AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced
financial results for the quarter ended March 31, 2022.
First Quarter 2022 Financial and Operational
Highlights
- Net income for the quarter was $22.2 million, or $0.30 per
share.
- Adjusted net income for the quarter
was $28.8 million, or $0.39 per share, on total
revenue of $148.3 million.
- Adjusted EBITDA for the quarter was $44.5 million, or
30.0% of total revenue.
- Platform assets increased 15.1% year-over-year, but declined
2.9% quarter-over-quarter to $90.8 billion, due to negative market
impact net of fees of $4.8 billion, partially offset by quarterly
net flows of $2.1 billion.
- Year-to-date annualized net flows as a percentage of
beginning-of-year platform assets were 9.1%.
- More than 5,700 new households and 195 new producing advisors
joined the AssetMark platform during the first quarter. In total,
as of March 31, 2022 there were over 8,700 advisors (approximately
2,800 were engaged advisors) and over 215,000 investor households
on the AssetMark platform.
- We realized an 18.7% annualized production lift from existing
advisors for the first quarter, indicating that advisors continued
to grow organically and increase wallet share on our platform.
“Our latest Outsourcing Survey shows that advisors who outsource
reported stronger client relationships, increased acquisition and
retention of clients, and higher asset totals. For these reasons
and more, we expect outsourcing growth to continue and we are
well-positioned to capitalize on the trend,” said Natalie Wolfsen,
CEO of AssetMark. “The strength of our first-quarter results is a
testament to the value we provide our advisors and their clients.
Year over year, we saw double-digit growth in key operational and
financial metrics, and we will look to continue this momentum
through 2022.”
First Quarter 2022 Key Operating Metrics
|
1Q22 |
1Q21 |
Variance per year |
Operational
metrics: |
|
|
|
Platform assets (at
period-beginning) (millions of dollars) |
93,487 |
74,520 |
25.5% |
Net flows (millions of dollars) |
2,135 |
1,927 |
10.8% |
Market impact net of fees (millions of dollars) |
(4,804) |
2,433 |
NM |
Acquisition impact (millions of dollars) |
- |
- |
NM |
Platform assets (at
period-end) (millions of dollars) |
90,818 |
78,880 |
15.1% |
Net flows lift (% of beginning
of year platform assets) |
2.3% |
2.6% |
(30 bps) |
Advisors (at period-end) |
8,701 |
8,477 |
2.6% |
Engaged advisors (at
period-end) |
2,815 |
2,611 |
7.8% |
Assets from engaged advisors
(at period-end) (millions of dollars) |
83,643 |
71,635 |
16.8% |
Households (at
period-end) |
215,668 |
190,915 |
13.0% |
New producing advisors |
195 |
194 |
0.5% |
Production lift from existing
advisors (annualized %) |
18.7% |
21.8% |
(14.1%) |
Assets in custody at ATC (at
period-end) (millions of dollars) |
69,762 |
57,778 |
20.7% |
ATC client cash (at
period-end) (millions of dollars) |
3,095 |
2,497 |
23.9% |
|
|
|
|
Financial
metrics: |
|
|
|
Total revenue (millions of
dollars) |
148 |
119 |
24.6% |
Net income (loss) (millions of
dollars) |
22.2 |
(8.9) |
NM |
Net income (loss) margin
(%) |
15.0% |
(7.5%) |
2,250 bps |
Capital expenditure (millions
of dollars) |
8.4 |
8.2 |
2.5% |
|
|
|
|
Non-GAAP financial
metrics: |
|
|
|
Adjusted EBITDA (millions of
dollars) |
44.5 |
34.1 |
30.5% |
Adjusted EBITDA margin
(%) |
30.0% |
28.6% |
140 bps |
Adjusted net income (millions
of dollars) |
28.8 |
22.2 |
29.8% |
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 first 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: April 28, 2022
- Time: 2:00 p.m. PT; 5:00 p.m. ET
- Phone: Listeners can pre-register for the
conference call here:
https://www.incommglobalevents.com/registration/q4inc/10526/assetmark-financial-holdings-inc-q1-2022-earnings-conference-call/.
Upon registering, you will be provided with participant dial-in
numbers, a passcode and a 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 April 28, 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 $90.8
billion in platform assets as of March 31, 2022 and has a history
of innovation spanning more than 25 years.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding our future financial and
operating performance, which involve risks and uncertainties.
Actual results may differ materially from the results predicted,
and reported results should not be considered as an indication of
future performance. Forward-looking statements include all
statements that are not historical facts and can be identified by
terms such as “will,” “may,” “could,” “should,” “believe,”
“expect,” “estimate,” “potential” or “continue,” the negative of
these terms and other comparable terminology that conveys
uncertainty of future events or outcomes. These forward-looking
statements involve known and unknown risks, uncertainties,
assumptions and other factors that may cause actual results to
differ materially from statements made in this press release,
including our business strategies, our operating and financial
performance and general market, economic and business conditions.
Other potential risks and uncertainties that could cause actual
results to differ from the results predicted include, among others,
those risks and uncertainties included under the captions “Risk
Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our 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 March 31, 2022, which is expected to be filed
in early May. 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)
|
March 31, 2022 |
|
December 31, 2021 |
|
(unaudited) |
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
$ |
98,717 |
|
$ |
76,707 |
Restricted cash |
|
13,000 |
|
|
13,000 |
Investments, at fair value |
|
14,461 |
|
|
14,498 |
Fees and other receivables, net |
|
9,075 |
|
|
9,019 |
Income tax receivable, net |
|
— |
|
|
6,276 |
Prepaid expenses and other current assets |
|
13,696 |
|
|
14,673 |
Total current assets |
|
148,949 |
|
|
134,173 |
Property, plant and equipment, net |
|
7,724 |
|
|
8,015 |
Capitalized software, net |
|
77,130 |
|
|
73,701 |
Other intangible assets, net |
|
707,522 |
|
|
709,693 |
Operating lease right-of-use assets |
|
21,425 |
|
|
22,469 |
Goodwill |
|
436,821 |
|
|
436,821 |
Other assets |
|
3,184 |
|
|
2,090 |
Total assets |
$ |
1,402,755 |
|
$ |
1,386,962 |
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
2,384 |
|
$ |
2,613 |
Accrued liabilities and other current liabilities |
|
46,010 |
|
|
56,249 |
Income tax payable, net |
|
397 |
|
|
— |
Total current liabilities |
|
48,791 |
|
|
58,862 |
Long-term debt, net |
|
116,735 |
|
|
115,000 |
Other long-term liabilities |
|
16,463 |
|
|
16,468 |
Long-term portion of operating lease liabilities |
|
27,089 |
|
|
28,316 |
Deferred income tax liabilities, net |
|
158,930 |
|
|
158,930 |
Total long-term liabilities |
|
319,217 |
|
|
318,714 |
Total liabilities |
|
368,008 |
|
|
377,576 |
Stockholders’ equity: |
|
|
|
|
|
Common stock, $0.001 par value (675,000,000 shares authorized and
73,594,027 and 73,562,717 shares issued and outstanding as of March
31, 2022 and December 31, 2021, respectively) |
|
74 |
|
|
74 |
Additional paid-in capital |
|
932,212 |
|
|
929,070 |
Retained earnings |
|
102,461 |
|
|
80,242 |
Total stockholders’ equity |
|
1,034,747 |
|
|
1,009,386 |
Total liabilities and
stockholders’ equity |
$ |
1,402,755 |
|
$ |
1,386,962 |
AssetMark Financial Holdings,
Inc. Unaudited Condensed Consolidated Statements
of Income(in thousands, except share and per share
data)
|
Three Months Ended March 31, |
|
|
2022 |
|
2021 |
|
Revenue: |
|
|
|
|
|
|
Asset-based revenue |
$ |
142,076 |
|
$ |
115,813 |
|
Subscription-based revenue |
|
3,318 |
|
|
— |
|
Spread-based revenue |
|
1,955 |
|
|
2,606 |
|
Other revenue |
|
954 |
|
|
587 |
|
Total revenue |
|
148,303 |
|
|
119,006 |
|
Operating expenses: |
|
|
|
|
|
|
Asset-based expenses |
|
41,687 |
|
|
36,094 |
|
Spread-based expenses |
|
405 |
|
|
676 |
|
Employee compensation |
|
40,290 |
|
|
67,302 |
|
General and operating expenses |
|
22,059 |
|
|
17,489 |
|
Professional fees |
|
5,733 |
|
|
4,260 |
|
Depreciation and amortization |
|
7,469 |
|
|
9,471 |
|
Total operating expenses |
|
117,643 |
|
|
135,292 |
|
Interest expense |
|
1,159 |
|
|
771 |
|
Other expenses, net |
|
128 |
|
|
(15 |
) |
Income (loss) before income
taxes |
|
29,373 |
|
|
(17,042 |
) |
Provision for (benefit from)
income taxes |
|
7,154 |
|
|
(8,126 |
) |
Net income (loss) |
|
22,219 |
|
|
(8,916 |
) |
Net comprehensive income
(loss) |
$ |
22,219 |
|
$ |
(8,916 |
) |
Net income (loss) per share
attributable to common stockholders: |
|
|
|
|
|
|
Basic |
$ |
0.30 |
|
$ |
(0.13 |
) |
Diluted |
$ |
0.30 |
|
$ |
(0.13 |
) |
Weighted average number of common
shares outstanding, basic |
|
73,571,785 |
|
|
70,422,306 |
|
Weighted average number of common
shares outstanding, diluted |
|
73,675,460 |
|
|
70,422,306 |
|
AssetMark Financial Holdings,
Inc. Unaudited Condensed Consolidated Statements
of Cash Flows(in thousands)
|
Three Months Ended March 31, |
|
|
2022 |
|
|
2021 |
|
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net income (loss) |
$ |
22,219 |
|
|
$ |
(8,916 |
) |
Adjustments to reconcile net
income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
7,469 |
|
|
|
9,471 |
|
Interest |
|
209 |
|
|
|
190 |
|
Share-based compensation |
|
3,142 |
|
|
|
33,428 |
|
Debt acquisition write-down |
|
130 |
|
|
|
— |
|
Changes in certain assets and
liabilities: |
|
|
|
|
|
|
|
Fees and other receivables, net |
|
(137 |
) |
|
|
(710 |
) |
Receivables from related party |
|
81 |
|
|
|
— |
|
Prepaid expenses and other current assets |
|
2,541 |
|
|
|
804 |
|
Accounts payable, accrued liabilities and other current
liabilities |
|
(16,905 |
) |
|
|
(11,028 |
) |
Income tax receivable and payable, net |
|
6,673 |
|
|
|
(8,582 |
) |
Net cash provided by operating
activities |
|
25,422 |
|
|
|
14,657 |
|
CASH FLOWS FROM INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
Purchase of investments |
|
(1,280 |
) |
|
|
(1,363 |
) |
Sale of investments |
|
361 |
|
|
|
151 |
|
Purchase of property and
equipment |
|
(361 |
) |
|
|
(231 |
) |
Purchase of computer
software |
|
(8,077 |
) |
|
|
(8,002 |
) |
Net cash used in investing
activities |
|
(9,357 |
) |
|
|
(9,445 |
) |
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 |
|
(1,563 |
) |
|
|
— |
|
Net cash provided by financing
activities |
|
5,945 |
|
|
|
— |
|
Net change in cash, cash
equivalents, and restricted cash |
|
22,010 |
|
|
|
5,212 |
|
Cash, cash equivalents, and
restricted cash at beginning of period |
|
89,707 |
|
|
|
81,619 |
|
Cash, cash equivalents, and
restricted cash at end of period |
$ |
111,717 |
|
|
$ |
86,831 |
|
SUPPLEMENTAL CASH FLOW
INFORMATION |
|
|
|
|
|
|
|
Income taxes paid |
$ |
532 |
|
|
$ |
464 |
|
Interest paid |
$ |
390 |
|
|
$ |
577 |
|
Non-cash operating
activities: |
|
|
|
|
|
|
|
Non-cash changes to right-of-use assets |
$ |
32 |
|
|
$ |
(2,263 |
) |
Non-cash changes to lease liabilities |
$ |
32 |
|
|
$ |
(2,263 |
) |
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 ended March 31, 2022 and 2021 (unaudited).
|
|
Three Months Ended March 31, |
|
|
Three Months
EndedMarch 31, |
|
(in thousands except for percentages) |
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Net income (loss) |
|
$ |
22,219 |
|
|
$ |
(8,916 |
) |
|
15.0 |
% |
|
(7.5 |
)% |
Provision for (benefit from) income taxes |
|
|
7,154 |
|
|
|
(8,126 |
) |
|
4.8 |
% |
|
(6.8 |
)% |
Interest income |
|
|
(31 |
) |
|
|
(25 |
) |
|
— |
% |
|
— |
% |
Interest expense |
|
|
1,159 |
|
|
|
771 |
|
|
0.8 |
% |
|
0.6 |
% |
Depreciation and amortization |
|
|
7,469 |
|
|
|
9,471 |
|
|
5.0 |
% |
|
8.0 |
% |
EBITDA |
|
|
37,970 |
|
|
|
(6,825 |
) |
|
25.6 |
% |
|
(5.7 |
)% |
Share-based compensation(1) |
|
|
3,142 |
|
|
|
33,428 |
|
|
2.1 |
% |
|
28.0 |
% |
Reorganization and integration costs(2) |
|
|
3,006 |
|
|
|
4,496 |
|
|
2.0 |
% |
|
3.8 |
% |
Acquisition expenses(3) |
|
|
135 |
|
|
|
2,817 |
|
|
0.1 |
% |
|
2.3 |
% |
Business continuity plan(4) |
|
|
115 |
|
|
|
72 |
|
|
0.1 |
% |
|
0.1 |
% |
Office closures(5) |
|
|
— |
|
|
|
121 |
|
|
— |
% |
|
0.1 |
% |
Other expense |
|
|
128 |
|
|
|
(15 |
) |
|
0.1 |
% |
|
— |
% |
Adjusted EBITDA |
|
$ |
44,496 |
|
|
$ |
34,094 |
|
|
30.0 |
% |
|
28.6 |
% |
(1) |
“Share-based compensation” represents granted share-based
compensation in the form of RSA, restricted stock unit, stock
option, and stock appreciation right grants by us to certain of our
directors and employees. Although this expense occurred in each
measurement period, we have added the expense back in our
calculation of adjusted EBITDA because of its noncash impact. |
(2) |
“Reorganization and integration costs” includes costs related 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 and hiring
of a primarily remote workforce and other costs due to the COVID-19
pandemic. |
(5) |
“Office closures” represents one-time expenses related to closing
facilities. |
Set forth below is a summary of the adjustments involved in the
reconciliation from net income and net income margin, the most
directly comparable GAAP financial measures, to adjusted EBITDA and
adjusted EBITDA margin for the three months ended March 31, 2022
and 2021, broken out by compensation and non-compensation expenses
(unaudited).
|
|
Three Months Ended March 31, 2022 |
|
|
Three Months Ended March 31, 2021 |
|
(in thousands) |
|
Compensation |
|
|
Non-Compensation |
|
|
Total |
|
|
Compensation |
|
|
Non-Compensation |
|
|
Total |
|
Share-based compensation(1) |
|
$ |
3,142 |
|
|
$ |
— |
|
|
$ |
3,142 |
|
|
$ |
33,428 |
|
|
$ |
— |
|
|
$ |
33,428 |
|
Reorganization and integration
costs(2) |
|
|
786 |
|
|
|
2,220 |
|
|
|
3,006 |
|
|
|
2,207 |
|
|
|
2,289 |
|
|
|
4,496 |
|
Acquisition expenses(3) |
|
|
— |
|
|
|
135 |
|
|
|
135 |
|
|
|
716 |
|
|
|
2,101 |
|
|
|
2,817 |
|
Business continuity plan(4) |
|
|
— |
|
|
|
115 |
|
|
|
115 |
|
|
|
— |
|
|
|
72 |
|
|
|
72 |
|
Office closures(5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
121 |
|
|
|
121 |
|
Other expenses |
|
|
— |
|
|
|
128 |
|
|
|
128 |
|
|
|
— |
|
|
|
(15 |
) |
|
|
(15 |
) |
Total adjustments to adjusted
EBITDA |
|
$ |
3,928 |
|
|
$ |
2,598 |
|
|
$ |
6,526 |
|
|
$ |
36,351 |
|
|
$ |
4,568 |
|
|
$ |
40,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2022 |
|
|
Three Months Ended March 31, 2021 |
|
(in percentages) |
|
Compensation |
|
|
Non-Compensation |
|
|
Total |
|
|
Compensation |
|
|
Non-Compensation |
|
|
Total |
|
Share-based compensation(1) |
|
|
2.1 |
% |
|
|
— |
|
|
|
2.1 |
% |
|
|
28.0 |
% |
|
|
— |
|
|
|
28.0 |
% |
Reorganization and integration
costs(2) |
|
|
0.5 |
% |
|
|
1.5 |
% |
|
|
2.0 |
% |
|
|
1.9 |
% |
|
|
1.9 |
% |
|
|
3.8 |
% |
Acquisition expenses(3) |
|
|
— |
|
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
0.6 |
% |
|
|
1.7 |
% |
|
|
2.3 |
% |
Business continuity plan(4) |
|
|
— |
|
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
— |
|
|
|
0.1 |
% |
|
|
0.1 |
% |
Office closures(5) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
% |
|
|
0.1 |
% |
Other expenses |
|
|
— |
|
|
|
0.1 |
% |
|
|
0.1 |
% |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total adjustments to adjusted
EBITDA margin % |
|
|
2.6 |
% |
|
|
1.8 |
% |
|
|
4.4 |
% |
|
|
30.5 |
% |
|
|
3.8 |
% |
|
|
34.3 |
% |
(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 and
hiring of a primarily remote workforce 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, includingthe following:
- non-cash equity grants made to employees at a certain price and
point in time do not necessarily reflect how our business is
performing at any particular time; as such, share-based
compensation expense is not a key measure of our operating
performance;
- costs associated with acquisitions and related integrations,
restructuring and conversions can vary from period to period and
transaction to transaction; as such, expenses associated with these
activities are not considered a key measure of our operating
performance; and
- amortization expense can vary substantially from company to
company and from period to period depending upon each company’s
financing and accounting methods, the fair value and average
expected life of acquired intangible assets and the method by which
assets were acquired; as such, the amortization of intangible
assets obtained in acquisitions is not considered a key measure of
our operating performance.
Adjusted net income does not purport to be an alternative to net
income or cash flows from operating activities. The term adjusted
net income is not defined under GAAP, and adjusted net income is
not a measure of net income, operating income or any other
performance or liquidity measure derived in accordance with GAAP.
Therefore, adjusted net income has limitations as an analytical
tool and should not be considered in isolation to, or as a
substitute for, analysis of our results as reported under GAAP.
Some of these limitations are:
- adjusted net income does not reflect all cash expenditures,
future requirements for capital expenditures or contractual
commitments;
- adjusted net income does not reflect changes in, or cash
requirements for, working capital needs; and
- other companies in the financial services industry may
calculate adjusted net income differently than we do, limiting its
usefulness as a comparative measure.
The schedule set forth below presents the Company’s GAAP results
from the Condensed Consolidated Statements of Income (unaudited)
for the three months ended March 31, 2022 and 2021, with certain
line items adjusted for the items described above. Included below
is also a reconciliation from net income, the most directly
comparable GAAP financial measure, to adjusted net income for the
three months and years ended March 31, 2022 and 2021
(unaudited).
|
Three Months Ended March 31, |
|
2022 |
|
2021 |
Revenue: |
|
|
|
|
|
Asset-based revenue |
$ |
142,076 |
|
$ |
115,813 |
Subscription-based revenue |
|
3,318 |
|
|
— |
Spread-based revenue |
|
1,955 |
|
|
2,606 |
Other revenue |
|
954 |
|
|
587 |
Total revenue |
|
148,303 |
|
|
119,006 |
Adjusted operating expenses: |
|
|
|
|
|
Asset-based expenses |
|
41,687 |
|
|
36,094 |
Spread-based expenses |
|
405 |
|
|
676 |
Adjusted employee compensation(1) |
|
36,362 |
|
|
30,952 |
Adjusted general and operating expenses(1) |
|
20,803 |
|
|
13,418 |
Adjusted professional fees(1) |
|
4,519 |
|
|
3,748 |
Adjusted depreciation and amortization(2) |
|
5,740 |
|
|
4,363 |
Total adjusted operating
expenses |
|
109,516 |
|
|
89,251 |
Interest expense |
|
1,159 |
|
|
771 |
Adjusted other expense,
net(1) |
|
— |
|
|
— |
Adjusted income before income
taxes |
|
37,628 |
|
|
28,984 |
Adjusted provision for income
taxes(3) |
|
8,842 |
|
|
6,811 |
Adjusted net income |
$ |
28,786 |
|
$ |
22,173 |
Net income per share attributable
to common stockholders: |
|
|
|
|
|
Adjusted earnings per share(4) |
$ |
0.39 |
|
$ |
0.30 |
Weighted average number of common
shares outstanding, diluted(4) |
|
73,675,460 |
|
|
72,898,648 |
(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) |
In Q1 2022, we began using the diluted GAAP shares outstanding
given that our restricted stock awards fully vested in 2021
resulting in no material reconciling differences compared to the
adjusted diluted common shares outstanding historically used for
calculating adjusted earnings per share. |
Set forth below is a reconciliation from net income, the most
directly comparable GAAP financial measure, to adjusted net income
for the three months ended March 31, 2022 and 2021 (unaudited).
Reconciliation of Non-GAAP Presentation. |
|
Three months endedMarch 31,
2022 |
|
Three months endedMarch 31,
2021 |
(in thousands) |
|
GAAP |
|
|
Adjustments |
|
|
Adjusted |
|
GAAP |
|
|
Adjustments |
|
|
Adjusted |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based revenue |
|
$ |
142,076 |
|
|
$ |
— |
|
|
$ |
142,076 |
|
$ |
115,813 |
|
|
$ |
— |
|
|
$ |
115,813 |
Subscription-based revenue |
|
|
3,318 |
|
|
|
— |
|
|
|
3,318 |
|
|
— |
|
|
|
— |
|
|
|
— |
Spread-based revenue |
|
|
1,955 |
|
|
|
— |
|
|
|
1,955 |
|
|
2,606 |
|
|
|
— |
|
|
|
2,606 |
Other revenue |
|
|
954 |
|
|
|
— |
|
|
|
954 |
|
|
587 |
|
|
|
— |
|
|
|
587 |
Total revenue |
|
|
148,303 |
|
|
|
— |
|
|
|
148,303 |
|
|
119,006 |
|
|
|
— |
|
|
|
119,006 |
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset-based expenses |
|
|
41,687 |
|
|
|
— |
|
|
|
41,687 |
|
|
36,094 |
|
|
|
— |
|
|
|
36,094 |
Spread-based expenses |
|
|
405 |
|
|
|
— |
|
|
|
405 |
|
|
676 |
|
|
|
— |
|
|
|
676 |
Employee compensation(1) |
|
|
40,290 |
|
|
|
(3,928 |
) |
|
|
36,362 |
|
|
67,302 |
|
|
|
(36,350 |
) |
|
|
30,952 |
General and operating expenses(1) |
|
|
22,059 |
|
|
|
(1,256 |
) |
|
|
20,803 |
|
|
17,489 |
|
|
|
(4,071 |
) |
|
|
13,418 |
Professional fees(1) |
|
|
5,733 |
|
|
|
(1,214 |
) |
|
|
4,519 |
|
|
4,260 |
|
|
|
(512 |
) |
|
|
3,748 |
Depreciation and amortization(2) |
|
|
7,469 |
|
|
|
(1,729 |
) |
|
|
5,740 |
|
|
9,471 |
|
|
|
(5,108 |
) |
|
|
4,363 |
Total operating
expenses |
|
|
117,643 |
|
|
|
(8,127 |
) |
|
|
109,516 |
|
|
135,292 |
|
|
|
(46,041 |
) |
|
|
89,251 |
Interest expense |
|
|
1,159 |
|
|
|
— |
|
|
|
1,159 |
|
|
771 |
|
|
|
— |
|
|
|
771 |
Other expense,
net(1) |
|
|
128 |
|
|
|
(128 |
) |
|
|
— |
|
|
(15 |
) |
|
|
15 |
|
|
|
— |
Income (loss) before
income taxes |
|
|
29,373 |
|
|
|
8,255 |
|
|
|
37,628 |
|
|
(17,042 |
) |
|
|
46,026 |
|
|
|
28,984 |
Provision for
(benefit from) income taxes(3) |
|
|
7,154 |
|
|
|
1,688 |
|
|
|
8,842 |
|
|
(8,126 |
) |
|
|
14,937 |
|
|
|
6,811 |
Net income
(loss) |
|
$ |
22,219 |
|
|
|
|
|
|
$ |
28,786 |
|
$ |
(8,916 |
) |
|
|
|
|
|
$ |
22,173 |
(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 March 31, 2022 |
|
|
Three Months Ended March 31, 2021 |
|
(in thousands) |
|
Compensation |
|
|
Non-Compensation |
|
|
Total |
|
|
Compensation |
|
|
Non-Compensation |
|
|
Total |
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
$ |
22,219 |
|
|
|
|
|
|
|
|
|
|
$ |
(8,916 |
) |
Acquisition-related amortization(1) |
|
$ |
— |
|
|
$ |
1,729 |
|
|
|
1,729 |
|
|
$ |
— |
|
|
$ |
5,108 |
|
|
|
5,108 |
|
Expense adjustments(2) |
|
|
786 |
|
|
|
2,470 |
|
|
|
3,256 |
|
|
|
2,922 |
|
|
|
4,583 |
|
|
|
7,505 |
|
Share-based compensation |
|
|
3,142 |
|
|
|
— |
|
|
|
3,142 |
|
|
|
33,428 |
|
|
|
— |
|
|
|
33,428 |
|
Other expenses |
|
|
— |
|
|
|
128 |
|
|
|
128 |
|
|
|
— |
|
|
|
(15 |
) |
|
|
(15 |
) |
Tax effect of adjustments(3) |
|
|
(185 |
) |
|
|
(1,503 |
) |
|
|
(1,688 |
) |
|
|
(687 |
) |
|
|
(14,250 |
) |
|
|
(14,937 |
) |
Adjusted net income |
|
$ |
3,743 |
|
|
$ |
2,824 |
|
|
$ |
28,786 |
|
|
$ |
35,663 |
|
|
$ |
(4,574 |
) |
|
$ |
22,173 |
|
(1) |
Relates to intangible assets established in connection with HTSC’s
acquisition of our Company in 2016. |
(2) |
Consists of the adjustments to EBITDA listed in the adjusted EBITDA
reconciliation table above other than share-based
compensation. |
(3) |
Consists of the provision for income taxes under U.S. GAAP and the
estimated tax impact of expense adjustments and acquisition-related
amortization. |
Contacts Investors:Taylor J. Hamilton, CFAHead
of Investor RelationsInvestorRelations@assetmark.com
Media: Alaina KleinmanHead of PR &
Communicationsalaina.kleinman@assetmark.com
SOURCE: AssetMark Financial Holdings, Inc.
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