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AssetMark Reports $93.5B Platform Assets for Fourth Quarter 2021

·32 min read
AssetMark, Inc.
AssetMark, Inc.

CONCORD, Calif., Feb. 15, 2022 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Financial and Operational Highlights

  • Net income for the quarter was $12.4 million, or $0.17 per share.

  • Adjusted net income for the quarter was $24.7 million, or $0.33 per share, on total revenue of $143.6 million.

  • Adjusted EBITDA for the quarter was $38.3 million, or 26.7% of total revenue.

  • Platform assets increased 25.5% year-over-year and 7.7% quarter-over-quarter to $93.5 billion, aided by quarterly record net flows of $2.9 billion and market impact net of fees of $3.7 billion. Annual net flows as a percentage of beginning-of-year platform assets were 13.3%.

  • More than 6,800 new households and 215 new producing advisors joined the AssetMark platform during the fourth quarter. In total, as of December 31, 2021 there were over 8,600 advisors (approximately 2,850 were engaged advisors) and over 209,000 investor households on the AssetMark platform.

  • We realized a 24.6% 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 ended 2021 with record results; assets on the platform grew to over $93 billion, and we served more advisors and investor households than ever before. We realized double digit growth for top- and bottom-line financials and expanded margins by 300 bps,” said AssetMark CEO Natalie Wolfsen. “We achieved important milestones that will drive our business forward – most notably, our expansion into the growing RIA channel and our acquisition of the financial planning software provider Voyant. In 2022, we will continue broadening our platform to redefine the advisor experience and deliver value to our clients and shareholders.”

Fourth Quarter 2021 Key Operating Metrics

4Q21

4Q20

Variance
per year

Operational metrics:

Platform assets (at period-beginning) (millions of dollars)

86,826

67,254

29.1%

Net flows (millions of dollars)

2,949

1,533

92.4%

Market impact net of fees (millions of dollars)

3,713

5,734

(35.2%)

Acquisition impact (millions of dollars)

-

-

NM

Platform assets (at period-end) (millions of dollars)

93,488

74,520

25.5%

Net flows lift (% of beginning of year platform assets)

4.0%

2.5%

150 bps

Advisors (at period-end)

8,649

8,454

2.3%

Engaged advisors (at period-end)

2,858

2,536

12.7%

Assets from engaged advisors (at period-end) (millions of dollars)

86,385

67,300

28.4%

Households (at period-end)

209,900

186,602

12.5%

New producing advisors

215

177

21.5%

Production lift from existing advisors (annualized %)

24.6%

21.3%

15.8%

Assets in custody at ATC (at period-end) (millions of dollars)

71,320

53,878

32.4%

ATC client cash (at period-end) (millions of dollars)

2,932

2,618

12.0%

Financial metrics:

Total revenue (millions of dollars)

144

111

29.4%

Net income (loss) (millions of dollars)

12.4

(9.9)

NM

Net income (loss) margin (%)

8.6%

(8.9%)

1750 bps

Capital expenditure (millions of dollars)

8.0

8.0

-0.1%

Non-GAAP financial metrics:

Adjusted EBITDA (millions of dollars)

38.3

32.0

19.7%

Adjusted EBITDA margin (%)

26.7%

28.9%

(220 bps)

Adjusted net income (millions of dollars)

24.7

22.2

11.3%

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


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

Full Year 2021 Key Operating Metrics

2021

2020

Variance
per year

Operational metrics:

Platform assets (at period-beginning) (millions of dollars)

74,520

61,608

21.0%

Net flows (millions of dollars)

9,934

5,483

81.2%

Market impact net of fees (millions of dollars)

9,034

5,369

68.3%

Acquisition impact (millions of dollars)

-

2,060

NM

Platform assets (at period-end) (millions of dollars)

93,488

74,520

25.5%

Net flows lift (% of beginning of year platform assets)

13.3%

8.9%

440 bps

Advisors (at period-end)

8,649

8,454

2.3%

Engaged advisors (at period-end)

2,858

2,536

12.7%

Assets from engaged advisors (at period-end) (millions of dollars)

86,385

67,300

28.4%

Households (at period-end)

209,900

186,602

12.5%

New producing advisors

811

743

9.2%

Production lift from existing advisors

24.2%

19.9%

21.7%

Assets in custody at ATC (at period-end) (millions of dollars)

71,320

53,878

32.4%

ATC client cash (at period-end) (millions of dollars)

2,932

2,618

12.0%

Financial metrics:

Total revenue (millions of dollars)

530

432

22.7%

Net income (loss) (millions of dollars)

25.7

(7.8)

NM

Net income (loss) margin (%)

4.8%

(1.8%)

660 bps

Capital expenditure (millions of dollars)

34.7

29.1

19.2%

Non-GAAP financial metrics:

Adjusted EBITDA (millions of dollars)

157.2

115.0

36.6%

Adjusted EBITDA margin (%)

29.6%

26.6%

300 bps

Adjusted net income (millions of dollars)

103.3

73.2

41.1%

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 fourth quarter 2021 results. In conjunction with this earnings press release, AssetMark has posted an earnings presentation on its investor relations website at http://ir.assetmark.com. Conference call and webcast details are as follows:

About AssetMark Financial Holdings, Inc.

AssetMark is a leading provider of extensive wealth management and technology solutions that power independent financial advisors and their clients. Through AssetMark, Inc., its investment advisor subsidiary registered with the Securities and Exchange Commission, AssetMark operates a platform that comprises fully integrated technology, personalized and scalable service and curated investment platform solutions designed to make a difference in the lives of advisors and their clients. AssetMark had $93.5 billion in platform assets as of December 31, 2021 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 “may,” “could,” “should,” “believes,” “estimates,” “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 financial performance, investments in new products, services and capabilities 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 prospectus dated July 17, 2019 filed with the Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933, as amended, and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 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 Annual Report on Form 10-K for the year ended December 31, 2021, 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,
2021

December 31,
2020

ASSETS

Current assets:

Cash and cash equivalents

$

76,707

$

70,619

Restricted cash

13,000

11,000

Investments, at fair value

14,498

10,577

Fees and other receivables, net

9,019

8,891

Income tax receivable, net

6,276

8,596

Prepaid expenses and other current assets

14,673

13,637

Total current assets

134,173

123,320

Property, plant and equipment, net

8,015

7,388

Capitalized software, net

73,701

68,835

Other intangible assets, net

709,693

655,736

Operating lease right-of-use assets

22,469

27,496

Goodwill

436,821

338,848

Other assets

2,090

1,965

Total assets

$

1,386,962

$

1,223,588

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

2,613

$

2,199

Accrued liabilities and other current liabilities

56,249

43,694

Total current liabilities

58,862

45,893

Long-term debt, net

115,000

75,000

Other long-term liabilities

16,468

16,302

Long-term portion of operating lease liabilities

28,316

31,820

Deferred income tax liabilities, net

158,930

149,500

Total long-term liabilities

318,714

272,622

Total liabilities

377,576

318,515

Commitments and contingencies

Stockholders' equity:

Common stock, $0.001 par value (675,000,000 shares authorized and 73,562,717 and 72,459,255 shares issued and outstanding as of December 31, 2021 and 2020, respectively)

74

72

Additional paid-in capital

929,070

850,430

Retained earnings

80,242

54,571

Total stockholders' equity

1,009,386

905,073

Total liabilities and stockholders' equity

$

1,386,962

$

1,223,588


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,

2021

2020

2021

2020

Revenue:

Asset-based revenue

$

137,533

$

107,854

$

512,188

$

412,023

Spread-based revenue

2,055

2,490

8,568

16,618

Subscriptions based revenue

3,209

6,381

Other revenue

787

576

3,162

3,438

Total revenue

143,584

110,920

530,299

432,079

Operating expenses:

Asset-based expenses

40,227

34,165

150,836

132,695

Spread-based expenses

367

545

1,427

2,703

Employee compensation

45,901

44,821

196,701

176,483

General and operating expenses

20,342

13,770

72,941

62,466

Professional fees

7,464

4,473

21,813

15,100

Depreciation and amortization

8,080

9,300

37,929

35,126

Total operating expenses

122,381

107,074

481,647

424,573

Interest expense

953

1,142

3,559

5,588

Other expenses, net

24

1,692

106

1,687

Income before income taxes

20,226

1,012

44,987

231

Provision for income taxes

7,875

10,877

19,316

8,043

Net income (loss)

$

12,351

$

(9,865)

$

25,671

$

(7,812)

Net income (loss) per share attributable to common stockholders:

Basic

$

0.17

$

(0.15)

$

0.36

$

(0.12)

Diluted

$

0.17

$

(0.15)

$

0.35

$

(0.12)

Weighted average number of common shares outstanding, basic

73,242,802

67,810,682

72,137,174

67,361,995

Weighted average number of common shares outstanding, diluted

73,441,555

67,810,682

72,399,213

67,361,995



AssetMark Financial Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended
December 31,

Year Ended
December 31,

2021

2020

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

12,351

$

(9,865

)

$

25,671

$

(7,812

)

Adjustments to reconcile net income (loss) to net cash provided by
operating activities:

Depreciation and amortization

8,080

9,300

37,929

35,126

Interest

160

150

700

606

Deferred income taxes

(1,784

)

(1,299

)

(1,558

)

(706

)

Share-based compensation

5,558

13,796

53,637

53,837

Debt acquisition cost write-down

1,729

1,729

Impairment of operating lease right-of-use assets and property, plant, and
equipment

139

2,520

Changes in certain assets and liabilities:

Fees and other receivables, net

757

(1,328

)

163

1,525

Receivables from related party

(101

)

(91

)

(143

)

Prepaid expenses and other current assets

(2,360

)

(2,395

)

2,506

2,401

Accounts payable, accrued liabilities and other liabilities

7,436

5,626

7,450

(7,534

)

Income tax receivable, net

4,878

6,796

2,570

(4,602

)

Net cash provided by operating activities

35,076

22,548

128,977

76,947

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of Voyant, net of cash received

76

(124,160

)

Purchase of WBI OBS Financial, Inc., net of cash received

(18,561

)

Purchase of investments

(569

)

(488

)

(3,004

)

(2,384

)

Sale of investments

660

28

833

40

Purchase of property and equipment

(855

)

(613

)

(1,507

)

(2,901

)

Purchase of computer software

(7,129

)

(7,414

)

(33,145

)

(26,164

)

Net cash used in investing activities

(7,817

)

(8,487

)

(160,983

)

(49,970

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from exercise of stock options

94

187

Payments on long-term debt

(123,750

)

(35,000

)

(123,750

)

Proceeds from credit facility draw down

73,019

75,000

73,019

Payment of credit facility issuance costs

(155

)

(155

)

Net cash (used in) provided by financing activities

(50,886

)

40,094

(50,699

)

Net change in cash, cash equivalents, and restricted cash

27,259

(36,825

)

8,088

(23,722

)

Cash, cash equivalents, and restricted cash at beginning of period

62,448

118,444

81,619

105,341

Cash, cash equivalents, and restricted cash at end of period

$

89,707

$

81,619

$

89,707

$

81,619


SUPPLEMENTAL CASH FLOW INFORMATION

Income taxes paid

$

3,819

$

4,649

$

19,796

$

13,456

Interest paid

$

958

$

984

$

2,828

$

4,969

Non-cash operating, investing, and financing activities:

Non-cash changes to right-of-use assets

$

243

$

62

$

(933

)

$

38,796

Non-cash changes to lease liabilities

$

2,109

$

62

$

933

$

40,140

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, 2021 and 2020 (unaudited).

Three Months Ended December 31,

Three Months Ended December 31,

(in thousands except for percentages)

2021

2020

2021

2020

Net income (loss)

$

12,351

$

(9,865

)

8.6

%

(8.9

)%

Provision for income taxes

7,875

10,877

5.5

%

9.8

%

Interest income (loss)

(21

)

(57

)

(0.1

)%

Interest expense

953

1,142

0.7

%

1.1

%

Amortization/depreciation

8,080

9,300

5.6

%

8.4

%

EBITDA

$

29,238

$

11,397

20.4

%

10.3

%

Share-based
compensation(1)

5,558

13,796

3.9

%

12.4

%

Reorganization and
integration costs(2)

2,722

2,348

1.9

%

2.1

%

Acquisition expenses(3)

446

2,320

0.3

%

2.1

%

Debt acquisition cost
write-down(4)

1,729

1.6

%

Business continuity plan (5)

324

185

0.2

%

0.2

%

Office closures(6)

276

0.2

%

Other expense

24

(38

)

Adjusted EBITDA

$

38,312

$

32,013

26.7

%

28.9

%


Year Ended December 31,

Year Ended December 31,

(in thousands except for percentages)

2021

2020

2021

2020

Net income (loss)

$

25,671

$

(7,812

)

4.8

%

(1.8

)%

Provision for income taxes

19,316

8,043

3.6

%

1.9

%

Interest income (loss)

(137

)

(899

)

(0.2

)%

Interest expense

3,559

5,588

0.7

%

1.3

%

Amortization/depreciation

37,929

35,126

7.2

%

8.1

%

EBITDA

$

86,338

$

40,046

16.3

%

9.3

%

Share-based
compensation(1)

53,637

53,837

10.1

%

12.4

%

Reorganization and
integration costs(2)

10,816

2,596

2.0

%

0.6

%

Acquisition expenses(3)

5,682

12,558

1.1

%

2.9

%

Debt acquisition cost
write-down(4)

1,729

(—

)%

0.4

%

Business continuity plan (5)

460

1,568

0.1

%

0.4

%

Office closures(6)

167

2,755

0.6

%

Other expense

106

(42

)

Adjusted EBITDA

$

157,206

$

115,047

29.6

%

26.6

%

(1) “Share-based compensation” represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our former parent company, and 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 the departure of our former chief executive officer in March 2021, 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) “Debt acquisition cost write-down” represents capitalized debt issuance costs extinguished due to the repayment of $124 million of our outstanding indebtedness under the Term Loan in July 2019 and repayment of $124 million remaining outstanding indebtedness under the Term Loan in December 2020. The July 2019 repayment was considered a substantial modification and the debt was considered fully extinguished as of December 31, 2020.
(5) “Business continuity plan” includes incremental compensation and other costs that are directly related to operations while transitioning to a remote workforce and other costs due to the COVID-19 pandemic.
(6) “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 for the three months and years ended December 31, 2021 and 2020, broken out by compensation and non-compensation expenses (unaudited).

Three Months Ended December 31, 2021

Three Months Ended December 31, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based
compensation(1)

$

5,558

$

$

5,558

$

13,796

$

$

13,796

Reorganization and
integration costs(2)

979

1,743

2,722

2,335

13

2,348

Acquisition expenses(3)

38

408

446

1,164

1,156

2,320

Debt acquisition cost
write-down(4)

1,729

1,729

Business continuity plan (5)

162

162

324

184

184

Office closures(6)

276

276

Other expense

24

24

(38

)

(38

)

Total adjustments to adjusted
EBITDA

$

6,737

$

2,337

$

9,074

$

17,295

$

3,320

$

20,615

Three Months Ended December 31, 2021

Three Months Ended December 31, 2020

(in percentages)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based
compensation(1)

3.9

%

3.9

%

12.4

%

12.4

%

Reorganization and
integration costs(2)

0.7

%

1.2

%

1.9

%

2.1

%

2.1

%

Acquisition expenses(3)

0.3

%

0.3

%

1.0

%

1.0

%

2.0

%

Debt acquisition cost
write-down(4)

1.6

%

1.6

%

Business continuity plan (5)

0.1

%

0.1

%

0.2

%

0.2

%

0.2

%

Office closures(6)

0.2

%

0.2

%

Other expense

Total adjustments to adjusted
EBITDA margin %

4.7

%

1.6

%

6.3

%

15.5

%

3.0

%

18.5

%


Year Ended December 31, 2021

Year Ended December 31, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based
compensation(1)

$

53,637

$

$

53,637

$

53,837

$

$

53,837

Reorganization and
integration costs(2)

5,396

5,420

10,816

2,585

11

2,596

Acquisition expenses(3)

1,441

4,241

5,682

6,022

6,536

12,558

Debt acquisition cost
write-down(4)

1,729

1,729

Business continuity plan (5)

174

286

460

1,082

486

1,568

Office closures(6)

167

167

2,755

2,755

Other expense

106

106

(42

)

(42

)

Total adjustments to adjusted
EBITDA

$

60,648

$

10,220

$

70,868

$

63,526

$

11,475

$

75,001

Year Ended December 31, 2021

Year Ended December 31, 2020

(in percentages)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based
compensation(1)

10.1

%

10.1

%

12.4

%

12.4

%

Reorganization and
integration costs(2)

1.0

%

1.0

%

2.0

%

0.6

%

0.6

%

Acquisition expenses(3)

0.2

%

0.7

%

0.9

%

1.4

%

1.5

%

2.9

%

Debt acquisition cost
write-down(4)

0.4

%

0.4

%

Business continuity plan (5)

0.3

%

0.1

%

0.4

%

Office closures(6)

0.6

%

0.6

%

Other expense

Total adjustments to adjusted
EBITDA margin %

11.3

%

1.7

%

13.0

%

14.7

%

2.6

%

17.3

%

(1) “Share-based compensation” represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our former parent company, and 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 the departure of our former chief executive officer in March 2021, 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) “Debt acquisition cost write-down” represents capitalized debt issuance costs extinguished due to the repayment of $124 million of our outstanding indebtedness under the Term Loan in July 2019 and repayment of $124 million remaining outstanding indebtedness under the Term Loan in December 2020. The July 2019 repayment was considered a substantial modification and the debt was considered fully extinguished as of December 31, 2020.
(5) “Business continuity plan” includes incremental compensation and other costs that are directly related to operations while transitioning to a remote workforce and other costs due to the COVID-19 pandemic.
(6) “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 twelve months ended December 30, 2021 and 2020, 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, 2021 and 2020 (unaudited).

Three Months Ended
December 31,

Year Ended
December 31,

2021

2020

2021

2020

Revenue:

Asset-based revenue

$

137,533

$

107,854

$

512,188

$

412,023

Subscription-based revenue

3,209

8,568

16,618

Spread-based revenue

2,055

2,490

6,381

Other revenue

787

576

3,162

3,438

Total revenue

143,584

110,920

530,299

432,079

Adjusted operating expenses:

Asset-based expenses

40,227

34,165

150,836

132,695

Spread-based expenses

367

545

1,427

2,703

Adjusted employee compensation (1)

39,163

27,526

136,052

112,957

Adjusted general and operating expenses (1)

18,874

12,273

65,072

53,757

Adjusted professional fees (1)

6,619

4,342

19,568

14,021

Adjusted depreciation and amortization (2)

5,126

4,192

18,790

14,694

Total adjusted operating expenses

110,376

83,043

391,745

330,827

Interest expense

953

1,142

3,559

5,588

Adjusted other expense, net (1)

Adjusted income before income taxes

32,255

26,735

134,995

95,664

Adjusted provision for income taxes (3)

7,580

4,560

31,723

22,481

Adjusted net income

$

24,675

$

22,175

$

103,272

$

73,183

Net income per share attributable to common stockholders:

Adjusted earnings per share

$

0.33

$

0.31

$

1.40

$

1.01

Adjusted number of common shares outstanding, diluted (4)

74,746,770

72,265,783

73,947,311

72,541,836

Adjusted EBITDA (5)

$

38,312

$

32,013

$

157,206

$

115,047

(1) Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above.
(2) Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.
(3) Consists of the provision for income taxes under US GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization.
(4) Consists of the outstanding shares at period-end and the full dilutive impact of unvested equity awards which includes restricted stock awards, restricted stock units, stock options and stock appreciation rights.
(5) 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 in the ‘Adjusted EBITDA and Adjusted EBITDA Margin’ section above.

Set forth below is a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for the three months ended December 31, 2021 and 2020 (unaudited).

Reconciliation of Non-GAAP Presentation.

Three months ended
December 31, 2021

Three months ended
December 31, 2020

(in thousands)

GAAP

Adjustments

Adjusted

GAAP

Adjustments

Adjusted

Revenue:

Asset-based revenue

$

137,533

$

$

137,533

$

107,854

$

$

107,854

Subscription-based revenue

3,209

3,209

Spread-based revenue

2,055

2,055

2,490

2,490

Other revenue

787

787

576

576

Total revenue

143,584

143,584

110,920

110,920

Operating expenses:

Asset-based expenses

40,227

40,227

34,165

34,165

Spread-based expenses

367

367

545

545

Employee compensation (1)

45,901

(6,738

)

39,163

44,821

(17,295

)

27,526

General and operating expenses (1)

20,342

(1,468

)

18,874

13,770

(1,497

)

12,273

Professional fees (1)

7,464

(845

)

6,619

4,473

(131

)

4,342

Depreciation and amortization(2)

8,080

(2,954

)

5,126

9,300

(5,108

)

4,192

Total operating expenses

122,381

(12,005

)

110,376

107,074

(24,031

)

83,043

Interest expense

953

953

1,142

1,142

Other income (expense), net (1)

24

(24

)

1,692

(1,692

)

Income before income taxes

20,226

12,029

32,255

1,012

25,723

26,735

Provision for (benefit from) income taxes (3)

7,875

(295

)

7,580

10,877

(6,317

)

4,560

Net income

$

12,351

$

24,675

$

(9,865

)

$

22,175

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

Reconciliation of Non-GAAP Presentation.

Year ended December 31, 2021

Year ended December 31, 2020

(in thousands)

GAAP

Adjustments

Adjusted

GAAP

Adjustments

Adjusted

Revenue:

Asset-based revenue

$

512,188

$

$

512,188

$

412,023

$

$

412,023

Spread-based revenue

8,568

8,568

16,618

16,618

Subscription-based revenue

6,381

6,381

Other revenue

3,162

3,162

3,438

3,438

Total revenue

530,299

530,299

432,079

432,079

Operating expenses:

Asset-based expenses

150,836

150,836

132,695

132,695

Spread-based expenses

1,427

1,427

2,703

2,703

Employee compensation (1)

196,701

(60,649

)

136,052

176,483

(63,526

)

112,957

General and operating expenses (1)

72,941

(7,869

)

65,072

62,466

(8,709

)

53,757

Professional fees (1)

21,813

(2,245

)

19,568

15,100

(1,079

)

14,021

Depreciation and amortization(2)

37,929

(19,139

)

18,790

35,126

(20,432

)

14,694

Total operating expenses

481,647

(89,902

)

391,745

424,573

(93,746

)

330,827

Interest expense

3,559

3,559

5,588

5,588

Other income (expense), net (1)

106

(106

)

1,687

(1,687

)

Income before income taxes

44,987

90,008

134,995

231

95,433

95,664

Provision for (benefit from) income taxes (3)

19,316

12,407

31,723

8,043

14,438

22,481

Net income

$

25,671

$

103,272

$

(7,812

)

$

73,183

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

Three Months Ended December 31, 2021

Three Months Ended December 31, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Net income (loss)

$

12,351

$

(9,865

)

Acquisition-related
amortization(1)

$

$

2,954

2,954

$

$

5,108

5,108

Expense adjustments(2)

1,180

2,313

3,493

3,499

1,628

5,127

Share-based
compensation

5,558

5,558

13,796

13,796

Other expenses

24

24

1,692

1,692

Tax effect of
adjustments(3)

(277

)

572

295

(910

)

7,227

6,317

Adjusted net income

$

24,675

$

22,175

Year Ended December 31, 2021

Year Ended December 31, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Net income (loss)

$

25,671

$

(7,812

)

Acquisition-related
amortization(1)

$

$

19,139

19,139

$

$

20,432

20,432

Expense adjustments(2)

7,012

10,114

17,126

9,689

9,788

19,477

Share-based
compensation

53,637

53,637

53,837

53,837

Other expenses

106

106

1,687

1,687

Tax effect of
adjustments(3)

(1,648

)

(10,759

)

(12,407

)

(2,519

)

(11,919

)

(14,438

)

Adjusted net income

$

103,272

$

73,183

(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) Reflects the 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.