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AssetMark Reports $82.1B Platform Assets for Second Quarter 2022

08/03/2022

CONCORD, Calif., Aug. 03, 2022 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter ended June 30, 2022.

Second Quarter 2022 Financial and Operational Highlights

  • Net income for the quarter was $25.3 million, or $0.34 per share.
  • Adjusted net income for the quarter was $32.4 million, or $0.44 per share, on total revenue of $151.2 million.
  • Adjusted EBITDA for the quarter was $49.6 million, or 32.8% of total revenue.
  • Platform assets decreased 2.9% year-over-year and 9.6% quarter-over-quarter to $82.1 billion, due to negative market impact net of fees of $10.1 billion, partially offset by quarterly net flows of $1.4 billion.
  • Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 7.5%.
  • More than 4,500 new households and 193 new producing advisors joined the AssetMark platform during the second quarter. In total, as of June 30, 2022 there were almost 8,700 advisors (approximately 2,700 were engaged advisors) and over 220,000 investor households on the AssetMark platform.
  • We realized an 17.4% annualized production lift from existing advisors for the second quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

“Our financial results in the second quarter reflect AssetMark’s evolution from a traditional TAMP to a full-service wealth management platform. We realized record numbers in revenue, adjusted EBITDA, and net income, all while expanding adjusted EBITDA margins 150 bps year-over-year,” said Natalie Wolfsen, CEO of AssetMark. “Our recently announced acquisition of Adhesion Wealth will further expand our addressable market and strengthen our ability to serve the rapidly-growing RIA segment. We will continue to execute on our growth strategy to serve advisors with unparalleled service, sophisticated investment solutions, and flexible technology.”

Second Quarter 2022 Key Operating Metrics

       
  2Q22 2Q21 Variance per year
Operational metrics:      
Platform assets (at period-beginning) (millions of dollars) 90,818 78,880 15.1%
Net flows (millions of dollars) 1,363 2,228 (38.8%)
Market impact net of fees (millions of dollars) (10,054) 3,487 NM
Acquisition impact (millions of dollars) - - NM
Platform assets (at period-end) (millions of dollars) 82,127 84,594 (2.9%)
Net flows lift (% of beginning of year platform assets) 1.5% 3.0% (150 bps)
Advisors (at period-end) 8,688 8,496 2.3%
Engaged advisors (at period-end) 2,663 2,691 (1.0%)
Assets from engaged advisors (at period-end) (millions of dollars) 74,994 77,352 (3.0%)
Households (at period-end) 220,172 196,474 12.1%
New producing advisors 193 201 (4.0%)
Production lift from existing advisors (annualized %) 17.4% 26.6% (920 bps)
Assets in custody at ATC (at period-end) (millions of dollars) 63,055 63,394 (0.5%)
ATC client cash (at period-end) (millions of dollars) 3,700 2,590 42.9%
       
Financial metrics:      
Total revenue (millions of dollars) 151 128 18.1%
Net income (loss) (millions of dollars) 25.3 10.0 153.8%
Net income (loss) margin (%) 16.8% 7.8% 900 bps
Capital expenditure (millions of dollars) 10.0 9.2 8.6%
       
Non-GAAP financial metrics:      
Adjusted EBITDA (millions of dollars) 49.6 40.0 24.0%
Adjusted EBITDA margin (%) 32.8% 31.3% 150 bps
Adjusted net income (millions of dollars) 32.4 26.6 22.1%
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 second 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:

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 $82.1 billion in platform assets as of June 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 ability to close the Adhesion acquisition and expand our addressable market, 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 June 30, 2022, which is expected to be filed on August 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)

    June 30,  2022     December 31, 2021  
    (unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 116,537     $ 76,707  
Restricted cash     13,000       13,000  
Investments, at fair value     13,225       14,498  
Fees and other receivables, net     12,497       9,019  
Income tax receivable, net     7,630       6,276  
Prepaid expenses and other current assets     13,252       14,673  
Total current assets     176,141       134,173  
Property, plant and equipment, net     7,916       8,015  
Capitalized software, net     81,364       73,701  
Other intangible assets, net     705,351       709,693  
Operating lease right-of-use assets     22,576       22,469  
Goodwill     437,154       436,821  
Other assets     3,103       2,090  
Total assets   $ 1,433,605     $ 1,386,962  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable   $ 2,246     $ 2,613  
Accrued liabilities and other current liabilities     50,313       56,249  
Total current liabilities     52,559       58,862  
Long-term debt, net     115,203       115,000  
Other long-term liabilities     15,100       16,468  
Long-term portion of operating lease liabilities     28,368       28,316  
Deferred income tax liabilities, net     159,257       158,930  
Total long-term liabilities     317,928       318,714  
Total liabilities     370,487       377,576  
Stockholders’ equity:                
Common stock, $0.001 par value (675,000,000 shares authorized and 73,745,114 and 73,562,717 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)     74       74  
Additional paid-in capital     935,243       929,070  
Retained earnings     127,801       80,242  
Total stockholders’ equity     1,063,118       1,009,386  
Total liabilities and stockholders’ equity   $ 1,433,605     $ 1,386,962  

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

    Three Months Ended June 30,     Six Months Ended June 30,  
    2022     2021     2022     2021  
Revenue:                                
Asset-based revenue   $ 139,249     $ 124,690     $ 281,325     $ 240,503  
Spread-based revenue     7,150       2,672       9,105       5,278  
Subscription-based revenue     3,259             6,577        
Other revenue     1,549       680       2,503       1,267  
Total revenue     151,207       128,042       299,510       247,048  
Operating expenses:                                
Asset-based expenses     40,266       35,818       81,953       71,912  
Spread-based expenses     641       868       1,046       1,544  
Employee compensation     39,973       39,447       80,263       106,749  
General and operating expenses     22,223       16,316       44,282       33,805  
Professional fees     5,494       5,018       11,227       9,278  
Depreciation and amortization     7,711       9,730       15,180       19,201  
Total operating expenses     116,308       107,197       233,951       242,489  
Interest expense     1,488       774       2,647       1,545  
Other expenses, net     78       (22 )     206       (37 )
Income before income taxes     33,333       20,093       62,706       3,051  
Provision for income taxes     7,993       10,107       15,147       1,981  
Net income     25,340       9,986       47,559       1,070  
Net comprehensive income   $ 25,340     $ 9,986     $ 47,559     $ 1,070  
Net income per share attributable to common stockholders:                                
Basic   $ 0.34     $ 0.14     $ 0.65     $ 0.02  
Diluted   $ 0.34     $ 0.14     $ 0.65       0.02  
Weighted average number of common shares outstanding, basic     73,631,588       71,922,179       73,601,852       71,176,386  
Weighted average number of common shares outstanding, diluted     73,692,278       72,155,068       73,651,172       71,231,337  

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

    Six Months Ended June 30,  
    2022     2021  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income   $ 47,559     $ 1,070  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization     15,180       19,201  
Interest     407       370  
Deferred income taxes           226  
Share-based compensation     6,173       40,104  
Debt acquisition write-down     130        
Changes in certain assets and liabilities:                
Fees and other receivables, net     (3,145 )     47  
Receivables from related party     (333 )     (43 )
Prepaid expenses and other current assets     3,887       1,913  
Accounts payable, accrued liabilities and other current liabilities     (13,236 )     (5,220 )
Income tax receivable and payable, net     (1,354 )     (4,383 )
Net cash provided by operating activities     55,268       53,285  
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of investments     (1,780 )     (1,927 )
Sale of investments     361       174  
Purchase of property and equipment     (1,222 )     (421 )
Purchase of computer software     (17,180 )     (16,974 )
Net cash used in investing activities     (19,821 )     (19,148 )
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from credit facility draw down           75,000  
Proceeds from issuance of long-term debt, net     122,508        
Payments on revolving credit facility     (115,000 )      
Payments on term loan     (3,125 )      
Net cash provided by financing activities     4,383       75,000  
Net change in cash, cash equivalents, and restricted cash     39,830       109,137  
Cash, cash equivalents, and restricted cash at beginning of period     89,707       81,619  
Cash, cash equivalents, and restricted cash at end of period   $ 129,537     $ 190,756  
SUPPLEMENTAL CASH FLOW INFORMATION                
Income taxes paid   $ 16,905     $ 7,672  
Interest paid   $ 1,376     $ 985  
Non-cash operating activities:                
Non-cash changes to right-of-use assets   $ 2,161     $ (2,140 )
Non-cash changes to lease liabilities   $ 2,161     $ (2,140 )

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 six months ended June 30, 2022 and 2021 (unaudited).

    Three Months Ended June 30,     Three Months Ended June 30,  
(in thousands except for percentages)   2022     2021     2022     2021  
Net income   $ 25,340     $ 9,986       16.8 %     7.8 %
Provision for income taxes     7,993       10,107       5.3 %     7.9 %
Interest income     (227 )     (73 )     (0.2 )%     (0.1 )%
Interest expense     1,488       774       1.0 %     0.6 %
Depreciation and amortization     7,711       9,730       5.1 %     7.6 %
EBITDA   $ 42,305     $ 30,524       28.0 %     23.8 %
Share-based compensation(1)     3,031       6,676       2.0 %     5.2 %
Reorganization and integration costs(2)     3,313       1,283       2.2 %     1.0 %
Acquisition expenses(3)     799       1,471       0.5 %     1.2 %
Business continuity plan(4)     105       61       0.1 %     0.1 %
Office closures(5)           46              
Other expense, net     78       (22 )     0.1 %      
Adjusted EBITDA   $ 49,631     $ 40,039       32.9 %     31.3 %


    Six Months Ended June 30,     Six Months Ended June 30,  
(in thousands except for percentages)   2022     2021     2022     2021  
Net income   $ 47,559     $ 1,070       15.9 %     0.4 %
Provision for income taxes     15,147       1,981       5.1 %     0.8 %
Interest income     (258 )     (98 )     (0.1 )%      
Interest expense     2,647       1,545       0.9 %     0.6 %
Amortization/depreciation     15,180       19,201       5.1 %     7.8 %
EBITDA     80,275       23,699       26.9 %     9.6 %
Share-based compensation(1)     6,173       40,104       2.1 %     16.2 %
Reorganization and integration costs(2)     6,319       5,779       2.1 %     2.3 %
Acquisition expenses(3)     934       4,288       0.3 %     1.7 %
Business continuity plan(4)     220       132       0.1 %     0.1 %
Office closures(5)           167             0.1 %
Other expenses     206       (37 )     0.1 %      
Adjusted EBITDA   $ 94,127     $ 74,132       31.6 %     30.0 %

(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 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 six months ended June 30, 2022 and 2021, broken out by compensation and non-compensation expenses (unaudited).

    Three Months Ended
June 30, 2022
    Three Months Ended
June 30, 2021
 
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)   $ 3,031     $     $ 3,031     $ 6,676     $     $ 6,676  
Reorganization and integration costs(2)     1,209       2,104       3,313       726       557       1,283  
Acquisition expenses(3)           799       799       509       962       1,471  
Business continuity plan(4)     (2 )     107       105       12       49       61  
Office closures(5)                             46       46  
Other expenses, net           78       78             (22 )     (22 )
Total adjustments to adjusted EBITDA   $ 4,238     $ 3,088     $ 7,326     $ 7,923     $ 1,592     $ 9,515  
                                                 
    Three Months Ended
June 30, 2022
    Three Months Ended
June 30, 2021
 
(in percentages)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)     2.0 %           2.0 %     5.2 %           5.2 %
Reorganization and integration costs(2)     0.8 %     1.4 %     2.2 %     0.6 %     0.4 %     1.0 %
Acquisition expenses(3)           0.5 %     0.5 %     0.4 %     0.7 %     1.1 %
Business continuity plan(4)           0.1 %     0.1 %                  
Office closures(5)                                    
Other expenses, net           0.1 %     0.1 %                  
Total adjustments to adjusted EBITDA margin %     2.8 %     2.1 %     4.9 %     6.2 %     1.1 %     7.3 %
                                                 


    Six Months Ended
June 30, 2022
    Six Months Ended
June 30, 2021
 
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)   $ 6,173     $     $ 6,173     $ 40,104     $     $ 40,104  
Reorganization and integration costs(2)     1,995       4,324       6,319       2,933       2,846       5,779  
Acquisition expenses(3)           934       934       1,225       3,063       4,288  
Business continuity plan(4)     (2 )     222       220       12       120       132  
Office closures(5)                             167       167  
Other expenses           206       206             (37 )     (37 )
Total adjustments to adjusted EBITDA   $ 8,166     $ 5,686     $ 13,852     $ 44,274     $ 6,159     $ 50,433  
                                                 
    Six Months Ended
June 30, 2022
    Six Months Ended
June 30, 2021
 
(in percentages)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Share-based compensation(1)     2.1 %           2.1 %     16.2 %           16.2 %
Reorganization and integration costs(2)     0.7 %     1.4 %     2.1 %     1.2 %     1.2 %     2.4 %
Acquisition expenses(3)           0.3 %     0.3 %     0.5 %     1.2 %     1.7 %
Business continuity plan(4)           0.1 %     0.1 %                  
Office closures(5)                             0.1 %     0.1 %
Other expenses           0.1 %     0.1 %                  
Total adjustments to adjusted EBITDA margin %     2.8 %     1.9 %     4.7 %     17.9 %     2.5 %     20.4 %

(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 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 six months ended June 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 six months and years ended June 30, 2022 and 2021 (unaudited).

  Three Months Ended
June 30,
    Six Months Ended
June 30,
  2022     2021     2022     2021
Revenue:                            
Asset-based revenue $ 139,249     $ 124,690     $ 281,325     $ 240,503
Spread-based revenue   7,150       2,672       9,105       5,278
Subscription-based revenue   3,259             6,577      
Other revenue   1,549       680       2,503       1,267
Total revenue   151,207       128,042       299,510       247,048
Adjusted operating expenses:                            
Asset-based expenses   40,266       35,818       81,953       71,912
Spread-based expenses   641       868       1,046       1,544
Adjusted employee compensation (1)   35,735       31,523       72,097       62,475
Adjusted general and operating expenses (1)   20,561       15,068       41,365       28,485
Adjusted professional fees (1)   4,146       4,653       8,664       8,402
Adjusted depreciation and amortization (2)   5,982       4,622       11,723       8,985
Total adjusted operating expenses   107,331       92,552       216,848       181,803
Interest expense   1,488       774       2,647       1,545
Adjusted other expense, net (1)                    
Adjusted income before income taxes   42,388       34,716       80,015       63,700
Adjusted provision for income taxes (3)   9,962       8,158       18,804       14,970
Adjusted net income $ 32,426     $ 26,558     $ 61,211     $ 48,730
Net income per share attributable to common stockholders:                            
Adjusted earnings per share (4) $ 0.44     $ 0.36     $ 0.83     $ 0.66
Weighted average number of common shares outstanding, diluted (4)   73,692,278       73,456,784       73,651,172       73,456,784

(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 US GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization.
(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 six months ended June 30, 2022 and 2021 (unaudited).

Reconciliation of Non-GAAP Presentation.   Three months ended
June 30, 2022
    Three months ended
June 30, 2021
(in thousands)   GAAP     Adjustments     Adjusted     GAAP     Adjustments     Adjusted
Revenue:                                              
Asset-based revenue   $ 139,249     $     $ 139,249     $ 124,690     $     $ 124,690
Spread-based revenue     7,150             7,150       2,672             2,672
Subscription-based revenue     3,259             3,259                  
Other revenue     1,549             1,549       680             680
Total revenue     151,207             151,207       128,042             128,042
Operating expenses:                                              
Asset-based expenses     40,266             40,266       35,818             35,818
Spread-based expenses     641             641       868             868
Employee compensation (1)     39,973       (4,238 )     35,735       39,447       (7,924 )     31,523
General and operating expenses (1)     22,223       (1,662 )     20,561       16,316       (1,248 )     15,068
Professional fees (1)     5,494       (1,348 )     4,146       5,018       (365 )     4,653
Depreciation and amortization (2)     7,711       (1,729 )     5,982       9,730       (5,108 )     4,622
Total operating expenses     116,308       (8,977 )     107,331       107,197       (14,645 )     92,552
Interest expense     1,488             1,488       774             774
Other expenses, net (1)     78       (78 )           (22 )     22      
Income before income taxes     33,333       9,055       42,388       20,093       14,623       34,716
Provision for income taxes (3)     7,993       1,969       9,962       10,107       (1,949 )     8,158
Net income   $ 25,340             $ 32,426     $ 9,986             $ 26,558

(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 US GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization.

Reconciliation of Non-GAAP Presentation.   Six months ended
June 30, 2022
    Six months ended
June 30, 2021
(in thousands)   GAAP     Adjustments     Adjusted     GAAP     Adjustments     Adjusted
Revenue:                                              
Asset-based revenue   $ 281,325     $     $ 281,325     $ 240,503     $     $ 240,503
Spread-based revenue     9,105             9,105     $ 5,278             5,278
Subscription-based revenue     6,577             6,577     $            
Other revenue     2,503             2,503     $ 1,267             1,267
Total revenue     299,510             299,510       247,048             247,048
Operating expenses:                                              
Asset-based expenses     81,953             81,953       71,912             71,912
Spread-based expenses     1,046             1,046       1,544             1,544
Employee compensation (1)     80,263       (8,166 )     72,097       106,749       (44,274 )     62,475
General and operating expenses (1)     44,282       (2,917 )     41,365       33,805       (5,320 )     28,485
Professional fees (1)     11,227       (2,563 )     8,664       9,278       (876 )     8,402
Depreciation and amortization (2)     15,180       (3,457 )     11,723       19,201       (10,216 )     8,985
Total operating expenses     233,951       (17,103 )     216,848       242,489       (60,686 )     181,803
Interest expense     2,647             2,647       1,545             1,545
Other expense, net (1)     206       (206 )           (37 )     37      
Income before income taxes     62,706       17,309       80,015       3,051       60,649       63,700
Provision for income taxes (3)     15,147       3,657       18,804       1,981       12,989       14,970
Net income   $ 47,559             $ 61,211     $ 1,070             $ 48,730

(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 US GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization.

    Three Months Ended
June 30, 2022
    Three Months Ended
June 30, 2021
 
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Net income                   $ 25,340                     $ 9,986  
Acquisition-related amortization(1)   $     $ 1,729       1,729     $     $ 5,108       5,108  
Expense adjustments(2)     1,207       3,010       4,217       1,248       1,613       2,861  
Share-based compensation     3,031             3,031       6,676             6,676  
Other expenses, net           78       78             (22 )     (22 )
Tax effect of adjustments(3)     (996 )     (973 )     (1,969 )     (293 )     2,242       1,949  
Adjusted net income   $ 3,242     $ 3,844     $ 32,426     $ 7,631     $ 8,941     $ 26,558  
                                                 
    Six Months Ended
June 30, 2022
    Six Months Ended
June 30, 2021
 
(in thousands)   Compensation     Non-
Compensation
    Total     Compensation     Non-
Compensation
    Total  
Net income                   $ 47,559                     $ 1,070  
Acquisition-related amortization(1)   $     $ 3,457       3,457     $     $ 10,216       10,216  
Expense adjustments(2)     1,993       5,480       7,473       4,170       6,196       10,366  
Share-based compensation     6,173             6,173       40,104             40,104  
Other expenses, net           206       206             (37 )     (37 )
Tax effect of adjustments(3)     (1,919 )     (1,738 )     (3,657 )     (980 )     (12,009 )     (12,989 )
Adjusted net income   $ 6,247     $ 7,405     $ 61,211     $ 43,294     $ 4,366     $ 48,730  

(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.

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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