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 SeptemberJune 30, 20212022
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
 
Commission file number 001-34835
env-20220630_g1.jpg
Envestnet, Inc.
(Exact name of registrant as specified in its charter)
Delaware20-1409613
(State or other jurisdiction of
incorporation or organization)
(I.R.S Employer
Identification No.)
35 East Wacker Drive,1000 Chesterbrook Boulevard, Suite 2400, Chicago, Illinois250, Berwyn, Pennsylvania6060119312
(Address of principal executive offices)(Zip Code)
 Registrant’s telephone number, including area code:
(312) 827-2800
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of exchange on which registered
Common Stock, par value $0.005 per shareENVNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerý Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes   No 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No 
As of November 1, 2021,July 29, 2022, Envestnet, Inc. had 54,644,26355,196,880 shares of common stock outstanding.



TABLE OF CONTENTS
Page
2




Envestnet, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(unaudited)
September 30,December 31,June 30,December 31,
2021202020222021
AssetsAssetsAssets
Current assets:Current assets:Current assets:
Cash and cash equivalentsCash and cash equivalents$393,799 $384,565 Cash and cash equivalents$338,115 $429,279 
Fees receivable, netFees receivable, net116,137 80,064 Fees receivable, net82,878 95,291 
Prepaid expenses and other current assetsPrepaid expenses and other current assets39,585 40,570 Prepaid expenses and other current assets46,627 42,706 
Total current assetsTotal current assets549,521 505,199 Total current assets467,620 567,276 
Property and equipment, netProperty and equipment, net48,158 47,969 Property and equipment, net61,392 50,215 
Internally developed software, netInternally developed software, net125,590 96,501 Internally developed software, net159,751 133,659 
Intangible assets, netIntangible assets, net417,644 435,041 Intangible assets, net386,231 400,396 
GoodwillGoodwill924,504 906,773 Goodwill936,054 925,154 
Operating lease right-of-use assets, netOperating lease right-of-use assets, net93,204 105,249 Operating lease right-of-use assets, net83,494 90,714 
Other non-current assetsOther non-current assets58,724 47,558 Other non-current assets92,858 73,768 
Total assetsTotal assets$2,217,345 $2,144,290 Total assets$2,187,400 $2,241,182 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Current liabilities:Current liabilities:Current liabilities:
Accrued expenses and other liabilitiesAccrued expenses and other liabilities$200,206 $158,548 Accrued expenses and other liabilities$198,230 $225,159 
Accounts payableAccounts payable21,763 18,003 Accounts payable20,444 19,092 
Operating lease liabilitiesOperating lease liabilities12,021 13,649 Operating lease liabilities10,852 10,999 
Contingent consideration806 11,251 
Deferred revenueDeferred revenue34,609 34,918 Deferred revenue37,453 33,473 
Current portion of long-term debtCurrent portion of long-term debt343,057 — 
Total current liabilitiesTotal current liabilities269,405 236,369 Total current liabilities610,036 288,723 
Long-term debt847,633 756,503 
Long-term debt, net of current portionLong-term debt, net of current portion508,282 848,862 
Non-current operating lease liabilitiesNon-current operating lease liabilities107,852 112,182 Non-current operating lease liabilities110,623 105,920 
Deferred tax liabilities, netDeferred tax liabilities, net27,754 34,740 Deferred tax liabilities, net12,912 21,021 
Other non-current liabilitiesOther non-current liabilities17,626 28,678 Other non-current liabilities11,555 17,114 
Total liabilitiesTotal liabilities1,270,270 1,168,472 Total liabilities1,253,408 1,281,640 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies00
Equity:Equity:Equity:
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
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, respectively343 339 
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of June 30, 2022 and December 31, 2021— — 
Common stock, par value $0.005, 500,000,000 shares authorized; 69,666,983 and 68,879,152 shares issued as of June 30, 2022 and December 31, 2021, respectively; 55,179,401 and 54,793,088 shares outstanding as of June 30, 2022 and December 31, 2021, respectivelyCommon stock, par value $0.005, 500,000,000 shares authorized; 69,666,983 and 68,879,152 shares issued as of June 30, 2022 and December 31, 2021, respectively; 55,179,401 and 54,793,088 shares outstanding as of June 30, 2022 and December 31, 2021, respectively348 344 
Additional paid-in capitalAdditional paid-in capital1,108,864 1,166,774 Additional paid-in capital1,176,763 1,131,628 
Accumulated deficitAccumulated deficit(32,879)(79,912)Accumulated deficit(75,132)(37,988)
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)
Treasury stock at cost, 14,487,582 and 14,086,064 shares as of June 30, 2022 and December 31, 2021, respectivelyTreasury stock at cost, 14,487,582 and 14,086,064 shares as of June 30, 2022 and December 31, 2021, respectively(162,344)(134,996)
Accumulated other comprehensive lossAccumulated other comprehensive loss(2,016)(398)Accumulated other comprehensive loss(6,470)(1,899)
Total stockholders’ equityTotal stockholders’ equity944,435 976,337 Total stockholders’ equity933,165 957,089 
Non-controlling interestNon-controlling interest2,640 (519)Non-controlling interest827 2,453 
Total equityTotal equity947,075 975,818 Total equity933,992 959,542 
Total liabilities and equityTotal liabilities and equity$2,217,345 $2,144,290 Total liabilities and equity$2,187,400 $2,241,182 
See accompanying notes to unaudited Condensed Consolidated Financial Statements.
3


Envestnet, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share information)
(unaudited)

Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30,September 30,June 30,June 30,
20212020202120202022202120222021
Revenues:Revenues:Revenues:
Asset-basedAsset-based$184,008 $137,744 $513,458 $394,801 Asset-based$191,972 $170,075 $394,689 $329,450 
Subscription-basedSubscription-based113,572 107,897 335,905 317,427 Subscription-based118,120 112,504 232,854 222,333 
Total recurring revenuesTotal recurring revenues297,580 245,641 849,363 712,228 Total recurring revenues310,092 282,579 627,543 551,783 
Professional services and other revenuesProfessional services and other revenues5,473 6,918 17,533 22,183 Professional services and other revenues8,760 6,159 12,672 12,060 
Total revenuesTotal revenues303,053 252,559 866,896 734,411 Total revenues318,852 288,738 640,215 563,843 
Operating expenses:Operating expenses:Operating expenses:
Cost of revenuesCost of revenues109,836 78,545 303,199 222,327 Cost of revenues126,482 100,494 251,764 193,363 
Compensation and benefitsCompensation and benefits109,839 94,428 316,101 300,423 Compensation and benefits125,767 105,548 252,616 206,262 
General and administrationGeneral and administration39,393 38,979 117,463 118,537 General and administration66,144 41,755 110,479 78,070 
Depreciation and amortizationDepreciation and amortization29,850 28,951 88,252 85,077 Depreciation and amortization32,182 30,010 63,800 58,402 
Total operating expensesTotal operating expenses288,918 240,903 825,015 726,364 Total operating expenses350,575 277,807 678,659 536,097 
Income from operations14,135 11,656 41,881 8,047 
Other expense, net(3,551)(8,836)(14,803)(18,546)
Income (loss) from operationsIncome (loss) from operations(31,723)10,931 (38,444)27,746 
Other income (expense), netOther income (expense), net1,622 (3,784)(4,345)(11,252)
Income (loss) before income tax provision (benefit)Income (loss) before income tax provision (benefit)10,584 2,820 27,078 (10,499)Income (loss) before income tax provision (benefit)(30,101)7,147 (42,789)16,494 
Income tax provision (benefit)Income tax provision (benefit)(854)497 9,074 (161)Income tax provision (benefit)(5,833)15,516 (3,813)9,928 
Net income (loss)Net income (loss)11,438 2,323 18,004 (10,338)Net income (loss)(24,268)(8,369)(38,976)6,566 
Add: Net (income) loss attributable to non-controlling interest302 (413)401 (12)
Add: Net loss attributable to non-controlling interestAdd: Net loss attributable to non-controlling interest983 88 1,832 99 
Net income (loss) attributable to Envestnet, Inc.Net income (loss) attributable to Envestnet, Inc.$11,740 $1,910 $18,405 $(10,350)Net income (loss) attributable to Envestnet, Inc.$(23,285)$(8,281)$(37,144)$6,665 
Net income (loss) per share attributable to Envestnet, Inc.:Net income (loss) per share attributable to Envestnet, Inc.:Net income (loss) per share attributable to Envestnet, Inc.:
BasicBasic$0.22 $0.04 $0.34 $(0.19)Basic$(0.42)$(0.15)$(0.67)$0.12 
DilutedDiluted$0.21 $0.03 $0.33 $(0.19)Diluted$(0.42)$(0.15)$(0.67)$0.12 
Weighted average common shares outstanding:Weighted average common shares outstanding:Weighted average common shares outstanding:
BasicBasic54,547,858 53,800,048 54,400,247 53,464,101 Basic55,203,120 54,440,388 55,054,272 54,325,353 
DilutedDiluted55,388,627 55,558,983 55,287,972 53,464,101 Diluted55,203,120 54,440,388 55,054,272 55,136,946 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.
4


Envestnet, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
 
Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30,September 30,June 30,June 30,
20212020202120202022202120222021
Net income (loss) attributable to Envestnet, Inc.Net income (loss) attributable to Envestnet, Inc.$11,740 $1,910 $18,405 $(10,350)Net income (loss) attributable to Envestnet, Inc.$(23,285)$(8,281)$(37,144)$6,665 
Foreign currency translation gains (losses), net of taxes270 1,739 (1,618)290 
Foreign currency translation losses, net of taxesForeign currency translation losses, net of taxes(3,093)(1,264)(4,571)(1,888)
Comprehensive income (loss) attributable to Envestnet, Inc.Comprehensive income (loss) attributable to Envestnet, Inc.$12,010 $3,649 $16,787 $(10,060)Comprehensive income (loss) attributable to Envestnet, Inc.$(26,378)$(9,545)$(41,715)$4,777 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

5


Envestnet, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share information)
(unaudited)
Accumulated
Common StockTreasury StockAdditionalOtherNon-
CommonPaid-inComprehensiveAccumulatedcontrollingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 202168,879,152 $344 (14,086,064)$(134,996)$1,131,628 $(1,899)$(37,988)$2,453 $959,542 
Exercise of stock options38,681 — — — 658 — — — 658 
Issuance of common stock - vesting of restricted stock units514,319 — — — — — — 
Stock-based compensation expense— — — — 21,690 — — — 21,690 
Shares withheld to satisfy tax withholdings— — (170,992)(12,570)— — — — (12,570)
Foreign currency translation loss, net of taxes— — — — — (1,478)— — (1,478)
Other— — — — (84)— — 102 18 
Net loss— — — — — — (13,859)(849)(14,708)
Balance, March 31, 202269,432,152 $347 (14,257,056)$(147,566)$1,153,892 $(3,377)$(51,847)$1,706 $953,155 
Exercise of stock options2,503 — — — 84 — — — 84 
Issuance of common stock - vesting of restricted stock units232,328 — — — — — — 
Stock-based compensation expense— — — — 22,876 — — — 22,876 
Shares withheld to satisfy tax withholdings— — (78,506)(5,543)— — — — (5,543)
Share repurchases— — (152,020)(9,235)— — — — (9,235)
Foreign currency translation loss, net of taxes— — — — — (3,093)— — (3,093)
Other— — — — (89)— — 104 15 
Net loss— — — — — — (23,285)(983)(24,268)
Balance, June 30, 202269,666,983 $348 (14,487,582)$(162,344)$1,176,763 $(6,470)$(75,132)$827 $933,992 

Accumulated
Common StockTreasury StockAdditionalOtherNon-
CommonPaid-inComprehensiveAccumulatedcontrollingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 202067,832,706 $339 (13,739,171)$(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)— — — — (108,470)— 28,628 — (79,842)
Exercise of stock options27,043 — — — 522 — — — 522 
Issuance of common stock - vesting of restricted stock units455,349 — — — — — — 
Stock-based compensation expense— — — — 14,013 — — — 14,013 
Shares withheld to satisfy tax withholdings— — (147,041)(9,541)— — — — (9,541)
Share repurchase— — (24,227)(1,672)— — — — (1,672)
Foreign currency translation loss, net of taxes— — — — — (624)— — (624)
Other— — — — — — — 118 118 
Net income (loss)— — — — — — 14,946 (11)14,935 
Balance, March 31, 202168,315,098 $341 (13,910,439)$(121,679)$1,072,839 $(1,022)$(36,338)$(412)$913,729 
Exercise of stock options4,082 — — — 51 — — — 51 
Issuance of common stock - vesting of restricted stock units140,082 — — — — — — 
Stock-based compensation expense— — — — 17,161 — — — 17,161 
Shares withheld to satisfy tax withholdings— — (46,699)(3,479)— — — — (3,479)
Share repurchase— — (6,261)(425)— — — — (425)
Capital contribution - non-controlling interest— — — — (788)— — 811 23 
Foreign currency translation loss, net of taxes— — — — — (1,264)— — (1,264)
Other— — — — — — — 38 38 
Net loss— — — — — — (8,281)(88)(8,369)
Balance, June 30, 202168,459,262 $342 (13,963,399)$(125,583)$1,089,263 $(2,286)$(44,619)$349 $917,466 
See accompanying notes to unaudited Condensed Consolidated Financial Statements.


-continued-



6


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


Accumulated
Common StockTreasury StockAdditionalOtherNon-
CommonPaid-inComprehensiveAccumulatedcontrollingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, June 30, 202168,459,262 $342 (13,963,399)$(125,583)$1,089,263 $(2,286)$(44,619)$349 $917,466 
Exercise of stock options12,954— — — 347 — — — 347 
Issuance of common stock - vesting of restricted stock units163,999 — — — — — — 
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, 202168,636,215 $343 (14,018,311)$(129,877)$1,108,864 $(2,016)$(32,879)$2,640 $947,075 


See accompanying notes to unaudited Condensed Consolidated Financial Statements.





7


Envestnet, Inc.
Condensed Consolidated Statements of Stockholders' Equity (continued)
(in thousands, except share information)
(unaudited)
AccumulatedAccumulated
Common StockTreasury StockAdditionalOtherNon-Common StockTreasury StockAdditionalOtherNon-
CommonPaid-inComprehensiveAccumulatedcontrollingTotalCommonPaid-inComprehensiveAccumulatedcontrollingTotal
SharesAmountSharesAmountCapitalLossDeficitInterestEquitySharesAmountSharesAmountCapitalLossDeficitInterestEquity
Balance, December 31, 201966,320,706 $331 (13,479,000)$(90,965)$1,037,141 $(1,749)$(75,664)$(1,518)$867,576 
Adoption of ASC 326, net of taxes— — — — — — (1,141)— (1,141)
Balance, December 31, 2020Balance, December 31, 202067,832,706 $339 (13,739,171)$(110,466)$1,166,774 $(398)$(79,912)$(519)$975,818 
Adoption of ASU 2020-06, net of taxes of $7,641Adoption of ASU 2020-06, net of taxes of $7,641— — — — (108,470)— 28,628 — (79,842)
Exercise of stock optionsExercise of stock options357,974 — — 3,406 — — — 3,408 Exercise of stock options27,043 — — — 522 — — — 522 
Issuance of common stock - vesting of restricted stock unitsIssuance of common stock - vesting of restricted stock units398,881 — — — — — — Issuance of common stock - vesting of restricted stock units455,349 — — — — — — 
Stock-based compensation expenseStock-based compensation expense— — — — 13,765 — — — 13,765 Stock-based compensation expense— — — — 14,013 — — — 14,013 
Shares withheld to satisfy tax withholdingsShares withheld to satisfy tax withholdings— — (130,164)(9,199)— — — — (9,199)Shares withheld to satisfy tax withholdings— — (147,041)(9,541)— — — — (9,541)
Share repurchaseShare repurchase— — (24,227)(1,672)— — — — (1,672)
Foreign currency translation loss, net of taxesForeign currency translation loss, net of taxes— — — — — (3,024)— — (3,024)Foreign currency translation loss, net of taxes— — — — — (624)— — (624)
OtherOther— — — — — — — 118 118 
Net income (loss)Net income (loss)— — — — — — (7,336)146 (7,190)Net income (loss)— — — — — — 14,946 (11)14,935 
Balance, March 31, 202067,077,561 $335 (13,609,164)$(100,164)$1,054,312 $(4,773)$(84,141)$(1,372)$864,197 
Balance, March 31, 2021Balance, March 31, 202168,315,098 $341 (13,910,439)$(121,679)$1,072,839 $(1,022)$(36,338)$(412)$913,729 
Exercise of stock optionsExercise of stock options184,475 — — 3,274 — — — 3,275 Exercise of stock options4,082 — — — 51 — — — 51 
Issuance of common stock - vesting of restricted stock unitsIssuance of common stock - vesting of restricted stock units134,207 — — — — — — Issuance of common stock - vesting of restricted stock units140,082 — — — — — — 
Stock-based compensation expenseStock-based compensation expense— — — — 13,006 — — — 13,006 Stock-based compensation expense— — — — 17,161 — — — 17,161 
Shares withheld to satisfy tax withholdingsShares 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)— — — — — 1,575 — — 1,575 
Share repurchaseShare repurchase— — (6,261)(425)— — — — (425)
Capital contribution - non-controlling interestCapital contribution - non-controlling interest— — — — (788)— — 811 23 
Foreign currency translation loss, net of taxesForeign currency translation loss, net of taxes— — — — — (1,264)— — (1,264)
OtherOther— — — — — — — 38 38 
Net lossNet loss— — — — — — (4,924)(547)(5,471)Net loss— — — — — — (8,281)(88)(8,369)
Balance, June 30, 202067,396,243 $337 (13,652,861)$(103,781)$1,071,502 $(3,198)$(89,065)$(2,058)$873,737 
Exercise of stock options44,672 — — — 1,370 — — — 1,370 
Issuance of common stock - vesting of restricted stock units144,041 — — — — — — — — 
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, 202067,584,956 $337 (13,700,057)$(107,248)$1,150,198 $(1,459)$(87,155)$(1,306)$953,367 
Balance, June 30, 2021Balance, June 30, 202168,459,262 $342 (13,963,399)$(125,583)$1,089,263 $(2,286)$(44,619)$349 $917,466 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.
87


Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months EndedSix Months Ended
September 30,June 30,
2021202020222021
OPERATING ACTIVITIES:OPERATING ACTIVITIES:OPERATING ACTIVITIES:
Net income (loss)Net income (loss)$18,004 $(10,338)Net income (loss)$(38,976)$6,566 
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:Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortizationDepreciation and amortization88,252 85,077 Depreciation and amortization63,800 58,402 
Provision for doubtful accountsProvision for doubtful accounts2,051 2,323 Provision for doubtful accounts(1,230)455 
Deferred income taxesDeferred income taxes7,078 79 Deferred income taxes(8,222)8,137 
Release of uncertain tax positionsRelease of uncertain tax positions(3,095)— 
Non-cash compensation expenseNon-cash compensation expense50,307 45,721 Non-cash compensation expense45,318 31,422 
Non-cash interest expenseNon-cash interest expense4,889 12,255 Non-cash interest expense3,474 2,906 
Accretion on contingent consideration and purchase liabilityAccretion on contingent consideration and purchase liability656 1,308 Accretion on contingent consideration and purchase liability— 575 
Payments of contingent considerationPayments of contingent consideration(2,360)— Payments of contingent consideration— (2,360)
Fair market value adjustment to contingent consideration liabilityFair market value adjustment to contingent consideration liability(1,067)(2,056)Fair market value adjustment to contingent consideration liability— (140)
Fair market value adjustment to investment in private companyFair market value adjustment to investment in private company(758)— Fair market value adjustment to investment in private company— (758)
Gain on settlement of liability(1,206)— 
Gain on acquisition of equity method investment— (4,230)
Loss allocation from equity method investments5,553 4,280 
Loss allocations from equity method investmentsLoss allocations from equity method investments2,945 4,045 
Dilution gain on equity method investee share issuanceDilution gain on equity method investee share issuance(6,934)— 
Impairment of right of use assetsImpairment of right of use assets1,537 1,426 Impairment of right of use assets12,961 1,110 
Loss on property and equipment disposals - office closuresLoss on property and equipment disposals - office closures3,710 — 
OtherOther249 556 Other167 282 
Changes in operating assets and liabilities, net of acquisitions:
Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Fees receivable, netFees receivable, net(38,030)(10,825)Fees receivable, net13,694 (1,334)
Prepaid expenses and other current assetsPrepaid expenses and other current assets569 (11,139)Prepaid expenses and other current assets(2,721)(155)
Other non-current assetsOther non-current assets4,854 (1,807)Other non-current assets(3,638)3,665 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities26,637 3,393 Accrued expenses and other liabilities(31,962)527 
Accounts payableAccounts payable4,122 12,084 Accounts payable1,368 2,333 
Deferred revenueDeferred revenue(1,065)1,488 Deferred revenue4,277 2,789 
Other non-current liabilitiesOther non-current liabilities(298)2,084 Other non-current liabilities(2,294)692 
Net cash provided by operating activitiesNet cash provided by operating activities169,974 131,679 Net cash provided by operating activities52,642 119,159 
INVESTING ACTIVITIES:INVESTING ACTIVITIES:INVESTING ACTIVITIES:
Purchases of property and equipmentPurchases of property and equipment(15,779)(8,824)Purchases of property and equipment(9,141)(11,357)
Capitalization of internally developed softwareCapitalization of internally developed software(49,024)(40,257)Capitalization of internally developed software(43,045)(31,802)
Investments in private companies(8,926)(13,875)
Acquisition of proprietary technologyAcquisition of proprietary technology(25,517)— Acquisition of proprietary technology(15,000)(25,517)
Acquisitions of businesses, net of cash acquiredAcquisitions of businesses, net of cash acquired(32,794)(20,257)Acquisitions of businesses, net of cash acquired(14,472)(33,143)
Investments in private companiesInvestments in private companies(8,000)(4,549)
Advance for technology solutionsAdvance for technology solutions(3,000)— Advance for technology solutions(4,000)(3,000)
Issuance of notes receivable to equity method investeesIssuance of notes receivable to equity method investees(4,350)— 
Net cash used in investing activitiesNet cash used in investing activities(135,040)(83,213)Net cash used in investing activities(98,008)(109,368)

-continued-












98


Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
Nine Months EndedSix Months Ended
September 30,June 30,
2021202020222021
FINANCING ACTIVITIES:FINANCING ACTIVITIES:FINANCING ACTIVITIES:
Proceeds from issuance of Convertible Notes due 2025— 517,500 
Convertible Notes due 2025 issuance costs— (14,540)
Proceeds from borrowings on revolving credit facility— 45,000 
Payments on revolving credit facility— (305,000)
Proceeds from exercise of stock optionsProceeds from exercise of stock options742 573 
Capital contributions - non-controlling shareholdersCapital contributions - non-controlling shareholders3,201 — Capital contributions - non-controlling shareholders— 23 
Payments of deferred consideration on prior acquisitions— (1,879)
Taxes paid in lieu of shares issued for stock-based compensationTaxes paid in lieu of shares issued for stock-based compensation(18,113)(13,020)
Finance lease paymentsFinance lease payments(14,517)— 
Share repurchasesShare repurchases(9,235)(2,097)
Revolving credit facility issuance costsRevolving credit facility issuance costs(1,872)— 
Payments of contingent considerationPayments of contingent consideration(9,200)— Payments of contingent consideration(750)(9,200)
Proceeds from exercise of stock options920 8,053 
Taxes paid in lieu of shares issued for stock-based compensation(17,314)(16,283)
Share repurchases(2,097)— 
OtherOther(666)Other(587)
Net cash provided by (used in) financing activities(25,156)232,854 
Net cash used in financing activitiesNet cash used in financing activities(43,741)(24,308)
EFFECT OF EXCHANGE RATE CHANGES ON CASHEFFECT OF EXCHANGE RATE CHANGES ON CASH(544)(1,009)EFFECT OF EXCHANGE RATE CHANGES ON CASH(2,057)(524)
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH9,234 280,311 
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASHDECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH(91,164)(15,041)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIODCASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD384,714 82,755 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD429,428 384,714 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
(See Note 2)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
(See Note 2)
$393,948 $363,066 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
(See Note 2)
$338,264 $369,673 
Supplemental disclosure of cash flow information - net cash paid during the period for income taxesSupplemental disclosure of cash flow information - net cash paid during the period for income taxes$5,895 $5,349 Supplemental disclosure of cash flow information - net cash paid during the period for income taxes$5,460 $3,077 
Supplemental disclosure of cash flow information - cash paid during the period for interestSupplemental disclosure of cash flow information - cash paid during the period for interest7,794 9,652 Supplemental disclosure of cash flow information - cash paid during the period for interest5,591 5,533 
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:
Contingent consideration issued in acquisition of businesses— 5,239 
Purchase liabilities included in accrued expenses and other liabilities— 632 
Purchase liabilities included in other non-current liabilitiesPurchase liabilities included in other non-current liabilities2,951 — Purchase liabilities included in other non-current liabilities— 3,300 
Fixed assets acquired through finance leaseFixed assets acquired through finance lease14,517 — 
Purchase of fixed assets included in accounts payable and accrued expenses and other liabilitiesPurchase of fixed assets included in accounts payable and accrued expenses and other liabilities449 1,104 Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities2,308 832 
Internally developed software costs included in accrued expenses and other liabilitiesInternally developed software costs included in accrued expenses and other liabilities1,060 — Internally developed software costs included in accrued expenses and other liabilities628 — 
Membership interest liabilities included in other non-current liabilitiesMembership interest liabilities included in other non-current liabilities373 3,221 Membership interest liabilities included in other non-current liabilities752 248 
Leasehold improvements funded by lease incentiveLeasehold improvements funded by lease incentive164 1,766 Leasehold improvements funded by lease incentive— 164 
Assets obtained in exchange for lease liabilities4,387 — 
Transfer of non-controlling units— 771 
Assets obtained in exchange for lease liabilities, netAssets obtained in exchange for lease liabilities, net9,604 999 
Conversion of equity method investee loan to sharesConversion of equity method investee loan to shares2,623 — 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.


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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business

Envestnet, Inc. (“Envestnet”) through its subsidiaries (collectively, the “Company”) is transforming the way financial advice and wellnessinsight are delivered. Its mission is to empower financial advisors and financial service providers with innovative technology, solutions and intelligence to makeintelligence. Envestnet has been a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness a reality for everyone. Through a combination of platform enhancements, partnerships and acquisitions, Envestnet provides a uniqueecosystem so that our clients can deliver an intelligent financial network connecting technology, solutions and data, delivering better intelligence and enabling its customerslife to drive better outcomes.their clients.

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 SeptemberJune 30, 20212022 and for the three and ninesix months ended SeptemberJune 30, 20212022 and 20202021 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, 20202021 and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of SeptemberJune 30, 20212022 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,income (expense), net in the condensed consolidated statements of operations.

The results of operations for the three and ninesix months ended SeptemberJune 30, 20212022 are not necessarily indicative of the operating results of operations to be expected for other interim periods or for the full fiscal year.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the 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, 2020,2021, filed with the SEC on February 26, 2021.25, 2022.
 
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.
 
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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,June 30,June 30,
2021202020222021
(in thousands)(in thousands)
Cash and cash equivalentsCash and cash equivalents$393,799 $362,918 Cash and cash equivalents$338,115 $369,524 
Restricted cash included in prepaid expenses and other current assetsRestricted cash included in prepaid expenses and other current assets149 — Restricted cash included in prepaid expenses and other current assets149 149 
Restricted cash included in other non-current assets— 148 
Total cash, cash equivalents and restricted cashTotal cash, cash equivalents and restricted cash$393,948 $363,066 Total cash, cash equivalents and restricted cash$338,264 $369,673 
 
Financial Impacts Related To COVID-19Russia and Ukraine Conflict

On March 11, 2020,In February 2022, military conflict escalated between Russia and Ukraine which continues as of the World Health Organization declareddate of this quarterly report. The uncertainty over the outbreakextent and duration of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreakthe ongoing conflict continues to cause disruptions to businesses and markets worldwide as the virus spreads.worldwide. The extent of the effect on the Company’s operational and financial performance will continue to depend on future developments, including the duration, spreadextent and intensityduration of the pandemic, andconflict, economic sanctions imposed, further governmental regulatory and private sector responses and the timing and extent normal economic conditions resume, all of which are uncertain and difficult to predict. Although the Company is unable to estimate the overall financial effect of the pandemicconflict at this time, as the pandemicconflict continues, it could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. As of SeptemberJune 30, 2021,2022, these condensed consolidated financial statements do not reflect any adjustments as a result of the pandemic.conflict.

Related Party Transactions

The Company has a 4.3%an approximate 4.4% 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$4.3 million and $2.9$3.9 million in the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. Revenues from the private services company totaled $11.9$9.0 million and $8.0$7.7 million in the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the Company had recorded a net receivable of $3.3$2.5 million and $2.1$3.0 million, respectively, from the private services company.

Dilution gain on equity method investee share issuance

The Company has an ownership interest in a privately held company that is accounted for under the equity method. During the six months ended June 30, 2022, the Company funded a $2.5 million convertible loan to this privately held company. During the three months ended June 30, 2022, this privately held company raised additional preferred equity which reduced the Company's ownership to 41.0% and the Company's convertible loan was converted. As a result of this transaction, the Company recorded a $6.9 million dilution gain during the three months ended June 30, 2022, which is included in other income (expense), net in the condensed consolidated statements of operations.

Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements—In December 2019,October 2021, the FASB issued ASU 2019-12, “Income Taxes2021-08, “Business Combinations (Topic 740): Simplifying the Accounting for Income Taxes.805).” This update aimsamends Topic 805 to reduce complexity withinadd contract assets and contract liabilities to the accounting for income taxes as partlist of exceptions to the simplification initiative.recognition and measurement principles that apply to business combinations and to require that an entity (acquirer) recognize and measure contract assets and contract liabilities in accordance with ASC 606. This standard is effective for financial statements issued by public companies for annual and interim periods beginning after December 15, 2020. These changes became2022. Early adoption of the standard is permitted. The amendment is to be applied prospectively to business combinations occurring on or after the effective fordate of the Company's fiscal year beginningamendment. The Company adopted this standard as of January 1, 2021. This standard will be applied prospectively.2022. Adoption of this standard did not have a material impact on the Company's condensed 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 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 accounting. Under the new guidance, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, or that do not result in substantial premiums accounted for as paid-in capital. The convertible debt instruments will be accounted for as a 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. Adoption of the standard requires using either a modified retrospective or a full retrospective approach.
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Envestnet, Inc.
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 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)3.Acquisitions and 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 Company's consolidated statements of cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     Other Investments

Investment in Privately Held Company
3.
Acquisitions
On May 20, 2022, the Company acquired a 25.0% interest in a privately held company for cash consideration of $5.0 million. Subject to the occurrence of certain conditions, the Company agreed to invest up to an additional $10.0 million for additional units in the future. The Company uses the equity method of accounting to record its portion of this privately held company's net income or loss on a 1 quarter lag from the actual results of operations. The Company uses the equity method of accounting because of its less than 50% ownership interest and lack of control and does not otherwise exercise control over the significant economic and operating decisions of the privately held company.

Acquisition of Proprietary Technology401kplans.com

The Company previously owned approximately 29%On May 31, 2022, Envestnet Retirement Solutions, LLC, a wholly-owned subsidiary 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 acquireacquired 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 unitissued and outstanding membership interests 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 technology401kplans.com LLC (“401kplans.com”). 401kplans.com has been integrated into the Envestnet Wealth Solutions segment.

Acquisition of Harvest
On April 7, 2021, pursuant to an agreement401kplans.com provides a digital 401(k) retirement plan marketplace that streamlines retirement plan distribution and plan of merger (the “Merger Agreement”), dated as of March 31, 2021, between,due diligence among others, Harvest Savings & Wealth Technologies (“Harvest”), a Delaware corporation,financial advisors 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.third-party administrators. The acquisition optimizesdemonstrates Envestnet's commitment to the Company's API-based financial wellness ecosystem,retirement plan industry and also helps strengthenis expected to create a more seamless experience and enhance productivity for advisors by helping them shop, compare and select the Company's foothold to enable embedded finance, which the Company sees as a key driver of the future of financial services.best-fitting 401(k) plan for their client.

In connection with the Harvest Acquisition,401kplans.com acquisition, the Company paid estimated consideration of $32.8$14.5 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 post-closing adjustments. The Company funded the acquisition with cash on hand.

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

Preliminary EstimateMeasurement Period AdjustmentsRevised Estimate
(in thousands)
Tangible assets acquired, net of cash(1)
$2,032 $3,938 $5,970 
Total liabilities assumed(596)54 (542)
Identifiable intangible assets9,500 — 9,500 
Goodwill21,858 (3,992)17,866 
Total net assets acquired$32,794 $— $32,794 
Preliminary Estimate
(in thousands)
Tangible assets acquired, net of acquired cash$94 
Identifiable intangible assets3,000 
Goodwill11,378 
Total net assets acquired$14,472 

(1) The Company recorded measurement period adjustments of $4.0 million primarily due to the establishment of deferred tax assets in the three months ended September 30, 2021.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction, primarily related to anthe enhancement of the Company's existing technologies and increase in future revenues as a result of potential cross selling opportunities, as well as enhancements to the Company's existing technologies.opportunities. The estimated goodwill is not deductible for income tax purposes.

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

Preliminary Estimate
(in thousands)
Estimated Useful Life in YearsAmortization Method
Proprietary technology$6,900 6Straight-line
Customer list2,600 14Accelerated
Total intangible assets acquired$9,500 
Preliminary Estimate
(in thousands)
Estimated Useful Life in YearsAmortization Method
Proprietary technology$3,000 5Straight-line

The estimated fair values of certain of the assets and liabilities acquired are provisional and based on information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation and other studiesprocedures 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 tangible assets acquired, liabilities assumed, identifiable intangible assets and goodwill balances and complete the acquisition accounting as soon as reasonably practicable but no later than April 7, 2022.May 31, 2023.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The results of Harvest’s401kplans.com's operations are included in the condensed consolidated statements of operations beginning April 7, 2021May 31, 2022 and were not considered material to the Company’s results of operations.

For the three and ninesix months ended SeptemberJune 30, 2021,2022, the Company’s acquisition related costs were not material, and are included in general and administration expenses. The Company may incur additional acquisition related costs over the remainder of 2021.2022.

4.Prepaid Expenses and Other Current Assets
 
Prepaid expenses and other current assets consisted of the following:
September 30,December 31,June 30,December 31,
20212020 20222021
(in thousands)(in thousands)
Prepaid technologyPrepaid technology$14,825 $13,165 Prepaid technology$20,928 $15,415 
Non-income tax receivablesNon-income tax receivables7,031 6,571 Non-income tax receivables5,703 7,013 
Income tax prepayments and receivables4,012 1,684 
Prepaid insurancePrepaid insurance3,035 1,777 Prepaid insurance5,004 2,234 
Advance payroll taxes and benefits1,449 6,429 
Escrow for acquisitionEscrow for acquisition2,951 2,951 
OtherOther9,233 10,944 Other12,041 15,093 
Total prepaid expenses and other current assetsTotal prepaid expenses and other current assets$39,585 $40,570 Total prepaid expenses and other current assets$46,627 $42,706 
5.Property and Equipment, Net
Property and equipment, net consisted of the following:
 June 30,December 31,
 Estimated Useful Life20222021
(in thousands)
Cost:   
Computer equipment and software3 years$72,638 $72,289 
Leasehold improvementsShorter of the lease term or useful life of the asset36,707 43,544 
Leased data servers3 years15,108 590 
Office furniture and fixtures3-7 years10,789 12,214 
Office equipment and other3-5 years9,027 7,973 
Building and building improvements7-39 years2,729 2,729 
LandNot applicable940 940 
  147,938 140,279 
Less: accumulated depreciation and amortization(86,546)(90,064)
Total property and equipment, net$61,392 $50,215 
During the six months ended June 30, 2022, the Company entered into an arrangement with a third party cloud service provider for the use of dedicated servers to migrate its infrastructure to the cloud. As the terms of the arrangement convey a finance lease under FASB Topic 842 - Leases (“ASC 842”), the Company accounts for those dedicated servers as leased assets when the lease term commences. The Company accounts for each lease and any non-lease components associated with that lease as a single lease component for all asset classes. The leased dedicated servers are presented as a component of property and equipment, net in the condensed consolidated balance sheets as of June 30, 2022. To take advantage of the favorable savings programs offered by the cloud service provider, the Company prepaid the lease payments and therefore does not have a lease liability recorded for the leased assets. Gross property and equipment under finance leases as of June 30, 2022 was $15.1 million with accumulated depreciation of $2.3 million. Finance lease activity as of and for the year ended December 31, 2021 was not material.

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

In April 2022, in response to changing needs and an increase in employees working remotely, the Company closed 3 offices in the United States. The Company is currently exploring alternative uses for these properties, including sublease options.

During the three and six months ended June 30, 2022, including the office closures, the Company retired property and equipment that was no longer in service for the Envestnet Wealth Solutions segment with an historical cost of $13.6 million and $16.5 million, respectively. Including the office closures, gains and losses on asset retirements were $3.7 million in the three and six months ended June 30, 2022 for the Envestnet Wealth Solutions segment. The Company also recognized $13.0 million of lease restructuring costs in the three and six months ended June 30, 2022 which are included in general and administration expense in the condensed consolidated statements of operations. Gains and losses on asset retirements during the three and six months ended June 30, 2022 were not material for the Envestnet Data & Analytics segment.

During the three and six months ended June 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 $5.1 million and $7.8 million, respectively. During the three and six months ended June 30, 2021, the Company retired an immaterial amount of property and equipment that was no longer in service for the Envestnet Data & Analytics segment. Gains and losses on asset retirements during the three and six months ended June 30, 2021 were not material.
Depreciation and amortization expense was as follows:
 Three Months EndedSix Months Ended
 June 30,June 30,
 2022202120222021
(in thousands)
Depreciation and amortization expense$5,450 $5,246 $11,054 $10,889 
6.Internally Developed Software

Internally developed software, net consisted of the following:
  June 30,December 31,
 Estimated Useful Life20222021
(in thousands)
Internally developed software5 years$269,053 $225,380 
Less: accumulated amortization (109,302)(91,721)
Internally developed software, net $159,751 $133,659 
Amortization expense was as follows:
 Three Months EndedSix Months Ended
 June 30,June 30,
 2022202120222021
(in thousands)
Amortization expense$9,087 $7,262 $17,581 $13,533 
 
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
5.Property and Equipment, Net
Property and equipment, net consisted of the following:
  September 30,December 31,
 Estimated Useful Life20212020
(in thousands)
Cost:   
Computer equipment and software3 years$72,415 $72,443 
Leasehold improvementsShorter of the lease term or useful life of the asset43,860 37,671 
Office furniture and fixtures3-7 years12,243 11,249 
Office equipment and other3-5 years5,810 7,151 
Building and building improvements7-39 years2,669 2,669 
LandNot applicable940 940 
  137,937 132,123 
Less: accumulated depreciation and amortization(89,779)(84,154)
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 $1.0 million and $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 $1.4 million and $2.1 million, respectively.

Gains and losses on asset retirements during the three and nine months ended September 30, 2021 and 2020 were not material.
Depreciation and amortization expense was as follows:
 Three Months EndedNine Months Ended
 September 30,September 30,
 2021202020212020
(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 Life20212020
(in thousands)
Internally developed software5 years$209,703 $159,619 
Less: accumulated amortization (84,113)(63,118)
Internally developed software, net $125,590 $96,501 
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Amortization expense was as follows:
 Three Months EndedNine Months Ended
 September 30,September 30,
 2021202020212020
(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 SolutionsEnvestnet Data & AnalyticsTotal
(in thousands)
Balance at December 31, 2020$603,350 $303,423 $906,773 
Harvest Acquisition17,866 — 17,866 
Foreign exchange rates— (135)(135)
Balance at September 30, 2021$621,216 $303,288 $924,504 

 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsTotal
(in thousands)
Balance at December 31, 2021$621,876 $303,278 $925,154 
401kplans.com acquisition11,378 — 11,378 
Foreign currency translation— (478)(478)
Balance at June 30, 2022$633,254 $302,800 $936,054 

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 Company closed the transaction and paid the remaining $15.0 million in February 2022. This proprietary technology asset has been integrated into the Envestnet Data & Analytics segment and is being amortized over an estimated useful life of five years. In addition, the agreement includes an earn-out payment of $10.0 million based upon the achievement of certain target metrics within five years after the date of the Company’s launch of the technology solutions. The parties have agreed to renegotiate the terms of the earn-out payment.

Intangible assets, net consisted of the following:
September 30, 2021December 31, 2020 June 30, 2022December 31, 2021
Gross NetGross Net Gross NetGross Net
CarryingAccumulatedCarryingCarryingAccumulatedCarrying CarryingAccumulatedCarryingCarryingAccumulatedCarrying
AmountAmortizationAmountAmountAmortizationAmount AmountAmortizationAmountAmountAmortizationAmount
(in thousands)(in thousands)
Customer listsCustomer lists$593,820 $(233,477)$360,343 $591,520 $(198,555)$392,965 Customer lists$590,080 $(263,212)$326,868 $590,080 $(241,189)$348,891 
Proprietary technologiesProprietary technologies85,324 (38,439)46,885 54,914 (26,949)27,965 Proprietary technologies106,324 (53,682)52,642 85,324 (43,004)42,320 
Trade namesTrade names33,700 (23,284)10,416 33,700 (19,589)14,111 Trade names33,700 (26,979)6,721 33,700 (24,515)9,185 
Total intangible assetsTotal intangible assets$712,844 $(295,200)$417,644 $680,134 $(245,093)$435,041 Total intangible assets$730,104 $(343,873)$386,231 $709,104 $(308,708)$400,396 

There were no material retirements of intangible assets during the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.

Amortization expense was as follows:
 Three Months EndedNine Months Ended
 September 30,September 30,
 2021202020212020
(in thousands)
Amortization expense$17,390 $18,510 $51,370 $56,014 
 Three Months EndedSix Months Ended
 June 30,June 30,
 2022202120222021
(in thousands)
Amortization expense$17,645 $17,502 $35,165 $33,980 

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
8.Accrued Expenses and Other Liabilities
 
Accrued expenses and other liabilities consisted of the following:
September 30,December 31,June 30,December 31,
20212020 20222021
(in thousands)(in thousands)
Accrued investment manager feesAccrued investment manager fees$88,963 $57,894 Accrued investment manager fees$97,052 $95,858 
Accrued compensation and related taxesAccrued compensation and related taxes80,549 71,039 Accrued compensation and related taxes67,761 97,523 
Accrued professional servicesAccrued professional services8,453 9,240 Accrued professional services8,894 7,746 
Accrued technologyAccrued technology7,032 4,701 Accrued technology6,667 8,951 
Non-income tax payablesNon-income tax payables4,615 8,398 Non-income tax payables4,053 4,907 
Accrued purchase consideration4,008 — 
Other accrued expensesOther accrued expenses6,586 7,276 Other accrued expenses13,803 10,174 
Total accrued expenses and other liabilitiesTotal accrued expenses and other liabilities$200,206 $158,548 Total accrued expenses and other liabilities$198,230 $225,159 

In the fourth quarter of 2020, as part of an organizational realignment, the Company entered into separation agreements with several employees. In connection with this realignment, the Company recognized a net credit of $0.1 million of severance expense in the three months ended September 30, 2021. Total severance expense related to this program for the nine months ended September 30, 2021 was $5.1 million. The Company has approximately $1.6 million and $5.1 million in accrued compensation and related taxes associated with these separation agreements as of September 30, 2021 and December 31, 2020, respectively.
9.Debt
 
The Company’s outstanding debt obligations as of SeptemberJune 30, 20212022 and December 31, 20202021 were as follows: 
September 30,December 31, June 30,December 31,
20212020 20222021
(in thousands)(in thousands)
Revolving credit facility balanceRevolving credit facility balance$— $— Revolving credit facility balance$— $— 
Convertible Notes due 2023Convertible Notes due 2023$345,000 $345,000 Convertible Notes due 2023$345,000 $345,000 
Unamortized issuance costs on Convertible Notes due 2023Unamortized issuance costs on Convertible Notes due 2023(3,491)(4,306)Unamortized issuance costs on Convertible Notes due 2023(1,943)(2,979)
Unaccreted discount on Convertible Notes due 2023— (24,058)
Convertible Notes due 2023 carrying valueConvertible Notes due 2023 carrying value$341,509 $316,636 Convertible Notes due 2023 carrying value$343,057 $342,021 
Convertible Notes due 2025Convertible Notes due 2025$517,500 $517,500 Convertible Notes due 2025$517,500 $517,500 
Unamortized issuance costs on Convertible Notes due 2025Unamortized issuance costs on Convertible Notes due 2025(11,376)(11,731)Unamortized issuance costs on Convertible Notes due 2025(9,218)(10,659)
Unaccreted discount on Convertible Notes due 2025— (65,902)
Convertible Notes due 2025 carrying valueConvertible Notes due 2025 carrying value$506,124 $439,867 Convertible Notes due 2025 carrying value$508,282 $506,841 

AmendedThird Credit Agreement

At September 30, 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 andOn February 4, 2022, the Company entered into a Third Amendment to the Amended and Restated Credit Agreement whereby the investment threshold was increased from $25.0 million to $50.0 million.(the “Third Credit Agreement”) with a group of banks (the “Banks”), for which Bank of Montreal is acting as administrative agent. The Company was in compliance with all other covenants in the AmendedThird Credit Agreement asamends and restates, in its entirety, the Company's prior credit agreement. In connection with entering into the Third Credit Agreement, the Company capitalized an additional $1.9 million of September 30, 2021.deferred financing charges to Other non-current assets on the condensed consolidated balance sheets and wrote off $0.6 million of pre-existing finance charges to Other expense, net on the condensed consolidated statements of operations.

As of September 30, 2021,Pursuant to the Third Credit Agreement, the Banks have agreed to provide the Company had all $500.0 million available to borrow under thewith a revolving credit facility subject to covenant compliance.of $500.0 million (the “Revolving Credit Facility”). The Third Credit Agreement also includes a $20.0 million sub-facility for the issuances of letters of credit. As of June 30, 2022 and December 31, 2021, there were no amounts outstanding under the Revolving Credit Facility.

Obligations under the Third Credit Agreement are guaranteed by substantially all of Envestnet’s U.S. subsidiaries and are secured by a first-priority lien on substantially all of the personal property (other than intellectual property) of Envestnet and the guarantors, subject to certain exclusions. Proceeds under the Third Credit Agreement may be used to finance capital expenditures and permitted acquisitions and for working capital and general corporate purposes.

In the event the Company has borrowings under the Third Credit Agreement, at the Company's option, it will pay interest on these borrowings at a rate equal to either (i) a base rate plus an applicable margin ranging from 0.25% to 1.75% per annum or (ii) an adjusted Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin ranging from 1.25% to
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
2.75% per annum, in each case based upon the total net leverage ratio, as calculated pursuant to the Credit Agreement. Any borrowings under the Third Credit Agreement will mature on February 4, 2027. There is also a commitment fee at a rate ranging from 0.25% to 0.30% per annum based upon the total net leverage ratio.

As of June 30, 2022, debt issuance costs related to the Third Credit Agreement are presented in prepaid expenses and other non-current assets in the condensed consolidated balance sheets which have outstanding amounts of $0.7 million and $2.5 million, respectively.

The Third Credit Agreement contains customary conditions, representations and warranties, affirmative and negative covenants, mandatory prepayment provisions and events of default. The covenants include certain financial covenants requiring the Company to maintain compliance with a maximum total leverage ratio, a minimum interest coverage ratio and a minimum liquidity covenant. The Company was in compliance with these financial covenants as of June 30, 2022.

As of June 30, 2022, the Company had all $500.0 million available to borrow under the Revolving Credit Facility, subject to covenant compliance.

Convertible Notes due 2023

Upon adoptionIn May 2018, the Company issued $345.0 million of ASU 2020-06, effective JanuaryConvertible Notes due 2023 that mature on June 1, 2021, the embedded conversion option, or equity component, is no longer separated from the host contract2023. The Convertible Notes due 2023 bear interest at a rate of 1.75% per annum payable semiannually in arrears on June 1 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, asDecember 1 of September 30, 2021, theeach year. The Convertible Notes due 2023 are presented at their gross proceedsgeneral unsecured obligations, subordinated in right of $345.0 million less unamortized debt issuance costs of $3.5 million with no future accretion of the original issue discount necessary.

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 allocatedpayment 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.Company's obligations under its Credit Agreement.

The effective interest rate of the Convertible Notes due 2023 was approximately 2.4% for the three and ninesix months ended SeptemberJune 30, 2021. The effective interest rate of the Convertible Notes due 2023 was approximately 6% for the three2022 and nine months ended September 30, 2020.2021. 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.costs.

Convertible Notes due 2025

Upon adoptionIn August 2020, the Company issued $517.5 million of ASU 2020-06, effective January 1, 2021, the embedded conversion option, or equity component, is no longer separated from the host contractConvertible Notes due 2025 that mature on August 15, 2025. The Convertible Notes due 2025 bear interest at a rate of 0.75% per annum payable semiannually in arrears on February 15 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, asAugust 15 of September 30, 2021, theeach year. The Convertible Notes due 2025 are presented at their gross proceedsgeneral unsecured obligations, subordinated in right of $517.5 million less unamortized debt issuance costs of $11.4 million with no future accretion of the original issue discount necessary.

In connection with the issuance of the Convertible Notes due 2025, the Company incurred a total of $14.5 million of issuance costs in 2020, of which $12.6 million was originally allocatedpayment to the debt component and presented net in Long-term debt and $1.9 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 2025.Company's obligations under its Credit Agreement.

The effective interest rate of the Convertible Notes due 2025 was approximately 1.3% for the three and ninesix months ended SeptemberJune 30, 2022 and 2021. The effective interest rate of the Convertible Notes due 2025 was 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.costs.

See “Note 14—Net Income (Loss) Per Share” for further discussion of the effect of conversion on net income per share.
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Interest Expense

Interest expense was comprised of the following and is included in other expense, net in the condensed consolidated statements of operations:
Three Months EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands)(in thousands)
Coupon interestCoupon interest$2,479 $1,951 $7,439 $4,962 Coupon interest$2,480 $2,480 $4,960 $4,960 
Amortization of issuance costsAmortization of issuance costs1,443 922 4,295 2,186 Amortization of issuance costs1,415 1,429 3,474 2,852 
Undrawn and other feesUndrawn and other fees320 191 948 477 Undrawn and other fees317 316 631 628 
Interest on revolving credit facility— 1,259 — 5,786 
Accretion of debt discount— 3,816 — 8,496 
Total interest expense Total interest expense$4,242 $8,139 $12,682 $21,907  Total interest expense$4,212 $4,225 $9,065 $8,440 

For each of the three and nine months ended SeptemberJune 30, 2022 and 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.million.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
For each of the three and ninesix months ended SeptemberJune 30, 2020,2022 and 2021, total interest expense related to the Convertible Notes was $6.5$7.4 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.$2.4 million.

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 SeptemberJune 30, 20212022 and December 31, 2020,2021, based on the three-tier fair value hierarchy, as defined in ASC 820, “Fair Value Measurements and Disclosures”:
September 30, 2021 June 30, 2022
Fair ValueLevel ILevel IILevel III Fair ValueLevel ILevel IILevel III
(in thousands)(in thousands)
Assets:Assets:    Assets:    
Money market fundsMoney market funds$1,720 $1,720 $— $— Money market funds$1,819 $1,819 $— $— 
Investment in private company1,508 — 1,508 — 
Assets to fund deferred compensation liabilityAssets to fund deferred compensation liability10,753 — — 10,753 Assets to fund deferred compensation liability10,107 — — 10,107 
Total assetsTotal assets$13,981 $1,720 $1,508 $10,753 Total assets$11,926 $1,819 $— $10,107 
Liabilities:Liabilities:    Liabilities:    
Contingent consideration$806 $— $— $806 
Deferred compensation liabilityDeferred compensation liability9,645 9,645 — — Deferred compensation liability7,947 7,947 — — 
Total liabilitiesTotal liabilities$10,451 $9,645 $— $806 Total liabilities$7,947 $7,947 $— $— 

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
December 31, 2020 December 31, 2021
Fair ValueLevel ILevel IILevel III Fair ValueLevel ILevel IILevel III
(in thousands)(in thousands)
Assets:Assets:    Assets:    
Money market fundsMoney market funds$84,110 $84,110 $— $— Money market funds$2,684 $2,684 $— $— 
Assets to fund deferred compensation liabilityAssets to fund deferred compensation liability9,961 — — 9,961 Assets to fund deferred compensation liability11,140 — — 11,140 
Total assetsTotal assets$94,071 $84,110 $— $9,961 Total assets$13,824 $2,684 $— $11,140 
Liabilities:Liabilities:    Liabilities:    
Contingent considerationContingent consideration$12,559 $— $— $12,559 Contingent consideration$743 $— $— $743 
Deferred compensation liabilityDeferred compensation liability8,720 8,720 — — Deferred compensation liability10,418 10,418 — — 
Total liabilitiesTotal liabilities$21,279 $8,720 $— $12,559 Total liabilities$11,161 $10,418 $— $743 
 
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 ninethree and six months ended SeptemberJune 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 sheets2022 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.2021.

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. 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. The Company had contingent consideration liabilities of $0.7 million as of December 31, 2021 which were recorded as a component of Accrued expenses and other liabilities on the condensed consolidated balance sheets. The Company had no contingent consideration liabilities as of June 30, 2022.

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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, 2020 to September 30, 2021: 
Fair Value of Contingent Consideration Liabilities
(in thousands)
Balance at December 31, 2020$12,559 
Fair market value adjustment on contingent consideration liability(667)
Accretion on contingent consideration474 
Payments of contingent consideration(11,560)
Balance at September 30, 2021$806 

Fair Value of Deferred Compensation Liability

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, 20202021 to SeptemberJune 30, 2021:2022:
 Fair Value of Assets to Fund Deferred Compensation Liability
(in thousands)
Balance at December 31, 20202021$9,96111,140 
Contributions215649 
Fair value adjustments and fees577 (1,682)
Balance at SeptemberJune 30, 20212022$10,75310,107 
 
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, increaseddecreased due to funding of the plan and gainsnet losses on the underlying investment vehicles.vehicles, partially offset by additional funding. These gainslosses 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
 
The Company considered theits Convertible Notes due 2023 and the Convertible Notes due 2025 to be Level II liabilities at SeptemberJune 30, 20212022 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 SeptemberJune 30, 20212022 (See “Note 9—Debt”).

As of SeptemberJune 30, 2022 and December 31, 2021, the carrying value of the Convertible Notes due 2023 equaled $341.5$343.1 million and $342.0 million, respectively, 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 2023 equaled $316.6 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the estimated fair value of the Convertible Notes due 2023 was $434.7$349.8 million and $460.8$439.9 million, respectively.

As of SeptemberJune 30, 2022 and December 31, 2021, the carrying value of the Convertible Notes due 2025 equaled $506.1$508.3 million and $506.8 million, respectively, 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 $439.9 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of SeptemberJune 30, 20212022 and December 31, 2020,2021, the estimated fair value of the Convertible Notes due 2025 was $523.0$451.5 million and $540.8$526.1 million, respectively.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Fair Value of Other Financial Assets and Liabilities

The Company considered the recorded value of its other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at SeptemberJune 30, 2022 and December 31, 2021 based upon the short-term nature of these assets and liabilities.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
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, Three Months Ended June 30, 2022
20212020 20222021
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidatedEnvestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidated Envestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidatedEnvestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidated
(in thousands)(in thousands)
Revenues:Revenues:Revenues:      
Asset-basedAsset-based$184,008 $— $184,008 $137,744 $— $137,744 Asset-based$191,972 $— $191,972 $170,075 $— $170,075 
Subscription-basedSubscription-based66,988 46,584 113,572 62,783 45,114 107,897 Subscription-based73,568 44,552 118,120 66,663 45,841 112,504 
Total recurring revenuesTotal recurring revenues250,996 46,584 297,580 200,527 45,114 245,641 Total recurring revenues265,540 44,552 310,092 236,738 45,841 282,579 
Professional services and other revenuesProfessional services and other revenues3,738 1,735 5,473 3,767 3,151 6,918 Professional services and other revenues6,460 2,300 8,760 3,559 2,600 6,159 
Total revenuesTotal revenues$254,734 $48,319 $303,053 $204,294 $48,265 $252,559 Total revenues$272,000 $46,852 $318,852 $240,297 $48,441 $288,738 

 Nine Months Ended September 30,
 20212020
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidatedEnvestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidated
(in thousands)
Revenues:      
Asset-based$513,458 $— $513,458 $394,801 $— $394,801 
Subscription-based197,663 138,242 335,905 184,516 132,911 317,427 
Total recurring revenues711,121 138,242 849,363 579,317 132,911 712,228 
Professional services and other revenues10,320 7,213 17,533 11,082 11,101 22,183 
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 EndedNine Months Ended
 September 30,September 30,
 2021202020212020
Fidelity17 %15 %17 %15 %
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
One customer accounted for more than 10% of the Envestnet Wealth Solutions segment’s revenues:

 Three Months EndedNine Months Ended
 September 30,September 30,
 2021202020212020
Fidelity21 %18 %20 %18 %

No single customer accounted for more than 10% of the Envestnet Data & Analytics segment’s revenue for any period presented.
 Six Months Ended June 30,
 20222021
 Envestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidatedEnvestnet Wealth SolutionsEnvestnet Data & AnalyticsConsolidated
(in thousands)
Revenues:      
Asset-based$394,689 $— $394,689 $329,450 $— $329,450 
Subscription-based142,105 90,749 232,854 130,675 91,658 222,333 
Total recurring revenues536,794 90,749 627,543 460,125 91,658 551,783 
Professional services and other revenues8,774 3,898 12,672 6,582 5,478 12,060 
Total revenues$545,568 $94,647 $640,215 $466,707 $97,136 $563,843 

The following table presents the Company’s revenues disaggregated by geography, based on the billing address of the customer:
Three Months EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands)(in thousands)
United StatesUnited States$298,022 $247,692 $851,683 $718,246 United States$314,271 $283,589 $631,000 $553,661 
InternationalInternational5,031 4,867 15,213 16,165 International4,581 5,149 9,215 10,182 
Total revenuesTotal revenues$303,053 $252,559 $866,896 $734,411 Total revenues$318,852 $288,738 $640,215 $563,843 

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
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 SeptemberJune 30, 2021: 
Years ending December 31,(in thousands)
Remainder of 2021$72,598 
2022236,203 
2023150,088 
202479,617 
202542,978 
Thereafter22,606 
Total$604,090 
2022: 

Only fixed consideration from significant contracts with customers is included in the amounts presented above.
Years ending December 31,(in thousands)
Remainder of 2022$137,741 
2023196,180 
2024114,774 
202567,070 
202635,991 
Thereafter8,228 
Total$559,984 

The remaining performance obligations disclosed above are not indicative of revenue for future periods.

Remaining performance obligations represent the transaction price allocated to unsatisfied or partially satisfied performance obligations. The disclosure includes estimates of variable consideration. The Company has appliedapplies the practical expedients and exemption and therefore does not to 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 SeptemberJune 30, 2021 decreased2022 increased by $1.0$4.3 million during the nine months ended September 30,from December 31, 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 $5.3$10.2 million and $5.2$9.5 million for the three months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. The amount of revenue recognized that was included in the opening deferred revenue balance was $31.6$26.1 million and $31.0$26.3 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, 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 $11.1$11.4 million and $10.8$11.8 million as of SeptemberJune 30, 20212022 and December 31, 2020,2021, respectively. Amortization expense for the deferred sales incentive compensation was $1.2$1.1 million and $0.9 million for each of the three months ended SeptemberJune 30, 20212022 and 2020, respectively.2021. Amortization expense for the deferred sales incentive compensation was $3.3$2.2 million and $2.9$2.1 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020, respectively.2021. 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. No significant impairment loss for capitalized costs was recorded during the periods.

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.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Cost of Revenues

The following table summarizes cost of revenues by revenue category:
Three Months EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands)(in thousands)
Asset-basedAsset-based$102,298 $71,133 $281,829 $201,600 Asset-based$112,301 $93,341 $229,729 $179,531 
Subscription-basedSubscription-based7,355 7,291 20,986 20,375 Subscription-based7,241 7,027 15,052 13,631 
Professional services and otherProfessional services and other183 121 384 352 Professional services and other6,940 126 6,983 201 
Total cost of revenuesTotal cost of revenues$109,836 $78,545 $303,199 $222,327 Total cost of revenues$126,482 $100,494 $251,764 $193,363 

12.Stock-Based Compensation
 
The Company has stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”) outstanding under 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 SeptemberJune 30, 2021,2022, the maximum number of common shares available for future issuance under the Company’s plans is 3,747,932.2,537,157.
 
Stock-based compensation expense under the Company’s plans was as follows:
Three Months EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands)(in thousands)
Stock-based compensation expenseStock-based compensation expense$18,512 $15,729 $49,934 $42,500 Stock-based compensation expense$22,876 $17,409 $44,566 $31,422 
Tax effect on stock-based compensation expenseTax effect on stock-based compensation expense(4,720)(4,011)(12,733)(10,837)Tax effect on stock-based compensation expense(5,833)(4,439)(11,364)(8,013)
Net effect on incomeNet effect on income$13,792 $11,718 $37,201 $31,663 Net effect on income$17,043 $12,970 $33,202 $23,409 
 
The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% for each of the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Stock Options
 
The Company hasdid not grantedgrant any stock options since January 2019.in the three and six months ended June 30, 2021 or 2022. The following table summarizes option activity under the Company’s plans:
  Weighted-Average    Weighted-Average 
 Weighted-Remaining   Weighted-Remaining 
 AverageContractual LifeAggregate  AverageContractual LifeAggregate
OptionsExercise Price(Years)Intrinsic Value OptionsExercise Price(Years)Intrinsic Value
(in thousands)(in thousands)
Outstanding as of December 31, 2020438,040 $36.28 4.1$20,156 
Outstanding as of December 31, 2021Outstanding as of December 31, 2021365,241 $38.61 3.3$14,878 
ExercisedExercised(44,079)20.87  Exercised(41,184)18.04  
ForfeitedForfeited(1,277)49.02  Forfeited(4,472)74.83  
Outstanding as of September 30, 2021392,684 37.97 3.616,601 
Outstanding as of June 30, 2022Outstanding as of June 30, 2022319,585 40.75 2.43,888 
Options exercisableOptions exercisable353,781 $36.75 3.2$15,384 Options exercisable319,276 $40.72 2.4$3,888 
 
Exercise prices of stock options outstanding as of SeptemberJune 30, 20212022 range from $10.40$15.34 to $55.29.$74.83. At SeptemberJune 30, 2021,2022, 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 0.31.1 years.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
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%0% 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:
RSUsPSUsRSUsPSUs
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, 20201,345,347 $70.56 302,797 $72.50 
Outstanding as of December 31, 2021Outstanding as of December 31, 20211,507,424 $71.50 359,184 $73.64 
GrantedGranted1,140,358 70.43 119,699 69.66 Granted1,301,073 74.49 113,269 69.67 
VestedVested(696,906)69.58 (62,524)61.53 Vested(618,310)70.52 (128,337)65.81 
ForfeitedForfeited(170,011)70.57 (10,954)78.97 Forfeited(176,727)73.01 (57,987)77.53 
Outstanding as of September 30, 20211,618,788 70.89 349,018 73.28 
Outstanding as of June 30, 2022Outstanding as of June 30, 20222,013,460 73.60 286,129 74.79 

At SeptemberJune 30, 2021,2022, there was $97.2$129.2 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 2.02.1 years. At SeptemberJune 30, 2021,2022, there was $11.2$11.0 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 EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands, except for effective tax rate)(in thousands, except for effective tax rate)
Income (loss) before income tax provision (benefit)Income (loss) before income tax provision (benefit)$10,584 $2,820 $27,078 $(10,499)Income (loss) before income tax provision (benefit)$(30,101)$7,147 $(42,789)$16,494 
Income tax provision (benefit)Income tax provision (benefit)(854)497 9,074 (161)Income tax provision (benefit)(5,833)15,516 (3,813)9,928 
Effective tax rateEffective tax rate(8.1)%17.6 %33.5 %1.5 %Effective tax rate19.4 %217.1 %8.9 %60.2 %

Under ASC 740-270-25, the Company is required to report income tax expense by applying a projected annual effective tax rate (“AETR”("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”("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 and ninesix months ended SeptemberJune 30, 2022 and 2021, and 2020, the Company’sCompany's ETR was impacted by the change in forecasted and actual year-to-date pre-tax book income.

For the three and six months ended SeptemberJune 30, 2021, the Company’s 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 nine months ended September 30, 2021,2022, the Company’s effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets includingwhich includes the valuation allowance impact of the Harvest acquisition,IRC Section 174, permanent book-tax differences, and the impact of state and local taxes offset by federal and state research and development (“("R&D”&D") credits.credits and the partial reserve release of an uncertain tax position due to the expiration of a statute of limitations.

For the three and ninesix months ended SeptemberJune 30, 2020,2021, the Company's effective tax rate differed from the statutory rate primarily due to the changeincrease in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets,
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
including the valuation allowance impact of the acquisition of Harvest Savings & Wealth Technologies in April 2021, permanent book-tax differences and the impact of state and local taxes partially offset by the permanent book tax differences, the windfall from stock-based compensation, the impact of the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") related to net operating loss ("NOL") carryback, and federal and state R&D 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 method or if-converted method as appropriate.

Prior to January 1, 2021, the Company accounted for the effect of its convertible notes using the treasury stock method since they may be settled in cash, shares or a combination thereof at the Company's option. Pursuant to the 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 using the if-converted method (See “Note 2—Basis of Presentation” and “Note 9—Debt”).



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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
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 EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands, except share and per share data)(in thousands, except share and per share data)
Net income (loss) attributable to Envestnet, Inc. (a)
Net income (loss) attributable to Envestnet, Inc. (a)
$11,740 $1,910 $18,405 $(10,350)
Net income (loss) attributable to Envestnet, Inc. (a)
$(23,285)$(8,281)$(37,144)$6,665 
Weighted-average common shares outstanding:Weighted-average common shares outstanding:Weighted-average common shares outstanding:
Basic (b)
Basic (b)
54,547,858 53,800,048 54,400,247 53,464,101 
Basic (b)
55,203,120 54,440,388 55,054,272 54,325,353 
Effect of dilutive shares:Effect of dilutive shares:Effect of dilutive shares:
Options to purchase common stockOptions to purchase common stock201,103 331,728 207,281 — Options to purchase common stock— — — 210,381 
Unvested restricted stock unitsUnvested restricted stock units570,515 610,442 614,005 — Unvested restricted stock units— — — 536,186 
Convertible Notes— 730,267 — — 
WarrantsWarrants69,151 86,498 66,439 — Warrants— — — 65,026 
Diluted (c)
Diluted (c)
55,388,627 55,558,983 55,287,972 53,464,101 
Diluted (c)
55,203,120 54,440,388 55,054,272 55,136,946 
Net income (loss) per share attributable to Envestnet, Inc common stock:Net income (loss) per share attributable to Envestnet, Inc common stock:Net income (loss) per share attributable to Envestnet, Inc common stock:
Basic (a/b)
Basic (a/b)
$0.22 $0.04 $0.34 $(0.19)
Basic (a/b)
$(0.42)$(0.15)$(0.67)$0.12 
Diluted (a/c)
$0.21 $0.03 $0.33 $(0.19)
Diluted (a/c)
Diluted (a/c)
$(0.42)$(0.15)$(0.67)$0.12 
Securities that were anti-dilutive and therefore excluded from the computation of diluted net income (loss) per share were as follows:
Three Months EndedSix Months Ended
Three Months EndedNine Months Ended June 30,June 30,
September 30,September 30, 2022202120222021
2021202020212020(in thousands)
Options to purchase common stockOptions to purchase common stock— — — 556,252 Options to purchase common stock319,585 405,638 319,585 — 
Unvested RSUs and PSUsUnvested RSUs and PSUs— — — 1,766,715 Unvested RSUs and PSUs2,299,589 2,161,056 2,299,589 39,652 
WarrantsWarrants— — — 470,000 Warrants470,000 470,000 470,000 — 
Convertible NotesConvertible Notes9,898,549 4,848,044 9,898,549 9,898,549 Convertible Notes9,898,549 9,898,549 9,898,549 9,898,549 
Total anti-dilutive securitiesTotal anti-dilutive securities9,898,549 4,848,044 9,898,549 12,691,516 Total anti-dilutive securities12,987,723 12,935,243 12,987,723 9,938,201 
 
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 intelligence platform powering dynamic, cloud-based innovation for digitalinstitutions to enable them to deliver an intelligent financial services.life to their clients.

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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The following table presentsEnvestnet Data & Analytics a reconciliation from income (loss) from operations by segmentleading data aggregation, intelligence, and experiences platform that powers data connectivity and business intelligence across digital financial services to consolidated net income (loss) attributableenable them to Envestnet, Inc.:
 Three Months EndedNine Months Ended
 September 30,September 30,
 2021202020212020
(in thousands)
Envestnet Wealth Solutions$34,386 $29,683 $101,042 $60,890 
Envestnet Data & Analytics1,265 (1,238)3,896 (6,764)
Nonsegment operating expenses(21,516)(16,789)(63,057)(46,079)
Income from operations14,135 11,656 41,881 8,047 
Other expense, net(3,551)(8,836)(14,803)(18,546)
Consolidated income (loss) before income tax benefit10,584 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 interest302 (413)401 (12)
Consolidated net income (loss) attributable to Envestnet, Inc.$11,740 $1,910 $18,405 $(10,350)
deliver an Intelligent Financial Life to their clients.

The information in the above tablefollowing tables 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, certain restructuring charges and other non-recurring and/or non-operationally related expenses. Intersegment revenues were not material for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.

A summary of consolidated total assets follows:
 September 30,December 31,
 20212020
(in thousands)
Envestnet Wealth Solutions$1,704,660 $1,634,153 
Envestnet Data & Analytics512,685 510,137 
Consolidated total assets$2,217,345 $2,144,290 
See “Note 11—Revenues and Cost of Revenues” for detail of revenues by segment.

The following table presents a reconciliation from income (loss) from operations by segment to consolidated net income (loss) attributable to Envestnet, Inc.:
 Three Months EndedSix Months Ended
 June 30,June 30,
 2022202120222021
(in thousands)
Envestnet Wealth Solutions$3,968 $32,459 $29,237 $66,656 
Envestnet Data & Analytics(3,705)1,342 (9,292)2,631 
Nonsegment operating expenses(31,986)(22,870)(58,389)(41,541)
Income (loss) from operations(31,723)10,931 (38,444)27,746 
Other income (expense), net1,622 (3,784)(4,345)(11,252)
Consolidated income (loss) before income tax benefit(30,101)7,147 (42,789)16,494 
Income tax provision (benefit)(5,833)15,516 (3,813)9,928 
Consolidated net income (loss)(24,268)(8,369)(38,976)6,566 
Add: Net loss attributable to non-controlling interest983 88 1,832 99 
Consolidated net income (loss) attributable to Envestnet, Inc.$(23,285)$(8,281)$(37,144)$6,665 

A summary of consolidated total assets follows:
 June 30,December 31,
 20222021
(in thousands)
Envestnet Wealth Solutions$1,615,651 $1,720,779 
Envestnet Data & Analytics571,749 520,403 
Consolidated total assets$2,187,400 $2,241,182 

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, June 30,December 31,
20212020 20222021
(in thousands)(in thousands)
United StatesUnited States$170,812 $140,651 United States$218,397 $180,680 
IndiaIndia2,603 2,970 India2,571 2,923 
OtherOther333 849 Other175 271 
Total long-lived assets, netTotal long-lived assets, net$173,748 $144,470 Total long-lived assets, net$221,143 $183,874 

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 no previous claims and cannot determine the maximum amount of potential future payments, if any, related to such indemnification and guarantee provisions. The Company believes that it is unlikely it will have to make material payments under these arrangements and therefore has not recorded a contingent liability associated with these arrangements in the condensed consolidated balance sheets.

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

Procurement of Technology Solutions

On June 21, 2021,April 1, 2022, the Company entered into a purchase agreement with a privately held company to acquire the technology solutions being developed by this privately held company for a purchase price of $18.0$9.0 million, including an advance of $3.0$4.0 million. The transactionThis advance is expected to close no later than December 31, 2022. In addition,included in other non-current assets in 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.condensed consolidated balance sheets.

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)
trial to take place before the Yodlee bench trial. Fact discovery closed on April 23, 2021, other than a few outstanding matters, and expert discovery is underway.
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Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
The Company believes FinancialApps’s allegations are without merit and will continue to defend the claims against it and litigate the counterclaims vigorously.

The Company and Yodlee were also named as defendants in a putative class action lawsuit filed on August 25, 2020, by Plaintiff Deborah Wesch in the United States District Court for the Northern District of California. On October 21, 2020, an amended class action complaint was filed by Plaintiff Wesch and nine9 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 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 two2 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 beguncontinues on the remaining state law claims against Yodlee. On October 9,8, 2021, Yodlee filed a motion for summary judgment, which has been fully briefed. Oral argument is currently scheduled for a hearing in late JanuaryAugust 22, 2022. Yodlee will continue to vigorously defend the remaining 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 anany accrual for any claims as of SeptemberJune 30, 2021.2022. 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.
 
18.Subsequent Events

Acquisition of Truelytics

On July 1, 2022, pursuant to an agreement and plan of merger (the “Merger Agreement”), dated as of May 10, 2022, between, among others, Truelytics, Inc., (“Truelytics”), Yodlee, Inc. and Quadrant Merger Sub Inc., a wholly owned subsidiary of Envestnet (“Merger Sub”), the Company completed the merger of Truelytics with and into Merger Sub, with Truelytics continuing as the surviving corporation (the “Truelytics Merger”) and a wholly owned subsidiary of Envestnet.

The acquisition of Truelytics aligns with the Company's strategy to further connect its ecosystem by creating transformative progress for its advisors and clients. Truelytics is an Advisor Transition Management platform and the first end-to-end data-driven system to help wealth management and insurance enterprises attract, grow, and retain advisory businesses, while also reducing the costs related to advisor transitions. The Truelytics platform combines Envestnet data, analytics, and wealth technology to further support advisors across the ecosystem.

Envestnet expects to integrate Truelytics into the Company’s Envestnet Data and Analytics segment.
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Table of Contents
Envestnet, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements (continued)
Contingencies
CertainSubject to the terms and conditions of the Company’s revenues areMerger Agreement, the Company paid estimated cash consideration of approximately $21 million, net of cash acquired, subject to sales and use taxes in certain jurisdictions where it conducts business inpost-closing adjustments. The Company funded the United States. As of September 30, 2021 and December 31, 2020, the Company estimated a sales and use tax liability of $3.8 million and $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.Truelytics acquisition with available cash resources.

As of September 30, 2021 and December 31, 2020, the Company also estimated a sales and use tax receivable of $2.8 million and $2.1 million, respectively, relatedDue to the estimated recoverabilitylack of a portion ofavailable information, the liability from customers. This amount isdisclosures in relation to ASC 805 are currently not able to be included in prepaid expenses and other current assets in the condensed consolidated balance sheets.this Form 10-Q.

Additional future information obtained from the applicable jurisdictions may affect the Company's estimateAcquisition of its sales and use tax liability, but such change in the estimate cannot currently be made.
18.Subsequent EventsRedi2 Technologies

Investment in YieldX
On OctoberJuly 1, 2021, the Company acquired2022 pursuant to a 6.8% ownership interest in YieldXstock purchase agreement, dated as of June 24, 2022, between Envestnet, Inc. ("YieldX"(“Envestnet”) and Redi2 Technologies Inc., (“Redi2 Technologies”), a Delaware corporation, for cash considerationEnvestnet completed the acquisition of $15.0 million. YieldXRedi2 Technologies (the “Redi2 Technologies Acquisition”). Redi2 Technologies provides an end-to-end digitalrevenue management and hosted fee-billing solutions. Its platform with smart workflows, artificial intelligence powered analyticsenables fee calculation, invoice creation, payouts and a reimagined user experience for financial professionalsaccounting, and investors in the fixed income markets. billing compliance.

The Company electedexpects to integrate 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.technology and operations of the Redi2 Technologies business into the Company’s Envestnet Wealth segment.

In connection with this investment,the Redi2 Technologies Acquisition, the Company also entered into a commercial agreementpaid estimated consideration of approximately $70 million in cash. The Company funded the Redi2 Technologies Acquisition with YieldXavailable cash resources. In addition, certain executives may earn up to integrate$20 million based upon the productsachievement of certain target financial and solutions of YieldX into the Company’s platform offering. The consideration under the commercial agreement includes a warrant and quarterly cash payments subjectnon-financial metrics.

Due to the satisfactionlack of available information, the disclosures in relation to ASC 805 are currently not able to be included in this Form 10-Q.

Exercise of Membership Interests

The Company granted membership interests in certain performance targets.of the Company's equity investments to 2 legacy PIEtech executives as part of its 2019 acquisition of PIEtech. These interests, which were fully vested as of May 1, 2020, became exercisable on May 1, 2022. In July 2022, these executives exercised their respective put options and sold these membership interests to the Company for approximately $10 million.
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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.

This quarterly report on Form 10-Q for the quarter ended June 30, 2022 ("Quarterly Report") contains forward-looking statements regarding future events and our future results within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, in particular, statements about our plans, strategies and prospects under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. These statements are based on our current expectations and projections about future events and are identified by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “expected,” “intend,” “will,” “may,” or “should” or the negative of those terms or variations of such words, and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our business and other characteristics of future events or circumstances are forward-looking statements. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this quarterly reportQuarterly Report include, but are not limited to,
 
a pandemic or health crisis, including the Coronavirus Disease 2019 (“COVID-19”) pandemic,COVID-19 pandemic;
the conflict between Russia and itsUkraine including related sanctions, and their 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;markets;
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;
the renegotiation of fees by our clients;
changes in the estimates of fair value of reporting units or of long-lived assets;
the amount of our debt and our ability to service our debt;
limitations on our ability to access information from third parties or charges for accessing such information;
the targeting of some of our sales efforts at large financial institutions and large internet servicesfinancial technology ("FinTech") 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 assets on which we derive revenue and the freedom of investors to 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;
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;
regulatory compliance failures;
failure by our customers to obtain proper permissions or waivers for our use of disclosure of information;
adverse judicial or regulatory proceedings against us;
failure of our solutions, services or systems, or those of third parties on which we rely, to work properly;
potential liability for use of inaccurate information by third parties provided by us;
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the occurrence of a deemed change of control;
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the uncertainty of the application and interpretation of certain tax laws;
issuances of additional shares of common stock or issuances of shares of preferred stock or convertible 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 reportQuarterly 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 reportQuarterly 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 reportQuarterly 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, 20202021 (the “2020“2021 Form 10-K”); 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-QQuarterly Report and the 20202021 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 reportQuarterly Report and the consolidated financial statements and related notes included in our 20202021 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 wellnessinsight are delivered. Our mission is to empower financial advisors and financial service providers with innovative technology, solutions and intelligence to make financial wellness a reality for everyone.intelligence. Envestnet has been a leader in helping transform wealth management, working towards our goal of buildingexpanding a holistic financial wellness ecosystem so that our clients can deliver an intelligent financial life to improve the financial lives of millions of consumers.their clients ("Intelligent Financial Life").
 
More than 6,0006,500 companies, including 1716 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 servicesFinTech companies, leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients.

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

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

We also 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

Acquisition of Proprietary Technology

We previously owned approximately 29% of the outstanding units in a privately held companyRussia and 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 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 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, we acquired Harvest Savings & Wealth Technologies (“Harvest”), a Delaware corporation (the “Harvest Acquisition”). Harvest provides automated goals-based saving tools and wealth solutions to banks, credit unions, trust companies, and other financial institutions. Harvest has been integrated into the Envestnet Wealth Solutions segment. The acquisition optimizes our 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.Ukraine Conflict

In connectionFebruary 2022, military conflict escalated between Russia and Ukraine which continues as of the date of this quarterly report. The uncertainty over the extent and duration of the ongoing conflict continues to cause disruptions to businesses and markets worldwide. The extent of the effect on our financial performance will continue to depend on future developments, including the extent and duration of the conflict, economic sanctions imposed, further governmental and private sector responses and the timing and extent normal economic conditions resume, all of which are uncertain and difficult to predict. Although we are unable to estimate the overall financial effect of the conflict at this time, as the conflict continues, it could have a material adverse effect on our business, results of operations, financial condition and cash flows. As of June 30, 2022, these condensed consolidated financial statements do not reflect any adjustments as a result of the conflict.

Credit Agreement Amendment

On February 4, 2022, we entered into a Third Amended and Restated Credit Agreement (the “Third Credit Agreement”) with a group of banks. The Third Credit Agreement amends and restates, in its entirety, our prior Amended and Restated Credit Agreement, dated as of July 18, 2017, as amended (the “Prior Credit Agreement”).

The Third Credit Agreement amended certain provisions under the Harvest Acquisition, we paid estimated considerationPrior Credit Agreement to, among other things, (i) extend the maturity of $32.8 million (of which $3.0 million is being held in escrow for 18 months afterloans and the closing date), netrevolving credit commitments, (ii) reduce the interest rate payable on the loans and (iii) increase capacity and flexibility under certain of cash acquired,the negative covenants.

The Third Credit Agreement provides, subject to certain post-closing adjustments. We funded the acquisitioncustomary conditions, for a revolving credit facility (the “Credit Facility”), in an aggregate amount of $500.0 million, with cash on hand.a $20.0 million sub-facility for letters of credit.

We recorded estimated goodwill of $17.9 million, which is not deductible for income tax purposes, and estimated identifiable intangible assets for proprietary technologies of $9.5 million. The tangible assets acquired and liabilities assumed were not material.Credit Facility matures on February 4, 2027.

Organizational RealignmentOutstanding loans under the Credit Facility accrue interest, at Envestnet’s option, at a rate equal to either (i) a base rate plus an applicable margin ranging from 0.25% to 1.75% per annum or (ii) an adjusted Term Secured Overnight Financing Rate ("SOFR") plus an applicable margin ranging from 1.25% to 2.75% per annum, based upon the total net leverage ratio, as calculated pursuant to the Third Credit Agreement. The undrawn portion of the commitments under the Credit Facility is subject to a commitment fee at a rate ranging from 0.25% to 0.30% per annum, based upon the total net leverage ratio as calculated pursuant to the Credit Agreement.

InThe obligations of Envestnet under the fourth quarterThird Credit Agreement are guaranteed by substantially all of 2020, as partEnvestnet’s domestic subsidiaries and are secured by a first-priority lien on substantially all of an organizational realignment, we entered into separation agreements with several employees. In connection with this realignment, we recognized a net creditthe personal property (other than intellectual property) of $0.1 million of severance expense inEnvestnet and the three months ended September 30, 2021. Total severance expense relatedguarantors, subject to this program for the nine months ended September 30, 2021 was $5.1 million. As of September 30, 2021, we had approximately $1.6 million in accrued compensation and related taxes associated with these separation agreements.

certain exclusions.
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In connection with entering the Third Credit Agreement, we capitalized $1.9 million of new issuance costs and wrote off $0.6 million of existing deferred financing charges.

Accelerated Investment Plan

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

Enhancing and streamlining our platforms to make it easier for our customers to work with us;Capturing more of the addressable market;
Redefining the way data is used in an effort to create better intelligence, insight and guidance for advisors to better assist their clients;
ImprovingModernizing 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;engagement marketplace; and
Opening the platform for expansion to more solutions providers and developers.platform.

These investments, which beganWe expect to incur an additional $35 to $40 million over the remainder of 2022 as we continue to invest in our ecosystem. The majority of these charges will be recorded to compensation and benefits expense in our condensed consolidated statement of operations. For the second quarter of 2021 and will increase as the year progresses, are expected to approximate $30six months ended June 30, 2022, we recorded approximately $22 million of additional operating expenses in 2021.compensation and benefit expense related to this plan.

Uncertainties Related to COVID-19Procurement of Technology Solutions

On March 11, 2020,April 1, 2022, we entered into a purchase agreement with a privately held company to acquire the World Health Organization declaredtechnology solutions being developed by this privately held company for a purchase price of $9.0 million, including an advance of $4.0 million. This advance is included in other non-current assets in the outbreakcondensed consolidated balance sheets.

Office Closures

In April 2022, in response to changing needs and an increase in employees working remotely, we closed three offices in the United States. We are currently exploring alternative uses for these properties, including sublease options. In connection with these closures, we recognized $3.7 million of COVID-19,losses on asset retirements in the three and six months ended June 30, 2022 which are included in general and administration expense in the condensed consolidated statement of operations. Additionally, we recognized $13.0 million of lease restructuring costs in the three and six months ended June 30, 2022 which are included in general and administration expense in the condensed consolidated statement of operations.

Investment in Privately Held Company

On May 20, 2022, we acquired a novel strain25.0% interest in a privately held company for cash consideration of Coronavirus,$5.0 million. Subject to the occurrence of certain conditions, we agreed to invest up to an additional $10.0 million for additional units in the future. We use the equity method of accounting to record our portion of this privately held company's net income or loss on a global pandemic. This outbreak continues to cause disruptions to businessesone quarter lag from the actual results of operations. We use the equity method of accounting because of our less than 50% ownership interest and markets worldwide aslack of control and we do not otherwise exercise control over the virus spreads. The extentsignificant economic and operating decisions of the effectprivately held company.

Acquisition of 401kplans.com

On May 31, 2022, we acquired 401kplans.com LLC (“401kplans.com”). 401kplans.com has been integrated into the Envestnet Wealth Solutions segment.

401kplans.com provides a digital 401(k) retirement plan marketplace that streamlines retirement plan distribution and due diligence among financial advisors and third-party administrators. The acquisition demonstrates our commitment to the retirement plan industry and is expected to create a more seamless experience and enhance productivity for advisors by helping them shop, compare and select the best-fitting 401(k) plan for their client.

In connection with the 401kplans.com acquisition, we paid estimated consideration of $14.5 million, net of cash acquired, subject to certain post-closing adjustments. We funded the acquisition with cash on hand.

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Dilution gain on equity method investee share issuance

We have an ownership interest in a privately held company that is accounted for under the equity method. During the six months ended June 30, 2022, we funded a $2.5 million convertible loan to this privately held company. During the three months ended June 30, 2022, this privately held company raised additional preferred equity which reduced our operationalownership to 41.0% 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.convertible loan was converted. As of September 30, 2021, these condensed consolidated financial statements do not reflect any adjustments as a result of this transaction, we recorded a $6.9 million dilution gain during the pandemic.three months ended June 30, 2022, which is included in other income (expense), net in the condensed consolidated statements of operations.

Acquisition of Truelytics

On July 1, 2022, we acquired Truelytics, Inc. (“Truelytics”). The acquisition of Truelytics aligns with our strategy to further connect our ecosystem by creating transformative progress for our advisors and clients. Truelytics is an Advisor Transition Management platform and the first end-to-end data-driven system to help wealth management and insurance enterprises attract, grow, and retain advisory businesses, while also reducing the costs related to advisor transitions. The Truelytics platform combines our data, analytics, and wealth technology to further support advisors across the ecosystem. We expect to integrate Truelytics into the Envestnet Data & Analytics segment.

In connection with the acquisition of Truelytics, we paid estimated cash consideration of approximately $21 million, net of cash acquired, subject to certain post-closing adjustments. We funded the Truelytics acquisition with cash on hand.

Acquisition of Redi2 Technologies

On July 1, 2022, we acquired Redi2 Technologies Inc. (“Redi2 Technologies”). Redi2 Technologies provides revenue management and hosted fee-billing solutions. Its platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. We expect to integrate Redi2 Technologies into the Envestnet Wealth segment.

In connection with the Redi2 Technologies Acquisition, we paid estimated consideration of approximately $70 million in cash. We funded the Redi2 Technologies Acquisition with cash on hand. In addition, certain executives may earn up to $20 million based upon the achievement of certain target financial and non-financial metrics.

Exercise of Membership Interests

We granted membership interests in certain of our equity investments to two legacy PIEtech executives as part of the 2019 acquisition of PIEtech. These interests, which were fully vested as of May 1, 2020, became exercisable on May 1, 2022. In July 2022, these executives exercised their respective put options and sold these membership interests to us for approximately $10 million.

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.Report. 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.institutions to enable them to deliver an Intelligent Financial Life to their clients.

Envestnet Data & Analytics – a leading data aggregation, intelligence, and experiences platform that powers data connectivity and business intelligence platform powering dynamic, cloud-based innovation foracross digital financial services.services to enable them to deliver an Intelligent Financial Life to their clients.

Envestnet Wealth Solutions Segment
 
Envestnet Wealth Solutions empowers financial advisors at broker-dealers, banks, and RIAs with all the tools they require to deliver holistic wealth management to their end clients, enabling them to deliver an Intelligent Financial Life to their clients. In addition, the firm provides advisors with practice management support so that they can grow their practices and operate more efficiently. By SeptemberJune 30, 2021,2022, Envestnet’s platform assets grew to more than $5.4were approximately $5.0 trillion in approximately 17nearly 18 million accounts overseen by more than 108,000105,000 advisors.
 
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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 more than 22,000 investment products. Envestnet | Enterprise also sells data aggregation and reporting, data analytics and digital advice capabilities to customers.

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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 more than 4,900 vetted third party managed account products, multi-manager portfolios, and fund strategist portfolios, as well as more thanapproximately 900 proprietary products, such as quantitative portfolios and fund strategist portfolios. PMC also offers portfolio overlay and tax optimization services.

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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 ofAs of
September 30,December 31,March 31,June 30,September 30,June 30,September 30,December 31,March 31,June 30,
20202020202120212021202120212021
2022(1)
2022
(in millions, except accounts and advisors data)(in millions, except accounts and advisors data)
Platform AssetsPlatform AssetsPlatform Assets
Assets under Management (“AUM”)Assets under Management (“AUM”)$228,905 $263,043 $286,039 $315,422 $327,279 Assets under Management (“AUM”)$315,422 $327,279 $362,038 $361,251 $325,209 
Assets under Administration (“AUA”)Assets under Administration (“AUA”)375,860 405,365 408,858 426,416 431,040 Assets under Administration (“AUA”)426,416 431,040 456,316 432,141 352,840 
Total AUM/ATotal AUM/A604,765 668,408 694,897 741,838 758,319 Total AUM/A741,838 758,319 818,354 793,392 678,049 
SubscriptionSubscription3,498,353 3,892,814 4,132,917 4,447,733 4,670,827 Subscription4,447,733 4,670,827 4,901,662 4,736,537 4,312,114 
Total Platform AssetsTotal Platform Assets$4,103,118 $4,561,222 $4,827,814 $5,189,571 $5,429,146 Total Platform Assets$5,189,571 $5,429,146 $5,720,016 $5,529,929 $4,990,163 
Platform AccountsPlatform AccountsPlatform Accounts
AUMAUM1,018,8171,073,1221,138,1831,209,7611,276,066AUM1,209,7611,276,0661,345,2741,459,0931,491,861
AUAAUA1,318,7301,276,9751,192,6681,163,9911,193,069AUA1,163,9911,193,0691,217,0761,186,1801,061,484
Total AUM/ATotal AUM/A2,337,5472,350,0972,330,8512,373,7522,469,135Total AUM/A2,373,7522,469,1352,562,3502,645,2732,553,345
SubscriptionSubscription10,639,39911,079,04811,453,43411,712,57314,810,664Subscription11,712,57314,810,66414,986,53115,151,56915,312,144
Total Platform AccountsTotal Platform Accounts12,976,94613,429,14513,784,28514,086,32517,279,799Total Platform Accounts14,086,32517,279,79917,548,88117,796,84217,865,489
AdvisorsAdvisorsAdvisors
AUM/AAUM/A41,45041,20641,17741,25941,696AUM/A41,25941,69639,73539,80038,394
SubscriptionSubscription63,86265,10465,72466,59766,489Subscription66,59766,48968,80867,16866,838
Total AdvisorsTotal Advisors105,312106,310106,901107,856108,185Total Advisors107,856108,185108,543106,968105,232
(1) Certain assets and accounts have been reclassified from AUA to AUM to better reflect the nature of the services provided to certain customers.
 
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The following tables providetable provides information regarding the degree to which gross sales, redemptions, net flows and changes in the market values of assets contributed to changes in AUM or AUA in the periods indicated:

Asset Rollforward - Three Months Ended September 30, 2021 Asset Rollforward - Three Months Ended June 30, 2022
As ofGrossNetMarketAs of As ofGrossNetMarketReclass toAs of
6/30/2021SalesRedemptionsFlowsImpact9/30/2021 3/31/2022SalesRedemptionsFlowsImpactSubscription6/30/2022
(in millions, except account data) (in millions, except account data)
AUMAUM$315,422 $27,197 $(12,703)$14,494 $(2,637)$327,279 AUM$361,251 $24,829 $(18,962)$5,867 $(41,909)$— $325,209 
AUAAUA426,416 32,375 (22,274)10,101 (5,477)431,040 AUA432,141 27,323 (27,662)(339)(50,499)(28,463)352,840 
Total AUM/ATotal AUM/A$741,838 $59,572 $(34,977)$24,595 $(8,114)$758,319 Total AUM/A$793,392 $52,152 $(46,624)$5,528 $(92,408)$(28,463)$678,049 
Fee-Based AccountsFee-Based Accounts2,373,752 95,383 2,469,135 Fee-Based Accounts2,645,273 19,494 (111,422)2,553,345 

The above AUM/A gross sales figures include $6.1$9.2 billion in new client conversions. We onboarded an additional $149.5$24.4 billion in subscription conversions during the three months ended SeptemberJune 30, 2022 bringing total conversions for the three months ended SeptemberJune 30, 2022 to $155.6 billion.

 Asset Rollforward - Nine Months Ended September 30, 2021
 As ofGrossNetMarketReclass toAs of
 12/31/2020SalesRedemptionsFlowsImpactSubscription9/30/2021
 (in millions, except account data)
AUM$263,043 $82,952 $(38,353)$44,599 $19,637 $— $327,279 
AUA405,365 85,798 (68,994)16,804 22,200 (13,329)431,040 
Total AUM/A$668,408 $168,750 $(107,347)$61,403 $41,837 $(13,329)$758,319 
Fee-Based Accounts2,350,097 227,018 (107,980)2,469,135 

The above AUM/A gross sales figures include $23.7 billion in new client conversions. We onboarded an additional $266.8 billion in subscription conversions during the nine months ended September 30, 2021 bringing total conversions for the nine months ended September 30, 2021 to $290.5$33.6 billion.

Asset and account figures in the “Reclass to Subscription” columns for the ninethree months ended SeptemberJune 30, 20212022 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
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 Asset Rollforward - Six Months Ended June 30, 2022
 As ofGrossNetMarketReclass toAs of
 12/31/2021SalesRedemptionsFlowsImpactSubscription
Reclassification(1)
6/30/2022
 (in millions, except account data)
AUM$362,038 $53,528 $(34,929)$18,599 $(64,149)$— $8,721 $325,209 
AUA456,316 55,664 (47,574)8,090 (74,382)(28,463)(8,721)352,840 
Total AUM/A$818,354 $109,192 $(82,503)$26,689 $(138,531)$(28,463)$— $678,049 
Fee-Based Accounts2,562,350 102,417 (111,422)— 2,553,345 
(1) Certain assets have been reclassified from AUA to changeAUM to better reflect the way they paynature of the services provided to certain customers.

The above AUM/A gross sales figures include $18.3 billion in new client conversions. We onboarded an additional $58.7 billion in subscription conversions during the six months ended June 30, 2022 bringing total conversions for the six months ended June 30, 2022 to $77.0 billion. (Note: We have revised our solution, whereby they switchsubscription conversions for the three months ended March 31, 2022 to $34.3 billion from an asset-based pricing modelthe previously reported $32.8 billion.)

Asset and account figures in the “Reclass to aSubscription” columns for the six months ended June 30, 2022 represent enterprise customers whose billing arrangements in future periods are subscription-based, model,rather than asset-based. Such amounts are included in Subscription metrics at the end of the quarter in which has increased our subscription-based metrics.the reclassification occurred, with no impact on total platform assets or accounts.

Envestnet Data & Analytics Segment
 
Envestnet Data & Analytics is a leading data aggregation, and data intelligence, platform. As an artificial intelligence (“AI”) and data specialist,experiences platform. Envestnet Data & Analytics gathers, refinesenables consumers to aggregate financial accounts within client applications and aggregates aprovides to clients the functionality to gather, refine, and aggregate massive setsets of end-userconsumer permissioned transaction level data and combines them withfor use in financial applications, reports, market research analysis, and application programming interfaces (“APIs”) for its customers..
Over 1,500Approximately 1,700 clients, including financial institutions, financial technology innovators and financial advisory firms, including 1513 of the 20 largest U.S. banks, subscribe to the Envestnet Data & Analytics platform to underpin personalized financial apps and services for over 30approximately 36 million paid subscribers.end-users.
 
Envestnet Data & Analytics serves twofour main customerclient groups: financial institutions (“FI”Banking”), financial advisors and institutions (“Wealth”), market intelligence and analytics providers (“Research”) and financial technology innovators which we refer to as Yodlee Interactive (“YI”Tech”) customers..

These groups serve the following customers:

The Financial InstitutionsBanking group provides customers– Retail Banks, Credit Unions and credit card providers
Wealth – Wealth management financial advisors and institutions
Research – Research and analyst firms
Tech – Personal financial management, small business accounting, e-commerce, payment solutions providers, small business lending and authentication

With the exception of the Tech Group, we provide clients with secure access to open APIs, end-useruser facing applications powered by our platform, and APIs (“FinApps”), and reports. Customers receive end-user permissioned transaction data elements that weWe aggregate and cleanse.cleanse client permission consumer data elements. Envestnet Data & Analytics also enables customersclients to develop their own applications through its open APIs, which deliver secure data, money movementpayments 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
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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 InteractiveTech group enables customersclients to develop new applications and enhance existing solutions.solutions through our APIs. These customersclients operate in a number of sub-vertical markets, including FinTech, 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 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.
We believe that our brand leadership,recognition, innovative technology and intellectual property, large customerclient base, and unique data gathering and enrichment provide us with competitive advantages that have enabled us to grow.
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Operational Highlights
 
Asset-based recurring revenues increased 34%13% from $137.7$170.1 million in the three months ended SeptemberJune 30, 20202021 to $184.0$192.0 million in the three months ended SeptemberJune 30, 2021.2022. Subscription-based recurring revenues increased 5% from $107.9$112.5 million in the three months ended SeptemberJune 30, 20202021 to $113.6$118.1 million in the three months ended SeptemberJune 30, 2021.2022. Total revenues, which also includes professional services and other revenues, increased 20%10% from $252.6$288.7 million in the three months ended SeptemberJune 30, 20202021 to $303.1$318.9 million in the three months ended SeptemberJune 30, 2021.2022.

The Envestnet Wealth Solutions segment's total revenues increased 25%13% from $204.3$240.3 million in the three months ended SeptemberJune 30, 20202021 to $254.7$272.0 million in the three months ended SeptemberJune 30, 2021 primarily2022 due to an increase in asset-based revenues of $46.3$21.9 million, and an increase in subscription-based revenues of $4.2$6.9 million and an increase in professional services and other revenues of $2.9 million. The Envestnet Data & Analytics segment's total revenues remained flat as increasesdecreased 3% from $48.4 million in the three months ended June 30, 2021 to $46.9 million in the three months ended June 30, 2022 primarily due to a decrease in subscription-based revenues were offset by decreasesof $1.3 million and a decrease in professional services and other revenues.revenues of $0.3 million.

Asset-based recurring revenues increased 30%20% from $394.8$329.5 million in the ninesix months ended SeptemberJune 30, 20202021 to $513.5$394.7 million in the ninesix months ended SeptemberJune 30, 2021.2022. Subscription-based recurring revenues increased 6%5% from $317.4$222.3 million in the ninesix months ended SeptemberJune 30, 20202021 to $335.9$232.9 million in the ninesix months ended SeptemberJune 30, 2021.2022. Total revenues, which also includes professional services and other revenues, increased 18%14% from $734.4$563.8 million in the ninesix months ended SeptemberJune 30, 20202021 to $866.9$640.2 million in the ninesix months ended SeptemberJune 30, 2021.2022.

The Envestnet Wealth Solutions segment's total revenues increased 22%17% from $590.4$466.7 million in the ninesix months ended SeptemberJune 30, 20202021 to $721.4$545.6 million in the ninesix months ended SeptemberJune 30, 2021 primarily2022 due to an increase in asset-based revenues of $118.7$65.2 million, and an increase in subscription-based revenues of $13.1$11.4 million and an increase in professional services and other revenues of $2.2 million. The Envestnet Data & Analytics segment's total revenues increased 1%decreased 3% from $144.0$97.1 million in the ninesix months ended SeptemberJune 30, 20202021 to $145.5$94.6 million in the ninesix months ended SeptemberJune 30, 20212022 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 $3.9$1.6 million and a decrease in subscription-based revenues of $0.9 million.

Net incomeloss attributable to Envestnet, Inc. for the three months ended SeptemberJune 30, 20212022 was $11.7$23.3 million, or $0.21$0.42 per diluted share, compared to a net loss attributable to Envestnet, Inc. of $8.3 million, or $0.15 per diluted share, for the three months ended June 30, 2021.

Net loss attributable to Envestnet, Inc. for the six months ended June 30, 2022 was $37.1 million, or $0.67 per diluted share, compared to net income attributable to Envestnet, Inc. of $1.9$6.7 million, or $0.03$0.12 per diluted share, for the threesix months ended SeptemberJune 30, 2020.

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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 $10.4 million, or $0.19 per diluted share, for the nine months ended September 30, 2020.2021.

Adjusted revenues for the three months ended SeptemberJune 30, 20212022 were $303.1$318.9 million, compared to adjusted revenues of $252.7$288.8 million in the prior year period. Adjusted EBITDA for the three months ended SeptemberJune 30, 20212022 was $66.2$57.1 million, compared to adjusted EBITDA of $67.6$71.1 million in the prior year period. Adjusted net income for the three months ended SeptemberJune 30, 20212022 was $39.9$32.0 million, or $0.61$0.49 per diluted share, compared to adjusted net income of $40.2$43.5 million, or $0.72$0.67 per diluted share in the prior year period.

Adjusted revenues for the ninesix months ended SeptemberJune 30, 20212022 were $867.1$640.3 million, compared to adjusted revenues of $735.0$564.0 million in the prior year period. Adjusted EBITDA for the ninesix months ended SeptemberJune 30, 20212022 was $205.5$112.8 million, compared to adjusted EBITDA of $178.0$139.3 million in the prior year period. Adjusted net income for the ninesix months ended SeptemberJune 30, 20212022 was $125.3$63.0 million, or $1.92$0.96 per diluted share, compared to adjusted net income of $103.2$85.4 million, or $1.88$1.31 per diluted share in the prior year period.
 
Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted 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.

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Results of Operations
Three Months Ended Nine Months Ended  Three Months Ended Six Months Ended 
September 30,
 Percent
September 30,
 Percent
June 30,
 Percent
June 30,
 Percent
20212020Change20212020Change 20222021Change20222021Change
(in thousands) (in thousands)  (in thousands) (in thousands) 
Revenues:Revenues:      Revenues:      
Asset-basedAsset-based$184,008 $137,744 34 %$513,458 $394,801 30 %Asset-based$191,972 $170,075 13 %$394,689 $329,450 20 %
Subscription-basedSubscription-based113,572 107,897 %335,905 317,427 %Subscription-based118,120 112,504 %232,854 222,333 %
Total recurring revenuesTotal recurring revenues297,580 245,641 21 %849,363 712,228 19 %Total recurring revenues310,092 282,579 10 %627,543 551,783 14 %
Professional services and other revenuesProfessional services and other revenues5,473 6,918 (21)%17,533 22,183 (21)%Professional services and other revenues8,760 6,159 42 %12,672 12,060 %
Total revenuesTotal revenues303,053 252,559 20 %866,896 734,411 18 %Total revenues318,852 288,738 10 %640,215 563,843 14 %
Operating expenses:Operating expenses:      Operating expenses:      
Cost of revenuesCost of revenues109,836 78,545 40 %303,199 222,327 36 %Cost of revenues126,482 100,494 26 %251,764 193,363 30 %
Compensation and benefitsCompensation and benefits109,839 94,428 16 %316,101 300,423 %Compensation and benefits125,767 105,548 19 %252,616 206,262 22 %
General and administrationGeneral and administration39,393 38,979 %117,463 118,537 (1)%General and administration66,144 41,755 58 %110,479 78,070 42 %
Depreciation and amortizationDepreciation and amortization29,850 28,951 %88,252 85,077 %Depreciation and amortization32,182 30,010 %63,800 58,402 %
Total operating expensesTotal operating expenses288,918 240,903 20 %825,015 726,364 14 %Total operating expenses350,575 277,807 26 %678,659 536,097 27 %
Income from operations14,135 11,656 21 %41,881 8,047 *
Other expense, net(3,551)(8,836)(60)%(14,803)(18,546)(20)%
Income (loss) from operationsIncome (loss) from operations(31,723)10,931 *(38,444)27,746 *
Other income (expense), netOther income (expense), net1,622 (3,784)(143)%(4,345)(11,252)(61)%
Income (loss) before income tax provision (benefit)Income (loss) before income tax provision (benefit)10,584 2,820 *27,078 (10,499)*Income (loss) before income tax provision (benefit)(30,101)7,147 *(42,789)16,494 *
Income tax provision (benefit)Income tax provision (benefit)(854)497 *9,074 (161)*Income tax provision (benefit)(5,833)15,516 (138)%(3,813)9,928 (138)%
Net income (loss)Net income (loss)11,438 2,323 *18,004 (10,338)*Net income (loss)(24,268)(8,369)*(38,976)6,566 *
Add: Net (income) loss attributable to non-controlling interest302 (413)*401 (12)*
Add: Net loss attributable to non-controlling interestAdd: Net loss attributable to non-controlling interest983 88 *1,832 99 *
Net income (loss) attributable to Envestnet, Inc.Net income (loss) attributable to Envestnet, Inc.$11,740 $1,910 *$18,405 $(10,350)*Net income (loss) attributable to Envestnet, Inc.$(23,285)$(8,281)*$(37,144)$6,665 *
*Not meaningful.

Three months ended SeptemberJune 30, 20212022 compared to three months ended SeptemberJune 30, 20202021

Asset-based recurring revenues
 
Asset-based recurring revenues increased 34%13% from $137.7$170.1 million in the three months ended SeptemberJune 30, 20202021 to $184.0$192.0 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in(which are based on the three months ended September 30, 2021 compared tomarket value of the three months ended September 30, 2020,customers' assets on our platforms as of the end of the previous quarter), the impact of new account growth and positive net flows of AUM/A in the thirdsecond quarter of 2021.2022.
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The number of financial advisors with asset-based recurring revenue on our technology platforms increaseddecreased from approximately 41,000 as of SeptemberJune 30, 20202021 to approximately 42,00038,000 as of SeptemberJune 30, 2021,2022, and the number of AUM/A client accounts increased from approximately 2.32.4 million as of SeptemberJune 30, 20202021 to approximately 2.52.6 million as of SeptemberJune 30, 2021.2022.

Asset-based recurring revenues increased from 55%59% of total revenue in the three months ended SeptemberJune 30, 20202021 to 61%60% of total revenue in the three months ended SeptemberJune 30, 2021, primarily due to a higher increase in asset-based recurring revenues as compared to subscription-based recurring revenues.2022.

Subscription-based recurring revenues
 
Subscription-based recurring revenue increased 5% from $107.9$112.5 million in the three months ended SeptemberJune 30, 20202021 to $113.6$118.1 million in the three months ended SeptemberJune 30, 2021.2022. This increase was primarily due to an increase of $4.26.9 million in the Envestnet Wealth Solutions segment, which can be attributed to new and an increaseexisting customer growth, partially offset by a decrease of $1.5$1.3 million in the Envestnet Data & Analytics segment which are primarily due to new and existing customer growth.segment.

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Professional services and other revenues
 
Professional services and other revenues decreased 21%increased 42% from $6.9$6.2 million in the three months ended SeptemberJune 30, 20202021 to $5.5$8.8 million in the three months ended SeptemberJune 30, 2021.2022. The decreaseincrease was due to an increase in revenues resulting from the 2022 Advisor Summit, which was held as an in-person event. The 2021 Advisor Summit was virtual due to the COVID-19 pandemic. This increase in Advisor Summit revenues was partially offset by lower professional services revenue due to the timing of the completion of customer projects and deployments.deployments within both segments.

Cost of revenues
 
Cost of revenues increased 40%26% from $78.5$100.5 million in the three months ended SeptemberJune 30, 20202021 to $109.8$126.5 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset-based cost of revenues of $31.2$19.0 million, which directly correlates directly with the increase to asset-based recurring revenues during the period.period, and an increase in professional services and other cost of revenues of $6.8 million, primarily as a result of our 2022 Advisor Summit, which was held in-person. As a percentage of total revenues, cost of revenues increased from 31%35% in the three months ended SeptemberJune 30, 20202021 to 36%40% in three months ended SeptemberJune 30, 2021,2022, primarily due to shifts in pricing and product mix for asset-based revenues.revenues and additional costs incurred in 2022 related to the in-person Advisor Summit event in the Envestnet Wealth Solutions segment. Cost of revenues as a percentage of total revenues in the Envestnet Data & Analytics segment remained consistent.

Compensation and benefits

Compensation and benefits increased 16%19% from $94.4$105.5 million in the three months ended SeptemberJune 30, 20202021 to $109.8$125.8 million in the three months ended SeptemberJune 30, 2021.2022. The increase wasis comprised primarily due toof increases in salaries, benefits and related payroll taxes of $8.8 million, incentive compensation of $5.0$11.8 million, non-cash compensation expense of $3.0$6.2 million and other immaterial increases within compensation and benefits. These increases were partially offset by a decrease in severance expense of $2.5$1.8 million. As a percentage of total revenues, compensation and benefits decreasedincreased from 37% in the three months ended SeptemberJune 30, 20202021 to 36%39% in the three months ended SeptemberJune 30, 2021.2022.

General and administration
 
General and administration expenses increased 1%58% from $39.0$41.8 million in the three months ended SeptemberJune 30, 20202021 to $39.4$66.1 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to increases in systems developmentlease restructuring and asset retirement costs of $3.6$15.4 million, software and maintenance charges of $3.7 million, litigation and regulatory related expenses of $2.4 million, marketing expense of $3.0$1.6 million and other immaterial increases within generaltravel and administration.entertainment expense of $1.5 million. These increases were partially offset by decreasesa decrease in non-income tax expenseprofessional and legal fees of $2.6 million, restructuring charges and transaction costs of $2.4$1.7 million and miscellaneous general and administration expensein occupancy costs of $1.5 million. As a percentage of total revenues, general and administration expenses decreasedincreased from 15%14% in the three months ended SeptemberJune 30, 20202021 to 13%21% in the three months ended SeptemberJune 30, 2021.2022, primarily due to lease restructuring and asset retirements charges incurred for three office closures.

Depreciation and amortization
 
Depreciation and amortization expense increased 3%7% from $29.0$30.0 million in the three months ended SeptemberJune 30, 20202021 to $29.9$32.2 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increaseincreases in amortization related to internally developed software amortization expense of $2.4$1.8 million partially offset by a decrease in intangible asset amortization expense of $1.1 million.and additional depreciation on fixed assets. As a percentage of total revenues, depreciation and amortization expense decreased from 11% in the three months ended September 30, 2020 toremained consistent at 10% in the three months ended SeptemberJune 30, 2021.2021 and 2022.

Other income (expense), net

Other income (expense), net increased from other expense of $3.8 million in the three months ended June 30, 2021 to other income of $1.6 million in the three months ended June 30, 2022, primarily due to a $6.9 million dilution gain recorded in 2022 related to an equity method investee's share issuance, which was partially offset by a decrease of $0.8 million related to the fair market value adjustment to investment in private company and an increase in losses of $0.6 million related to equity investments.
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Other expense, net

Other expense, net decreased from $8.8 million in the three months ended September 30, 2020 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 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, June 30,
20212020 20222021
(in thousands)(in thousands, except effective tax rate)
Income before income tax provision (benefit)$10,584 $2,820 
Income (loss) before income tax provision (benefit)Income (loss) before income tax provision (benefit)$(30,101)$7,147 
Income tax provision (benefit)Income tax provision (benefit)(854)497 Income tax provision (benefit)(5,833)15,516 
Effective tax rateEffective tax rate(8.1)%17.6 %Effective tax rate19.4 %217.1 %

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 SeptemberJune 30, 20212022 and 2020,2021, our ETR was impacted by the change in forecasted and actual year-to-date pre-tax book income.

For the three months ended SeptemberJune 30, 2022, our effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance we had placed on a portion of U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, the impact of state and local taxes offset by federal and state research and development ("R&D") credits, and the partial reserve release for an uncertain tax position due to the expiration of a statute of limitations.

For the three months ended June 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 haswe had 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 the Company has placed on a portion of its U.S. deferred tax assetspermanent book-tax differences, 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 NOL carryback, and federal and state R&D credits.

NineSix months ended SeptemberJune 30, 20212022 compared to ninesix months ended SeptemberJune 30, 20202021
 
Asset-based recurring revenues
 
Asset-based recurring revenues increased 30%20% from $394.8$329.5 million in the ninesix months ended SeptemberJune 30, 20202021 to $513.5$394.7 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in(which are based on the nine months ended September 30, 2021 compared tomarket value of the nine months ended September 30, 2020,customers' assets on our platforms as of the end of the previous quarter), the impact of new account growth and positive net flows of AUM/A in the first ninesix months of 2021.2022.

The number of financial advisors with asset-based recurring revenue on our technology platforms increaseddecreased from approximately 41,000 as of SeptemberJune 30, 20202021 to approximately 42,00038,000 as of SeptemberJune 30, 2021,2022, and the number of AUM/A client accounts increased from approximately 2.32.4 million as of SeptemberJune 30, 20202021 to approximately 2.52.6 million as of SeptemberJune 30, 2021.2022.

Asset-based recurring revenues increased from 54%58% of total revenue in the ninesix months ended SeptemberJune 30, 20202021 to 59%62% of total revenue in the ninesix months ended SeptemberJune 30, 2020,2022, primarily due to a higher increase in asset-based recurring revenues as compared to subscription-based recurring revenues.
 
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Subscription-based recurring revenues
 
Subscription-based recurring revenue increased 6%5% from $317.4$222.3 million in the ninesix months ended SeptemberJune 30, 20202021 to $335.9$232.9 million in the ninesix months ended SeptemberJune 30, 2021.2022. This increase was primarily due to an increase of $13.111.4 million in the Envestnet Wealth Solutions segment, and an increase of $5.3 million in the Envestnet Data & Analytics segment, both of which can be attributed to new and existing customer growth.

Professional services and other revenues
 
Professional services and other revenues decreased 21%increased 5% from $22.2$12.1 million in the ninesix months ended SeptemberJune 30, 20202021 to $17.5$12.7 million in the ninesix months ended SeptemberJune 30, 2021.2022. The decreaseincrease was due to an increase in revenues resulting from the 2022 Advisor Summit, which was held as an in-person event. The 2021 Advisor Summit was virtual due to the COVID-19 pandemic. This increase in Advisor Summit revenues was partially offset by lower professional services revenue in the Envestnet Data & Analytics segment due to the timing of the completion of customer projects and deployments.
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Cost of revenues
 
Cost of revenues increased 36%30% from $222.3$193.4 million in the ninesix months ended SeptemberJune 30, 20202021 to $303.2$251.8 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset-based cost of revenues of $80.2$50.2 million, which directly correlates with the increase to asset-based recurring revenues during the period.period, and an increase in professional services and other cost of revenues of $6.8 million, primarily as a result of our 2022 Advisor Summit, which was held in-person. As a percentage of total revenues, cost of revenues increased from 30%34% in the ninesix months ended SeptemberJune 30, 20202021 to 35%39% in ninesix months ended SeptemberJune 30, 2021,2022, primarily due to shifts in pricing and product mix for asset-based revenues.revenues and additional costs incurred in 2022 related to the in-person Advisor Summit event in the Envestnet Wealth Solutions segment as well as costs incurred to migrate our hosting platforms to a third-party cloud server solution in the Envestnet Data & Analytics segment.
 
Compensation and benefits

Compensation and benefits increased 5%22% from $300.4$206.3 million in the ninesix months ended SeptemberJune 30, 20202021 to $316.1$252.6 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase is primarily comprised of increases in incentive compensation of $11.6 million, salaries, benefits and related payroll taxes of $9.2$28.0 million, non-cash compensation expense of $4.6$13.9 million, and other immaterial increases within compensation and benefit accounts. These increases were partially offset by decreases in severance expense of $8.1 million and miscellaneous employee expenses of $3.1$1.9 million, contract labor expenses of $1.4 million and short term variable expenses of $1.2 million. The decrease in severance expense is primarily related to charges incurred in connection with the Early Retirement Program during the nine months ended September 30, 2020. As a percentage of total revenues, compensation and benefits decreasedincreased from 41%37% in the ninesix months ended SeptemberJune 30, 20202021 to 36%39% in the ninesix months ended SeptemberJune 30, 2021, due to a higher revenue increase compared to a lower compensation and benefits increase.2022.

General and administration
 
General and administration expenses decreased 1%increased 42% from $118.5$78.1 million in the ninesix months ended SeptemberJune 30, 20202021 to $117.5$110.5 million in the ninesix months ended SeptemberJune 30, 2021.2022. The decreaseincrease was primarily due to decreasesincreases in lease restructuring charges and transactionasset retirement costs of $5.4$15.3 million, software and maintenance charges of $7.2 million, litigation and regulatory related expenses of $3.7 million, marketing expense of $3.2 million, travel and entertainment expense of $2.5 million, and miscellaneous general and administration expense of $4.1 million, non-income tax expense of $2.4 million, travel and entertainment expense of $2.3 million, communications, research and data services of $1.1 million and other immaterial decreases within general and administration expense.$2.1 million. These decreasesincreases were partially offset by increasesdecreases in systems development costs of $7.6 million, marketing expense of $4.0 million and professional and legal fees of $3.5$2.1 million, occupancy costs of $2.1 million and bad debt expense of $1.7 million. As a percentage of total revenues, general and administration expenses decreasedincreased from 16% in the nine months ended September 30, 2020 to 14% in the ninesix months ended SeptemberJune 30, 2021.2021 to 17% in the six months ended June 30, 2022, primarily due to lease restructuring and asset retirements charges incurred for three office closures.

Depreciation and amortization
 
Depreciation and amortization expense increased 4%9% from $85.1$58.4 million in the ninesix months ended SeptemberJune 30, 20202021 to $88.3$63.8 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increaseincreases in internally developed software amortization expense of $8.0$4.0 million partially offset by a decrease in intangible asset amortization expense of $4.6 million.and additional depreciation on fixed assets. As a percentage of total revenues, depreciation and amortization expense decreased from 12% in the nine months ended September 30, 2020 toremained consistent at 10% in the ninesix months ended SeptemberJune 30, 2021.2021 and 2022.

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Other expense, net

Other expense, net decreased from $18.5$11.3 million in the ninesix months ended SeptemberJune 30, 20202021 to $14.8$4.3 million in the ninesix months ended SeptemberJune 30, 2021.2022. The decrease was primarily due to reduced interest expensea $6.9 million dilution gain recorded in 2022 related to an equity method investee's share issuance and a decrease in losses of $9.2$1.1 million in the current year period primarily duerelated to the adoptionequity investments. These were partially offset by a decrease 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$0.8 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 market value adjustment upon the settlement of a former Chief Executive Officer's stock options during the nine months ended September 30, 2020.to investment in private company.
 
Income tax provision (benefit)
Nine Months Ended Six Months Ended
September 30, June 30,
20212020 20222021
(in thousands)(in thousands, except effective tax rate)
Income (loss) before income tax provision (benefit)Income (loss) before income tax provision (benefit)$27,078 $(10,499)Income (loss) before income tax provision (benefit)$(42,789)$16,494 
Income tax provision (benefit)Income tax provision (benefit)9,074 (161)Income tax provision (benefit)(3,813)9,928 
Effective tax rateEffective tax rate33.5 %1.5 %Effective tax rate8.9 %60.2 %

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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 ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, our ETR was impacted by the change in forecasted and actual year-to-date pre-tax book income.

For the ninesix months ended SeptemberJune 30, 2022, our effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance we had placed on a portion of U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, the impact of state and local taxes offset by federal and state research and development ("R&D") credits, and the partial reserve release for an uncertain tax position due to the expiration of a statute of limitations.

For the six months ended June 30, 2021, our effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance the Company haswe had 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 the Company has placed on a portion of its 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 NOL carryback, and federal and state R&D credits.

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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 from operations by segment to consolidated net income (loss) attributable to Envestnet, Inc.:
Three Months EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands)(in thousands)
Envestnet Wealth SolutionsEnvestnet Wealth Solutions$34,386 $29,683 $101,042 $60,890 Envestnet Wealth Solutions$3,968 $32,459 $29,237 $66,656 
Envestnet Data & AnalyticsEnvestnet Data & Analytics1,265 (1,238)3,896 (6,764)Envestnet Data & Analytics(3,705)1,342 (9,292)2,631 
Nonsegment operating expensesNonsegment operating expenses(21,516)(16,789)(63,057)(46,079)Nonsegment operating expenses(31,986)(22,870)(58,389)(41,541)
Income from operations14,135 11,656 41,881 8,047 
Other expense, net(3,551)(8,836)(14,803)(18,546)
Income (loss) from operationsIncome (loss) from operations(31,723)10,931 (38,444)27,746 
Other income (expense), netOther income (expense), net1,622 (3,784)(4,345)(11,252)
Consolidated income (loss) before income tax benefitConsolidated income (loss) before income tax benefit10,584 2,820 27,078 (10,499)Consolidated income (loss) before income tax benefit(30,101)7,147 (42,789)16,494 
Income tax provision (benefit)Income tax provision (benefit)(854)497 9,074 (161)Income tax provision (benefit)(5,833)15,516 (3,813)9,928 
Consolidated net income (loss)Consolidated net income (loss)11,438 2,323 18,004 (10,338)Consolidated net income (loss)(24,268)(8,369)(38,976)6,566 
Add: Net (income) loss attributable to non-controlling interest302 (413)401 (12)
Add: Net loss attributable to non-controlling interestAdd: Net loss attributable to non-controlling interest983 88 1,832 99 
Consolidated net income (loss) attributable to Envestnet, Inc.Consolidated net income (loss) attributable to Envestnet, Inc.$11,740 $1,910 $18,405 $(10,350)Consolidated net income (loss) attributable to Envestnet, Inc.$(23,285)$(8,281)$(37,144)$6,665 

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 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 Six Months Ended 
September 30,PercentSeptember 30,Percent June 30,PercentJune 30,Percent
20212020Change20212020Change 20222021Change20222021Change
(in thousands) (in thousands)  (in thousands) (in thousands) 
Revenues:Revenues:      Revenues:      
Asset-basedAsset-based$184,008 $137,744 34 %$513,458 $394,801 30 %Asset-based$191,972 $170,075 13 %$394,689 $329,450 20 %
Subscription-basedSubscription-based66,988 62,783 %197,663 184,516 %Subscription-based73,568 66,663 10 %142,105 130,675 %
Total recurring revenuesTotal recurring revenues250,996 200,527 25 %711,121 579,317 23 %Total recurring revenues265,540 236,738 12 %536,794 460,125 17 %
Professional services and other revenuesProfessional services and other revenues3,738 3,767 (1)%10,320 11,082 (7)%Professional services and other revenues6,460 3,559 82 %8,774 6,582 33 %
Total revenuesTotal revenues254,734 204,294 25 %721,441 590,399 22 %Total revenues272,000 240,297 13 %545,568 466,707 17 %
Operating expenses:Operating expenses:Operating expenses:
Cost of revenuesCost of revenues103,742 72,435 43 %285,887 205,338 39 %Cost of revenues120,722 94,713 27 %239,530 182,145 32 %
Compensation and benefitsCompensation and benefits67,592 59,522 14 %195,560 194,906 — %Compensation and benefits78,759 65,114 21 %157,403 127,968 23 %
General and administrationGeneral and administration26,086 22,248 17 %71,669 69,358 %General and administration45,001 24,884 81 %72,361 45,583 59 %
Depreciation and amortizationDepreciation and amortization22,928 20,406 12 %67,283 59,907 12 %Depreciation and amortization23,550 23,127 %47,037 44,355 %
Total operating expensesTotal operating expenses220,348 174,611 26 %620,399 529,509 17 %Total operating expenses268,032 207,838 29 %516,331 400,051 29 %
Income from operations
Income from operations
$34,386 $29,683 16 %$101,042 $60,890 66 %
Income from operations
$3,968 $32,459 (88)%$29,237 $66,656 (56)%

Three months ended SeptemberJune 30, 20212022 compared to three months ended SeptemberJune 30, 20202021 for the Envestnet Wealth Solutions segment
Asset-based recurring revenues

Asset-based recurring revenues
Asset-based recurring revenues increased 34%13% from $137.7$170.1 million in the three months ended SeptemberJune 30, 20202021 to $184.0$192.0 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in(which are based on the three months ended September 30, 2021 comparedmarket value of the customers' assets on our platforms as of the end of the previous quarter), due to the three months ended September 30, 2020, the impact of new account growth and positive net flows of AUM/A in the thirdsecond quarter of 2021.2022.

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The number of financial advisors with asset-based recurring revenue on our technology platforms increaseddecreased from approximately 41,000 as of SeptemberJune 30, 20202021 to approximately 42,00038,000 as of SeptemberJune 30, 2021,2022, and the number of AUM/A client accounts increased from approximately 2.32.4 million as of SeptemberJune 30, 20202021 to approximately 2.52.6 million as of SeptemberJune 30, 2021.2022.

As a percentage of segment revenues, asset-based recurring revenue increased from 67%remained consistent at 71% of segment revenue in the three months ended September 30, 2020 to 72% of segment revenue in the three months ended SeptemberJune 30, 2021 primarily due to a higher increase in asset-basedand 2022.
Subscription-based recurring revenues as compared to subscription-based recurring revenues.

Subscription-based recurring revenues
Subscription-based recurring revenues increased 7%10% from $62.8$66.7 million in the three months ended SeptemberJune 30, 20202021 to $67.0$73.6 million in the three months ended SeptemberJune 30, 2021,2022, primarily due to new and existing customer growth.
 
Professional services and other revenues

Professional services and other revenues decreased 1%increased 82% from $3.8$3.6 million in the three months ended SeptemberJune 30, 20202021 to $3.7$6.5 million in the three months ended SeptemberJune 30, 2021.2022. The increase was due to an increase in revenues resulting from the 2022 Advisor Summit, which was held as an in-person event. The 2021 Advisor Summit was virtual due to the COVID-19 pandemic. This increase in Advisor Summit revenues was partially offset by lower professional services revenue due to the timing and completion of customer projects and deployments.
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Cost of revenues
 
Cost of revenues increased 43%27% from $72.4$94.7 million in the three months ended SeptemberJune 30, 20202021 to $103.7$120.7 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset-based cost of revenues of $31.2$19.0 million, which directly correlates with the increase to asset-based recurring revenues during the period.period, and an increase in professional services and other cost of revenues of $6.8 million, primarily as a result of our 2022 Advisor Summit, which was held in-person. As a percentage of totalsegment revenues, cost of revenues increased from 35%39% in the three months ended SeptemberJune 30, 20202021 to 41%44% in the three months ended SeptemberJune 30, 2021,2022, primarily due to shifts in pricing and product mix for asset-based revenues.revenues and additional costs incurred in 2022 related to the in-person Advisor Summit event.

Compensation and benefits
 
Compensation and benefits increased 14% from $59.5$65.1 million in the three months ended SeptemberJune 30, 20202021 to $67.6$78.8 million in the three months ended SeptemberJune 30, 2021.2022. The increase is primarily due to increases in salaries, benefits and related payroll taxes of $5.7$8.7 million, incentive compensation of $2.7 million and non-cash compensation expense of $1.0 million. These$3.8 million, severance expense of $1.7 million and other immaterial increases werewithin compensation and benefit accounts, partially offset by a decrease in severance expenseincentive compensation of $2.2$1.0 million. As a percentage of totalsegment revenues, compensation and benefits decreasedincreased from 27% in the three months ended June 30, 2021 to 29% in the three months ended SeptemberJune 30, 2020 to 27% in the three months ended September 30, 2021.2022.

General and administration

General and administration expenses increased 17%81% from $22.2$24.9 million in the three months ended SeptemberJune 30, 20202021 to $26.1$45.0 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to increasesan increase of $15.4 million related to lease restructuring costs incurred in systems development costs2022 driven by the closure of $3.0three offices in the United States, in software and maintenance charges of $3.3 million, marketing expense of $2.6 million, restructuring charges and transaction costs of $1.1$2.3 million, and bad debt expensemiscellaneous general and administrative expenses of $0.9$1.0 million. These increases were partially offset by decreases in non-income tax expenseoccupancy costs of $2.8$1.5 million and miscellaneous generalprofessional and administration expenseslegal fees of $1.3$1.2 million. As a percentage of totalsegment revenues, general and administration expenses decreasedincreased from 11% in the three months ended September 30, 2020 to 10% in the three months ended SeptemberJune 30, 2021.2021 to 17% in the three months ended June 30, 2022, primarily due to lease restructuring and asset retirements charges incurred for three office closures in April 2022.

Depreciation and amortization
 
Depreciation and amortization expense increased 12%2% from $20.4$23.1 million in the three months ended SeptemberJune 30, 20202021 to $22.9$23.6 million in the three months ended SeptemberJune 30, 2021.2022. The increase was primarily due to increasesan increase in internally developed software amortization expense of $1.7$0.9 million, partially offset by other immaterial decreases within depreciation and intangible asset amortization of $0.8 million.accounts. As a percentage of segment revenues, depreciation and amortization expense decreased from 10% in the three months ended SeptemberJune 30, 20202021 to 9% in the three months ended SeptemberJune 30, 2021.2022.
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NineSix months ended SeptemberJune 30, 20212022 compared to ninesix months ended SeptemberJune 30, 20202021 for the Envestnet Wealth Solutions segment
  
Asset-based recurring revenues

Asset-based recurring revenues increased 30%20% from $394.8$329.5 million in the ninesix months ended SeptemberJune 30, 20202021 to $513.5$394.7 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles in(which are based on the nine months ended September 30, 2021 compared tomarket value of the nine months ended September 30, 2020,customers' assets on our platforms as of the end of the previous quarter), due to the impact of new account growth and positive net flows of AUM/A in the first ninesix months of 2021.2022.

The number of financial advisors with asset-based recurring revenue on our technology platforms increaseddecreased from approximately 41,000 as of SeptemberJune 30, 20202021 to approximately 42,00038,000 as of SeptemberJune 30, 2021,2022, and the number of AUM/A client accounts increased from approximately 2.32.4 million as of SeptemberJune 30, 20202021 to approximately 2.52.6 million as of SeptemberJune 30, 2021.2022.

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 ninesix months ended SeptemberJune 30, 2021 primarily due to a higher increase72% of segment revenue in asset-based recurring revenues as compared to subscription-based recurring revenues.the six months ended June 30, 2022.
 
Subscription-based recurring revenues

Subscription-based recurring revenues increased 7%9% from $184.5$130.7 million in the ninesix months ended SeptemberJune 30, 20202021 to $197.7$142.1 million in the ninesix months ended SeptemberJune 30, 2021,2022, 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.growth. 
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Professional services and other revenues

Professional services and other revenues decreased 7%increased 33% from $11.1$6.6 million in the ninesix months ended SeptemberJune 30, 20202021 to $10.3$8.8 million in the ninesix months ended SeptemberJune 30, 2021.2022. The decreaseincrease was primarily due to an increase in revenues resulting from the 2022 Advisor Summit, which was held as an in-person event. The 2021 Advisor Summit was virtual due to the COVID-19 pandemic. This increase in Advisor Summit revenues was partially offset by lower professional services revenue due to the timing of theand completion of customer projects and deployments.

Cost of revenues
 
Cost of revenues increased 39%32% from $205.3$182.1 million in the ninesix months ended SeptemberJune 30, 20202021 to $285.9$239.5 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in asset-based cost of revenues of $80.2$50.2 million, which directly correlates with the increase to asset-based recurring revenues during the period.period, and an increase in professional services and other cost of revenues of $6.8 million, primarily as a result of our 2022 Advisor Summit, which was held in-person. As a percentage of segment revenues, cost of revenues increased from 35%39% in the ninesix months ended SeptemberJune 30, 20202021 to 40%44% in the ninesix months ended SeptemberJune 30, 2021,2022, primarily due to shifts in pricing and product mix for asset-based revenues.revenues and additional costs incurred in 2022 related to the in-person Advisor Summit event.
 
Compensation and benefits
 
Compensation and benefits increased from $194.9$128.0 million in the ninesix months ended SeptemberJune 30, 20202021 to $195.6$157.4 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase is primarily due to increases in incentive compensation of $6.6 million, salaries, benefits and related payroll taxes of $4.9 million. These increases are partially offset by a decrease in severance$20.2 million, non-cash compensation expense of $10.5 million. The decrease in severance expense is primarily related to charges in connection with the Early Retirement Program during the nine months ended September 30, 2020.$7.2 million and other immaterial increases within compensation and benefit accounts. As a percentage of segment revenues, compensation and benefits decreasedincreased from 33% in the nine months ended September 30, 2020 to 27% in the ninesix months ended SeptemberJune 30, 2021 primarily due to a higher revenue increase compared to a lower compensation and benefits increase.29% in the six months ended June 30, 2022.

General and administration

General and administration expenses increased 3%59% from $69.4$45.6 million in the ninesix months ended SeptemberJune 30, 20202021 to $71.7$72.4 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to increasesan increase of $15.3 million related to lease restructuring costs incurred in systems development costs2022 driven by the closure of $6.0 million, professionalthree offices in the United States, software and legal feesmaintenance charges of $2.9$6.7 million, marketing expense of $2.4$3.9 million and occupancy costsmiscellaneous general and administration expenses of $1.0$2.6 million. These increases were partially offset by decreases in miscellaneous general and administration expensesdecreased occupancy costs of $4.2 million, non-income tax expense of $2.9 million, travel and entertainment expenses of $1.7 million and
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various other immaterial decreases.$1.8 million. As a percentage of segment revenues, general and administration expenses decreasedincreased from 12% in the nine months ended September 30, 2020 to 10% in the ninesix months ended SeptemberJune 30, 2021.2021 to 13% in the six months ended June 30, 2022, primarily due to lease restructuring and asset retirements charges incurred for three office closures.
  
Depreciation and amortization
 
Depreciation and amortization expense increased 12%6% from $59.9$44.4 million in the ninesix months ended SeptemberJune 30, 20202021 to $67.3$47.0 million in the ninesix months ended SeptemberJune 30, 2021.2022. The increase was primarily due to an increase in internally developed software amortization expense of $6.0 million.$2.2 million and an increase in finance lease amortization of $1.2 million, partially offset by other immaterial decreases within depreciation and amortization accounts. As a percentage of segment revenues, depreciation and amortization expense decreased from 10% in the ninesix months ended SeptemberJune 30, 20202021 to 9% in the ninesix months ended SeptemberJune 30, 2021.2022.

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Envestnet Data & Analytics

The following table presents income (loss) from operations for the Envestnet Data & Analytics segment:
Three Months Ended Nine Months Ended  Three Months Ended Six Months Ended 
September 30,PercentSeptember 30,Percent June 30,PercentJune 30,Percent
20212020Change20212020Change 20222021Change20222021Change
(in thousands) (in thousands)  (in thousands) (in thousands) 
Revenues:Revenues:      Revenues:      
Subscription-basedSubscription-based$46,584 $45,114 %$138,242 $132,911 %Subscription-based$44,552 $45,841 (3)%$90,749 $91,658 (1)%
Professional services and other revenuesProfessional services and other revenues1,735 3,151 (45)%7,213 11,101 (35)%Professional services and other revenues2,300 2,600 (12)%3,898 5,478 (29)%
Total revenuesTotal revenues48,319 48,265 — %145,455 144,012 %Total revenues46,852 48,441 (3)%94,647 97,136 (3)%
Operating expenses:Operating expenses:  Operating expenses:  
Cost of revenuesCost of revenues6,094 6,110 — %17,312 16,989 %Cost of revenues5,760 5,781 — %12,234 11,218 %
Compensation and benefitsCompensation and benefits26,468 26,540 — %77,765 82,455 (6)%Compensation and benefits23,994 25,008 (4)%54,160 51,297 %
General and administrationGeneral and administration7,570 8,308 (9)%25,513 26,162 (2)%General and administration12,171 9,427 29 %20,782 17,943 16 %
Depreciation and amortizationDepreciation and amortization6,922 8,545 (19)%20,969 25,170 (17)%Depreciation and amortization8,632 6,883 25 %16,763 14,047 19 %
Total operating expensesTotal operating expenses47,054 49,503 (5)%141,559 150,776 (6)%Total operating expenses50,557 47,099 %103,939 94,505 10 %
Income (loss) from operationsIncome (loss) from operations$1,265 $(1,238)*$3,896 $(6,764)*Income (loss) from operations$(3,705)$1,342 *$(9,292)$2,631 *
*Not meaningful.
 
Three months ended SeptemberJune 30, 20212022 compared to three months ended SeptemberJune 30, 20202021 for the Envestnet Data & Analytics segment

Subscription-based recurring revenues
 
Subscription-based recurring revenues increaseddecreased 3% from $45.1$45.8 million in the three months ended SeptemberJune 30, 20202021 to $46.6$44.6 million in the three months ended SeptemberJune 30, 2021,2022, primarily due to increasesdecreases in revenue from new and existing customers.
 
Professional services and other revenues
 
Professional services and other revenues decreased 45%12% from $3.2$2.6 million in the three months ended SeptemberJune 30, 20202021 to $1.7$2.3 million in the three months ended SeptemberJune 30, 20212022 primarily due to the timing of the completion of customer projects and deployments.

Cost of revenues
 
Cost of revenues remained consistent at $6.1$5.8 million in the three months ended SeptemberJune 30, 20202021 and 2021.2022. As a percentage of segment revenues, cost of revenues remained consistent at 13%12% in the three months ended SeptemberJune 30, 20202021 and 2021.2022.
 
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Compensation and benefits
 
Compensation and benefits remained consistent at $26.5decreased 4% from $25.0 million in the three months ended SeptemberJune 30, 20202021 to $24.0 million in the three months ended June 30, 2022, primarily due to decreases in severance expense of $2.1 million and 2021.non-cash compensation expense of $1.3 million, partially offset by an increase in salaries, benefits, and related payroll taxes of $1.8 million. As a percentage of segment revenues, compensation and benefits remained consistent at 55%decreased from 52% in the three months ended SeptemberJune 30, 2020 and 2021.2021 to 51% in the three months ended June 30, 2022.

General and administration

General and administration expenses decreased 9%increased 29% from $8.3$9.4 million in the three months ended SeptemberJune 30, 20202021 to $7.6$12.2 million in the three months ended SeptemberJune 30, 2021 as decreases from a fair market value adjustment2022 primarily due to an outstanding contingent consideration liability and lowerincrease in litigation and regulatory costs were partially offset by increases in systems development costs.related expense of $2.4 million. As a percentage of segment revenues, general and administration expenses decreasedincreased from 17%19% in the three months ended SeptemberJune 30, 20202021 to 16%26% in the three months ended SeptemberJune 30, 2021.2022, primarily due to an increase in litigation and regulatory related expenses incurred during 2022.
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Depreciation and amortization
 
Depreciation and amortization expense decreased 19%increased 25% from $8.5 million in the three months ended September 30, 2020 to $6.9 million in the three months ended SeptemberJune 30, 2021.2021 to $8.6 million in the three months ended June 30, 2022. The decreaseincrease is primarily due to a decrease in intangible asset amortization expense of $1.9 million, partially offset by an increase in internally developed software and intangible asset amortization expense of $0.6 million.expense. As a percentage of segment revenues, depreciation and amortization expense decreasedincreased from 18% in the three months ended September 30, 2020 to 14% in the three months ended SeptemberJune 30, 2021.2021 to 18% in three months ended June 30, 2022. The decreaseincrease in depreciation and amortization as a percentage of segmenttotal revenues is primarily due to higher amortization expense incurred in 2022 driven by a technology intangible asset becoming fully amortized in the fourth quarter of 2020.increased capitalization related to internally developed software costs.

NineSix months ended SeptemberJune 30, 20212022 compared to ninesix months ended SeptemberJune 30, 20202021 for the Envestnet Data & Analytics segment
 
Subscription-based recurring revenues
 
Subscription-based recurring revenues increased 4%decreased 1% from $132.9$91.7 million in the ninesix months ended SeptemberJune 30, 20202021 to $138.2$90.7 million in the ninesix months ended SeptemberJune 30, 2021,2022, primarily due to increasesdecreases in revenue from new and existing customers.
��
Professional services and other revenues
 
Professional services and other revenues decreased 35%29% from $11.1$5.5 million in the ninesix months ended SeptemberJune 30, 20202021 to $7.2$3.9 million in the ninesix months ended SeptemberJune 30, 20212022 primarily due to the timing of the completion of customer projects and deployments.

Cost of revenues
 
Cost of revenues increased 2%9% from $17.0$11.2 million in the ninesix months ended SeptemberJune 30, 20202021 to $17.3$12.2 million in the ninesix months ended SeptemberJune 30, 2021.2022. As a percentage of segment revenues, cost of revenues remained consistent atincreased from 12% in the ninesix months ended SeptemberJune 30, 2020 and 2021.2021 to 13% in the six months ended June 30, 2022.
 
Compensation and benefits
 
Compensation and benefits decreasedincreased 6% from $82.5$51.3 million in the ninesix months ended SeptemberJune 30, 20202021 to $77.8$54.2 million in the ninesix months ended SeptemberJune 30, 2021,2022, primarily due to decreasesan increase in salaries, benefits, and related payroll taxes of $3.5$4.2 million, non-cash compensation expense of $2.0 million and miscellaneous employee expenses of $1.9 million. These decreases were$1.1 million and other immaterial increases within compensation and benefit accounts, partially offset by increasesdecreases in severance expense of $2.2 million and in incentive compensation of $1.3 million and severance expense of $1.0 million. As a percentage of segment revenues, compensation and benefits decreasedincreased from 53% in the six months ended June 30, 2021 to 57% in the ninesix months ended SeptemberJune 30, 2020 to 53% in the nine months ended September 30, 2021.2022. The decreaseincrease in compensation and benefits as a percentage of totalsegment revenues is primarily driven by a decrease in overall compensation and benefits costs as a result of lower increased headcount in the current year, partially offset by an increase in revenues for the nine months ended September 30, 2021 comparedrelated to the nine months ended September 30, 2020.domestic employees.

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General and administration

General and administration expenses decreased 2%increased 16% from $26.2$17.9 million in the ninesix months ended SeptemberJune 30, 20202021 to $25.5$20.8 million in the ninesix months ended SeptemberJune 30, 20212022 as decreasesan increase in occupancy costslitigation and regulatory related expense of $1.6$3.7 million travel and entertainment expenses of $0.7 million and various other immaterial decreases within general and administration were primarilywas partially offset by increasesa decrease in marketing expensesbad debt expense of $1.5 million and systems development costs of $1.4$0.7 million. As a percentage of segment revenues, general and administration expenses remained consistent atincreased from 18% in the ninesix months ended SeptemberJune 30, 20202021 to 22% in the six months ended June 30, 2022, primarily due to an increase in litigation and 2021.regulatory related expenses incurred during 2022.
 
Depreciation and amortization
 
Depreciation and amortization expense decreased 17%increased 19% from $25.2$14.0 million in the ninesix months ended SeptemberJune 30, 20202021 to $21.0$16.8 million in the ninesix months ended SeptemberJune 30, 2021.2022. The decreaseincrease is primarily due to a decrease in intangible asset amortization expense of $5.7 million, partially offset by an increase in internally developed software and intangible asset amortization expense of $1.9 million.expense. As a percentage of segment revenues, depreciation and amortization expense decreasedincreased from 17% in the nine months ended September 30, 2020 to 14% in the ninesix months ended SeptemberJune 30, 2021.2021 to 18% in six months ended June 30, 2022. The decreaseincrease in depreciation and amortization as a percentage of segmenttotal revenues is primarily due to higher amortization expense incurred in 2022 driven by a technology intangible asset becoming fully amortized in the fourth quarter of 2020.increased capitalization related to internally developed software costs.

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Nonsegment
 
The following table presents nonsegment operating expenses: 
Three Months Ended Nine Months Ended  Three Months Ended Six Months Ended 
September 30,PercentSeptember 30,Percent June 30,PercentJune 30,Percent
20212020Change20212020Change 20222021Change20222021Change
(in thousands) (in thousands)  (in thousands) (in thousands) 
Operating expenses:Operating expenses:      Operating expenses:      
Compensation and benefitsCompensation and benefits$15,779 $8,366 89 %$42,776 $23,062 85 %Compensation and benefits$23,014 $15,426 49 %$41,053 $26,997 52 %
General and administrationGeneral and administration5,737 8,423 (32)%20,281 23,017 (12)%General and administration8,972 7,444 21 %17,336 14,544 19 %
Nonsegment operating expensesNonsegment operating expenses$21,516 $16,789 28 %$63,057 $46,079 37 %Nonsegment operating expenses$31,986 $22,870 40 %$58,389 $41,541 41 %

Three months ended SeptemberJune 30, 20212022 compared to three months ended SeptemberJune 30, 20202021 for Nonsegment
 
Compensation and benefits
 
Compensation and benefits increased 89%49% from $8.4$15.4 million in the three months ended SeptemberJune 30, 20202021 to $15.8$23.0 million in the three months ended SeptemberJune 30, 2021,2022, primarily due to increased headcount that resulted in increases in non-cash compensation expense of $3.8 million, severance of $2.2 million, and salaries, benefits and related payroll taxes of $3.2 million, non-cash compensation expense of $2.8 million and incentive compensation of $1.4$1.3 million.

General and administration
 
General and administration expenses decreased 32%increased 21% from $8.4$7.4 million in the three months ended SeptemberJune 30, 20202021 to $5.7$9.0 million in the three months ended SeptemberJune 30, 2021,2022. The increase was primarily due to a decreasean increase in restructuring charges and transaction costs of $3.4$2.1 million driven by acquisition activity and system implementation costs, partially offset by variousother immaterial increases.decreases.
 
NineSix months ended SeptemberJune 30, 20212022 compared to ninesix months ended SeptemberJune 30, 20202021 for Nonsegment
 
Compensation and benefits
 
Compensation and benefits increased 85%52% from $23.1$27.0 million in the ninesix months ended SeptemberJune 30, 20202021 to $42.8$41.1 million in the ninesix months ended SeptemberJune 30, 2021,2022, primarily due to increased headcount that resulted in increases in non-cash compensation expense of $7.3 million, salaries, benefits and related payroll taxes of $7.8 million, non-cash compensation expense of $6.9$3.5 million, and incentive compensationseverance of $3.7 million. Also contributing to the increase was an increase in severance expense of $1.3$2.1 million.
 
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General and administration
 
General and administration expenses decreased 12%increased 19% from $23.0$14.5 million in the ninesix months ended SeptemberJune 30, 20202021 to $20.3$17.3 million in the ninesix months ended SeptemberJune 30, 2021.2022. The decreaseincrease was primarily due to a decreasean increase in restructuring charges and transaction costs of $5.1$3.1 million driven by acquisition activity and system implementation costs, partially offset by an increase in insurance and bank charges of $1.0 million as well as other immaterial increases.decreases.
 
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 EBITDA,” “adjusted net income” and “adjusted net income per diluted share.”

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

“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, accretion on contingent consideration and purchase liability, fair market value
48


adjustment on contingent consideration liability, fair market value adjustment to investment in private company, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, dilution 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,investee share issuance, income or loss allocationallocations from equity method investments and income(income) loss 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, accretion on contingent consideration and purchase liability, fair market value adjustment on contingent consideration liability, fair market value adjustment to investment in private company, amortization of acquired intangibles, litigation and regulatory related expenses, foreign currency, non-income tax expense adjustment, dilution 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,investee share issuance, income or loss allocationallocations from equity method investments and income(income) loss 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 diluted share” represents adjusted net income attributable to common stockholders divided by the diluted number of weighted-averageweighted 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 of Directors and our management may also consider adjusted EBITDA, among other factors, when determining management’s incentive compensation.
 
We also present adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted share as supplemental performance measures because we believe that they provide our Board, management and investors with additional
50


information to assess our performance. Adjusted revenues provide comparisons from period to period by excluding the effect of purchase accounting on the fair value of acquired deferred revenue. Adjusted EBITDA 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, severance, accretion on contingent consideration and purchase liability, severance, fair market value adjustment on contingent consideration liability, litigation and regulatory related expenses, foreign currency, non-income tax expense, dilution gain on acquisition of equity method investment, fair market value adjustment to investment in private company,investee share issuance, income or loss allocationallocations from equity method investments, (income)pre-tax loss attributable to non-controlling interest, and changes in interest expense and interest income that are influenced by capital structure decisions and capital market conditions. Our management also believes it is useful to exclude non-cash stock-based compensation expense from adjusted EBITDA and adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time.
 
We believe adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted share are useful to investors in evaluating our operating performance because securities analysts use adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted share as supplemental measures to evaluate the overall performance of companies, and we anticipate that our investorinvestors and analyst presentations will include adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted share.
 
Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted 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 EBITDA, adjusted net income and adjusted net income per diluted share are frequently used by securities analysts and others in their evaluation of companies, these measures have
49


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

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

Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted 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 eitherWe paid net losses beforecash for income tax expense or the usetaxes of federal$5.5 million and state net operating loss carryforwards, we made net tax payments of $5,895 and $5,349$3.1 million for the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, respectively. In the event that we begin to generate taxable income and our existing net operating loss carryforwards for federal and state income taxes have been fully utilized or have expired, income tax payments will be higher; and

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

Management compensates for the inherent limitations associated with using adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per diluted share through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of adjusted revenues to revenues, the most directly comparable GAAP measure and adjusted EBITDA, adjusted net income and adjusted net income per diluted share to net income and net income per share, the most directly comparable GAAP measure.measures. Further, our management also reviews GAAP measures and evaluates individual measures that are not included in some or all of our non-GAAP financial measures, such as our level of capital expenditures and interest income, among other measures.
 
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The following table sets forth a reconciliation of total revenues to adjusted revenues based on our historical results:
Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30,September 30,June 30,June 30,
20212020202120202022202120222021
(in thousands)(in thousands)
Total revenuesTotal revenues$303,053 $252,559 $866,896 $734,411 Total revenues$318,852 $288,738 $640,215 $563,843 
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment67 91 227 607 Deferred revenue fair value adjustment54 80 108 160 
Adjusted revenuesAdjusted revenues$303,120 $252,650 $867,123 $735,018 Adjusted revenues$318,906 $288,818 $640,323 $564,003 

The following table sets forth a reconciliation of net income (loss) to adjusted EBITDA based on our historical results:
Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30,September 30,June 30,June 30,
20212020202120202022202120222021
(in thousands)(in thousands)
Net income (loss)Net income (loss)$11,438 $2,323 $18,004 $(10,338)Net income (loss)$(24,268)$(8,369)$(38,976)$6,566 
Add (deduct):Add (deduct):    Add (deduct):    
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment67 91 227 607 Deferred revenue fair value adjustment54 80 108 160 
Interest incomeInterest income(202)(262)(569)(850)Interest income(713)(197)(1,034)(367)
Interest expenseInterest expense4,242 8,139 12,682 21,907 Interest expense4,212 4,225 9,065 8,440 
Income tax provision (benefit)Income tax provision (benefit)(854)497 9,074 (161)Income tax provision (benefit)(5,833)15,516 (3,813)9,928 
Depreciation and amortizationDepreciation and amortization29,850 28,951 88,252 85,077 Depreciation and amortization32,182 30,010 63,800 58,402 
Non-cash compensation expenseNon-cash compensation expense18,885 15,852 50,307 43,197 Non-cash compensation expense23,504 17,285 45,318 31,422 
Restructuring charges and transaction costsRestructuring charges and transaction costs3,403 4,993 11,215 14,461 Restructuring charges and transaction costs21,026 5,028 23,372 7,812 
SeveranceSeverance207 2,715 10,498 18,566 Severance7,148 5,377 10,254 10,291 
Accretion on contingent consideration and purchase liabilityAccretion on contingent consideration and purchase liability81 398 656 1,308 Accretion on contingent consideration and purchase liability— 187 — 575 
Fair market value adjustment on contingent consideration liabilityFair market value adjustment on contingent consideration liability(927)(74)(1,067)(2,056)Fair market value adjustment on contingent consideration liability— — — (140)
Fair market value adjustment to investment in private companyFair market value adjustment to investment in private company— — (758)— Fair market value adjustment to investment in private company— (758)— (758)
Litigation and regulatory related expensesLitigation and regulatory related expenses1,512 1,809 5,159 6,029 Litigation and regulatory related expenses4,306 1,938 7,383 3,647 
Foreign currencyForeign currency97 (37)110 (68)Foreign currency413 (138)305 13 
Gain on acquisition of equity method investment— — — (4,230)
Gain on settlement of liability(1,206)— (1,206)— 
Gain on insurance reimbursement(968)— (968)— 
Non-income tax expense adjustmentNon-income tax expense adjustment(831)1,795 (1,102)1,341 Non-income tax expense adjustment189 295 213 (271)
Loss allocation from equity method investments1,508 994 5,553 4,280 
Income attributable to non-controlling interest(114)(603)(554)(1,103)
Dilution gain on equity method investee share issuanceDilution gain on equity method investee share issuance(6,934)— (6,934)— 
Loss allocations from equity method investmentsLoss allocations from equity method investments1,400 757 2,945 4,045 
(Income) loss attributable to non-controlling interest(Income) loss attributable to non-controlling interest440 (175)817 (440)
Adjusted EBITDAAdjusted EBITDA$66,188 $67,581 $205,513 $177,967 Adjusted EBITDA$57,126 $71,061 $112,823 $139,325 

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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 EndedNine Months Ended Three Months EndedSix Months Ended
September 30,September 30, June 30,June 30,
2021202020212020 2022202120222021
(in thousands, except share and per share information) (in thousands, except share and per share information)
Net income (loss)Net income (loss)$11,438 $2,323 $18,004 $(10,338)Net income (loss)$(24,268)$(8,369)$(38,976)$6,566 
Income tax provision (benefit) (1)
Income tax provision (benefit) (1)
(854)497 9,074 (161)
Income tax provision (benefit) (1)
(5,833)15,516 (3,813)9,928 
Income (loss) before income tax provision (benefit)Income (loss) before income tax provision (benefit)10,584 2,820 27,078 (10,499)Income (loss) before income tax provision (benefit)(30,101)7,147 (42,789)16,494 
Add (deduct):Add (deduct):Add (deduct):
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment67 91 227 607 Deferred revenue fair value adjustment54 80 108 160 
Non-cash interest expenseNon-cash interest expense1,443 4,738 4,295 10,682 Non-cash interest expense1,415 1,429 3,474 2,852 
Cash interest - Convertible Notes (2)
2,479 — 7,439 — 
Cash interest - Convertible NotesCash interest - Convertible Notes2,480 2,480 4,960 4,960 
Non-cash compensation expenseNon-cash compensation expense18,885 15,852 50,307 43,197 Non-cash compensation expense23,504 17,285 45,318 31,422 
Restructuring charges and transaction costsRestructuring charges and transaction costs3,403 4,993 11,215 14,461 Restructuring charges and transaction costs21,026 5,028 23,372 7,812 
SeveranceSeverance207 2,715 10,498 18,566 Severance7,148 5,377 10,254 10,291 
Accretion on contingent consideration and purchase liabilityAccretion on contingent consideration and purchase liability81 398 656 1,308 Accretion on contingent consideration and purchase liability— 187 — 575 
Fair market value adjustment on contingent consideration liabilityFair market value adjustment on contingent consideration liability(927)(74)(1,067)(2,056)Fair market value adjustment on contingent consideration liability— — — (140)
Fair market value adjustment to investment in private companyFair market value adjustment to investment in private company— — (758)— Fair market value adjustment to investment in private company— (758)— (758)
Amortization of acquired intangiblesAmortization of acquired intangibles17,390 18,510 51,370 56,014 Amortization of acquired intangibles17,645 17,502 35,165 33,980 
Litigation and regulatory related expensesLitigation and regulatory related expenses1,512 1,809 5,159 6,029 Litigation and regulatory related expenses4,306 1,938 7,383 3,647 
Foreign currencyForeign currency97 (37)110 (68)Foreign currency413 (138)305 13 
Gain on acquisition of equity method investment— — — (4,230)
Gain on settlement of liability(1,206)— (1,206)— 
Gain on insurance reimbursement(968)— (968)— 
Non-income tax expense adjustmentNon-income tax expense adjustment(831)1,795 (1,102)1,341 Non-income tax expense adjustment189 295 213 (271)
Loss allocation from equity method investments1,508 994 5,553 4,280 
Income attributable to non-controlling interest(114)(603)(554)(1,103)
Dilution gain on equity method investee share issuanceDilution gain on equity method investee share issuance(6,934)— (6,934)— 
Loss allocations from equity method investmentsLoss allocations from equity method investments1,400 757 2,945 4,045 
(Income) loss attributable to non-controlling interest(Income) loss attributable to non-controlling interest440 (175)817 (440)
Adjusted net income before income tax effectAdjusted net income before income tax effect53,610 54,001 168,252 138,529 Adjusted net income before income tax effect42,985 58,434 84,591 114,642 
Income tax effect (3)
(13,670)(13,772)(42,904)(35,325)
Income tax effect (2)
Income tax effect (2)
(10,961)(14,901)(21,571)(29,234)
Adjusted net incomeAdjusted net income$39,940 $40,229 $125,348 $103,204 Adjusted net income$32,024 $43,533 $63,020 $85,408 
Basic number of weighted-average shares outstandingBasic number of weighted-average shares outstanding54,547,858 53,800,048 54,400,247 53,464,101 Basic number of weighted-average shares outstanding55,203,120 54,440,388 55,054,272 54,325,353 
Effect of dilutive shares:Effect of dilutive shares:Effect of dilutive shares:
Options to purchase common stockOptions to purchase common stock201,103 331,728 207,281 458,232 Options to purchase common stock129,217 198,277 142,510 210,381 
Unvested restricted stock unitsUnvested restricted stock units570,515 610,442 614,005 548,858 Unvested restricted stock units199,853 435,023 381,397 536,186 
Convertible notesConvertible notes9,898,549 730,267 9,898,549 280,375 Convertible notes9,898,549 9,898,549 9,898,549 9,898,549 
WarrantsWarrants69,151 86,498 66,439 46,562 Warrants22,170 53,648 37,473 65,026 
Diluted number of weighted-average shares outstandingDiluted number of weighted-average shares outstanding65,287,176 55,558,983 65,186,521 54,798,128 Diluted number of weighted-average shares outstanding65,452,909 65,025,885 65,514,201 65,035,495 
Adjusted net income per share - dilutedAdjusted net income per share - diluted$0.61 $0.72 $1.92 $1.88 Adjusted net income per share - diluted$0.49 $0.67 $0.96 $1.31 
(1)For the three months ended SeptemberJune 30, 20212022 and 2020,2021, the effective tax rate computed in accordance with GAAP equaled (8.1)%19.4% and 17.6%217.1%, respectively. For the ninesix months ended SeptemberJune 30, 20212022 and 2020,2021, the effective tax rate computed in accordance with GAAP equaled 33.5%8.9% and 1.5%60.2%, 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 ninesix months ended SeptemberJune 30, 20212022 and 2020.2021.

Note on Income Taxes: As of December 31, 2020,2021, we had NOL carryforwards of approximately $242.0$195 million and $211.0$233 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.

5352


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 ninesix months ended SeptemberJune 30, 20212022 and 2020:2021:

Three Months Ended September 30, 2021 Three Months Ended June 30, 2022
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
(in thousands) (in thousands)
RevenuesRevenues$254,734 $48,319 $— $303,053 Revenues$272,000 $46,852 $— $318,852 
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment67 — — 67 Deferred revenue fair value adjustment54 — — 54 
Adjusted revenuesAdjusted revenues254,801 48,319 — 303,120 Adjusted revenues$272,054 $46,852 $— $318,906 
Income (loss) from operationsIncome (loss) from operations$34,386 $1,265 $(21,516)$14,135 Income (loss) from operations$3,968 $(3,705)$(31,986)$(31,723)
Add:Add:Add:
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment67 — — 67 Deferred revenue fair value adjustment54 — — 54 
Depreciation and amortizationDepreciation and amortization22,928 6,922 — 29,850 Depreciation and amortization23,550 8,632 — 32,182 
Non-cash compensation expenseNon-cash compensation expense9,661 3,667 5,557 18,885 Non-cash compensation expense13,364 1,852 8,288 23,504 
Restructuring charges and transaction costsRestructuring charges and transaction costs2,863 (55)595 3,403 Restructuring charges and transaction costs16,897 753 3,376 21,026 
SeveranceSeverance(49)227 29 207 Severance2,813 (431)4,766 7,148 
Accretion on contingent consideration and purchase liability62 19 — 81 
Fair market value adjustment on contingent consideration liability— (927)— (927)
Litigation and regulatory related expensesLitigation and regulatory related expenses— 1,512 — 1,512 Litigation and regulatory related expenses— 4,306 — 4,306 
Non-income tax expense adjustmentNon-income tax expense adjustment(905)74 — (831)Non-income tax expense adjustment184 — 189 
Income attributable to non-controlling interest(114)— — (114)
Other(63)(9)(8)(80)
Loss attributable to non-controlling interestLoss attributable to non-controlling interest440 — — 440 
Adjusted EBITDAAdjusted EBITDA$68,836 $12,695 $(15,343)$66,188 Adjusted EBITDA$61,270 $11,412 $(15,556)$57,126 

Three Months Ended September 30, 2020 Three Months Ended June 30, 2021
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
(in thousands) (in thousands)
RevenuesRevenues$204,294 $48,265 $— $252,559 Revenues$240,297 $48,441 $— $288,738 
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment91 — — 91 Deferred revenue fair value adjustment80 — — 80 
Adjusted revenuesAdjusted revenues204,385 48,265 — 252,650 Adjusted revenues$240,377 $48,441 $— $288,818 
Income (loss) from operationsIncome (loss) from operations$29,683 $(1,238)$(16,789)$11,656 Income (loss) from operations$32,459 $1,342 $(22,870)$10,931 
Add:
Add (deduct):Add (deduct):
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment91 — — 91 Deferred revenue fair value adjustment80 — — 80 
Depreciation and amortizationDepreciation and amortization20,406 8,545 — 28,951 Depreciation and amortization23,127 6,883 — 30,010 
Non-cash compensation expenseNon-cash compensation expense8,685 4,458 2,709 15,852 Non-cash compensation expense9,590 3,183 4,512 17,285 
Restructuring charges and transaction costsRestructuring charges and transaction costs944 33 4,016 4,993 Restructuring charges and transaction costs3,821 27 1,180 5,028 
SeveranceSeverance2,154 495 66 2,715 Severance1,096 1,687 2,594 5,377 
Accretion on contingent consideration and purchase liabilityAccretion on contingent consideration and purchase liability341 57 — 398 Accretion on contingent consideration and purchase liability168 19 — 187 
Fair market value adjustment on contingent consideration liability— (74)— (74)
Litigation and regulatory related expensesLitigation and regulatory related expenses— 1,809 — 1,809 Litigation and regulatory related expenses— 1,938 — 1,938 
Non-income tax expense adjustmentNon-income tax expense adjustment1,860 (65)— 1,795 Non-income tax expense adjustment105 190 — 295 
Income attributable to non-controlling interestIncome attributable to non-controlling interest(603)— — (603)Income attributable to non-controlling interest(175)— — (175)
OtherOther(2)— — (2)Other88 105 
Adjusted EBITDAAdjusted EBITDA$63,559 $14,020 $(9,998)$67,581 Adjusted EBITDA$70,359 $15,278 $(14,576)$71,061 


5453


Nine Months Ended September 30, 2021 Six Months Ended June 30, 2022
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
(in thousands) (in thousands)
RevenuesRevenues$721,441 $145,455 $— $866,896 Revenues$545,568 $94,647 $— $640,215 
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment227 — — 227 Deferred revenue fair value adjustment108 — — 108 
Adjusted revenuesAdjusted revenues$721,668 $145,455 $— $867,123 Adjusted revenues$545,676 $94,647 $— $640,323 
Income (loss) from operationsIncome (loss) from operations$101,042 $3,896 $(63,057)$41,881 Income (loss) from operations$29,237 $(9,292)$(58,389)$(38,444)
Add:
Add (deduct):Add (deduct):
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment227 — — 227 Deferred revenue fair value adjustment108 — — 108 
Depreciation and amortizationDepreciation and amortization67,283 20,969 — 88,252 Depreciation and amortization47,037 16,763 — 63,800 
Non-cash compensation expenseNon-cash compensation expense27,080 9,691 13,536 50,307 Non-cash compensation expense24,654 5,387 15,277 45,318 
Restructuring charges and transaction costsRestructuring charges and transaction costs8,049 119 3,047 11,215 Restructuring charges and transaction costs17,181 750 5,441 23,372 
SeveranceSeverance4,134 3,634 2,730 10,498 Severance4,223 1,211 4,820 10,254 
Accretion on contingent consideration and purchase liability572 84 — 656 
Fair market value adjustment on contingent consideration liability— (1,067)— (1,067)
Litigation and regulatory related expensesLitigation and regulatory related expenses— 5,159 — 5,159 Litigation and regulatory related expenses— 7,383 — 7,383 
Non-income tax expense adjustmentNon-income tax expense adjustment(1,335)233 — (1,102)Non-income tax expense adjustment291 (78)— 213 
Income attributable to non-controlling interest(554)— — (554)
Loss attributable to non-controlling interestLoss attributable to non-controlling interest817 — — 817 
OtherOther41 — — 41 Other— — 
Adjusted EBITDAAdjusted EBITDA$206,539 $42,718 $(43,744)$205,513 Adjusted EBITDA$123,548 $22,126 $(32,851)$112,823 

Nine Months Ended September 30, 2020 Six Months Ended June 30, 2021
Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal Envestnet Wealth SolutionsEnvestnet Data & AnalyticsNonsegmentTotal
(in thousands) (in thousands)
RevenuesRevenues$590,399 $144,012 $— $734,411 Revenues$466,707 $97,136 $— $563,843 
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment607 — — 607 Deferred revenue fair value adjustment160 — — 160 
Adjusted revenuesAdjusted revenues$591,006 $144,012 $— $735,018 Adjusted revenues$466,867 $97,136 $— $564,003 
Income (loss) from operationsIncome (loss) from operations$60,890 $(6,764)$(46,079)$8,047 Income (loss) from operations$66,656 $2,631 $(41,541)$27,746 
Add:
Add (deduct):Add (deduct):
Deferred revenue fair value adjustmentDeferred revenue fair value adjustment607 — — 607 Deferred revenue fair value adjustment160 — — 160 
Depreciation and amortizationDepreciation and amortization59,907 25,170 — 85,077 Depreciation and amortization44,355 14,047 — 58,402 
Non-cash compensation expenseNon-cash compensation expense27,437 11,665 6,619 45,721 Non-cash compensation expense17,419 6,024 7,979 31,422 
Restructuring charges and transaction costsRestructuring charges and transaction costs5,864 489 8,108 14,461 Restructuring charges and transaction costs5,186 174 2,452 7,812 
SeveranceSeverance14,593 2,587 1,386 18,566 Severance4,183 3,407 2,701 10,291 
Accretion on contingent consideration and purchase liabilityAccretion on contingent consideration and purchase liability1,087 221 — 1,308 Accretion on contingent consideration and purchase liability510 65 — 575 
Fair market value adjustment on contingent consideration liabilityFair market value adjustment on contingent consideration liability— (2,056)— (2,056)Fair market value adjustment on contingent consideration liability— (140)— (140)
Litigation and regulatory related expensesLitigation and regulatory related expenses— 6,029 — 6,029 Litigation and regulatory related expenses— 3,647 — 3,647 
Non-income tax expense adjustmentNon-income tax expense adjustment1,532 (191)— 1,341 Non-income tax expense adjustment(430)159 — (271)
Income attributable to non-controlling interestIncome attributable to non-controlling interest(1,103)— — (1,103)Income attributable to non-controlling interest(440)— — (440)
OtherOther(31)— — (31)Other104 121 
Adjusted EBITDAAdjusted EBITDA$170,783 $37,150 $(29,966)$177,967 Adjusted EBITDA$137,703 $30,023 $(28,401)$139,325 
5554


Liquidity and Capital Resources
 
As of SeptemberJune 30, 2021,2022, we had total cash and cash equivalents of $393.8$338.1 million compared to $384.6$429.3 million as of December 31, 2020.2021. We plan to use existing cash as of SeptemberJune 30, 2021,2022, 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 SeptemberJune 30, 2021,2022, we had $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 Six Months Ended
September 30, June 30,
20212020 20222021
(in thousands) (in thousands)
Net cash provided by operating activitiesNet cash provided by operating activities$169,974 $131,679 Net cash provided by operating activities$52,642 $119,159 
Net cash used in investing activitiesNet cash used in investing activities(135,040)(83,213)Net cash used in investing activities(98,008)(109,368)
Net cash provided by (used in) financing activities(25,156)232,854 
Net cash used in financing activitiesNet cash used in financing activities(43,741)(24,308)
Effect of exchange rate on changes on cashEffect of exchange rate on changes on cash(544)(1,009)Effect of exchange rate on changes on cash(2,057)(524)
Net increase in cash, cash equivalents and restricted cash9,234 280,311 
Net decrease in cash, cash equivalents and restricted cashNet decrease in cash, cash equivalents and restricted cash(91,164)(15,041)
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period393,948 363,066 Cash, cash equivalents and restricted cash, end of period338,264 369,673 
 
Operating Activities
 
Net cash provided by operating activities for the ninesix months ended SeptemberJune 30, 20212022 was $170.0$52.6 million compared to net cash provided by operating activities of $131.7$119.2 million for the same period in 2020.2021. The increasedecrease was primarily due to an increasea decrease in pre-tax income period over period of $37.6 million.$59.3 million and timing of payments within working capital items.

Investing Activities
 
Net cash used in investing activities for the ninesix months ended SeptemberJune 30, 20212022 was $135.0$98.0 million compared to net cash used in investing activities of $83.2$109.4 million for the same period in 2020.2021. The increasedecrease was primarily due to an increasea decrease in net cash disbursements for various acquisitions and investments in privately held companies of $25.5$15.2 million and a decrease in cash disbursements for an acquisition of proprietary technology and the related redemptionassets of our equity interest in a privately held company,$10.5 million, partially offset by an additional $8.8$11.2 million of internally developed software costs capitalized in 20212022 as compared to the same period in 2020, $7.62021 and $4.4 million of increased disbursements related to various acquisitions and investmentsthe issuance of notes receivable to equity method investees 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.2022.
 
Financing Activities
 
Net cash used in financing activities for the ninesix months ended SeptemberJune 30, 20212022 was $25.2$43.7 million compared to net cash provided byused in financing activities of $232.9$24.3 million for the same period in 2020. In August 2020, we received net proceeds2021, primarily due to finance lease payments of approximately $503.0 million from the issuance of convertible debt. With these proceeds, we paid off the outstanding balance of our revolving credit facility. These transactions contributed to a net cash inflow related to our third party debt agreements of $243.0$14.5 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 and2022, increased share repurchases of $2.1$7.1 million in the current year period also contributedand an additional $5.1 million of taxes paid on the vesting of restricted shares in 2022 as compared to this year over year decrease.the same period in 2021. These decreasesincreases were partially offset by $3.2 milliondecreased contingent consideration payments of capital contributions made by non-controlling shareholders of one of our subsidiaries.$8.5 million.

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. 

56
55


Procurement of Technology Solutions

See “Part I, Item 1, Note 17—Commitments7—Goodwill and Contingencies,Intangible Assets, net, Procurement of Technology Solutions” and Note 17—Commitments for details related to these transactions.

Investment in Privately Held Company

See “Part I, Item 1, Note 3— Acquisitions and Other Investments” 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 20202021 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 20202021 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.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
There have been no material changes to our market, foreign currency or interest rate risks as discussed in Part II, Item 7A of our 20202021 Form 10-K.

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 SeptemberJune 30, 2021.2022. 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 SeptemberJune 30, 2021,2022, 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 SeptemberJune 30, 2021,2022, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
 

5756


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 20202021 Form 10-K when making investment decisions regarding our securities. The risk factors that were disclosed in our 20202021 Form 10-K have not materially changed since the date our 20202021 Form 10-K was filed.

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 2,000,0002.0 million shares of our common stock. There were noThe following purchases of equity securities were made under the share repurchase program in the three months ended SeptemberJune 30, 2021. As of September 30, 2021, there were 1,925,902 shares that may yet be repurchased under the program.2022:

 Total number
of shares
purchased
Average
price paid
per share(1)
Total number of
shares purchased
as part of publicly
announced plans
or programs
Maximum number (or
approximate dollar
value) of shares
that may yet be
purchased under the
plans or programs
April 1, 2022 through April 30, 2022— $— — 1,900,902 
May 1, 2022 through May 31, 202272,388 64.26 72,388 1,828,514 
June 1, 2022 through June 30, 202279,632 57.51 79,632 1,748,882 
(1) Excludes fees, commissions and other costs

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 and general market conditions. No time limit has been set for the completion of the repurchase program, and the program may be suspended or discontinued at any time. The repurchase program authorizes the Company to purchase its common stock from time to time in the open market (including pursuant to a “Rule 10b5-1 plan”), in block transactions, in privately negotiated transactions, through accelerated stock repurchase programs, through option or other forward transactions or otherwise, all in compliance with applicable laws and other restrictions.

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.
5857


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


* Management contract or compensation plan.
** The following materials are formatted in Inline XBRL (Extensible Business Reporting Language): (i) the cover page; (ii) the Condensed Consolidated Balance Sheets as of SeptemberJune 30, 20212022 and December 31, 2020;2021; (iii) the Condensed Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; (iv) the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; (v) the Condensed Consolidated Statements of Stockholders' Equity for the three and ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; (vi) the Condensed Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20212022 and 2020;2021; (vii) Notes to Condensed Consolidated Financial Statements tagged as blocks of text.




5958


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 8, 2021.August 5, 2022.
 
 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
6059