Envestnet Inc : Envestnet Reports Second Quarter 2012 Financial Results
08/08/2012| 04:05pm US/Eastern
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Envestnet (NYSE: ENV), a leading provider of technology-enabled wealth
management solutions to investment advisors, today reported financial
results for its second quarter ended June 30, 2012.
Key Financial Metrics
Second Quarter
%
(in millions except per share data)
2012
2011
Change
Revenues from AUM/A
$31.0
$25.4
22%
Total Revenues
$38.0
$31.3
21%
Adjusted Revenues(1)
$38.6
$31.3
23%
Adjusted EBITDA(1)
$5.3
$7.1
-25%
Adjusted Net Income per Share(1)
$ 0.07
$ 0.11
-36%
Financial results for the second quarter of 2012 compared to the
second quarter of 2011:
Revenues from assets under management (AUM) or assets under
administration (AUA) increased 22% to $31.0 million for the second
quarter of 2012 from $25.4 million for the second quarter of 2011;
total revenues, which include licensing and professional services
fees, increased 21% to $38.0 million for the second quarter of 2012
from $31.3 million for the second quarter of 2011.
Adjusted revenues, which exclude the effect of purchase accounting on
the fair value of acquired deferred revenue, increased 23% to $38.6
million for the second quarter of 2012 from $31.3 million for the
second quarter of 2011.
Net loss was $(0.7) million, or $(0.02) per diluted share, for the
second quarter of 2012 compared to net income of $2.4 million, or
$0.07 per diluted share, for the second quarter of 2011.
Adjusted EBITDA(1) was $5.3 million for the second quarter
of 2012 compared to $7.1 million for the second quarter of 2011.
Adjusted Net Income(1) was $2.2 million, or $0.07 per
diluted share, for the second quarter of 2012 compared to $3.5
million, or $0.11 per diluted share, for the second quarter of 2011.
"During the second quarter we achieved record levels of gross sales and
net flows, and conversion activity continued at a high level, reflecting
growing support from fee-based advisors," said Jud Bergman, chairman and
chief executive officer of Envestnet. "Our integration efforts of both
Tamarac and Prima Capital remain on schedule, better enabling Envestnet
to empower advisors to improve client outcomes and strengthen their
practices."
Key Operating Metrics as of and for the quarter ended June 30, 2012:
AUM/A of $87.3 billion, up 23% from June 30, 2011
Accounts (AUM/A only) of 416,017, up 25% from June 30, 2011
Advisors (AUM/A only) served totaled 15,045
Gross sales of AUM/A of $13.1 billion, resulting in net flows of $8.5
billion
The following table summarizes the changes in AUM and AUA for the
quarter ended June 30, 2012:
Gross
Redemp-
Net
Market
In Millions Except Account Data
3/31/12
Sales
tions
Flows
Impact
6/30/12
Assets under Management (AUM)
$
26,084
$
3,120
$
(1,843
)
$
1,277
$
(603
)
$
26,758
Assets under Administration (AUA)
54,336
10,011
(2,826
)
7,185
(1,010
)
60,511
Total AUM/A
$
80,420
$
13,131
$
(4,669
)
$
8,462
$
(1,613
)
$
87,269
Fee-Based Accounts
364,236
70,079
(18,298
)
51,781
416,017
During the second quarter, the Company added $4.6 billion of
conversions, which are included in the above AUM/A gross sales figures.
Review of Financial Results
Adjusted revenues increased 23% to $38.6 million for the second quarter
of 2012 from $31.3 million for the second quarter of 2011. The increase
was primarily due to a 22% increase in revenues from assets under
management or administration to $31.0 million from $25.4 million in the
prior year period, as well as higher licensing and professional services
revenues related to the acquisitions of Tamarac Inc. and Prima Capital
Holding, Inc., both of which closed during the second quarter of 2012.
Total operating expenses in the second quarter of 2012 increased 39% to
$39.1 million from $28.2 million in the prior year period. After certain
non-GAAP adjustments(2) included in our Adjusted EBITDA
reconciliation, total operating expenses increased 31% compared to the
prior year period. Cost of revenues increased 24% to $13.5 million in
the second quarter of 2012 from $10.9 million in the second quarter of
2011 due to the increase in revenue from AUM or AUA and additional cost
from Tamarac. Compensation and benefits increased 36% to $14.1 million
in the second quarter of 2012 from $10.4 million in the prior year
period due to higher personnel cost from completed acquisitions, as well
as higher stock-based compensation expense. General and administration
expenses increased 55% to $8.2 million in the second quarter of 2012
from $5.3 million in the prior year period, primarily due to transaction
costs related to the completed acquisitions, and ongoing expense from
the acquired companies.
Loss from operations was $(1.1) million for the second quarter of 2012
compared to income from operations of $3.2 million for the second
quarter of 2011. Net loss was $(0.7) million, or $(0.02) per diluted
share, for the second quarter of 2012 compared to net income of $2.4
million, or $0.07 per diluted share, for the second quarter of 2011. The
loss in the current period was due to acquisition-related expenses noted
above.
Adjusted EBITDA(1) in the second quarter of 2012 was $5.3
million, compared to $7.1 million in the prior year period. Adjusted Net
Income(1) was $2.2 million, compared to $3.5 million in the
second quarter of 2011. Adjusted Net Income Per Share(1) was
$0.07 per diluted share, compared to $0.11 per diluted share in the
second quarter of 2011.
Conference Call
The Company will host a conference call to discuss second quarter 2012
financial results today at 5:00 p.m. ET. The live webcast can be
accessed from the Company's investor relations website at http://ir.envestnet.com/.
The conference call can also be accessed live over the phone by dialing
(888) 417-8525, or (719) 457-2702 for international callers. A replay
will be available beginning one hour after the call and can be accessed
from the Company's investor relations website, or by dialing (877)
870-5176, or (858) 384-5517 for international callers; the conference ID
is 2615847. The dial-in replay will be available for one week and the
webcast replay will be available for one month following the date of the
conference call.
About Envestnet
Envestnet, Inc. (NYSE: ENV) is a leading provider of technology-enabled
wealth management solutions to investment advisors. Envestnet's Advisor
Suite software empowers advisors to better manage client outcomes and
strengthen their practice. Envestnet offers advanced portfolio solutions
through its Portfolio Management Consultants Group, Envestnet | PMC.
Envestnet | Tamarac provides leading rebalancing, reporting and practice
management software. Envestnet | Prima provides institutional-quality
research and due diligence on investment and fund managers. Envestnet |
Vantage gives advisors an in-depth view of clients' investments,
empowering them to give holistic, personalized advice.
"Adjusted revenues" exclude the effect of purchase accounting on the
fair value of acquired deferred revenue. Under U.S. GAAP, we record at
fair value the acquired deferred revenue for contracts in effect at the
time the entities were acquired. Consequently, revenue related to
acquired entities for periods subsequent to the acquisition does not
reflect the full amount of revenue that would have been recorded by
these entities had they remained stand-alone entities.
"Adjusted EBITDA" represents net income before deferred revenue fair
value adjustment, interest income, interest expense, income tax
provision, depreciation and amortization, non-cash stock-based
compensation expense, gain on investments, other income, restructuring
charges and transaction costs, severance, customer inducement costs, and
litigation related expense.
"Adjusted net income" represents net income before deferred revenue fair
value adjustment, non-cash stock-based compensation expense,
restructuring expense and transaction costs, severance, amortization of
acquired intangibles, customer inducement costs, imputed interest
expense and litigation related expense. Reconciling items are tax
effected using the income tax rates in effect on the applicable date.
"Adjusted net income per share" represents adjusted net income divided
by the diluted number of weighted-average shares outstanding.
See reconciliation of Non-GAAP Financial Measures at the end of this
press release. These measures should not be viewed as a substitute for
net income determined in accordance with United States generally
accepted accounting principles (GAAP).
(2) Adjustments include stock-based compensation expense, restructuring
charges and transaction costs, severance and litigation related expense.
The forward-looking statements made in this press release and its
attachments concerning, among other things, Envestnet, Inc.'s (the
"Company") expected financial performance and outlook, its strategic
operational plans and growth strategy are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. These statements involve risks and uncertainties and the Company's
actual results could differ materially from the results expressed or
implied by such forward-looking statements. Furthermore, reported
results should not be considered as an indication of future performance.
The potential risks, uncertainties and other factors that could cause
actual results to differ from those expressed by the forward-looking
statements in this press release include, but are not limited to,
difficulty in sustaining rapid revenue growth, which may place
significant demands on the Company's administrative, operational and
financial resources, fluctuations in the Company's revenue, the
concentration of nearly all of the Company's revenues from the delivery
of investment solutions and services to clients in the financial
advisory industry, the Company's reliance on a limited number of clients
for a material portion of its revenue, the renegotiation of fee
percentages or termination of the Company's services by its clients, the
Company's ability to identify potential acquisition candidates, complete
acquisitions and successfully integrate acquired companies, the impact
of market and economic conditions on the Company's revenues, compliance
failures, regulatory actions against the Company, the failure to protect
the Company's intellectual property rights, the Company's inability to
successfully execute the conversion of its clients' assets from their
technology platform to the Company's technology platform in a timely and
accurate manner, general economic, political and regulatory conditions,
as well as management's response to these factors. More information
regarding these and other risks, uncertainties and factors is contained
in the Company's filings with the Securities and Exchange Commission
("SEC") which are available on the SEC's website at www.sec.gov
or the Company's Investor Relations website at http://ir.envestnet.com/.
You are cautioned not to unduly rely on these forward-looking
statements, which speak only as of the date of this press release. All
information in this press release and its attachments is as of August 8,
2012 and, unless required by law, the Company undertakes no obligation
to publicly revise any forward-looking statement to reflect
circumstances or events after the date of this press release or to
report the occurrence of unanticipated events.
Envestnet, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share information)
(Unaudited)
June 30,
December 31,
2012
2011
Assets
Current assets:
Cash and cash equivalents
$
13,400
$
64,909
Fees receivable
8,631
9,644
Deferred tax assets, net
610
192
Prepaid expenses and other current assets
7,036
4,040
Total current assets
29,677
78,785
Property and equipment, net
12,377
11,091
Internally developed software, net
3,752
3,524
Intangible assets, net
30,712
12,225
Goodwill
66,152
22,223
Deferred tax assets, net
7,058
6,692
Other non-current assets
3,284
3,162
Total assets
$
153,012
$
137,702
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses
$
16,485
$
14,919
Accounts payable
2,683
1,974
Note payable
-
171
Deferred revenue
5,214
79
Total current liabilities
24,382
17,143
Deferred rent liability
1,891
1,414
Lease incentive liability
4,163
2,933
Other non-current liabilities
689
573
Total liabilities
31,125
22,063
Stockholders' equity
121,887
115,639
Total liabilities and stockholders' equity
$
153,012
$
137,702
Envestnet, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2012
2011
2012
2011
Revenues:
Assets under management or administration
$
31,012
$
25,427
$
59,275
$
48,698
Licensing and professional services
6,950
5,907
11,329
11,898
Total revenues
37,962
31,334
70,604
60,596
Operating expenses:
Cost of revenues
13,549
10,917
25,075
21,045
Compensation and benefits
14,085
10,387
24,770
20,533
General and administration
8,148
5,258
14,921
10,134
Depreciation and amortization
3,224
1,578
5,623
3,126
Restructuring charges
88
43
115
53
Total operating expenses
39,094
28,183
70,504
54,891
Income (loss) from operations
(1,132
)
3,151
100
5,705
Other income (expense):
Interest income
14
20
23
46
Interest expense
-
(204
)
(3
)
(415
)
Other income
-
1,100
-
1,100
Gain on investments
-
1
-
4
Total other income (expense)
14
917
20
735
Income (loss) before income tax provision (benefit)
(1,118
)
4,068
120
6,440
Income tax provision (benefit)
(450
)
1,621
48
2,589
Net income (loss)
$
(668
)
$
2,447
$
72
$
3,851
Net income (loss) per share:
Basic
$
(0.02
)
$
0.08
$
0.00
$
0.12
Diluted
$
(0.02
)
$
0.07
$
0.00
$
0.12
Weighted average common shares outstanding:
Basic
32,149,957
31,591,412
32,004,386
31,502,139
Diluted
32,149,957
32,969,824
33,054,632
32,912,916
Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
Six Months Ended
June 30,
2012
2011
OPERATING ACTIVITIES:
Net income
$
72
$
3,851
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization
5,623
3,126
Amortization of customer inducements
-
2,413
Deferred rent and lease incentive
1,362
(110
)
Gain on investments
-
(4
)
Deferred income taxes
(432
)
2,117
Stock-based compensation
1,930
1,645
Interest expense
3
415
Changes in operating assets and liabilities:
Fees receivable
1,574
442
Prepaid expenses and other current assets
(1,016
)
(422
)
Customer inducements
-
(1,000
)
Other non-current assets
67
-
Accrued expenses
(616
)
119
Accounts payable
709
51
Deferred revenue
474
(130
)
Other non-current liabilities
116
132
Net cash provided by operating activities
9,866
12,645
INVESTING ACTIVITIES:
Purchase of property and equipment
(2,999
)
(2,917
)
Capitalization of internally developed software
(988
)
(817
)
Repayment of notes payable assumed in acquisition
(174
)
(162
)
Proceeds from investments
3
17
Goodwill - working capital settlement
889
-
Acquisition of businesses, net
(62,352
)
-
Net cash used in investing activities
(65,621
)
(3,879
)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options
1,565
2,260
Issuance of restricted stock
2,759
-
Purchase of treasury stock
(78
)
(94
)
Net cash provided by financing activities
4,246
2,166
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(51,509
)
10,932
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
64,909
67,668
CASH AND CASH EQUIVALENTS, END OF PERIOD
$
13,400
$
78,600
Envestnet, Inc.
Reconciliation of Non-GAAP Financial Measures
(in thousands, unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2012
2011
2012
2011
Revenue
$
37,962
$
31,334
$
70,604
$
60,596
Deferred revenue fair value adjustment
617
-
617
-
Adjusted revenues
$
38,579
$
31,334
$
71,221
$
60,596
Net income (loss)
$
(668
)
$
2,447
$
72
$
3,851
Deferred revenue fair value adjustment
617
-
617
-
Interest income
(14
)
(20
)
(23
)
(46
)
Interest expense
-
204
3
415
Income tax provision (benefit)
(450
)
1,621
48
2,589
Depreciation and amortization
3,224
1,578
5,623
3,126
Stock-based compensation expense
1,135
829
1,930
1,645
Restructuring charges and transaction costs
1,353
53
1,997
63
Severance
78
246
83
303
Litigation related expense
39
58
58
91
Gain on investments
-
(1
)
-
(4
)
Other income
-
(1,100
)
-
(1,100
)
Customer inducement costs
-
1,207
-
2,413
Adjusted EBITDA
$
5,314
$
7,122
$
10,408
$
13,346
Net income (loss)
$
(668
)
$
2,447
$
72
$
3,851
Deferred revenue fair value adjustment
369
-
369
-
Stock-based compensation expense
679
496
1,154
984
Restructuring charges and transaction costs
809
32
1,194
38
Severance
47
147
50
181
Amortization of acquired intangibles
971
137
1,557
307
Litigation related expense
23
35
35
54
Customer inducement costs
-
722
-
1,443
Other income
-
(658
)
-
(658
)
Imputed interest expense
-
121
-
243
Adjusted net income
$
2,230
$
3,479
$
4,431
$
6,443
Diluted number of weighted-average shares outstanding
33,173,778
32,969,824
33,054,632
32,912,916
Adjusted net income per share - diluted
$
0.07
$
0.11
$
0.13
$
0.20
* Adjustments are tax effected using an income tax rate of 40.2% for
2012 and 2011, respectively.
Envestnet, Inc.
Historical Assets, Accounts and Advisors
(in millions, except account and advisor data; unaudited)
As of
June 30,
September 30,
December 31,
March 31,
June 30,
2011
2011
2011
2012
2012
Platform Assets
Assets Under Management (AUM)
$
16,493
$
15,560
$
22,936
$
26,084
$
26,758
Assets Under Administration (AUA)
54,261
50,607
47,148
54,336
60,511
Subtotal AUM/A
70,754
66,167
70,084
80,420
87,269
Licensing
68,531
61,571
69,514
76,235
229,268
Total Platform Assets
$
139,285
$
127,738
$
139,598
$
156,655
$
316,537
Platform Accounts
AUM
77,302
83,073
124,636
134,294
141,695
AUA
254,995
254,100
216,038
229,942
274,322
Subtotal AUM/A
332,297
337,173
340,674
364,236
416,017
Licensing
572,612
572,791
588,038
588,936
1,138,233
Total Platform Accounts
904,909
909,964
928,712
953,172
1,554,250
Advisors
AUM/A
14,613
14,206
13,887
14,386
15,045
Licensing
6,201
5,522
5,709
5,351
6,758
Total Advisors
20,814
19,728
19,596
19,737
21,803
Note: Licensing metrics include Envestnet | Tamarac, which added
approximately $149 billion in assets, 550,000 accounts and 1,700
advisors as of May 1, 2012.
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