AssetMark Reports $100.8B Platform Assets for Second Quarter 2023

August 2, 2023

CONCORD, Calif., Aug. 02, 2023 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter ended June 30, 2023.

Second Quarter 2023 Financial and Operational Highlights

  • Net income for the quarter was $32.9 million, or $0.44 per share.
  • Adjusted net income for the quarter was $41.2 million, or $0.55 per share, on total revenue of $183.2 million.
  • Adjusted EBITDA for the quarter was $60.4 million, or 33.0% of total revenue.
  • Platform assets increased 22.7% year-over-year to $100.8 billion. Quarter-over-quarter platform assets were up 4.7%, due to market impact net of fees of $2.9 billion, and quarterly net flows of $1.7 billion.
  • Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 7.3%.
  • More than 2,700 new households and 188 new producing advisors joined the AssetMark platform during the second quarter. In total, as of June 30, 2023, there were over 9,300 advisors (over 3,000 were engaged advisors) and over 247,000 investor households on the AssetMark platform.
  • We realized an 20.2% annualized production lift from existing advisors for the second quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

“AssetMark continues to grow, adding 188 new producing advisors and $1.7 billion of net flows in the second quarter. We ended the quarter with over $100 billion of platform assets, an all-time high. Our financial results were strong, highlighted by all-time highs in revenue, adjusted EBITDA, adjusted net income and adjusted EPS – each of which increased by more than 20% year-over-year. Our 2023 Net Promoter Score was a record 72, eclipsing our previous record by 5 points – a powerful testament to the value we bring to our over 9,300 advisors,” said AssetMark CEO Natalie Wolfsen. “The first half of the year has been outstanding, and I am excited to deliver what we have planned for advisors in the second half of 2023.”

Second Quarter 2023 Key Operating Metrics

  2Q22 2Q23 Variance per year
Operational metrics:      
Platform assets (at period-beginning) (millions of dollars) 90,818   96,203   5.9 %
Net flows (millions of dollars) 1,363   1,695   24.3 %
Market impact net of fees (millions of dollars) (10,054 ) 2,864   NM
Acquisition impact (millions of dollars) -   -   NM
Platform assets (at period-end) (millions of dollars) 82,127   100,762   22.7 %
Net flows lift (% of beginning of year platform assets) 1.5 % 1.9 % 40 bps
Advisors (at period-end) 8,688   9,323   7.3 %
Engaged advisors (at period-end) 2,663   3,032   13.9 %
Assets from engaged advisors (at period-end) (millions of dollars) 74,994   93,109   24.2 %
Households (at period-end) 220,172   247,934   12.6 %
New producing advisors 193   188   (2.6 %)
Production lift from existing advisors (annualized %) 17.4 % 20.2 % 280 bps
Assets in custody at ATC (at period-end) (millions of dollars) 63,055   74,074   17.5 %
ATC client cash (at period-end) (millions of dollars) 3,700   2,942   (20.5 %)
       
Financial metrics:      
Total revenue (millions of dollars) 151   183   21.2 %
Net income (millions of dollars) 25.3   32.9   29.7 %
Net income margin (%) 16.8 % 17.9 % 110 bps
Capital expenditure (millions of dollars) 10.0   11.2   12.7 %
       
Non-GAAP financial metrics:      
Adjusted EBITDA (millions of dollars) 49.6   60.4   21.7 %
Adjusted EBITDA margin (%) 32.8 % 33.0 % 20 bps
Adjusted net income (millions of dollars) 32.4   41.2   27.2 %
Note: Percentage variance based on actual numbers, not rounded results
All metrics include Adhesion data, except "New producing advisors," "Production lift from existing advisors" and ATC related metrics

 

Webcast and Conference Call Information

AssetMark will host a live conference call and webcast to discuss its second quarter 2023 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: August 2, 2023
  • 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=ff486112&confId=52727. Upon registering, you will be provided with participant dial-in numbers, a 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 August 2, 2023.

About AssetMark Financial Holdings, Inc. 

AssetMark operates a wealth management platform that powers independent financial advisors and their clients. Together with our affiliates Voyant and Adhesion Wealth, we serve advisors of all models at every stage of their journey with flexible, purpose-built solutions that champion client engagement and drive efficiency. Our ecosystem of solutions equips advisors with services and capabilities that would otherwise require significant investments of time and money, ultimately enabling them to deliver better investor outcomes and enhance their productivity, profitability and client satisfaction.

Founded in 1996 and based in Concord, California, the company has over 1,000 employees. Today, the AssetMark platform serves 9,300 financial advisors and roughly 247,000 investor households. As of June 30, 2023, the company had $100.8 billion in platform assets.

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, 2022, 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, 2023, which is expected to be filed on August 4. 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, 2023   December 31, 2022
  (unaudited)    
ASSETS      
Current assets:      
Cash and cash equivalents $ 172,818     $ 123,274  
Restricted cash   14,000       13,000  
Investments, at fair value   16,395       13,714  
Fees and other receivables, net   20,482       20,082  
Income tax receivable, net         265  
Prepaid expenses and other current assets   16,532       16,870  
Total current assets   240,227       187,205  
Property, plant and equipment, net   7,635       8,495  
Capitalized software, net   100,335       89,959  
Other intangible assets, net   689,388       694,627  
Operating lease right-of-use assets   21,289       22,002  
Goodwill   487,292       487,225  
Other assets   17,671       13,417  
Total assets $ 1,563,837     $ 1,502,930  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 1,763     $ 4,624  
Accrued liabilities and other current liabilities   78,638       69,196  
Income tax payable, net   13,797        
Total current liabilities   94,198       73,820  
Long-term debt, net   93,496       112,138  
Other long-term liabilities   17,110       15,185  
Long-term portion of operating lease liabilities   27,097       27,924  
Deferred income tax liabilities, net   147,497       147,497  
Total long-term liabilities   285,200       302,744  
Total liabilities   379,398       376,564  
Stockholders’ equity:      
Common stock, $0.001 par value (675,000,000 shares authorized and 74,172,080 and 73,847,596 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)   74       74  
Additional paid-in capital   950,920       942,946  
Retained earnings   233,602       183,503  
Accumulated other comprehensive loss   (157 )     (157 )
Total stockholders’ equity   1,184,439       1,126,366  
Total liabilities and stockholders’ equity $ 1,563,837     $ 1,502,930  
               

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

  Three Months Ended June 30,   Six Months Ended June 30,
    2023       2022     2023     2022
Revenue:              
Asset-based revenue $ 137,336     $ 139,249   $ 268,375   $ 281,325
Spread-based revenue   37,271       7,150     75,534     9,105
Subscription-based revenue   3,693       3,259     7,237     6,577
Other revenue   4,932       1,549     8,648     2,503
Total revenue   183,232       151,207     359,794     299,510
Operating expenses:              
Asset-based expenses   39,344       40,266     76,778     81,953
Spread-based expenses   8,003       641     14,560     1,046
Employee compensation   48,099       39,973     95,010     80,263
General and operating expenses   24,354       22,223     50,043     44,282
Professional fees   8,372       5,494     13,765     11,227
Depreciation and amortization   8,684       7,711     17,112     15,180
Total operating expenses   136,856       116,308     267,268     233,951
Interest expense   2,137       1,488     4,484     2,647
Other expense (income), net   (288 )     78     19,577     206
Income before income taxes   44,527       33,333     68,465     62,706
Provision for income taxes   11,650       7,993     18,366     15,147
Net income   32,877       25,340     50,099     47,559
Net comprehensive income $ 32,877     $ 25,340   $ 50,099   $ 47,559
Net income per share attributable to common stockholders:              
Basic $ 0.44     $ 0.34   $ 0.68   $ 0.65
Diluted $ 0.44     $ 0.34   $ 0.67   $ 0.65
Weighted average number of common shares outstanding, basic   73,986,326       73,631,588     73,938,510     73,601,852
Weighted average number of common shares outstanding, diluted   74,505,158       73,692,278     74,325,580     73,651,172
                         

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

  Six Months Ended June 30,
    2023       2022  
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income $ 50,099     $ 47,559  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization   17,112       15,180  
Interest (income) expense, net   (45 )     407  
Share-based compensation   7,974       6,173  
Debt acquisition cost write-down   92       130  
Changes in certain assets and liabilities:      
Fees and other receivables, net   (863 )     (3,145 )
Receivables from related party   480       (333 )
Prepaid expenses and other current assets   2,954       3,887  
Accounts payable, accrued liabilities and other current liabilities   13,614       (13,236 )
Income tax receivable and payable, net   14,062       (1,354 )
Net cash provided by operating activities   105,479       55,268  
CASH FLOWS FROM INVESTING ACTIVITIES      
Purchase of Adhesion Wealth   (3,000 )      
Purchase of investments   (1,528 )     (1,780 )
Sale of investments   257       361  
Purchase of property and equipment   (469 )     (1,222 )
Purchase of computer software   (20,920 )     (17,180 )
Purchase of convertible notes   (4,275 )      
Net cash used in investing activities   (29,935 )     (19,821 )
CASH FLOWS FROM FINANCING ACTIVITIES      
Proceeds from issuance of long-term debt, net         122,508  
Payments on revolving credit facility         (115,000 )
Payments on term loan   (25,000 )     (3,125 )
Net cash (used in) provided by financing activities   (25,000 )     4,383  
Net change in cash, cash equivalents, and restricted cash   50,544       39,830  
Cash, cash equivalents, and restricted cash at beginning of period   136,274       89,707  
Cash, cash equivalents, and restricted cash at end of period $ 186,818     $ 129,537  
SUPPLEMENTAL CASH FLOW INFORMATION      
Income taxes paid, net $ 4,298     $ 16,905  
Interest paid $ 5,736     $ 1,376  
Non-cash operating and investing activities:      
Non-cash changes to right-of-use assets $ 1,795     $ 2,161  
Non-cash changes to lease liabilities $ 1,795     $ 2,161  

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, 2023 and 2022 (unaudited).

    Three Months Ended June 30,   Three Months Ended June 30,
(in thousands except for percentages)     2023       2022     2023     2022  
Net income   $ 32,877     $ 25,340     17.9 %   16.8 %
Provision for income taxes     11,650       7,993     6.4 %   5.3 %
Interest income     (2,509 )     (227 )   (1.4 )%   (0.2 )%
Interest expense     2,137       1,488     1.2 %   1.0 %
Depreciation and amortization     8,684       7,711     4.7 %   5.1 %
EBITDA   $ 52,839     $ 42,305     28.8 %   28.0 %
Share-based compensation(1)     4,152       3,031     2.3 %   2.0 %
Reorganization and integration costs(2)     3,556       3,313     2.0 %   2.2 %
Acquisition expenses(3)     (140 )     799     (0.1 )%   0.5 %
Business continuity plan(4)           105         0.1 %
Other (income) expense, net     (10 )     78         0.1 %
Adjusted EBITDA   $ 60,397     $ 49,631     33.0 %   32.9 %

 

    Six Months Ended June 30,   Six Months Ended June 30,
(in thousands except for percentages)     2023       2022     2023     2022  
Net income   $ 50,099     $ 47,559     13.9 %   15.9 %
Provision for income taxes     18,366       15,147     5.1 %   5.1 %
Interest income     (4,560 )     (258 )   (1.3 )%   (0.1 )%
Interest expense     4,484       2,647     1.2 %   0.9 %
Amortization/depreciation     17,112       15,180     4.8 %   5.1 %
EBITDA   $ 85,501     $ 80,275     23.7 %   26.9 %
Share-based compensation(1)     7,974       6,173     2.2 %   2.1 %
Reorganization and integration costs(2)     5,465       6,319     1.5 %   2.1 %
Acquisition expenses(3)     173       934     0.1 %   0.3 %
Business continuity plan(4)     (6 )     220         0.1 %
Accrual for SEC matter(5)     20,000           5.6 %    
Other expense, net     77       206         0.1 %
Adjusted EBITDA   $ 119,184     $ 94,127     33.1 %   31.6 %

(1) “Share-based compensation” represents granted share-based compensation in the form of 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 hybrid workforce in 2022.

(5) “Accrual for SEC matter” represents an accrual recognized based on the SEC matter further discussed in Note 12 of notes to unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.


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 three and six months ended June 30, 2023 and 2022 (unaudited), broken out by compensation and non-compensation expenses (unaudited).

  Three Months Ended June 30, 2023   Three Months Ended June 30, 2022
(in thousands) Compensation   Non-
Compensation
  Total   Compensation   Non-
Compensation
  Total
Share-based compensation(1) $ 4,152   $     $ 4,152     $ 3,031     $   $ 3,031
Reorganization and integration costs(2)   1,204     2,352       3,556       1,209       2,104     3,313
Acquisition expenses(3)       (140 )     (140 )           799     799
Business continuity plan(4)                   (2 )     107     105
Other (income) expense, net       (10 )     (10 )           78     78
Total adjustments to adjusted EBITDA $ 5,356   $ 2,202     $ 7,558     $ 4,238     $ 3,088   $ 7,326

 

                       
  Three Months Ended June 30, 2023   Three Months Ended June 30, 2022
(in percentages) Compensation   Non-
Compensation
  Total   Compensation   Non-
Compensation
  Total
Share-based compensation(1) 2.3 %       2.3 %   2.0 %       2.0 %
Reorganization and integration costs(2) 0.7 %   1.3 %   2.0 %   0.8 %   1.4 %   2.2 %
Acquisition expenses(3)     (0.1)%   (0.1)%       0.5 %   0.5 %
Business continuity plan(4)                 0.1 %   0.1 %
Other (income) expense, net                 0.1 %   0.1 %
Total adjustments to adjusted EBITDA margin % 3.0 %   1.2 %   4.2 %   2.8 %   2.1 %   4.9 %

 

  Six Months Ended June 30, 2023   Six Months Ended June 30, 2022
(in thousands) Compensation   Non-
Compensation
  Total   Compensation   Non-
Compensation
  Total
Share-based compensation(1) $ 7,974   $     $ 7,974     $ 6,173     $   $ 6,173
Reorganization and integration costs(2)   2,269     3,196       5,465       1,995       4,324     6,319
Acquisition expenses(3)   100     73       173             934     934
Business continuity plan(4)       (6 )     (6 )     (2 )     222     220
Accrual for SEC matter(5)       20,000       20,000                
Other (income) expense, net       77       77             206     206
Total adjustments to adjusted EBITDA $ 10,343   $ 23,340     $ 33,683     $ 8,166     $ 5,686   $ 13,852

 

  Six Months Ended June 30, 2023   Six Months Ended June 30, 2022
(in percentages) Compensation   Non-
Compensation
  Total   Compensation   Non-
Compensation
  Total
Share-based compensation(1) 2.2 %       2.2 %   2.1 %       2.1 %
Reorganization and integration costs(2) 0.6 %   0.9 %   1.5 %   0.7 %   1.4 %   2.1 %
Acquisition expenses(3) 0.1 %       0.1 %       0.3 %   0.3 %
Business continuity plan(4)                 0.1 %   0.1 %
Accrual for SEC matter(5)     5.6 %   5.6 %            
Other (income) expense, net                 0.1 %   0.1 %
Total adjustments to adjusted EBITDA margin % 2.9 %   6.5 %   9.4 %   2.8 %   1.9 %   4.7 %

(1) “Share-based compensation” represents granted share-based compensation in the form of 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 hybrid workforce in 2022.

(5) “Accrual for SEC matter” represents an accrual recognized based on the SEC matter further discussed in Note 12 of notes to unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.


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, 2023 and 2022, 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 ended June 30, 2023 and 2022 (unaudited).

         
  Three Months Ended
June 30,
Six Months Ended
June 30,
    2023 2022 2023     2022
Revenue:        
Asset-based revenue $ 137,336   $ 139,249 $ 268,375   $ 281,325
Spread-based revenue   37,271     7,150   75,534     9,105
Subscription-based revenue   3,693     3,259   7,237     6,577
Other revenue   4,932     1,549   8,648     2,503
Total revenue   183,232     151,207   359,794     299,510
Operating expenses:        
Asset-based expenses   39,344     40,266   76,778     81,953
Spread-based expenses   8,003     641   14,560     1,046
Adjusted employee compensation(1)   42,743     35,735   84,667     72,097
Adjusted general and operating expenses(1)   23,731     20,561   48,536     41,365
Adjusted professional fees(1)   6,783     4,146   12,009     8,664
Adjusted depreciation and amortization(2)   6,504     5,982   15,180     11,723
Total adjusted operating expenses   127,108     107,331   249,308     216,848
Interest expense   2,137     1,488   4,484     2,647
Adjusted other expenses, net(1)   (278 )     (500 )  
Adjusted income before income taxes   54,265     42,388   106,502     80,015
Adjusted provision for income taxes(3)   13,023     9,962   25,560     18,804
Adjusted net income $ 41,242   $ 32,426 $ 80,942   $ 61,211
Net income per share attributable to common stockholders:        
Adjusted earnings per share $ 0.55   $ 0.44 $ 0.67   $ 0.83
Weighted average number of common shares outstanding, diluted   74,505,158     73,692,278   74,325,580     73,651,172

(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.

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, 2023 and 2022 (unaudited).

  Three Months Ended June 30, 2023   Three Months Ended June 30, 2022
Reconciliation of Non-GAAP Presentation GAAP   Adjustments   Adjusted   GAAP   Adjustments   Adjusted
Revenue:                      
Asset-based revenue $ 137,336     $     $ 137,336     $ 139,249   $     $ 139,249
Spread-based revenue   37,271             37,271       7,150           7,150
Subscription-based revenue   3,693             3,693       3,259           3,259
Other revenue   4,932             4,932       1,549           1,549
Total revenue   183,232             183,232       151,207           151,207
Operating expenses:                      
Asset-based expenses   39,344             39,344       40,266           40,266
Spread-based expenses   8,003             8,003       641           641
Employee compensation(1)   48,099       (5,356 )     42,743       39,973     (4,238 )     35,735
General and operating expenses(1)   24,354       (623 )     23,731       22,223     (1,662 )     20,561
Professional fees(1)   8,372       (1,589 )     6,783       5,494     (1,348 )     4,146
Depreciation and amortization(2)   8,684       (2,180 )     6,504       7,711     (1,729 )     5,982
Total operating expenses   136,856       (9,748 )     127,108       116,308     (8,977 )     107,331
Interest expense   2,137             2,137       1,488           1,488
Other expenses, net(1)   (288 )     10       (278 )     78     (78 )    
Income before income taxes   44,527       9,738       54,265       33,333     9,055       42,388
Provision for income taxes(3)   11,650       1,373       13,023       7,993     1,969       9,962
Net income $ 32,877         $ 41,242     $ 25,340       $ 32,426

(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 GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization, and share-based compensation beginning in 2022.

  Six Months Ended June 30, 2023   Six Months Ended June 30, 2022
Reconciliation of Non-GAAP Presentation GAAP   Adjustments   Adjusted   GAAP   Adjustments   Adjusted
Revenue:                      
Asset-based revenue $ 268,375   $     $ 268,375     $ 281,325   $     $ 281,325
Spread-based revenue   75,534           75,534       9,105           9,105
Subscription-based revenue   7,237           7,237       6,577           6,577
Other revenue   8,648           8,648       2,503           2,503
Total revenue   359,794           359,794       299,510           299,510
Operating expenses:                      
Asset-based expenses   76,778           76,778       81,953           81,953
Spread-based expenses   14,560           14,560       1,046           1,046
Employee compensation(1)   95,010     (10,343 )     84,667       80,263     (8,166 )     72,097
General and operating expenses(1)   50,043     (1,507 )     48,536       44,282     (2,917 )     41,365
Professional fees(1)   13,765     (1,756 )     12,009       11,227     (2,563 )     8,664
Depreciation and amortization(2)   17,112     (4,354 )     12,758       15,180     (3,457 )     11,723
Total operating expenses   267,268     (17,960 )     249,308       233,951     (17,103 )     216,848
Interest expense   4,484           4,484       2,647           2,647
Other expenses, net(1)   19,577     (20,077 )     (500 )     206     (206 )    
Income before income taxes   68,465     38,037       106,502       62,706     (17,309 )     80,015
Provision for income taxes(3)   18,366     7,194       25,560       15,147     3,657       18,804
Net income $ 50,099       $ 80,942     $ 47,559       $ 61,211

(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.

Set forth below is a summary of the adjustments involved in the reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for three and six months ended June 30, 2023 and 2022 (unaudited), broken out by compensation and non-compensation expenses (unaudited).

    Three Months Ended June 30, 2023   Three Months Ended June 30, 2022
(in thousands)   Compensation   Non-
Compensation
  Total   Compensation   Non-
Compensation
  Total
Net income           $ 32,877             $ 25,340  
Acquisition-related amortization(1)         $ 2,180       2,180     $     $ 1,729       1,729  
Expense adjustments(2)     1,204       2,212       3,416       1,207       3,010       4,217  
Share-based compensation     4,152             4,152       3,031             3,031  
Other (income) expense, net           (10 )     (10 )           78       78  
Tax effect of adjustments(3)     (1,285 )     (88 )     (1,373 )     (996 )     (973 )     (1,969 )
Adjusted net income   $ 4,071     $ 4,294     $ 41,242     $ 3,242     $ 3,844     $ 32,426  

 

    Six Months Ended June 30, 2023   Six Months Ended June 30, 2022
(in thousands)   Compensation   Non-
Compensation
  Total   Compensation   Non-
Compensation
  Total
Net income           $ 50,099             $ 47,559  
Acquisition-related amortization(1)   $     $ 4,354       4,354     $     $ 3,457       3,457  
Expense adjustments(2)     2,369       23,263       25,632       1,993       5,480       7,473  
Share-based compensation     7,974             7,974       6,173             6,173  
Other (income) expense, net           77       77             206       206  
Tax effect of adjustments(3)     (2,482 )     (4,712 )     (7,194 )     (1,919 )     (1,738 )     (3,657 )
Adjusted net income   $ 7,861     $ 22,982     $ 80,942     $ 6,247     $ 7,405     $ 61,211  

(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 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.