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EI

ENVESTNET, INC. (ENV)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue was $348.3M, up 11% YoY and above the high end of company guidance; adjusted EBITDA was $77.8M (22% margin), also above guidance .
  • Adjusted EPS of $0.55 missed company guidance ($0.60–$0.65), with management citing non‑cash items (minority investment gains and write‑offs of previously capitalized software development) as drivers; free cash flow surged to $67.0M .
  • Wealth Solutions remained the growth engine (13% YoY), while Data & Analytics stabilized sequentially but declined 1% YoY; D&A goodwill was fully impaired ($96.3M) and FDx deconsolidated with a $19.5M gain .
  • Management withdrew Q3 guidance and did not host Q&A due to the pending Bain Capital acquisition (announced July 11), positioning the deal as a key stock narrative driver .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue beat: $348.3M vs guidance range $337.0–$345.0; adjusted EBITDA beat: $77.8M vs $71.0–$75.0 .
    • Strong structural inflows: ~$13B AUM flows in Q2 (first-half $26B vs ~$30B for all of 2023), and platform AUM/A assets reached $943.5B .
    • Free cash flow and leverage improved: Q2 FCF $67.0M; cash $122.0M; net leverage ~2.7x (down >1x YoY) .
    • Quote: “Our Q2 revenue was $348 million… Adjusted EBITDA was $78 million… representing a 22% adjusted EBITDA margin and nearly 450 bps of margin expansion” .

  • What Went Wrong

    • Adjusted EPS miss vs guidance ($0.55 vs $0.60–$0.65) driven by non‑cash items (minority investment gains ~$20M and software write‑offs ~$13M) .
    • Data & Analytics headwinds: revenue down 1% YoY and full impairment of D&A goodwill ($96.3M), underscoring challenges in the segment .
    • No Q3 guidance and no Q&A due to the Bain transaction, limiting near‑term visibility for investors .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Revenue ($USD Millions)$317.6 $325.0 $348.3
GAAP Diluted EPS ($)$(3.35) $0.05 $(1.44)
Adjusted EPS ($)$0.65 $0.60 $0.55
Adjusted EBITDA ($USD Millions)$75.5 $70.4 $77.8
Adjusted EBITDA Margin (%)24% (company) 22% (company) 22% (company)

YoY comparison (Q2 2024 vs Q2 2023):

MetricQ2 2023Q2 2024
Revenue ($USD Millions)$312.4 $348.3
Adjusted EPS ($)$0.46 $0.55
Adjusted EBITDA ($USD Millions)$56.0 $77.8

Segment revenue and mix:

Segment / Revenue TypeQ2 2023Q1 2024Q2 2024
Envestnet Wealth Solutions ($USD Millions)$275.8 $289.8 $312.1
Envestnet Data & Analytics ($USD Millions)$36.6 $35.1 $36.2
Asset-based Revenue ($USD Millions)$185.8 $202.6 $219.5
Subscription Revenue ($USD Millions)$115.0 $117.5 $118.0
Recurring Revenue (% of Total)96% ($300.7M/$312.4M) 98% ($320.1M/$325.0M) 97% ($337.5M/$348.3M)
Professional Services ($USD Millions)$11.7 $4.9 $10.8

Key KPIs:

KPIQ4 2023Q1 2024Q2 2024
AUM ($USD Millions)$416,001 $452,464 $471,978
AUA ($USD Millions)$430,846 $471,401 $471,479
Total Platform Assets ($USD Millions)$5,806,361 $6,082,045 $6,271,396
Total Platform Accounts (Millions)19.1 19.6 19.4
Advisors (Total)108,670 109,076 110,052
Net AUM/A Flows ($USD Billions)$7.871 $32.720 $10.625

Q2 actual vs company guidance:

MetricCompany Guidance (Q2 2024)Actual (Q2 2024)Result vs Guidance
Revenue ($USD Millions)$337.0 – $345.0 $348.3 Beat
Adjusted EBITDA ($USD Millions)$71.0 – $75.0 $77.8 Beat
Adjusted EPS ($)$0.60 – $0.65 $0.55 Miss
Asset-based Direct Expense ($USD Millions)$125.0 – $126.5 $130.1 (asset-based within $144.4 total direct) Above guidance (mix/volume impact)
Total Direct Expense ($USD Millions)$139.5 – $141.0 $144.4 Above guidance

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ2 2024$337.0 – $345.0M (May 7) Actual $348.3M Beat vs guidance
Adjusted EBITDAQ2 2024$71.0 – $75.0M Actual $77.8M Beat vs guidance
Adjusted EPSQ2 2024$0.60 – $0.65 Actual $0.55 Miss vs guidance
Asset-based Direct ExpenseQ2 2024$125.0 – $126.5M Actual $130.1M (asset-based within direct) Higher than guided
Total Direct ExpenseQ2 2024$139.5 – $141.0M Actual $144.4M Higher than guided
Company Guidance PolicyQ3 2024Historically providedNo guidance; no Q&A due to pending Bain transaction Withdrawn

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023 and Q1 2024)Current Period (Q2 2024)Trend
Bain Capital acquisitionNot applicable in Q4; normal guidance cadence in Q1 Transaction announced July 11; no Q&A; no Q3 guidance New pivotal narrative
Data & Analytics segmentOngoing revenue pressure; goodwill impairment in Q4 ($191.8M) Full impairment of D&A goodwill ($96.3M); subscription revenue ~flat last 4 quarters; FDx deconsolidated Reset; stabilization efforts
Asset-based flowsNet flows strong; AUM/A grew through 2023–Q1 ~$13B AUM flows in Q2; ~$26B 1H24 vs ~$30B FY23 Strengthening structurally
Cost discipline and FCFHeadcount reduced ~10% in 2023; margin expansion FCF $67.0M; leverage ~2.7x; capex $3M in Q2 Improving conversion/leverage
Professional servicesElevated around Elevate conference in Q2 Q2 PS revenue $10.8M; conference timing offset by direct expense Seasonal, managed
Accounts cleanupNot discussed previouslyProgrammatic reduction of unfunded dormant accounts; minimal revenue impact Operational housekeeping

Management Commentary

  • “We look forward to the successful completion of our pending transaction with Bain Capital and the value it will deliver to our shareholders.” — Jim Fox, Interim CEO .
  • “Our Q2 revenue was $348 million… Adjusted EBITDA was $78 million… 22% adjusted EBITDA margin… adjusted EPS was $0.55, lower than our guidance in connection with certain noncash charges” .
  • “We delivered over $13 billion of AUM flows in Q2… $26 billion… during the first half of 2024 compares to approximately $30 billion… for all of 2023” — CFO Josh Warren .
  • “We recorded a noncash impairment charge of $96 million… writing off the remaining goodwill related to the D&A business… [and] deconsolidated FDx… in connection with the recent funding round” .
  • “Our free cash flow during Q2 2024 was $67 million… leverage ratio… approximately 2.7x… more than a full turn… relative to a year ago” .

Q&A Highlights

  • No Q&A conducted due to the pending Bain Capital transaction and withdrawal of Q3 guidance .
  • Management clarified the adjusted EPS miss was linked to non‑cash items (minority investment gains and software write‑offs) without cash impact .
  • Commentary emphasized strong structural flows, improving FCF, and balance sheet deleveraging .

Estimates Context

  • S&P Global/Capital IQ consensus for Q2 2024 was unavailable for ENV due to a data mapping issue; consequently, Street comparisons cannot be provided (S&P Global data unavailable; tool returned missing mapping error).
  • In lieu of Street estimates, company guidance served as the benchmark: revenue and adjusted EBITDA exceeded guidance, while adjusted EPS missed the $0.60–$0.65 range .

Key Takeaways for Investors

  • Revenue and adjusted EBITDA outperformance against guidance indicate underlying strength in Wealth Solutions and asset‑based fee momentum; watch for continued structural flows .
  • Adjusted EPS miss was driven by non‑cash items and accounting clean‑up; cash generation improved materially (Q2 FCF $67.0M), supporting deleveraging .
  • Data & Analytics has been reset with full goodwill impairment; subscription revenue is stabilizing but remains a watch item for bookings and growth .
  • Pending Bain Capital acquisition is the primary stock narrative; absence of Q3 guidance/Q&A reduces near‑term visibility but may de‑emphasize quarterly volatility .
  • Asset‑based direct expenses ran above guidance, reflecting revenue mix/volume; monitor cost containment vs scaling initiatives .
  • Platform KPIs are robust: AUM/A reached $943.5B; advisors rose to 110,052; net flows healthy—positive read‑through for future asset‑based revenue .
  • Near‑term trading: beats on revenue/EBITDA vs EPS miss could yield mixed reactions; medium‑term thesis hinges on Wealth Solutions scale, FCF conversion, and post‑deal strategic execution .