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AssetMark Reports $79.4B Platform Assets for Third Quarter 2022

11/01/2022

CONCORD, Calif., Nov. 01, 2022 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter ended September 30, 2022.

Third Quarter 2022 Financial and Operational Highlights

  • Net income for the quarter was $30.1 million, or $0.41 per share.
  • Adjusted net income for the quarter was $35.0 million, or $0.47 per share, on total revenue of $154.7 million.
  • Adjusted EBITDA for the quarter was $52.7 million, or 34.0% of total revenue.
  • Platform assets decreased 8.6% year-over-year to $79.4 billion. Quarter-over-quarter platform assets were down 3.3%, due to negative market impact net of fees of $4.0 billion, partially offset by quarterly net flows of $1.2 billion.
  • Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 6.7%.
  • More than 2,900 new households and 159 new producing advisors joined the AssetMark platform during the third quarter. In total, as of September 30, 2022 there were over 8,700 advisors (approximately 2,600 were engaged advisors) and over 223,000 investor households on the AssetMark platform.
  • We realized a 14.9% annualized production lift from existing advisors for the third quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

“Our deep connectivity with our advisors, especially during periods of uncertainty, has enabled us to deliver another quarter of record results – notably, record top and bottom line financial results and adjusted margin expansion of 200 bps year-over-year,” said Natalie Wolfsen, CEO of AssetMark. “In this challenging environment, we are committed to playing offense and doing even more to demonstrate our value to existing and prospective advisors. We have increased our representation at broker-dealer conferences, increased our spend on high-impact digital lead generation, and are hosting more live, community-based events. These efforts are driving new advisor engagement, and we are confident in the opportunity ahead.”

Third Quarter 2022 Key Operating Metrics      
       
  3Q22      3Q21      Variance
per year
 
Operational metrics:              
Platform assets (at period-beginning) (millions of dollars) 82,127     84,594     (2.9%)
Net flows (millions of dollars) 1,207     2,830     (57.4%)
Market impact net of fees (millions of dollars) (3,952 )   (598 )   NM 
Acquisition impact (millions of dollars) -     -     NM 
Platform assets (at period-end) (millions of dollars) 79,382     86,826     (8.6%)
Net flows lift (% of beginning of year platform assets) 1.3 %   3.8 %   (250 bps)
Advisors (at period-end) 8,702     8,552     1.8%
Engaged advisors (at period-end) 2,601     2,749     (5.4%)
Assets from engaged advisors (at period-end) (millions of dollars) 72,195     79,667     (9.4%)
Households (at period-end) 223,098     203,004     9.9%
New producing advisors 159     201     (20.9%)
Production lift from existing advisors (annualized %) 14.9 %   23.7 %   (880 bps)
Assets in custody at ATC (at period-end) (millions of dollars) 61,539     65,656     (6.3%)
ATC client cash (at period-end) (millions of dollars) 3,510     2,611     34.4%
               
Financial metrics:              
Total revenue (millions of dollars) 155     140     10.7%
Net income (millions of dollars) 30.1     12.2     145.8%
Net income margin (%) 19.5 %   8.8 %   1,070 bps
Capital expenditure (millions of dollars) 9.0     9.3     (3.2%)
               
Non-GAAP financial metrics:              
Adjusted EBITDA (millions of dollars) 52.7     44.8     17.6%
Adjusted EBITDA margin (%) 34.0 %   32.0 %   200 bps
Adjusted net income (millions of dollars) 35.0     29.9     17.1%
Note: Percentage variance based on actual numbers, not rounded results              

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 third quarter 2022 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: November 1, 2022
  • Time: 2:00 p.m. PT; 5:00 p.m. ET
  • Phone: Listeners can pre-register for the conference call here:
    https://www.netroadshow.com/events/login?show=da4b41d4&confId=42163. 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.
  • Webcast: http://ir.assetmark.com. Please access the website 10 minutes prior to the start time. The webcast will be available in recorded form at http://ir.assetmark.com for 14 days from November 1, 2022.

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 $79.4 billion in platform assets as of September 30, 2022 and has a history of innovation spanning more than 25 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 “will,” “may,” “could,” “should,” “believe,” “expect,” “estimate,” “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 our business strategies, our operating and financial performance and general market, 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 Annual Report on Form 10-K for the year ended December 31, 2021, which is on file with the Securities and Exchange Commission and available on our investor relations website at http://ir.assetmark.com. Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, which is expected to be filed on November 8, 2022. 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.
Unaudited Condensed Consolidated Balance Sheets
(in thousands except share data and par value)
 
   
    September 30,
2022
    December 31,
2021
 
    (unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 137,210     $ 76,707  
Restricted cash     13,000       13,000  
Investments, at fair value     12,919       14,498  
Fees and other receivables, net     15,789       9,019  
Income tax receivable, net     9,617       6,276  
Prepaid expenses and other current assets     11,293       14,673  
Total current assets     199,828       134,173  
Property, plant and equipment, net     7,467       8,015  
Capitalized software, net     85,110       73,701  
Other intangible assets, net     703,180       709,693  
Operating lease right-of-use assets     22,833       22,469  
Goodwill     437,154       436,821  
Other assets     11,633       2,090  
Total assets   $ 1,467,205     $ 1,386,962  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 1,637     $ 2,613  
Accrued liabilities and other current liabilities     52,118       56,249  
Total current liabilities     53,755       58,862  
Long-term debt, net     113,673       115,000  
Other long-term liabilities     14,686       16,468  
Long-term portion of operating lease liabilities     28,684       28,316  
Deferred income tax liabilities, net     159,257       158,930  
Total long-term liabilities     316,300       318,714  
Total liabilities     370,055       377,576  
Stockholders’ equity:                
Common stock, $0.001 par value (675,000,000 shares authorized and
73,845,974 and 73,562,717 shares issued and outstanding as of September 30,
2022 and December 31, 2021, respectively)
    74       74  
Additional paid-in capital     939,166       929,070  
Retained earnings     157,910       80,242  
Total stockholders’ equity     1,097,150       1,009,386  
Total liabilities and stockholders’ equity   $ 1,467,205     $ 1,386,962  
                 


AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
 
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
    2022     2021       2022       2021  
Revenue:                              
Asset-based revenue   $ 128,173     $ 134,152       $ 409,498       $ 374,655  
Spread-based revenue     21,160       1,235         30,265         6,513  
Subscription-based revenue     3,126       3,172         9,703         3,172  
Other revenue     2,204       1,108         4,707         2,375  
Total revenue     154,663       139,667         454,173         386,715  
Operating expenses:                              
Asset-based expenses     36,476       38,697         118,429         110,609  
Spread-based expenses     2,142       (484 )       3,188         1,060  
Employee compensation     41,589       44,051         121,852         150,800  
General and operating expenses     21,667       18,794         65,949         52,599  
Professional fees     5,877       5,071         17,104         14,349  
Depreciation and amortization     7,961       10,648         23,141         29,849  
Total operating expenses     115,712       116,777         349,663         359,266  
Interest expense     1,560       1,061         4,207         2,606  
Other income (expense), net     11       (119 )       (195 )       (82 )
Income before income taxes     37,402       21,710         100,108         24,761  
Provision for income taxes     7,293       9,460         22,440         11,441  
Net income     30,109       12,250         77,668         13,320  
Net comprehensive income   $ 30,109     $ 12,250       $ 77,668       $ 13,320  
Net income per share attributable to common stockholders:                              
Basic   $ 0.41     $ 0.17       $ 1.05       $ 0.19  
Diluted   $ 0.41     $ 0.17       $ 1.05       $ 0.19  
Weighted average number of common shares outstanding, basic     73,842,297       72,921,794         73,682,881         71,764,582  
Weighted average number of common shares outstanding, diluted     73,844,689       73,566,777         73,783,858         71,940,398  


AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 
    Nine Months Ended September 30,  
    2022     2021  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income   $ 77,668     $ 13,320  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     23,141       29,849  
Interest     607       540  
Deferred income taxes           226  
Share-based compensation     10,096       48,079  
Debt acquisition write-down     130        
Changes in certain assets and liabilities:                
Fees and other receivables, net     (7,338 )     (594 )
Receivables from related party     568       (91 )
Prepaid expenses and other current assets     6,732       4,866  
Accounts payable, accrued liabilities and other current liabilities     (12,664 )     14  
Income tax receivable and payable, net     (3,341 )     (2,308 )
Net cash provided by operating activities     95,599       93,901  
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of Voyant, Inc., net of cash received           (124,236 )
Purchase of investments     (2,211 )     (2,435 )
Sale of investments     384       173  
Purchase of property and equipment     (1,440 )     (652 )
Purchase of computer software     (26,049 )     (26,016 )
Purchase of convertible notes receivable     (8,600 )      
Net cash used in investing activities     (37,916 )     (153,166 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from revolving credit facility draw down           75,000  
Proceeds from issuance of long-term debt, net     122,508        
Proceeds from exercise of stock options           94  
Payments on revolving credit facility     (115,000 )     (35,000 )
Payments on term loan     (4,688 )      
Net cash provided by financing activities     2,820       40,094  
Net change in cash, cash equivalents, and restricted cash     60,503       (19,171 )
Cash, cash equivalents, and restricted cash at beginning of period     89,707       81,619  
Cash, cash equivalents, and restricted cash at end of period   $ 150,210     $ 62,448  
SUPPLEMENTAL CASH FLOW INFORMATION                
Income taxes paid   $ 26,176     $ 15,977  
Interest paid   $ 2,714     $ 1,870  
Non-cash operating and investing activities:                
Non-cash changes to right-of-use assets   $ 3,396     $ (1,176 )
Non-cash changes to lease liabilities   $ 3,396     $ (1,176 )
Common stock issued in acquisition of business   $     $ 24,910  

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 and nine months ended September 30, 2022 and 2021 (unaudited).

    Three Months Ended
September 30,
    Three Months Ended
September 30,
 
(in thousands except for percentages)   2022     2021     2022     2021  
Net income   $ 30,109     $ 12,250       19.5 %     8.8 %
Provision for income taxes     7,293       9,460       4.7 %     6.8 %
Interest income     (849 )     (18 )     (0.5 )%      
Interest expense     1,560       1,061       1.0 %     0.8 %
Depreciation and amortization     7,961       10,648       5.1 %     7.6 %
EBITDA   $ 46,074     $ 33,401       29.8 %     24.0 %
Share-based compensation(1)     3,923       7,974       2.5 %     5.7 %
Reorganization and integration costs(2)     2,281       2,315       1.5 %     1.7 %
Acquisition expenses(3)     379       948       0.2 %     0.7 %
Business continuity plan(4)     14       4              
Other (income) expense, net     (11 )     119             0.1 %
Adjusted EBITDA   $ 52,660     $ 44,761       34.0 %     32.2 %


    Nine Months Ended
September 30,
    Nine Months Ended
September 30,
 
(in thousands except for percentages)   2022     2021     2022     2021  
Net income   $ 77,668     $ 13,320       17.1 %     3.4 %
Provision for income taxes     22,440       11,441       4.9 %     3.0 %
Interest income     (1,107 )     (116 )     (0.2 )%      
Interest expense     4,207       2,606       0.9 %     0.7 %
Amortization/depreciation     23,141       29,849       5.1 %     7.7 %
EBITDA   $ 126,349     $ 57,100       27.8 %     14.8 %
Share-based compensation(1)     10,096       48,079       2.2 %     12.4 %
Reorganization and integration costs(2)     8,600       8,094       1.9 %     2.1 %
Acquisition expenses(3)     1,313       5,236       0.3 %     1.4 %
Business continuity plan(4)     234       136       0.1 %      
Office closures(5)           167              
Other (income) expense, net     195       82              
Adjusted EBITDA   $ 146,787     $ 118,894       32.3 %     30.7 %

(1) “Share-based compensation” represents granted share-based compensation in the form of 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 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 a transition to a primarily remote workforce in 2021 and a transition to a hybrid workforce in 2022, 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 and nine months ended September 30, 2022 and 2021, broken out by compensation and non-compensation expenses (unaudited).

             
    Three Months Ended September 30, 2022     Three Months Ended September 30, 2021  
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)   $ 3,923     $     $ 3,923     $ 7,974     $     $ 7,974  
Reorganization and integration costs(2)     829       1,452       2,281       1,484       831       2,315  
Acquisition expenses(3)     (4 )     383       379       178       770       948  
Business continuity plan(4)           14       14             4       4  
Other (income) expense, net           (11 )     (11 )           119       119  
Total adjustments to adjusted EBITDA   $ 4,748     $ 1,838     $ 6,586     $ 9,636     $ 1,724     $ 11,360  
                                                 
   

Three Months Ended September 30, 2022
    Three Months Ended September 30, 2021  
(in percentages)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)     2.5 %           2.5 %     5.7 %           5.7 %
Reorganization and integration costs(2)     0.5 %     1.0 %     1.5 %     1.1 %     0.6 %     1.7 %
Acquisition expenses(3)           0.2 %     0.2 %     0.1 %     0.5 %     0.6 %
Business continuity plan(4)                                    
Other (income) expense, net                                    
Total adjustments to adjusted EBITDA margin %     3.0 %     1.2 %     4.2 %     6.9 %     1.1 %     8.0 %


    Nine Months Ended September 30, 2022     Nine Months Ended September 30, 2021  
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)   $ 10,096     $     $ 10,096     $ 48,079     $     $ 48,079  
Reorganization and integration costs(2)     2,823       5,777       8,600       4,417       3,677       8,094  
Acquisition expenses(3)     (4 )     1,317       1,313       1,403       3,833       5,236  
Business continuity plan(4)     (2 )     236       234       12       124       136  
Office closures(5)                             167       167  
Other (income) expense, net           195       195             82       82  
Total adjustments to adjusted EBITDA   $ 12,913     $ 7,525     $ 20,438     $ 53,911     $ 7,883     $ 61,794  
                                                 
    Nine Months Ended September 30, 2022     Nine Months Ended September 30, 2021  
(in percentages)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)     2.2 %           2.2 %     12.4 %           12.4 %
Reorganization and integration costs(2)     0.6 %     1.3 %     1.9 %     1.1 %     1.0 %     2.1 %
Acquisition expenses(3)           0.3 %     0.3 %     0.4 %     1.0 %     1.4 %
Business continuity plan(4)           0.1 %     0.1 %                  
Office closures(5)                                    
Other (income) expense, net                                    
Total adjustments to adjusted EBITDA margin %     2.8 %     1.7 %     4.5 %     13.9 %     2.0 %     15.9 %

(1) “Share-based compensation” represents granted share-based compensation in the form of 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 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 a transition to a primarily remote workforce in 2021 and a transition to a hybrid workforce in 2022, 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.

The schedule set forth below presents the Company’s GAAP results from the Condensed Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2022 and 2021, with certain line items adjusted for the items described above. Included below is also a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for the three and nine months and years ended September 30, 2022 and 2021 (unaudited).

  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2022     2021     2022     2021
Revenue:                          
Asset-based revenue $ 128,173     $ 134,152     $ 409,498     $ 374,655
Spread-based revenue   21,160       1,235       30,265       6,513
Subscription-based revenue   3,126       3,172       9,703       3,172
Other revenue   2,204       1,108       4,707       2,375
Total revenue   154,663       139,667       454,173       386,715
Adjusted operating expenses:                          
Asset-based expenses   36,476       38,697       118,429       110,609
Spread-based expenses   2,142       (484 )     3,188       1,060
Adjusted employee compensation (1)   36,841       34,415       108,939       96,889
Adjusted general and operating expenses (1)   20,509       17,712       61,873       46,198
Adjusted professional fees (1)   5,186       4,548       13,850       12,949
Adjusted depreciation and amortization (2)   6,232       4,679       17,955       13,664
Total adjusted operating expenses   107,386       99,567       324,234       281,369
Interest expense   1,560       1,061       4,207       2,606
Adjusted other income (expense), net (1)                    
Adjusted income before income taxes   45,717       39,039       125,732       102,740
Adjusted provision for income taxes (3)   10,744       9,174       29,548       24,143
Adjusted net income $ 34,973     $ 29,865     $ 96,184     $ 78,597
Net income per share attributable to common stockholders:                          
Adjusted earnings per share (4) $ 0.47     $ 0.40     $ 1.30     $ 1.07
Weighted average of common shares outstanding, diluted (4)   73,844,689       74,687,043       73,783,858       73,680,825

(1) Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above.
(2) Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.
(3) Consists of the provision for income taxes under U.S. GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization, and share-based compensation beginning in 2022.
(4) In Q1 2022, we began using the diluted GAAP shares outstanding given that our restricted stock awards fully vested in 2021 resulting in no material reconciling differences compared to the adjusted diluted common shares outstanding historically used for calculating adjusted earnings per share.

Set forth below is a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for the three and nine months ended September 30, 2022 and 2021 (unaudited).

Reconciliation of Non-GAAP Presentation.   Three months ended
September 30, 2022
    Three months ended
September 30, 2021
(in thousands)   GAAP     Adjustments     Adjusted     GAAP     Adjustments     Adjusted
Revenue:                                              
Asset-based revenue   $ 128,173     $     $ 128,173     $ 134,152     $     $ 134,152
Spread-based revenue     21,160             21,160       1,235             1,235
Subscription-based revenue     3,126             3,126       3,172             3,172
Other revenue     2,204             2,204       1,108             1,108
Total revenue     154,663             154,663       139,667             139,667
Operating expenses:                                              
Asset-based expenses     36,476             36,476       38,697             38,697
Spread-based expenses     2,142             2,142       (484 )           (484
Employee compensation(1)     41,589       (4,748 )     36,841       44,051       (9,636 )     34,415
General and operating expenses(1)     21,667       (1,158 )     20,509       18,794       (1,082 )     17,712
Professional fees(1)     5,877       (691 )     5,186       5,071       (523 )     4,548
Depreciation and amortization(2)     7,961       (1,729 )     6,232       10,648       (5,969 )     4,679
Total operating expenses     115,712       (8,326 )     107,386       116,777       (17,210 )     99,567
Interest expense     1,560             1,560       1,061             1,061
Other (income) expense, net(1)     (11 )     11             119       (119 )    
Income before income taxes     37,402       8,315       45,717       21,710       17,329       39,039
Provision for income taxes(3)     7,293       3,451       10,744       9,460       (286 )     9,174
Net income   $ 30,109             $ 34,973     $ 12,250             $ 29,865

(1) Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above.
(2) Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.
(3) Consists of the provision for income taxes under U.S. GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization, and share-based compensation beginning in 2022.

           
Reconciliation of Non-GAAP Presentation.   Nine Months Ended
September 30, 2022
    Nine Months Ended
September 30, 2021
(in thousands)   GAAP     Adjustments     Adjusted     GAAP     Adjustments     Adjusted
Revenue:                                              
Asset-based revenue   $ 409,498     $     $ 409,498     $ 374,655     $     $ 374,655
Spread-based revenue     30,265             30,265     $ 6,513             6,513
Subscription-based revenue     9,703             9,703     $ 3,172             3,172
Other revenue     4,707             4,707     $ 2,375             2,375
Total revenue     454,173             454,173       386,715             386,715
Operating expenses:                                              
Asset-based expenses     118,429             118,429       110,609             110,609
Spread-based expenses     3,188             3,188       1,060             1,060
Employee compensation(1)     121,852       (12,913 )     108,939       150,800       (53,911 )     96,889
General and operating expenses(1)     65,949       (4,076 )     61,873       52,599       (6,401 )     46,198
Professional fees(1)     17,104       (3,254 )     13,850       14,349       (1,400 )     12,949
Depreciation and amortization(2)     23,141       (5,186 )     17,955       29,849       (16,185 )     13,664
Total operating expenses     349,663       (25,429 )     324,234       359,266       (77,897 )     281,369
Interest expense     4,207             4,207       2,606             2,606
Other (income) expense, net(1)     195       (195 )           82       (82 )    
Income before income taxes     100,108       25,624       125,732       24,761       77,979       102,740
Provision for income taxes(3)     22,440       7,108       29,548       11,441       12,702       24,143
Net income   $ 77,668             $ 96,184     $ 13,320             $ 78,597

(1) Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above.
(2) Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.
(3) Consists of the provision for income taxes under U.S. GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization, and share-based compensation beginning in 2022.

    Three Months Ended
September 30, 2022
    Three Months Ended
September 30, 2021
 
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Net income                   $ 30,109                     $ 12,250  
Acquisition-related amortization(1)   $     $ 1,729       1,729     $     $ 5,969       5,969  
Expense adjustments(2)     825       1,849       2,674       1,662       1,605       3,267  
Share-based compensation     3,923             3,923       7,974             7,974  
Other (income) expense, net           (11 )     (11 )           119       119  
Tax effect of adjustments(3)     (1,116 )     (2,335 )     (3,451 )     (391 )     677       286  
Adjusted net income   $ 3,632     $ 1,232     $ 34,973     $ 9,245     $ 8,370     $ 29,865  
                                                 
    Nine Months Ended
September 30, 2022
    Nine Months Ended
September 30, 2021
 
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Net income                   $ 77,668                     $ 13,320  
Acquisition-related amortization(1)   $     $ 5,186       5,186     $     $ 16,185       16,185  
Expense adjustments(2)     2,817       7,330       10,147       5,832       7,801       13,633  
Share-based compensation     10,096             10,096       48,079             48,079  
Other (income) expense, net           195       195             82       82  
Tax effect of adjustments(3)     (3,035 )     (4,073 )     (7,108 )     (1,371 )     (11,331 )     (12,702 )
Adjusted net income   $ 9,878     $ 8,638     $ 96,184     $ 52,540     $ 12,737     $ 78,597  

(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)  Consists of the provision for income taxes under U.S. GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization, and share-based compensation beginning in 2022.

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

Media: 
Alaina Kleinman
Head of PR & Communications
alaina.kleinman@assetmark.com  

SOURCE: AssetMark Financial Holdings, Inc.

 


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Source: AssetMark, Inc.
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