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AssetMark Reports $91.5B Platform Assets for Fourth Quarter 2022

CONCORD, Calif., Feb. 22, 2023 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter and full year ended December 31, 2022.

Fourth Quarter 2022 Financial and Operational Highlights

  • Net income for the quarter was $25.6 million, or $0.35 per share.
  • Adjusted net income for the quarter was $34.3 million, or $0.46 per share, on total revenue of $164.1 million.
  • Adjusted EBITDA for the quarter was $52.9 million, or 32.2% of total revenue.
  • Platform assets decreased 2.2% year-over-year to $91.5 billion. Quarter-over-quarter platform assets were up 15.2%, due to adding $6.9 billion from the acquisition of Adhesion Wealth, market impact net of fees of $4.3 billion, and quarterly net flows of $908 million.
  • Annual net flows as a percentage of beginning-of-year platform assets were 6.0%.
  • More than 17,900 new households and 143 new producing advisors joined the AssetMark platform during the fourth quarter. In total, as of December 31, 2022, there were over 9,200 advisors (approximately 2,900 were engaged advisors) and over 241,000 investor households on the AssetMark platform.
  • We realized a 14.1% annualized production lift from existing advisors for the fourth quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

“AssetMark continued its evolution from a TAMP to a holistic, full-service wealth management platform oriented around what advisors need to deliver resilient investor outcomes while successfully growing their practices. In 2022, we served more advisors and investors than ever before, supporting over 9,200 advisors who used our platform to help more than 241,000 investor households. We achieved record financial and operational results and matched our all-time high in our annual Net Promoter Score. Despite a challenging macro-environment, we truly made a difference in the lives of our advisors and their clients. 2022 was a strong year at AssetMark,” said Natalie Wolfsen, CEO of AssetMark. “We are well positioned to help our advisors grow in 2023 and beyond, which in turn will help AssetMark grow. I could not be more excited about the opportunity ahead.”

Fourth Quarter 2022 Key Operating Metrics

 4Q22 4Q21 Variance per
year
Operational metrics:    
Platform assets (at period-beginning) (millions of dollars)79,382 86,826 (8.6%)
Net flows (millions of dollars)908 2,949 (69.2%)
Market impact net of fees (millions of dollars)4,284 3,713 15.4%
Acquisition impact (millions of dollars)6,896 - NM
Platform assets (at period-end) (millions of dollars)91,470 93,488 (2.2%)
Net flows lift (% of beginning of year platform assets)1.0%4.0%(300 bps)
Advisors (at period-end)9,297 8,649 7.5%
Engaged advisors (at period-end)2,882 2,858 0.8%
Assets from engaged advisors (at period-end) (millions of dollars)83,803 86,385 (3.0%)
Households (at period-end)241,053 209,900 14.8%
New producing advisors143 215 (33.5%)
Production lift from existing advisors (annualized %)14.1%24.6%(1,050 bps)
Assets in custody at ATC (at period-end) (millions of dollars)66,169 71,320 (7.2%)
ATC client cash (at period-end) (millions of dollars)3,541 2,932 20.7%
    
Financial metrics:    
Total revenue (millions of dollars)164 144 14.3%
Net income (millions of dollars)25.6 12.4 107.2%
Net income margin (%)15.6%8.6%700 bps
Capital expenditure (millions of dollars)11.3 8.0 41.0%
    
Non-GAAP financial metrics:   
Adjusted EBITDA (millions of dollars)52.9 38.3 38.0%
Adjusted EBITDA margin (%)32.2%26.7%550 bps
Adjusted net income (millions of dollars)34.3 24.7 38.9%
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
 

Full Year 2022 Key Operating Metrics

 2022 2021 Variance per
year
Operational metrics:   
Platform assets (at period-beginning) (millions of dollars)93,488 74,520 25.5%
Net flows (millions of dollars)5,612 9,934 (43.5%)
Market impact net of fees (millions of dollars)(14,526)9,034 NM
Acquisition impact (millions of dollars)6,896 - NM
Platform assets (at period-end) (millions of dollars)91,470 93,488 (2.2%)
Net flows lift (% of beginning of year platform assets)6.0%13.3%(730 bps)
Advisors (at period-end)9,297 8,649 7.5%
Engaged advisors (at period-end)2,882 2,858 0.8%
Assets from engaged advisors (at period-end) (millions of dollars)83,803 86,385 (3.0%)
Households (at period-end)241,053 209,900 14.8%
New producing advisors690 811 (14.9%)
Production lift from existing advisors (annualized %)16.3%24.2%(790 bps)
Assets in custody at ATC (at period-end) (millions of dollars)66,169 71,320 (7.2%)
ATC client cash (at period-end) (millions of dollars)3,541 2,932 20.7%
    
Financial metrics:   
Total revenue (millions of dollars)618 530 16.6%
Net income (millions of dollars)103.3 25.7 302.3%
Net income margin (%)16.7%4.8%1,190 bps
Capital expenditure (millions of dollars)38.6 34.7 11.5%
    
Non-GAAP financial metrics:   
Adjusted EBITDA (millions of dollars)199.7 157.2 27.0%
Adjusted EBITDA margin (%)32.3%29.6%270 bps
Adjusted net income (millions of dollars)130.5 103.3 26.3%
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 fourth 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: February 22, 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=5acca13d&confId=46295. 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 February 22, 2023.

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 $91.5 billion in platform assets as of December 31, 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 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 Annual Report on Form 10-K for the year ended December 31, 2022, which is expected to be filed in mid-March. 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)
 
  December 31,
  2022  2021
ASSETS       
Current assets:       
Cash and cash equivalents $123,274  $76,707
Restricted cash  13,000   13,000
Investments, at fair value  13,714   14,498
Fees and other receivables, net  20,082   9,019
Income tax receivable, net  265   6,276
Prepaid expenses and other current assets  16,870   14,673
Total current assets  187,205   134,173
Property, plant and equipment, net  8,495   8,015
Capitalized software, net  89,959   73,701
Other intangible assets, net  694,627   695,093
Operating lease right-of-use assets  22,002   22,469
Goodwill  487,225   447,864
Other assets  13,417   2,090
Total assets $1,502,930  $1,383,405
LIABILITIES AND STOCKHOLDERS' EQUITY       
Current liabilities:       
Accounts payable $4,624  $2,613
Accrued liabilities and other current liabilities  69,196   56,249
Total current liabilities  73,820   58,862
Long-term debt, net  112,138   115,000
Other long-term liabilities  15,185   16,468
Long-term portion of operating lease liabilities  27,924   28,316
Deferred income tax liabilities, net  147,497   155,373
Total long-term liabilities  302,744   315,157
Total liabilities  376,564   374,019
Commitments and contingencies     
Stockholders' equity:       
Common stock, $0.001 par value (675,000,000 shares authorized and 73,847,596 and 73,562,717 shares issued and outstanding as of December 31, 2022 and 2021, respectively)  74   74
Additional paid-in capital  942,946   929,070
Retained earnings  183,503   80,242
Accumulated other comprehensive loss  (157)  
Total stockholders' equity  1,126,366   1,009,386
Total liabilities and stockholders' equity $1,502,930  $1,383,405


 
AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Income
(in thousands, except share and per share data)
 
  Three Months Ended December 31,  Year Ended December 31,
  2022  2021  2022  2021
Revenue:               
Asset-based revenue $124,684  $137,533  $534,182  $512,188
Spread-based revenue  33,144   2,055   63,409   8,568
Subscription-based revenue  3,317   3,209   13,020   6,381
Other revenue  2,988   787   7,695   3,162
Total revenue  164,133   143,584   618,306   530,299
Operating expenses:               
Asset-based expenses  35,671   40,227   154,100   150,836
Spread-based expenses  4,994   367   8,182   1,427
Employee compensation  44,478   45,901   166,330   196,701
General and operating expenses  24,173   20,342   90,122   72,941
Professional fees  8,082   7,464   25,186   21,813
Depreciation and amortization  8,008   8,080   31,149   37,929
Total operating expenses  125,406   122,381   475,069   481,647
Interest expense  2,313   953   6,520   3,559
Other expenses, net  (238)  24   (43)  106
Income before income taxes  36,652   20,226   136,760   44,987
Provision for income taxes  11,059   7,875   33,499   19,316
Net income  25,593   12,351   103,261   25,671
Change in fair value of convertible notes receivable, net  (157)     (157)  
Net comprehensive income $25,436  $12,351  $103,104  $25,671
Net income (loss) per share attributable to common stockholders:               
Basic $0.35  $0.18  $1.40  $0.36
Diluted $0.35  $0.17  $1.40  $0.35
Weighted average number of common shares outstanding, basic  73,847,371   73,242,802   73,724,341   72,137,174
Weighted average number of common shares outstanding, diluted  73,943,318   73,441,555   73,872,828   72,399,213


 
AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
 
  Three Months Ended December 31,  Year Ended December 31, 
  2022  2021  2022  2021 
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income $25,593  $12,351  $103,261  $25,671 
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation and amortization  8,008   8,080   31,149   37,929 
Interest expense, net  (66)  160   541   700 
Deferred income taxes  (6,673)  (1,788)  (6,673)  (1,562)
Share-based compensation  3,780   5,558   13,876   53,637 
Debt acquisition cost write-down        130    
Changes in certain assets and liabilities:                
Fees and other receivables, net  (3,380)  757   (10,718)  163 
Receivables from related party        568   (91)
Prepaid expenses and other current assets  (4,386)  (2,406)  2,346   2,460 
Accounts payable, accrued liabilities and other liabilities  12,412   7,486   (252)  7,500 
Income tax receivable, net  9,414   4,878   6,073   2,570 
Net cash provided by operating activities  44,702   35,076   140,301   128,977 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchase of Adhesion, net of cash received  (43,861)     (43,861)   
Purchase of Voyant, net of cash received     75      (124,161)
Purchase of convertible notes receivable  (1,700)     (10,300)   
Purchase of investments  (481)  (569)  (2,692)  (3,004)
Sale of investments  534   660   918   833 
Purchase of property and equipment  (1,621)  (855)  (3,061)  (1,507)
Purchase of computer software  (9,947)  (7,129)  (35,996)  (33,145)
Net cash used in investing activities  (57,076)  (7,818)  (94,992)  (160,984)
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from issuance of long-term debt, net        122,508    
Payments on revolving credit facility        (115,000)  (35,000)
Payments on long-term debt  (1,562)     (6,250)   
Proceeds from credit facility draw down           75,000 
Proceeds from exercise of stock options     1      95 
Net cash provided by (used in) financing activities  (1,562)  1   1,258   40,095 
Net change in cash, cash equivalents, and restricted cash  (13,936)  27,259   46,567   8,088 
Cash, cash equivalents, and restricted cash at beginning of period  150,210   62,448   89,707   81,619 
Cash, cash equivalents, and restricted cash at end of period $136,274  $89,707  $136,274  $89,707 
SUPPLEMENTAL CASH FLOW INFORMATION                
Income taxes paid, net $7,461  $3,819  $33,637  $19,796 
Interest paid $1,373  $958  $4,087  $2,828 
Non-cash operating, investing, and financing activities:                
Non-cash changes to right-of-use assets $379  $2,109  $3,775  $933 
Non-cash changes to lease liabilities $379  $2,109  $3,775  $933 
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 months and years ended December 31, 2022 and 2021 (unaudited).

  Three Months Ended December 31,  Three Months Ended December 31, 
(in thousands except for percentages) 2022  2021  2022  2021 
Net income $25,593  $12,351   15.6%  8.6%
Provision for income taxes  11,059   7,875   6.7%  5.5%
Interest income  (1,557)  (21)  (1.0)%   
Interest expense  2,313   953   1.4%  0.7%
Amortization/depreciation  8,008   8,080   4.9%  5.6%
EBITDA $45,416  $29,238   27.6%  20.4%
Share-based compensation(1)  3,780   5,558   2.3%  3.9%
Reorganization and integration costs(2)  1,818   2,722   1.1%  1.9%
Acquisition expenses(3)  2,098   446   1.3%  0.3%
Business continuity plan (4)  (173)  324   (0.1)%  0.2%
Other (income) expense  (60)  24       
Adjusted EBITDA $52,879  $38,312   32.2%  26.7%


  Year Ended December 31,  Year Ended December 31, 
(in thousands except for percentages) 2022  2021  2022  2021 
Net income $103,261  $25,671   16.7%  4.8%
Provision for income taxes  33,499   19,316   5.4%  3.6%
Interest income  (2,664)  (137)  (0.4)%   
Interest expense  6,520   3,559   1.1%  0.7%
Amortization/depreciation  31,149   37,929   5.0%  7.2%
EBITDA $171,765  $86,338   27.8%  16.3%
Share-based compensation(1)  13,876   53,637   2.2%  10.1%
Reorganization and integration costs(2)  10,418   10,816   1.7%  2.0%
Acquisition expenses(3)  3,411   5,682   0.6%  1.1%
Business continuity plan (4)  61   460      0.1%
Office closures(5)     167       
Other (income) expense  135   106       
Adjusted EBITDA $199,666  $157,206   32.3%  29.6%

(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.

Set forth below is a summary of the adjustments involved in the reconciliation from net income and net income margin, the most directly comparable GAAP financial measures, to adjusted EBITDA and adjusted EBITDA margin for the three months and years ended December 31, 2022 and 2021, broken out by compensation and non-compensation expenses (unaudited).

  Three Months Ended December 31, 2022  Three Months Ended December 31, 2021
 
(in thousands) Compensation  Non-
Compensation
  Total  Compensation
  Non-
Compensation
  Total
 
Share-based compensation(1) $3,780  $  $3,780  $5,558  $  $5,558 
Reorganization and integration costs(2)  1,512   306   1,818   979   1,743   2,722 
Acquisition expenses(3)  4   2,094   2,098   38   408   446 
Business continuity plan (4)     (173)  (173)  162   162   324 
Other (income) expense     (60)  (60)     24   24 
Total adjustments to adjusted EBITDA $5,296  $2,167  $7,463  $6,737  $2,337  $9,074 


  Three Months Ended December 31, 2022  Three Months Ended December 31, 2021 
(in percentages) Compensation  Non-
Compensation
  Total  Compensation  Non-
Compensation
  Total 
Share-based compensation(1)  2.3%     2.3%  3.9%     3.9%
Reorganization and integration costs(2)  0.9%  0.2%  1.1%  0.7%  1.2%  1.9%
Acquisition expenses(3)     1.3%  1.3%     0.3%  0.3%
Business continuity plan (4)     (0.1)%  (0.1)%  0.1%  0.1%  0.2%
Other (income) expense                  
Total adjustments to adjusted EBITDA margin %  3.2%  1.4%  4.6%  4.7%  1.6%  6.3%


  Year Ended December 31, 2022  Year Ended December 31, 2021
 
(in thousands) Compensation  Non-
Compensation
  Total  Compensation  Non-
Compensation
  Total
 
Share-based compensation(1) $13,876  $  $13,876  $53,637  $  $53,637 
Reorganization and integration costs(2)  4,335   6,083   10,418   5,396   5,420   10,816 
Acquisition expenses(3)     3,411   3,411   1,441   4,241   5,682 
Business continuity plan (4)  (2)  63   61   174   286   460 
Office closures(5)              167   167 
Other (income) expense     135   135      106   106 
Total adjustments to adjusted EBITDA $18,209  $9,692  $27,901  $60,648  $10,220  $70,868 


  Year Ended December 31, 2022  Year Ended December 31, 2021 
(in percentages) Compensation  Non-
Compensation
  Total  Compensation  Non-
Compensation
  Total 
Share-based compensation(1)  2.2%     2.2%  10.1%     10.1%
Reorganization and integration costs(2)  0.7%  1.0%  1.7%  1.0%  1.0%  2.0%
Acquisition expenses(3)     0.6%  0.6%  0.2%  0.7%  0.9%
Business continuity plan (4)                  
Office closures(5)                  
Other (income) expense                  
Total adjustments to adjusted EBITDA margin %  2.9%  1.6%  4.5%  11.3%  1.7%  13.0%

(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 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 months and years ended December 31, 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 months and years ended December 31, 2022 and 2021 (unaudited).

  Three Months Ended December 31,  Year Ended December 31,
  2022  2021  2022  2021
Revenue:               
Asset-based revenue $124,684  $137,533  $534,182  $512,188
Spread-based revenue  33,144   2,055   63,409   8,568
Subscription-based revenue  3,317   3,209   13,020   6,381
Other revenue  2,988   787   7,695   3,162
Total revenue  164,133   143,584   618,306   530,299
Operating expenses:               
Asset-based expenses  35,671   40,227   154,100   150,836
Spread-based expenses  4,994   367   8,182   1,427
Adjusted employee compensation(1)  39,182   39,163   148,121   136,052
Adjusted general and operating expenses(1)  23,927   18,874   85,800   65,072
Adjusted professional fees(1)  6,101   6,619   19,951   19,568
Adjusted depreciation and amortization(2)  6,198   5,126   24,153   18,790
Total adjusted operating expenses  116,073   110,376   440,307   391,745
Interest expense  2,313   953   6,520   3,559
Adjusted other (income) expenses, net(1)  (178)     (178)  
Adjusted income before income taxes  45,925   32,255   171,657   134,995
Adjusted provision for income taxes(3)  11,650   7,580   41,198   31,723
Adjusted net income $34,275  $24,675  $130,459  $103,272
Net income per share attributable to common stockholders:               
Adjusted earnings per share(4) $0.46  $0.33  $1.77  $1.40
Weighted average number of common shares outstanding, diluted(4)  73,943,318   74,746,770   73,872,828   73,947,311

(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 months and years ended December 31, 2022 and 2021 (unaudited).

 
  Three Months Ended December 31, 2022  Three Months Ended December 31, 2021
 
Reconciliation of Non-GAAP Presentation GAAP  Adjustments  Adjusted  GAAP  Adjustments  Adjusted
 
Revenue:                        
Asset-based revenue $124,684  $  $124,684  $137,533  $  $137,533 
Spread-based revenue  33,144      33,144   2,055      2,055 
Subscription-based revenue  3,317      3,317   3,209      3,209 
Other revenue  2,988      2,988   787      787 
Total revenue  164,133      164,133   143,584      143,584 
Operating expenses:                        
Asset-based expenses  35,671      35,671   40,227      40,227 
Spread-based expenses  4,994      4,994   367      367 
Employee compensation(1)  44,478   (5,296)  39,182   45,901   (6,738)  39,163 
General and operating expenses(1)  24,173   (246)  23,927   20,342   (1,468)  18,874 
Professional fees(1)  8,082   (1,981)  6,101   7,464   (845)  6,619 
Depreciation and amortization(2)  8,008   (1,810)  6,198   8,080   (2,954)  5,126 
Total operating expenses  125,406   (9,333)  116,073   122,381   (12,005)  110,376 
Interest expense  2,313      2,313   953      953 
Other (income) expenses, net  (238)  60   (178)  24   (24)   
Income before income taxes  36,652   9,273   45,925   20,226   12,029   32,255 
Provision for income taxes(3)  11,059   591   11,650   7,875   (295)  7,580 
Net income $25,593      $34,275  $12,351      $24,675 

(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.

 
  Year Ended December 31, 2022  Year Ended December 31, 2021
 
Reconciliation of Non-GAAP Presentation GAAP  Adjustments  Adjusted  GAAP  Adjustments  Adjusted
 
Revenue:                        
Asset-based revenue $534,182  $  $534,182  $512,188  $  $512,188 
Spread-based revenue  63,409      63,409   8,568      8,568 
Subscription-based revenue  13,020      13,020   6,381      6,381 
Other revenue  7,695      7,695   3,162      3,162 
Total revenue  618,306      618,306   530,299      530,299 
Operating expenses:                        
Asset-based expenses  154,100      154,100   150,836      150,836 
Spread-based expenses  8,182      8,182   1,427      1,427 
Employee compensation(1)  166,330   (18,209)  148,121   196,701   (60,649)  136,052 
General and operating expenses(1)  90,122   (4,322)  85,800   72,941   (7,869)  65,072 
Professional fees(1)  25,186   (5,235)  19,951   21,813   (2,245)  19,568 
Depreciation and amortization(2)  31,149   (6,996)  24,153   37,929   (19,139)  18,790 
Total operating expenses  475,069   (34,762)  440,307   481,647   (89,902)  391,745 
Interest expense  6,520      6,520   3,559      3,559 
Other (income) expenses, net  (43)  (135)  (178)  106   (106)   
Income before income taxes  136,760   34,897   171,657   44,987   90,008   134,995 
Provision for income taxes(3)  33,499   7,699   41,198   19,316   12,407   31,723 
Net income $103,261      $130,459  $25,671      $103,272 

(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 December 31, 2022  Three Months Ended December 31, 2021
 
(in thousands) Compensation  Non-
Compensation
  Total  Compensation  Non-
Compensation
  Total
 
Net income         $25,593          $12,351 
Acquisition-related amortization(1) $  $1,810   1,810  $  $2,954   2,954 
Expense adjustments(2)  1,516   2,227   3,743   1,180   2,313   3,493 
Share-based compensation  3,780      3,780   5,558      5,558 
Other (income) expense     (60)  (60)     24   24 
Tax effect of adjustments(3)  (1,335)  744   (591)  (277)  572   295 
Adjusted net income         $34,275          $24,675 


  Year Ended December 31, 2022  Year Ended December 31, 2021 
(in thousands) Compensation  Non-
Compensation
  Total  Compensation  Non-
Compensation
  Total 
Net income         $103,261          $25,671 
Acquisition-related amortization(1) $  $6,996   6,996  $  $19,139   19,139 
Expense adjustments(2)  4,333   9,557   13,890   7,012   10,114   17,126 
Share-based compensation  13,876      13,876   53,637      53,637 
Other (income) expense     135   135      106   106 
Tax effect of adjustments(3)  (4,370)  (3,329)  (7,699)  (1,648)  (10,759)  (12,407)
Adjusted net income         $130,459          $103,272 

(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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