XFRA:30E Envestnet Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended June 30, 2012

 

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

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.)

35 East Wacker Drive, Suite 2400, Chicago, IL   60601
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code:

(312) 827-2800

 

 

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨    Smaller reporting company   ¨

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

As of August 1, 2012, 32,280,646 shares of the common stock with a par value of $0.005 per share were outstanding.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

     Page  
PART I - FINANCIAL INFORMATION   

Item 1. Financial Statements (Unaudited)

  

Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011

     3   

Condensed Consolidated Statements of Operations for the three and six months ended June  30, 2012 and 2011

     4   

Condensed Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2012

     5   

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011

     6   

Notes to Condensed Consolidated Financial Statements

     7   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     24   

Forward-Looking Statements

     24   

Overview

     24   

Results of Operations

     27   

Liquidity and Capital Resources

     34   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     35   

Item 4. Controls and Procedures

     35   
PART II - OTHER INFORMATION   

Item 1. Legal Proceedings

     37   

Item 1A. Risk Factors

     37   

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

     37   

Item 6. Exhibits

     37   

 

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Table of Contents

Envestnet, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share information)

(Unaudited)

 

     June 30,
2012
    December 31,
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   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity

    

Preferred stock

     —          —     

Common stock, par value $0.005, 500,000,000 shares authorized as of June 30, 2012 and December 31, 2011 respectively; 43,994,077 and 43,515,899 shares issued as of June 30, 2012 and December 31, 2011, respectively; 32,282,802 and 31,810,726 shares outstanding as of June 30, 2012 and December 31, 2011, respectively

     220        218   

Treasury stock at cost, 11,711,275 and 11,705,173 shares as of June 30, 2012 and December 31, 2011, respectively

     (10,499     (10,421

Additional paid-in capital

     169,836        163,584   

Accumulated deficit

     (37,670     (37,742
  

 

 

   

 

 

 

Total stockholders’ equity

     121,887        115,639   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 153,012      $ 137,702   
  

 

 

   

 

 

 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents

Envestnet, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share information)

(Unaudited)

 

     Three Months Ended
June 30,
    Six Months Ended
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   
  

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents

Envestnet, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share information)

(Unaudited)

 

     Common Stock      Treasury Stock     Additional
Paid-in
Capital
     Accumulated
deficit
    Total
Stockholders’
Equity
 
     Shares      Amount      Common
Shares
    Amount         

Balance, December 31, 2011

     43,515,899       $ 218         (11,705,173   $ (10,421   $ 163,584       $ (37,742   $ 115,639   

Exercise of stock options

     224,793         1         —          —          1,564         —          1,565   

Issuance of common stock -

                 

Vesting of restricted stock

     21,235         —           —          —          —           —          —     

Issuance of restricted stock

     232,150         1             2,758           2,759   

Stock-based compensation

     —           —           —          —          1,930         —          1,930   

Purchase of treasury stock (at cost)

     —           —           (6,102     (78     —           —          (78

Net income

     —           —           —          —          —           72        72   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Balance, June 30, 2012

     43,994,077       $ 220         (11,711,275   $ (10,499   $ 169,836       $ (37,670   $ 121,887   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents

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   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information - cash paid during the period for:

    

Income taxes

   $ 325      $ 391   

See accompanying notes to unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

1. Organization and Description of Business

Envestnet, Inc. (“Envestnet”) and its subsidiaries (collectively, the “Company”) provide open-architecture wealth management services and technology to independent financial advisors and financial institutions. These services and related technology are provided via the Envestnet AdvisorSuite®, Envestnet | PMC®, Envestnet | Vantage, Envestnet | Prima and Envestnet | Tamarac.

AdvisorSuite is a platform of integrated, internet-based technology applications and related services that provide portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back-office and middle-office operations and administration.

The Company’s investment consulting group, Envestnet | PMC, provides investment manager due diligence and research, a full spectrum of investment offerings supported by both proprietary and third-party research, and overlay portfolio management services.

Envestnet | Prima provides institutional-quality research and due diligence on investment and fund managers and Envestnet | Tamarac provides leading rebalancing, performance reporting and practice management software.

Through these platform and service offerings, the Company provides open-architecture support for a wide range of investment products (separately managed accounts, multi-manager accounts, mutual funds, exchange-traded funds, stock baskets, alternative investments, and other fee-based investment solutions) from Envestnet | PMC and other leading investment providers via multiple custodians, and also account administration and reporting services.

Envestnet operates six registered investment advisor subsidiaries (“RIAs”) and a registered broker-dealer. Four of the RIAs are registered with the Securities and Exchange Commission (“SEC”), one RIA is registered only with States of Colorado, North Carolina and Texas and one RIA is registered only with the State of Washington. The broker-dealer is registered with the SEC, all 50 states and the District of Columbia and is a member of the Financial Industry Regulatory Authority (“FINRA”).

 

2. Basis of Presentation and Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements of the Company as of June 30, 2012 and for the three and six months ended June 30, 2012 and 2011 have not been audited by an independent registered public accounting firm. These unaudited condensed consolidated financial statements reflect all normal recurring adjustments which are, in the opinion of management, necessary to present fairly the Company’s financial position as of June 30, 2012 and the results of operations, stockholders’ equity and cash flows for the periods presented herein. The unaudited condensed consolidated balance sheet as of December 31, 2011 was derived from the Company’s audited financial statements for the year ended December 31, 2011 but does not include all disclosures, including notes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”). The results of operations for the three and six months ended June 30, 2012 are not necessarily indicative of the operating results to be expected for other interim periods or for the full fiscal year. Dollar amounts contained in these unaudited condensed consolidated financial statements are in thousands, except share and per share amounts.

The unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. 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 filed for the year ended December 31, 2011.

The preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in these unaudited condensed consolidated financial statements and accompanying notes. Significant estimates in these unaudited condensed consolidated financial statements include estimating uncollectible receivables, costs capitalized for internally developed software, valuations and assumptions used for impairment testing of goodwill, intangible and other long-lived assets, fair value of stock and stock options issued, realization of deferred tax assets and valuation and other assumptions used to allocate purchase prices in business combinations. Actual results could differ materially from those estimates under different assumptions or conditions.

 

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Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

Revenue Recognition—The Company recognizes revenue from services related to asset management and administration, licensing and professional services fees.

 

   

Asset management and administration fees—The Company derives revenues from fees charged as a percentage of the assets that are managed or administered on its technology platform by financial advisors, financial institutions, and their clients (collectively “customers”) and for services the Company provides to its customers. Such services include investment manager due diligence and research, portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back office and middle-office operations and administration. Investment decisions for assets under management or administration are made by our customers. The asset management and administration fees the Company earns are generally based upon a contractual percentage of assets managed or administered on our platform based on preceding quarter-end values. The contractual fee percentages vary based on the level and type of services the Company provides to its customers. Fees related to assets under management or administration increase or decrease based on values of existing customer accounts. The values are affected by inflows or outflows of customer funds and market fluctuations.

 

   

Licensing and professional services fees—

Licensing—The Company derives licensing fees from recurring contractual fixed fee contracts with larger financial institutions or enterprise clients. Licensing contracts allow the customer to provide a unique configuration of platform features and investment solutions for their advisors. The licensing fees vary based on the type of services provided and our revenues received under license agreements are recognized over the contractual term.

The Company’s license agreements do not generally provide its customers the ability to take possession of its software or host the software on its own systems or through a hosting arrangement with an unrelated party. However, in a certain instance, a customer has the ability to take possession of the software, and accordingly, the Company considers this circumstance as a software multiple-element arrangement. As a software multiple-element arrangement, the Company is required to determine whether there is vendor specific objective evidence (“VSOE”) of the various elements, including the software license and service components. The Company has not established VSOE of fair value for the separate components, and accordingly, recognizes revenue from these arrangements at such time as all elements of the arrangement have been delivered.

For the Company’s non-software multiple-element arrangements, the Company allocates the revenue in the arrangement using VSOE or third-party evidence (“TPE”) of selling price, or using the estimated selling price (“ESP”) of deliverables if it does not have VSOE or TPE. VSOE is the price charged when the same or similar product or service is sold separately. Many of the Company’s contracts renew automatically at the same rate as the original contract. The Company defines VSOE as the renewal rates of the standalone transactions.

TPE is determined based on the prices charged by the Company’s competitors for a similar deliverable when sold separately. However, due to the difficulty in obtaining sufficient information on competitor pricing and differences in the Company’s product offerings when compared with those of the Company’s peers, the Company generally is unable to reliably determine TPE.

ESP is the Company’s best estimate of selling price of an element in a transaction involving multiple deliverables. If the Company is unable to establish selling price using either VSOE or TPE, the Company uses ESP in the allocation of arrangement consideration. The objective of ESP is to determine the price at which the Company would transact business if the product or service were sold on a standalone basis. The Company determines ESP based on revenue price drivers applied within a narrow range.

For multiple-element arrangements, the consideration allocated to online license fees is recognized on a straight line basis over the initial contract period, which typically ranges from one to five years and commences with the completed implementation date for the related product. The Company generally recognizes revenue for consideration allocated to implementation and consulting services in a multiple-element arrangement as services are performed because these services have standalone value separate from the online license fees.

Professional services—The Company derives professional service fees from providing contractual customized service platform software development, which are recognized under a proportional performance model utilizing an output based approach. The Company’s contracts have fixed prices, and generally specify or quantify interim deliverables.

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

Substantially all of the Company’s revenues are based on contractual arrangements. Revenues are recognized in the periods in which the related services are performed provided that persuasive evidence of an agreement exists, the fee is fixed or determinable, and collectability is reasonably assured. Cash received by the Company in advance of the performance of services is deferred and recognized as revenue when earned. Certain portions of the Company’s revenues require management’s consideration of the nature of the client relationship in determining whether to recognize as revenue the gross amount billed or net amount retained after payments are made to providers for certain services related to the product or service offering.

The two main factors the Company uses to determine whether to record revenue on a gross or net basis is based on whether:

 

   

the Company has a direct contract with the third party provider; and

 

   

the Company has discretion in establishing fees paid by the customer and fees due to the third party service provider.

When customer fees include charges for third party service providers where the Company has a direct contract with such third party service providers, gross revenue recognized by the Company equals the fee paid by customer. The cost of revenues recognized by the Company is the amount due to the third party provider.

In instances where the Company does not have a direct contract with the third party service provider, the Company does not recognize any revenue or expense. The fees that are collected from the customer by the Company and are remitted to the third party service provider are considered pass through amounts and accordingly are not a component of revenue or cost of revenues.

Deferred Revenue—Deferred revenue primarily consists of implementation and set up fees, professional services, and license fee payments received in advance from customers.

Segments—The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis. Historically, the Company has determined that it has a single reporting segment and operating unit structure. As a result of the acquisitions as discussed in Note 3, the Company has re-examined its reporting and operating structure and has determined it continues to maintain a single reporting and operating unit structure.

Recent Accounting Pronouncements

In June 2011, the FASB issued authoritative guidance that amends ASC Topic 220, Comprehensive Income, to require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and it eliminates the option to present components of other comprehensive income as a part of the statement of changes in stockholders’ equity. In addition, this guidance requires an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. These amendments are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In September 2011, the FASB issued authoritative guidance regarding the testing of goodwill for impairment. This guidance allows companies to perform a “qualitative” assessment to determine whether or not the current two-step quantitative testing method, in which a company compares the fair value of reporting units to its carrying amount including goodwill, must be followed. If a qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment test is not required. A company may choose to use the qualitative assessment on none, some, or all of its reporting units or to bypass the qualitative assessment and proceed directly to the two-step quantitative testing method. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

3. Business Acquisitions

FundQuest Acquisition

On December 13, 2011, the Company acquired all of the outstanding shares of FundQuest Incorporated (“FundQuest”), a subsidiary of BNP Paribas Investment Partners USA Holdings, Inc. for total consideration of approximately $27,796. FundQuest was renamed Envestnet Portfolio Solutions, Inc. (“EPS”) subsequent to the acquisition. EPS provides managed account programs, overlay portfolio management, mutual funds, institutional asset management and investment consulting to registered investment advisors, independent advisors, broker-dealers, banks and trust organizations. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is not deductible for income tax purposes.

During the three months ended March 31, 2012, the Company finalized the estimated working capital adjustment. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date of December 13, 2011 as initially reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011:

 

    December 13, 2011     Consideration     December 13, 2011  
    (As initially reported)     Adjustments     (As adjusted)  

Accounts receivable

  $ 2,603      $ —        $ 2,603   

Prepaid expenses and other current assets

    46        —          46   

Property and equipment

    442        —          442   

Intangible assets

    11,830        —          11,830   

Goodwill

    20,192        (889     19,303   

Accounts payable and accrued liabilities

    (1,364     —          (1,364

Deferred income taxes

    (4,710     —          (4,710

Deferred revenue

    (354     —          (354
 

 

 

   

 

 

   

 

 

 

Total assets acquired

  $ 28,685      $ (889   $ 27,796   
 

 

 

   

 

 

   

 

 

 

The initially reported estimated fair values of assets acquired and liabilities assumed were based on the information that was available at the time the Company filed its annual report on Form 10-K for the year ended December 31, 2011. Management of the Company believes all relevant information is now available to finalize the estimates.

Prima Capital Holding, Inc. Acquisition

On April 5, 2012, the Company completed the acquisition of Prima Capital Holding, Inc. (“Prima”). In accordance with the stock purchase agreement, the Company acquired all of the outstanding shares of Prima for total consideration of approximately $13,925. Prima provides investment management due diligence, research applications, asset allocation modeling and multi-manager portfolios to the wealth management and retirement industries. Prima’s clientele includes seven of the top 20 banks in the U.S. as measured by total assets, independent RIAs, regional broker-dealers, family offices and trust companies. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is not deductible for income tax purposes.

The consideration transferred in the acquisition was as follows:

 

Cash paid to owners

   $ 13,750   

Cash assumed

     (1,767

Cash paid for working capital settlement

     1,942   
  

 

 

 
   $ 13,925   
  

 

 

 

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

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

 

Accounts receivable

   $ 72   

Prepaid expenses and other current assets

     36   

Notes receivable

     860   

Property and equipment

     103   

Deferred income taxes - non current

     1,129   

Intangible assets

     4,940   

Goodwill

     9,555   

Accounts payable and accrued liabilities

     (171

Deferred income tax liabilities

     (1,869

Deferred revenue

     (730
  

 

 

 

Total net assets acquired

   $ 13,925   
  

 

 

 

The estimated fair value of deferred revenue is provisional and is based on the information that was available as of the acquisition date to estimate the fair value of this amount. The Company believes the information provides a reasonable basis for estimating the fair values of these amounts, but is waiting for additional information necessary to finalize the fair value. Therefore, provisional measurements of fair value reflected are subject to change and such change could be significant. The Company expects to finalize the valuation of deferred revenue and complete the acquisition accounting as soon as practicable but no later than September 31, 2012.

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

 

     Amount      Weighted Average
Useful Life in
Years
     Amortization
Method

Customer list

   $ 3,740         10       Accelerated

Proprietary technology

     700         5       Accelerated

Trade names

     500         5       Accelerated
  

 

 

       

Total

   $ 4,940         
  

 

 

       

The results of Prima’s operations are included in the consolidated statement of operations beginning April 5, 2012. Prima’s revenues and net loss for the period beginning April 5, 2012 through June 30, 2012 totaled $1,149 and ($330), respectively. The net loss included pre-tax acquired intangible asset amortization of $325.

Tamarac, Inc. Acquisition

On May 1, 2012, the Company completed the acquisition of Tamarac, Inc. (“Tamarac”). In accordance with the merger agreement, a newly formed subsidiary of Envestnet merged with and into Tamarac, and Tamarac became a wholly owned subsidiary of Envestnet. Under the terms of the merger agreement, total consideration was approximately $48,427 for all of the outstanding stock of Tamarac. Tamarac is a provider of sophisticated portfolio management technology that enables RIAs to efficiently deliver customized individual account management to their clients. The goodwill arising from the acquisition represents the expected synergistic benefits of the transaction and the knowledge and experience of the workforce in place. The goodwill recognized is expected to be non-deductible for income tax purposes.

As a result of the merger with Tamarac, the Company adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock. The unvested common stock vests based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition (Note 13). The Company also granted to certain Tamarac employees 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date (Note 13).

In accordance with the terms of the merger agreement between Envestnet and Tamarac, Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed (Note 12).

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

The consideration transferred in the acquisition was as follows:

 

Cash paid to owners

   $ 54,000   

Non-cash consideration

     101   

Cash assumed

     (2,533

Receivable from working capital settlement

     (3,141
  

 

 

 
   $ 48,427   
  

 

 

 

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

 

Accounts receivable

   $ 489   

Other receivables

     681   

Prepaid expenses and other current assets

     216   

Deferred income tax assets

     7,235   

Property and equipment

     444   

Deposits

     379   

Intangible assets

     16,150   

Goodwill

     35,263   

Accounts payable and accrued liabilities

     (2,356

Deferred income tax liabilities

     (6,143

Deferred revenue

     (3,931
  

 

 

 

Total net assets acquired

   $ 48,427   
  

 

 

 

The estimated fair value of deferred revenue and the working capital settlement is provisional and is based on the information that was available as of the acquisition date to estimate the fair value of these amounts. The Company believes the 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 value reflected are subject to change and such changes could be significant. The Company expects to finalize the valuation of deferred revenue and working capital settlement, and complete the acquisition accounting as soon as practicable but no later than the contractual period.

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

 

     Amount      Weighted Average
Useful Life in
Years
     Amortization
Method

Customer list

   $ 8,680         12       Accelerated

Proprietary technology

     5,880         8       Accelerated

Trade names

     1,590         5       Accelerated
  

 

 

       

Total

   $ 16,150         
  

 

 

       

The results of Tamarac’s operations are included in the consolidated statement of operations beginning May 1, 2012. Tamarac’s revenues and net loss for the period May 1, 2012 through June 30, 2012 totaled $1,784 and ($589), respectively. The net loss includes acquired intangible asset amortization of $326

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

For the three and six months ended June 30, 2012, acquisition related costs for FundQuest, Tamarac and Prima, totaled $1,265 and $1,881, respectively, and are included in general and administration expenses.

Pro forma results for Envestnet, Inc. giving effect to the FundQuest, Prima and Tamarac acquisitions

The following unaudited pro forma financial information presents the combined results of operations of Envestnet, Prima and Tamarac for the three and six months ended June 30, 2012. The following unaudited pro forma financial information presents the combined results of operations of Envestnet, FundQuest, Prima and Tamarac for the three and six months ended June 30, 2011. For the three and six months ended June 30, 2012 and 2011, the unaudited pro forma financial information presents the results as if the acquisitions had occurred as of the beginning of 2011.

The unaudited pro forma results presented include amortization charges for acquired intangible assets, the elimination of intercompany transactions, restructuring charges, unrealized gain or loss on warrant and imputed interest expense, stock based compensation expense and the related tax effect on the aforementioned items.

Pro forma financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented.

 

     Three Months ended
June 30,
     Six Months ended
June 30,
 
     2012     2011      2012     2011  

Revenue

   $ 39,082      $ 37,968       $ 76,197      $ 73,606   

Net income (loss)

     (957     2,146         (1,980     2,158   

Net income (loss) per share:

         

Basic

     (0.03     0.07         (0.06     0.07   

Diluted

     (0.03     0.06         (0.06     0.06   

 

4. Customer Inducements

Prior to acquiring FundQuest, the Company provided FundQuest and its clients with the Company’s platform technology and support services, replacing FundQuest’s technology platform (“Platform Services Agreement”). The Company earned fees based upon a contractual percentage of assets under administration. As a result of the acquisition of FundQuest on December 13, 2011 (Note 3), the Platform Services Agreement was terminated, and all of the assets and liabilities associated with the Platform Services Agreement were eliminated.

In connection with the Platform Services Agreement, the Company was required to make various payments to FundQuest during the contract term as defined in the Platform Services Agreement. These payments included an up-front payment upon completion of the conversion of FundQuest’s clients’ assets to the Company’s technology platform, five annual payments and a payment after the fifth year of the Platform Services Agreement calculated based on the average annual revenues the Company was to receive from FundQuest during the first five years of the contract term. As of December 31, 2010, the estimate of the present value of these payments was approximately $30,400. The Company also issued to FundQuest a warrant to purchase 1,388,888 shares of its common stock, with an exercise price of $10.80 for an estimated fair value of $2,946 as of December 31, 2010. The present value of all payments and the fair value of the warrant was accounted for as customer inducement costs and were amortized as a reduction to the Company’s revenues from assets under management or administration on a straight-line basis over the contract term of seven years.

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

Amortization and imputed interest expense was as follows:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Amortization expense

   $ —         $ 1,207       $ —         $ 2,413   

Imputed interest expense

     —           202         —           407   

 

5. Property and Equipment

Property and equipment consist of the following:

 

   

Estimated Useful Life

   June 30,
2012
    December 31,
2011
 

Cost:

      

Office furniture and fixtures

  5-7 years    $ 3,338      $ 2,713   

Computer equipment and software

  3 years      20,831        18,942   

Other office equipment

  5 years      598        598   

Leasehold improvements

  Shorter of the term of the lease or useful life of the asset      7,340        5,833   
    

 

 

   

 

 

 
       32,107        28,086   

Less accumulated depreciation and amortization

       (19,730     (16,995
    

 

 

   

 

 

 

Property and equipment, net

     $ 12,377      $ 11,091   
    

 

 

   

 

 

 

Depreciation and amortization expense for property and equipment was as follows:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Depreciation and amortization expense

   $ 1,223       $ 950       $ 2,260       $ 1,814   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

6. Internally Developed Software

Internally developed software consists of the following:

 

    

Estimated Useful Life

   June 30,
2012
    December 31,
2011
 

Internally developed software

   5 years    $ 11,870      $ 10,882   

Less accumulated depreciation

        (8,118     (7,358
     

 

 

   

 

 

 

Internally developed software, net

      $ 3,752      $ 3,524   
     

 

 

   

 

 

 

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

Amortization expense for internally developed software was as follows:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Amortization expense

   $ 377       $ 397       $ 760       $ 799   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

7. Goodwill and Intangible Assets

Changes in the carrying amount of the Company’s goodwill was as follows:

 

Balance at December 31, 2011

   $ 22,223   

FundQuest adjustment (note 3)

     (889
  

 

 

 

Balance at March 31, 2012

     21,334   

Prima acquisition (note 3)

     9,555   

Tamarac acquisition (note 3)

     35,263   
  

 

 

 

Balance at June 30, 2012

   $ 66,152   
  

 

 

 

Intangible assets consist of the following:

 

          June 30, 2012      December 31, 2011  
    

Useful Life

   Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 

Customer list

   4 -8 years    $ 28,103       $ (5,815     22,288       $ 15,683       $ (3,458   $ 12,225   

Proprietary technology

   5 - 8 years      6,580         (178     6,402         —           —          —     

Trade Names

   5 years      2,090         (68     2,022         —           —          —     
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total intangible assets

      $ 36,773       $ (6,061   $ 30,712       $ 15,683       $ (3,458   $ 12,225   
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Amortization expense for intangible assets was as follows:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Amortization expense

   $ 1,624       $ 231       $ 2,603       $ 513   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

8. Other Non-Current Assets

Other non-current assets consist of the following:

 

     June 30,
2012
     December 31,
2011
 

Investment in private company

   $ 1,250       $ 1,250   

Deposits

     

Lease

     1,660         1,538   

Other

     264         259   

Other

     110         115   
  

 

 

    

 

 

 

Total other non-current assets

   $ 3,284       $ 3,162   
  

 

 

    

 

 

 

 

9. Fair Value Measurements

Financial assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon a fair value hierarchy established by U.S. GAAP, which prioritizes the inputs used to measure fair value into the following levels:

 

Level 1:    Inputs based on quoted market prices in active markets for identical assets or liabilities at the measurement date.
Level 2:    Inputs based on quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or inputs that are observable and can be corroborated by observable market data.
Level 3:    Inputs reflect management’s best estimates and assumptions of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the valuation of the instruments.

Fair Value on a Recurring Basis:

The Company periodically invests excess cash in money market funds not insured by the FDIC. The Company believes that the investments in money market funds are on deposit with creditworthy financial institutions and that the funds are highly liquid. The fair values of the Company’s investments in money market funds are based on the daily quoted market prices for the net asset value of the various money market funds. These money market funds are considered Level 1 assets, totaled approximately $9,761 and $52,383 as of June 30, 2012 and December 31, 2011, respectively and are included in cash and cash equivalents in the unaudited condensed consolidated balance sheet.

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

10. Accrued Expenses

Accrued expenses consist of the following:

 

     June 30,
2012
     December 31,
2011
 

Accrued investment manager fees

   $ 10,901       $ 8,451   

Accrued compensation and related taxes

     3,807         4,230   

Accrued professional services

     501         481   

Accrued restructuring charges

     34         290   

Other accrued expenses

     1,242         1,467   
  

 

 

    

 

 

 

Total accrued expenses

   $ 16,485       $ 14,919   
  

 

 

    

 

 

 

As a result of the FundQuest, Prima and Tamarac acquisitions, the Company incurred restructuring charges, primarily severance charges related to the termination of certain FundQuest and Tamarac employees and lease abandonment charges related to Prima in the six months ended June 30, 2012.

In the three and six months ended June 30, 2012, the Company recognized pretax restructuring charges of $88 and $115, respectively. In the three and six months ended June 30, 2011, the Company recognized pretax restructuring charges of $43 and $53, respectively.

The summary of activity in accrued restructuring charges was as follows:

 

Balance at December 31, 2011

   $ 290   

Restructuring provision incurred

     27   

Payments

     (298
  

 

 

 

Balance at March 31, 2012

     19   

Restructuring provision incurred

     88   

Payments

     (73
  

 

 

 

Balance at June 30, 2012

   $ 34   
  

 

 

 

 

11. Income Taxes

U.S. GAAP requires the interim period tax provision to be determined as follows:

 

   

At the end of each quarter, the Company estimates the tax that will be provided for the year stated as a percent of estimated “ordinary” income for the year. The term ordinary income refers to earnings from continuing operations before income taxes, excluding significant unusual or infrequently occurring items.

The estimated annual effective rate is applied to the year-to-date “ordinary” income at the end of each quarter to compute the year-to-date tax applicable to ordinary income. The tax expense or benefit related to ordinary income in each quarter is the difference between the most recent year-to-date and the prior quarter year-to-date computations.

 

   

The tax effects of significant unusual or infrequently occurring items are recognized as discrete items in the interim period in which the events occur. The impact of changes in tax laws or rates on deferred tax amounts, the effects of changes in judgment about beginning of the year valuation allowances and change in tax reserves resulting from the finalization of tax audits or reviews are examples of significant unusual or infrequently occurring items that are recognized as discrete items in the interim period in which the event occurs.

The determination of the annual effective tax rate is based upon a number of significant estimates and judgments, including the estimated annual pretax income of the Company and the development of tax planning strategies during the year.

 

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Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

Net deferred tax assets consist of the following:

 

     June 30,
2012
    December 31,
2011
 

Current:

    

Deferred revenue

   $ 291      $ 30   

Prepaid expenses and accruals

     319        162   
  

 

 

   

 

 

 

Net current deferred tax assets

     610        192   
  

 

 

   

 

 

 

Non-Current:

    

Deferred rent

   $ 586      $ 535   

Net operating loss and tax credit carry-forwards

     16,315        9,910   

Loss on investments

     2,157        2,157   

Amortization and depreciation

     (12,807     (4,516

Other

     4,251        2,050   
  

 

 

   

 

 

 

Net long-term deferred tax assets

     10,502        10,136   
  

 

 

   

 

 

 

Net deferred tax assets

     11,112        10,328   

Less valuation allowance

     (3,444     (3,444
  

 

 

   

 

 

 
   $ 7,668      $ 6,884   
  

 

 

   

 

 

 

The valuation allowance as of June 30, 2012 and December 31, 2011 was related to capital losses of $2,157 and Federal and state net operating losses of $1,287 primarily due to Section 382 limitations. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some or all of the deferred tax assets will be realized.

The following table includes tax expense and the effective tax rate for the Company’s income from operations:

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Income (loss) before income taxes

   $ (1,118   $ 4,068      $ 120      $ 6,440   

Income tax provision

     (450     1,621        48        2,589   

Effective tax rate

     40.2     39.8     40.2     40.2

Upon exercise of stock options, the Company recognizes any difference between U.S. GAAP compensation expense and income tax compensation expense as a tax windfall or shortfall. The difference is charged to equity in the case of a windfall. When the exercise results in a windfall and the windfall results in a net operating loss (“NOL”), or the windfall increases an NOL carryforward, no windfall is recognized until the deduction reduces the income tax payable. For U.S. GAAP purposes, the Company has deferred the recognition of approximately $1,381 in windfall tax benefits associated with its stock-based compensation until a cash tax savings is realized. The benefit will be recorded in stockholders’ equity when utilized on an income tax return to reduce taxes payable, and as such, it will not impact the Company’s effective tax rate.

The total amount of the gross liability for unrecognized tax benefits reported in other non-current liabilities was $688 and $573 at June 30, 2012 and December 31, 2011, respectively. At June 30, 2012, the amount of unrecognized tax benefits that would benefit the Company’s effective tax rate, if recognized, was $522.

The Company recognizes potential interest and penalties related to unrecognized tax benefits in income tax expense. The Company had accrued interest and penalties of $209 as of both June 30, 2012 and December 31, 2011.

 

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Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

The Company files a consolidated federal income tax return and separate tax returns with various states. Additionally, a subsidiary of the Company files a tax return in a foreign jurisdiction. The Company’s tax returns for the calendar years ended December 31, 2011, 2010 and 2009, and fiscal year ended March 31, 2009 remain open to examination by the Internal Revenue Service in their entirety. They also remain open with respect to state taxing jurisdictions.

 

12. Stockholders’ Equity

In accordance with the terms of the merger agreement between Envestnet and Tamarac (Note 3 and 13), Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed. These shares cannot be sold or otherwise transferred for a period of two years following the date of merger. If a participant terminates their employment with the Company or is terminated for cause, the participant shall be required to pay the Company an amount equal to 5% multiplied by the closing market price on the day before the merger closed.

 

13. Stock-Based Compensation

As a result of the merger between Envestnet and Tamarac (Note 3), the Company adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of restricted common stock, stock options and the purchase of common stock for certain Tamarac employees. The maximum number of shares of stock which may be issued with respect to awards under the 2012 Plan shall be equal to 1,023,851 shares of stock

The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock (“Target Revenue Incentive Awards”). The Target Revenue Incentive Awards vest based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition. The Company measured the cost of these awards based on the estimated fair value of the award as of the market closing price on the day before the acquisition closed. The Company is recognizing the estimated expense on a graded-vesting method over a requisite service period of three to five years, which is the estimated vesting period. The Company has estimated expected forfeitures at the grant date and will recognize compensation expense only for those awards expected to vest. The initial forfeiture assumption will be reassessed in subsequent periods and may change based upon new facts and circumstances. Changes in the forfeiture assumptions may impact the total amount of expense ultimately recognized over the vesting period.

The Company also granted to certain Tamarac employees 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date.

In addition, in accordance with the 2012 Plan, Tamarac senior management was required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed (Note 12). These shares cannot be sold or otherwise transferred for a period of two years following the date of merger. If a participant terminates their employment with the Company or is terminated for cause, the participant shall be required to pay the Company an amount equal to 5% multiplied by the closing market price on the day before the merger closed.

Stock Options

The Company has stock options and restricted stock outstanding under the 2004 Stock Incentive Plan (the “2004 Plan”), the 2010 Long-Term Incentive Plan (the “2010 Plan”) and the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”) as described below (collectively “the Plans”). As of June 30, 2012, the maximum number of shares available for future issuance under the Plans is 1,775,746.

 

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Table of Contents

Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

Employee stock-based compensation expense was as follows:

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Employee stock-based compensation expense

   $ 1,135      $ 829      $ 1,930      $ 1,645   

Tax effect on employee stock-based compensation expense

     (456     (330     (777     (661
  

 

 

   

 

 

   

 

 

   

 

 

 

Net effect on income

   $ 679      $ 499      $ 1,153      $ 984   
  

 

 

   

 

 

   

 

 

   

 

 

 

The following weighted average assumptions were used to value options granted during the periods indicated:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012     2011      2012     2011  

Grant date fair value of options

   $ 4.97      $ —         $ 4.91      $ 5.26   

Volatility

     39.7     —           39.7     39.3

Risk-free interest rate

     1.2     —           1.2     2.5

Dividend yield

     0.0     —           0.0     0.0

Expected term (in years)

     6.0        —           6.0        6.0   

The following table summarizes option activity under the 2004 Plan, 2010 Plan and 2012 Plan:

 

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

Outstanding as of December 31, 2011

     4,863,718      $ 8.19         

Granted

     149,652        12.45         

Exercised

     (124,956     7.59         

Forfeited

     (2,000     9.70         
  

 

 

         

Outstanding as of March 31, 2012

     4,886,414        8.34         6.7       $ 20,544   

Granted

     589,263        12.55         

Exercised

     (99,837     6.18         

Forfeited

     (1,800     9.00         
  

 

 

         

Outstanding as of June 30, 2012

     5,374,040        8.84         6.8         17,737   
  

 

 

         

Options exercisable

     2,977,757        7.43         5.4         13,769   
  

 

 

         

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

Exercise prices of stock options outstanding as of June 30, 2012 range from $0.11 to $13.45.

Restricted Stock

Periodically, the Company grants restricted stock awards under the 2010 Plan to employees that vest one-third on each of the first three anniversaries of the grant date. The Company also granted restricted stock awards under the 2012 Plan that vest upon Tamarac meeting certain performance conditions and then a subsequent two year service condition.

The following is a summary of the activity for unvested restricted stock awards granted under all Plans:

 

     Number
of Shares
    Weighted-
Average
Grant
Date Fair
Value per
Share
 

Balance at December 31, 2011

     73,820      $ 12.26   

Granted

     155,383        12.44   

Vested

     (21,235     12.55   

Expired/cancelled

     (1,064     12.45   

Forfeited

     (104     12.55   
  

 

 

   

Balance at March 31, 2012

     206,800        12.36   

Granted

     559,551        12.51   

Forfeited

     (381     12.49   
  

 

 

   

Balance at June 30, 2012

     765,970      $ 12.47   
  

 

 

   

At June 30, 2012, there was $7,643 of unrecognized compensation cost related to unvested stock options which the Company expects to recognize over a weighted-average period of 2.1 years. At June 30, 2012, there was $2,060 of unrecognized compensation cost related to unvested restricted stock which the Company expects to recognize over a weighted-average period of 4.1 years.

 

14. Earnings Per Share

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted earnings per share reflects the weighted average number of shares outstanding after the assumed conversion of all dilutive securities.

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

The following is a reconciliation of net earnings to basic earnings per share and diluted earnings per share:

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2012     2011     2012     2011  

Net income (loss)

  $ (668   $ 2,447      $ 72      $ 3,851   
 

 

 

   

 

 

   

 

 

   

 

 

 

Basic number of weighted-average shares outstanding

    32,149,957        31,591,412        32,004,386        31,502,139   

Effect of dilutive shares:

       

Options to purchase common stock

    —          1,082,818        900,085        1,112,797   

Common warrants

    —          295,594        144,076        297,980   

Unvested restricted stock

    —          —          6,085        —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted number of weighted-average shares outstanding

    32,149,957        32,969,824        33,054,632        32,912,916   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per share:

       

Basic

  $ (0.02   $ 0.08      $ 0.00      $ 0.12   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ (0.02   $ 0.07      $ 0.00      $ 0.12   
 

 

 

   

 

 

   

 

 

   

 

 

 

Common share equivalents for securities that were anti-dilutive and therefore excluded from the computation of diluted earnings per share was as follows:

 

     Three Months Ended
June  30,
     Six Months Ended
June  30,
 
     2012      2011      2012      2011  

Options to purchase common stock

     5,374,040         —           1,227,248         —     

Common warrants

     1,388,888         —           —           —     

Unvested restricted stock

     765,970         —           755,970         —     

 

15. Major Customers

One customer accounted for more than 10% of the Company’s fees receivable:

 

     June 30,
2012
    December 31,
2011
 

Fidelity

     19     34

The Company has not established an allowance for doubtful accounts related to the receivables from this customer as of June 30, 2012 or December 31, 2011.

 

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Envestnet, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except share and per share amounts)

 

One customer accounted for more than 10% of the Company’s revenues:

 

     Three Months Ended
June  30,
    Six Months Ended
June  30,
 
     2012     2011     2012     2011  

Fidelity

     22     31     23     31

 

16. Commitments and Contingencies

The Company is involved in litigation arising in the ordinary course of its business. Management does not believe that the outcome of any of the current litigation, individually or in the aggregate, would, if determined adversely to it, have a material adverse effect on its results of operations, financial condition, cash flows or business.

The Company rents office space under leases that expire at various dates through 2023. Future minimum lease commitments under these operating leases was as follows:

 

Years ending December 31:

  

Remainder of 2012

   $ 1,720   

2013

     4,189   

2014

     5,075   

2015

     5,272   

2016

     5,490   

Thereafter

     26,411   
  

 

 

 
   $ 48,157   
  

 

 

 

 

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, the terms “Envestnet”, the “Company”, “we”, “us” and “our” refer to Envestnet, Inc. and its subsidiaries. All amounts are in thousands, except share and per share information, financial advisors and client accounts.

Forward-Looking Statements

This quarterly report on Form 10-Q 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 other comparable terminology. 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 our Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”) under “Risk Factors”; 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 quarterly report to conform those statements to reflect the occurrence of unanticipated events, except as required by applicable law.

You should read this quarterly report on Form 10-Q and our 2011 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 unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report and the audited consolidated financial statements and the related notes included in our 2011 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.

Overview

We are a leading independent provider of integrated wealth management software and services to financial advisors and institutions. Envestnet AdvisorSuite® software empowers advisors to better manage client outcomes and strengthen their practice. Envestnet® also offers advanced portfolio solutions through Envestnet | PMC®. Envestnet | Vantage gives advisors an in-depth view of clients’ various investments, empowering them to give holistic, personalized advice. Envestnet | Prima™ provides institutional-quality research and due diligence on investment and fund managers and Envestnet | Tamarac™ provides leading rebalancing, reporting and practice management software.

By integrating a wide range of investment solutions and services, our Web-based technology platform provides financial advisors with the flexibility to address their clients’ needs. We work with financial advisors who are independent, as well as those who are associated with financial advisory firms and financial institutions, which we refer to as enterprise clients. We focus our technology development efforts and our sales and marketing approach on addressing financial advisors’ front-, middle- and back-office needs. We believe that our investment solutions and services allow financial advisors to be more efficient and effective in the activities critical to their businesses by facilitating client interactions, supporting and enhancing portfolio management and analysis, and enabling reliable account support and administration. In addition, we are not controlled by a financial institution, broker-dealer or other entity operating in the securities or wealth management industry, which we believe affords us a greater level of independence and impartiality.

Operational Highlights

Revenues from assets under management (“AUM”) or assets under administration (“AUA”) increased 22% from $25,427 in the three months ended June 30, 2011 to $31,012 in the three months ended June 30, 2012. Revenues from assets under management (“AUM”) or assets under administration (“AUA”) increased 22% from $48,698 in the six months ended June 30, 2011 to $59,275 in the six months ended June 30, 2012. The increase in revenues from assets under management or administration were a result of the positive effects of new account growth and positive net flows of AUM or AUA, as well as an increase in revenues related to the FundQuest acquisition.

Total revenues, which include licensing and professional service fees, increased 21% from $31,334 in the three months ended June 30, 2011 to $37,962 in the three months ended June 30, 2012. Total revenues, which include licensing and professional service fees, increased 17% from $60,596 in the six months ended June 30, 2011 to $70,604 in the six months ended June 30, 2012. The overall increase in revenues were also favorably impacted by revenues related to acquired companies.

 

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Table of Contents

Net loss for the three months ended June 30, 2012 was ($668), or ($0.02) per diluted share, compared to net income of $2,447, or $0.07 per diluted share for the three months ended June 30, 2011. Net income for the six months ended June 30, 2012 was $72, or $0.00 per diluted share, compared to net income of $3,851, or $0.12 per diluted share for the six months ended June 30, 2011.

Adjusted revenues for the three months ended June 30, 2012 was $38,579, an increase of 23% from $31,334 in the prior year period. Adjusted revenue for the six months ended June 30, 2012 was $71,221, an increase of 18% from $60,596 in the prior year period.

Adjusted EBITDA for the three months ended June 30, 2012 was $5,314, a decrease of 25% from $7,122 in the prior year period. Adjusted EBITDA for the six months ended June 30, 2012 was $10,408, a decrease of 22% from $13,346 in the prior year period.

Adjusted net income for the three months ended June 30, 2012 was $2,230, or $0.07 per diluted share, compared to adjusted net income of $3,479, or $0.11 per diluted share in the prior year period. Adjusted net income for the six months ended June 30, 2012 was $4,431, or $0.13 per diluted share, compared to adjusted net income of $6,443, or $0.20 per diluted share in the prior year period.

Adjusted EBITDA and Adjusted net income are non-GAAP financial measures. See “Non-GAAP Financial Measures” for a discussion of non-GAAP measures and a reconciliation of such measures to GAAP.

Recent Events

Prima Capital Holding, Inc. Acquisition

On April 5, 2012, we completed the acquisition of Prima Capital Holding, Inc. (“Prima”). In accordance with the stock purchase agreement, we acquired all of the outstanding shares of Prima for consideration of approximately $13,925. Prima provides investment management due diligence, research applications, asset allocation modeling and multi-manager portfolios to the wealth management and retirement industries. Prima’s clientele includes seven of the top 20 banks in the U.S. as measured by total assets, independent RIAs, regional broker-dealers, family offices and trust companies.

Tamarac, Inc. Acquisition

On May 1, 2012, the Company completed the acquisition of Tamarac, Inc. (“Tamarac”). In accordance with the merger agreement, a newly formed subsidiary of Envestnet merged with and into Tamarac, and Tamarac became a wholly owned subsidiary of Envestnet. Under the terms of the merger agreement, total consideration was approximately $48,427 for all of the outstanding stock of Tamarac. Such shares vest at pre-established intervals, but in no event later than May 15, 2015, based upon Tamarac meeting certain financial targets. Tamarac is a provider of sophisticated portfolio management technology that enables RIAs to efficiently deliver customized individual account management to their clients.

As a result of the merger with Tamarac, we adopted the Envestnet, Inc. Management Incentive Plan for Envestnet | Tamarac Management Employees (the “2012 Plan”). The 2012 Plan provides for the grant of up to 559,551 shares of unvested common stock. The unvested common stock vests based upon Tamarac meeting certain performance conditions and then a subsequent two year service condition (Note 13). We also granted to certain Tamarac employees, 232,150 stock options to acquire Envestnet common stock at an exercise price of $12.51. These stock options vest on the second anniversary of the grant date.

In accordance with the terms of the merger agreement between Envestnet and Tamarac, Tamarac senior management were required to apply at least 50% (up to 100%) of the aggregate proceeds of the Tamarac change of control payment totaling $2,759 to purchase registered shares of Envestnet common stock (232,150 shares) in an amount equal to 95% multiplied by the Envestnet closing market price on the day before the merger closed.

Key Operating Metrics

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

Licensing metrics in the table below, 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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Table of Contents
     As of  
     June 30,
2011
     September 30,
2011
     December 31,
2011
     March 31,
2012
     June 30,
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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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 June 30, 2012  
     As of
3/31/12
     Gross
Sales
     Redemptions     Net
Flows
     Market
Impact
    As of
6/30/12
 
     (in millions except account data, unaudited)  

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   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Subtotal 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   

Gross sales for the three months ended June 30, 2012 included $4.6 billion in new client conversions.

 

     Asset Rollforward - Six Months Ended June 30, 2012  
     As of
12/31/11
     Gross
Sales
     Redemptions     Net
Flows
     Market
Impact
     As of
6/30/12
 
     (in millions except account data, unaudited)  

Assets under Management (AUM)

   $ 22,936       $ 6,213       $ (3,374   $ 2,839       $ 983       $ 26,758   

Assets under Administration (AUA)

     47,148         17,130         (5,578     11,552         1,811         60,511   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Subtotal AUM/A

   $ 70,084       $ 23,343       $ (8,952   $ 14,391       $ 2,794       $ 87,269   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Fee-Based Accounts

     340,674         112,399         (37,056     75,343            416,017   

 

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Table of Contents

Gross sales for the six months ended June 30, 2012 included $8.7 billion in new client conversions

The mix of AUM and AUM was as follows for the periods indicated:

 

     June 30,
2011
    September 30,
2011
    December 31,
2011
    March 31,
2012
    June 30,
2012
 

Assets under management (AUM)

     23     24     33     32     31

Assets under administration (AUA)

     77     76     67     68     69
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     100     100     100     100     100
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Results of Operations

Three months ended June 30, 2012 compared to three months ended June 30, 2011

 

     Three Months Ended
June 30,
    Increase
(Decrease)
 
     2012     2011     Amount     %  
     (In thousands, unaudited)        

Revenues:

        

Assets under management or administration

   $ 31,012      $ 25,427      $ 5,585        22

Licensing and professional services

     6,950        5,907        1,043        18
  

 

 

   

 

 

   

 

 

   

Total revenues

     37,962        31,334        6,628        21
  

 

 

   

 

 

   

 

 

   

Operating expenses:

        

Cost of revenues

     13,549        10,917        2,632        24

Compensation and benefits

     14,085        10,387        3,698        36

General and administration

     8,148        5,258        2,890        55

Depreciation and amortization

     3,224        1,578        1,646        104

Restructuring charges

     88        43        45        105
  

 

 

   

 

 

   

 

 

   

Total operating expenses

     39,094        28,183        10,911        39
  

 

 

   

 

 

   

 

 

   

Income (loss) from operations

     (1,132     3,151        (4,283     -136
  

 

 

   

 

 

   

 

 

   

Other income (expense):

        

Interest income

     14        20        (6     -30

Interest expense

     —          (204     204        -100

Other income

     —          1,100        (1,100     -100

Gain on investments

     —          1        (1     -100
  

 

 

   

 

 

   

 

 

   

Total other income (expense)

     14        917        (903     -98
  

 

 

   

 

 

   

 

 

   

Income (loss) before income tax provision (benefit)

     (1,118     4,068        (5,186     -127

Income tax provision (benefit)

     (450     1,621        (2,071     -128
  

 

 

   

 

 

   

 

 

   

Net income (loss)

   $ (668   $ 2,447      $ (3,115     -127
  

 

 

   

 

 

   

 

 

   

Revenues

Total revenues increased 21% from $31,334 in the three months ended June 30, 2011 to $37,962 in the three months ended June 30, 2012. The increase was primarily due to an increase in revenues from AUM or AUA of $5,585. Revenues from assets under management or administration were 82% and 81% of total revenues in the three months ended June 30, 2012 and 2011, respectively.

Assets under management or administration

Revenues earned from AUM or AUA increased 22% from $25,427 in the three months ended June 30, 2011 to $31,012 in the three months ended June 30, 2012. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycle in 2012, relative to the corresponding period in 2011. In the second quarter of 2012, revenues were positively affected by new account growth and positive net flows of AUM or AUA during 2011 and 2012, as well as an increase in revenues related to the FundQuest acquisition.

 

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Table of Contents

The number of financial advisors with AUM or AUA that had client accounts on our technology platform increased from 14,613 as of June 30, 2011 to 15,045 as of June 30, 2012 and the number of AUM or AUA client accounts increased from approximately 332,000 as of June 30, 2011 to approximately 416,000 as of June 30, 2012.

Licensing and professional services

Licensing and professional services revenues increased 18% from $5,907 in the three months ended June 30, 2011 to $6,950 in the three months ended June 30, 2012, primarily due to an increase in net licensing revenue of $576. This increase was a result of the acquisitions of Prima and Tamarac, offset by the renegotiated license agreement with Fidelity.

Cost of revenues

Cost of revenues increased 24% from $10,917 in the three months ended June 30, 2011 to $13,549 in the three months ended June 30, 2012, primarily due to a corresponding increase in revenues from AUM or AUA. As a percentage of total revenues, cost of revenues increased from 35% in the three months ended June 30, 2011 to 36% in the three months ended June 30, 2012.

Compensation and benefits

Compensation and benefits increased 36% from $10,387 in the three months ended June 30, 2011 to $14,085 in the three months ended June 30, 2012, primarily due to an increase in salaries, benefits and commissions of $3,180 related to an increase in headcount as a result of the FundQuest, Prima and Tamarac acquisitions. As a percentage of total revenues, compensation and benefits increased from 33% in the three months ended June 30, 2011 to 37% in the three months ended June 30, 2012.

General and administration

General and administration expenses increased 55% from $5,258 in the three months ended June 30, 2011 to $8,148 in the three months ended June 30, 2012, primarily due to increases in transaction related costs of $1,265, occupancy costs of $472, professional and other legal fees of $260 and communication, research and data services expense of $286. Transaction related costs were not material in the prior year period. As a percentage of total revenues, general and administration expenses increased from 17% in the three months ended June 30, 2011 to 21% in the three months ended June 30, 2012.

Depreciation and amortization

Depreciation and amortization expense increased 104% from $1,578 in the three months ended June 30, 2011 to $3,224 in the three months ended June 30, 2012, primarily due to an increase in intangible asset amortization of $1,394 and fixed asset depreciation of $252. The increase in intangible asset amortization was due to an increase in intangible asset amortization as a result of the FundQuest, Prima and Tamarac acquisitions (see note 3 to the unaudited condensed consolidated financial statements). The increase in fixed asset depreciation expense was primarily due to increases in computer equipment and software to support the growth of our operations. As a percentage of total revenues, depreciation and amortization expense increased from 5% in the three months ended June 30, 2011 to 8% in the three months ended June 30, 2012.

Interest expense

Interest expense decreased from $204 in the three months ended June 30, 2011 to zero in the three months ended June 30, 2012, primarily due to three months of imputed interest on payments due to FundQuest compared to no imputed interest in the current year period. As discussed in notes 3 and 4 to the unaudited consolidated financial statements, due to the FundQuest acquisition and the related termination of the Platform Services Agreement with FundQuest, we have ceased imputing interest expense as of the date of acquisition.

Other income

Other income decreased from $1,100 in the three months ended June 30, 2011 to zero in the three months ended June 30, 2012. In 2011, the Company received proceeds from an insurance recovery.

 

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Income tax provision (benefit)

 

     Three Months Ended
June 30,
 
     2012     2011  
     (in thousands, unaudited)  

Income tax provision (benefit)

   $ (450   $ 1,621   

Effective tax rate

     40.2     39.8

For the three months ended June 30, 2012 and June 30, 2011, our effective tax rate differs from the statutory rate primarily due to the effect of state taxes and permanent differences.

Six months ended June 30, 2012 compared to six months ended June 30, 2011

 

     Six Months Ended
June 30,
    Increase
(Decrease)
 
     2012     2011     Amount     %  
     (In thousands, unaudited)        

Revenues:

        

Assets under management or administration

   $ 59,275      $ 48,698      $ 10,577        22

Licensing and professional services

     11,329        11,898        (569     -5
  

 

 

   

 

 

   

 

 

   

Total revenues

     70,604        60,596        10,008        17
  

 

 

   

 

 

   

 

 

   

Operating expenses:

        

Cost of revenues

     25,075        21,045        4,030        19

Compensation and benefits

     24,770        20,533        4,237        21

General and administration

     14,921        10,134        4,787        47

Depreciation and amortization

     5,623        3,126        2,497        80

Restructuring charges

     115        53        62        117
  

 

 

   

 

 

   

 

 

   

Total operating expenses

     70,504        54,891        15,613        28
  

 

 

   

 

 

   

 

 

   

Income from operations

     100        5,705        (5,605     -98
  

 

 

   

 

 

   

 

 

   

Other income (expense):

        

Interest income

     23        46        (23     -50

Interest expense

     (3     (415     412        -99

Other income

     —          1,100        (1,100     -100

Gain on investments

     —          4        (4     -100
  

 

 

   

 

 

   

 

 

   

Total other income (expense)

     20        735        (715     -97
  

 

 

   

 

 

   

 

 

   

Income before income tax provision

     120        6,440        (6,320     -98

Income tax provision

     48        2,589        (2,541     -98
  

 

 

   

 

 

   

 

 

   

Net income

   $ 72      $ 3,851      $ (3,779     -98
  

 

 

   

 

 

   

 

 

   

Revenues

Total revenues increased 17% from $60,596 in the six months ended June 30, 2011 to $70,604 in the six months ended June 30, 2012. The increase was primarily due to an increase in revenues from AUM or AUA of $10,577. Revenues from assets under management or administration were 84% and 80% of total revenues in the six months ended June 30, 2012 and 2011, respectively.

Assets under management or administration

Revenues earned from AUM or AUA increased 22% from $48,698 in the six months ended June 30, 2011 to $59,275 in the six months ended June 30, 2012. The increase was primarily due to an increase in asset values applicable to our quarterly billing cycle in 2012, relative to the corresponding period in 2011. In 2012, revenues were positively affected by new account growth and positive net flows of AUM or AUA during 2011 and the first quarter of 2012, as well as an increase in revenues related to the FundQuest acquisition.

 

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The number of financial advisors with AUM or AUA that had client accounts on our technology platform increased from 14,613 as of June 30, 2011 to 15,045 as of June 30, 2012 and the number of AUM or AUA client accounts increased from approximately 332,000 as of June 30, 2011 to approximately 416,000 as of June 30, 2012.

Licensing and professional services

Licensing and professional services revenues decreased 5% from $11,898 in the six months ended June 30, 2011 to $11,329 in the six months ended June 30, 2012, primarily due to a net decrease in licensing revenue of $1,486 and an increase in professional services revenue of $913. The decrease in licensing revenue was a result of the renegotiated license agreement with Fidelity, offset by the acquisitions of Prima and Tamarac.

Cost of revenues

Cost of revenues increased 19% from $21,045 in the six months ended June 30, 2011 to $25,075 in the six months ended June 30, 2012, primarily due to a corresponding increase in revenues from AUM or AUA. As a percentage of total revenues, cost of revenues increased from 35% in the six months ended June 30, 2011 to 36% in the six months ended June 30, 2012.

Compensation and benefits

Compensation and benefits increased 21% from $20,533 in the six months ended June 30, 2011 to $24,770 in the six months ended June 30, 2012, primarily due to an increase in salaries, benefits and commissions of $4,053 related to an increase in headcount as a result of the FundQuest, Prima and Tamarac acquisitions. As a percentage of total revenues, compensation and benefits increased from 34% in the six months ended June 30, 2011 to 35% in the six months ended June 30, 2012.

General and administration

General and administration expenses increased 47% from $10,134 in the six months ended June 30, 2011 to $14,921 in the six months ended June 30, 2012, primarily due to increases in transaction related costs of $1,881, occupancy costs of $880, professional and other legal fees of $641 and communication, research and data services expense of $505. Transaction related costs were not material in the prior year period. As a percentage of total revenues, general and administration expenses increased from 17% in the six months ended June 30, 2011 to 21% in the six months ended June 30, 2012.

Depreciation and amortization

Depreciation and amortization expense increased 80% from $3,126 in the six months ended June 30, 2011 to $5,623 in the six months ended June 30, 2012, primarily due to an increase in intangible asset amortization of $2,091 and fixed asset depreciation of $406. The increase in intangible asset amortization was due to an increase in intangible asset amortization as a result of the FundQuest, Prima and Tamarac acquisitions (see note 3 to the unaudited condensed consolidated financial statements). The increase in fixed asset depreciation expense was primarily due to increases in computer equipment and software to support the growth of our operations. As a percentage of total revenues, depreciation and amortization expense increased from 5% in the six months ended June 30, 2011 to 8% in the six months ended June 30, 2012.

Interest expense

Interest expense decreased from $415 in the six months ended June 30, 2011 to $3 in the six months ended June 30, 2012, primarily due to six months of imputed interest on payments due to FundQuest in 2011 compared to no imputed interest in the current year period. As discussed in notes 3 and 4 to the unaudited consolidated financial statements, due to the FundQuest acquisition and the related termination of the Platform Services Agreement with FundQuest, we have ceased imputing interest expense as of the date of acquisition.

Other income

Other income decreased from $1,100 in the six months ended June 30, 2011 to zero in the six months ended June 30, 2012. In 2011, the Company received proceeds from an insurance recovery.

 

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Income tax provision

 

     Six Months Ended
June 30,
 
     2012     2011  
     (in thousands, unaudited)  

Income tax provision

   $ 48      $ 2,589   

Effective tax rate

     40.2     40.2

For the six months ended June 30, 2012 and June 30, 2011, our effective tax rate differs from the statutory rate primarily due to the effect of state taxes and permanent differences.

Non GAAP Financial Measures

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  
     (in thousands, unaudited)  

Adjusted revenues

   $ 38,579       $ 31,334       $ 71,221       $ 60,596   

Adjusted EBITDA

     5,314         7,122         10,408         13,346   

Adjusted net income

     2,230         3,479         4,431         6,443   

Adjusted net income per share

     0.07         0.11         0.13         0.20   

“Adjusted revenues” excludes 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 the effect of purchase accounting on the fair value of acquired deferred revenue, interest income, interest expense, income tax provision, depreciation and amortization, 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 the effect of purchase accounting on the fair value of acquired deferred revenue, stock-based compensation expense, restructuring charges 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.

The Compensation Committee of our Board of Directors and our management use adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share:

 

   

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 of Directors concerning our financial performance.

Our Compensation Committee and our management may also consider adjusted EBITDA, among other factors, when determining management’s incentive compensation.

 

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We also present adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share as supplemental performance measures because we believe that they provide our Board of Directors, management and investors with additional information to assess our performance. Adjusted revenues provides 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 customer inducement costs, litigation-related expense, severance, gain on investments, and changes in interest expense and interest income that are influenced by capital structure decisions and capital market conditions. Our management also believes it is useful to exclude non-cash stock-based compensation expense from adjusted EBITDA, adjusted operating income and adjusted net income because non-cash equity grants made at a certain price and point in time do not necessarily reflect how our business is performing at any particular time.

We believe adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are useful to investors in evaluating our operating performance because securities analysts use adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share as supplemental measures to evaluate the overall performance of companies, and we anticipate that our investor and analyst presentations will include adjusted EBITDA, adjusted net income and adjusted net income per share.

Adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are not measurements of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, or any other performance measures derived in accordance with U.S. GAAP, or as an alternative to cash flows from operating activities as a measure of our profitability or liquidity.

We understand that, although adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share are frequently used by securities analysts and others in their evaluation of companies, these measures have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for an analysis of our results as reported under U.S. GAAP. In particular you should consider:

 

   

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

 

   

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

 

   

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

 

   

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements;

 

   

Due to either net losses before income tax expenses or the use of federal and state net operating loss carryforwards in 2012 and 2011 we had cash income tax payments of $325 and $391 in the six months ended June 30, 2012 and 2011, respectively. Income tax payments will be higher if we continue to generate taxable income and our existing net operating loss carryforwards for federal and state income taxes have been fully utilized or have expired; and

 

   

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

Management compensates for the inherent limitations associated with using adjusted revenues, adjusted EBITDA, adjusted net income and adjusted net income per share through disclosure of such limitations, presentation of our financial statements in accordance with U.S. GAAP and reconciliation of adjusted revenues adjusted EBITDA, adjusted net income and adjusted net income per share to revenues, net income and net income per share, the most directly comparable U.S. GAAP measure. Further, our management also reviews U.S. GAAP measures and evaluates individual measures that are not included in some or all of our non-U.S. GAAP financial measures, such as our level of capital expenditures and interest income, among other measures.

The following table sets forth a reconciliation of revenue to adjusted revenue based on our historical results:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  
     (in thousands, unaudited)  

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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  
     (in thousands, unaudited)  

Net income

   $ (668   $ 2,447      $ 72      $ 3,851   

Add (deduct):

        

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   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2012 *     2011 *     2012 *     2011 *  
    (in thousands, unaudited)  

Net income (loss)

  $ (668   $ 2,447      $ 72      $ 3,851   

Add:

       

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   
 

 

 

   

 

 

   

 

 

   

 

 

 

Basic number of weighted-average shares outstanding

    32,149,957        31,591,412        32,004,386        31,502,139   

Effect of dilutive shares:

       

Options to purchase common stock

    886,748        1,082,818        900,085        1,112,797   

Common warrants

    131,554        295,594        144,076        297,980   

Restricted stock

    5,519        —          6,085        —     
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted number of weighted-average shares outstanding

    33,173,778        32,969,824        33,054,632        32,912,916   
 

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income per share

  $ 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.

 

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Liquidity and Capital Resources

As of June 30, 2012, we had total cash and cash equivalents of $13,400 compared to $64,909 as of December 31, 2011. We believe that our current level of cash generation, together with our existing current assets, will adequately support our operations and capital expenditures over the next 12 months.

Cash Flows

The following table presents information regarding our cash flows and cash and cash equivalents for the periods indicated:

 

     Six Months Ended
June 30,
 
     2012     2011  
     (In thousands, unaudited)  

Net cash provided by operating activities

   $ 9,866      $ 12,645   

Net cash used in investing activities

     (65,621     (3,879

Net cash provided by financing activities

     4,246        2,166   

Net increase (decrease) in cash and cash equivalents

     (51,509     10,932   

Cash and cash equivalents, end of period

     13,400        78,600   

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2012 decreased by $2,779 compared to the same period in 2011, primarily due to a decrease in net income of $3,779 from the six months ended June 30, 2012 compared to the prior year period, offset by various other non-cash adjustments and changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2012 decreased by $61,742 compared to the same period in 2011. During the six months ended June 30, 2012 the company acquired Prima and Tamarac for a total consideration of $62,352 (see note 3 to the unaudited condensed consolidated financial statements). Cash disbursements in 2012 and 2011 totaled $3,987 and $3,734, respectively, for purchases of property and equipment and capitalization of internally developed software. In the six months ended June 30, 2012 the Company also decreased goodwill by $889 resulting from the finalization of the working capital adjustment related to the FundQuest acquisition (see note 3 to the unaudited condensed consolidated financial statements).

Financing Activities

Net cash provided by financing activities for the six months ended June 30, 2012 increased by $2,080 primarily a result of the proceeds from the issuance of restricted stock of $2,759, offset by a net decrease in proceeds from the exercise of stock options of $695.

Critical Accounting Estimates

There have been no changes in the matters for which we make critical accounting estimates in the preparation of our unaudited condensed consolidated financial statements during the six months ended June 30, 2012, as compared to those disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2011 included in our 2011 Form 10-K.

 

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Commitments and Off-Balance Sheet Arrangements

Leases

The following table sets forth information regarding our future minimum lease obligations as of June 30, 2012:

 

Years ending December 31:

  

Remainder of 2012

   $ 1,720   

2013

     4,189   

2014

     5,075   

2015

     5,272   

2016

     5,490   

Thereafter

     26,411   
  

 

 

 
   $ 48,157   
  

 

 

 

Recent Accounting Pronouncements

In June 2011, the FASB issued authoritative guidance that amends ASC Topic 220, Comprehensive Income, to require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements, and it eliminates the option to present components of other comprehensive income as a part of the statement of changes in stockholders’ equity. In addition, this guidance requires an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. These amendments are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on our consolidated financial statements.

In September 2011, the FASB issued authoritative guidance regarding the testing of goodwill for impairment. This guidance allows companies to perform a “qualitative” assessment to determine whether or not the current two-step quantitative testing method, in which a company compares the fair value of reporting units to its carrying amount including goodwill, must be followed. If a qualitative assessment indicates that it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, then the quantitative impairment test is not required. A company may choose to use the qualitative assessment on none, some, or all of its reporting units or to bypass the qualitative assessment and proceed directly to the two-step quantitative testing method. This guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011; however, early adoption is permitted. The adoption of this guidance on January 1, 2012 did not have a material impact on our consolidated financial statements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk

Our exposure to market risk is directly related to revenues from asset management or administration services earned based upon a contractual percentage of AUM or AUA. In the three and six months ended June 30, 2012, 81% and 84%, respectively of our revenues were derived from revenues based on the market value of AUM or AUA. We expect this percentage to vary over time. A decrease in the aggregate value of AUM or AUA may cause our revenue and income to decline.

Foreign currency risk

The expenses of our India subsidiary, which primarily consist of expenditures related to compensation and benefits, are paid using the Indian Rupee. We are directly exposed to changes in foreign currency exchange rates through the translation of these monthly expenditures into U.S. dollars. For the three and six months ended June 30, 2012, we estimate that a hypothetical 10% increase in the value of the Indian Rupee to the U.S. dollar would result in a decrease of approximately $100 and $200 to pre-tax earnings, respectively and a hypothetical 10% decrease in the value of the Indian Rupee to the U.S. dollar would result in an increase of approximately $100 and $200 to pre-tax earnings, respectively.

Interest rate risk

We have no floating interest rate debt and therefore we are not directly exposed to interest rate risk.

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“the Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. In

 

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designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet the reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation, our principal executive officer and our principal financial officer concluded that as of June 30, 2012, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There were no changes in internal control over financial reporting during the quarter ended June 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In December 2011, the Company acquired FundQuest Incorporated (“FundQuest”). In accordance with the rules of the Securities and Exchange Commission (the “SEC”), FundQuest, now known as Envestnet Portfolio Solutions, Inc. (“EPS”) was excluded from management’s annual report on internal control over financial reporting for the fiscal year ended December 31, 2011. Beginning in the fourth quarter of 2012, management will include the internal controls of EPS in its assessment of the effectiveness of Envestnet’s internal controls over financial reporting.

In April 2012, the Company acquired Prima Capital Holding, Inc. (“Prima”) and in May 2012, the Company acquired Tamarac, Inc. (“Tamarac”). In accordance with the rules of the SEC, management will include the internal controls of Prima and Tamarac in its assessment of the effectiveness of Envestnet’s internal controls over financial reporting beginning in the fourth quarter of 2012.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

We are involved in litigation arising in the ordinary course of our business. We do not believe that the outcome of any of the current litigation, individually or in the aggregate, would, if determined adversely to us, have a material adverse effect on our results of operations, financial condition, cash flows or business.

 

Item 1A. Risk Factors

Investment in our securities involves risk. An investor or potential investor should consider the risks summarized under the caption “Risk Factors” in Part I, Item 1A of our 2011 Form 10-K filed, when making investment decisions regarding our securities. The risk factors that were disclosed in our 2011 Form 10-K have not materially changed since the date our 2011 Form 10-K was filed.

 

Item 2. Unregistered Sales of Equity Securities

 

  (a) Unregistered Sales of Equity Securities

See Form 8-K filed May 1, 2012 with the Securities and Exchange Commission.

 

  (c) Issuer Purchases of Equity Securities

None

 

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.

 

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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 August 9, 2012.

 

ENVESTNET, INC.
By:  

/S/    JUDSON BERGMAN        

 

Judson Bergman

Chairman and Chief Executive Officer

Principal Executive Officer

By:  

/S/    PETER D’ARRIGO        

 

Peter D’Arrigo

Chief Financial Officer

Principal Financial Officer

By:  

/S/    DALE SEIER        

 

Dale Seier

Senior Vice President, Finance

Principal Accounting Officer

 

38


Table of Contents

INDEX TO EXHIBITS

 

Exhibit
No.

 

Description

  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(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(1)   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 *
101.SCH   XBRL Taxonomy Extension Schema Document *
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document *
101.LAB   XBRL Taxonomy Extension Label Linkbase Document *
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document *
101 DEF   XBRL Taxonomy Extension Definition Linkbase Document *

 

(1) 

The material contained in Exhibit 32.1 and 32.2 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference.

* Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011; (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011; (iii) the Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2012; (iv) the Condensed Consolidated Statements of Cash Flow for the six months ended June 30, 2012 and 2011; (v) Notes to the Condensed Consolidated Financial Statements.

The XBRL related information in this Quarterly Report on Form 10-Q, Exhibit 101, is not deemed “filed” for purposes of Section 11 or 12 of the Securities Act of 1933, as amended (the Securities Act), or Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of those sections, and is not part of any registration statement to which it may relate, and is not incorporated by reference into any registration statement or other document filed under the Securities Act or the Exchange Act, except as is expressly set forth by specific reference in such filing or document.

 

39

XFRA:30E Envestnet Inc Quarterly Report 10-Q Filling

Envestnet Inc XFRA:30E Stock - Get Quarterly Report SEC Filing of Envestnet Inc XFRA:30E stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XFRA:30E Envestnet Inc Quarterly Report 10-Q Filing - 6/30/2012
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