Financial News

AssetMark Reports $100.8B Platform Assets for Second Quarter 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

 2Q222Q23Variance 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 advisors193 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,
  202320222023  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 PresentationGAAP 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 PresentationGAAP 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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