New Issue: Envestnet, Inc. (ENV) Convertible Notes due December 15, 2019

While small in size, the $125 million new issue should be well received due to the company’s record of consistent asset growth, leading market position, strong EBITDA generation and solid balance sheet. Our HOCS slash line measures an impressive 77 Overall / 77 Growth / 77 Safety.

Envestnet, Inc. is a leading provider of wealth management software and services to financial advisors and institutions. The company’s product platform enables advisors to deliver fee-based advice to their clients. ENV’s platform spans various elements of the wealth management process; from the initial meeting an advisor has with a prospective client to the ongoing day-to-day operations of managing an advisory practice. The company’s common equity currently trades slightly above the mid-point of its 52-week trading range ($33.12-55.02), closing yesterday at $47.39. ENV priced its 2010 IPO at $9.00 and now enjoys a $1.7 billion equity market capitalization.

ENV’s centrally-hosted technology platforms provide advisors with access to a series of integrated services. These services include risk assessment and selection of investment strategies and solutions, asset allocation models, research and due diligence, portfolio construction, proposal generation and paperwork preparation, model management and account rebalancing, account monitoring, tax management, and other features. ENV believes that these attributes empower advisors to better manage client outcomes and strengthen their overall advisory business.

Revenues for Q3 2014 increased 27%, to $88.6 million from last year’s $69.9 million. The increase was driven by a 26% gain in revenues from assets under management (AUM) or assets under administration (AUA), the result of a 37% increase in total AUM and AUA in the year-over-year comparison. In turn, EBITDA increased to $14.7 million in the most recent quarter, in contrast to last year’s $10.0 million; and, Net Income per share improved to $0.21, from last year’s $0.14. Notwithstanding the above top-line and bottom-line gains, Q3 2014 results were only managed to slightly beat analyst estimates by $1.9 million and $0.02 per share, respectively.

On October, 1, 2014, ENV completed its acquisition of Placemark Holding (the fifth acquisition in four years) for approximately $66 million in cash. Pro forma, this latest acquisition results in a slight increase in financial advisors using the company’s technology platforms as well as AUM/AUA. Positively, revenue, earnings and cash flow growth continue to be largely driven by organic growth. At September 30, 2014, the company’s balance sheet boasted $106 million in cash, in contrast to only $30 million in total debt. Proceeds from today’s announced deal are expected to be used for general corporate purposes. In addition, the company will continue to pursue strategic transactions and other relationships.

Pro Forma Summary Statistics:

Cash: $231 million

Total Debt: $155 million

LTM EBITDA: $50.4 million

LTM Cash Flow: $49.1 million

Total Market Cap: $1,855 million

Total Debt to Cap: 8%