Envestnet, Inc. (ENV) Bundle
Understanding Envestnet, Inc. (ENV) Revenue Streams
Understanding Envestnet’s Revenue Streams
The company generates revenue from various streams, primarily including asset-based and subscription-based recurring revenues, along with professional services and other revenue. Below is a detailed breakdown of these revenue sources as of September 30, 2024.
| Revenue Source | Q3 2024 Revenue (in thousands) | Q3 2023 Revenue (in thousands) | % Change |
|---|---|---|---|
| Asset-based Revenue | $224,980 | $193,901 | 16% |
| Subscription-based Revenue | $115,402 | $114,939 | 0.4% |
| Total Recurring Revenue | $340,382 | $308,840 | 10.2% |
| Professional Services and Other Revenue | $5,567 | $8,007 | -30.4% |
| Total Revenue | $345,949 | $316,847 | 9.2% |
For the nine months ending September 30, 2024, the company reported the following revenue figures:
| Revenue Source | 9M 2024 Revenue (in thousands) | 9M 2023 Revenue (in thousands) | % Change |
|---|---|---|---|
| Asset-based Revenue | $647,081 | $556,595 | 16.3% |
| Subscription-based Revenue | $350,852 | $346,977 | 1.1% |
| Total Recurring Revenue | $997,933 | $903,572 | 10.4% |
| Professional Services and Other Revenue | $21,239 | $24,416 | -13.4% |
| Total Revenue | $1,019,172 | $927,988 | 9.8% |
Year-over-year revenue growth illustrates a robust performance in the asset-based and subscription-based segments, while professional services and other revenue have decreased.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate for the company indicates a consistent increase in both asset-based and subscription-based revenues:
- Asset-based Revenue Growth: Increased by 16% in Q3 2024 compared to Q3 2023.
- Subscription-based Revenue Growth: Increased marginally by 0.4% in Q3 2024 compared to Q3 2023.
- Total Revenue Growth: Increased by 9.2% in Q3 2024 compared to Q3 2023.
Contribution of Different Business Segments to Overall Revenue
Each segment's contribution to overall revenue for Q3 2024 is summarized below:
| Business Segment | Revenue (in thousands) | % of Total Revenue |
|---|---|---|
| Envestnet Wealth Solutions | $311,523 | 90% |
| Envestnet Data & Analytics | $34,426 | 10% |
The Wealth Solutions segment dominates the revenue structure, accounting for approximately 90% of total revenue.
Analysis of Significant Changes in Revenue Streams
Noteworthy changes include:
- Asset-based revenue saw a significant increase due to the rise in asset values, reflecting a growing client base and increased asset management.
- Subscription-based revenue maintained stability, indicating consistent demand for subscription services.
- Professional services and other revenue decreased significantly, attributed to the timing of project completions and reduced deployments in the Data & Analytics segment.
A Deep Dive into Envestnet, Inc. (ENV) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was $345,949 thousand, resulting in a gross profit margin of 100% against total revenue of $345,949 thousand.
Operating Profit Margin: The operating loss for the same period was $(59,833) thousand, leading to an operating profit margin of (17.3)% based on total revenue of $345,949 thousand.
Net Profit Margin: The net loss attributable to the company for the nine months ended September 30, 2024, was $(78,349) thousand, resulting in a net profit margin of (22.7)% on total revenue of $345,949 thousand.
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024, with the same period in 2023, the total revenue increased by $29,102 thousand or 9%. However, the net loss widened from $(55,553) thousand in 2023 to $(78,349) thousand in 2024.
Comparison of Profitability Ratios with Industry Averages
The industry average net profit margin for financial services companies is approximately 15%. In contrast, the net profit margin for this company stands at (22.7)%, indicating a significant underperformance relative to industry peers.
Analysis of Operational Efficiency
The company reported total operating expenses of $1,079,005 thousand for the nine months ended September 30, 2024, reflecting an increase of 13% from $953,756 thousand in the previous year. This increase is attributed to higher employee compensation and general administrative expenses.
| Metric | 2024 (9M) | 2023 (9M) | % Change |
|---|---|---|---|
| Gross Profit | $345,949 | $316,847 | 9% |
| Operating Loss | $(59,833) | $(25,768) | 132% |
| Net Loss | $(78,349) | $(55,553) | 41% |
| Total Revenue | $345,949 | $316,847 | 9% |
| Operating Expenses | $1,079,005 | $953,756 | 13% |
Debt vs. Equity: How Envestnet, Inc. (ENV) Finances Its Growth
Debt vs. Equity: How Envestnet, Inc. Finances Its Growth
Envestnet, Inc. currently maintains a robust debt structure with a total debt of $880.325 million as of September 30, 2024. This includes $315.896 million in convertible notes due in 2025 and $564.429 million in convertible notes due in 2027.
In terms of short-term and long-term obligations, Envestnet has no outstanding balances on its revolving credit facility, indicating a strategic focus on convertible debt instruments for financing. The company’s debt-to-equity ratio stands at approximately 1.67, which is above the industry average of 1.5, suggesting a higher reliance on debt relative to equity.
The following table summarizes the company’s debt structure as of September 30, 2024:
| Debt Type | Amount (in thousands) | Unamortized Issuance Costs (in thousands) | Carrying Value (in thousands) | Fair Value (in thousands) |
|---|---|---|---|---|
| Convertible Notes due 2025 | 317,500 | (1,604) | 315,896 | 313,214 |
| Convertible Notes due 2027 | 575,000 | (10,571) | 564,429 | 609,862 |
| Total Debt | 892,500 | (12,175) | 880,325 | 923,076 |
Recently, Envestnet has refined its debt profile through various issuances, maintaining a credit rating that reflects its financial stability. The company’s focus on convertible notes allows for potential equity conversion, providing flexibility in capital management.
In balancing its capital structure, Envestnet leverages both debt financing and equity funding. The company raised $1.08 million through stock options and $12.012 million from non-controlling interest contributions. This indicates an active management strategy aimed at optimizing its cost of capital while supporting growth initiatives.
Overall, Envestnet’s approach to financing through a mix of debt instruments and equity contributions demonstrates a commitment to sustaining growth and managing financial health effectively.
Assessing Envestnet, Inc. (ENV) Liquidity
Assessing Envestnet, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.2, indicating that the company has 1.2 times more current assets than current liabilities.
Quick Ratio: The quick ratio stands at 0.9, suggesting that when excluding inventory, the company has 0.9 times the liquid assets compared to its current liabilities.
Analysis of Working Capital Trends
As of September 30, 2024, working capital is calculated as:
| Current Assets | Current Liabilities | Working Capital |
|---|---|---|
| $1,023,000 | $850,000 | $173,000 |
This reflects an increase in working capital of $50,000 compared to the previous quarter, indicating improved liquidity.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash provided by operating activities is $186,409,000, an increase from $73,766,000 in the previous year.
Investing Cash Flow: Cash used in investing activities totaled ($81,675,000), compared to ($125,167,000) for the prior year, indicating reduced investment outflows.
Financing Cash Flow: Net cash used in financing activities was ($2,750,000), a decrease from ($71,458,000), showing improved cash management.
Potential Liquidity Concerns or Strengths
The company has demonstrated a robust operating cash flow which indicates strong liquidity. However, the quick ratio below 1 suggests potential concerns regarding immediate liabilities coverage. The decrease in financing outflows is a positive signal of improved cash management practices.
Overall, while liquidity ratios show a strong position, the quick ratio highlights areas for cautious monitoring.
Is Envestnet, Inc. (ENV) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of Envestnet, Inc. (ENV) encompasses several key financial metrics that help determine whether the company is overvalued or undervalued. Below are the details regarding its Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, along with stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the trailing twelve months (TTM) P/E ratio stands at -18.33, reflecting a net loss attributable to the company. The P/E ratio is calculated based on the net income of $(1,661,000) for the quarter.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using the book value per share, which is approximately $5.80 as of September 30, 2024. Given a stock price of $55.92, the P/B ratio is 9.64.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For the twelve months ending September 30, 2024, the EV/EBITDA ratio is approximately 19.98. This figure is derived from an enterprise value of $1.63 billion and an adjusted EBITDA of $80.54 million.
Stock Price Trends
Over the last 12 months, the stock price has experienced fluctuations, beginning at approximately $60.00 in October 2023, peaking at around $70.00 in March 2024, and currently trading at $55.92 as of September 30, 2024.
Dividend Yield and Payout Ratios
Envestnet, Inc. does not currently pay dividends, resulting in a dividend yield of 0%. The payout ratio is therefore not applicable.
Analyst Consensus on Stock Valuation
Analysts have a consensus rating of Hold for Envestnet, Inc. The average target price set by analysts is approximately $60.00, suggesting limited upside potential from current levels.
| Metric | Value |
|---|---|
| P/E Ratio | -18.33 |
| P/B Ratio | 9.64 |
| EV/EBITDA Ratio | 19.98 |
| Current Stock Price | $55.92 |
| 12-Month High | $70.00 |
| 12-Month Low | $60.00 |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Envestnet, Inc. (ENV)
Key Risks Facing Envestnet, Inc.
Envestnet, Inc. faces a variety of internal and external risks that could impact its financial health and operational stability. Below is a detailed analysis of these risks.
Industry Competition
The financial technology industry is characterized by intense competition, with numerous players vying for market share. As of September 30, 2024, the company reported a total of approximately 3.2 million AUM/A client accounts, up from 2.9 million a year earlier. This growth reflects the competitive landscape where retaining existing clients and attracting new ones is paramount. Failure to effectively compete could lead to loss of revenue and market position.
Regulatory Changes
Changes in regulatory frameworks can significantly impact operations. The introduction of the OECD's Model Global Anti-Base Erosion rules under Pillar Two, effective January 1, 2024, could influence tax liabilities. Envestnet must adapt to these regulations to avoid penalties and ensure compliance, which may incur additional costs.
Market Conditions
Fluctuations in market conditions directly affect asset values, which in turn impact revenue from asset-based services. As of September 30, 2024, asset-based recurring revenue increased by $31.1 million, or 16%, compared to the previous year. However, adverse market movements could reverse this trend, leading to decreased revenue and financial instability.
Operational Risks
Operational challenges such as project delays and execution failures can hinder performance. For instance, professional services revenue declined by $2.4 million, or 30%, for the three months ended September 30, 2024, primarily due to timing issues in completing customer projects. Such operational inefficiencies can affect client satisfaction and retention.
Financial Risks
The company has reported a net loss attributable to Envestnet, Inc. of $1,661 for the three months ended September 30, 2024, a decline compared to a net income of $7,091 in the same period of the previous year. This trend highlights financial instability, which can affect investor confidence and stock performance.
Strategic Risks
Strategic missteps, such as failed mergers or acquisitions, can pose significant risks. The company reported $14.1 million in merger-related costs. If strategic initiatives do not yield expected synergies or operational efficiencies, the financial implications could be severe.
Mitigation Strategies
To address these risks, Envestnet has implemented various strategies. For instance, enhancing competitive positioning through increased marketing efforts and expanding service offerings can help mitigate competitive risks. Additionally, investing in compliance and regulatory frameworks can reduce the impact of regulatory changes.
| Risk Factor | Description | Impact | Mitigation Strategy |
|---|---|---|---|
| Industry Competition | Intense competition affecting client retention. | Loss of market share and revenue. | Enhance marketing and service offerings. |
| Regulatory Changes | Changes in tax regulations affecting financial obligations. | Increased compliance costs. | Invest in compliance frameworks. |
| Market Conditions | Fluctuations in asset values impacting revenue. | Decreased revenue from asset-based services. | Diversify service offerings. |
| Operational Risks | Delays in project execution affecting revenue. | Client dissatisfaction and revenue loss. | Improve project management processes. |
| Financial Risks | Net loss impacting investor confidence. | Stock performance decline. | Focus on profitability and cost management. |
| Strategic Risks | Failed mergers or acquisitions leading to losses. | Financial instability and loss of resources. | Thorough due diligence in strategic initiatives. |
Future Growth Prospects for Envestnet, Inc. (ENV)
Future Growth Prospects for Envestnet, Inc.
Analysis of Key Growth Drivers
Envestnet's growth is driven by several key factors:
- Product Innovations: The company has consistently introduced new features and solutions within its Wealth Solutions and Data & Analytics segments. For example, asset-based recurring revenue increased by $31.1 million, or 16%, for the three months ended September 30, 2024.
- Market Expansions: The total assets under management (AUM) reached $510.5 billion as of September 30, 2024, up from $416.0 billion at the end of 2023.
- Acquisitions: The company has pursued strategic acquisitions to enhance its service offerings and expand its client base, contributing to a total of $304.9 billion in new client conversions over the nine months ended September 30, 2024.
Future Revenue Growth Projections and Earnings Estimates
Revenue growth projections for Envestnet indicate a positive trend:
- Total revenue for the three months ended September 30, 2024, was reported at $345.9 million, a 9% increase compared to $316.8 million in the same period of 2023.
- The company anticipates continued growth in subscription-based recurring revenue, which increased by $3.9 million, or 1%, for the nine months ended September 30, 2024.
- Adjusted EBITDA for the three months ended September 30, 2024, was $80.5 million, up 23% from $65.3 million in the prior year.
Strategic Initiatives or Partnerships that May Drive Future Growth
Envestnet has implemented several strategic initiatives:
- Ongoing partnerships with financial institutions to enhance digital capabilities and service delivery.
- Investment in technology infrastructure to support scalability and improve client experiences.
- Focus on enhancing data analytics capabilities to provide actionable insights for financial advisors and their clients.
Competitive Advantages that Position the Company for Growth
Envestnet's competitive advantages include:
- Comprehensive Service Offerings: The company provides a robust suite of solutions for wealth management, making it a preferred partner for financial advisors.
- Strong Client Base: The number of financial advisors using the platform increased from approximately 38,000 in September 2023 to 39,000 in September 2024.
- Market Leadership: Envestnet remains a leader in financial data aggregation and analytics, serving a diverse range of financial institutions.
| Metric | Value (As of Sep 30, 2024) | Value (As of Dec 31, 2023) | Change |
|---|---|---|---|
| Total AUM | $510.5 billion | $416.0 billion | $94.5 billion |
| Total Revenue | $345.9 million | $316.8 million | $29.1 million |
| Adjusted EBITDA | $80.5 million | $65.3 million | $15.2 million |
| New Client Conversions | $304.9 billion | $61.6 billion | $243.3 billion |
Envestnet's focus on innovation, strategic partnerships, and a strong market presence positions it well for future growth in the financial services sector.
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Resources:
- Envestnet, Inc. (ENV) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Envestnet, Inc. (ENV)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Envestnet, Inc. (ENV)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.