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 March 31, ~~2022~~2023

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

For the transition period from __________ to __________

Commission file number 001-34835

Envestnet, Inc.

(Exact name of registrant as specified in its charter)


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

1000 Chesterbrook Boulevard, Suite 250, Berwyn, Pennsylvania

19312

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(312) 827-2800

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


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

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

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

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

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

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

As of April ~~29, 2022,~~28, 2023, Envestnet, Inc. had ~~55,187,306~~54,404,069 shares of common stock outstanding.

TABLE OF CONTENTS


			Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements ~~(Unaudited)~~(u naudited)
Condensed Consolidated Balance Sheets as of March 31 ~~2022~~, 202 3 and December 31, ~~2021~~20 2 2			3
Condensed Consolidated Statements of Operations for the three months ended March 31 ~~2022~~, 202 3 and ~~2021~~20 2 2			4
Condensed Consolidated Statements of Comprehensive ~~Income (Loss)~~Loss for the three months ended March 31, ~~2022~~2023 and ~~2021~~20 2 2			5
Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, ~~2022~~2023 and ~~2021~~20 2 2			6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021~~20 2 2			7
Notes to Unaudited Condensed Consolidated Financial Statements			98

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements			2523
Overview			2723
Results of Operations			3227
Liquidity and Capital Resources			4338

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4439

Item 4. Controls and Procedures			4439

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			4540

Item 1A. Risk Factors			4540

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4540

Item 3. Defaults Upon Senior Securities			4540

Item 4. Mine Safety Disclosures			4540

Item 5. Other Information			4540

Item 6. Exhibits			4540

Index to Exhibits			4641

Glossary of Terms			42

Signatures			4743

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share information)

(unaudited)


		March 31,		December 31,			March 31,		December 31,
		2022		2021			2023		2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	359,614	$	429,279	Cash and cash equivalents	$	52,664	$	162,173
Fees receivable, net	Fees receivable, net	88,377		95,291		Fees receivable, net	122,704		101,696
Prepaid expenses and other current assets	Prepaid expenses and other current assets	53,488		42,706		Prepaid expenses and other current assets	47,391		41,363
Total current assets	Total current assets	501,479		567,276		Total current assets	222,759		305,232

Property and equipment, net	Property and equipment, net	62,848		50,215		Property and equipment, net	64,144		62,443
Internally developed software, net	Internally developed software, net	147,014		133,659		Internally developed software, net	196,874		184,558
Intangible assets, net	Intangible assets, net	400,876		400,396		Intangible assets, net	377,055		379,995
Goodwill	Goodwill	925,003		925,154		Goodwill	998,428		998,414
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	88,011		90,714		Operating lease right-of-use assets, net	79,553		81,596
Other non-current assets		74,539		73,768
Other assets						Other assets	117,644		99,927
Total assets	Total assets	$	2,199,770	$	2,241,182	Total assets	$	2,056,457	$	2,112,165

Liabilities and Equity
Liabilities and equity						Liabilities and equity
Current liabilities:	Current liabilities:					Current liabilities:
Accrued expenses and other liabilities		$	201,087	$	225,159
Accounts payable		18,854		19,092
Accounts payable, accrued expenses and other current liabilities						Accounts payable, accrued expenses and other current liabilities	$	195,983	$	233,866
Operating lease liabilities	Operating lease liabilities	10,439		10,999		Operating lease liabilities	12,270		11,949

Deferred revenue	Deferred revenue	44,427		33,473		Deferred revenue	44,445		36,363
Current portion of debt						Current portion of debt	44,954		44,886
Total current liabilities	Total current liabilities	274,807		288,723		Total current liabilities	297,652		327,064

Long-term debt		850,097		848,862
Non-current operating lease liabilities		103,332		105,920
Debt, net of current portion						Debt, net of current portion	872,968		871,769
Operating lease liabilities, net of current portion						Operating lease liabilities, net of current portion	108,568		110,652
Deferred tax liabilities, net	Deferred tax liabilities, net	2,108		21,021		Deferred tax liabilities, net	21,445		16,196
Other non-current liabilities		16,271		17,114
Other liabilities						Other liabilities	18,644		18,880
Total liabilities	Total liabilities	1,246,615		1,281,640		Total liabilities	1,319,277		1,344,561

Commitments and contingencies		0		0

Equity:
Stockholders’ equity:
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2022 and December 31, 2021		—		—
Common stock, par value $0.005, 500,000,000 shares authorized; 69,432,152 and 68,879,152 shares issued as of March 31, 2022 and December 31, 2021, respectively; 55,175,096 and 54,793,088 shares outstanding as of March 31, 2022 and December 31, 2021, respectively		347		344
Commitments and contingencies (note 19)						Commitments and contingencies (note 19)
Stockholders' equity						Stockholders' equity
Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022						Preferred stock, par value $0.005, 50,000,000 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022	—		—
Common stock, par value $0.005, 500,000,000 shares authorized; 70,587,503 and 70,025,733 shares issued as of March 31, 2023 and December 31, 2022, respectively; 54,401,984 and 54,013,826 shares outstanding as of March 31, 2023 and December 31, 2022, respectively						Common stock, par value $0.005, 500,000,000 shares authorized; 70,587,503 and 70,025,733 shares issued as of March 31, 2023 and December 31, 2022, respectively; 54,401,984 and 54,013,826 shares outstanding as of March 31, 2023 and December 31, 2022, respectively	352		350
Treasury stock at cost, 16,185,519 and 16,011,907 shares as of March 31, 2023 and December 31, 2022, respectively						Treasury stock at cost, 16,185,519 and 16,011,907 shares as of March 31, 2023 and December 31, 2022, respectively	(264,283)		(253,551)
Additional paid-in capital	Additional paid-in capital	1,153,892		1,131,628		Additional paid-in capital	1,154,012		1,135,284
Accumulated deficit	Accumulated deficit	(51,847)		(37,988)		Accumulated deficit	(160,155)		(118,927)
Treasury stock at cost, 14,257,056 and 14,086,064 shares as of March 31, 2022 and December 31, 2021, respectively		(147,566)		(134,996)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(3,377)		(1,899)		Accumulated other comprehensive loss	(4,312)		(8,589)
Total stockholders’ equity		951,449		957,089
Total stockholders’ equity, attributable to Envestnet, Inc.						Total stockholders’ equity, attributable to Envestnet, Inc.	725,614		754,567
Non-controlling interest	Non-controlling interest	1,706		2,453		Non-controlling interest	11,566		13,037
Total equity	Total equity	953,155		959,542		Total equity	737,180		767,604
Total liabilities and equity	Total liabilities and equity	$	2,199,770	$	2,241,182	Total liabilities and equity	$	2,056,457	$	2,112,165

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share information)

(unaudited)

Three Months Ended
March 31,
2022 2021
Revenues:
Asset-based $ 202,717 $ 159,375
Subscription-based 114,734 109,829
Total recurring revenues 317,451 269,204
Professional services and other revenues 3,912 5,901
Total revenues 321,363 275,105
Operating expenses:
Cost of revenues 125,282 92,869
Compensation and benefits 126,849 100,714
General and administration 44,335 36,315
Depreciation and amortization 31,618 28,392
Total operating expenses 328,084 258,290
Income (loss) from operations (6,721) 16,815
Other expense, net (5,967) (7,468)
Income (loss) before income tax provision (benefit) (12,688) 9,347
Income tax provision (benefit) 2,020 (5,588)
Net income (loss) (14,708) 14,935
Add: Net loss attributable to non-controlling interest 849 11
Net income (loss) attributable to Envestnet, Inc. $ (13,859) $ 14,946
Net income (loss) per share attributable to Envestnet, Inc.:
Basic $ (0.25) $ 0.28
Diluted $ (0.25) $ 0.27
Weighted average common shares outstanding:
Basic 54,903,677 54,208,469
Diluted 54,903,677 59,917,648


	Three Months Ended
	March 31,
		2023		2022
Revenue:
Asset-based		$	176,932	$	202,717
Subscription-based		117,079		114,734
Total recurring revenue		294,011		317,451
Professional services and other revenue		4,696		3,912
Total revenue		298,707		321,363
Operating expenses:
Direct expense		108,989		125,282
Employee compensation		114,215		126,849
General and administrative		53,619		44,335
Depreciation and amortization		32,941		31,618
Total operating expenses		309,764		328,084
Loss from operations		(11,057)		(6,721)
Other expense, net		(7,935)		(5,967)
Loss before income tax provision		(18,992)		(12,688)
Income tax provision		23,769		2,020
Net loss		(42,761)		(14,708)
Add: Net loss attributable to non-controlling interest		1,533		849
Net loss attributable to Envestnet, Inc.		$	(41,228)	$	(13,859)
Net loss attributable to Envestnet, Inc. per share:
Basic and diluted		$	(0.76)	$	(0.25)
Weighted average common shares outstanding:
Basic and diluted		54,143,259		54,903,677

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

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

(in thousands)

(unaudited)

Three Months Ended
March 31,
2022 2021
Net income (loss) attributable to Envestnet, Inc. $ (13,859) $ 14,946
Foreign currency translation losses, net of taxes (1,478) (624)
Comprehensive income (loss) attributable to Envestnet, Inc. $ (15,337) $ 14,322


	Three Months Ended
	March 31,
		2023		2022
Net loss attributable to Envestnet, Inc.		$	(41,228)	$	(13,859)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		4,277		(1,478)
Total other comprehensive income (loss), net of tax		4,277		(1,478)
Comprehensive loss attributable to Envestnet, Inc.		$	(36,951)	$	(15,337)

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share information)

(unaudited)

Accumulated
Common Stock Treasury Stock Additional Other Non-
Common Paid-in Comprehensive Accumulated controlling Total
Shares Amount Shares Amount Capital Loss Deficit Interest Equity
Balance, December 31, 2021 68,879,152 $ 344 (14,086,064) $ (134,996) $ 1,131,628 $ (1,899) $ (37,988) $ 2,453 $ 959,542
Exercise of stock options 38,681 — — — 658 — — — 658
Issuance of common stock - vesting of restricted stock units 514,319 3 — — — — — — 3
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, 2022 69,432,152 $ 347 (14,257,056) $ (147,566) $ 1,153,892 $ (3,377) $ (51,847) $ 1,706 $ 953,155


									Accumulated
							Additional		Other				Non-
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Accumulated		Controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, December 31, 2022	70,025,733	$	350	(16,011,907)	$	(253,551)	$	1,135,284	$	(8,589)	$	(118,927)	$	13,037	$	767,604
Net loss	—	—		—	—		—		—		(41,228)		(1,533)		(42,761)
Other comprehensive income, net of tax	—	—		—	—		—		4,277		—		—		4,277
Stock-based compensation expense	—	—		—	—		19,345		—		—		108		19,453
Issuance of common stock, vesting of RSUs and PSUs	524,316	2		—	—		—		—		—		—		2
Net cash paid related to tax withholding for stock-based compensation	—	—		(173,612)	(10,732)		—		—		—		—		(10,732)
Proceeds from the exercise of stock options	37,454	—		—	—		367		—		—		—		367

Purchase of non-controlling units from third-party shareholders	—	—		—	—		(984)		—		—		(24)		(1,008)
Other	—	—		—	—		—		—		—		(22)		(22)
Balance, March 31, 2023	70,587,503	$	352	(16,185,519)	$	(264,283)	$	1,154,012	$	(4,312)	$	(160,155)	$	11,566	$	737,180

Balance, December 31, 2020 67,832,706 $ 339 (13,739,171) $ (110,466) $ 1,166,774 $ (398) $ (79,912) $ (519) $ 975,818
Adoption of ASU 2020-06, net of taxes of $7,641 — — — — (108,470) — 28,628 — (79,842)
Exercise of stock options 27,043 — — — 522 — — — 522
Issuance of common stock - vesting of restricted stock units 455,349 2 — — — — — — 2
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, 2021 68,315,098 $ 341 (13,910,439) $ (121,679) $ 1,072,839 $ (1,022) $ (36,338) $ (412) $ 913,729


									Accumulated
							Additional		Other				Non-
	Common Stock			Treasury Stock			Paid-in		Comprehensive		Accumulated		Controlling		Total
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		Interest		Equity
Balance, December 31, 2021	68,879,152	$	344	(14,086,064)	$	(134,996)	$	1,131,628	$	(1,899)	$	(37,988)	$	2,453	$	959,542
Net loss	—	—		—	—		—		—		(13,859)		(849)		(14,708)
Other comprehensive loss, net of tax	—	—		—	—		—		(1,478)		—		—		(1,478)
Stock-based compensation expense	—	—		—	—		21,690		—		—		—		21,690
Issuance of common stock, vesting of RSUs and PSUs	514,319	3		—	—		—		—		—		—		3
Net cash paid related to tax withholding for stock-based compensation	—	—		(170,992)	(12,570)		—		—		—		—		(12,570)
Proceeds from the exercise of stock options	38,681	—		—	—		658		—		—		—		658
Other	—	—		—	—		(84)		—		—		102		18
Balance, March 31, 2022	69,432,152	$	347	(14,257,056)	$	(147,566)	$	1,153,892	$	(3,377)	$	(51,847)	$	1,706	$	953,155

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Envestnet, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

Three Months Ended
March 31,
2022 2021
OPERATING ACTIVITIES:
Net income (loss) $ (14,708) $ 14,935
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 31,618 28,392
Provision for doubtful accounts (1,747) 298
Deferred income taxes (18,955) (3,581)
Non-cash compensation expense 21,814 14,137
Non-cash interest expense 2,599 2,015
Accretion on contingent consideration and purchase liability — 388
Fair market value adjustment to contingent consideration liability — (140)
Loss allocations from equity method investments 1,545 3,288
Other (59) 165
Changes in operating assets and liabilities:
Fees receivable, net 8,661 473
Prepaid expenses and other current assets (8,377) 1,756
Other non-current assets (1,114) 3,093
Accrued expenses and other liabilities (27,320) (28,668)
Accounts payable (432) 6,444
Deferred revenue 11,097 7,882
Other non-current liabilities (1,361) (1,068)
Net cash provided by operating activities 3,261 49,809
INVESTING ACTIVITIES:
Purchases of property and equipment (3,896) (7,062)
Capitalization of internally developed software (21,671) (15,058)
Acquisition of proprietary technology (15,000) (25,517)
Investments in private companies (3,000) (2,538)
Other (2,500) —
Net cash used in investing activities (46,067) (50,175)

~~-continued-~~

~~Envestnet, Inc.~~

~~Condensed Consolidated Statements of Cash Flows (continued)~~

~~(in thousands)~~

~~(unaudited)~~

Three Months Ended
March 31,
2022 2021
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 658 522
Taxes paid in lieu of shares issued for stock-based compensation (12,570) (9,541)
Finance lease payments (12,454) —
Revolving credit facility issuance costs (1,869) —
Share repurchases — (1,672)
Payments of contingent consideration — (1,000)
Other 3 (479)
Net cash used in financing activities (26,232) (12,170)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (627) (52)
DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (69,665) (12,588)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 429,428 384,714
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD
(See Note 2) $ 359,763 $ 372,126
Supplemental disclosure of cash flow information - net cash paid during the period for income taxes $ 716 $ 1,879
Supplemental disclosure of cash flow information - cash paid during the period for interest 2,254 2,200
Supplemental disclosure of non-cash operating, investing and financing activities:
Fixed assets acquired through finance lease 12,454 —
Purchase of fixed assets included in accounts payable and accrued expenses and other liabilities 1,883 1,129
Internally developed software costs included in accrued expenses and other liabilities 178 —
Membership interest liabilities included in other non-current liabilities 124 124
Leasehold improvements funded by lease incentive — 127


	Three Months Ended
	March 31,
	2023		2022
Cash flows from operating activities:
Net loss	$	(42,761)	$	(14,708)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	32,941		31,618
Provision for doubtful accounts	571		(1,747)
Deferred income taxes	5,221		(18,955)
Non-cash compensation expense	19,453		21,814
Non-cash interest expense	4,498		2,599
Loss allocations from equity method investments	2,940		1,545
Other	(103)		(59)
Changes in operating assets and liabilities:
Fees receivable, net	(21,579)		8,661
Prepaid expenses and other assets	(9,858)		(9,491)
Accounts payable, accrued expenses and other liabilities	(32,917)		(29,113)
Deferred revenue	8,073		11,097
Net cash (used in) provided by operating activities	(33,521)		3,261
Cash flows from investing activities:
Purchases of property and equipment	(4,402)		(3,896)
Capitalization of internally developed software	(23,664)		(21,671)
Acquisition of proprietary technology	(10,000)		(15,000)
Investments in private companies	(950)		(3,000)
Issuance of loan receivable to private company	(20,000)		—

Other	260		(2,500)
Net cash used in investing activities	(58,756)		(46,067)
Cash flows from financing activities:
Proceeds from exercise of stock options	367		658
Payments related to tax withholdings for stock-based compensation	(10,732)		(12,570)
Payments on finance lease obligations	(152)		(12,454)
Payments related to revolving credit facility	—		(1,869)
Payments related to share repurchases	(9,289)		—
Purchase of non-controlling units from third-party shareholders	(1,008)		—
Other	2		3
Net cash used in financing activities	(20,812)		(26,232)
Effect of exchange rate on changes on cash, cash equivalents and restricted cash	3,580		(627)
Net change in cash, cash equivalents and restricted cash	(109,509)		(69,665)
Cash, cash equivalents and restricted cash, beginning of period	162,173		429,428
Cash, cash equivalents and restricted cash, end of period	$	52,664	$	359,763
Supplemental disclosures of cash flow information
Net cash paid for income taxes	$	1,110	$	716
Cash paid for interest	$	1,822	$	2,254
Supplemental disclosure of non-cash activities
Conversion of equity method investee loan to shares	$	4,129	$	—
Right-of-use assets obtained in exchange for lease liabilities, net	$	206	$	—
Property and equipment acquired through finance lease	$	152	$	12,454
Purchase of property and equipment included in accounts payable, accrued expenses and other liabilities	$	2,018	$	1,883
Internally developed software costs included in accrued expenses and other liabilities	$	—	$	178
Membership interest liabilities included in other non-current liabilities	$	—	$	124

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1.Organization and Description of Business

Envestnet, Inc. (“Envestnet”) through its subsidiaries (collectively, the “Company”) is transforming the way financial advice and insight are delivered. Its mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet has been a leader in helping transform wealth management, working towards its goal of expanding a holistic financial wellness ecosystem so that our clients can deliver an intelligent financial life to their clients.

Envestnet is organized around 2two primary, complementary business segments. Financial information about each business segment is contained in “Note ~~14—~~18—Segment Information” to the condensed consolidated financial ~~statements.~~statements and is described in detail within the Company's Annual Report on Form 10-K.

For a summary of commonly used industry terms and abbreviations used in this quarterly report on Form 10-Q, see the

Glossary of Terms.

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company as of March 31, ~~2022~~2023 and for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 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, ~~2021~~2022 and reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of March 31, ~~2022~~2023 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~~revenue and expenses are translated at average exchange rates. Differences arising from these foreign currency translations are recorded in the unaudited condensed consolidated balance sheets as accumulated other comprehensive income (loss) within stockholders' equity. The Company is also subject to gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts, both of which are included in other expense, net in the condensed consolidated statements of operations.

The results of operations for the three months ended March 31, ~~2022~~2023 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”).~~SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with ~~accounting principles generally accepted in the United States (“GAAP”)~~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.”~~FASB ASC and ASUs. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on February ~~25, 2022.~~28, 2023.

Use of Estimates

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

Reclassifications

Certain items on the condensed consolidated balance sheets as of December 31, 2022 and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 have been reclassified to conform to the current year

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

presentation. These reclassifications did not change the previously reported total assets, total liabilities and equity, or net change in cash and cash equivalents and did not affect the condensed consolidated statements of operations, condensed consolidated statements of comprehensive loss or condensed consolidated statements of stockholders' equity.

Cash, Cash Equivalents and Restricted Cash

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

March 31, March 31,
2022 2021
(in thousands)
Cash and cash equivalents $ 359,614 $ 371,977
Restricted cash included in prepaid expenses and other current assets 149 —
Restricted cash included in other non-current assets — 149
Total cash, cash equivalents and restricted cash $ 359,763 $ 372,126

~~Russia and Ukraine Conflict~~

In February 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 the Company’s 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 the Company is 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 the Company’s business, results of operations, financial condition and cash flows. As of March 31, 2022, these condensed consolidated financial statements do not reflect any adjustments as a result of the conflict.


	March 31,		March 31,
	2023		2022

	(in thousands)
Cash and cash equivalents	$	52,664	$	359,614
Restricted cash included in prepaid expenses and other current assets	—		149

Total cash, cash equivalents and restricted cash	$	52,664	$	359,763

Related Party Transactions

The Company has ~~a 4.4%~~an approximate 3.7% membership interest in a private services company that it accounts for using the equity method of accounting and is considered to be a related party. ~~Revenues~~Revenue from the private services company totaled ~~$4.7~~$3.6 million and ~~$3.8~~$4.7 million in the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company recorded a net receivable ~~of $2.9 million and $3.0 million, respectively,~~ from the private services ~~company.~~company of $3.9 million and $2.0 million, respectively.

Recent Accounting Pronouncements Not Yet Adopted

~~Recently Adopted Accounting Pronouncements~~— In ~~October 2021,~~March 2023, the FASB issued ASU ~~2021-08, “Business Combinations~~2023-01, “Leases (Topic ~~805).~~842): Common Control Arrangements.” This update amends ~~Topic 805 to add contract assets~~ASC 842 and ~~contract liabilities to~~ the list of exceptions to the 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 accordanceaccounting for leasehold improvements associated with ~~ASC 606.~~common control leases. This standard is effective for ~~financial statements issued by public companies for annual and interim periods~~fiscal years beginning after December 15, ~~2022.~~2023, including interim periods within those fiscal years. Early adoption of the standard is permitted. The ~~amendment~~Company is ~~to be applied prospectively to business combinations occurring on or after~~analyzing the ~~effective date~~impact of the ~~amendment. The Company adopted this standard as of January 1, 2022. Adoption of this standard did~~adoption, but does not expect it to have a material impact on the ~~Company's~~consolidated financial statements.

3.Acquisitions

Acquisition of Redi2 Technologies

On July 1, 2022, Envestnet completed the acquisition of all of the issued and outstanding shares of Redi2 Technologies ("Redi2"). Redi2 provides revenue management and hosted fee-billing solutions. Its platform enables fee calculation, invoice creation, payouts and accounting, and billing compliance. Redi2 has been integrated into the Envestnet Wealth Solutions segment.

In connection with the Redi2 acquisition, the Company paid estimated consideration as follows:


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate

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

The Company funded the Redi2 acquisition with available cash resources. In addition, certain executives may earn up to $20.0 million in performance bonuses based upon the achievement of certain target financial and non-financial metrics.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

These performance bonuses will be recognized as compensation and benefits expense in the condensed consolidated ~~financial statements.~~statements of operations. The performance bonuses recognized during the three months ended March 31, 2023 were immaterial.

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


	Preliminary Estimate		Measurement Period Adjustments		Revised Estimate

	(in thousands)
Total current assets	$	1,985	$	—	$	1,985
Other non-current assets	3,349		(28)		3,321
Identifiable intangible assets	26,500		—		26,500
Goodwill	44,236		2,231		46,467
Total assets acquired	76,070		2,203		78,273

Accounts payable and accrued expenses	(1,157)		(1,271)		(2,428)
Operating lease liabilities	(2,201)		—		(2,201)
Deferred revenue	(4,771)		—		(4,771)
Total liabilities assumed	(8,129)		(1,271)		(9,400)
Total net assets acquired, net of cash received	$	67,941	$	932	$	68,873

The goodwill arising from the acquisition represents the expected benefits of the transaction, primarily related to the enhancement of the Company's existing technologies and increase in future revenue as a result of potential cross selling opportunities. Estimated goodwill of $40.7 million is deductible for income tax purposes.

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


	Preliminary Estimate		Estimated Useful Life	Amortization Method

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

The estimated fair values of certain of the assets acquired and liabilities assumed are provisional and based on information that was available to the Company as of the acquisition date. The estimated fair values of these provisional items are based on certain valuation procedures that are in progress and not yet at the point where there is sufficient information for a definitive measurement. 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. No measurement period adjustments were made during the three months ended March 31, 2023. The Company expects to finalize the valuation of tangible assets acquired, liabilities assumed, identifiable intangible assets and goodwill balances and complete the acquisition accounting as soon as reasonably practicable, though no later than July 1, 2023.

The results of Redi2 are included in the condensed consolidated statements of operations beginning July 1, 2022 and are not considered material to the Company’s results of operations.

For the three months ended March 31, 2023, the Company’s acquisition related costs were not material, and are included in general and administrative expenses. The Company may incur additional acquisition related costs over the remainder of 2023.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

4.Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	March 31,		December 31,
	2023		2022

	(in thousands)
Prepaid technology	$	20,657	$	16,649
Elevate Summit prepayments and deposits	6,447		528
Non-income tax receivable	5,484		5,488
Prepaid insurance	2,817		2,881
Income tax prepayments and receivables	—		2,515

Other	11,986		13,302
Total prepaid expenses and other current assets	$	47,391	$	41,363

5.Internally Developed Software, net

Internally developed software, net consisted of the following:


		March 31,		December 31,
	Estimated Useful Life	2023		2022

		(in thousands)
Internally developed software	5 years	$	336,607	$	313,200
Less: accumulated amortization		(139,733)		(128,642)
Internally developed software, net		$	196,874	$	184,558

6.Geographical Information

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


	March 31,		December 31,
	2023		2022

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

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

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

3.~~Prepaid Expenses and Other Current Assets~~

~~Prepaid expenses and other current assets consisted of the following:~~

March 31, December 31,
2022 2021
(in thousands)
Prepaid technology $ 22,227 $ 15,415
Non-income tax receivables 5,986 7,013
Advisor Summit prepayments and deposits 4,856 1,057
Escrow for acquisition 2,951 2,951
Prepaid insurance 2,584 2,234
Loan to equity method investee 2,560 —
Other 12,324 14,036
Total prepaid expenses and other current assets $ 53,488 $ 42,706

4.~~Property and Equipment, Net~~

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

March 31, December 31,
Estimated Useful Life 2022 2021
(in thousands)
Cost:
Computer equipment and software 3 years $ 73,142 $ 72,289
Leasehold improvements Shorter of the lease term or useful life of the asset 43,970 43,544
Leased data servers 3 years 13,044 590
Office furniture and fixtures 3-7 years 12,286 12,214
Office equipment and other 3-5 years 8,193 7,973
Building and building improvements 7-39 years 2,729 2,729
Land Not applicable 940 940
154,304 140,279
Less: accumulated depreciation and amortization (91,456) (90,064)
Total property and equipment, net $ 62,848 $ 50,215

During the three months ended March 31, 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 March 31, 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 March 31, 2022 was $13.0 million with accumulated depreciation of $1.1 million. Finance lease activity as of and for the year ended December 31, 2021 was not material.

During the three months ended March 31, 2022 and 2021, the Company retired property and equipment that was no longer in service with historical costs of $4.0 million and $3.1 million, respectively. Retirements within each segment were immaterial.

~~Gains and losses on asset retirements during the three months ended March 31, 2022 and 2021 were not material.~~

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~~Envestnet, Inc.~~

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

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

Three Months Ended
March 31,
2022 2021
(in thousands)
Depreciation and amortization expense $ 5,604 $ 5,643

5.~~Internally Developed Software~~

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

March 31, December 31,
Estimated Useful Life 2022 2021
(in thousands)
Internally developed software 5 years $ 247,229 $ 225,380
Less: accumulated amortization (100,215) (91,721)
Internally developed software, net $ 147,014 $ 133,659

~~Amortization expense was as follows:~~

Three Months Ended
March 31,
2022 2021
(in thousands)
Amortization expense $ 8,494 $ 6,271

6.7.Intangible Assets, Net

~~Procurement~~Intangible assets, net consisted of ~~Technology Solutions~~the following:


			March 31, 2023						December 31, 2022
			Gross				Net		Gross				Net
			Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
			Amount		Amortization		Amount		Amount		Amortization		Amount

			(in thousands)
Customer lists			$	604,080	$	(295,976)	$	308,104	$	604,080	$	(285,288)	$	318,792
Proprietary technologies			109,057		(46,894)		62,163		113,224		(59,401)		53,823
Trade names			15,700		(8,912)		6,788		15,700		(8,320)		7,380
Total intangible assets	$	728,837	$	(351,782)	$	377,055	$	733,004	$	(353,009)	$	379,995

On ~~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 purchase agreement was amended in January 2023 to include additional functionality and features for additional consideration of $5.0 million. The Company closed the transaction and paid the remaining ~~$15.0~~$10.0 million ~~in February 2022.~~during the three months ended March 31, 2023. This proprietary technology asset has been integrated into the Envestnet Data & Analytics segment and is being amortized over an estimated useful life of five years. 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~~During the three months ended March 31, 2023, the Company retired fully amortized proprietary technologies with a historical cost of ~~the following:~~

March 31, 2022 December 31, 2021
Gross Net Gross Net
Carrying Accumulated Carrying Carrying Accumulated Carrying
Amount Amortization Amount Amount Amortization Amount
(in thousands)
Customer lists $ 590,080 $ (252,313) $ 337,767 $ 590,080 $ (241,189) $ 348,891
Proprietary technologies 103,324 (48,168) 55,156 85,324 (43,004) 42,320
Trade names 33,700 (25,747) 7,953 33,700 (24,515) 9,185
Total intangible assets $ 727,104 $ (326,228) $ 400,876 $ 709,104 $ (308,708) $ 400,396

~~There were no material retirements of intangible assets during~~$17.5 million. During the three months ended March 31, 2022, the Company had no material retirements of intangible assets.

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



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

8.Depreciation and ~~2021.~~Amortization Expense

Depreciation and amortization expense consisted of the following:


	Three Months Ended
	March 31,
	2023		2022

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

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

~~Amortization expense was~~9.Goodwill

Changes in the carrying amount of goodwill by reportable segment were as follows:

Three Months Ended
March 31,
2022 2021
(in thousands)
Amortization expense $ 17,520 $ 16,478


	Envestnet Wealth Solutions		Envestnet Data & Analytics		Total

	(in thousands)
Balance as of December 31, 2022	$	679,739	$	318,675	$	998,414



Foreign currency translation	—		14		14
Balance as of March 31, 2023	$	679,739	$	318,689	$	998,428

7.10.Other Assets

On January 31, 2023, the Company entered into a Convertible Promissory Note with a customer of the Company's business, a privately held company, whereby the Company was issued a convertible promissory note with a principal amount of $20.0 million and a stated interest rate of 8.0% per annum. The Convertible Promissory Note has a maturity date of January 31, 2026 and is convertible into common stock or preferred stock of the privately held company upon qualified financing events or corporate transactions.

In connection with the Convertible Promissory Note, the Company concurrently entered into a call option agreement with the privately held company, which provides the Company an option to acquire the privately held company at a predetermined price as of the earlier of July 2024 or upon satisfaction of certain financial metrics.

The Company accounts for this loan receivable in accordance with ASC 310 - Receivables as it is not a security and includes it in other assets in the condensed consolidated balance sheets. Credit impairment is measured as the difference between this loan receivable’s amortized cost and its estimated recoverable value, which is the present value of its expected future cash flows discounted at the effective interest rate. There was no impairment for this investment for the three months ended March 31, 2023.

11.Accounts Payable, Accrued Expenses and Other Current Liabilities

~~Accrued~~Accounts payable, accrued expenses and other liabilities consisted of the following:

March 31, December 31,
2022 2021
(in thousands)
Accrued investment manager fees $ 100,566 $ 95,858
Accrued compensation and related taxes 51,898 97,523
Income tax payables 19,147 —
Accrued professional services 5,620 7,746
Accrued technology 7,483 8,951
Non-income tax payables 4,154 4,907
Other accrued expenses 12,219 10,174
Total accrued expenses and other liabilities $ 201,087 $ 225,159

8.~~Debt~~

~~The Company’s outstanding debt obligations as of March 31, 2022 and December 31, 2021 were as follows:~~

March 31, December 31,
2022 2021
(in thousands)
Revolving credit facility balance $ — $ —
Convertible Notes due 2023 $ 345,000 $ 345,000
Unamortized issuance costs on Convertible Notes due 2023 (2,463) (2,979)
Convertible Notes due 2023 carrying value $ 342,537 $ 342,021
Convertible Notes due 2025 $ 517,500 $ 517,500
Unamortized issuance costs on Convertible Notes due 2025 (9,940) (10,659)
Convertible Notes due 2025 carrying value $ 507,560 $ 506,841


	March 31,		December 31,
	2023		2022

	(in thousands)
Accrued investment manager fees	$	98,419	$	99,851
Accrued compensation and related taxes	42,120		77,939
Accrued professional services	14,188		10,762
Accounts payable	9,605		11,271
Income tax payable	9,459		260
Accrued capital expenditures	6,359		4,783
Accrued interest	6,147		3,091
Accrued technology	5,179		6,393

Accrued treasury stock purchases	—		9,289

Other accrued expenses	4,507		10,227
Total accounts payable, accrued expenses and other current liabilities	$	195,983	$	233,866

~~Third Credit Agreement~~

On February 4, 2022, the Company entered into a Third Amended and Restated Credit Agreement (the “Third Credit Agreement”) with a group of banks (the “Banks”), for which Bank of Montreal is acting as administrative agent. The Third Credit Agreement amends 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 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.

Pursuant to the Third Credit Agreement, the Banks have agreed to provide the Company with a revolving credit facility 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 March 31, 2022 and December 31, 2021, there were no amounts outstanding under the Revolving Credit Facility.

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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. Obligations under the Third Credit Agreement are secured by substantially all of the Company’s domestic assets and the Company’s pledge of 66% of the voting equity and 100% of the non-voting equity of certain of its first-tier foreign subsidiaries. Proceeds under the Third Credit Agreement may be used to finance capital expenditures and permitted acquisitions and for working capital and general corporate purposes.12.Debt

InThe following tables set forth the ~~event the Company has borrowings under the Third Credit Agreement, at~~carrying value and estimated fair value of 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 2.75% per annum, in each case based upon the total net leverage ratio,debt obligations 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.of March 31, 2023 and December 31, 2022:

~~As of March 31, 2022, debt issuance costs related to the Third~~


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

	(in thousands)

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


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

	(in thousands)

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

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 $2.7 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 and a minimum interest coverage ~~ratio and a minimum liquidity covenant.~~ratio. The Company was in compliance with these financial covenants as of March 31, ~~2022.~~2023.

As of March 31, 2023 and December 31, 2022, there were no amounts outstanding under the ~~Company had~~Revolving Credit Facility and as of March 31, 2023 all $500.0 million was available to ~~borrow under~~borrow. As of March 31, 2023 and December 31, 2022, debt issuance costs related to the ~~revolving~~Third Credit ~~Facility, subject to covenant compliance.~~Agreement included in prepaid expense and other current assets in the condensed consolidated balance sheets was $0.7 million and $0.7 million, respectively and included in other assets in the condensed consolidated balance sheets was $2.0 million and $2.2 million, respectively.

~~Convertible Notes due 2023~~

In May 2018, the Company issued $345.0 million of Convertible Notes due 2023 that mature on June 1, 2023. The Convertible Notes due 2023 bear interest at a rate of 1.75% per annum payable semiannually in arrears on June 1 and December 1 of each year. The Convertible Notes due 2023 are general unsecured obligations, subordinated in right of payment to the Company's obligations under its Credit Agreement.

The effective interest rate of the Convertible Notes due 2023 was approximately 2.4% for the three months ended March 31, 2022 and 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.

~~Convertible Notes due 2025~~

In August 2020, the Company issued $517.5 million of Convertible 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 August 15 of each year. The Convertible Notes due 2025 are general unsecured obligations, subordinated in right of payment to the Company's obligations under its Credit Agreement.

The effective interest rate of the Convertible Notes due 2025 was approximately 1.3% for the three months ended March 31, 2022 and 2021. 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.

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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 Ended							Three Months Ended
		March 31,							March 31,
				2022		2021				2023		2022

			(in thousands)							(in thousands)
Coupon interest	Coupon interest			$	2,480	$	2,479	Coupon interest		$	4,565	$	2,480
Amortization of issuance costs				2,060		1,423
Amortization of debt discount and issuance costs								Amortization of debt discount and issuance costs		1,442		2,060
Undrawn and other fees	Undrawn and other fees			313		313		Undrawn and other fees		313		313

Total interest expense	Total interest expense			$	4,853	$	4,215	Total interest expense		$	6,320	$	4,853

Table of Contents

~~For each~~Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

The effective interest rate of the ~~three months ended March 31, 2022 and 2021, total interest expense related~~Notes was equal to the ~~Convertible Notes due 2023 and~~stated interest rate plus the ~~Convertible Notes due 2025 (collectively, the "Convertible Notes") was $3.7 million with coupon interest expense of $2.5 million and~~ amortization of the debt ~~discount and~~ issuance costs ~~of $1.2 million.~~and is set forth below:


	Three Months Ended
	March 31,
		2023		2022

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

9.13.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 March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, based on the three-tier fair value hierarchy, as ~~defined~~described in ~~ASC~~ ~~820, “Fair Value Measurements and Disclosures”:~~detail within the Company's Annual Report on Form 10-K:


		March 31, 2022									March 31, 2023
		Fair Value		Level I		Level II		Level III			Fair Value		Level I		Level II		Level III

		(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Money market funds	Money market funds	$	2,946	$	2,946	$	—	$	—	Money market funds	$	2,118	$	2,118	$	—	$	—

Assets to fund deferred compensation liability	Assets to fund deferred compensation liability	11,201		—		—		11,201		Assets to fund deferred compensation liability	10,380		—		—		10,380
Total assets	Total assets	$	14,147	$	2,946	$	—	$	11,201	Total assets	$	12,498	$	2,118	$	—	$	10,380
Liabilities:	Liabilities:									Liabilities:
Contingent consideration		$	750	$	—	$	—	$	750

Deferred compensation liability	Deferred compensation liability	9,515		9,515		—		—		Deferred compensation liability	8,667		8,667		—		—
Total liabilities	Total liabilities	$	10,265	$	9,515	$	—	$	750	Total liabilities	$	8,667	$	8,667	$	—	$	—


		December 31, 2021									December 31, 2022
		Fair Value		Level I		Level II		Level III			Fair Value		Level I		Level II		Level III

		(in thousands)									(in thousands)
Assets:	Assets:									Assets:
Money market funds	Money market funds	$	2,684	$	2,684	$	—	$	—	Money market funds	$	2,628	$	2,628	$	—	$	—
Assets to fund deferred compensation liability	Assets to fund deferred compensation liability	11,140		—		—		11,140		Assets to fund deferred compensation liability	10,074		—		—		10,074
Total assets	Total assets	$	13,824	$	2,684	$	—	$	11,140	Total assets	$	12,702	$	2,628	$	—	$	10,074
Liabilities:	Liabilities:									Liabilities:
Contingent consideration		$	743	$	—	$	—	$	743

Deferred compensation liability	Deferred compensation liability	10,418		10,418		—		—		Deferred compensation liability	8,088		8,088		—		—
Total liabilities	Total liabilities	$	11,161	$	10,418	$	—	$	743	Total liabilities	$	8,088	$	8,088	$	—	$	—

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 three months ended March 31, 2023 and 2022.

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

Fair Value of ~~Contingent Consideration Liabilities~~

~~The fair value of~~Assets Used to Fund 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 $0.8 million and $0.7 million as of March 31, 2022 and December 31, 2021, respectively, which are recorded as a component of Accrued expenses and other liabilities on the condensed consolidated balance sheets.

~~Fair Value of~~ Deferred Compensation Liability

The table below presents a reconciliation of the assets used to fund the Company's deferred compensation liability, which is measured at fair value on a recurring basis using significant unobservable inputs (Level III) for the period from December 31, ~~2021~~2022 to March 31, ~~2022:~~2023:


	Fair Value of Assets Used to Fund Deferred Compensation Liability

	(in thousands)
Balance atas of December ~~31, 2021~~	$	~~11,140~~
~~Contributions~~	~~649~~
~~Fair value adjustments~~	~~(588)~~
~~Balance at March~~ 31, 2022	$	~~11,201~~10,074

Fair value adjustments and fees	306
Balance as of March 31, 2023	$	10,380

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

Fair Value of Debt Agreements

The Company considered its Convertible Notes to be Level II liabilities atas of March 31, 2023 and December 31, 2022, and used a market approach to calculate their respective fair values. The estimated fair value for each convertible note was determined based on estimated or actual bids and offers in an over-the-counter market on March 31, 2023 and December 31, 2022, respectively (See “Note 8—12—Debt”).

As of March 31, 2022, the carrying value of the Convertible Notes due 2023 equaled $342.5 million and represented the aggregate principal amount outstanding less the unamortized debt issuance costs. As of December 31, 2021, the carrying value of the Convertible Notes due 2023 equaled $342.0 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of March 31, 2022 and December 31, 2021, the estimated fair value of the Convertible Notes due 2023 was $418.3 million and $439.9 million, respectively.

As of March 31, 2022, the carrying value of the Convertible Notes due 2025 equaled $507.6 million and represented the aggregate principal amount outstanding less the unamortized debt issuance costs. As of December 31, 2021, the carrying value of the Convertible Notes due 2025 equaled $506.8 million and represented the aggregate principal amount outstanding less the unamortized discount and debt issuance costs. As of March 31, 2022 and December 31, 2021, the estimated fair value of the Convertible Notes due 2025 was $505.9 million and $526.1 million, respectively.

~~Table of Contents~~

~~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 atas of March 31, ~~2022~~2023 and December 31, ~~2021~~2022, based upon the short-term nature of these assets and liabilities.

~~10.~~14.~~Revenues~~Revenue and ~~Cost of Revenues~~Direct Expense

Disaggregation of Revenue

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

Three Months Ended March 31,
2022 2021
Envestnet Wealth Solutions Envestnet Data & Analytics Consolidated Envestnet Wealth Solutions Envestnet Data & Analytics Consolidated
(in thousands)
Revenues:
Asset-based $ 202,717 $ — $ 202,717 $ 159,375 $ — $ 159,375
Subscription-based 68,537 46,197 114,734 64,012 45,817 109,829
Total recurring revenues 271,254 46,197 317,451 223,387 45,817 269,204
Professional services and other revenues 2,314 1,598 3,912 3,023 2,878 5,901
Total revenues $ 273,568 $ 47,795 $ 321,363 $ 226,410 $ 48,695 $ 275,105

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

Three Months Ended
March 31,
2022 2021
(in thousands)
United States $ 316,729 $ 270,072
International 4,634 5,033
Total revenues $ 321,363 $ 275,105

~~Remaining Performance Obligations~~

~~The following table includes estimated revenue expected to be recognized in the future as of March 31, 2022:~~

Years ending December 31, (in thousands)
Remainder of 2022 $ 201,257
2023 178,329
2024 102,504
2025 57,142
2026 29,564
Thereafter 6,878
Total $ 575,674

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


	Three Months Ended March 31,
	2023						2022
	Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated		Envestnet Wealth Solutions		Envestnet Data & Analytics		Consolidated

	(in thousands)
Revenue:
Asset-based	$	176,932	$	—	$	176,932	$	202,717	$	—	$	202,717
Subscription-based	76,485		40,594		117,079		68,537		46,197		114,734
Total recurring revenue	253,417		40,594		294,011		271,254		46,197		317,451
Professional services and other revenue	3,243		1,453		4,696		2,314		1,598		3,912
Total revenue	$	256,660	$	42,047	$	298,707	$	273,568	$	47,795	$	321,363

1716

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

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


	Three Months Ended
	March 31,
		2023		2022

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

Remaining Performance Obligations

As of March 31, 2023, the Company's estimated revenue expected to be recognized in the future related to performance obligations ~~represent~~associated with existing customer contracts that are partially or wholly unsatisfied is approximately $527.0 million. We expect to recognize approximately 35% of this revenue during the ~~transaction price allocated to unsatisfied or partially satisfied performance obligations. The disclosure includes estimates~~remainder of ~~variable consideration. The Company applies~~2023, with the ~~practical expedients and exemption not to disclose the value of unsatisfied~~balance recognized thereafter. These remaining performance obligations are not indicative of revenue 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.future periods.

Contract Balances

Total deferred revenue as of March 31, ~~2022~~2023 increased by ~~$11.1~~$8.1 million from December 31, ~~2021,~~2022, 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 ~~$15.9~~$16.8 million and ~~$16.9~~$15.9 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. The majority of this revenue consists of subscription-based services and professional services arrangements. The amount of revenue recognized from performance obligations satisfied in prior periods was not material.

Deferred Sales Incentive Compensation

Deferred sales incentive compensation was ~~$11.6~~$11.3 million and ~~$11.8~~$11.0 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Amortization expense for the deferred sales incentive compensation was $1.1 million for the three months ended March 31, ~~2022~~2023 and 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.2022. No significant impairment loss for capitalized costs was recorded during the ~~periods.~~three months ended March 31, 2023 and 2022.

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

~~Cost of Revenues~~Direct Expense

The following table summarizes ~~cost of revenues~~direct expense by revenue category:


		Three Months Ended							Three Months Ended
		March 31,							March 31,
				2022		2021				2023		2022

			(in thousands)							(in thousands)
Asset-based	Asset-based			$	117,428	$	86,190	Asset-based		$	102,623	$	117,428
Subscription-based	Subscription-based			7,811		6,604		Subscription-based		6,362		7,811
Professional services and other	Professional services and other			43		75		Professional services and other		4		43
Total cost of revenues				$	125,282	$	92,869
Total direct expense								Total direct expense		$	108,989	$	125,282

~~11.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 of March 31, 2022, the maximum number of common shares available for future issuance under the Company’s plans is 2,423,500.~~

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

15.Stock-Based Compensation

The Company has stock options, RSUs and PSUs outstanding under the 2010 Plan and the 2019 Equity Plan. As of March 31, 2023, the maximum number of common shares available for future issuance under the Company's plans is 1,564,414.

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


		Three Months Ended							Three Months Ended
		March 31,							March 31,
				2022		2021				2023		2022

			(in thousands)							(in thousands)
Stock-based compensation expense	Stock-based compensation expense			$	21,690	$	14,013	Stock-based compensation expense		$	19,453	$	21,690
Tax effect on stock-based compensation expense	Tax effect on stock-based compensation expense			(5,531)		(3,573)		Tax effect on stock-based compensation expense		(4,961)		(5,531)
Net effect on income	Net effect on income			$	16,159	$	10,440	Net effect on income		$	14,492	$	16,159

The tax effect on stock-based compensation expense above was calculated using a blended statutory rate of 25.5% for each of the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

Stock Options

~~The Company did not grant any stock options in the three months ended March 31, 2021 or 2022.~~ The following table summarizes option activity under the Company’s plans:

Weighted-Average
Weighted- Remaining
Average Contractual Life Aggregate
Options Exercise Price (Years) Intrinsic Value
(in thousands)
Outstanding as of December 31, 2021 365,241 $ 38.61 3.3 $ 14,878
Exercised (38,681) 17.02
Forfeited (260) 74.83
Outstanding as of March 31, 2022 326,300 41.14 3.4 10,869
Options exercisable 321,779 $ 40.66 3.3 $ 10,869


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

					(in thousands)
Outstanding as of December 31, 2022	277,535	$	40.07	2.2	$	6,005

Exercised	(37,454)	$	15.34

Outstanding as of March 31, 2023	240,081	$	43.93	2.2	$	3,542
Options exercisable as of March 31, 2023	239,849	$	43.90	2.2	$	3,542

~~Exercise prices of stock options outstanding as~~As of March 31, ~~2022 range from $15.34 to $74.83. At March 31, 2022,~~2023, there was an immaterial amount of unrecognized stock-based compensation expense related to ~~unvested~~ stock options, which the Company expects to recognize over a weighted-average period of ~~1.3~~0.3 years.

Restricted Stock Units and Performance Stock Units

The ~~Company has granted restricted stock units~~following table summarizes RSU 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 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~~PSU activity ~~for unvested restricted stock units and performance stock units granted~~ under the Company’s plans:


		RSUs			PSUs				RSUs			PSUs
		Number of Shares	Weighted- Average Grant Date Fair Value per Share		Number of Shares	Weighted- Average Grant Date Fair Value per Share			Number of Shares	Weighted- Average Grant Date Fair Value per Share		Number of Shares	Weighted- Average Grant Date Fair Value per Share
Outstanding as of December 31, 2021		1,507,424	$	71.50	359,184	$	73.64

Non-vested as of December 31, 2022								Non-vested as of December 31, 2022	1,681,976	$	72.69	259,049	$	74.83
Granted	Granted	1,266,891	74.76		75,025	82.96		Granted	1,089,706	$	62.51	40,010	$	69.47
Vested	Vested	(458,869)	69.91		(55,450)	67.46		Vested	(502,322)	$	74.09	(21,994)	$	81.25
Forfeited	Forfeited	(51,484)	72.04		(1,359)	75.67		Forfeited	(65,397)	$	71.96	(49,712)	$	75.18
Outstanding as of March 31, 2022		2,263,962	73.63		377,400	76.39
Non-vested as of March 31, 2023								Non-vested as of March 31, 2023	2,203,963	$	67.35	227,353	$	73.19

As of March 31, 2023, there was $134.8 million of unrecognized stock-based compensation expense related to RSUs, which the Company expects to recognize over a weighted-average period of 2.1 years. As of March 31, 2023, there was $7.8 million of unrecognized stock-based compensation expense related to PSUs, which the Company expects to recognize over a weighted-average period of 1.4 years.

Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

At March 31, 2022, there was $157.6 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 2.3 years. At March 31, 2022, there was $16.2 million of unrecognized stock-based compensation expense related to unvested performance-based restricted stock units, which the Company expects to recognize over a weighted-average period of 1.9 years.

~~12.~~16. Income Taxes

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

Three Months Ended
March 31,
2022 2021
(in thousands, except for effective tax rate)
Income (loss) before income tax provision (benefit) $ (12,688) $ 9,347
Income tax provision (benefit) 2,020 (5,588)
Effective tax rate (15.9) % (59.8) %


	Three Months Ended
	March 31,
	2023			2022

	(in thousands, except for effective tax rate)
Loss before income tax provision	$	(18,992)		$	(12,688)
Income tax provision	$	23,769		$	2,020
Effective tax rate	(125.2)		%	(15.9)		%

Under ASC 740-270-25, the Company is required to report income tax expense by applying a projected AETR to ordinary pre-tax book income for the interim period. The tax impact of discrete items is accounted for separately in the period in which they occur. The ETR for the quarter is the result of the projected AETR applied to actual pre-tax book income plus discrete items as a percentage of pre-tax book income. Therefore, a change in pre-tax book income, either forecasted or actual year-to-date, from one period to the next will cause the ETR to change.

For the three months ended March 31, 2023, the Company’s effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, uncertain tax positions and the impact of state and local taxes offset by federal and state R&D credits.

For the three months ended March 31, 2022, the Company's ~~quarterly provision for income taxes is calculated by applying a projected annual effective tax rate ("ETR"), calculated separately for the US and each foreign entity, to ordinary pre-tax book income.~~

~~For the three months ended March 31, 2022, the Company’s~~ effective tax rate differed from the statutory rate primarily due to the increase in the valuation allowance the Company has placed on a portion of its U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, the impact of state and local taxes offset by federal and state ~~research and development ("~~R~~&D")~~&D credits and the windfall from stock-based compensation.

~~For~~Inflation Reduction Act of 2022

On August 16, 2022, the ~~three months ended March 31, 2021,~~U.S. enacted the ~~Company's~~IRA, which, among other things, implements a 15% minimum tax on book income of certain large corporations and a 1% excise tax on net stock repurchases. The provisions of the IRA became effective ~~tax rate differed from~~beginning in 2023. The Company does not anticipate a material impact on 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, permanent book-tax differences and the impact of state and local taxes offset by federal and state R&D credits.consolidated financial statements.

~~13.~~17.Net ~~Income (Loss)~~Loss Per Share

~~Basic net income (loss) per common share is computed by dividing net income (loss) available to common stockholders by~~Securities that were anti-dilutive and therefore excluded from the ~~weighted average number of shares of common stock outstanding for the period. For the calculation~~computation of diluted net ~~income (loss)~~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 methodwere as ~~appropriate.~~follows:


	Three Months Ended
	March 31,
		2023	2022

		(in thousands)
Options to purchase common stock		240,081	326,300
Non-vested RSUs and PSUs		2,431,316	2,641,362
Convertible Notes		11,470,645	9,898,549
Warrants		—	470,000
Total anti-dilutive securities		14,142,042	13,336,211

2019

Table of Contents

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 Ended
March 31,
2022 2021
(in thousands, except share and per share data)
Net income (loss) attributable to Envestnet, Inc. (a)
$ (13,859) $ 14,946
Interest on dilutive Convertible Notes due 2025, net of tax — 1,252
Net income (loss) attributable to Envestnet, Inc - Diluted (b)
$ (13,859) $ 16,198
Weighted-average common shares outstanding:
Basic (c)
54,903,677 54,208,469
Effect of dilutive shares:
Options to purchase common stock — 222,387
Unvested restricted stock units — 562,606
Convertible Notes — 4,848,044
Warrants — 76,142
Diluted (d)
54,903,677 59,917,648
Net income (loss) per share attributable to Envestnet, Inc common stock:
Basic (a/c)
$ (0.25) $ 0.28
Diluted (b/d)
$ (0.25) $ 0.27

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

Three Months Ended
March 31,
2022 2021
(in thousands)
Options to purchase common stock 326,300 —
Unvested RSUs and PSUs 2,641,362 —
Warrants 470,000 —
Convertible Notes 9,898,549 5,050,505
Total anti-dilutive securities 13,336,211 5,050,505

~~14.~~18.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 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 for~~across digital financial ~~services.~~services to enable them to deliver an intelligent financial life to their clients.

The information in the following 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~~revenue was not material for the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

~~Table of Contents~~

~~Envestnet, Inc.~~

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

See “Note ~~10—Revenues~~14—Revenue and ~~Cost of Revenues”~~Direct Expense” for detail of ~~revenues~~revenue by segment.

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


		Three Months Ended							Three Months Ended
		March 31,							March 31,
				2022		2021				2023		2022

			(in thousands)							(in thousands)
Envestnet Wealth Solutions	Envestnet Wealth Solutions			$	25,269	$	34,197	Envestnet Wealth Solutions		$	23,463	$	25,269
Envestnet Data & Analytics	Envestnet Data & Analytics			(5,587)		1,289		Envestnet Data & Analytics		(7,780)		(5,587)
Nonsegment operating expenses	Nonsegment operating expenses			(26,403)		(18,671)		Nonsegment operating expenses		(26,740)		(26,403)
Income (loss) from operations				(6,721)		16,815
Loss from operations								Loss from operations		(11,057)		(6,721)
Other expense, net	Other expense, net			(5,967)		(7,468)		Other expense, net		(7,935)		(5,967)
Consolidated income (loss) before income tax benefit				(12,688)		9,347
Income tax provision (benefit)				2,020		(5,588)
Consolidated net income (loss)				(14,708)		14,935
Consolidated loss before income tax provision								Consolidated loss before income tax provision		(18,992)		(12,688)
Income tax provision								Income tax provision		23,769		2,020
Consolidated net loss								Consolidated net loss		(42,761)		(14,708)
Add: Net loss attributable to non-controlling interest	Add: Net loss attributable to non-controlling interest			849		11		Add: Net loss attributable to non-controlling interest		1,533		849
Consolidated net income (loss) attributable to Envestnet, Inc.				$	(13,859)	$	14,946
Consolidated net loss attributable to Envestnet, Inc.								Consolidated net loss attributable to Envestnet, Inc.		$	(41,228)	$	(13,859)

AThe following table presents a summary of consolidated total assets ~~follows:~~

March 31, December 31,
2022 2021
(in thousands)
Envestnet Wealth Solutions $ 1,658,134 $ 1,720,779
Envestnet Data & Analytics 541,636 520,403
Consolidated total assets $ 2,199,770 $ 2,241,182
by segment:

~~15.Geographical Information~~

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

March 31, December 31,
2022 2021
(in thousands)
United States $ 206,961 $ 180,680
India 2,681 2,923
Other 220 271
Total long-lived assets, net $ 209,862 $ 183,874

~~See “Note 10—Revenues and Cost of Revenues” for detail of revenues by geographic area.~~


	March 31,		December 31,
	2023		2022

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

2220

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

~~16.~~19.Commitments and Contingencies

Purchase Obligations and Indemnifications

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

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

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 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.~~concluded on September 30, 2022. The parties’ respective summary judgment and motions to exclude the presentation of expert testimony (a “Daubert Motion”) are fully briefed and awaiting ruling.

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 nine additional named plaintiffs. The case caption is Deborah

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~~Envestnet, Inc.~~

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

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

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements (continued)

plaintiffs further allege that Yodlee unlawfully sold the transaction data to third parties. The complaint alleges violations of certain California statutes and common law, including the Unfair Competition Law, and federal statutes, including the Stored Communications Act. Plaintiffs are seeking monetary damages and equitable and injunctive relief on behalf of themselves and a putative nationwide class and California subclass of persons who provided their log-in credentials to a Yodlee-powered app in an allegedly similar manner from 2014 to the present. The Company believes that it is not properly named as a defendant in the lawsuit and it further believes, along with Yodlee, that plaintiffs’ claims are without merit. On November 4, 2020, the Company and Yodlee filed separate motions to dismiss all of the claims in the complaint. On February 16, 2021, the district court granted in part and denied in part Yodlee’s motion to dismiss the amended complaint and granted the plaintiffs leave to further amend. The Court reserved ruling on the Company’s motion to dismiss and granted limited jurisdictional discovery to the plaintiffs. On March 15, 2021, Plaintiffs filed a second amended class action complaint re-alleging, among others, the claims the district court had dismissed. The second amended complaint did not allege any claims against the Company or Yodlee that were not previously alleged in first amended complaint. On May 5, 2021, the Company filed a motion to dismiss all claims asserted against it in the second amended complaint, and Yodlee filed a motion to dismiss most claims asserted against it in the second amended complaint. On July 19, 2021, the Court granted in part Yodlee’s motion, resulting in the dismissal of all federal law claims and two of the state-law claims. On August 5, 2021, the Court granted the Company's motion to dismiss, and dismissed the Company from the lawsuit. ~~Discovery continues on the remaining state law claims against Yodlee.~~ On October 8, 2021, Yodlee filed an early motion for summary judgment. On August 12, 2022, Plaintiffs moved for leave to file a third amended complaint, which Yodlee opposed. On September 29, 2022, the Court denied Plaintiffs’ motion to amend the complaint. On December 13, 2022, the Court granted in part and denied in part Yodlee’s early motion for summary judgment, narrowing the scope of issues that remain to be resolved. On January 30, 2023, the Court granted Yodlee’s motion for reconsideration and ~~is awaiting a schedule for the completion of briefing on this motion.~~dismissed one additional claim. Yodlee will continue to vigorously defend the remaining claims against it.

In addition, the Company is involved in legal proceedings arising in the ordinary course of its business. Legal fees and other costs associated with such actions are expensed as incurred. The Company will record a provision for these claims when it is both probable that a liability has been incurred and the amount of the loss, or a range of the potential loss, can be reasonably estimated. These provisions are reviewed regularly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information or events pertaining to a particular case. For litigation matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established, but if the matter is material, it is subject to disclosures. The Company believes that liabilities associated with any claims, while possible, are not probable, and therefore has not recorded any accrual for any claims as of March 31, ~~2022.~~2023. 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~~Company’s results of operations or cash flow in a particular quarter or year.

~~17.Subsequent Events~~

~~Procurement of Technology Solutions~~

On April 1, 2022, the Company entered into a purchase agreement with a privately held company to acquire the technology solutions being developed by this privately held company for a purchase price of $9.0 million, including an advance of $4.0 million.

~~Office Closures~~

In April 2022, in response to changing needs and an increase in employees working remotely, the Company decided to close 3 offices in the United States. The Company is currently exploring alternative uses for these properties, including sublease options. As a result, the Company is currently unable to provide a reasonable estimate of the amount of costs it may write off in connection with these closures.

2422

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

~~This~~related notes included elsewhere in this quarterly report on Form 10-Q for the quarter ended March 31, ~~2022 ("~~2023 and the consolidated financial statements and related notes included on Form 10-K for the year ended December 31, 2022.

This Quarterly ~~Report")~~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 Report include, but are not limited to,

•~~a pandemic or health crisis, including the Coronavirus Disease 2019 (“COVID-19”) pandemic;~~

•~~the conflict between Russia and Ukraine including related sanctions, and their impact on the global economy and capital 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 financial 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;~~

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

•~~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 Report and documents incorporated herein by reference are qualified -in their entirety by this cautionary statement. Forward-looking statements speak only as of the date they are made, and we do not intend to update or otherwise revise the forward-looking statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, except as required by applicable law. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

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

These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report are set forth in Part I, Item 1A.“Risk Factors” in our annual report on Form 10-K for the year ended December 31, ~~2021 (the “2021 Form 10-K”);~~2022; accordingly, investors should not place undue reliance upon our forward-looking statements. We undertake no obligation to update any of the forward-looking statements after the date of this report to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

You should read this Quarterly Report and the ~~2021~~2022 Form 10-K completely and with the understanding that our actual future results, levels of activity, performance and achievements may be different from what we expect and that these differences may be material. We qualify all of our forward-looking statements by these cautionary ~~statements.~~

~~The following discussion and analysis should also be read along with our condensed consolidated financial~~ statements, ~~and the related notes included elsewhere in this Quarterly Report and the consolidated financial statements and related notes included in our 2021 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.

26Unless otherwise indicated, the terms “Envestnet,” the “Company,” “we,” “us” and “our” refer to Envestnet, Inc. and its subsidiaries as a whole.

Overview

Envestnet, through its subsidiaries, is transforming the way financial advice and insight are delivered. Our mission is to empower financial advisors and service providers with innovative technology, solutions and intelligence. Envestnet has been a leader in helping transform wealth management, working towards our goal of expanding a holistic financial wellness ecosystem so that our clients can deliver an intelligent financial life to their ~~clients ("Intelligent Financial Life").~~clients.

~~More than 6,500~~Approximately 106,000 advisors and approximately 6,900 companies, including 16 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”),~~RIAs, and hundreds of FinTech companies, leverage Envestnet technology and services that help drive better outcomes for enterprises, advisors and their clients. We also operate six RIAs registered with the SEC. We believe that our business model results in a high degree of recurring and predictable financial results.

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

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

~~We also operate five~~ ~~registered investment advisers (“RIA~~s”) ~~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

~~Russia and Ukraine Conflict~~Macroeconomic Environment

~~In February 2022,~~Our business is directly and indirectly affected by macroeconomic conditions and the state of global financial markets. Recent geopolitical uncertainty resulting, in part, from military conflict ~~escalated~~ between Russia and Ukraine which escalated in

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February 2022 as well as rising inflation have contributed to significant volatility and decline in global financial markets during 2022 which continues as of the date of this ~~quarterly report.~~Quarterly Report. The uncertainty over the extent and duration of the ongoing conflict and this period of inflation continues to cause disruptions to businesses and markets worldwide. The extent of the effect on our financial performance will continue to depend on future developments, including the extent and duration of the conflict and this period of inflation, the Federal Reserve's monetary policy in response to rising inflation, the extent of economic sanctions imposed, changes in market interest rates, further governmental and private sector responses and the timing and extent normal economic conditions resume, all of which are uncertain and difficult to predict. Although we are unable to estimate the overall financial effect of the conflict and this period of inflation at this time, as ~~the conflict continues, it~~these conditions continue, they could have a material adverse effect on our business, results of operations, financial condition and cash flows. As of March 31, ~~2022, these condensed~~2023, the consolidated financial statements do not reflect any adjustments as a result of ~~the conflict.~~these macroeconomic conditions.

~~Credit Agreement Amendment~~Convertible Promissory Note

On ~~February 4, 2022, we~~January 31, 2023, the Company entered into a ~~Third Amended and Restated Credit Agreement (the “Third Credit Agreement”)~~Convertible Promissory Note with a ~~group~~customer of ~~banks. The Third Credit Agreement amends~~the Company's business, a privately held company, whereby the Company was issued a convertible promissory note with a principal amount of $20.0 million and ~~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 Prior Credit Agreement to, among other things, (i) extend the maturity of loans and the revolving credit commitments, (ii) reduce the~~a stated interest rate ~~payable on the loans~~of 8.0% per annum. The Convertible Promissory Note has a maturity date of January 31, 2026 and ~~(iii) increase capacity and flexibility under certain~~is convertible into common stock or preferred stock of the ~~negative covenants.~~

The Third Credit Agreement provides, subject to certain customary conditions, for a revolving credit facility (the “Credit Facility”), in an aggregate amount of $500.0 million, with a $20.0 million sub-facility for letters of credit.

~~The Credit Facility matures on February 4, 2027.~~

~~Outstanding 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~~privately held company upon qualified financing events 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.

The obligations of Envestnet under the Third Credit Agreement are guaranteed by substantially all of Envestnet’s domestic 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.

~~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~~corporate transactions.

In ~~February 2021, we announced that we would be accelerating our investment in our ecosystem,~~connection with the Convertible Promissory Note, the Company concurrently entered into a call option agreement with the privately held company, which provides the Company an option to ~~fulfill our strategy of:~~acquire the privately held company at a predetermined price as of the earlier of July 2024 or upon satisfaction of certain financial metrics.

•~~Capturing more of the addressable market;~~

•~~Modernizing the digital engagement marketplace; and~~

•~~Opening the platform.~~Reduction in Force

~~We expect to incur an additional $35 to $40~~In the first quarter of 2023, as part of a reduction in force initiative, we entered into separation agreements with a number of employees. In connection with the reduction in force initiative as well as a fourth quarter organizational realignment, we incurred approximately $6.2 million ~~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~~total severance expense in ~~our condensed consolidated statement of operations. For~~ the three months ended March 31, ~~2022, we recorded approximately $11 million of compensation and benefit expense related to this plan.~~

~~Procurement of Technology Solutions~~

On April 1, 2022, we entered into a purchase agreement with a privately held company to acquire the technology solutions being developed by this privately held company for a purchase price of $9.0 million, including an advance of $4.0 million.

~~Office Closures~~

In April 2022, in response to changing needs and an increase in employees working remotely, we decided to close three offices in the United States. We are currently exploring alternative uses for these properties, including sublease options. As a result, we are currently unable to provide a reasonable estimate of the amount of costs it may write off in connection with these closures.2023.

Segments

Envestnet is organized around two primary, complementary business segments. Financial information about each business segment is contained in Part I, Item 1, “Note ~~14—~~18—Segment Information” to the condensed consolidated financial statements included in Item 1 of this Quarterly Report. Our business segments are as follows:

•Envestnet Data & Analytics – a leading data aggregation, intelligence, and experiences platform that powers data connectivity and business intelligence ~~platform powering dynamic, cloud-based innovation for~~across digital financial ~~services.~~services to enable them to deliver an intelligent financial life to their clients.

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Key Metrics

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 March 31, 2022, Envestnet’s platform assets grew to more than $5.5 trillion in approximately 18 million accounts overseen by more than 106,000 advisors.

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

~~We offer these solutions principally through the following product and services suites:~~

•~~Envestnet | Enterprise~~ provides an end-to-end open architecture wealth management platform through which advisors can construct portfolios for clients. It begins with aggregated household data, which then leads to the creation of a financial plan, asset allocation, investment strategy, portfolio management, rebalancing and performance reporting. Advisors have access to more than 22,000 investment products. Envestnet | ~~Enterprise also sells data aggregation and reporting, data analytics and digital advice capabilities to customers.~~

•~~Envestnet | Tamarac~~™ ~~provides leading trading, rebalancing, portfolio accounting, performance reporting and client relationship management software, principally to high-end RIAs.~~

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

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

•~~Envestnet | PMC~~®~~, or Portfolio Management Consultants~~ ~~(“PMC”)~~ provides research and consulting services to assist advisors in creating investment solutions for their clients. These solutions include more than 4,900 vetted third party managed account products, multi-manager portfolios, and fund strategist portfolios, as well as approximately 900 proprietary products, such as quantitative portfolios and fund strategist portfolios. PMC also offers portfolio overlay and tax optimization services.

~~Key Metrics~~

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


		As of											As of
		March 31,		June 30,		September 30,		December 31,		March 31,			March 31,		June 30,		September 30,		December 31,		March 31,
		2021		2021		2021		2021		2022(1)			2022(1)		2022		2022		2022		2023

		(in millions, except accounts and advisors data)											(in millions, except accounts and advisors data)
Platform Assets	Platform Assets											Platform Assets
Assets under Management (“AUM”)	Assets under Management (“AUM”)	$	286,039	$	315,422	$	327,279	$	362,038	$	361,251	Assets under Management (“AUM”)	$	361,251	$	325,209	$	315,883	$	341,144	$	363,244
Assets under Administration (“AUA”)	Assets under Administration (“AUA”)	408,858		426,416		431,040		456,316		432,141		Assets under Administration (“AUA”)	432,141		352,840		350,576		367,412		379,843
Total AUM/A	Total AUM/A	694,897		741,838		758,319		818,354		793,392		Total AUM/A	793,392		678,049		666,459		708,556		743,087
Subscription	Subscription	4,132,917		4,447,733		4,670,827		4,901,662		4,736,537		Subscription	4,736,537		4,312,114		4,134,414		4,382,109		4,566,971
Total Platform Assets	Total Platform Assets	$	4,827,814	$	5,189,571	$	5,429,146	$	5,720,016	$	5,529,929	Total Platform Assets	$	5,529,929	$	4,990,163	$	4,800,873	$	5,090,665	$	5,310,058
Platform Accounts	Platform Accounts											Platform Accounts
AUM	AUM	1,138,183		1,209,761		1,276,066		1,345,274		1,459,093		AUM	1,459,093		1,491,861		1,522,968		1,547,009		1,571,862
AUA	AUA	1,192,668		1,163,991		1,193,069		1,217,076		1,186,180		AUA	1,186,180		1,061,484		1,135,302		1,135,026		1,142,166
Total AUM/A	Total AUM/A	2,330,851		2,373,752		2,469,135		2,562,350		2,645,273		Total AUM/A	2,645,273		2,553,345		2,658,270		2,682,035		2,714,028
Subscription	Subscription	11,453,434		11,712,573		14,810,664		14,986,531		15,151,569		Subscription	15,151,569		15,312,144		15,596,403		15,665,020		15,779,980
Total Platform Accounts	Total Platform Accounts	13,784,285		14,086,325		17,279,799		17,548,881		17,796,842		Total Platform Accounts	17,796,842		17,865,489		18,254,673		18,347,055		18,494,008
Advisors	Advisors											Advisors
AUM/A	AUM/A	41,177		41,259		41,696		39,735		39,800		AUM/A	39,800		38,394		38,417		38,025		38,611
Subscription	Subscription	65,724		66,597		66,489		68,808		67,168		Subscription	67,168		66,838		67,348		67,520		67,843
Total Advisors	Total Advisors	106,901		107,856		108,185		108,543		106,968		Total Advisors	106,968		105,232		105,765		105,545		106,454

(1) Certain assets and accounts have been reclassified from AUA to AUM to better reflect the nature of the services provided to certain customers.

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

Asset Rollforward - Three Months Ended March 31, 2022
As of Gross Net Market As of
12/31/2021 Sales Redemptions Flows Impact
Reclassification(1)
3/31/2022
(in millions, except account data)
AUM $ 362,038 $ 28,699 $ (15,967) $ 12,732 $ (22,240) $ 8,721 $ 361,251
AUA 456,316 28,341 (19,912) 8,429 (23,883) (8,721) 432,141
Total AUM/A $ 818,354 $ 57,040 $ (35,879) $ 21,161 $ (46,123) $ — $ 793,392
Fee-Based Accounts 2,562,350 82,923 — 2,645,273

~~(1)~~ ~~Certain assets have been reclassified from AUA to AUM to better reflect the nature of the services provided to certain customers.~~


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

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

The above AUM/A gross sales figures include ~~$9.1~~$17.1 billion in new client conversions. We onboarded an additional ~~$32.8~~$48.8 billion in subscription conversions during the three months ended March 31, ~~2022~~2023 bringing total conversions for the three months ended March 31, ~~2022~~2023 to ~~$41.9~~$65.9 billion.

Asset and account figures in the “Reclass to Subscription” column for the three months ended March 31, 2023 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.

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Envestnet Data & Analytics Segment

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

~~Approximately 1,600 financial institutions, financial technology innovators and financial advisory~~ firms ~~including 13 of the 20 largest U.S. banks, subscribe to~~using the Envestnet Data & Analytics platform ~~to underpin personalized financial apps and services for approximately 31 million paid subscribers.~~in the periods indicated:


	As of
	March 31,	June 30,	September 30,	December 31,	March 31,
	2022	2022	2022	2022	2023

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

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

•~~The Financial Institutions~~ group provides customers with secure access to open APIs, end-user facing applications powered by our platform and APIs (“FinApps”), and reports. Customers receive end-user permissioned transaction data elements that we aggregate and cleanse. Envestnet Data & Analytics also enables customers to develop their own applications through its open APIs, which deliver secure data, payments 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 banking, wealth management, small business, credit card, lenders, and other financial services sectors. These FinApps help consumers and small businesses simplify and manage their finances, review their financial accounts, track their spending, calculate their net worth, and perform a variety of other activities. For example, Envestnet Yodlee Expense and Income Analysis FinApp helps consumers track their spending.

•~~The Yodlee Interactive~~ group enables customers to develop new applications and enhance existing solutions. These customers operate in a number of sub-vertical markets, including FinTech, wealth management, personal financial management, small business accounting, small business lending and authentication. They use the Envestnet Yodlee platform to build solutions that leverage our open APIs and 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 aggregation, account verification, and enriched transaction data via our APIs. We play a critical role in transferring innovation from financial technology innovators to financial institutions. For example, YI customers use Envestnet Yodlee applications to provide personalized financial management, planning and advisory services; e-commerce payment solutions; online accounting systems for small businesses; and other services.

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 Yodlee solutions provide access to critical data solutions, faster speed to market and enhanced distribution.

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

Operational Highlights


	Three Months Ended
	March 31,			$		%
		2023		2022		Change		Change

	(in thousands, except percentages)
Revenue:
Envestnet Wealth Solutions:
Asset-based		$	176,932	$	202,717	$	(25,785)	(13)	%
Subscription-based		76,485		68,537		7,948		12	%
Total recurring revenue		253,417		271,254		(17,837)		(7)	%
Professional services and other revenue		3,243		2,314		929		40	%
Total Envestnet Wealth Solutions revenue		$	256,660	$	273,568	$	(16,908)	(6)	%

Envestnet Data & Analytics:
Subscription-based		$	40,594	$	46,197	$	(5,603)	(12)	%
Total recurring revenue		40,594		46,197		(5,603)		(12)	%
Professional services and other revenue		1,453		1,598		(145)		(9)	%
Total Envestnet Data & Analytics revenue		$	42,047	$	47,795	$	(5,748)	(12)	%

Total consolidated revenue		$	298,707	$	321,363	$	(22,656)	(7)	%

Deferred revenue fair value adjustment		52		54		(2)		(4)	%
Total consolidated adjusted revenue		$	298,759	$	321,417	$	(22,658)	(7)	%

Consolidated net loss attributable to Envestnet, Inc.		$	(41,228)	$	(13,859)	$	(27,369)	*
Net loss attributable to Envestnet, Inc. per share - basic and diluted		$	(0.76)	$	(0.25)	$	(0.51)	*

Adjusted EBITDA		$	55,424	$	55,697	$	(273)	—	%
Adjusted net income		$	30,149	$	30,996	$	(847)	(3)	%
Adjusted net income per share - diluted		$	0.46	$	0.47	$	(0.01)	(2)	%

*Not meaningful

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Results of Operations


	Three Months Ended March 31,
	2023			2022
		Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change

	(in thousands)			(in thousands)				(in thousands)
Revenue:
Asset-based		$	176,932	59	%	$	202,717	63	%	$	(25,785)	(13)	%
Subscription-based		117,079		39	%	114,734		36	%	2,345		2	%
Total recurring revenue		294,011		98	%	317,451		99	%	(23,440)		(7)	%
Professional services and other revenue		4,696		2	%	3,912		1	%	784		20	%
Total revenue		298,707		100	%	321,363		100	%	(22,656)		(7)	%
Operating expenses:
Direct expense		108,989		36	%	125,282		39	%	(16,293)		(13)	%
Employee compensation		114,215		38	%	126,849		39	%	(12,634)		(10)	%
General and administrative		53,619		18	%	44,335		14	%	9,284		21	%
Depreciation and amortization		32,941		11	%	31,618		10	%	1,323		4	%
Total operating expenses		309,764		104	%	328,084		102	%	(18,320)		(6)	%
Loss from operations		(11,057)		(4)	%	(6,721)		(2)	%	(4,336)		(65)	%
Other expense, net		(7,935)		(3)	%	(5,967)		(2)	%	(1,968)		(33)	%
Loss before income tax provision		(18,992)		(6)	%	(12,688)		(4)	%	(6,304)		(50)	%
Income tax provision		23,769		8	%	2,020		1	%	21,749		*
Net loss		(42,761)		(14)	%	(14,708)		(5)	%	(28,053)		*
Add: Net loss attributable to non-controlling interest		1,533		1	%	849		—	%	684		81	%
Net loss attributable to Envestnet, Inc.		$	(41,228)	(14)	%	$	(13,859)	(4)	%	$	(27,369)	*

*Not meaningful

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

Asset-based recurring ~~revenues increased 27% from $159.4~~revenue

Asset-based recurring revenue decreased $25.8 million, inor 13%, for the three months ended March 31, ~~2021~~2023 compared to $202.7 million in the three months ended March 31, 2022. Subscription-based recurring revenues increased 4% from $109.8 million in the three months ended March 31, 2021 to $114.7 million in the three months ended March 31, 2022. Total revenues, which also includes professional services and other revenues, increased 17% from $275.1 million in the three months ended March 31, 2021 to $321.4 million in the three months ended March 31, 2022.

The Envestnet Wealth Solutions segment's total revenues increased 21% from $226.4 million in the three months ended March 31, 2021 to $273.6 million in the three months ended March 31, 2022 primarily due to an increase in asset-based revenues of $43.3 million and an increase in subscription-based revenues of $4.5 million. The Envestnet Data & Analytics segment's total revenues decreased 2% from $48.7 million in the three months ended March 31, 2021 to $47.8 million in the three months ended March 31, 2022 primarily due to a decrease in ~~professional services and other revenues of $1.3 million, partially offset by an increase in subscription-based revenues of $0.4 million.~~

Net loss attributable to Envestnet, Inc. for the three months ended March 31, 2022 was $13.9 million, or $0.25 per diluted share, compared to net income attributable to Envestnet, Inc. of $14.9 million, or $0.27 per diluted share, for the three months ended March 31, 2021.

Adjusted revenues for the three months ended March 31, 2022 were $321.4 million, compared to adjusted revenues of $275.2 million in the prior year period. Adjusted EBITDA for the three months ended March 31, 2022 was $55.7 million, compared to adjusted EBITDA of $68.3 million in the prior year period. Adjusted net income for the three months ended March 31, 2022 was $31.0 million, or $0.47 per diluted share, compared to adjusted net income of $41.9 million, or $0.64 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.

~~Results of Operations~~

Three Months Ended
March 31,
Percent
2022 2021 Change
(in thousands)
Revenues:
Asset-based $ 202,717 $ 159,375 27 %
Subscription-based 114,734 109,829 4 %
Total recurring revenues 317,451 269,204 18 %
Professional services and other revenues 3,912 5,901 (34) %
Total revenues 321,363 275,105 17 %
Operating expenses:
Cost of revenues 125,282 92,869 35 %
Compensation and benefits 126,849 100,714 26 %
General and administration 44,335 36,315 22 %
Depreciation and amortization 31,618 28,392 11 %
Total operating expenses 328,084 258,290 27 %
Income (loss) from operations (6,721) 16,815 (140) %
Other expense, net (5,967) (7,468) (20) %
Income (loss) before income tax provision (benefit) (12,688) 9,347 *
Income tax provision (benefit) 2,020 (5,588) (136) %
Net income (loss) (14,708) 14,935 *
Add: Net loss attributable to non-controlling interest 849 11 *
Net income (loss) attributable to Envestnet, Inc. $ (13,859) $ 14,946 *

*Not meaningful.

~~Three months ended March 31, 2022 compared to three months ended March 31, 2021~~

~~Asset-based recurring revenues~~

Asset-based recurring revenues increased 27% from $159.4 million in the three months ended March 31, 2021 to $202.7 million in the three months ended March 31, 2022. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycles, inwhich are based on the ~~three months ended March 31, 2022 compared to~~market value of the ~~three months ended March 31, 2021,~~customers' assets on our platforms as of the ~~impact~~end of ~~new account growth and positive net flows of AUM/A in~~ the ~~first three months of 2022.~~previous quarter.

The number of financial advisors with asset-based recurring revenue on our technology platforms decreased from approximately ~~41,000 as of March 31, 2021 to approximately~~ 40,000 as of March 31, 2022 to approximately 39,000 as of March 31, 2023, and the number of AUM/A client accounts increased from approximately ~~2.3 million as of March 31, 2021 to approximately~~ 2.6 million as of March 31, ~~2022.~~2022 to approximately 2.7 million as of March 31, 2023.

~~Asset-based recurring revenues increased from 58%~~As a percentage of total revenue, asset-based recurring revenue decreased 4% points primarily due to a decrease in asset-based recurring revenue compared to an increase in subscription-based recurring revenue.

Subscription-based recurring revenue

Subscription-based recurring revenue increased $2.3 million, or 2%, for the three months ended March 31, ~~2021~~2023 compared to ~~63% of total revenue in~~ the three months ended March 31, 2022 primarily due to ~~a higher increase in asset-based recurring revenues as compared to subscription-based recurring revenues.~~

~~Subscription-based recurring revenues~~

Subscription-based recurring revenue increased 4% from $109.8 million in the three months ended March 31, 2021 to $114.7 million in the three months ended March 31, 2022. This increase was primarily due to an increase of $~~4.5~~7.9 million in the Envestnet Wealth Solutions segment, ~~and an increase of $0.4 million in the Envestnet Data & Analytics segment, both of~~ which can be attributed to new and existing customer ~~growth.~~growth, partially offset by a decrease of $5.6 million in the Envestnet Data & Analytics segment, which is primarily attributable to a decrease in revenue from existing customers.

As a percentage of total revenue, subscription-based recurring revenue increased 3% points primarily due to an increase in subscription-based recurring revenue compared to a decrease in asset-based recurring revenue.

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Professional services and other ~~revenues~~revenue

Professional services and other ~~revenues decreased 34% from $5.9~~revenue increased $0.8 million, inor 20%, for the three months ended March 31, ~~2021~~2023 compared to ~~$3.9 million in~~ the three months ended March 31, ~~2022. The decrease was~~2022 primarily due to timing of the completion of customer projects and deployments.

~~Cost of revenues~~Direct expense

~~Cost of revenues increased 35% from $92.9~~Direct expense decreased $16.3 million, inor 13%, for the three months ended March 31, ~~2021~~2023 compared to ~~$125.3 million in~~ the three months ended March 31, ~~2022. The increase was~~2022 primarily due to ~~an increase~~a decrease in asset-based ~~cost of revenues of $31.2 million,~~direct expense, which directly correlates with the ~~increase~~decrease to asset-based recurring ~~revenues~~revenue during the period.

As a percentage of total ~~revenues, cost of revenues increased from 34% in~~revenue, direct expense decreased 3% points for the three months ended March 31, ~~2021~~2023 compared to ~~39% in~~the three months ended March 31, 2022 primarily due to shifts in pricing and product mix for asset-based ~~revenues~~revenue in the Envestnet Wealth Solutions ~~segment and costs incurred to migrate the Company's hosting platforms to a third-party cloud server solution in the Envestnet Data & Analytics~~ segment.

~~Compensation and benefits~~Employee compensation

~~Compensation and benefits increased 26% from $100.7~~Employee compensation decreased $12.6 million, inor 10%, for the three months ended March 31, ~~2021~~2023 compared to ~~$126.8 million in~~ the three months ended March 31, ~~2022. The increase is comprised of increases~~2022 primarily due to decreases in salaries, benefits and related payroll taxes of ~~$16.2~~$9.5 million, which is primarily a result of the outsourcing arrangement with TCS in the Envestnet Data & Analytics segment, a reduction in force initiative in the first quarter of 2023 and the organizational realignment in the fourth quarter of 2022, non-cash compensation expense of ~~$7.7~~$2.4 million, ~~miscellaneous employee expenses~~incentive compensation of ~~$1.1~~$2.3 million and other immaterial ~~increases~~decreases within employee compensation, ~~and benefit accounts. These increases were~~ partially offset by ~~a decrease~~an increase in severance expense of ~~$1.8 million. As~~$3.1 million as a ~~percentage~~result of ~~total revenues, compensation~~the reduction in force and ~~benefits~~organizational realignment.

General and administrative

General and administrative expenses increased ~~from 37% in~~$9.3 million, or 21%, for the three months ended March 31, ~~2021~~2023 compared to ~~39% in~~ the three months ended March 31, ~~2022.~~

~~General and administration~~

~~General and administration expenses increased 22% from $36.3 million in the three months ended March 31, 2021 to $44.3 million in the three months ended March 31, 2022. The increase was~~2022 primarily due to increases in software and maintenance charges of ~~$3.5~~$8.6 million ~~miscellaneous~~primarily a result of the outsourcing arrangement with TCS which shifted certain expenses from employee compensation to general and ~~administration~~administrative expense, governance related expense of $1.8 million ~~marketing~~as a result of expense associated with activist shareholder activity, restructuring charges and transaction costs of ~~$1.6~~$1.5 million, ~~litigation and regulatory related expenses of $1.4 million and~~ travel and entertainment expense of $1.0 ~~million.~~million and other immaterial increases within general and administrative expense. These increases were partially offset by ~~a decrease~~decreases in ~~bad debt~~occupancy costs of $1.8 million, litigation related expense of ~~$2.0~~$1.8 million and marketing costs of $0.9 million.

As a percentage of total ~~revenues,~~revenue, general and ~~administration expenses~~administrative increased ~~from 13%~~4% points for three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily a result of the outsourcing arrangement with TCS as well as a decrease in revenue in the three months ended March 31, ~~2021~~2023 compared to ~~14% in~~ the ~~three months ended March 31, 2022.~~prior year period.

Depreciation and amortization

Depreciation and amortization expense increased ~~11% from $28.4~~$1.3 million, inor 4%, for the three months ended March 31, ~~2021~~2023 compared to ~~$31.6 million in~~ the three months ended March 31, ~~2022. The increase was~~2022 primarily due to increases in amortization related to internally developed software ~~amortization~~of $2.6 million, partially offset by decreases in property and equipment depreciation expense of ~~$2.2 million and intangible asset amortization expense of $1.0~~$1.4 million. ~~As a percentage of total revenues, depreciation and amortization expense remained consistent at 10% in the three months ended March 31, 2021 and 2022.~~

Other expense, net

Other expense, net ~~decreased from $7.5~~increased $2.0 million, inor 33%, for the three months ended March 31, ~~2021~~2023 compared to ~~$6.0 million in~~ the three months ended March 31, ~~2022. The decrease was~~2022 primarily due to ~~$1.7 million~~an increase in ~~additional losses recorded in 2021 related to~~loss allocations from equity ~~investments.~~method investments of $1.4 million.

Income tax provision ~~(benefit)~~

Three Months Ended
March 31,
2022 2021
(in thousands, except effective tax rate)
Income (loss) before income tax provision (benefit) $ (12,688) $ 9,347
Income tax provision (benefit) 2,020 (5,588)
Effective tax rate (15.9) % (59.8) %
Under ASC 740-270-25, we are required to report income tax expense by applying a projected AETR to ordinary pre-tax book income for the interim period. The tax impact of discrete items is accounted for separately in the period in which they occur. The ETR for the quarter is the result of the projected AETR applied to actual pre-tax book income plus discrete items as a percentage of pre-tax book income. Therefore, a change in pre-tax book income, either forecasted or actual year-to-date, from one period to the next will cause the ETR to change.

Table of Contents

For the three months ended March 31, 2023, our effective tax rate of (125.2)% differed from the statutory rate primarily due to the increase in the valuation allowance we have placed on a portion of U.S. deferred tax assets which includes the impact of IRC Section 174, permanent book-tax differences, uncertain tax positions and the impact of state and local taxes offset by federal and state R&D credits.

For the three months ended March 31, 2022, our effective tax rate of (15.9%) differed from the statutory rate primarily due to the increase in the valuation allowance ~~we had~~the Company has 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")~~&D credits and the windfall from stock-based compensation.

For the three months ended March 31, 2021, 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, permanent book-tax differences, and the impact of state and local taxes offset by the federal and state R&D credits.

Segment Results

Business segments are generally organized around our service offerings. Financial information about each of our two business segments is contained in “Note ~~14—~~18—Segment Information” to the condensed consolidated financial statements.

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


		Three Months Ended							Three Months Ended
		March 31,							March 31,
				2022		2021				2023		2022

			(in thousands)							(in thousands)
Envestnet Wealth Solutions	Envestnet Wealth Solutions			$	25,269	$	34,197	Envestnet Wealth Solutions		$	23,463	$	25,269
Envestnet Data & Analytics	Envestnet Data & Analytics			(5,587)		1,289		Envestnet Data & Analytics		(7,780)		(5,587)
Nonsegment operating expenses	Nonsegment operating expenses			(26,403)		(18,671)		Nonsegment operating expenses		(26,740)		(26,403)
Income (loss) from operations				(6,721)		16,815
Loss from operations								Loss from operations		(11,057)		(6,721)
Other expense, net	Other expense, net			(5,967)		(7,468)		Other expense, net		(7,935)		(5,967)
Consolidated income (loss) before income tax benefit				(12,688)		9,347
Income tax provision (benefit)				2,020		(5,588)
Consolidated net income (loss)				(14,708)		14,935
Consolidated loss before income tax provision								Consolidated loss before income tax provision		(18,992)		(12,688)
Income tax provision								Income tax provision		23,769		2,020
Consolidated net loss								Consolidated net loss		(42,761)		(14,708)
Add: Net loss attributable to non-controlling interest	Add: Net loss attributable to non-controlling interest			849		11		Add: Net loss attributable to non-controlling interest		1,533		849
Consolidated net income (loss) attributable to Envestnet, Inc.				$	(13,859)	$	14,946
Consolidated net loss attributable to Envestnet, Inc.								Consolidated net loss attributable to Envestnet, Inc.		$	(41,228)	$	(13,859)

Envestnet Wealth Solutions

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

Three Months Ended
March 31, Percent
2022 2021 Change
(in thousands)
Revenues:
Asset-based $ 202,717 $ 159,375 27 %
Subscription-based 68,537 64,012 7 %
Total recurring revenues 271,254 223,387 21 %
Professional services and other revenues 2,314 3,023 (23) %
Total revenues 273,568 226,410 21 %
Operating expenses:
Cost of revenues 118,808 87,432 36 %
Compensation and benefits 78,644 62,854 25 %
General and administration 27,360 20,699 32 %
Depreciation and amortization 23,487 21,228 11 %
Total operating expenses 248,299 192,213 29 %
Income from operations
$ 25,269 $ 34,197 (26) %


	Three Months Ended March 31,
	2023			2022
		Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change

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

3429

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Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021 for the Envestnet Wealth Solutions segment~~

~~Asset-based recurring revenues~~2022

Asset-based recurring ~~revenues increased 27% from $159.4~~revenue

Asset-based recurring revenue decreased $25.8 million, inor 13%, for the three months ended March 31, ~~2021~~2023 compared to ~~$202.7 million in~~ the three months ended March 31, ~~2022. The increase was~~2022 primarily due to ~~an increase~~a decrease in asset values applicable to our quarterly billing cycles, inwhich are based on the ~~three months ended March 31, 2022 compared to~~market value of the ~~three months ended March 31, 2021, due to~~customers' assets on our platforms as of the ~~impact~~end of ~~new account growth and positive net flows of AUM/A in~~ the ~~first three months of 2022.~~previous quarter.

As a percentage of segment ~~revenues,~~revenue, asset-based recurring revenue ~~increased from 70% of segment revenue in~~decreased 5% points for the three months ended March 31, ~~2021~~2023 compared to ~~74% of segment revenue in~~ the three months ended March 31, 2022 primarily due to a ~~higher increase~~decrease in asset-based recurring ~~revenues as~~revenue compared to an increase in subscription-based recurring ~~revenues.~~revenue.

Subscription-based recurring ~~revenues~~revenue

Subscription-based recurring ~~revenues~~revenue increased ~~7% from $64.0~~$7.9 million, inor 12%, for the three months ended March 31, ~~2021~~2023 compared to ~~$68.5 million in~~ the three months ended March 31, 2022 primarily due to new and existing customer growth.

~~Professional services and other revenues~~ As a percentage of segment revenue, subscription-based recurring revenue increased 5% points primarily due to an increase in subscription-based recurring revenue compared to a decrease in asset-based recurring revenue.

Professional services and other ~~revenues decreased 23% from $3.0~~revenue

Professional services and other revenue increased $0.9 million, inor 40%, for the three months ended March 31, ~~2021~~2023 compared to ~~$2.3 million in~~ the three months ended March 31, ~~2022. The decrease was~~2022 primarily due to timing of the completion of customer projects and deployments.

~~Cost of revenues~~Direct expense

~~Cost of revenues increased 36% from $87.4~~Direct expense decreased $14.8 million, inor 12%, for the three months ended March 31, ~~2021~~2023 compared to ~~$118.8 million in~~ the three months ended March 31, ~~2022. The increase was~~2022 primarily due ~~to an increase~~a decrease in asset-based ~~cost of revenues of $31.2 million,~~direct expense, which directly correlates with the ~~increase to~~decrease in asset-based recurring ~~revenues~~revenue during the period. ~~As a percentage of segment revenues, cost of revenues increased from 39% in~~

Employee compensation

Employee compensation decreased $1.8 million, or 2%, for the three months ended March 31, ~~2021~~2023 compared to ~~43% in~~ the three months ended March 31, 2022 primarily due to ~~shifts in pricing and product mix for asset-based revenues.~~

~~Compensation and benefits~~

~~Compensation and benefits increased from $62.9 million in the three months ended March 31, 2021 to $78.6 million in the three months ended March 31, 2022. The increase is primarily due to increases~~decreases in salaries, benefits and related payroll taxes of ~~$11.5~~$1.5 million, ~~non-cash~~which is primarily a result of a reduction in force in the first quarter of 2023 and an organizational realignment in the fourth quarter of 2022, incentive compensation ~~expense~~ of ~~$3.5~~$1.1 million and other immaterial ~~increases~~decreases within ~~compensation and benefit accounts.~~employee compensation. These ~~increases are~~decreases were partially offset by ~~a decrease~~an increase in severance expense of ~~$1.7 million. As~~$2.2 million as a ~~percentage~~result of ~~segment revenues, compensation~~the reduction in force and ~~benefits~~organizational realignment.

General and administrative

General and administrative expenses increased ~~from 28% in~~$0.8 million, or 3%, for the three months ended March 31, ~~2021~~2023 compared to ~~29% in~~ the three months ended March 31, ~~2022.~~

~~General and administration~~

~~General and administration expenses increased 32% from $20.7 million in the three months ended March 31, 2021 to $27.4 million in the three months ended March 31, 2022. The increase was~~2022 primarily due to increases in software and maintenance charges of ~~$3.4~~$1.6 million, ~~marketing~~restructuring charges and transaction costs of $0.8 million, travel and entertainment expense of ~~$1.6~~$0.7 million and ~~miscellaneous~~other immaterial increases within general and ~~administration expenses~~administrative expense. These increases were partially offset by decreases in occupancy costs of ~~$1.6~~$1.5 million and marketing costs of $0.8 million. ~~As a percentage of segment revenues, general and administration expenses increased from 9% in the three months ended March 31, 2021 to 10% in the three months ended March 31, 2022.~~

Depreciation and amortization

Depreciation and amortization expense increased ~~11% from $21.2~~$0.7 million, inor 3%, for the three months ended March 31, ~~2021~~2023 compared to ~~$23.5 million in~~ the three months ended March 31, ~~2022. The increase was~~2022 primarily due to ~~an increase~~increases in amortization related to internally developed software ~~amortization~~of $1.6 million, partially offset by decreases in property and equipment depreciation expense of $1.3 million and other immaterial increases within depreciation and amortization accounts. As a percentage of segment revenues, depreciation and amortization expense remained consistent at 9% in the three$0.8 million.

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~~months ended March 31, 2021 and 2022.~~

Envestnet Data & Analytics

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

Three Months Ended
March 31, Percent
2022 2021 Change
(in thousands)
Revenues:
Subscription-based $ 46,197 $ 45,817 1 %
Professional services and other revenues 1,598 2,878 (44) %
Total revenues 47,795 48,695 (2) %
Operating expenses:
Cost of revenues 6,474 5,437 19 %
Compensation and benefits 30,166 26,289 15 %
General and administration 8,611 8,516 1 %
Depreciation and amortization 8,131 7,164 13 %
Total operating expenses 53,382 47,406 13 %
Income (loss) from operations $ (5,587) $ 1,289 *


	Three Months Ended March 31,
	2023			2022
		Amount		% of Revenue		Amount		% of Revenue		$ Change		% Change

	(in thousands)			(in thousands)				(in thousands)
Revenue:
Subscription-based		$	40,594	97	%	$	46,197	97	%	$	(5,603)	(12)	%
Professional services and other revenue		1,453		3	%	1,598		3	%	(145)		(9)	%
Total revenue		42,047		100	%	47,795		100	%	(5,748)		(12)	%
Operating expenses:
Direct expense		4,940		12	%	6,474		14	%	(1,534)		(24)	%
Employee compensation		21,406		51	%	30,166		63	%	(8,760)		(29)	%
General and administrative		14,678		35	%	8,611		18	%	6,067		70	%
Depreciation and amortization		8,803		21	%	8,131		17	%	672		8	%
Total operating expenses		49,827		119	%	53,382		112	%	(3,555)		(7)	%
Income loss from operations		$	(7,780)	(19)	%	$	(5,587)	(12)	%	$	(2,193)	(39)	%

*Not meaningful.

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021 for the Envestnet Data & Analytics segment~~2022

Subscription-based recurring ~~revenues~~revenue

Subscription-based recurring ~~revenues increased 1%~~revenue decreased $5.6 million, or 12%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to decreases in revenue from ~~$45.8~~ existing customers.

Professional services and other revenue

Professional services and other revenue decreased$0.1million, or 9%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

Direct expense

Direct expense decreased $1.5 million, or 24%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to a decrease in subscription-based direct expense as a result of a decrease in subscription-based recurring revenue during the period.

Employee compensation

Employee compensation decreased $8.8 million, or 29%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to decreases in salaries, benefits and related payroll taxes of $6.8 million, which is primarily as a result of the outsourcing arrangement with TCS which shifted certain expenses from employee compensation to general and administrative expense, a reduction in force initiative in the first quarter of 2023 and an organizational realignment in the fourth quarter of 2022, incentive compensation of $1.1 million, non-cash compensation expense of $0.9 million and other immaterial decreases within employee compensation. These decreases were partially offset by an increase in severance expense of $0.8 million as a result of the reduction in force and organizational realignment.

As a percentage of segment revenue, employee compensation expense decreased 12% points for three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to the outsourcing arrangement with TCS, partially offset by a decrease in segment revenue in the three months ended March 31, ~~2021~~2023 compared to ~~$46.2~~the prior year period.

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General and administrative

General and administrative expenses increased $6.1 million, inor 70%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 primarily due to increases in ~~revenue from new~~software and ~~existing customers.~~

~~Professional services~~maintenance charges of $6.8 million, which is primarily a result of the outsourcing arrangement with TCS, and other ~~revenues~~

immaterial increases within general and administrative expense. These increases were partially offset by decrease in litigation related expense of $1.8 million.

~~Professional services~~

As a percentage of segment revenue, general and ~~other revenues decreased44% from $2.9 million in the~~administrative expense increased 17% points for three months ended March 31, ~~2021~~2023 compared to ~~$1.6 million in~~ the three months ended March 31, 2022 primarily due to the ~~timing of the completion of customer projects and deployments.~~

~~Cost of revenues~~

Cost of revenues increased 19% from $5.4 million in the three months ended March 31, 2021 to $6.5 million in the three months ended March 31, 2022. As a percentage of segment revenues, cost of revenues increased from 11% in the three months ended March 31, 2021 to 14% in the three months ended March 31, 2022. The increase in cost of revenuesoutsourcing arrangement with TCS as ~~a percentage of segment revenues is primarily driven by costs incurred to migrate the Company's hosting platforms to a third-party cloud server solution.~~

~~Compensation and benefits~~

Compensation and benefits increased 15% from $26.3 million in the three months ended March 31, 2021 to $30.2 million in the three months ended March 31, 2022, primarily due to an increase in salaries, benefits, and related payroll taxes of $2.4 million and other immaterial increases within compensation and benefit accounts. As a percentage of segment revenues, compensation and benefits increased from 54% in the three months ended March 31, 2021 to 63% in the three months ended March 31, 2022. The increase in compensation and benefitswell as ~~a percentage of segment revenues is primarily driven by an increase in headcount in the current year.~~

~~General and administration~~

General and administration expenses increased 1% from $8.5 million in the three months ended March 31, 2021 to $8.6 million in the three months ended March 31, 2022 as an increase in litigation and regulatory related expense of $1.4 million was partially offset by a decrease in ~~bad debt expense of $1.1 million. As a percentage of~~ segment ~~revenues, general and administration expenses increased from 17% in the three months ended March 31, 2021 to 18% in the three months ended March 31, 2022.~~revenue.

Depreciation and amortization

Depreciation and amortization expense increased ~~13% from $7.2~~$0.7 million, inor 8%, for the three months ended March 31, ~~2021~~2023 compared to ~~$8.1 million in~~ the three months ended March 31, ~~2022. The increase is~~2022 primarily due to ~~an increase~~increases in amortization related to internally developed software ~~amortization expense.~~ of $1.0 million.

As a percentage of segment ~~revenues,~~revenue, depreciation and amortization expense increased ~~from 15% in~~4% points for three months ended March 31, 2023 compared to the three months ended March 31, ~~2021~~2022 primarily due to ~~17%~~a decrease in segment revenue for the three months ended March 31, ~~2022.~~2023 compared to the prior year period.

Nonsegment

The following table presents nonsegment operating expenses:


		Three Months Ended
		March 31,			Percent					Three Months Ended March 31,		$		%
			2022		2021		Change				2023	2022		Change		Change

		(in thousands)								(in thousands, except percentages)
Operating expenses:	Operating expenses:								Operating expenses:
Compensation and benefits			$	18,039	$	11,571	56	%
General and administration			8,364		7,100		18	%
Employee compensation									Employee compensation			$	15,926	$	18,039	$	(2,113)	(12)	%
General and administrative									General and administrative			10,814		8,364		2,450		29	%
Nonsegment operating expenses	Nonsegment operating expenses		$	26,403	$	18,671	41	%	Nonsegment operating expenses			$	26,740	$	26,403	$	337	1	%

Three months ended March 31, ~~2022~~2023 compared to three months ended March 31, ~~2021 for Nonsegment~~2022

~~Compensation and benefits~~Employee compensation

~~Compensation and benefits increased 56% from $11.6~~Employee compensation decreased $2.1 million, inor 12%, for the three months ended March 31, ~~2021~~2023 compared to ~~$18.0 million in~~ the three months ended March 31, 2022 primarily due to ~~increased headcount that resulted in increases~~decreases in non-cash compensation ~~expense~~ of ~~$3.6~~$1.4 million and salaries, ~~and~~ benefits and related payroll taxes of ~~$2.2 million.~~$1.1 million, partially offset by other immaterial changes within employee compensation.

General and ~~administration~~administrative

General and ~~administration~~administrative expenses increased ~~18% from $7.1~~$2.5 million, inor 29%, for the three months ended March 31, ~~2021~~2023 compared to ~~$8.4 million in~~ the three months ended March 31, ~~2022. The increase was~~2022 primarily due to an increase in ~~restructuring charges and transaction costs~~governance related expense of ~~$1.0 million.~~$1.8 million as a result of expense associated with activist shareholder activity.

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Non-GAAP Financial Measures

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

“Adjusted ~~revenues”~~revenue” excludes the effect of purchase accounting on the fair value of acquired deferred revenue. On January 1, 2022, the Company adopted ASU 2021-08 whereby ~~the Company~~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 recorded 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 did not reflect the full amount of revenue that would have been recorded by these entities had they remained stand-alone entities. Adjusted ~~revenues~~revenue 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, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring

charges and transaction costs, severance, ~~accretion on contingent consideration~~litigation, regulatory and ~~purchase liability, fair market value adjustment on contingent consideration liability, litigation and regulatory~~other governance related expenses, foreign currency, non-income tax expense adjustment, ~~income or~~ loss allocations from equity method investments and (income) loss attributable to non-controlling interest.

“Adjusted net income” represents net income (loss) before deferred revenue fair value adjustment, non-cash interest expense, cash interest on our convertible notes, 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,~~ amortization of acquired intangibles, litigation, regulatory and ~~regulatory~~other governance related expenses, foreign currency, non-income tax expense adjustment, ~~income or~~ loss allocations from equity method investments and (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 average shares outstanding. For purposes of the adjusted net income per share calculation, we assume all potential shares to be issued in connection with our Convertible Notes are dilutive.

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, 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,~~revenue, 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 information to assess our performance. Adjusted ~~revenues~~revenue 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, income tax provision (benefit), non-income tax expense, restructuring charges and transaction costs, severance, ~~accretion on contingent consideration~~litigation, regulatory and ~~purchase liability, fair market value adjustment on contingent consideration liability, litigation and regulatory~~other governance related expenses, foreign currency, ~~non-income tax expense, income or~~ loss allocations from equity method investments, pre-tax (income) loss attributable to ~~non-controlling~~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~~non‑cash compensation expense from adjusted EBITDA and adjusted net income because ~~non-cash~~non‑cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time.

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We believe adjusted ~~revenues,~~revenue, 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,~~revenue, 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 investors and analyst presentations will include adjusted ~~revenues,~~revenue, adjusted EBITDA, adjusted net income and adjusted net income per diluted share.

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

•Although depreciation and amortization are ~~non-cash~~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;

•WeDue to either net losses before income tax expense or the use of federal and state net operating loss carryforwards, we paid net cash of ~~$0.7~~$1.1 million and ~~$1.9~~$0.7 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, respectively. In the event that we generate taxable income and our existing net operating loss carryforwards for federal and state income taxes have been fully utilized or have expired, income tax payments will be higher; and

•Other companies in our industry may calculate adjusted ~~revenues,~~revenue, 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,~~revenue, 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~~revenue to ~~revenues,~~revenue, 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 measures. Further, our management also reviews GAAP measures and evaluates individual measures that are not included in some or all of our ~~non-GAAP~~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~~revenue to adjusted ~~revenues based on our historical results:~~revenue:

Three Months Ended
March 31,
2022 2021
(in thousands)
Total revenues $ 321,363 $ 275,105
Deferred revenue fair value adjustment 54 80
Adjusted revenues $ 321,417 $ 275,185


	Three Months Ended
	March 31,
		2023		2022

		(in thousands)
Total revenue		$	298,707	$	321,363
Deferred revenue fair value adjustment		52		54
Adjusted revenue		$	298,759	$	321,417

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


		Three Months Ended							Three Months Ended
		March 31,							March 31,
				2022		2021				2023		2022

			(in thousands)							(in thousands)
Net income (loss)				$	(14,708)	$	14,935
Net loss								Net loss		$	(42,761)	$	(14,708)
Add (deduct):	Add (deduct):							Add (deduct):
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment			54		80		Deferred revenue fair value adjustment		52		54
Interest income	Interest income			(321)		(170)		Interest income		(1,358)		(321)
Interest expense	Interest expense			4,853		4,215		Interest expense		6,320		4,853
Income tax provision (benefit)				2,020		(5,588)
Income tax provision								Income tax provision		23,769		2,020
Depreciation and amortization	Depreciation and amortization			31,618		28,392		Depreciation and amortization		32,941		31,618
Non-cash compensation expense	Non-cash compensation expense			21,814		14,137		Non-cash compensation expense		19,453		21,814
Restructuring charges and transaction costs	Restructuring charges and transaction costs			2,346		2,784		Restructuring charges and transaction costs		4,163		2,346
Severance	Severance			3,106		4,914		Severance		6,188		3,106
Accretion on contingent consideration and purchase liability				—		388
Fair market value adjustment on contingent consideration liability				—		(140)

Litigation and regulatory related expenses				3,077		1,709
Litigation, regulatory and other governance related expenses								Litigation, regulatory and other governance related expenses		3,074		3,077
Foreign currency	Foreign currency			(108)		151		Foreign currency		33		(108)

Non-income tax expense adjustment	Non-income tax expense adjustment			24		(566)		Non-income tax expense adjustment		(168)		24
Loss allocations from equity method investments	Loss allocations from equity method investments			1,545		3,288		Loss allocations from equity method investments		2,940		1,545
(Income) loss attributable to non-controlling interest				377		(265)
Loss attributable to non-controlling interest								Loss attributable to non-controlling interest		778		377
Adjusted EBITDA	Adjusted EBITDA			$	55,697	$	68,264	Adjusted EBITDA		$	55,424	$	55,697

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


		Three Months Ended							Three Months Ended
		March 31,							March 31,
				2022		2021				2023		2022

			(in thousands, except share and per share information)							(in thousands, except share and per share information)
Net income (loss)				$	(14,708)	$	14,935
Income tax provision (benefit) (1)				2,020		(5,588)
Income (loss) before income tax provision (benefit)				(12,688)		9,347
Net loss								Net loss		$	(42,761)	$	(14,708)
Income tax provision (1)								Income tax provision (1)		23,769		2,020
Loss before income tax provision								Loss before income tax provision		(18,992)		(12,688)
Add (deduct):	Add (deduct):							Add (deduct):
Deferred revenue fair value adjustment	Deferred revenue fair value adjustment			54		80		Deferred revenue fair value adjustment		52		54
Non-cash interest expense	Non-cash interest expense			2,059		1,423		Non-cash interest expense		1,442		2,059
Cash interest - Convertible Notes	Cash interest - Convertible Notes			2,480		2,480		Cash interest - Convertible Notes		4,565		2,480
Non-cash compensation expense	Non-cash compensation expense			21,814		14,137		Non-cash compensation expense		19,453		21,814
Restructuring charges and transaction costs	Restructuring charges and transaction costs			2,346		2,784		Restructuring charges and transaction costs		4,163		2,346
Severance	Severance			3,106		4,914		Severance		6,188		3,106
Accretion on contingent consideration and purchase liability				—		388
Fair market value adjustment on contingent consideration liability				—		(140)

Amortization of acquired intangibles	Amortization of acquired intangibles			17,520		16,478		Amortization of acquired intangibles		16,940		17,520
Litigation and regulatory related expenses				3,077		1,709
Litigation, regulatory and other governance related expenses								Litigation, regulatory and other governance related expenses		3,074		3,077
Foreign currency	Foreign currency			(108)		151		Foreign currency		33		(108)

Non-income tax expense adjustment	Non-income tax expense adjustment			24		(566)		Non-income tax expense adjustment		(168)		24
Loss allocations from equity method investments	Loss allocations from equity method investments			1,545		3,288		Loss allocations from equity method investments		2,940		1,545
(Income) loss attributable to non-controlling interest				377		(265)
Loss attributable to non-controlling interest								Loss attributable to non-controlling interest		778		377
Adjusted net income before income tax effect	Adjusted net income before income tax effect			41,606		56,208		Adjusted net income before income tax effect		40,468		41,606
Income tax effect (2)	Income tax effect (2)			(10,610)		(14,333)		Income tax effect (2)		(10,319)		(10,610)
Adjusted net income	Adjusted net income			$	30,996	$	41,875	Adjusted net income		$	30,149	$	30,996

Basic number of weighted-average shares outstanding	Basic number of weighted-average shares outstanding			54,903,677		54,208,469		Basic number of weighted-average shares outstanding		54,143,259		54,903,677
Effect of dilutive shares:	Effect of dilutive shares:							Effect of dilutive shares:
Options to purchase common stock	Options to purchase common stock			156,349		222,387		Options to purchase common stock		88,323		156,349
Unvested restricted stock units	Unvested restricted stock units			568,914		562,612		Unvested restricted stock units		463,719		568,914
Convertible notes	Convertible notes			9,898,549		9,898,549		Convertible notes		11,470,645		9,898,549
Warrants	Warrants			51,764		76,142		Warrants		—		51,764
Diluted number of weighted-average shares outstanding	Diluted number of weighted-average shares outstanding			65,579,253		64,968,159		Diluted number of weighted-average shares outstanding		66,165,946		65,579,253
Adjusted net income per share - diluted	Adjusted net income per share - diluted			$	0.47	$	0.64	Adjusted net income per share - diluted		$	0.46	$	0.47

(1)For the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, the effective tax rate computed in accordance with GAAP equaled ~~(15.9)~~(125.2)% and ~~(59.8)~~(15.9)%, respectively.

(2)An estimated normalized effective tax rate of 25.5% has been used to compute adjusted net income for both the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

Note on ~~Income Taxes:~~income taxes: As of December 31, ~~2021,~~2022, we had ~~NOL~~net operating loss carryforwards of approximately ~~$195~~$69.0 million and ~~$233~~$221.0 million for federal and state income tax purposes, respectively, available to reduce future income subject to income taxes. As a result, the amount of actual cash taxes we pay for federal, state and foreign income taxes differs significantly from the effective income tax rate computed in accordance with GAAP, and from the normalized rate shown above.

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The following tables set forth the reconciliation of ~~revenues~~revenue to adjusted ~~revenues~~revenue and income (loss) from operations to adjusted EBITDA based on our historical results for each segment for the three months ended March 31, ~~2022~~2023 and ~~2021:~~2022:


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

	(in thousands)
Revenue	$	256,660	$	42,047	$	—	$	298,707
Deferred revenue fair value adjustment	52		—		—		52
Adjusted revenue	$	256,712	$	42,047	$	—	$	298,759

Income (loss) from operations	$	23,463	$	(7,780)	$	(26,740)	$	(11,057)
Add:
Deferred revenue fair value adjustment	52		—		—		52

Depreciation and amortization	24,138		8,803		—		32,941
Non-cash compensation expense	11,242		2,662		5,549		19,453
Restructuring charges and transaction costs	1,138		244		2,781		4,163
Severance	3,576		2,428		184		6,188
Litigation, regulatory and other governance related expenses	—		1,324		1,750		3,074
Non-income tax expense adjustment	(102)		(66)		—		(168)

Loss attributable to non-controlling interest	778		—		—		778
Adjusted EBITDA	$	64,285	$	7,615	$	(16,476)	$	55,424


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

	(in thousands)
Revenue	$	273,568	$	47,795	$	—	$	321,363
Deferred revenue fair value adjustment	54		—		—		54
Adjusted revenue	$	273,622	$	47,795	$	—	$	321,417

Income (loss) from operations	$	25,269	$	(5,587)	$	(26,403)	$	(6,721)
Add (deduct):
Deferred revenue fair value adjustment	54		—		—		54
Depreciation and amortization	23,487		8,131		—		31,618
Non-cash compensation expense	11,290		3,535		6,989		21,814
Restructuring charges and transaction costs	284		(3)		2,065		2,346
Severance	1,410		1,642		54		3,106
Litigation, regulatory and other governance related expenses	—		3,077		—		3,077
Non-income tax expense adjustment	107		(83)		—		24
Loss attributable to non-controlling interest	377		—		—		377
Other	—		2		—		2
Adjusted EBITDA	$	62,278	$	10,714	$	(17,295)	$	55,697

Three Months Ended March 31, 2022
Envestnet Wealth Solutions Envestnet Data & Analytics Nonsegment Total
(in thousands)
Revenues $ 273,568 $ 47,795 $ — $ 321,363
Deferred revenue fair value adjustment 54 — — 54
Adjusted revenues $ 273,622 $ 47,795 $ — $ 321,417
Income (loss) from operations $ 25,269 $ (5,587) $ (26,403) $ (6,721)
Add (deduct):
Deferred revenue fair value adjustment 54 — — 54
Depreciation and amortization 23,487 8,131 — 31,618
Non-cash compensation expense 11,290 3,535 6,989 21,814
Restructuring charges and transaction costs 284 (3) 2,065 2,346
Severance 1,410 1,642 54 3,106
Litigation and regulatory related expenses — 3,077 — 3,077
Non-income tax expense adjustment 107 (83) — 24
Loss attributable to non-controlling interest 377 — — 377
Other — 2 — 2
Adjusted EBITDA $ 62,278 $ 10,714 $ (17,295) $ 55,697

Three Months Ended March 31, 2021
Envestnet Wealth Solutions Envestnet Data & Analytics Nonsegment Total
(in thousands)
Revenues $ 226,410 $ 48,695 $ — $ 275,105
Deferred revenue fair value adjustment 80 — — 80
Adjusted revenues $ 226,490 $ 48,695 $ — $ 275,185
Income (loss) from operations $ 34,197 $ 1,289 $ (18,671) $ 16,815
Add (deduct):
Deferred revenue fair value adjustment 80 — — 80
Depreciation and amortization 21,228 7,164 — 28,392
Non-cash compensation expense 7,829 2,841 3,467 14,137
Restructuring charges and transaction costs 1,365 147 1,272 2,784
Severance 3,087 1,720 107 4,914
Accretion on contingent consideration and purchase liability 342 46 — 388
Fair market value adjustment on contingent consideration liability — (140) — (140)
Litigation and regulatory related expenses — 1,709 — 1,709
Non-income tax expense adjustment (535) (31) — (566)
Income attributable to non-controlling interest (265) — — (265)
Other 16 — — 16
Adjusted EBITDA $ 67,344 $ 14,745 $ (13,825) $ 68,264

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Liquidity and Capital Resources

As of March 31, ~~2022,~~2023, we had total cash and cash equivalents of ~~$359.6~~$52.7 million compared to ~~$429.3~~$162.2 million as of December 31, ~~2021.~~2022. We plan to use existing cash as of March 31, ~~2022,~~2023, cash generated in the ongoing operations of our business and amounts under our ~~revolving credit facility~~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~~Revolving Credit Facility or incur additional debt to fund our ongoing operations or to fund potential acquisitions or other strategic activities. As of March 31, ~~2022,~~2023, we had $500.0 million available to borrow under our revolving credit ~~facility, subject to covenant compliance.~~facility.

Cash Flows

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


		Three Months Ended					Three Months Ended
		March 31,					March 31,
		2022		2021			2023		2022

		(in thousands)					(in thousands)
Net cash provided by operating activities		$	3,261	$	49,809
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	$	(33,521)	$	3,261
Net cash used in investing activities	Net cash used in investing activities	(46,067)		(50,175)		Net cash used in investing activities	(58,756)		(46,067)
Net cash used in financing activities	Net cash used in financing activities	(26,232)		(12,170)		Net cash used in financing activities	(20,812)		(26,232)
Effect of exchange rate on changes on cash	Effect of exchange rate on changes on cash	(627)		(52)		Effect of exchange rate on changes on cash	3,580		(627)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(69,665)		(12,588)		Net decrease in cash, cash equivalents and restricted cash	$	(109,509)	$	(69,665)
Cash, cash equivalents and restricted cash, end of period		359,763		372,126

Operating Activities

Net cash ~~provided by~~used in operating activities increased $36.8 million for the three months ended March 31, ~~2022 was $3.3 million~~2023 compared to ~~net cash provided by operating activities of $49.8 million for~~ the ~~same period in 2021. The decrease was~~three months ended March 31, 2022 primarily due ~~to a decrease in pre-tax income period over period of $22.0 million and~~ timing of payments within working capital items.

Investing Activities

Net cash used in investing activities increased $12.7 million for the three months ended March 31, ~~2022 was $46.1 million~~2023 compared to ~~net cash used in investing activities of $50.2 million for~~ the ~~same period in 2021. The decrease was~~three months ended March 31, 2022 primarily due to the cash disbursement related to the issuance of a ~~decrease in cash disbursements for proprietary technology assets~~loan receivable to a private company of ~~$10.5~~$20.0 million ~~partially offset by~~during the three months ended March 31, 2023. Also contributing to this increase was an additional ~~$6.6~~$2.0 million of internally developed software costs capitalized ~~in 2022~~during the three months ended March 31, 2023 as compared to the same period in ~~2021.~~2022. These increases were partially offset by decreases in cash disbursements of $5.0 million for proprietary technology assets and $2.1 million in investments in private companies for the three months ended March 31, 2023 compare to the same period in the prior year.

Financing Activities

Net cash used in financing activities decreased $5.4 million for the three months ended March 31, ~~2022 was $26.2 million~~2023 compared to ~~net cash used in financing activities of $12.2 million for~~ the ~~same period in 2021,~~three months ended March 31, 2022 primarily due to decreases in finance lease payments of ~~$12.5~~$12.3 million, decreases in ~~2022~~payments related to our Revolving Credit Facility of $1.9 million and ~~an additional $3.0 million~~a decrease of taxes paid on the vesting of restricted shares ~~in 2022 as~~of $1.8 million for the three months ended March 31, 2023 compared to the same period in ~~2021.~~the prior year. These decreases were partially offset by increases in cash paid for share repurchases of $9.3 million and increases in cash paid to purchase non-controlling units from third-party shareholders of $1.0 million for the three months ended March 31, 2023 compared to the same period in the prior year.

Table of Contents

Commitments and Off-Balance Sheet Arrangements

Purchase Obligations and Indemnifications

See “Part I, Item 1, Note ~~16—~~19—Commitments and Contingencies, Purchase Obligations and ~~Indemnifications” for purchase obligations and indemnifications details.~~ Indemnifications.”

~~Procurement~~Acquisition of ~~Technology Solutions~~Redi2 Technologies

See “Part I, Item 1, Note ~~6—Intangible Assets, net, and Note 17—Subsequent Events, Procurement of Technology Solutions”~~3— Acquisitions” for details related to ~~these transactions.~~this transaction.

Legal Proceedings

See “Part I, Item 1, Note ~~16—~~19—Commitments and Contingencies, Legal Proceedings” for legal proceedings details.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions, and estimates that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. ~~“Note~~See "Note 2—Summary of Significant Accounting ~~Policies”~~Policies" to the consolidated financial statements in our ~~2021~~2022 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 ~~2021~~2022 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,~~revenue, impairment of goodwill and acquired intangible assets and income taxes. Such accounting policies and estimates require significant judgments and assumptions to be used in the preparation of the condensed consolidated financial statements, 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 ~~2021~~2022 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 March 31, ~~2022.~~2023. 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 March 31, ~~2022,~~2023, 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 March 31, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

The information in Part I, Note ~~16—~~19—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 ~~2021~~2022 Form 10-K when making investment decisions regarding our securities. The risk factors that were disclosed in our ~~2021~~2022 Form 10-K have not materially changed since the date our ~~2021~~2022 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 2.0 million shares of our common stock. There were no purchases of equity securities made under the share repurchase program in the three months ended March 31, ~~2022.~~2023. As of March 31, ~~2022,~~2023, there were ~~1.9~~0.3 million shares that may yet be repurchased under the program.

The timing and volume of share repurchases will be determined by our management based on ongoing assessments of the capital needs of the business, the market price of our common stock 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.

4540

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INDEX TO EXHIBITS


Exhibit No.						Description
10.1						~~Form of Performance-Based Restricted Stock Unit Grant Award~~Cooperation Agreement, ~~under the~~dated March 27, 2023, by and among Impactive Capital LP, Impactive Capital Master Fund LP and Envestnet, Inc. ~~2010 Long-Term Incentive Plan (for awards~~ ~~beginning February~~ ~~2022),~~(filed as Exhibit 10.1 to the Company’s Form 8-K filed herewith.**
~~10.2~~						~~Form of Restricted Stock Unit Grant Award Agreement under~~with the ~~Envestnet, Inc. 2010 Long-Term Incentive Plan (for awards~~ ~~beginning February~~ ~~2022), filed herewith.~~SEC on March 28, 2023 and incorporated by reference herein). **
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1						Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2						Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document ***
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document ***
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document ***
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document ***
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document ***
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Exhibits omitted pursuant to Item 601(a)(5) of Regulation S-K. Envestnet, Inc. agrees to furnish supplementally a copy of any omitted exhibit to the SEC upon request; provided, however, that Envestnet, Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedules or exhibits so furnished.

** The following materials are formatted in Inline XBRL (Extensible Business Reporting Language): (i) the cover page; (ii) the Condensed Consolidated Balance Sheets as of March 31, ~~2022~~2023 and December 31, ~~2021;~~2022; (iii) the Condensed Consolidated Statements of Operations for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (iv) the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (v) the Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (vi) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021;~~2022; (vii) Notes to Condensed Consolidated Financial Statements tagged as blocks of text.

** Management contract or compensation plan.

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Table of Contents

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q are defined below:


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

ASU 2021-08						ASU Business Combinations (Topic 805): Accounting for Contract Assets and Contract
Board						Board of Directors
Convertible Notes due 2023						$345.0 million of aggregate principal amount of convertible notes issued in May 2018 with an interest rate of 1.75% per year that mature on June 1, 2023
Convertible Notes due 2025						$517.5 million of aggregate principal amount of convertible notes issued in August 2020 with an interest rate of 0.75% per year that mature on August 15, 2025
Convertible Notes due 2027						$575.0 million aggregate principal amount of convertible notes issued in November 2022 with an interest rate of 2.625% per year that mature on December 1, 2027
Convertible Promissory Note						$20.0 million convertible promissory note issued in January 2023 with a customer of the Company's business, a privately held company
ETR						Effective tax rate
Exchange Act						Securities Exchange Act of 1934, as amended
FASB						Financial Accounting Standards Board
FinancialApps						FinancialApps, LLC
FinTech						Financial Technology
GAAP						United States Generally Accepted Accounting Principles

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

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May ~~6, 2022.~~5, 2023.


			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

4743






Balance, December 31, 2020	67,832,706	$	339	(13,739,171)	$	(110,466)	$	1,166,774	$	(398)	$	(79,912)	$	(519)	$	975,818
Adoption of ASU 2020-06, net of taxes of $7,641	—	—		—	—		(108,470)		—		28,628		—		(79,842)
Exercise of stock options	27,043	—		—	—		522		—		—		—		522
Issuance of common stock - vesting of restricted stock units	455,349	2		—	—		—		—		—		—		2
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, 2021	68,315,098	$	341	(13,910,439)	$	(121,679)	$	1,072,839	$	(1,022)	$	(36,338)	$	(412)	$	913,729


Years ending December 31,	(in thousands)
Remainder of 2022	$	201,257
2023	178,329
2024	102,504
2025	57,142
2026	29,564
Thereafter	6,878
Total	$	575,674


	Three Months Ended March 31, 2021
	Envestnet Wealth Solutions		Envestnet Data & Analytics		Nonsegment		Total

	(in thousands)
Revenues	$	226,410	$	48,695	$	—	$	275,105
Deferred revenue fair value adjustment	80		—		—		80
Adjusted revenues	$	226,490	$	48,695	$	—	$	275,185

Income (loss) from operations	$	34,197	$	1,289	$	(18,671)	$	16,815
Add (deduct):
Deferred revenue fair value adjustment	80		—		—		80
Depreciation and amortization	21,228		7,164		—		28,392
Non-cash compensation expense	7,829		2,841		3,467		14,137
Restructuring charges and transaction costs	1,365		147		1,272		2,784
Severance	3,087		1,720		107		4,914
Accretion on contingent consideration and purchase liability	342		46		—		388
Fair market value adjustment on contingent consideration liability	—		(140)		—		(140)
Litigation and regulatory related expenses	—		1,709		—		1,709
Non-income tax expense adjustment	(535)		(31)		—		(566)
Income attributable to non-controlling interest	(265)		—		—		(265)
Other	16		—		—		16
Adjusted EBITDA	$	67,344	$	14,745	$	(13,825)	$	68,264