AssetMark Reports $79.4B Platform Assets for Third Quarter 2022

AssetMark, Inc.

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

Third Quarter 2022 Financial and Operational Highlights

• Net income for the quarter was $30.1 million, or $0.41 per share.

• Adjusted net income for the quarter was $35.0 million, or $0.47 per share, on total revenue of $154.7 million.

• Adjusted EBITDA for the quarter was $52.7 million, or 34.0% of total revenue.

• Platform assets decreased 8.6% year-over-year to $79.4 billion. Quarter-over-quarter platform assets were down 3.3%, due to negative market impact net of fees of $4.0 billion, partially offset by quarterly net flows of $1.2 billion.

• Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 6.7%.

• More than 2,900 new households and 159 new producing advisors joined the AssetMark platform during the third quarter. In total, as of September 30, 2022 there were over 8,700 advisors (approximately 2,600 were engaged advisors) and over 223,000 investor households on the AssetMark platform.

• We realized a 14.9% annualized production lift from existing advisors for the third quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.
  

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

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

Note: Percentage variance based on actual numbers, not rounded results

Webcast and Conference Call Information

AssetMark will host a live conference call and webcast to discuss its third quarter 2022 results. In conjunction with this earnings press release, AssetMark has posted an earnings presentation on its investor relations website at http://ir.assetmark.com. Conference call and webcast details are as follows:

• Date: November 1, 2022

• Time: 2:00 p.m. PT; 5:00 p.m. ET

• Phone: Listeners can pre-register for the conference call here:
  https://www.netroadshow.com/events/login?show=da4b41d4&confId=42163. Upon registering, you will be provided with participant dial-in numbers, passcode and unique registrant ID. In the 10 minutes prior to the call start time, you may use the conference access information (dial in number, direct event passcode and registrant ID) provided in the confirmation email received at the point of registering to join the call directly.

• Webcast: http://ir.assetmark.com. Please access the website 10 minutes prior to the start time. The webcast will be available in recorded form at http://ir.assetmark.com for 14 days from November 1, 2022.

About AssetMark Financial Holdings, Inc. 

AssetMark is a leading provider of extensive wealth management and technology solutions that power independent financial advisors and their clients. Through AssetMark, Inc., its investment advisor subsidiary registered with the Securities and Exchange Commission, AssetMark operates a platform that comprises fully integrated technology, personalized and scalable service and curated investment platform solutions designed to make a difference in the lives of advisors and their clients. AssetMark had $79.4 billion in platform assets as of September 30, 2022 and has a history of innovation spanning more than 25 years.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future financial and operating performance, which involve risks and uncertainties. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “will,” “may,” “could,” “should,” “believe,” “expect,” “estimate,” “potential” or “continue,” the negative of these terms and other comparable terminology that conveys uncertainty of future events or outcomes. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to differ materially from statements made in this press release, including our business strategies, our operating and financial performance and general market, economic and business conditions. Other potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, which is on file with the Securities and Exchange Commission and available on our investor relations website at http://ir.assetmark.com. Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, which is expected to be filed on November 8, 2022. All information provided in this release is based on information available to us as of the date of this press release and any forward-looking statements contained herein are based on assumptions that we believe are reasonable as of this date. Undue reliance should not be placed on the forward-looking statements in this press release, which are inherently uncertain. We undertake no duty to update this information unless required by law.

AssetMark Financial Holdings, Inc. Unaudited Condensed Consolidated Balance Sheets (in thousands except share data and par value)
		September 30, 2022				December 31, 2021
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	137,210			$	76,707
Restricted cash			13,000				13,000
Investments, at fair value			12,919				14,498
Fees and other receivables, net			15,789				9,019
Income tax receivable, net			9,617				6,276
Prepaid expenses and other current assets			11,293				14,673
Total current assets			199,828				134,173
Property, plant and equipment, net			7,467				8,015
Capitalized software, net			85,110				73,701
Other intangible assets, net			703,180				709,693
Operating lease right-of-use assets			22,833				22,469
Goodwill			437,154				436,821
Other assets			11,633				2,090
Total assets		$	1,467,205			$	1,386,962
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	1,637			$	2,613
Accrued liabilities and other current liabilities			52,118				56,249
Total current liabilities			53,755				58,862
Long-term debt, net			113,673				115,000
Other long-term liabilities			14,686				16,468
Long-term portion of operating lease liabilities			28,684				28,316
Deferred income tax liabilities, net			159,257				158,930
Total long-term liabilities			316,300				318,714
Total liabilities			370,055				377,576
Stockholders’ equity:
Common stock, $0.001 par value (675,000,000 shares authorized and 73,845,974 and 73,562,717 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively)			74				74
Additional paid-in capital			939,166				929,070
Retained earnings			157,910				80,242
Total stockholders’ equity			1,097,150				1,009,386
Total liabilities and stockholders’ equity		$	1,467,205			$	1,386,962

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

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

Explanations and Reconciliations of Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe adjusted EBITDA, adjusted EBITDA margin and adjusted net income, all of which are non-GAAP measures, are useful in evaluating our performance. We use adjusted EBITDA, adjusted EBITDA margin and adjusted net income to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that such non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, such non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.

Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization and less interest income), further adjusted to exclude certain non-cash charges and other adjustments set forth below. Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenue. Adjusted EBITDA and adjusted EBITDA margin are useful financial metrics in assessing our operating performance from period to period because they exclude certain items that we believe are not representative of our core business, such as certain material non-cash items and other adjustments such as share-based compensation, strategic initiatives and reorganization and integration costs. We believe that adjusted EBITDA and adjusted EBITDA margin, viewed in addition to, and not in lieu of, our reported GAAP results, provide useful information to investors regarding our performance and overall results of operations for various reasons, including:

• non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, share-based compensation expense is not a key measure of our operating performance; and

• costs associated with acquisitions and the resulting integrations, debt refinancing, restructuring, litigation and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance.

We use adjusted EBITDA and adjusted EBITDA margin:

• as measures of operating performance;

• for planning purposes, including the preparation of budgets and forecasts;

• to allocate resources to enhance the financial performance of our business;

• to evaluate the effectiveness of our business strategies;

• in communications with our board of directors concerning our financial performance; and

• as considerations in determining compensation for certain employees.

Adjusted EBITDA and adjusted EBITDA margin have limitations as analytical tools, and should not be considered in isolation to, or as substitutes for, analysis of our results as reported under GAAP. Some of these limitations are:

• adjusted EBITDA and adjusted EBITDA margin do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;

• adjusted EBITDA and adjusted EBITDA margin do not reflect changes in, or cash requirements for, working capital needs;

• adjusted EBITDA and adjusted EBITDA margin do not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments; and

• the definitions of adjusted EBITDA and adjusted EBITDA margin can differ significantly from company to company and as a result have limitations when comparing similarly titled measures across companies.

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

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

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

(1) “Share-based compensation” represents granted share-based compensation in the form of RSA, restricted stock unit, stock option, and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.
(2) “Reorganization and integration costs” includes costs related our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.
(3) “Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.
(4) “Business continuity plan” includes incremental compensation and other costs that are directly related to a transition to a primarily remote workforce in 2021 and a transition to a hybrid workforce in 2022, and other costs due to the COVID-19 pandemic.
(5) “Office closures” represents one-time expenses related to closing facilities.
Set forth below is a summary of the adjustments involved in the reconciliation from net income and net income margin, the most directly comparable GAAP financial measures, to adjusted EBITDA and adjusted EBITDA margin for the three and nine months ended September 30, 2022 and 2021, broken out by compensation and non-compensation expenses (unaudited).

		Three Months Ended September 30, 2022												Three Months Ended September 30, 2021
(in thousands)		Compensation				Non- Compensation				Total				Compensation				Non- Compensation				Total
Share-based compensation(1)		$	3,923			$	—			$	3,923			$	7,974			$	—			$	7,974
Reorganization and integration costs(2)			829				1,452				2,281				1,484				831				2,315
Acquisition expenses(3)			(4	)			383				379				178				770				948
Business continuity plan(4)			—				14				14				—				4				4
Other (income) expense, net			—				(11	)			(11	)			—				119				119
Total adjustments to adjusted EBITDA		$	4,748			$	1,838			$	6,586			$	9,636			$	1,724			$	11,360
		Three Months Ended September 30, 2022												Three Months Ended September 30, 2021
(in percentages)		Compensation				Non- Compensation				Total				Compensation				Non- Compensation				Total
Share-based compensation(1)			2.5	%			—				2.5	%			5.7	%			—				5.7	%
Reorganization and integration costs(2)			0.5	%			1.0	%			1.5	%			1.1	%			0.6	%			1.7	%
Acquisition expenses(3)			—				0.2	%			0.2	%			0.1	%			0.5	%			0.6	%
Business continuity plan(4)			—				—				—				—				—				—
Other (income) expense, net			—				—				—				—				—				—
Total adjustments to adjusted EBITDA margin %			3.0	%			1.2	%			4.2	%			6.9	%			1.1	%			8.0	%

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

(1) “Share-based compensation” represents granted share-based compensation in the form of RSA, restricted stock unit, stock option, and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.
(2) “Reorganization and integration costs” includes costs related to our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.
(3) “Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.
(4) “Business continuity plan” includes incremental compensation and other costs that are directly related to a transition to a primarily remote workforce in 2021 and a transition to a hybrid workforce in 2022, and other costs due to the COVID-19 pandemic.
(5) “Office closures” represents one-time expenses related to closing facilities.

Adjusted Net Income

Adjusted net income represents net income before: (a) share-based compensation expense, (b) amortization of acquisition-related intangible assets, (c) acquisition and related integration expenses, (d) restructuring and conversion costs and (e) certain other expenses. Reconciled items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts. We prepared adjusted net income to eliminate the effects of items that we do not consider indicative of our core operating performance. We have historically not used adjusted net income for internal management reporting and evaluation purposes; however, we believe that adjusted net income, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations for various reasons, including
the following:

• non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, share-based compensation expense is not a key measure of our operating performance;

• costs associated with acquisitions and related integrations, restructuring and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance; and

• amortization expense can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; as such, the amortization of intangible assets obtained in acquisitions is not considered a key measure of our operating performance.
  

Adjusted net income does not purport to be an alternative to net income or cash flows from operating activities. The term adjusted net income is not defined under GAAP, and adjusted net income is not a measure of net income, operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, adjusted net income has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

• adjusted net income does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;

• adjusted net income does not reflect changes in, or cash requirements for, working capital needs; and

• other companies in the financial services industry may calculate adjusted net income differently than we do, limiting its usefulness as a comparative measure.
  

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

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

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

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

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

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

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

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

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

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

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

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

SOURCE: AssetMark Financial Holdings, Inc.