Form 8-K ENVESTNET, INC. For: Feb 22

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

Current Report

 

Pursuant To Section 13 or 15 (d) of the

Securities Exchange Act of 1934

 

Date of Report  — February 22, 2017

 

Date of Earliest Event Reported — February 22, 2017

 

 

ENVESTNET, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

Registrant’s telephone number, including area code: (312) 827-2800

 

Not applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02.  Results of Operations and Financial Condition

 

On February 22, 2017, Envestnet, Inc. (the “Company”) issued a press release announcing that it will report its results for the fourth quarter and year ended December 31, 2016, upon the completion of the audit of its financial statements.

 

The Company is currently working to finalize certain accounting matters, primarily related to certain state and local non-income tax obligations. In addition, the Company may conclude that certain control deficiencies exist in internal controls over financial reporting and may represent a material weakness over financial reporting as of December 31, 2016. The resolution of these matters may impact the timing of the filing of the Company’s Form 10-K for the year ended December 31, 2016.

 

The Company is working diligently to complete its financial statements and anticipates releasing its fourth quarter results and holding a conference call to discuss its fourth quarter 2016 results and 2017 outlook as soon as practicable.

 

The press release also contained updated financial outlook for the fourth quarter ended December 31, 2016.

 

A copy of the Company’s press release referred to above is attached to this report as Exhibit 99.1 and is incorporated herein by reference.

 

Item 9.01.                                        Financial Statements and Exhibits.

 

(d)                                 Exhibits.

 

Exhibit No.		Description
99.1		Press release, dated February 22, 2017

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

	ENVESTNET, INC.
	By:	/S/ PETER H. D’ARRIGO
		Name:	Peter H. D’Arrigo
		Title:	Chief Financial Officer
Date: February 22, 2017

 

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EXHIBIT INDEX

 

Exhibit No.		Description
99.1		Press release, dated February 22, 2017

 

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Exhibit 99.1

 

Envestnet Provides Update on Fourth Quarter 2016 Financial Results

 

Chicago, IL — February 22, 2017 — Envestnet (NYSE: ENV), the leading provider of intelligent systems for wealth management and financial wellness, today announced that it will report its results for the fourth quarter and year ended December 31, 2016, upon the finalization of its financial statements.

 

Envestnet is currently working to finalize certain accounting matters, primarily related to potential state and local non-income tax obligations. In addition, the Company may conclude that certain control deficiencies exist in internal controls over financial reporting and may represent a material weakness over financial reporting as of December 31, 2016. The resolution of these matters may impact the timing of the filing of Envestnet’s Form 10-K for the year ended December 31, 2016.

 

Envestnet is working diligently to complete its financial statements and anticipates releasing its fourth quarter results and holding a conference call to discuss its fourth quarter 2016 results and 2017 outlook as soon as practicable.

 

The Company also updated its financial outlook for the fourth quarter ended December 31, 2016 as summarized below:

 

In Millions Except Adjusted EPS		Previous		Updated
GAAP:
AUM/A revenue		$92.5 - 93.5		$93.4 - 93.5
Subcription and licensing revenue		55.0 - 56.0		55.7 - 55.8
Professional services and other revenue		5.5 - 6.0		6.0 - 6.1
Revenues		$153.0 - 155.5		$155.1 - 155.5
Cost of revenues		$48.5 - 49.5		$48.2 - 48.3
Net Income		-		-
Diluted shares outstanding		45.0		44.8
Net Income per Diluted Share		-		-
Non-GAAP:
Adjusted Revenues(1)		$153.0 - 155.5		$155.6 - 156.0
Adjusted EBITDA(1)		29.0 - 30.0		30.1 - 30.5
Adjusted Net Income per Diluted Share(1)		$0.30		$0.32

 

Included in the Company’s adjusted revenues is approximately $0.5 million in acquired deferred revenue not recognizable under GAAP. The Company does not forecast net income and net income per share due to the unpredictable nature of various items adjusted for non-GAAP disclosure purposes, including the periodic GAAP income tax provision.

 

Included at the end of this press release are various operating metrics for the quarter and year ended December 31, 2016.

 

Neither the items included in the Company’s financial outlook above nor the operating metrics included below will be affected by any exposure to the potential state and local non-income tax obligations referred to above.

 

 

About Envestnet

 

Envestnet, Inc. (NYSE: ENV) is the 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 52,000 advisors and 2,500 companies including: 16 of the 20 largest U.S. banks, 38 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 revenues” exclude the effect of purchase accounting on the fair value of acquired deferred revenue.  Under United States generally accepted accounting principles (GAAP), we record at fair value the acquired deferred revenue for contracts in effect at the time the entities were acquired.  Consequently, revenue related to acquired entities for periods subsequent to the acquisition does not reflect the full amount of revenue that would have been recorded by these entities had they remained stand-alone entities.

 

“Adjusted EBITDA” represents net income before deferred revenue fair value adjustment, interest income, interest expense, accretion on contingent consideration, income tax provision (benefit), depreciation and amortization, non-cash compensation expense, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration, litigation related expense, foreign currency and related hedging activity, non-income tax adjustment, other (income) expense, impairment of equity method investment, 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, non-cash interest expense, non-cash compensation expense, accretion on contingent consideration, restructuring charges and transaction costs, severance, fair market value adjustment on contingent consideration, amortization of acquired intangibles,  litigation related expense, foreign currency and related hedging activity, non-income tax adjustment, other (income) expense, impairment of equity method investment, 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. The reconciling items, and resulting adjusted net

 

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income, are presented on a different basis than historically shown to eliminate the impact of quarterly volatility of the GAAP tax provision (benefit) on the Company’s adjusted earnings figures.

 

“Adjusted net income per share” represents adjusted net income divided by the diluted number of weighted-average shares outstanding.

 

Reconciliations are not provided for guidance on adjusted EBITDA, adjusted net income and adjusted net income per share, 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 concerning, among other things, Envestnet, Inc.’s (the “Company”) expected financial performance for the fourth quarter and full year of 2016, 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, potential exposure to state and local non-income tax obligations; the impact of any inability to timely complete the Company’s audit of its financial statements and file its Form 10-K; the Company’s ability to remediate any material weaknesses in internal controls over financial reporting which may have contributed to any delay in completion of the Company’s financial statements and filing of its Form 10-K; 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 the Company’s revenues from the delivery of investment solutions and services to clients in the financial services industry, the impact of market and economic conditions on revenues, the Company’s reliance on a limited number of clients for a material portion of its revenue, the renegotiation of fee percentages or termination of the Company’s services by its clients, the Company’s ability to identify potential acquisition candidates, complete acquisitions and successfully integrate acquired companies, the impact of market and economic conditions on revenue, the Company’s inability to successfully execute the conversion of its clients’ assets from their technology platform to the Company’s technology platform in a timely and accurate manner, the Company’s ability to expand its relationships with existing customers, grow the number of customers and derive revenue from new offerings such as its data analytic solutions and market research services and premium FinApps, compliance failures, adverse judicial or regulatory proceedings against the Company, liabilities associated with potential, perceived or actual breaches of fiduciary duties and/or conflicts of interest, changes in laws and regulations, general economic conditions, political and regulatory conditions,  the impact of fluctuations in market conditions and interest rates on the demand for the Company’s products and services and the value of assets under management or administration, the impact of market conditions on the Company’s ability to issue debt and equity, the impact of fluctuations in interest rates on the Company’s cost of borrowing, the Company’s financial performance, the results of the Company’s investments in research and development, our data center and other infrastructure, the Company’s ability to maintain the security and integrity of its systems and facilities and to maintain the privacy of personal information, failure of the Company’s systems to work properly, the Company’s ability to realize operating efficiencies, the advantages of the Company’s solutions as compared to those of others, the failure to protect the Company’s intellectual property rights, the Company’s ability to establish and maintain intellectual property rights, the Company’s ability to retain and hire necessary employees and appropriately staff its, and management’s response to these factors. More information

 

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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 is as of February 22, 2017 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.

 

Contacts
Investor Relations		Media Relations
[email protected]		[email protected]
(312) 827-3940

 

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Envestnet, Inc.

Historical Assets, Accounts and Advisors

(in millions, except accounts and advisors)

(unaudited)

 

		As of
		December 31,  2015			March 31,  2016			June 30,  2016			September 30, 2016			December 31, 2016
Platform Assets
Assets Under Management (AUM)		$	92,559		$	95,489		$	96,700		$	101,924		$	105,178
Assets Under Administration (AUA)		197,177			207,537			220,690			231,831			241,682
Subtotal AUM/A		289,736			303,026			317,390			333,755			346,860
Licensing		561,699			576,988			685,952			721,690			748,125
Total Platform Assets		$	851,435		$	880,014		$	1,003,342		$	1,055,445		$	1,094,985
Platform Accounts
AUM		490,471			498,449			503,147			519,717			545,130
AUA		807,708			904,373			935,870			961,590			994,583
Subtotal AUM/A		1,298,179			1,402,822			1,439,017			1,481,307			1,539,713
Licensing		2,176,068			2,237,427			4,304,645			4,394,670			4,558,883
Total Platform Accounts		3,474,247			3,640,249			5,743,662			5,875,977			6,098,596
Advisors
AUM/A		33,775			35,718			35,067			35,861			36,483
Licensing		13,553			13,675			16,081			16,191			17,852
Total Advisors		47,328			49,393			51,148			52,052			54,335

 

The following tables summarize the changes in AUM and AUA for the three months ended December 31, 2016:

 

In Millions Except Accounts		9/30/2016			Gross  Sales			Redemptions			Net  Flows			Market  Impact			12/31/2016
Assets under Management (AUM)		$	101,924		$	9,916		$	(6,635	)	$	3,281		$	(27	)	$	105,178
Assets under Administration (AUA)		231,831			23,400			(15,890		)	7,510			2,341			241,682
Total AUM/A		$	333,755		$	33,316		$	(22,525	)	$	10,791		$	2,314		$	346,860
Fee-Based Accounts		1,481,307									58,406						1,539,713

 

The above AUM/A gross sales figures include $5.3 billion in new client conversions. The Company onboarded an additional $19.0 billion in licensing conversions during the fourth quarter, bringing total conversions for the quarter to $24.3 billion.

 

The following tables summarize the changes in AUM and AUA for the year ended December 31, 2016:

 

In Millions Except Accounts		12/31/2015			Gross  Sales			Redemptions			Net  Flows			Market  Impact			12/31/2016
Assets under Management (AUM)		$	92,559		$	34,504		$	(26,698	)	$	7,806		$	4,813		$	105,178
Assets under Administration (AUA)		197,177			84,253			(54,942		)	29,311			15,194			241,682
Total AUM/A		$	289,736		$	118,757		$	(81,640	)	$	37,117		$	20,007		$	346,860
Fee-Based Accounts		1,298,179									241,534						1,539,713

 

The above AUM/A gross sales figures include $17.1 billion in new client conversions. The Company onboarded an additional $137.4 billion in licensing conversions during 2016, bringing total conversions for the year to $154.5 billion.

 

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