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AssetMark Reports $84.6B Platform Assets for Second Quarter 2021

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CONCORD, Calif., July 28, 2021 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter ended June 30, 2021.

Second Quarter 2021 Financial and Operational Highlights

  • Net income for the quarter was $10.0 million, or $0.14 per share.

  • Adjusted net income for the quarter was $26.6 million, or $0.36 per share, on total revenue of $128.0 million.

  • Adjusted EBITDA for the quarter was $40.0 million, or 31.3% of total revenue.

  • Platform assets increased 33.8% year-over-year and 7.2% quarter-over-quarter to $84.6 billion, aided by quarterly record net flows of $2.2 billion and market impact net of fees of $3.5 billion. Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 11.2%.

  • More than 5,500 new households and 201 new producing advisors joined the AssetMark platform during the second quarter. In total, as of June 30, 2021 there were over 8,400 advisors (approximately 2,700 were engaged advisors) and over 196,400 investor households on the AssetMark platform.

  • We realized a 26.6% annualized production lift from existing advisors for the second quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

“Our reframed growth strategy is starting to resonate with advisors, as evidenced by record results, greater share of wallet capture and record advisor satisfaction scores,” said AssetMark CEO Natalie Wolfsen. “We realized record net flows, revenue, adjusted EBITDA, adjusted net income and adjusted EPS in the second quarter. The enhancements we have made to our platform and the deep relationships we have built with our advisors continue to pay dividends. The first half of the year has been outstanding, and I am excited to deliver what we have planned for advisors in the second half of 2021.”

Second Quarter 2021 Key Operating Metrics

2Q21

2Q20

Variance per year

Operational metrics:

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

78,880

56,025

40.8%

Net flows (millions of dollars)

2,228

907

145.6%

Market impact net of fees (millions of dollars)

3,487

6,297

(44.6%)

Acquisition impact (millions of dollars)

-

-

NM

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

84,594

63,229

33.8%

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

3.0%

1.5%

150 bps

Advisors (at period-end)

8,496

8,474

0.3%

Engaged advisors (at period-end)

2,691

2,327

15.6%

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

77,352

56,095

37.9%

Households (at period-end)

196,474

179,166

9.7%

New producing advisors

201

178

12.9%

Production lift from existing advisors (annualized %)

26.6%

16.3%

63.3%

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

63,394

44,455

42.6%

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

2,590

2,960

(12.5%)

Financial metrics:

Total revenue (millions of dollars)

128

99

29.2%

Net income (loss) (millions of dollars)

10.0

(9.3)

NM

Net income (loss) margin (%)

7.8%

(9.4%)

1720 bps

Capital expenditure (millions of dollars)

9.2

6.2

47.0%

Non-GAAP financial metrics:

Adjusted EBITDA (millions of dollars)

40.0

25.3

58.1%

Adjusted EBITDA margin (%)

31.3%

25.6%

570 bps

Adjusted net income (millions of dollars)

26.6

15.1

75.4%

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 second 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:

  • Date: July 28, 2021

  • Time: 2:00 p.m. PT; 5:00 p.m. ET

  • Phone: Listeners can pre-register for the conference call here: http://www.directeventreg.com/registration/event/9481925. 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 July 28, 2021.

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 $84.6 billion in platform assets as of June 30, 2021 and has a history of innovation spanning more than 20 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,” “will,” “should,” “believes,” “predicts,” “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 growth strategy, our financial performance, investments in new products, services and capabilities and general market, political, 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 June 30, 2021, which is expected to be filled on August 6, 2021. Additional information is also available in our Annual Report on Form 10-K for the year ended December 31, 2020, which is on file with the Securities and Exchange Commission and available on our investor relations website at http://ir.assetmark.com. 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.
Condensed Consolidated Balance Sheets
(in thousands except share data and par value)

June 30, 2021

December 31, 2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

179,756

$

70,619

Restricted cash

11,000

11,000

Investments, at fair value

13,496

10,577

Fees and other receivables, net

7,745

8,891

Income tax receivable, net

12,979

8,596

Prepaid expenses and other current assets

12,926

13,637

Total current assets

237,902

123,320

Property, plant and equipment, net

7,793

7,388

Capitalized software, net

70,667

68,835

Other intangible assets, net

652,835

655,736

Operating lease right-of-use assets

23,648

27,496

Goodwill

338,848

338,848

Other assets

2,199

1,965

Total assets

$

1,333,892

$

1,223,588

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

1,007

$

2,199

Accrued liabilities and other current liabilities

39,423

43,694

Total current liabilities

40,430

45,893

Long-term debt, net

150,000

75,000

Other long-term liabilities

17,763

16,302

Long-term portion of operating lease liabilities

29,725

31,820

Deferred income tax liabilities, net

149,726

149,500

Total long-term liabilities

347,214

272,622

Total liabilities

387,644

318,515

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.001 par value (675,000,000 shares authorized and 72,540,664 and 72,459,255 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively)

73

72

Additional paid-in capital

890,534

850,430

Retained earnings

55,641

54,571

Total stockholders’ equity

946,248

905,073

Total liabilities and stockholders’ equity

$

1,333,892

$

1,223,588

AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenue:

Asset-based revenue

$

124,690

$

94,712

$

240,503

$

200,362

Spread-based revenue

2,672

3,549

5,278

11,500

Other revenue

680

870

1,267

2,159

Total revenue

128,042

99,131

247,048

214,021

Operating expenses:

Asset-based expenses

35,818

30,084

71,912

65,099

Spread-based expenses

868

433

1,544

1,722

Employee compensation

39,447

45,364

106,749

88,861

General and operating expenses

16,316

13,383

33,805

32,748

Professional fees

5,018

3,160

9,278

6,991

Depreciation and amortization

9,730

8,747

19,201

17,156

Total operating expenses

107,197

101,171

242,489

212,577

Interest expense

774

1,474

1,545

3,101

Other expense, net

(22

)

(39

)

(37

)

11

Income (loss) before income taxes

20,093

(3,475

)

3,051

(1,668

)

Provision for income taxes

10,107

5,805

1,981

4,876

Net income (loss)

9,986

(9,280

)

1,070

(6,544

)

Net comprehensive income (loss)

$

9,986

$

(9,280

)

$

1,070

$

(6,544

)

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

Basic

$

0.14

$

(0.14

)

$

0.02

$

(0.10

)

Diluted

0.14

(0.14

)

0.02

(0.10

)

Weighted average number of common shares outstanding, basic

71,922,179

67,208,746

71,176,386

67,175,603

Weighted average number of common shares outstanding, diluted

72,155,068

67,208,746

71,231,337

67,175,603

AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)

Six Months Ended June 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

1,070

$

(6,544

)

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

Depreciation and amortization

19,201

17,156

Interest

370

158

Deferred income taxes

226

593

Share-based compensation

40,104

27,122

Changes in certain assets and liabilities:

Fees and other receivables, net

47

1,333

Receivables from related party

(43

)

Prepaid expenses and other current assets

1,913

2,550

Accounts payable, accrued liabilities and other current liabilities

(5,220

)

(15,072

)

Income tax receivable, net

(4,383

)

2,208

Net cash provided by operating activities

53,285

29,504

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of WBI OBS Financial, LLC, net of cash received

(18,561

)

Purchase of investments

(1,927

)

(1,497

)

Sale of investments

174

5

Purchase of property and equipment

(421

)

(704

)

Purchase of computer software

(16,974

)

(12,004

)

Net cash used in investing activities

(19,148

)

(32,761

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from credit facility draw down

75,000

Net cash provided by financing activities

75,000

Net change in cash, cash equivalents, and restricted cash

109,137

(3,257

)

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

81,619

105,341

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

$

190,756

$

102,084

SUPPLEMENTAL CASH FLOW INFORMATION

Income taxes paid

$

7,672

$

2,674

Interest paid

$

985

$

2,939

Non-cash operating activities:

Non-cash changes to right-of-use assets

$

(2,140

)

$

38,495

Non-cash changes to lease liabilities

$

(2,140

)

$

39,839

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 June 30, 2021 and 2020 (unaudited).

Three Months Ended June 30,

Three Months Ended June 30,

(in thousands except for percentages)

2021

2020

2021

2020

Net income (loss)

$

9,986

$

(9,280

)

7.8

%

(9.4

)%

Provision for income taxes

10,107

5,805

7.9

%

5.9

%

Interest income

(73

)

(249

)

(0.1

)%

(0.3

)%

Interest expense

774

1,474

0.6

%

1.5

%

Amortization/depreciation

9,730

8,747

7.6

%

8.9

%

EBITDA

30,524

6,497

23.8

%

6.6

%

Share-based compensation(1)

6,676

13,934

5.2

%

14.0

%

Reorganization and integration costs(2)

1,283

44

1.0

%

0.0

%

Acquisition expenses(3)

1,471

3,648

1.2

%

3.7

%

Business continuity plan(4)

61

1,245

0.1

%

1.3

%

Office closures(5)

46

0.0

%

Other expenses

(22

)

(39

)

(0.0

)%

Adjusted EBITDA

$

40,039

$

25,329

31.3

%

25.6

%

Six Months Ended June 30,

Six Months Ended June 30,

(in thousands except for percentages)

2021

2020

2021

2020

Net income (loss)

$

1,070

$

(6,544

)

0.4

%

(3.1

)%

Provision for income taxes

1,981

4,876

0.8

%

2.3

%

Interest income

(98

)

(731

)

(0.0

)%

(0.3

)%

Interest expense

1,545

3,101

0.6

%

1.4

%

Amortization/depreciation

19,201

17,156

7.8

%

8.0

%

EBITDA

23,699

17,858

9.6

%

8.3

%

Share-based compensation(1)

40,104

27,122

16.2

%

12.7

%

Reorganization and integration costs(2)

5,779

147

2.3

%

0.1

%

Acquisition expenses(3)

4,288

7,225

1.7

%

3.4

%

Business continuity plan(4)

132

1,341

0.1

%

0.6

%

Office closures(5)

167

0.1

%

Other expenses

(37

)

11

(0

)

Adjusted EBITDA

$

74,132

$

53,704

30.0

%

25.1

%

(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) “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.
(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 for the three months ended June 30, 2021 and 2020, broken out by compensation and non-compensation expenses (unaudited).

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based compensation(1)

$

6,676

$

$

6,676

$

13,934

$

$

13,934

Reorganization and integration costs(2)

726

557

1,283

44

44

Acquisition expenses(3)

509

962

1,471

2,318

1,330

3,648

Business continuity plan(4)

12

49

61

986

259

1,245

Office closures(5)

46

46

Other expenses

(22

)

(22

)

(39

)

(39

)

Total adjustments to adjusted EBITDA

$

7,923

$

1,592

$

9,515

$

17,282

$

1,550

$

18,832

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

(in percentages)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based compensation(1)

5.2

%

5.2

%

14.0

%

14.0

%

Reorganization and integration costs(2)

0.6

%

0.4

%

1.0

%

Acquisition expenses(3)

0.4

%

0.7

%

1.1

%

2.4

%

1.3

%

3.7

%

Business continuity plan(4)

0.0

%

0.0

%

1.0

%

0.3

%

1.3

%

Office closures(5)

Other expenses

Total adjustments to adjusted EBITDA margin %

6.2

%

1.1

%

7.3

%

17.4

%

1.6

%

19.0

%

(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) “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.
(5) “Office closures” represents one-time expenses related to closing facilities.

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based compensation(1)

$

40,104

$

$

40,104

$

27,122

$

$

27,122

Reorganization and integration costs(2)

2,933

2,846

5,779

149

(2

)

147

Acquisition expenses(3)

1,225

3,063

4,288

3,450

3,775

7,225

Business continuity plan(4)

12

120

132

1,082

259

1,341

Office closures(5)

167

167

Other expenses

(37

)

(37

)

11

11

Total adjustments to adjusted EBITDA

$

44,274

$

6,159

$

50,433

$

31,803

$

4,043

$

35,846

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

(in percentages)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Share-based compensation(1)

16.2

%

16.2

%

12.7

%

12.7

%

Reorganization and integration costs(2)

1.2

%

1.2

%

2.4

%

0.1

%

0.1

%

Acquisition expenses(3)

0.5

%

1.2

%

1.7

%

1.6

%

1.8

%

3.4

%

Business continuity plan(4)

0.0

%

0.0

%

0.0

%

0.5

%

0.1

%

0.6

%

Office closures(5)

0.1

%

0.1

%

Other expenses

0.0

%

0.0

%

Total adjustments to adjusted EBITDA margin %

17.9

%

2.5

%

20.4

%

14.9

%

1.9

%

16.8

%

(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) “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.
(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.

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 June 30, 2021 and 2020 (unaudited).

Three Months Ended June 30, 2021

Three Months Ended June 30, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Net income (loss)

$

9,986

$

(9,280

)

Acquisition-related amortization(1)

$

$

5,108

5,108

$

$

5,108

5,108

Expense adjustments(2)

1,248

1,613

2,861

3,348

1,589

4,937

Share-based compensation

6,676

6,676

13,934

13,934

Other expenses

(22

)

(22

)

(39

)

(39

)

Tax effect of adjustments(3)

(293

)

2,242

1,949

(870

)

1,354

484

Adjusted net income

$

7,631

$

8,941

$

26,558

$

16,412

$

8,012

$

15,144

Six Months Ended June 30, 2021

Six Months Ended June 30, 2020

(in thousands)

Compensation

Non-
Compensation

Total

Compensation

Non-
Compensation

Total

Net income (loss)

$

1,070

$

(6,544

)

Acquisition-related amortization(1)

$

$

10,216

10,216

$

$

10,216

10,216

Expense adjustments(2)

4,170

6,196

10,366

4,680

4,032

8,712

Share-based compensation

40,104

40,104

27,122

27,122

Other expenses

(37

)

(37

)

11

11

Tax effect of adjustments(3)

(980

)

(12,009

)

(12,989

)

(1,217

)

(5,449

)

(6,666

)

Adjusted net income

$

43,294

$

4,366

$

48,730

$

30,585

$

8,810

$

32,851

(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.


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