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AssetMark Reports $78.9B Platform Assets for First Quarter 2021

May 4, 2021

CONCORD, Calif., May 04, 2021 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter ended March 31, 2021.

First Quarter 2021 Financial and Operational Highlights

  • Net loss for the quarter was $8.9 million, or $0.13 per share.
  • Adjusted net income for the quarter was $22.2 million, or $0.30 per share, on total revenue of $119.0 million.
  • Adjusted EBITDA for the quarter was $34.1 million, or 28.6% of total revenue.
  • Platform assets increased 40.8% year-over-year and 5.9% quarter-over-quarter to $78.9 billion, aided by quarterly record net flows of $1.9 billion and market impact net of fees of $2.4 billion. Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 10.3%.
  • More than 4,300 new households and 194 new producing advisors joined the AssetMark platform during the first quarter. In total, as of March 31, 2021 there were over 8,400 advisors (approximately 2,600 were engaged advisors) and over 190,900 investor households on the AssetMark platform.
  • We realized 21.8% annualized production lift from existing advisors for the first quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

“AssetMark had a very strong first quarter, a testament to living our mission and executing on our strategy. We grew through the pandemic, and are beginning to see an acceleration in our growth as we enter a post-pandemic world,” said AssetMark CEO Natalie Wolfsen. “First quarter net flows were a record $1.9 billion and annualized net flows as percentage of beginning of period assets are over 10%. We realized record revenue and adjusted EBTIDA in the first quarter, while continuing to drive scale in the business. We are making great progress on our 2021 strategic priorities, maintaining a strong financial position and will be returning to in-person events soon. These will help us continue to attract new advisors, accelerate organic growth and gain market share.”

First Quarter 2021 Key Operating Metrics

       
  1Q21 1Q20 Variance
per year
Operational metrics:      
Platform assets (at period-beginning) (millions of dollars) 74,520 61,608 21.0%
Net flows (millions of dollars) 1,927 1,834 5.1%
Market impact net of fees (millions of dollars) 2,433 (9,477) NM
Acquisition impact (millions of dollars) 0 2,060 NM
Platform assets (at period-end) (millions of dollars) 78,880 56,025 40.8%
Net flows lift (% of beginning of year platform assets) 2.6% 3.0% (40) bps
Advisors (at period-end) 8,477 8,477 0.0%
Engaged advisors (at period-end) 2,611 2,138 22.1%
Assets from engaged advisors (at period-end) (millions of dollars) 71,635 48,793 46.8%
Households (at period-end) 190,915 176,681 8.1%
New producing advisors 194 217 (10.6%)
Production lift from existing advisors (annualized %) 21.8% 23.3% (150 bps)
Assets in custody at ATC (at period-end) (millions of dollars) 57,778 38,770 49.0%
ATC client cash (at period-end) (millions of dollars) 2,497 2,991 (16.5%)
       
Financial metrics:      
Total revenue (millions of dollars) 119 115 3.6%
Net income (loss) (millions of dollars) (8.9) (2.7) NM
Net income (loss) margin (%) (7.5%) 2.4% (990 bps)
Capital expenditure (millions of dollars) 8.2 6.5 26.4%
       
Non-GAAP financial metrics:      
Adjusted EBITDA (millions of dollars) 34.1 28.4 20.2%
Adjusted EBITDA margin (%) 28.6% 24.7% 390 bps
Adjusted net income (millions of dollars) 22.2 17.7 25.2%
Note: Percentage variance based on actual numbers, not rounded results      
       

Webcast and Conference Call Information

AssetMark will host a live conference call and webcast to discuss its first quarter 2021 results. In conjunction with this earnings press release, AssetMark has posted an earnings presentation on its investor relations website at http://ir.assetmark.com. Conference call and webcast details are as follows:

  • Date: May 4, 2021
  • Time: 2:00 p.m. PT; 5:00 p.m. ET
  • Phone: Listeners can pre-register for the conference call here: http://www.directeventreg.com/registration/event/6587667. Upon registering, you will be provided with participant dial-in numbers, passcode and unique registrant ID. In the 10 minutes prior to the call start time, you may use the conference access information (dial in number, direct event passcode and registrant ID) provided in the confirmation email received at the point of registering to join the call directly.

About AssetMark Financial Holdings, Inc. 

AssetMark is a leading provider of extensive wealth management and technology solutions that power independent financial advisors and their clients. Through AssetMark, Inc., its investment advisor subsidiary registered with the Securities and Exchange Commission, AssetMark operates a platform that comprises fully integrated technology, personalized and scalable service and curated investment platform solutions designed to make a difference in the lives of advisors and their clients. AssetMark had $78.9 billion in platform assets as of March 31, 2021 and has a history of innovation spanning more than 20 years.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future financial and operating performance, which involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology that conveys uncertainty of future events or outcomes. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to differ materially from statements made in this press release, including in relation to our ability to attract and retain advisors, competition in the industry in which we operate, the interest rate environment, shifting investor preferences, our market share and the size of our addressable market, our financial performance, investments in new products, services and capabilities, our ability to execute strategic transactions, legal and regulatory developments and general market, political, economic and business conditions. Other potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our prospectus dated July 17, 2019 filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, which is expected to be filled on May 7, 2021. Additional information is also available in our Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the Securities and Exchange Commission and available on our investor relations website at http://ir.assetmark.com. All information provided in this release is based on information available to us as of the date of this press release and any forward-looking statements contained herein are based on assumptions that we believe are reasonable as of this date. Undue reliance should not be placed on the forward-looking statements in this press release, which are inherently uncertain. We undertake no duty to update this information unless required by law.

AssetMark Financial Holdings, Inc.
Condensed Consolidated Balance Sheets
(in thousands except share data and par value)

    March 31, 2021     December 31, 2020  
    (unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 75,831     $ 70,619  
Restricted cash     11,000       11,000  
Investments, at fair value     12,263       10,577  
Fees and other receivables, net     8,459       8,891  
Income tax receivable, net     17,178       8,596  
Prepaid expenses and other current assets     13,088       13,637  
Total current assets     137,819       123,320  
Property, plant and equipment, net     8,187       7,388  
Capitalized software, net     69,392       68,835  
Other intangible assets, net     654,286       655,736  
Operating lease right-of-use assets     24,512       27,496  
Goodwill     338,848       338,848  
Other assets     2,294       1,965  
Total assets   $ 1,235,338     $ 1,223,588  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 1,434     $ 2,199  
Accrued liabilities and other current liabilities     32,602       43,694  
Total current liabilities     34,036       45,893  
Long-term debt, net     75,000       75,000  
Other long-term liabilities     17,241       16,302  
Long-term portion of operating lease liabilities     29,976       31,820  
Deferred income tax liabilities, net     149,500       149,500  
Total long-term liabilities     271,717       272,622  
Total liabilities     305,753       318,515  
Commitments and contingencies     —       —  
Stockholders’ equity:                
Common stock, $0.001 par value (675,000,000 shares authorized and 72,459,255 shares issued and outstanding as of March 31, 2021 and December 31, 2020)     72       72  
Additional paid-in capital     883,858       850,430  
Retained earnings     45,655       54,571  
Total stockholders’ equity     929,585       905,073  
Total liabilities and stockholders’ equity   $ 1,235,338     $ 1,223,588  


AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share data)

    Three Months Ended March 31,  
    2021     2020  
Revenue:                
Asset-based revenue   $ 115,813     $ 105,650  
Spread-based revenue     2,606       7,951  
Other revenue     587       1,289  
Total revenue     119,006       114,890  
Operating expenses:                
Asset-based expenses     36,094       35,015  
Spread-based expenses     676       1,289  
Employee compensation     67,302       43,497  
General and operating expenses     17,489       19,365  
Professional fees     4,260       3,831  
Depreciation and amortization     9,471       8,409  
Total operating expenses     135,292       111,406  
Interest expense     771       1,627  
Other expense, net     (15 )     50  
Income (loss) before income taxes     (17,042 )     1,807  
Provision benefit from income taxes     (8,126 )     (929 )
Net income (loss)     (8,916 )     2,736  
Net comprehensive income (loss)   $ (8,916 )   $ 2,736  
Net income (loss) per share attributable to common stockholders:                
Basic     (0.13 )     0.04  
Diluted     (0.13 )     0.04  
Weighted average number of common shares outstanding, basic     70,422,306       67,142,459  
Weighted average number of common shares outstanding, diluted     70,422,306       69,317,261  


AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

    Three Months Ended March 31,  
    2021     2020  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income (loss)   $ (8,916 )   $ 2,736  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization     9,471       8,409  
Interest     190       78  
Deferred income taxes     —       522  
Share-based compensation     33,428       13,188  
Changes in certain assets and liabilities:                
Fees and other receivables, net     (710 )     (1,835 )
Prepaid expenses and other current assets     804       944  
Accounts payable, accrued liabilities and other current liabilities     (11,028 )     (12,909 )
Income tax receivable, net     (8,582 )     (1,884 )
Net cash provided by operating activities     14,657       9,249  
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of WBI OBS Financial, LLC, net of cash received     —       (18,404 )
Purchase of investments     (1,363 )     (1,014 )
Sale of investments     151       —  
Purchase of property and equipment     (231 )     (416 )
Purchase of computer software     (8,002 )     (6,095 )
Net cash used in investing activities     (9,445 )     (25,929 )
Net change in cash, cash equivalents, and restricted cash     5,212       (16,680 )
Cash, cash equivalents, and restricted cash at beginning of period     81,619       105,341  
Cash, cash equivalents, and restricted cash at end of period   $ 86,831     $ 88,661  
SUPPLEMENTAL CASH FLOW INFORMATION                
Income taxes paid   $ 464     $ 365  
Interest paid   $ 577     $ 1,547  
Non-cash operating activities:                
Non-cash changes to right-of-use assets   $ (2,263 )   $ 38,495  
Non-cash changes to lease liabilities   $ (2,263 )   $ 39,839  

Explanations and Reconciliations of Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe adjusted EBITDA, adjusted EBITDA margin and adjusted net income, all of which are non-GAAP measures, are useful in evaluating our performance. We use adjusted EBITDA, adjusted EBITDA margin and adjusted net income to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that such non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, such non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.

Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.  

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization and less interest income), further adjusted to exclude certain non-cash charges and other adjustments set forth below. Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenue. Adjusted EBITDA and adjusted EBITDA margin are useful financial metrics in assessing our operating performance from period to period because they exclude certain items that we believe are not representative of our core business, such as certain material non-cash items and other adjustments such as share-based compensation, strategic initiatives and reorganization and integration costs. We believe that adjusted EBITDA and adjusted EBITDA margin, viewed in addition to, and not in lieu of, our reported GAAP results, provide useful information to investors regarding our performance and overall results of operations for various reasons, including:

  • non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, share-based compensation expense is not a key measure of our operating performance; and
  • costs associated with acquisitions and the resulting integrations, debt refinancing, restructuring, litigation and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance.

We use adjusted EBITDA and adjusted EBITDA margin:

  • as measures of operating performance;
  • for planning purposes, including the preparation of budgets and forecasts;
  • to allocate resources to enhance the financial performance of our business;
  • to evaluate the effectiveness of our business strategies;
  • in communications with our board of directors concerning our financial performance; and
  • as considerations in determining compensation for certain employees.

Adjusted EBITDA and adjusted EBITDA margin have limitations as analytical tools, and should not be considered in isolation to, or as substitutes for, analysis of our results as reported under GAAP. Some of these limitations are:

  • adjusted EBITDA and adjusted EBITDA margin do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;
  • adjusted EBITDA and adjusted EBITDA margin do not reflect changes in, or cash requirements for, working capital needs;
  • adjusted EBITDA and adjusted EBITDA margin do not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments; and
  • the definitions of adjusted EBITDA and adjusted EBITDA margin can differ significantly from company to company and as a result have limitations when comparing similarly titled measures across companies.

Set forth below is a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted EBITDA for the three months ended March 31, 2021 and 2020 (unaudited).

    Three Months Ended March 31,     Three Months Ended March 31,  
(in thousands except for percentages)   2021     2020     2021     2020  
Net income (loss)   $ (8,916 )   $ 2,736       (7.5 )%     2.4 %
Provision for (benefit from) income taxes     (8,126 )     (929 )     (6.8 )%     (0.8 )%
Interest income (loss)     (25 )     (482 )     (— )%     (0.4 )%
Interest expense     771       1,627       0.6 %     1.4 %
Amortization/depreciation     9,471       8,409       8.0 %     7.3 %
EBITDA     (6,825 )     11,361       (5.7 )%     9.9 %
Share-based compensation(1)     33,428       13,188       28.0 %     11.5 %
Reorganization and integration costs(2)     4,496       103       3.8 %     0.1 %
Acquisition expenses(3)     2,817       3,577       2.3 %     3.1 %
Business continuity plan(4)     72       96       0.1 %     0.1 %
Office closures(5)     121       —       0.1 %     —  
Other expenses     (15 )     50       (— )%     —  
Adjusted EBITDA   $ 34,094     $ 28,375       28.6 %     24.7 %

(1)    “Share-based compensation” represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our former parent company, and RSA, restricted stock unit, stock option, and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.
(2)    “Reorganization and integration costs” includes costs related to the departure of our former chief executive officer (“CEO”), our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.
(3)    “Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.
(4)    “Business continuity plan” includes incremental compensation and other costs that are directly related to operations while transitioning to a remote workforce and other costs due to the COVID-19 pandemic.
(5)    “Office closures” represents one-time expenses related to closing facilities.

Set forth below is a summary of the adjustments involved in the reconciliation from net income and net income margin, the most directly comparable GAAP financial measures, to adjusted EBITDA and adjusted EBITDA margin for the three months for the three months ended March 31, 2021 and 2020, broken out by compensation and non-compensation expenses (unaudited).

    Three Months Ended March 31, 2021     Three Months Ended March 31, 2020  
(in thousands)   Compensation     Non-
Compensation 		    Total     Compensation     Non-
Compensation 		    Total  
Share-based compensation(1)   $ 33,428     $ —     $ 33,428     $ 13,188     $ —     $ 13,188  
Reorganization and integration costs(2)     2,207       2,289       4,496       105       (2 )     103  
Acquisition expenses(3)     716       2,101       2,817       1,132       2,445       3,577  
Business continuity plan(4)     —       72       72       96       —       96  
Office closures(5)     —       121       121       —       —       —  
Other expenses     —       (15 )     (15 )     —       50       50  
Total adjustments to adjusted EBITDA   $ 36,351     $ 4,568     $ 40,919     $ 14,521     $ 2,493     $ 17,014  
                                                 
    Three Months Ended March 31, 2021     Three Months Ended March 31, 2020  
(in percentages)   Compensation     Non-
Compensation 		    Total     Compensation     Non-
Compensation 		    Total  
Share-based compensation(1)     28.0 %     —       28.0 %     11.5 %     —       11.5 %
Reorganization and integration costs(2)     1.9 %     1.9 %     3.8 %     0.1 %     —       0.1 %
Acquisition expenses(3)     0.6 %     1.7 %     2.3 %     1.0 %     2.1 %     3.1 %
Business continuity plan(4)     —       0.1 %     0.1 %     0.1 %     —       0.1 %
Office closures(5)     —       0.1 %     0.1 %     —       —       —  
Other expenses     —       —       —       —       —       —  
Total adjustments to adjusted EBITDA margin %     30.5 %     3.8 %     34.3 %     12.7 %     2.1 %     14.8 %

(1)    “Share-based compensation” represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our former parent company, and RSA, restricted stock unit, stock option, and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.
(2)    “Reorganization and integration costs” includes costs related to the departure of our former chief executive officer, our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.
(3)    “Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.
(4)    “Business continuity plan” includes incremental compensation and other costs that are directly related to operations while transitioning to a remote workforce and other costs due to the COVID-19 pandemic.
(5)    “Office closures” represents one-time expenses related to closing facilities.

Adjusted Net Income

Adjusted net income represents net income before: (a) share-based compensation expense, (b) amortization of acquisition-related intangible assets, (c) acquisition and related integration expenses, (d) restructuring and conversion costs and (e) certain other expenses. Reconciled items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts. We prepared adjusted net income to eliminate the effects of items that we do not consider indicative of our core operating performance. We have historically not used adjusted net income for internal management reporting and evaluation purposes; however, we believe that adjusted net income, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations for various reasons, including
the following:

  • non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, share-based compensation expense is not a key measure of our operating performance;
  • costs associated with acquisitions and related integrations, restructuring and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance; and
  • amortization expense can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; as such, the amortization of intangible assets obtained in acquisitions is not considered a key measure of our operating performance.

Adjusted net income does not purport to be an alternative to net income or cash flows from operating activities. The term adjusted net income is not defined under GAAP, and adjusted net income is not a measure of net income, operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, adjusted net income has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

  • adjusted net income does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;
  • adjusted net income does not reflect changes in, or cash requirements for, working capital needs; and
  • other companies in the financial services industry may calculate adjusted net income differently than we do, limiting its usefulness as a comparative measure.

Set forth below is a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for the three months ended March 31, 2021 and 2020 (unaudited).

    Three Months Ended March 31, 2021     Three Months Ended March 31, 2020  
(in thousands)   Compensation     Non-
Compensation 		    Total     Compensation     Non-
Compensation 		    Total  
Net income (loss)                   $ (8,916 )                   $ 2,736  
Acquisition-related amortization(1)   $ —     $ 5,108       5,108     $ —     $ 5,108       5,108  
Expense adjustments(2)     2,922       4,568       7,490       1,332       2,493       3,825  
Share-based compensation     33,428       —       33,428       13,188       —       13,188  
Tax effect of adjustments(3)     (687 )     (14,250 )     (14,937 )     (346 )     (6,804 )     (7,150 )
Adjusted net income   $ 35,663     $ (4,574 )   $ 22,173     $ 14,174     $ 797     $ 17,707  

(1)    Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.
(2)    Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above other than share-based compensation.
(3)    Reflects the tax impact of expense adjustments and acquisition-related amortization.

Contacts
Investors:
Taylor J. Hamilton, CFA
Head of Investor Relations
InvestorRelations@assetmark.com

Media: 
Oliver Hays
MSR Communications for AssetMark, Inc.
oliver@msrcommunications.com

SOURCE: AssetMark Financial Holdings, Inc.


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Source: AssetMark, Inc.
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