousands)
Revenues:	Revenues:													Revenues:
Asset-based	Asset-based	$	137,744	$	126,591	9	%	$	394,801	$	355,595	11	%	Asset-based	$	184,008	$	137,744	34	%	$	513,458	$	394,801	30	%
Subscription-based	Subscription-based	62,783		57,353		9	%	184,516		148,457		24	%	Subscription-based	66,988		62,783		7	%	197,663		184,516		7	%
Total recurring revenues	Total recurring revenues	200,527		183,944		9	%	579,317		504,052		15	%	Total recurring revenues	250,996		200,527		25	%	711,121		579,317		23	%
Professional services and other revenues	Professional services and other revenues	3,767		4,280		(12)	%	11,082		13,767		(20)	%	Professional services and other revenues	3,738		3,767		(1)	%	10,320		11,082		(7)	%
Total revenues	Total revenues	204,294		188,224		9	%	590,399		517,819		14	%	Total revenues	254,734		204,294		25	%	721,441		590,399		22	%
Operating expenses:	Operating expenses:													Operating expenses:
Cost of revenues	Cost of revenues	72,435		65,752		10	%	205,338		187,857		9	%	Cost of revenues	103,742		72,435		43	%	285,887		205,338		39	%
Compensation and benefits	Compensation and benefits	59,522		60,836		(2)	%	194,906		165,610		18	%	Compensation and benefits	67,592		59,522		14	%	195,560		194,906		—	%
General and administration	General and administration	22,248		25,476		(13)	%	69,358		71,326		(3)	%	General and administration	26,086		22,248		17	%	71,669		69,358		3	%
Depreciation and amortization	Depreciation and amortization	20,406		18,414		11	%	59,907		46,057		30	%	Depreciation and amortization	22,928		20,406		12	%	67,283		59,907		12	%
Total operating expenses	Total operating expenses	174,611		170,478		2	%	529,509		470,850		12	%	Total operating expenses	220,348		174,611		26	%	620,399		529,509		17	%
Income from operations	Income from operations	$	29,683	$	17,746	67	%	$	60,890	$	46,969	30	%	Income from operations	$	34,386	$	29,683	16	%	$	101,042	$	60,890	66	%

Three months ended September 30, ~~2020~~2021 compared to three months ended September 30, ~~2019~~2020 for the Envestnet Wealth Solutions segment

Asset-based recurring revenues

Asset-based recurring revenues increased 9%34% from ~~$126,591~~$137.7 million in the three months ended September 30, ~~2019~~2020 to ~~$137,744~~$184.0 million in the three months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in the three months ended September 30, ~~2020~~2021 compared to the three months ended September 30, ~~2019, due to~~2020, the impact of new account growth and positive net flows of AUM/A in the third quarter of ~~2020.~~

2021.

4244

As a percentage of ~~total~~segment revenues, asset-based recurring revenue ~~remained consistent at~~increased from 67% of ~~total~~segment revenue in the three months ended September 30, ~~2019 and 2020.~~2020 to 72% of segment revenue in the three months ended September 30, 2021, primarily due to a higher increase in asset-based recurring revenues as compared to subscription-based recurring revenues.

Subscription-based recurring revenues

Subscription-based recurring revenues increased 9%7% from ~~$57,353~~$62.8 million in the three months ended September 30, ~~2019~~2020 to ~~$62,783~~$67.0 million in the three months ended September 30, ~~2020. The increase was~~2021, primarily due to ~~growth from~~ new and existing ~~customers.~~customer growth.

Professional services and other revenues

Professional services and other revenues decreased ~~12%~~1% from ~~$4,280~~$3.8 million in the three months ended September 30, ~~2019~~2020 to ~~$3,767~~$3.7 million in the three months ended September 30, ~~2020.~~2021.

Cost of revenues

Cost of revenues increased 43% from $72.4 million in the three months ended September 30, 2020 to $103.7 million in the three months ended September 30, 2021. The increase was primarily due to an increase in asset-based cost of revenues of $31.2 million, which directly correlates with the increase to asset-based recurring revenues during the period. As a percentage of total revenues, cost of revenues increased from 35% in the three months ended September 30, 2020 to 41% in the three months ended September 30, 2021, primarily due to shifts in pricing and product mix for asset-based revenues.

Compensation and benefits

Compensation and benefits increased 14% from $59.5 million in the three months ended September 30, 2020 to $67.6 million in the three months ended September 30, 2021. The increase is primarily due to increases in salaries, benefits and related payroll taxes of $5.7 million, incentive compensation of $2.7 million and non-cash compensation expense of $1.0 million. These increases were partially offset by a decrease in severance expense of $2.2 million. As a percentage of total revenues, compensation and benefits decreased from 29% in the three months ended September 30, 2020 to 27% in the three months ended September 30, 2021.

General and administration

General and administration expenses increased 17% from $22.2 million in the three months ended September 30, 2020 to $26.1 million in the three months ended September 30, 2021. The increase was primarily due to increases in systems development costs of $3.0 million, marketing expense of $2.6 million, restructuring charges and transaction costs of $1.1 million and bad debt expense of $0.9 million. These increases were partially offset by decreases in non-income tax expense of $2.8 million and miscellaneous general and administration expenses of $1.3 million. As a percentage of total revenues, general and administration expenses decreased from 11% in the three months ended September 30, 2020 to 10% in the three months ended September 30, 2021.

Depreciation and amortization

Depreciation and amortization expense increased 12% from $20.4 million in the three months ended September 30, 2020 to $22.9 million in the three months ended September 30, 2021. The increase was primarily due to increases in internally developed software amortization expense of $1.7 million and intangible asset amortization of $0.8 million. As a percentage of revenues, depreciation and amortization expense decreased from 10% in the three months ended September 30, 2020 to 9% in the three months ended September 30, 2021.

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020 for the Envestnet Wealth Solutions segment

Asset-based recurring revenues

Asset-based recurring revenues increased 30% from $394.8 million in the nine months ended September 30, 2020 to $513.5 million in the nine months ended September 30, 2021. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due to the impact of new account growth and positive net flows of AUM/A in the first nine months of 2021.

The number of financial advisors with asset-based recurring revenue on our technology platforms increased from approximately 41,000 as of September 30, 2020 to approximately 42,000 as of September 30, 2021, and the number of AUM/A client accounts increased from approximately 2.3 million as of September 30, 2020 to approximately 2.5 million as of September 30, 2021.

As a percentage of segment revenues, asset-based recurring revenue increased from 67% of segment revenue in the nine months ended September 30, 2020 to 71% of segment revenue in the nine months ended September 30, 2021, primarily due to a higher increase in asset-based recurring revenues as compared to subscription-based recurring revenues.

Subscription-based recurring revenues

Subscription-based recurring revenues increased 7% from $184.5 million in the nine months ended September 30, 2020 to $197.7 million in the nine months ended September 30, 2021, primarily due to new and existing customer growth along with additional revenue from existing customers switching from an asset-based pricing model to a subscription-based pricing model.

Professional services and other revenues

Professional services and other revenues decreased 7% from $11.1 million in the nine months ended September 30, 2020 to $10.3 million in the nine months ended September 30, 2021. The decrease was primarily due to timing of the completion of customer projects and deployments.

Cost of revenues

Cost of revenues increased ~~10%~~39% from ~~$65,752~~$205.3 million in the ~~three~~nine months ended September 30, ~~2019~~2020 to ~~$72,435~~$285.9 million in the ~~three~~nine months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in asset-based cost of revenues of ~~$6,794,~~$80.2 million, which directly ~~correlated~~correlates with the increase to asset-based recurring revenues during the period. As a percentage of ~~total~~segment revenues, cost of revenues ~~remained consistent at~~increased from 35% ~~in the three months ended September 30, 2019 and 2020.~~

~~Compensation and benefits~~

Compensation and benefits decreased 2% from $60,836 in the three months ended September 30, 2019 to $59,522 in the three months ended September 30, 2020. The decrease is primarily due to a decrease in salaries, benefits and related payroll taxes of $2,300, partially offset by an increase in severance expense of $1,075. As a percentage of total revenues, compensation and benefits decreased from 32% in the three months ended September 30, 2019 to 29% in the three months ended September 30, 2020 primarily due to decreased salaries, benefits and related taxes due to increased capitalized labor costs related to internally developed software and lower healthcare related expenses for three months ended September 30, 2020 compared to the three months ended September 30, 2019.

~~General and administration~~

General and administration expenses decreased 13% from $25,476 in the three months ended September 30, 2019 to $22,248 in the three months ended September 30, 2020. The decrease was primarily due to decreases in travel and entertainment expense of $2,771, restructuring charges and transaction costs of $1,531 and marketing expense of $1,117. These decreases were partially offset by increases in non-income tax expense of $1,553 and trade errors expense of $1,231. As a percentage of total revenues, general and administration expenses decreased from 14% in the three months ended September 30, 2019 to 11% in the three months ended September 30, 2020 primarily due to decreased travel and entertainment expense as a result of actions taken by the Company as a result of COVID-19.

~~Depreciation and amortization~~

Depreciation and amortization expense increased 11% from $18,414 in the three months ended September 30, 2019 to $20,406 in the three months ended September 30, 2020. The increase was primarily due to an increase in internally developed software amortization expense of $2,002 and an increase in property and equipment depreciation expense of $586, partially offset by a decrease in intangible asset amortization expense of $595. As a percentage of revenues, depreciation and amortization expense remained consistent at 10% in the three months ended September 30, 2019 and 2020.

~~Nine months ended September 30, 2020 compared to nine months ended September 30, 2019 for the Envestnet Wealth Solutions segment~~

~~Asset-based recurring revenues~~

Asset-based recurring revenues increased 11% from $355,595 in the nine months ended September 30, 2019 to $394,801 in the nine months ended September 30, 2020. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in the nine months ended September 30, 2020 ~~compared~~ to ~~the nine months ended September 30, 2019, due to the impact of new account growth and positive net flows of AUM/A in the first nine months of 2020.~~

The number of financial advisors with asset-based recurring revenue on our technology platforms increased from 39,735 as of September 30, 2019 to 41,450 as of September 30, 2020 and the number of AUM/A client accounts increased from approximately 2,100,000 as of September 30, 2019 to approximately 2,300,000 as of September 30, 2020.

~~As a percentage of total revenues, asset-based recurring revenue decreased from 69% of total revenue~~40% in the nine months ended September 30, ~~2019 to 67% of total revenue in the nine months ended September 30, 2020.~~

~~Subscription-based recurring revenues~~

~~Subscription-based recurring revenues increased 24% from $148,457 in the nine months ended September 30, 2019 to $184,516 in the nine months ended September 30, 2020.~~

The 2019 Acquisitions contributed incremental revenues of $27,529 to subscription-based recurring revenues in the nine months ended September 30, 2020. The remaining increase of $8,530 is a result of growth from new and existing customers.

~~Professional services and other revenues~~

~~Professional services and other revenues decreased 20% from $13,767 in the nine months ended September 30, 2019 to $11,082 in the nine months ended September 30, 2020. The decrease was~~2021, primarily due to ~~a decrease~~shifts in ~~revenues as a result of the cancellation of our 2020 Advisor Summit.~~

~~Cost of revenues~~

~~Cost of revenues increased 9% from $187,857 in the nine months ended September 30, 2019 to $205,338 in the nine months ended September 30, 2020. The increase was primarily due to an increase in~~pricing and product mix for asset-based cost of revenues of $23,126, directly correlated with the increase to asset-based recurring revenues during the period. This increase was partially offset by a decrease in professional services and other cost of revenues of $4,964, primarily a result of the cancellation of our 2020 Advisor Summit. The 2019 Acquisitions had an immaterial impact to cost of revenues in the nine months ended September 30, 2020. As a percentage of total revenues, cost of revenues decreased from 36% in the nine months ended September 30, 2019 to 35% in the nine months ended September 30, 2020.revenues.

Compensation and benefits

Compensation and benefits increased ~~18%~~ from ~~$165,610~~$194.9 million in the nine months ended September 30, ~~2019~~2020 to ~~$194,906~~$195.6 million in the nine months ended September 30, ~~2020.~~2021. The increase is primarily due to increases in ~~severance expense~~incentive compensation of ~~$12,351,~~$6.6 million, salaries, benefits and related payroll taxes of ~~$7,439, incentive compensation of $5,350 and non-cash compensation~~$4.9 million. These increases are partially offset by a decrease in severance expense of ~~$3,852.~~$10.5 million. The ~~increase~~decrease in severance expense is primarily related to charges in connection with the Early Retirement Program during the ~~three months ended March 31, 2020. The 2019 Acquisitions contributed compensation and benefit expenses of $14,339 and $22,165 to total compensation and benefits expense in the~~ nine months ended September 30, ~~2019 and 2020, respectively.~~2020. As a percentage of ~~total~~segment revenues, compensation and benefits ~~increased~~decreased from ~~32% in the nine months ended September 30, 2019 to~~ 33% in the nine months ended September 30, ~~2020.~~2020 to 27% in the nine months ended September 30, 2021, primarily due to a higher revenue increase compared to a lower compensation and benefits increase.

General and administration

General and administration expenses ~~decreased~~increased 3% from ~~$71,326~~$69.4 million in the nine months ended September 30, ~~2019~~2020 to ~~$69,358~~$71.7 million in the nine months ended September 30, ~~2020.~~2021. The ~~decrease~~increase was primarily due to increases in systems development costs of $6.0 million, professional and legal fees of $2.9 million, marketing expense of $2.4 million and occupancy costs of $1.0 million. These increases were partially offset by decreases in miscellaneous general and administration expenses of $4.2 million, non-income tax expense of $2.9 million, travel and entertainment expenses of ~~$5,772, marketing expense of $2,196, professional~~$1.7 million and ~~legal fees of $1,558 and occupancy costs of $1,251. These~~

4446

decreases were partially offset by increases in trade errors expense of $3,000, systems development costs of $2,529 and restructuring charges and transaction costs of $1,100. The 2019 Acquisitions contributed general and administration expenses of $6,442 and $4,835 in the nine months ended September 30, 2019 and 2020, respectively.various other immaterial decreases. As a percentage of ~~total~~segment revenues, general and administration expenses decreased from ~~14% in the nine months ended September 30, 2019 to~~ 12% in the nine months ended September 30, ~~2020.~~2020 to 10% in the nine months ended September 30, 2021.

Depreciation and amortization

Depreciation and amortization expense increased ~~30%~~12% from ~~$46,057~~$59.9 million in the nine months ended September 30, ~~2019~~2020 to ~~$59,907~~$67.3 million in the nine months ended September 30, ~~2020.~~2021. The increase was primarily due to an increase in ~~intangible asset amortization expense of $7,633, the direct result of amortizing additional intangible assets related to our 2019 Acquisitions, an increase in~~ internally developed software amortization expense of ~~$3,188 and an increase in property and equipment depreciation expense of $2,229.~~$6.0 million. As a percentage of segment revenues, depreciation and amortization expense ~~increased~~decreased from 10% in the nine months ended September 30, 2020 to 9% in the nine months ended September 30, ~~2019 to 10% in the nine months ended September 30, 2020.~~2021.

Envestnet Data & Analytics

The following table presents ~~loss~~income (loss) from operations for the Envestnet Data & Analytics segment:


															Three Months Ended						Nine Months Ended
		Three Months Ended						Nine Months Ended							September 30,				Percent		September 30,				Percent
		September 30,				Percent		September 30,				Percent			2021		2020		Change		2021		2020		Change
		2020		2019		Change		2020		2019		Change
		(in thousands)						(in thousands)							(in thousands)						(in thousands)
Revenues:	Revenues:													Revenues:
Subscription-based	Subscription-based	$	45,114	$	43,230	4	%	$	132,911	$	127,471	4	%	Subscription-based	$	46,584	$	45,114	3	%	$	138,242	$	132,911	4	%
Professional services and other revenues	Professional services and other revenues	3,151		4,626		(32)	%	11,101		14,901		(26)	%	Professional services and other revenues	1,735		3,151		(45)	%	7,213		11,101		(35)	%
Total revenues	Total revenues	48,265		47,856		1	%	144,012		142,372		1	%	Total revenues	48,319		48,265		—	%	145,455		144,012		1	%
Operating expenses:	Operating expenses:													Operating expenses:
Cost of revenues	Cost of revenues	6,110		6,118		—	%	16,989		17,738		(4)	%	Cost of revenues	6,094		6,110		—	%	17,312		16,989		2	%
Compensation and benefits	Compensation and benefits	26,540		28,956		(8)	%	82,455		91,913		(10)	%	Compensation and benefits	26,468		26,540		—	%	77,765		82,455		(6)	%
General and administration	General and administration	8,308		11,573		(28)	%	26,162		29,611		(12)	%	General and administration	7,570		8,308		(9)	%	25,513		26,162		(2)	%
Depreciation and amortization	Depreciation and amortization	8,545		8,321		3	%	25,170		27,110		(7)	%	Depreciation and amortization	6,922		8,545		(19)	%	20,969		25,170		(17)	%
Total operating expenses	Total operating expenses	49,503		54,968		(10)	%	150,776		166,372		(9)	%	Total operating expenses	47,054		49,503		(5)	%	141,559		150,776		(6)	%
Loss from operations		$	(1,238)	$	(7,112)	(83)	%	$	(6,764)	$	(24,000)	(72)	%
Income (loss) from operations														Income (loss) from operations	$	1,265	$	(1,238)	*		$	3,896	$	(6,764)	*

*Not meaningful.

Three months ended September 30, ~~2020~~2021 compared to three months ended September 30, ~~2019~~2020 for the Envestnet Data & Analytics segment

Subscription-based recurring revenues

Subscription-based recurring revenues increased 4%3% from ~~$43,230 in the three months ended September 30, 2019 to $45,114~~$45.1 million in the three months ended September 30, 2020 to $46.6 million in the three months ended September 30, 2021, primarily due to ~~broad~~ increases in revenue from new and existing customers.

Professional services and other revenues

Professional services and other revenues decreased ~~32%~~45% from ~~$4,626 in the three months ended September 30, 2019 to $3,151~~$3.2 million in the three months ended September 30, 2020 to $1.7 million in the three months ended September 30, 2021 primarily due to the timing of the completion of customer projects and deployments.

Cost of revenues

Cost of revenues remained consistent~~from $6,118~~ at $6.1 million in the three months ended September 30, ~~2019 to $6,110 in the three months ended September 30, 2020.~~2020 and 2021. As a percentage of ~~total~~segment revenues, cost of revenues remained consistent at 13% ~~for~~in the three months ended September 30, ~~2019~~2020 and ~~2020.~~2021.

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Compensation and benefits

Compensation and benefits ~~decreased 8% from $28,956~~remained consistent at $26.5 million in the three months ended September 30, ~~2019 to $26,540 in the three months ended September 30, 2020. The decrease is primarily due to decreases in salaries, benefits~~2020 and ~~related payroll taxes of $3,381 and severance expense of $724, partially offset by an increase in incentive compensation of $1,060 and non-cash compensation expense of $614.~~2021. As a percentage of ~~total~~segment revenues, compensation and benefits ~~decreased from 61% in the three months ended September 30, 2019 to~~remained consistent at 55% in the three months ended September 30, ~~2020. The decrease~~2020 and 2021.

General and administration

General and administration expenses decreased 9% from $8.3 million in ~~compensation and benefits as a percentage of total revenues is primarily due to increased capitalized labor costs related to internally developed software for~~ the three months ended September 30, 2020 ~~in comparison~~ to ~~the three months ended September 30, 2019.~~

~~General and administration~~

~~General and administration expenses decreased 28% from $11,573~~$7.6 million in the three months ended September 30, ~~2019~~2021 as decreases from a fair market value adjustment to ~~$8,308~~an outstanding contingent consideration liability and lower litigation and regulatory costs were partially offset by increases in the three months ended September 30, 2020. The decrease is primarily due to decreases in travel and entertainment expense of $1,244, occupancy costs of $963 and restructuring charges and transaction costs of $591.systems development costs. As a percentage of ~~total~~segment revenues, general and administration expenses decreased from ~~24% in the three months ended September 30, 2019 to~~ 17% in the three months ended September 30, 2020 ~~primarily due~~ to ~~decreased travel and entertainment expense as a result of actions taken by~~16% in the ~~Company as a result of COVID-19 as well as decreased occupancy costs.~~ three months ended September 30, 2021.

Depreciation and amortization

Depreciation and amortization expense ~~increased 3%~~decreased 19% from ~~$8,321 in the three months ended September 30, 2019 to $8,545~~$8.5 million in the three months ended September 30, 2020 ~~and is primarily due~~ to ~~an increase in internally developed software amortization. As a percentage of total revenues, depreciation and amortization expense increased from 17%~~$6.9 million in the three months ended September 30, ~~2019~~2021. The decrease is primarily due to a decrease in intangible asset amortization expense of $1.9 million, partially offset by an increase in internally developed software amortization expense of $0.6 million. As a percentage of segment revenues, depreciation and amortization expense decreased from 18% in the three months ended September 30, 2020 to 14% in the three months ended September 30, 2021. The decrease in depreciation and amortization as a percentage of segment revenues is primarily driven by a technology intangible asset becoming fully amortized in the fourth quarter of 2020.

Nine months ended September 30, ~~2020~~2021 compared to nine months ended September 30, ~~2019~~2020 for the Envestnet Data & Analytics segment

Subscription-based recurring revenues

Subscription-based recurring revenues increased 4% from ~~$127,471 in the nine months ended September 30, 2019 to $132,911~~$132.9 million in the nine months ended September 30, 2020 to $138.2 million in the nine months ended September 30, 2021, primarily due to ~~broad~~ increases in revenue from new and existing customers.

Professional services and other revenues

Professional services and other revenues decreased ~~26%~~35% from ~~$14,901 in the nine months ended September 30, 2019 to $11,101~~$11.1 million in the nine months ended September 30, 2020 to $7.2 million in the nine months ended September 30, 2021 primarily due to the timing of the completion of customer projects and deployments.

Cost of revenues

Cost of revenues ~~decreased 4%~~increased 2% from ~~$17,738 in the nine months ended September 30, 2019 to $16,989~~$17.0 million in the nine months ended September 30, 2020 ~~primarily due~~ to ~~a decrease~~$17.3 million in ~~outside services of $1,093.~~the nine months ended September 30, 2021. As a percentage of ~~total~~segment revenues, cost of revenues remained consistent at 12% in the nine months ended September 30, ~~2019 compared to the nine months ended September 30, 2020.~~2020 and 2021.

Compensation and benefits

Compensation and benefits decreased ~~10%~~6% from ~~$91,913~~$82.5 million in the nine months ended September 30, ~~2019~~2020 to ~~$82,455~~$77.8 million in the nine months ended September 30, ~~2020,~~2021, primarily due to decreases in salaries, benefits, and related payroll taxes of ~~$10,628 and severance~~$3.5 million, non-cash compensation expense of ~~$3,128.~~$2.0 million and miscellaneous employee expenses of $1.9 million. These decreases were partially offset by increases in incentive compensation of ~~$3,684~~$1.3 million and ~~other miscellaneous increases.~~severance expense of $1.0 million. As a percentage of ~~total~~segment revenues, compensation and benefits decreased from ~~65% in the nine months ended September 30, 2019 to~~ 57% in the nine months ended September 30, ~~2020.~~2020 to 53% in the nine months ended September 30, 2021. The decrease in compensation and benefits as a percentage of total revenues is primarily driven by ~~increased capitalized labor~~a decrease in overall compensation and benefits costs ~~related to internally developed software and decreased severance expense~~as a result of lower headcount in the current year, partially offset by an increase in revenues for the nine months ended September 30, ~~2020~~2021 compared to the nine months ended September 30, ~~2019.~~2020.

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General and administration

General and administration expenses decreased ~~12%~~2% from ~~$29,611 in the nine months ended September 30, 2019 to $26,162~~$26.2 million in the nine months ended September 30, 2020 ~~primarily due~~ to a decrease in travel and entertainment expense of $2,820, a decrease to contingent consideration liability related to fair value adjustments of $2,056, occupancy costs of $1,577 and restructuring charges and transaction costs of $904. These decreases were partially offset by an increase to litigation and regulatory related expenses of $3,964. As a percentage of total revenues, general and administration expenses decreased from 21%$25.5 million in the nine months ended September 30, ~~2019 to~~2021 as decreases in occupancy costs of $1.6 million, travel and entertainment expenses of $0.7 million and various other immaterial decreases within general and administration were primarily offset by increases in marketing expenses of $1.5 million and systems development costs of $1.4 million. As a percentage of segment revenues, general and administration expenses remained consistent at 18% in the nine months ended September 30, ~~2020. The decrease in general~~2020 and ~~administration expenses as a percentage of total revenues is primarily due to decreased travel and entertainment expense as a result of actions taken by the Company as a result of COVID-19.~~2021.

Depreciation and amortization

Depreciation and amortization expense decreased 7%17% from ~~$27,110~~$25.2 million in the nine months ended September 30, ~~2019~~2020 to ~~$25,170~~$21.0 million in the nine months ended September 30, ~~2020.~~2021. The decrease is primarily due to a decrease in intangible asset amortization expense of $5.7 million, partially offset by an increase in internally developed software amortization expense of $1.9 million. As a percentage of segment revenues, depreciation ~~of property~~ and ~~equipment of $2,224 resulting~~amortization expense decreased from ~~a purchase price accounting adjustment that occurred~~17% in the nine months ended September 30, ~~2019. As a percentage of total revenues, depreciation and amortization expense decreased from 19%~~2020 to 14% in the nine months ended September 30, ~~2019 to 17%~~2021. The decrease in depreciation and amortization as a percentage of segment revenues is primarily driven by a technology intangible asset becoming fully amortized in the ~~nine months ended September 30,~~fourth quarter of 2020.

Nonsegment

The following table presents nonsegment operating expenses:


															Three Months Ended						Nine Months Ended
		Three Months Ended						Nine Months Ended							September 30,				Percent		September 30,				Percent
		September 30,				Percent		September 30,				Percent			2021		2020		Change		2021		2020		Change
		2020		2019		Change		2020		2019		Change
		(in thousands)						(in thousands)							(in thousands)						(in thousands)
Operating expenses:	Operating expenses:													Operating expenses:
Compensation and benefits	Compensation and benefits	$	8,366	$	5,795	44	%	$	23,062	$	28,067	(18)	%	Compensation and benefits	$	15,779	$	8,366	89	%	$	42,776	$	23,062	85	%
General and administration	General and administration	8,423		4,967		70	%	23,017		24,024		(4)	%	General and administration	5,737		8,423		(32)	%	20,281		23,017		(12)	%
Nonsegment operating expenses	Nonsegment operating expenses	$	16,789	$	10,762	56	%	$	46,079	$	52,091	(12)	%	Nonsegment operating expenses	$	21,516	$	16,789	28	%	$	63,057	$	46,079	37	%

Three months ended September 30, ~~2020~~2021 compared to three months ended September 30, ~~2019~~2020 for Nonsegment

Compensation and benefits

Compensation and benefits increased ~~44%~~89% from ~~$5,795 in the three months ended September 30, 2019 to $8,366~~$8.4 million in the three months ended September 30, 2020 to $15.8 million in the three months ended September 30, 2021, primarily due to increased headcount that resulted in increases in ~~incentive compensation of $822,~~ salaries, benefits and related payroll taxes of ~~$803 and~~$3.2 million, non-cash compensation expense of ~~$481.~~$2.8 million and incentive compensation of $1.4 million.

General and administration

General and administration expenses ~~increased 70%~~decreased 32% from ~~$4,967 in the three months ended September 30, 2019 to $8,423~~$8.4 million in the three months ended September 30, 2020 to $5.7 million in the three months ended September 30, 2021, primarily due to ~~an increase~~a decrease in restructuring charges and transaction costs of ~~$2,873 and systems development costs of $587.~~$3.4 million, partially offset by various immaterial increases.

Nine months ended September 30, ~~2020~~2021 compared to nine months ended September 30, ~~2019~~2020 for Nonsegment

Compensation and benefits

Compensation and benefits ~~decreased 18%~~increased 85% from ~~$28,067 in the nine months ended September 30, 2019 to $23,062~~$23.1 million in the nine months ended September 30, 2020 to $42.8 million in the nine months ended September 30, 2021, primarily due to ~~a decrease~~increased headcount that resulted in ~~incentive compensation of $8,788 and non-cash compensation expense of $1,237, partially offset by~~ increases in salaries, benefits and related payroll taxes of ~~$2,966~~$7.8 million, non-cash compensation expense of $6.9 million and incentive compensation of $3.7 million. Also contributing to the increase was an increase in severance expense of $1,197. The decrease in incentive compensation is primarily a result of approximately $8,800 in retention bonuses paid in connection with the PIEtech Acquisition in the nine months ended September 30, 2019.$1.3 million.

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General and administration

General and administration expenses decreased 4%12% from ~~$24,024~~$23.0 million in the nine months ended September 30, ~~2019~~2020 to ~~$23,017~~$20.3 million in the nine months ended September 30, ~~2020,~~2021. The decrease was primarily due to a decrease in restructuring charges and transaction costs of ~~$2,781 and a decrease in travel and entertainment expense of $537,~~$5.1 million, partially offset by ~~increases~~an increase in ~~permits, licenses~~insurance and ~~fees~~bank charges of ~~$677, systems development costs of $556, professional and legal fees of $492 and~~$1.0 million as well as other ~~miscellaneous~~immaterial increases.

Non-GAAP Financial Measures

In addition to reporting results according to U.S. 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 net~~ revenues,” “adjusted EBITDA,” “adjusted net income” and “adjusted net income per share.”

“Adjusted revenues” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. Under 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 cost 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~~has limitations as a financial ~~measures,~~measure, should be considered as supplemental in nature and ~~are~~is not meant as a substitute for revenue prepared in accordance with GAAP.

“Adjusted EBITDA” represents net income (loss) before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration liability, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, gain on acquisition of equity method investment, gain on settlement of liability, gain on insurance reimbursement, fair market value adjustment to investment in private company, loss allocation from equity method investments and ~~(income) loss~~income attributable to non-controlling interest.

“Adjusted net income” represents net income before deferred revenue fair value adjustment, accretion on contingent consideration and purchase liability, non-cash interest expense, cash interest on our convertible notes (subsequent to the adoption of ASU 2020-06 on January 1, 2021), non-cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration liability, amortization of acquired intangibles, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, gain on acquisition of equity method investment, gain on settlement of liability, gain on insurance reimbursement, fair market value adjustment to investment in private company, loss allocation from equity method investments and ~~(income) loss~~income attributable to 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-average shares outstanding. Beginning January 1, 2021, the dilutive effect of our Convertible Notes are calculated using the if-converted method in accordance with the adoption of ASU 2020-06 (See Part I, “Note 2—Basis of Presentation”). As a result, 9.9 million potential shares to be issued in connection with our Convertible Notes are considered to be dilutive for purposes of the adjusted net income per share calculation beginning January 1, 2021.

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

•As measures of operating performance;

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

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

•To evaluate the effectiveness of our business strategies; and

•In communications with our Board concerning our financial performance.

Our Compensation Committee, our Board 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, 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 cost of revenues. 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 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, deferred revenue fair value adjustment, income tax provision (benefit), non-income tax expense, restructuring charges and transaction costs, accretion on contingent consideration and purchase liability, severance, fair market value adjustment on contingent consideration liability, litigation and regulatory related expenses, foreign currency, gain on acquisition of equity method investment, fair market value adjustment to investment in private company, loss allocation from equity method investments, (income) 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 GAAP and should not be considered as an alternative to revenues, net income, operating income or any other performance measures derived in accordance with GAAP, or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity.

We understand that, although adjusted 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 GAAP. In particular you should consider:

•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 ~~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;

•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;

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

•Due to either net losses before income tax expense or the use of federal and state net operating loss carryforwards, we made net tax payments of ~~$5,349~~$5,895 and ~~$7,826~~$5,349 for the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, 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 ~~net revenues, adjusted~~ EBITDA, adjusted net income and adjusted net income per share through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of adjusted ~~revenues and adjusted net~~ revenues to revenues, the most directly comparable 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 GAAP measure. Further, our management also

reviews GAAP measures and evaluates individual measures that are not included in some or all of our non-GAAP financial measures, such as our level of capital expenditures and interest income, among other measures.

The following 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
		Three Months Ended				Nine Months Ended					September 30,				September 30,
		September 30,				September 30,					2021		2020		2021		2020
		2020		2019		2020		2019
		(in thousands)				(in thousands)					(in thousands)
Total revenues	Total revenues	$	252,559	$	236,080	$	734,411	$	660,191	Total revenues	$	303,053	$	252,559	$	866,896	$	734,411
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	91		3,250		607		6,670		Deferred revenue fair value adjustment	67		91		227		607
Adjusted revenues	Adjusted revenues	252,650		239,330		735,018		666,861		Adjusted revenues	$	303,120	$	252,650	$	867,123	$	735,018
Less: Asset-based cost of revenues		(71,133)		(64,339)		(201,600)		(178,474)
Adjusted net revenues		$	181,517	$	174,991	$	533,418	$	488,387

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


											Three Months Ended				Nine Months Ended
		Three Months Ended				Nine Months Ended					September 30,				September 30,
		September 30,				September 30,					2021		2020		2021		2020
		2020		2019		2020		2019
		(in thousands)				(in thousands)					(in thousands)
Net income (loss)	Net income (loss)	$	2,323	$	(2,964)	$	(10,338)	$	(20,619)	Net income (loss)	$	11,438	$	2,323	$	18,004	$	(10,338)
Add (deduct):	Add (deduct):									Add (deduct):
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	91		3,250		607		6,670		Deferred revenue fair value adjustment	67		91		227		607
Interest income	Interest income	(262)		(448)		(850)		(2,859)		Interest income	(202)		(262)		(569)		(850)
Interest expense	Interest expense	8,139		8,986		21,907		24,345		Interest expense	4,242		8,139		12,682		21,907
Accretion on contingent consideration and purchase liability		398		498		1,308		1,240
Income tax provision (benefit)	Income tax provision (benefit)	497		(6,977)		(161)		(31,591)		Income tax provision (benefit)	(854)		497		9,074		(161)
Depreciation and amortization	Depreciation and amortization	28,951		26,735		85,077		73,167		Depreciation and amortization	29,850		28,951		88,252		85,077
Non-cash compensation expense	Non-cash compensation expense	15,852		15,389		43,197		43,241		Non-cash compensation expense	18,885		15,852		50,307		43,197
Restructuring charges and transaction costs	Restructuring charges and transaction costs	4,993		4,151		14,461		24,725		Restructuring charges and transaction costs	3,403		4,993		11,215		14,461
Severance	Severance	2,715		2,387		18,566		8,147		Severance	207		2,715		10,498		18,566
Accretion on contingent consideration and purchase liability										Accretion on contingent consideration and purchase liability	81		398		656		1,308
Fair market value adjustment on contingent consideration liability	Fair market value adjustment on contingent consideration liability	(74)		—		(2,056)		—		Fair market value adjustment on contingent consideration liability	(927)		(74)		(1,067)		(2,056)
Fair market value adjustment to investment in private company										Fair market value adjustment to investment in private company	—		—		(758)		—
Litigation and regulatory related expenses	Litigation and regulatory related expenses	1,809		2,065		6,029		2,065		Litigation and regulatory related expenses	1,512		1,809		5,159		6,029
Foreign currency	Foreign currency	(37)		363		(68)		208		Foreign currency	97		(37)		110		(68)
Gain on acquisition of equity method investment										Gain on acquisition of equity method investment	—		—		—		(4,230)
Gain on settlement of liability										Gain on settlement of liability	(1,206)		—		(1,206)		—
Gain on insurance reimbursement										Gain on insurance reimbursement	(968)		—		(968)		—
Non-income tax expense adjustment	Non-income tax expense adjustment	1,795		362		1,341		1,480		Non-income tax expense adjustment	(831)		1,795		(1,102)		1,341
Gain on acquisition of equity method investment		—		—		(4,230)		—
Loss allocation from equity method investments	Loss allocation from equity method investments	994		957		4,280		1,507		Loss allocation from equity method investments	1,508		994		5,553		4,280
(Income) loss attributable to non-controlling interest		(603)		(210)		(1,103)		31
Income attributable to non-controlling interest										Income attributable to non-controlling interest	(114)		(603)		(554)		(1,103)
Adjusted EBITDA	Adjusted EBITDA	$	67,581	$	54,544	$	177,967	$	131,757	Adjusted EBITDA	$	66,188	$	67,581	$	205,513	$	177,967

5052

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


											Three Months Ended				Nine Months Ended
		Three Months Ended				Nine Months Ended					September 30,				September 30,
		September 30,				September 30,					2021		2020		2021		2020
		2020		2019		2020		2019
		(in thousands)				(in thousands)					(in thousands, except share and per share information)
Net income (loss)	Net income (loss)	$	2,323	$	(2,964)	$	(10,338)	$	(20,619)	Net income (loss)	$	11,438	$	2,323	$	18,004	$	(10,338)
Income tax provision (benefit) (1)	Income tax provision (benefit) (1)	497		(6,977)		(161)		(31,591)		Income tax provision (benefit) (1)	(854)		497		9,074		(161)
Loss before income tax provision (benefit)		2,820		(9,941)		(10,499)		(52,210)
Income (loss) before income tax provision (benefit)										Income (loss) before income tax provision (benefit)	10,584		2,820		27,078		(10,499)
Add (deduct):	Add (deduct):									Add (deduct):
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	91		3,250		607		6,670		Deferred revenue fair value adjustment	67		91		227		607
Accretion on contingent consideration and purchase liability		398		498		1,308		1,240
Non-cash interest expense	Non-cash interest expense	4,738		5,006		10,682		14,268		Non-cash interest expense	1,443		4,738		4,295		10,682
Cash interest - Convertible Notes (2)										Cash interest - Convertible Notes (2)	2,479		—		7,439		—
Non-cash compensation expense	Non-cash compensation expense	15,852		15,389		43,197		43,241		Non-cash compensation expense	18,885		15,852		50,307		43,197
Restructuring charges and transaction costs	Restructuring charges and transaction costs	4,993		4,151		14,461		24,725		Restructuring charges and transaction costs	3,403		4,993		11,215		14,461
Severance	Severance	2,715		2,387		18,566		8,147		Severance	207		2,715		10,498		18,566
Accretion on contingent consideration and purchase liability										Accretion on contingent consideration and purchase liability	81		398		656		1,308
Fair market value adjustment on contingent consideration liability	Fair market value adjustment on contingent consideration liability	(74)		—		(2,056)		—		Fair market value adjustment on contingent consideration liability	(927)		(74)		(1,067)		(2,056)
Fair market value adjustment to investment in private company										Fair market value adjustment to investment in private company	—		—		(758)		—
Amortization of acquired intangibles	Amortization of acquired intangibles	18,510		19,242		56,014		51,048		Amortization of acquired intangibles	17,390		18,510		51,370		56,014
Litigation and regulatory related expenses	Litigation and regulatory related expenses	1,809		2,065		6,029		2,065		Litigation and regulatory related expenses	1,512		1,809		5,159		6,029
Foreign currency	Foreign currency	(37)		363		(68)		208		Foreign currency	97		(37)		110		(68)
Gain on acquisition of equity method investment										Gain on acquisition of equity method investment	—		—		—		(4,230)
Gain on settlement of liability										Gain on settlement of liability	(1,206)		—		(1,206)		—
Gain on insurance reimbursement										Gain on insurance reimbursement	(968)		—		(968)		—
Non-income tax expense adjustment	Non-income tax expense adjustment	1,795		362		1,341		1,480		Non-income tax expense adjustment	(831)		1,795		(1,102)		1,341
Gain on acquisition of equity method investment		—		—		(4,230)		—
Loss allocation from equity method investments	Loss allocation from equity method investments	994		957		4,280		1,507		Loss allocation from equity method investments	1,508		994		5,553		4,280
(Income) loss attributable to non-controlling interest		(603)		(210)		(1,103)		31
Income attributable to non-controlling interest										Income attributable to non-controlling interest	(114)		(603)		(554)		(1,103)
Adjusted net income before income tax effect	Adjusted net income before income tax effect	54,001		43,519		138,529		102,420		Adjusted net income before income tax effect	53,610		54,001		168,252		138,529
Income tax effect (2)		(13,772)		(11,097)		(35,325)		(26,117)
Income tax effect (3)										Income tax effect (3)	(13,670)		(13,772)		(42,904)		(35,325)
Adjusted net income	Adjusted net income	$	40,229	$	32,422	$	103,204	$	76,303	Adjusted net income	$	39,940	$	40,229	$	125,348	$	103,204

Basic number of weighted-average shares outstanding	Basic number of weighted-average shares outstanding	53,800,048		52,215,469		53,464,101		50,414,427		Basic number of weighted-average shares outstanding	54,547,858		53,800,048		54,400,247		53,464,101
Effect of dilutive shares:	Effect of dilutive shares:									Effect of dilutive shares:
Options to purchase common stock	Options to purchase common stock	331,728		953,184		458,232		1,107,995		Options to purchase common stock	201,103		331,728		207,281		458,232
Unvested restricted stock units	Unvested restricted stock units	610,442		548,057		548,858		662,364		Unvested restricted stock units	570,515		610,442		614,005		548,858
Convertible notes	Convertible notes	730,267		9,875		280,375		11,637		Convertible notes	9,898,549		730,267		9,898,549		280,375
Warrants	Warrants	86,498		—		46,562		—		Warrants	69,151		86,498		66,439		46,562
Diluted number of weighted-average shares outstanding	Diluted number of weighted-average shares outstanding	55,558,983		53,726,585		54,798,128		52,196,423		Diluted number of weighted-average shares outstanding	65,287,176		55,558,983		65,186,521		54,798,128
Adjusted net income per share - diluted	Adjusted net income per share - diluted	$	0.72	$	0.60	$	1.88	$	1.46	Adjusted net income per share - diluted	$	0.61	$	0.72	$	1.92	$	1.88

(1)For the three months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the effective tax rate computed in accordance with GAAP equaled ~~17.6%~~(8.1)% and ~~70.2%~~17.6%, respectively. For the nine months ended September 30, ~~2020~~2021 and ~~2019,~~2020, the effective tax rate computed in accordance with GAAP equaled ~~1.5%~~33.5% and ~~60.5%~~1.5%, respectively.

(2)Cash interest on the Company's convertible notes included only for the three and nine months ended September 30, 2021 due to the adoption of ASU 2020-06 on January 1, 2021 (See Part I, “Note 2—Basis of Presentation”).

(3)An estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income for both the three and nine months ended September 30, ~~2020~~2021 and ~~2019.~~2020.

Note on Income Taxes: As of December 31, ~~2019,~~2020, we had NOL carryforwards of approximately ~~$261,000~~$242.0 million and ~~$211,000~~$211.0 million for federal and state income tax purposes, respectively, available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we pay for federal, state and foreign income taxes differs significantly from the effective income tax rate computed in accordance with GAAP, and from the normalized rate shown above.

5153

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, ~~2020~~2021 and ~~2019:~~2020:


											Three Months Ended September 30, 2021
		Three Months Ended September 30, 2020									Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total
		Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total
		(in thousands)									(in thousands)
Revenues	Revenues	$	204,294	$	48,265	$	—	$	252,559	Revenues	$	254,734	$	48,319	$	—	$	303,053
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	91		—		—		91		Deferred revenue fair value adjustment	67		—		—		67
Adjusted revenues	Adjusted revenues	204,385		48,265		—		252,650		Adjusted revenues	254,801		48,319		—		303,120
Less: Asset-based cost of revenues		(71,133)		—		—		(71,133)
Adjusted net revenues		$	133,252	$	48,265	$	—	$	181,517

Income (loss) from operations	Income (loss) from operations	$	29,683	$	(1,238)	$	(16,789)	$	11,656	Income (loss) from operations	$	34,386	$	1,265	$	(21,516)	$	14,135
Add:	Add:									Add:
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	91		—		—		91		Deferred revenue fair value adjustment	67		—		—		67
Accretion on contingent consideration and purchase liability		341		57		—		398
Depreciation and amortization	Depreciation and amortization	20,406		8,545		—		28,951		Depreciation and amortization	22,928		6,922		—		29,850
Non-cash compensation expense	Non-cash compensation expense	8,685		4,458		2,709		15,852		Non-cash compensation expense	9,661		3,667		5,557		18,885
Restructuring charges and transaction costs	Restructuring charges and transaction costs	944		33		4,016		4,993		Restructuring charges and transaction costs	2,863		(55)		595		3,403
Non-income tax expense adjustment		1,860		(65)		—		1,795
Severance	Severance	2,154		495		66		2,715		Severance	(49)		227		29		207
Accretion on contingent consideration and purchase liability										Accretion on contingent consideration and purchase liability	62		19		—		81
Fair market value adjustment on contingent consideration liability	Fair market value adjustment on contingent consideration liability	—		(74)		—		(74)		Fair market value adjustment on contingent consideration liability	—		(927)		—		(927)
Litigation and regulatory related expenses	Litigation and regulatory related expenses	—		1,809		—		1,809		Litigation and regulatory related expenses	—		1,512		—		1,512
Non-income tax expense adjustment										Non-income tax expense adjustment	(905)		74		—		(831)
Income attributable to non-controlling interest	Income attributable to non-controlling interest	(603)		—		—		(603)		Income attributable to non-controlling interest	(114)		—		—		(114)
Other	Other	(2)		—		—		(2)		Other	(63)		(9)		(8)		(80)
Adjusted EBITDA	Adjusted EBITDA	$	63,559	$	14,020	$	(9,998)	$	67,581	Adjusted EBITDA	$	68,836	$	12,695	$	(15,343)	$	66,188


											Three Months Ended September 30, 2020
		Three Months Ended September 30, 2019									Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total
		Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total
		(in thousands)									(in thousands)
Revenues	Revenues	$	188,224	$	47,856	$	—	$	236,080	Revenues	$	204,294	$	48,265	$	—	$	252,559
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	3,250		—		—		3,250		Deferred revenue fair value adjustment	91		—		—		91
Adjusted revenues	Adjusted revenues	191,474		47,856		—		239,330		Adjusted revenues	204,385		48,265		—		252,650
Less: Asset-based cost of revenues		(64,339)		—		—		(64,339)
Adjusted net revenues		$	127,135	$	47,856	$	—	$	174,991

Income (loss) from operations	Income (loss) from operations	$	17,746	$	(7,112)	$	(10,762)	$	(128)	Income (loss) from operations	$	29,683	$	(1,238)	$	(16,789)	$	11,656
Add:	Add:									Add:
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	3,250		—		—		3,250		Deferred revenue fair value adjustment	91		—		—		91
Accretion on contingent consideration and purchase liability		498		—		—		498
Depreciation and amortization	Depreciation and amortization	18,414		8,321		—		26,735		Depreciation and amortization	20,406		8,545		—		28,951
Non-cash compensation expense	Non-cash compensation expense	9,317		3,844		2,228		15,389		Non-cash compensation expense	8,685		4,458		2,709		15,852
Restructuring charges and transaction costs	Restructuring charges and transaction costs	733		624		2,794		4,151		Restructuring charges and transaction costs	944		33		4,016		4,993
Severance										Severance	2,154		495		66		2,715
Accretion on contingent consideration and purchase liability										Accretion on contingent consideration and purchase liability	341		57		—		398
Fair market value adjustment on contingent consideration liability										Fair market value adjustment on contingent consideration liability	—		(74)		—		(74)
Litigation and regulatory related expenses										Litigation and regulatory related expenses	—		1,809		—		1,809
Non-income tax expense adjustment	Non-income tax expense adjustment	299		63		—		362		Non-income tax expense adjustment	1,860		(65)		—		1,795
Severance		1,076		1,218		93		2,387
Litigation and regulatory related expenses		—		2,065		—		2,065
(Income) loss attributable to non-controlling interest		(210)		—		—		(210)
Income attributable to non-controlling interest										Income attributable to non-controlling interest	(603)		—		—		(603)
Other	Other	46		(1)		—		45		Other	(2)		—		—		(2)
Adjusted EBITDA	Adjusted EBITDA	$	51,169	$	9,022	$	(5,647)	$	54,544	Adjusted EBITDA	$	63,559	$	14,020	$	(9,998)	$	67,581

5254


	Nine Months Ended September 30, 2021
	Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total

	(in thousands)
Revenues	$	721,441	$	145,455	$	—	$	866,896
Deferred revenue fair value adjustment	227		—		—		227
Adjusted revenues	$	721,668	$	145,455	$	—	$	867,123

Income (loss) from operations	$	101,042	$	3,896	$	(63,057)	$	41,881
Add:
Deferred revenue fair value adjustment	227		—		—		227
Depreciation and amortization	67,283		20,969		—		88,252
Non-cash compensation expense	27,080		9,691		13,536		50,307
Restructuring charges and transaction costs	8,049		119		3,047		11,215
Severance	4,134		3,634		2,730		10,498
Accretion on contingent consideration and purchase liability	572		84		—		656
Fair market value adjustment on contingent consideration liability	—		(1,067)		—		(1,067)
Litigation and regulatory related expenses	—		5,159		—		5,159
Non-income tax expense adjustment	(1,335)		233		—		(1,102)
Income attributable to non-controlling interest	(554)		—		—		(554)
Other	41		—		—		41
Adjusted EBITDA	$	206,539	$	42,718	$	(43,744)	$	205,513

Nine Months Ended September 30, 2020
Envestnet Wealth Solutions Envestnet Data & Analytics Nonsegment Total
(in thousands)
Revenues $ 590,399 $ 144,012 $ — $ 734,411
Deferred revenue fair value adjustment 607 — — 607
Adjusted revenues 591,006 144,012 — 735,018
Less: Asset-based cost of revenues (201,600) — — (201,600)
Adjusted net revenues $ 389,406 $ 144,012 $ — $ 533,418
Income (loss) from operations $ 60,890 $ (6,764) $ (46,079) $ 8,047
Add:
Deferred revenue fair value adjustment 607 — — 607
Accretion on contingent consideration and purchase liability 1,087 221 — 1,308
Depreciation and amortization 59,907 25,170 — 85,077
Non-cash compensation expense 27,437 11,665 6,619 45,721
Restructuring charges and transaction costs 5,864 489 8,108 14,461
Non-income tax expense adjustment 1,532 (191) — 1,341
Severance 14,593 2,587 1,386 18,566
Fair market value adjustment on contingent consideration liability — (2,056) — (2,056)
Litigation and regulatory related expenses — 6,029 — 6,029
Income attributable to non-controlling interest (1,103) — — (1,103)
Other (31) — — (31)
Adjusted EBITDA $ 170,783 $ 37,150 $ (29,966) $ 177,967


											Nine Months Ended September 30, 2020
		Nine Months Ended September 30, 2019									Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total
		Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total
		(in thousands)									(in thousands)
Revenues	Revenues	$	517,819	$	142,372	$	—	$	660,191	Revenues	$	590,399	$	144,012	$	—	$	734,411
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	6,670		—		—		6,670		Deferred revenue fair value adjustment	607		—		—		607
Adjusted revenues	Adjusted revenues	524,489		142,372		—		666,861		Adjusted revenues	$	591,006	$	144,012	$	—	$	735,018
Less: Asset-based cost of revenues		(178,474)		—		—		(178,474)
Adjusted net revenues		$	346,015	$	142,372	$	—	$	488,387

Income (loss) from operations	Income (loss) from operations	$	46,969	$	(24,000)	$	(52,091)	$	(29,122)	Income (loss) from operations	$	60,890	$	(6,764)	$	(46,079)	$	8,047
Add:	Add:									Add:
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment	6,670		—		—		6,670		Deferred revenue fair value adjustment	607		—		—		607
Accretion on contingent consideration and purchase liability		1,240		—		—		1,240
Depreciation and amortization	Depreciation and amortization	46,057		27,110		—		73,167		Depreciation and amortization	59,907		25,170		—		85,077
Non-cash compensation expense	Non-cash compensation expense	23,586		11,799		7,856		43,241		Non-cash compensation expense	27,437		11,665		6,619		45,721
Restructuring charges and transaction costs	Restructuring charges and transaction costs	1,789		1,393		21,543		24,725		Restructuring charges and transaction costs	5,864		489		8,108		14,461
Severance										Severance	14,593		2,587		1,386		18,566
Accretion on contingent consideration and purchase liability										Accretion on contingent consideration and purchase liability	1,087		221		—		1,308
Fair market value adjustment on contingent consideration liability										Fair market value adjustment on contingent consideration liability	—		(2,056)		—		(2,056)
Litigation and regulatory related expenses										Litigation and regulatory related expenses	—		6,029		—		6,029
Non-income tax expense adjustment	Non-income tax expense adjustment	1,407		73		—		1,480		Non-income tax expense adjustment	1,532		(191)		—		1,341
Severance		2,244		5,714		189		8,147
Litigation and regulatory related expenses		—		2,065		—		2,065
Loss attributable to non-controlling interest		31		—		—		31
Income attributable to non-controlling interest										Income attributable to non-controlling interest	(1,103)		—		—		(1,103)
Other	Other	111		—		2		113		Other	(31)		—		—		(31)
Adjusted EBITDA	Adjusted EBITDA	$	130,104	$	24,154	$	(22,501)	$	131,757	Adjusted EBITDA	$	170,783	$	37,150	$	(29,966)	$	177,967

5355

Liquidity and Capital Resources

As of September 30, ~~2020,~~2021, we had total cash and cash equivalents of ~~$362,918~~$393.8 million compared to ~~$82,505~~$384.6 million as of December 31, 2019. In August 2020, we issued $517,500 of convertible notes that mature on August 15, 2025. See “Part I, Note 9—Debt, Convertible Notes due 2025” for more details regarding the issuance of these convertible notes. With the proceeds from this convertible note issuance, we repaid the outstanding balance on our revolving credit facility of $150,000.

2020. We plan to use existing cash as of September 30, 2021, cash generated in the ongoing operations of our business and amounts under our revolving credit facility to fund our current operations, capital expenditures and possible acquisitions or other strategic 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 revolving credit facility or incur additional debt to fund our ongoing operations or to fund potential acquisitions or other strategic activities.

As of September 30, ~~2020,~~2021, we had ~~$500,000~~$500.0 million available to borrow under our revolving credit facility, subject to covenant compliance.

Cash Flows

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


							Nine Months Ended
		Nine Months Ended					September 30,
		September 30,					2021		2020
		2020		2019
		(in thousands)					(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	131,679	$	61,845	Net cash provided by operating activities	$	169,974	$	131,679
Net cash used in investing activities	Net cash used in investing activities	(83,213)		(364,518)		Net cash used in investing activities	(135,040)		(83,213)
Net cash provided by financing activities		232,854		85,062
Net cash provided by (used in) financing activities						Net cash provided by (used in) financing activities	(25,156)		232,854
Effect of exchange rate on changes on cash	Effect of exchange rate on changes on cash	(1,009)		(178)		Effect of exchange rate on changes on cash	(544)		(1,009)
Net increase (decrease) in cash, cash equivalents and restricted cash		280,311		(217,789)
Net increase in cash, cash equivalents and restricted cash						Net increase in cash, cash equivalents and restricted cash	9,234		280,311
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	363,066		71,882		Cash, cash equivalents and restricted cash, end of period	393,948		363,066

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, ~~2020~~2021 was ~~$131,679~~$170.0 million compared to net cash provided by operating activities of ~~$61,845~~$131.7 million for the same period in ~~2019.~~2020. The increase was primarily due ~~to:~~

•~~A decrease~~to an increase in ~~net losses~~pre-tax income period over period of ~~$10,281;~~

•~~A decrease in deferred taxes period over period of $37,705 primarily due to the 2019 reversal of a valuation allowance on certain of our deferred tax assets;~~

•~~An increase period over period for noncash addbacks for depreciation and amortization expense of $11,910; and~~

•~~An increase in the change in operating assets and liabilities of $12,129 which is primarily timing related.~~$37.6 million.

~~These increases were partially offset by a non-cash gain of $2,056 related to fair market value adjustments to an outstanding contingent consideration liability.~~

Investing Activities

Net cash used in investing activities for the nine months ended September 30, ~~2020~~2021 was ~~$83,213~~$135.0 million compared to net cash used in investing activities of ~~$364,518~~$83.2 million for the same period in ~~2019.~~2020. The ~~change~~increase was ~~primarily a result of a decrease~~due to an increase in net cash disbursements of $25.5 million for ~~business acquisitions~~an acquisition of ~~$301,314. In January 2020, we also used $11,000 to acquire a 4.25%~~proprietary technology and the related redemption of our equity interest in a privately held ~~company. In 2020, we have also capitalized~~company, an additional ~~$16,608~~$8.8 million of internally developed software costs capitalized in 2021 as compared to the same period in ~~2019.~~2020, $7.6 million of increased disbursements related to various acquisitions and investments in privately held companies, $7.0 million of increased purchases of property and equipment and a $3.0 million advance towards the acquisition of technology solutions being developed for us by an outside company in the current year period.

Financing Activities

Net cash ~~provided by~~used in financing activities for the nine months ended September 30, ~~2020~~2021 was ~~$232,854~~$25.2 million compared to net cash provided by financing activities of ~~$85,062~~$232.9 million for the same period in ~~2019.~~2020. In August 2020, we received net proceeds of approximately ~~$503,000~~$503.0 million from the issuance of convertible debt. With these proceeds, we paid off the outstanding balance of our revolving credit facility. OnThese transactions contributed to a net cash inflow related to our third party debt agreements of $243.0 million in 2020. Increased deferred payments related to prior acquisition activity of $7.3 million, lower proceeds from stock option exercises of $7.1 million and share repurchases of $2.1 million in the current year period also contributed to this year over year ~~basis,~~decrease. These decreases were partially offset by $3.2 million of capital contributions made by non-controlling shareholders of one of our ~~net revolver activity resulted in an additional $360,000 of cash outflows.~~subsidiaries.

Commitments and Off-Balance Sheet Arrangements

Purchase Obligations and Indemnifications

See “Part I, Item 1, Note 17—Commitments and Contingencies,Purchase Obligations and Indemnifications” for purchase obligations and indemnifications details.

Procurement of Technology Solutions

See “Part I, Item 1, Note 17—Commitments and Contingencies, Procurement of Technology Solutions” for details related to this transaction.

Legal Proceedings

See “Part I, Item 1, Note 17—Commitments and Contingencies, Legal Proceedings” for legal proceedings details.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. “Note 2—Summary of Significant Accounting Policies” to the consolidated financial statements in our ~~2019~~2020 Form 10-K describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. Our critical accounting estimates, identified in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our ~~2019~~2020 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, impairment of goodwill and acquired intangible assets and income taxes. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the condensed consolidated financial statements, and actual results could differ materially from the amounts reported.

~~Commitments and Off-Balance Sheet Arrangements~~

~~Purchase Obligations and Indemnifications~~

~~See “Part I, Note 17—Commitments and Contingencies~~, ~~Purchase Obligations and Indemnifications” for purchase obligations and indemnifications details.~~

~~Legal Proceedings~~

~~See “Part I, Note 17—Commitments and Contingencies, Legal Proceedings” for legal proceedings details.~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

~~Market Risk~~

~~Our exposure~~There have been no material changes to our market, ~~risk is directly related to asset-based recurring revenues earned based upon a contractual percentage of AUM~~foreign currency or ~~AUA. In the three and nine months ended September 30, 2020, 55% and 54%~~interest rate risks as discussed in Part II, Item 7A of our revenues, respectively, 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 financial market declines for COVID-19 or any other matter, our asset-based revenues may negatively be impacted in future periods.2020 Form 10-K.

~~Foreign Currency Risk~~

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, 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 $451 and $1,377 to pre-tax earnings, respectively.

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, 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 approximately $1,503 and $4,876 to pre-tax earnings, respectively, and a hypothetical 10% decrease in the value of the Indian Rupee to the U.S. dollar would result in an increase of approximately $1,229 and $3,990 to pre-tax earnings, respectively.

~~Interest Rate Risk~~

We are subject to market risk from changes in interest rates. We have a revolving credit facility that bears interest at LIBOR plus an applicable margin between 1.50% and 3.25%. As LIBOR rates fluctuate, so too will the interest expense on amounts borrowed under the Amended Credit Agreement. Interest charged on the revolving credit facility for the third quarter of 2020 was approximately 2.4%. As of September 30, 2020, we had no borrowings outstanding under the Amended Credit Agreement. We incurred interest expense of $1,450 and $6,263 for the three and nine months ended September 30, 2020, respectively, related to the Amended 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 $516 on an annual basis.

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, ~~2020.~~2021. 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.

Based on their evaluation of our disclosure controls and procedures as of September 30, ~~2020,~~2021, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes to our internal control over financial reporting during the three months ended September 30, ~~2020,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information in Part I, Note 17—Commitments and Contingencies, - Legal Proceedings is incorporated herein by reference.

Item 1A. Risk Factors

Investment in our securities involves risk. An investor or potential investor should consider the risks summarized below and under the caption “Risk Factors” in Part I, Item 1A of our ~~2019~~2020 Form 10-K when making investment decisions regarding our securities. ~~Other than as provided below, the~~The risk factors that were disclosed in our ~~2019~~2020 Form 10-K have not materially changed since the date our ~~2019~~2020 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-19”) 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 nine months ended September 30, 2020, approximately 54% 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. If current economic conditions 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

On February 25, 2016, we announced that our Board had authorized a share repurchase program under which we may repurchase up to 2,000,000 shares of our common stock. There were no purchases of equity securities made under ~~our~~the share repurchase program in the three months ended September 30, ~~2020.~~2021. As of September 30, ~~2020, 1,956,390~~2021, there were 1,925,902 shares that may yet be repurchased under the program.

The timing and volume of share repurchases will be determined by our management based on ongoing assessments of the capital needs of the business, the market price of our common stock ~~could still~~and general market conditions. No time limit has been set for the completion of the repurchase program, and the program may be ~~purchased under this program.~~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.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

(a)Exhibits

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

5758

INDEX TO EXHIBITS


Exhibit No.						Description
~~4.1~~						Indenture, dated August 20, 2020, by and among Envestnet, Inc., Envestnet Asset Management, Inc., and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company's Form 8-K filed with the SEC on August 20, 2020 and incorporated by reference herein).
~~4.2~~						~~Form of 0.75% Convertible Senior Notes due 2025 (filed as Exhibit 4.2 (included in Exhibit 4.1) to the Company's Form 8-K filed with the SEC on August 20, 2020 and incorporated by reference herein).~~
10.1						~~Purchase~~Third Amendment to Second Amended and Restated Credit Agreement, dated August 17, 2020, by and among Envestnet, Inc., Envestnet Asset Management, Inc., J.P. Morgan Securities LLC, BMO Capital Markets Corp., BofA Securities, Inc. and Goldman Sachs & Co. LLC, as representatives of the several purchasers named therein (filed as Exhibit 10.1 to the Company's Form 8-K filed ~~with the SEC on August 20, 2020 and incorporated by reference herein).~~herewith.
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						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						Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document *
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document *
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document *
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* 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, ~~2020~~2021 and December 31, ~~2019;~~2020; (iii) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, ~~2020~~2021 and ~~2019;~~2020; (iv) the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, ~~2020~~2021 and ~~2019;~~2020; (v) the Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, ~~2020~~2021 and ~~2019;~~2020; (vi) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2020~~2021 and ~~2019;~~2020; (vii) Notes to Condensed Consolidated Financial Statements tagged as blocks of text.

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 ~~6, 2020.~~8, 2021.


			ENVESTNET, INC.

			By:			/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

5960


	Envestnet Wealth Solutions		Envestnet Data & Analytics		Total
Balance at December 31, 2019	$	583,247	$	296,603	$	879,850
Acquisitions	20,173		7,017		27,190
Foreign currency and other	(70)		(273)		(343)
Balance at September 30, 2020	$	603,350	$	303,347	$	906,697