Envestnet Reports Third Quarter 2018 Financial Results
CHICAGO--(BUSINESS WIRE)--Nov 7, 2018--Envestnet (NYSE:ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for its quarter ended September 30, 2018.
“In the third quarter, Envestnet grew revenue 16%, adjusted EBITDA 22%, and adjusted earnings per share 43% over the prior year period,” said Jud Bergman, Chairman and CEO.
“Success will require embracing both deep integration and open architecture as the industry evolves. Across the wealth tech vertical, there are opportunities to build it, partner with third parties, or acquire it. Over the near term, we expect to be active in all three approaches as we offer the best of both worlds to our customers - a fully integrated wealth management solution, yet open architecture to give them choice as to how they best deliver better outcomes to their clients,” concluded Mr. Bergman.
Financial Results for the Third Quarter of 2018:
Total revenues increased 16% to $203.2 million for the third quarter of 2018 from $175.6 million for the third quarter of 2017. Revenues for FolioDynamix, which the Company acquired in January 2018, were $16.4 million for the third quarter of 2018. The Company’s total revenues for the third quarter of 2018 were negatively impacted by $3.7 million due to the adoption of ASU 2014-09. Excluding the effect of these items, total revenues grew 8% for the third quarter of 2018 compared to the prior year period.
Asset-based revenues were 59% of total revenues for the third quarter of 2018, compared to 60% of total revenues for the same period in 2017, and increased 12% from the prior year period. Subscription-based revenues were 38% of total revenues for the third quarter of 2018, compared to 36% of total revenues for the same period in 2017, and increased 21% from the prior year period. Professional services and other non-recurring revenues increased 21% from the prior year period.
Total operating expenses for the third quarter of 2018 increased 17% to $199.8 million from $171.3 million in the prior year period. Cost of revenues increased 16% to $65.0 million for the third quarter of 2018 from $56.1 million for the third quarter of 2017. Compensation and benefits increased 17% to $80.4 million for the third quarter of 2018 from $68.6 million for the prior year period. Compensation and benefits were 40% of total revenues for the third quarter of 2018, compared to 39% in the prior year period. General and administration expenses increased 12% to $34.8 million for the third quarter of 2018 from $31.2 million for the prior year period. General and administrative expenses were 17% of total revenues for the third quarter of 2018, compared to 18% in the prior year period. FolioDynamix was a significant contributor to the year-over-year increase in cost of revenues, compensation and benefits, and general and administrative expenses for the third quarter of 2018. Excluding FolioDynamix, operating expenses for the third quarter of 2018 increased 5% to $179.0 million compared to the prior year period.
Income from operations was $3.4 million for the third quarter of 2018 compared to $4.3 million for the third quarter of 2017. Net income was $2.5 million for the third quarter of 2018 compared to a loss of $1.3 million for the third quarter of 2017. Net income per diluted share attributable to Envestnet, Inc. was $0.06 for the third quarter of 2018 compared to a loss of $0.03 for the third quarter of 2017.
Adjusted EBITDA (1) for the third quarter of 2018 increased 22% to $42.6 million from $34.8 million for the prior year period. Adjusted Net Income (1) increased 46% for the third quarter of 2018 to $25.3 million from $17.3 million for the prior year period. Adjusted Net Income per Diluted Share (1) for the third quarter of 2018 increased 43% to $0.53 from $0.37 in the third quarter of 2017.
The Company provided the following outlook for the fourth quarter and full year ended December 31, 2018. This outlook is based on the market value of assets on September 30, 2018.
The Company does not forecast net income and net income per diluted share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.
Envestnet will host a conference call to discuss third quarter 2018 financial results today at 5:00 p.m. ET. The live webcast can be accessed from Envestnet’s investor relations website at http://ir.envestnet.com/. The call can also be accessed live over the phone by dialing (800) 263-0877, or for international callers (646) 828-8143. A replay will be available two hours after the call and can be accessed by dialing (844) 512-2921 or (412) 317-6671 for international callers; the conference ID is 8690281. The dial-in replay will be available for one week and the webcast replay will be available for one month following the date of the conference call.
Envestnet, Inc. (NYSE: ENV) is a leading provider of intelligent systems for wealth management and financial wellness. Envestnet’s unified technology enhances advisor productivity and strengthens the wealth management process. Envestnet empowers enterprises and advisors to more fully understand their clients and deliver better outcomes.
Envestnet enables financial advisors to better manage client outcomes and strengthen their practices. Institutional-quality research and advanced portfolio solutions are provided through Envestnet | PMC, our Portfolio Management Consultants group. Envestnet | Yodlee is a leading data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services. Envestnet | Tamarac provides leading rebalancing, reporting, and practice management software for advisors. Envestnet | Retirement Solutions provides retirement advisors with an integrated platform that combines leading practice management technology, research and due diligence, data aggregation, compliance tools, fiduciary solutions and intelligent managed account solutions.
More than 92,000 advisors and more than 3,500 companies including: 15 of the 20 largest U.S. banks, 43 of the 50 largest wealth management and brokerage firms, over 500 of the largest Registered Investment Advisers, and hundreds of Internet services companies, leverage Envestnet technology and services. Envestnet solutions enhance knowledge of the client, accelerate client on-boarding, improve client digital experiences, and help drive better outcomes for enterprises, advisors, and their clients.
For more information on Envestnet, please visit www.envestnet.com and follow @ENVintel.
(1) Non-GAAP Financial Measures
“Adjusted EBITDA” represents net income before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration and purchase liability, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, litigation related expense, foreign currency, non-income tax expense adjustment, loss allocation from equity method investment and loss attributable to non-controlling interest.
“Adjusted net income” represents net income before deferred revenue fair value adjustment, accretion on contingent consideration and purchase liability, non-cash interest expense, non-cash compensation expense, restructuring charges and transaction costs, severance, amortization of acquired intangibles, litigation related expense, foreign currency, non-income tax expense adjustment, loss allocation from equity method investment and loss attributable to non-controlling interest. Reconciling items are presented gross of tax, and a normalized tax rate is applied to the total of all reconciling items to arrive at adjusted net income.
“Adjusted net income per diluted share” represents adjusted net income divided by the diluted number of weighted-average shares outstanding.
See reconciliation of Non-GAAP Financial Measures on pages 9-12 of this press release. Reconciliations are not provided for guidance on such measures as the Company is unable to predict the amounts to be adjusted, such as the GAAP tax provision. The Company’s Non-GAAP Financial Measures should not be viewed as a substitute for revenues, net income or net income per share determined in accordance with GAAP.
Cautionary Statement Regarding Forward-Looking Statements
The forward-looking statements made in this press release and its attachments concerning, among other things, Envestnet, Inc.’s expected financial performance and outlook for the third quarter and full year of 2018, its strategic operational plans and growth strategy are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties and the Company’s actual results could differ materially from the results expressed or implied by such forward-looking statements. Furthermore, reported results should not be considered as an indication of future performance. The potential risks, uncertainties and other factors that could cause actual results to differ from those expressed by the forward-looking statements in this press release include, but are not limited to, the possibility that the anticipated benefits of the Company’s acquisition of FolioDynamix will not be realized to the extent or when expected, difficulty in sustaining rapid revenue growth, which may place significant demands on the Company’s administrative, operational and financial resources, the concentration of nearly all of our revenues from the delivery of our solutions and services to clients in the financial services industry, our reliance on a limited number of clients for a material portion of our revenue, the renegotiation of fee percentages or termination of our services by our clients, our ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, the impact of market and economic conditions on revenues, our inability to successfully execute the conversion of clients’ assets from their technology platform to our technology platforms in a timely and accurate manner, our ability to expand our relationships with existing customers, grow the number of customers and derive revenue from new offerings such as our data analytics solutions and market research services and premium financial applications (“FinApps”), compliance failures, adverse judicial or regulatory proceedings against us, liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest, changes in laws and regulations, including tax laws and regulations, general economic conditions, political and regulatory conditions, the impact of fluctuations in market condition and interest rates on the demand for our products and services and the value of assets under management or administration, the impact of market conditions on our ability to issue debt and equity, the impact of fluctuations in interest rates on our cost of borrowing, our financial performance, the results of our investments in research and development, our data center and other infrastructure, our ability to maintain the security and integrity of our systems and facilities and to maintain the privacy of personal information, failure of our systems to work properly, our ability to realize operating efficiencies, the advantages of our solutions as compared to those of others, the failure to protect our intellectual property rights, our ability to establish and maintain intellectual property rights, our ability to retain and hire necessary employees and appropriately staff our operations, and management’s response to these factors. More information regarding these and other risks, uncertainties and factors is contained in the Company’s filings with the Securities and Exchange Commission (“SEC”) which are available on the SEC’s website at www.sec.gov or the Company’s Investor Relations website at http://ir.envestnet.com/. You are cautioned not to unduly rely on these forward-looking statements, which speak only as of the date of this press release. All information in this press release and its attachments is as of November 7, 2018 and, unless required by law, the Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this press release or to report the occurrence of unanticipated events.
The following table summarizes the changes in AUM and AUA for the three months ended September 30, 2018:
The above AUM/A gross sales figures include $8.7 billion in new client conversions. The Company onboarded an additional $34.5 billion in subscription conversions during the three months ended September 30, 2018, bringing total conversions for the quarter to $43.2 billion.
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KEYWORD: UNITED STATES NORTH AMERICA ILLINOIS
INDUSTRY KEYWORD: TECHNOLOGY DATA MANAGEMENT PROFESSIONAL SERVICES ACCOUNTING BANKING CONSULTING FINANCE COMMUNICATIONS PUBLIC RELATIONS/INVESTOR RELATIONS
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