Envestnet (NYSE: ENV), a leading provider of intelligent systems for wealth management and financial wellness, today reported financial results for the quarter and year ended December 31, 2023.
| Three Months Ended | Year Ended | |||||||||||||||||||||
| Key Financial Metrics | December 31, | % | December 31, | % | ||||||||||||||||||
| (in millions, except per share data) (unaudited) | 2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||
| GAAP: | ||||||||||||||||||||||
| Total revenue | $ | 317.6 | $ | 292.9 | 8% | $ | 1,245.6 | $ | 1,239.8 | —% | ||||||||||||
| Net loss attributable to Envestnet, Inc. | $ | (183.2 | ) | $ | (36.5 | ) | * | $ | (238.7 | ) | $ | (80.9 | ) | * | ||||||||
| Net loss attributable to Envestnet, Inc., per diluted share | $ | (3.35 | ) | $ | (0.85 | ) | * | $ | (4.38 | ) | $ | (1.59 | ) | * | ||||||||
| Non-GAAP: | ||||||||||||||||||||||
| Adjusted revenue(1) | $ | 317.6 | $ | 292.9 | 8% | $ | 1,245.7 | $ | 1,240.0 | —% | ||||||||||||
| Adjusted EBITDA(1) | $ | 75.5 | $ | 52.4 | 44% | $ | 250.9 | $ | 215.4 | 16% | ||||||||||||
| Adjusted net income(1) | $ | 43.0 | $ | 29.9 | 44% | $ | 140.2 | $ | 122.5 | 14% | ||||||||||||
| Adjusted net income per diluted share(1) | $ | 0.65 | $ | 0.45 | 44% | $ | 2.12 | $ | 1.86 | 14% | ||||||||||||
| __________________________________________________________ | ||||||||||||||||||||||
| *Not meaningful | ||||||||||||||||||||||
For 25 years it has been a privilege to be a part of and lead the amazing journey that is Envestnet — how foundational it is to the industry, our clients and the advisors who grow, serve and enrich the lives of millions of families,” said Bill Crager, Chief Executive Officer.The foundation of the business is strong and Envestnet has the right strategy and people to continue delivering for clients and the industry.
Financial Results for the Fourth Quarter 2023 Compared to the Fourth Quarter 2022:
Total revenue increased 8% to $317.6 million for the fourth quarter of 2023 from $292.9 million for the fourth quarter of 2022. Asset-based recurring revenue increased 13% and represented 59% of total revenue for the fourth quarter of 2023, compared to 57% of total revenue for the fourth quarter of 2022. Subscription-based recurring revenue decreased 3% and represented 37% of total revenue for the fourth quarter of 2023, compared to 41% of total revenue for the fourth quarter of 2022. Professional services and other non-recurring revenue increased 115% for the fourth quarter of 2023 from the fourth quarter of 2022.
Total operating expenses increased 55% to $496.3 million for the fourth quarter of 2023 from $319.4 million for the fourth quarter of 2022. Direct expense increased 11% to $118.7 million for the fourth quarter of 2023 from $107.2 million for the fourth quarter of 2022. Employee compensation decreased 17% to $100.2 million for the fourth quarter of 2023 from $121.3 million for the fourth quarter of 2022. Employee compensation was 32% of total revenue for the fourth quarter of 2023, compared to 41% of total revenue for the fourth quarter of 2022. General and administrative expense decreased 13% to $51.3 million for the fourth quarter of 2023 from $59.0 million for the fourth quarter of 2022. General and administrative expense was 16% of total revenue for the fourth quarter of 2023, compared to 20% of total revenue for the fourth quarter of 2022. A goodwill impairment charge of $191.8 million was recognized for the fourth quarter of 2023.
Loss from operations was $178.7 million for the fourth quarter of 2023 compared to $26.5 million for the fourth quarter of 2022. Net loss attributable to Envestnet, Inc. was $183.2 million, or $3.35 per diluted share, for the fourth quarter of 2023 compared to $36.5 million, or $0.85 per diluted share, for the fourth quarter of 2022.
Adjusted revenue(1) increased 8% to $317.6 million for the fourth quarter of 2023 from $292.9 million for the fourth quarter of 2022. Adjusted EBITDA(1) increased 44% to $75.5 million for the fourth quarter of 2023 from $52.4 million for the fourth quarter of 2022. Adjusted net income(1) increased 44% to $43.0 million, or $0.65 per diluted share, for the fourth quarter of 2023 from $29.9 million, or $0.45 per diluted share, for the fourth quarter of 2022.
Financial Results for the Full Year 2023 Compared to the Full Year 2022:
Total revenue remained consistent at $1.2 billion for the years ended December 31, 2023 and 2022. Asset-based recurring revenue increased 1% and represented 60% of total revenue for the years ended December 31, 2023 and 2022. Subscription-based recurring revenue decreased 3% and represented 37% of total revenue for the year ended December 31, 2023 compared to 39% of total revenue for the year ended December 31, 2022. Professional services and other non-recurring revenue increased 50% for the year ended December 31, 2023 from the year ended December 31, 2022.
Total operating expenses increased 11% to $1.5 billion for the year ended December 31, 2023 from $1.3 billion for the year ended December 31, 2022. Direct expense increased 1% to $473.0 million for the year ended December 31, 2023 from $470.4 million for the year ended December 31, 2022. Employee compensation decreased 9% to $444.8 million for the year ended December 31, 2023 from $490.7 million for the year ended December 31, 2022. Employee compensation was 36% of total revenue for the year ended December 31, 2023, compared to 40% of total revenue for the year ended December 31, 2022. General and administrative expense decreased 4% to $210.1 million for the year ended December 31, 2023 from $218.8 million for the year ended December 31, 2022. General and administrative expense was 17% of total revenue for the year ended December 31, 2023, compared to 18% for the year ended December 31, 2022. A goodwill impairment charge of $191.8 million was recognized for the year ended December 31, 2023.
Loss from operations was $204.5 million for the year ended December 31, 2023 compared to $66.0 million for the year ended December 31, 2022. Net loss attributable to Envestnet, Inc. was $238.7 million, or $4.38 per diluted share, for the year ended December 31, 2023 compared to $80.9 million, or $1.59 per diluted share, for the year ended December 31, 2022.
Adjusted revenue(1) remained consistent at $1.2 billion for the years ended December 31, 2023 and 2022. Adjusted EBITDA(1) increased 16% to $250.9 million for the year ended December 31, 2023 from $215.4 million for the year ended December 31, 2022. Adjusted net income(1) increased 14% to $140.2 million, or $2.12 per diluted share, for the year ended December 31, 2023 from $122.5 million, or $1.86 per diluted share, for the year ended December 31, 2022.
Balance Sheet and Liquidity
As of December 31, 2023, Envestnet had $91.4 million in cash and cash equivalents and $892.5 million in outstanding debt. Debt as of December 31, 2023 consisted of $317.5 million in convertible notes maturing in 2025 and $575.0 million in convertible notes maturing in 2027. Envestnet’s $500.0 million revolving credit facility was undrawn as of December 31, 2023.
Segment Reporting
On October 1, 2023, the Company changed the composition of its reportable segments to reflect the way that the Company’s chief operating decision maker reviews the operating results, assesses performance and allocates resources. As a result, the advisor-focused Wealth Analytics business has been reclassified from the Envestnet Data & Analytics segment to the Envestnet Wealth Solutions segment. The segment change does not impact nonsegment results or the Company’s consolidated balance sheets, consolidated statements of operations or consolidated statements of cash flows. All segment information presented within this Exhibit 99.1 for the quarter and full year ended December 31, 2023 is presented in conjunction with the current organizational structure, with prior periods adjusted accordingly.
Correction of Immaterial Error
During the fourth quarter of 2023, the Company identified that the arrangement with a third-party for the use of cloud hosted virtual servers which was previously accounted for as a finance lease transaction and included as a component of property and equipment, net in the consolidated balance sheets should have been recognized as a prepayment included within prepaid expenses and other current assets and other assets in the consolidated balance sheets. The Company concluded that the classification of these transactions was immaterial in prior period financial statements and that amendment of previously filed reports was not required. However, the Company corrected this immaterial error in the prior periods reported within this Exhibit 99.1.
Outlook
Envestnet provided the following outlook for the first quarter ending March 31, 2024. This outlook is based on the market value of assets under management or administration on December 31, 2023. We caution that we cannot predict the market value of these assets on any future date. See “Cautionary Statement Regarding Forward-Looking Statements.”
| In Millions Except Adjusted EPS | 1Q 2024 | |||||||
| GAAP: | ||||||||
| Revenue: | ||||||||
| Asset-based | $ | 200.0 | – | $ | 203.0 | |||
| Subscription-based | 117.0 | – | 119.0 | |||||
| Total recurring revenue | 317.0 | – | 322.0 | |||||
| Professional services and other revenue | 3.0 | – | 4.0 | |||||
| Total revenue | $ | 320.0 | – | $ | 326.0 | |||
| Asset-based direct expense | $ | 117.5 | – | $ | 119.0 | |||
| Total direct expense | $ | 125.5 | – | $ | 127.0 | |||
| Net income (loss) | (a) | |||||||
| Diluted shares outstanding | 66.3 | |||||||
| Net income (loss) per diluted share | (a) | |||||||
| Non-GAAP: | ||||||||
| Adjusted EBITDA(1) | $ | 64.0 | – | $ | 69.0 | |||
| Adjusted net income per diluted share(1) | $ | 0.52 | – | $ | 0.57 | |||
| __________________________________________________________ |
| (a) Envestnet does not forecast net income (loss) and net income (loss) per diluted share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision. |
Conference Call
Envestnet will host a conference call to discuss fourth quarter and full year 2023 financial results today at 5:00 p.m. ET. The live webcast and accompanying presentation can be accessed from Envestnet’s investor relations website at http://investor.envestnet.com/. A replay of the webcast will be available on the investor relations website following the call.
