Envestnet Reports First Quarter 2012 Financial Results

Envestnet (NYSE: ENV), a leading provider of technology-enabled wealth management solutions to investment advisors, today reported financial results for its first quarter ended March 31, 2012.
      Key Financial Metrics     First Quarter     %Change  
(in millions except per share data)     2012     2011      
   
Revenues from AUM/A $28.3 $23.3 21%
Total Revenues $32.6 $29.3 12%
Adjusted EBITDA(1) $5.1 $6.2 -18%
Adjusted Net Income per Share(1) $0.07 $0.09 -22%
 

Financial results for the first quarter of 2012 compared to the first quarter of 2011:
  • Revenues from assets under management (AUM) or assets under administration (AUA) increased 21% to $28.3 million for the first quarter of 2012 from $23.3 million for the first quarter of 2011; total revenues, which includes licensing and professional services fees, increased 12% to $32.6 million for the first quarter of 2012 from $29.3 million for the first quarter of 2011.
  • Net income was $0.7 million, or $0.02 per diluted share, for the first quarter of 2012 compared to $1.4 million, or $0.04 per diluted share, for the first quarter of 2011.
  • Adjusted EBITDA(1) was $5.1 million for the first quarter of 2012 compared to $6.2 million for the first quarter of 2011.
  • Adjusted Net Income(1) was $2.2 million, or $0.07 per diluted share, for the first quarter of 2012 compared to $3.0 million, or $0.09 per diluted share, for the first quarter of 2011.

“During the first quarter, a growing number of advisors adopted Envestnet’s wealth management solutions, as we experienced positive net flows and strong conversion activity of new reporting clients,” said Jud Bergman, chief executive officer of Envestnet. “Having recently completed the acquisitions of Prima Capital and Tamarac, Envestnet is positioned better than ever to empower advisors to improve client outcomes and strengthen their advisory practices. We are helping advisors transform the wealth management industry to a transparent and unconflicted standard of care for investors.”

Key Operating Metrics as of and for the quarter ended March 31, 2012:

  • AUM/A of $80.4 billion, up 17% from March 31, 2011
  • Accounts (AUM/A only) of 364,236, up 13% from March 31, 2011
  • Advisors (AUM/A only) served totaled 14,386
  • Gross sales of AUM/A of $10.2 billion, resulting in net flows of $5.9 billion

The following table summarizes the changes in AUM and AUA for the quarter ended March 31, 2012:
In Millions Except Account Data    

12/31/11
   

GrossSales
   

Redemp-tions
   

NetFlows
   

MarketImpact
    3/31/12  
             
Assets under Management (AUM) $

22,936

 
$

3,094

 
$ (1,531 ) $

1,563

 
$

1,585

 
$

26,084

 
Assets under Administration (AUA)   47,148     7,119         (2,751 )       4,368     2,820     54,336  
Total AUM/A $ 70,084   $ 10,213       $ (4,282 )     $ 5,931   $ 4,405   $ 80,420  
Fee-Based Accounts 340,674 42,320 (18,758 ) 23,562 364,236
 

During the first quarter, the Company added $4.1 billion of conversions, which are included in the above AUM/A gross sales figures.

Review of Financial Results

Total revenues increased 12% to $32.6 million for the first quarter of 2012 from $29.3 million for the first quarter of 2011. The increase was primarily due to a 21% increase in revenues from assets under management or administration to $28.3 million from $23.3 million in the prior year period, partially offset by a previously expected reduction in licensing and professional services revenues.

Total operating expenses in the first quarter of 2012 increased 18% to $31.4 million from $26.7 million in the prior year period. Cost of revenues increased 14% to $11.5 million in the first quarter of 2012 from $10.1 million in the first quarter of 2011 due to the increase in revenue from AUM or AUA. Compensation and benefits increased 5% to $10.7 million in the first quarter of 2012 from $10.2 million in the prior year period. General and administration expenses increased 39% to $6.8 million in the first quarter of 2012 from $4.9 million in the prior year period.

Income from operations was $1.2 million for the first quarter of 2012 compared to $2.6 million for the first quarter of 2011. Net income was $0.7 million, or $0.02 per diluted share, for the first quarter of 2012 compared to $1.4 million, or $0.04 per diluted share, for the first quarter of 2011.

Adjusted EBITDA (1) in the first quarter of 2012 was $5.1 million, compared to $6.2 million in the prior year period, reflecting the previously expected reduction in licensing and professional services revenues. Adjusted Net Income (1) was $2.2 million, compared to $3.0 million in the first quarter of 2011. Adjusted Net Income Per Share (1) was $0.07 per diluted share, compared to $0.09 per diluted share in the first quarter of 2011.

Conference Call

The Company will host a conference call to discuss first 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) 300-2318, or (719) 457-1509 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 9201314. 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.

For more information on Envestnet, please visit www.envestnet.com.

(1) Non-GAAP Financial Measures

“Adjusted EBITDA” represents net income before 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 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).

Cautionary Statement Regarding Forward-Looking Statements

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 May 9, 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)
         

   March 31,   2012

December 31,2011
Assets
Current assets:
Cash and cash equivalents $

70,636

 
$

64,909

 
Fees receivable 8,610 9,644
Deferred tax assets, net 146 192
Prepaid expenses and other current assets   3,137     4,040  
Total current assets   82,529     78,785  
 
Property and equipment, net 10,667 11,091
Internally developed software, net 3,487 3,524
Intangible assets, net 11,246 12,225
Goodwill 21,334 22,223
Deferred tax assets, net 6,726 6,692
Other non-current assets   3,165     3,162  
Total assets $ 139,154   $ 137,702  
 
Liabilities and Stockholders' Equity
Current liabilities:
Accrued expenses $ 13,186 $ 14,919
Accounts payable 2,266 1,974
Note payable 174 171
Deferred revenue   530     79  
Total current liabilities   16,156     17,143  
 
Deferred rent liability 1,492 1,414
Lease incentive liability 2,844 2,933
Other non-current liabilities   618     573  
Total liabilities 21,110 22,063
 
Stockholders' equity   118,044     115,639  
Total liabilities and stockholders' equity $ 139,154   $ 137,702  
 
 
Envestnet, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share information)
(Unaudited)
         

Three Months EndedMarch 31,
2012 2011
 
Revenues:
Assets under management or administration $ 28,263 $ 23,271
Licensing and professional services   4,379     5,991  
Total revenues   32,642     29,262  
 
Operating expenses:
Cost of revenues 11,526 10,128
Compensation and benefits 10,685 10,146
General and administration 6,773 4,876
Depreciation and amortization 2,399 1,548
Restructuring charges   27     10  
Total operating expenses   31,410     26,708  
 
Income from operations   1,232     2,554  
 
Other income (expense):
Interest income 9 26
Interest expense (3 ) (211 )
Gain on investments   -     3  
Total other income (expense)   6     (182 )
 
Income before income tax provision   1,238     2,372  
 
Income tax provision   498     968  
 
Net income $ 740   $ 1,404  
 
 
Net income per share:
Basic $ 0.02   $ 0.04  
 
Diluted $ 0.02   $ 0.04  
 
Weighted average common shares outstanding:
Basic   31,857,598     31,433,964  
 
Diluted   32,901,969     32,872,600  
 
 
Envestnet, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands, unaudited)
           
Three Months EndedMarch 31,
2012 2011
 
OPERATING ACTIVITIES:
Net income $ 740 $ 1,404

Adjustments to reconcile net income to net cash  provided by operating activities:
Depreciation and amortization 2,399 1,548
Amortization of customer inducements - 1,206
Deferred rent and lease incentive (11 ) (69 )
Gain on investments - (3 )
Deferred income taxes 12 775
Stock-based compensation 795 816
Interest expense 3 211
Changes in operating assets and liabilities:
Fees receivable 1,034 567
Prepaid expenses and other current assets 903 (480 )
Accrued expenses (1,733 ) (1,212 )
Accounts payable 292 349
Deferred revenue 451 (164 )
Other non-current liabilities   45     60  
Net cash provided by operating activities   4,930     5,008  
 
INVESTING ACTIVITIES:
Purchase of property and equipment (613 ) (1,419 )
Capitalization of internally developed software (346 ) (435 )
Proceeds from investments (3 ) 15
Goodwill adjustment   889     -  
Net cash used in investing activities   (73 )   (1,839 )
 
FINANCING ACTIVITIES:
Proceeds from exercise of stock options 948 1,072
Purchase of treasury stock   (78 )   (94 )
Net cash provided by financing activities   870     978  
 
INCREASE IN CASH AND CASH EQUIVALENTS   5,727     4,147  
 
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 64,909 67,668
   
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 70,636   $ 71,815  
 
 
 
Envestnet, Inc.Reconciliation of Non-GAAP Financial Measures(in thousands, unaudited)
         

Three Months EndedMarch 31,
2012 2011
 
Net income $ 740 $ 1,404
Add (deduct):
Interest income (9 ) (26 )
Interest expense 3 211
Income tax provision 498 968
Depreciation and amortization 2,399 1,548
Stock-based compensation expense 795 816
Gain on investments - (3 )
Restructuring charges and transaction costs 644 10
Severance 5 57
Customer inducement costs - 1,206
Litigation related expense   19     33  
Adjusted EBITDA $ 5,094   $ 6,224  
 
 
 
 
 

Three Months EndedMarch 31,
2012* 2011*
 
Net income $ 740 $ 1,404
Add:
Stock-based compensation expense 475 488
Restructuring charges and transaction costs 386 6
Severance 3 34
Amortization of acquired intangibles 586 169
Customer inducement costs - 721
Imputed interest expense - 122
Litigation related expense   11     20  
Adjusted net income $ 2,201   $ 2,964  
 
Diluted number of weighted-average shares outstanding   32,901,969     32,872,600  
 
Adjusted net income per share - diluted $ 0.07   $ 0.09  

* 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

  March 31,  2011
 

  June 30,  2011
 

September 30,2011
 

December 31,2011
 

  March 31,  2012
 
Platform Assets
Assets Under Management (AUM) $

15,635

 
$

16,493

 
$

15,560

 
$

22,936

 

$

26,084

 
Assets Under Administration (AUA)   53,115       54,261       50,607       47,148       54,336  
Subtotal AUM/A 68,750 70,754 66,167 70,084 80,420
Licensing   83,538       68,531       61,571       69,514       76,235  
Total Platform Assets $ 152,288     $ 139,285     $ 127,738     $ 139,598     $ 156,655  
 
Platform Accounts
AUM 71,396 77,302 83,073 124,636 134,294
AUA   252,260       254,995       254,100       216,038       229,942  
Subtotal AUM/A 323,656 332,297 337,173 340,674 364,236
Licensing   601,512       572,612       572,791       588,038       588,936  
Total Platform Accounts   925,168       904,909       909,964       928,712       953,172  
 
Advisors
AUM/A 14,140 14,613 14,206 13,887 14,386
Licensing   7,895       6,201       5,522       5,709       5,351  
Total Advisors   22,035       20,814       19,728       19,596       19,737  

Copyright Business Wire 2010

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