Envestnet Reports First Quarter 2022 Financial Results

Envestnet

BERWYN, PA — Envestnet (NYSE: ENV) recenlty reported financial results for the three months ended March 31, 2022.

Three months ended

Key Financial Metrics

March 31,

%

(in millions, except per share data)

2022

2021

Change

GAAP:

Total revenues

$

321.4

$

275.1

17

%

Net income (loss)

$

(14.7

)

$

14.9

n/m

Net income (loss) per diluted share attributable to Envestnet, Inc.

$

(0.25

)

$

0.27

n/m

Non-GAAP:

Adjusted revenues(1)

$

321.4

$

275.2

17

%

Adjusted EBITDA(1)

$

55.7

$

68.3

(18

)%

Adjusted net income(1)

$

31.0

$

41.9

(26

)%

Adjusted net income per diluted share(1)

$

0.47

$

0.64

(27

)%

n/m – not meaningful

“Envestnet has made substantial progress in bringing together the powerful capabilities of Envestnet to create more scalable, more intelligent, and more valuable solutions for our clients,” said Bill Crager, Chief Executive Officer.

“Our first quarter financial results continue to demonstrate the strength of our business and the hard work of the Envestnet team,” concluded Mr. Crager.

Financial Results for the First Quarter of 2022

Asset-based recurring revenues increased 27% from the first quarter of 2021, and represented 63% of total revenues for the first quarter of 2022 compared to 58% for the first quarter of 2021. Subscription-based recurring revenues increased 4% from the first quarter of 2021, and represented 36% of total revenues for the first quarter of 2022, compared to 40% for the first quarter of 2021. Professional services and other non-recurring revenues decreased 34% from the prior year period. Total revenues increased 17% to $321.4 million for the first quarter of 2022 from $275.1 million for the first quarter of 2021.

Total operating expenses for the first quarter of 2022 increased 27% to $328.1 million from $258.3 million in the prior year period. Cost of revenues increased 35% to $125.3 million for the first quarter of 2022 from $92.9 million for the prior year period. Compensation and benefits increased 26% to $126.8 million for the first quarter of 2022 from $100.7 million for the prior year period. Compensation and benefits were 39% of total revenues for the first quarter of 2022, compared to 37% for the prior year period. General and administration expenses increased 22% to $44.3 million for the first quarter of 2022 from $36.3 million for the prior year period. General and administration expenses were 14% of total revenues for the first quarter of 2022, compared to 13% for the prior year period.

Loss from operations was $6.7 million for the first quarter of 2022 compared to income of $16.8 million for the first quarter of 2021. Net loss was $14.7 million for the first quarter of 2022 compared to net income of $14.9 million for the first quarter of 2021. Net loss per diluted share attributable to Envestnet, Inc. was $0.25 for the first quarter of 2022 compared to net income per diluted share attributable to Envestnet, Inc. of $0.27 for the first quarter of 2021.

Adjusted revenues(1) for the first quarter of 2022 increased 17% to $321.4 million from $275.2 million for the prior year period. Adjusted EBITDA(1) for the first quarter of 2022 decreased 18% to $55.7 million from $68.3 million for the prior year period. Adjusted net income(1) decreased 26% for the first quarter of 2022 to $31.0 million from $41.9 million for the prior year period. Adjusted net income per diluted share(1) for the first quarter of 2022 decreased 27% to $0.47 from $0.64 in the first quarter of 2021.

Balance Sheet and Liquidity

As of March 31, 2022, Envestnet had $359.6 million in cash and cash equivalents and $862.5 million in outstanding debt. The outstanding debt as of March 31, 2022 included $345 million in convertible notes maturing in 2023 and $517.5 million in convertible notes maturing in 2025. Envestnet’s $500 million revolving credit facility was undrawn as of March 31, 2022.

Outlook

Envestnet provided the following outlook for the second quarter ending June 30, 2022 and full year ending December 31, 2022. This outlook is based on the market value of assets under management or administration as of March 31, 2022. The Company cautions that they cannot predict the market value of these assets on any future date.

In Millions, Except Adjusted EPS

2Q 2022

FY 2022

GAAP:

Revenues:

Asset-based

$

196.5

$

197.5

Subscription-based

118.5

119.0

Total recurring revenues

$

315.0

$

316.5

Professional services and other revenues

9.0

9.5

Total revenues

$

324.0

$

326.0

$

1,329.8

$

1,339.7

Asset-based cost of revenues

$

116.0

$

116.5

Total cost of revenues

$

129.5

$

130.0

Net income

(a)

(a)

(a)

(a)

Diluted shares outstanding

66.3

66.1

Net income per diluted share

(a)

(a)

(a)

(a)

Non-GAAP:

Adjusted revenues (1):

Asset-based

$

196.5

$

197.5

Subscription-based

118.5

119.0

Total recurring revenues

$

315.0

$

316.5

Professional services and other revenues

9.0

9.5

Total revenues

$

324.0

$

326.0

$

1,330.0

$

1,340.0

Adjusted EBITDA(1)

$

55.5

$

56.5

$

255.0

$

260.0

Adjusted net income per diluted share(1)

$

0.45

$

0.46

$

2.17

$

2.23

(a) Envestnet does not forecast net income and net income per diluted share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

(1) Non-GAAP Financial Measures

“Adjusted revenues” 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 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, the Company 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 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 and purchase liability, fair market value adjustment on contingent consideration liability, litigation and regulatory 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 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 and regulatory 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 the Company operates. The Company monitors 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.

Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company’s Non-GAAP Financial Measures should not be viewed as a substitute for revenues, net income (loss) or net income (loss) per share determined in accordance with GAAP.

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