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AssetMark Reports $108.9B Platform Assets for Fourth Quarter 2023

CONCORD, Calif., Feb. 21, 2024 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter ended December 31, 2023.

Fourth Quarter 2023 Financial and Operational Highlights

  • Net income for the quarter was $34.6 million, or $0.47 per share.
  • Adjusted net income for the quarter was $44.0 million, or $0.59 per share, on total revenue of $158.2 million.
  • Adjusted EBITDA for the quarter was $63.8 million, or 40.3% of total revenue.
  • Platform assets increased 19.1% year-over-year to $108.9 billion. Quarter-over-quarter platform assets were up 9.4%, due to market impact net of fees of $8.1 billion and quarterly net flows of $1.3 billion.
  • Annual net flows as a percentage of beginning-of-year platform assets were 6.7%.
  • More than 2,600 new households and 154 new producing advisors joined the AssetMark platform during the fourth quarter. In total, as of December 31, 2023, there were over 9,300 advisors (approximately 3,100 were engaged advisors) and over 254,000 investor households on the AssetMark platform.
  • We realized a 19.4% annualized production lift from existing advisors for the fourth quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

"In 2023, AssetMark reached new heights and served a record-breaking 9,300 advisors who used our platform to help more than 254,000 investor households. We achieved outstanding financial and operational results, including a record $109 billion in platform assets. Our annual Net Promoter Score of 72, an all-time high, is a true testament to AssetMark's positive impact on the lives of advisors and their clients," said Michael Kim, CEO of AssetMark. "Looking to 2024, we're committed to doubling down on our simplified strategy and will continue to deliver an industry leading experience to advisors focused on flexible, integrated technology, exceptional service and consulting, and compelling wealth solutions. I am incredibly excited about the opportunities ahead."

Fourth Quarter 2023 Key Operating Metrics

 4Q22 4Q23 Variance
per year
Operational metrics:     
Platform assets (at period-beginning) (millions of dollars)$79,382  $99,597  25.5%
Net flows (millions of dollars) 908   1,265  39.3%
Market impact net of fees (millions of dollars) 4,284   8,067  88.3%
Acquisition impact (millions of dollars) 6,896     NM
Platform assets (at period-end) (millions of dollars)$91,470  $108,929  19.1%
Net flows lift (% of beginning of year platform assets) 1.0%  1.4% 40 bps
Advisors (at period-end) 9,297   9,323  0.3%
Engaged advisors (at period-end) 2,882   3,123  8.4%
Assets from engaged advisors (at period-end) (millions of dollars)$83,803  $101,335  20.9%
Households (at period-end) 241,053   254,110  5.4%
New producing advisors 143   154  7.7%
Production lift from existing advisors (annualized %) 14.1%  19.4% 530 bps
Assets in custody at ATC (at period-end) (millions of dollars)$66,169  $80,325  21.4%
ATC client cash (at period-end) (millions of dollars)$3,541  $3,054  (13.8)%
      
Financial metrics:     
Total revenue (millions of dollars)*$164.0  $158.2  (3.5)%
Net income (millions of dollars)$25.6  $34.6  35.2%
Net income margin (%) 15.6%  21.9% 630 bps
Capital expenditure (millions of dollars)$11.3  $11.4  0.9%
      
Non-GAAP financial metrics:     
Adjusted EBITDA (millions of dollars)$52.9  $63.8  20.6%
Adjusted EBITDA margin (%) 32.2%  40.3% 810 bps
Adjusted net income (millions of dollars)$34.3  $44.0  28.3%

Note: Percentage variance based on actual numbers, not rounded results
All metrics include Adhesion data, except "New producing advisors," "Production lift from existing advisors" and ATC related metrics
* The Company reclassified $30.5 million representing the full year of 2023 spread-based expenses to offset spread-based revenue to account for interest credited to customer accounts on a net basis during the three months ended December 31, 2023. Expenses related to interest credited to customer accounts were recorded in spread-based expense in the prior year and were not material.

Full Year 2023 Key Operating Metrics

  2022   2023  Variance
per year
Operational metrics:     
Platform assets (at period-beginning) (millions of dollars)$93,488  $91,470  (2.2)%
Net flows (millions of dollars) 5,612   6,133  9.3%
Market impact net of fees (millions of dollars) (14,526)  11,326  NM
Acquisition impact (millions of dollars) 6,896     NM
Platform assets (at period-end) (millions of dollars)$91,470  $108,929  19.1%
Net flows lift (% of beginning-of-year platform assets) 6.0%  6.7% 70 bps
Advisers (at period-end) 9,297   9,323  0.3%
Engaged advisers (at period-end) 2,882   3,123  8.4%
Assets from engaged advisers (at period-end) (millions of dollars)$83,803  $101,335  20.9%
Households (at period-end) 241,053   254,110  5.4%
New producing advisers 690   666  (3.5)%
Production lift from existing advisers (annualized %) 16.3%  19.3% 300 bps
Assets in custody at ATC (at period-end) (millions of dollars)$66,169  $80,325  21.4%
ATC client cash (at period-end) (millions of dollars)$3,541  $3,054  (13.8)%
      
Financial metrics:     
Total revenue (millions of dollars)*$618.3  $708.5  14.6%
Net income (millions of dollars)$103.3  $123.1  19.2%
Net income margin (%) 16.7%  17.4% NM
Capital expenditure (millions of dollars)$38.6  $44.2  14.5%
      
Non-GAAP financial metrics:     
Adjusted EBITDA (millions of dollars)$199.7  $249.5  24.9%
Adjusted EBITDA margin (%) 32.3%  35.2% 290 bps
Adjusted net income (millions of dollars)$130.5  $170.9  31.0%

Note: Percentage variance based on actual numbers, not rounded results
All metrics include Adhesion data, except "New producing advisors," "Production lift from existing advisors" and ATC related metrics
* The Company reclassified $30.5 million representing the full year of 2023 spread-based expenses to offset spread-based revenue to account for interest credited to customer accounts on a net basis during the year ended December 31, 2023. Expenses related to interest credited to customer accounts were recorded in spread-based expense in the prior year and were not material.

Webcast and Conference Call Information

AssetMark will host a live conference call and webcast to discuss its fourth quarter 2023 results. In conjunction with this earnings press release, AssetMark has posted an earnings presentation on its investor relations website at http://ir.assetmark.com. Conference call and webcast details are as follows:

  • Date: February 21, 2024
  • Time: 2:00 p.m. PT; 5:00 p.m. ET
  • Phone: Listeners can pre-register for the conference call here: https://www.netroadshow.com/events/login?show=a33808da&confId=59484. 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 February 21, 2024.

About AssetMark Financial Holdings, Inc.

AssetMark operates a wealth management platform that powers independent financial advisors and their clients. Together with our affiliates Voyant and Adhesion Wealth, we serve advisors of all models at every stage of their journey with flexible, purpose-built solutions that champion client engagement and drive efficiency. Our ecosystem of solutions equips advisors with services and capabilities that would otherwise require significant investments of time and money, ultimately enabling them to deliver better investor outcomes and enhance their productivity, profitability and client satisfaction.

Founded in 1996 and based in Concord, California, the company has nearly 1,000 employees. Today, the AssetMark platform serves over 9,300 financial advisors and over 254,000 investor households. As of December 31, 2023, the company had $108.9 billion in platform assets.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future financial and operating performance, which involve risks and uncertainties. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “will,” “may,” “could,” “should,” “believe,” “expect,” “estimate,” “potential” or “continue,” the negative of these terms and other comparable terminology that conveys uncertainty of future events or outcomes. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to differ materially from statements made in this presentation, including our ability to advance our growth strategy, deliver an industry leading experience to advisors and meet our operating and financial performance guidance. 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, 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 end December 31, 2023, which is expected to be filed in mid-March. All information provided in this presentation is based on information available to us as of the date of this presentation 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 presentation, 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
  2023   2022 
ASSETS   
Current assets:   
Cash and cash equivalents$217,680  $123,274 
Restricted cash 15,000   13,000 
Investments, at fair value 18,003   13,714 
Fees and other receivables, net 21,345   20,082 
Income tax receivable, net 1,890   265 
Prepaid expenses and other current assets 17,193   16,870 
Total current assets 291,111   187,205 
Property, plant and equipment, net 8,765   8,495 
Capitalized software, net 108,955   89,959 
Other intangible assets, net 684,142   694,627 
Operating lease right-of-use assets 20,408   22,002 
Goodwill 487,909   487,225 
Other assets 19,273   13,417 
Total assets$1,620,563  $1,502,930 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable$288  $4,624 
Accrued liabilities and other current liabilities 75,554   69,196 
Total current liabilities 75,842   73,820 
Long-term debt, net 93,543   112,138 
Other long-term liabilities 18,429   15,185 
Long-term portion of operating lease liabilities 26,295   27,924 
Deferred income tax liabilities, net 139,072   147,497 
Total long-term liabilities 277,339   302,744 
Total liabilities 353,181   376,564 
Commitments and contingencies     
Stockholders’ equity:   
Common stock, $0.001 par value (675,000,000 shares authorized and 74,372,889 and 73,847,596 shares issued and outstanding as of December 31, 2023 and 2022, respectively) 74   74 
Additional paid-in capital 960,700   942,946 
Retained earnings 306,622   183,503 
Accumulated other comprehensive loss (14)  (157)
Total stockholders’ equity 1,267,382   1,126,366 
Total liabilities and stockholders’ equity$1,620,563  $1,502,930 


AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share data)
    
 Three Months Ended December 31, Year Ended December 31,
  2023   2022   2023  2022 
Revenue:       
Asset-based revenue$141,268  $124,684  $553,483 $534,182 
Spread-based revenue* 7,399   33,144   120,262  63,409 
Subscription-based revenue 4,051   3,317   15,179  13,020 
Other revenue 5,465   2,988   19,575  7,695 
Total revenue 158,183   164,133   708,499  618,306 
Operating expenses:       
Asset-based expenses 42,550   35,671   162,420  154,100 
Spread-based expenses* (21,808)  4,994   1,244  8,182 
Employee compensation 48,993   44,478   190,616  166,330 
General and operating expenses 25,545   24,173   98,302  90,122 
Professional fees 5,718   8,082   26,852  25,186 
Depreciation and amortization 9,467   8,008   35,544  31,149 
Total operating expenses 110,465   125,406   514,978  475,069 
Interest expense 2,319   2,313   9,108  6,520 
Other (income) expense, net (438)  (238)  16,947  (43)
Income before income taxes 45,837   36,652   167,466  136,760 
Provision for income taxes 11,202   11,059   44,347  33,499 
Net income 34,635   25,593   123,119  103,261 
Change in fair value of convertible notes receivable, net 143   (157)  143  (157)
Net comprehensive income$34,778  $25,436  $123,262 $103,104 
Net income per share attributable to common stockholders:       
Basic$0.47  $0.35  $1.66 $1.40 
Diluted$0.46  $0.35  $1.65 $1.40 
Weighted average number of common shares outstanding, basic 74,309,970   73,847,371   74,113,591  73,724,341 
Weighted average number of common shares outstanding, diluted 74,565,589   73,943,318   74,438,332  73,872,828 

* The Company reclassified $30.5 million representing the full year of 2023 spread-based expenses to offset spread-based revenue to account for interest credited to customer accounts on a net basis during the three months and year ended December 31, 2023. Expenses related to interest credited to customer accounts were recorded in spread-based expense in the prior year and were not material.


AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Statements of Cash Flows
(in thousands)
    
 Three Months Ended December 31, Year Ended December 31,
  2023   2022   2023   2022 
CASH FLOWS FROM OPERATING ACTIVITIES       
Net income$34,635  $25,593  $123,119  $103,261 
Adjustments to reconcile net income to net cash provided by operating activities:       
Depreciation and amortization 9,467   8,008   35,544   31,149 
Interest (income) expense, net (157)  (66)  (341)  541 
Deferred income taxes (9,132)  (6,673)  (9,132)  (6,673)
Share-based compensation 4,126   3,780   16,388   13,876 
Debt acquisition cost write-down       92   130 
Changes in certain assets and liabilities:       
Fees and other receivables, net (855)  (3,380)  (1,734)  (10,718)
Receivables from related party       480   568 
Prepaid expenses and other current assets (3,014)  (4,386)  4,737   2,346 
Income tax receivable and payable, net (27,506)  9,414   (1,486)  6,073 
Accounts payable, accrued liabilities and other liabilities 7,681   12,412   7,006   (252)
Net cash provided by operating activities 15,245   44,702   174,673   140,301 
CASH FLOWS FROM INVESTING ACTIVITIES       
Purchase of Adhesion Wealth, net of cash received    (43,861)  (3,000)  (43,861)
Purchase of convertible notes (1,159)  (1,700)  (5,434)  (10,300)
Purchase of investments (393)  (481)  (2,329)  (2,692)
Sale of investments 167   534   456   918 
Purchase of property and equipment (1,698)  (1,621)  (2,853)  (3,061)
Purchase of computer software (9,602)  (9,947)  (41,473)  (35,996)
Net cash used in investing activities (12,685)  (57,076)  (54,633)  (94,992)
CASH FLOWS FROM FINANCING ACTIVITIES       
Proceeds from issuance of long-term debt, net          122,508 
Payments on revolving credit facility       (50,000)  (115,000)
Payments on term loan    (1,562)  (25,000)  (6,250)
Proceeds from credit facility draw down       50,000    
Proceeds from exercise of stock options 1,366      1,366    
Net cash (used in) provided by financing activities 1,366   (1,562)  (23,634)  1,258 
Net change in cash, cash equivalents, and restricted cash 3,926   (13,936)  96,406   46,567 
Cash, cash equivalents, and restricted cash at beginning of period 228,754   150,210   136,274   89,707 
Cash, cash equivalents, and restricted cash at end of period$232,680  $136,274  $232,680  $136,274 
SUPPLEMENTAL CASH FLOW INFORMATION       
Income taxes paid, net$47,558  $7,461  $54,520  $33,637 
Interest paid$2,110  $1,373  $9,947  $4,087 
Non-cash operating, investing, and financing activities:       
Non-cash changes to right-of-use assets$  $379  $3,360  $3,775 
Non-cash changes to lease liabilities$  $379  $3,360  $3,775 
Non-cash change in fair value of convertible notes$143  $(157) $143  $(157)

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, conversions, as well as other non-recurring litigation costs 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 year ended December 31, 2023 and 2022 (unaudited).

  Three Months Ended December 31, Three Months Ended December 31,
(in thousands except for percentages)  2023   2022  2023  2022 
Net income $34,635  $25,593  21.9% 15.6%
Provision for income taxes  11,202   11,059  7.1% 6.7%
Interest income  (3,617)  (1,557) (2.3)% (1.0)%
Interest expense  2,319   2,313  1.4% 1.4%
Amortization and depreciation  9,467   8,008  6.0% 4.9%
EBITDA $54,006  $45,416  34.1% 27.6%
Share-based compensation(1)  4,126   3,780  2.6% 2.3%
Reorganization and integration costs(2)  4,817   1,818  3.0% 1.1%
Acquisition expenses(3)  959   2,098  0.6% 1.3%
Business continuity plan(4)     (173)   (0.1)%
Other (income) expense, net  (79)  (60)    
Adjusted EBITDA $63,829  $52,879  40.3% 32.2%


 Year Ended December 31, Year Ended December 31,
(in thousands except for percentages) 2023   2022  2023  2022 
Net income$123,119  $103,261  17.4% 16.7%
Provision for income taxes 44,347   33,499  6.3% 5.4%
Interest income (11,363)  (2,664) (1.6)% (0.4)%
Interest expense 9,108   6,520  1.3% 1.1%
Amortization and depreciation 35,544   31,149  5.0% 5.0%
EBITDA$200,755  $171,765  28.4% 27.8%
Share-based compensation(1) 16,388   13,876  2.3% 2.2%
Reorganization and integration costs(2) 12,944   10,418  1.8% 1.7%
Acquisition expenses(3) 1,327   3,411  0.1% 0.6%
Business continuity plan(4) (6)  61     
SEC settlement(5) 18,327     2.6%  
Other (income) expense, net (265)  135     
Adjusted EBITDA$249,470  $199,666  35.2% 32.3%

(1) “Share-based compensation” represents granted share-based compensation in the form of restricted stock unit, stock option and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.
(2) “Reorganization and integration costs” includes costs related to our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.
(3) “Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.
(4) “Business continuity plan” includes incremental compensation and other costs that are directly related to a transition to a hybrid workforce in 2022.
(5) “SEC settlement” represents the amount paid by us pursuant to our settlement with the SEC discussed in Note 12 of notes to unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

Set forth below is a summary of the adjustments involved in the reconciliation from net income and net income margin, the most directly comparable GAAP financial measures, to adjusted EBITDA and adjusted EBITDA margin for three months and year ended December 31, 2023 and 2022 (unaudited), broken out by compensation and non-compensation expenses (unaudited).

  Three Months Ended December 31, 2023 Three Months Ended December 31, 2022
(in thousands) Compensation Non-
Compensation
 Total Compensation Non-
Compensation
 Total
Share-based compensation(1) $4,126  $  $4,126  $3,780  $  $3,780 
Reorganization and integration costs(2)  2,534   2,283   4,817   1,512   306   1,818 
Acquisition expenses(3)  839   120   959   4   2,094   2,098 
Business continuity plan(4)              (173)  (173)
Other (income) expense, net     (79)  (79)     (60)  (60)
Total adjustments to adjusted EBITDA $7,499  $2,324  $9,823  $5,296  $2,167  $7,463 


  Three Months Ended December 31, 2023 Three Months Ended December 31, 2022
(in percentages) Compensation Non-
Compensation
 Total Compensation Non-
Compensation
 Total
Share-based compensation(1) 2.6%   2.6% 2.3%   2.3%
Reorganization and integration costs(2) 1.6% 1.4% 3.0% 0.9% 0.2% 1.1%
Acquisition expenses(3) 0.5% 0.1% 0.6%   1.3% 1.3%
Business continuity plan(4)         (0.1)% (0.1)%
Other (income) expense, net            
Total adjustments to adjusted EBITDA margin % 4.7% 1.5% 6.2% 3.2% 1.4% 4.6%

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

 Year Ended December 31, 2023 Year Ended December 31, 2022
(in thousands)Compensation Non-
Compensation
 Total Compensation Non-
Compensation
 Total
Share-based compensation(1)$16,388  $  $16,388  $13,876  $  $13,876 
Reorganization and integration costs(2) 5,904   7,040   12,944   4,335   6,083   10,418 
Acquisition expenses(3) 939   388   1,327      3,411   3,411 
Business continuity plan(4)    (6)  (6)  (2)  63   61 
SEC settlement(5)    18,327   18,327          
Other (income) expense, net    (265)  (265)     135   135 
Total adjustments to adjusted EBITDA$23,231  $25,484  $48,715  $18,209  $9,692  $27,901 


 Year Ended December 31, 2023 Year Ended December 31, 2022
(in percentages)Compensation Non-
Compensation
 Total Compensation Non-
Compensation
 Total
Share-based compensation(1)2.3%   2.3% 2.2%   2.2%
Reorganization and integration costs(2)0.8% 1.0% 1.8% 0.7% 1.0% 1.7%
Acquisition expenses(3)0.1%   0.1%   0.6% 0.6%
Business continuity plan(4)           
SEC settlement(5)  2.6% 2.6%      
Other (income) expense, net           
Total adjustments to adjusted EBITDA margin %3.2% 3.6% 6.8% 2.9% 1.6% 4.5%

(1) “Share-based compensation” represents granted share-based compensation in the form of restricted stock unit, stock option and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.
(2) “Reorganization and integration costs” includes costs related to our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.
(3) “Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.
(4) “Business continuity plan” includes incremental compensation and other costs that are directly related to a transition to a hybrid workforce in 2022.
(5) “SEC settlement” represents the amount paid by us pursuant to our settlement with the SEC discussed in Note 12 of notes to unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

Adjusted Net Income

Adjusted net income represents net income before: (a) share-based compensation expense, (b) amortization of acquisition-related intangible assets, (c) acquisition and related integration expenses, (d) restructuring and conversion costs and (e) certain other expenses. Reconciled items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts. We prepared adjusted net income to eliminate the effects of items that we do not consider indicative of our core operating performance. We 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, debt refinancing, 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 expenses 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 and year ended December 31, 2023 and 2022, with certain line items adjusted for the items described above. Included below is also a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for the three months and year ended December 31, 2023 and 2022 (unaudited).

 Three Months Ended
December 31,
 Year Ended
December 31
  2023   2022   2023   2022 
Revenue:       
Asset-based revenue$141,268  $124,684  $553,483  $534,182 
Spread-based revenue(4) 7,399   33,144   120,262   63,409 
Subscription-based revenue 4,051   3,317   15,179   13,020 
Other revenue 5,465   2,988   19,575   7,695 
Total revenue 158,183   164,133   708,499   618,306 
Operating expenses:       
Asset-based expenses 42,550   35,671   162,420   154,100 
Spread-based expenses(4) (21,808)  4,994   1,244   8,182 
Adjusted employee compensation(1) 41,494   39,182   167,385   148,121 
Adjusted general and operating expenses(1) 23,573   23,927   93,227   85,800 
Adjusted professional fees(1) 5,287   6,101   24,505   19,951 
Adjusted depreciation and amortization(2) 7,287   6,198   26,829   24,153 
Total adjusted operating expenses 98,383   116,073   475,610   440,307 
Interest expense 2,319   2,313   9,108   6,520 
Adjusted other (income) expenses, net(1) (359)  (178)  (1,115)  (178)
Adjusted income before income taxes 57,840   45,925   224,896   171,657 
Adjusted provision for income taxes(3) 13,883   11,650   53,976   41,198 
Adjusted net income$43,957  $34,275  $170,920  $130,459 
Net income per share attributable to common stockholders:       
Adjusted earnings per share$0.59  $0.46  $2.30  $1.77 
Weighted average number of common shares outstanding, diluted 74,565,589   74,943,318   74,438,332   73,872,828 

(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 adjustments to normalize our estimated tax rate in determining adjusted net income.
(4) The Company reclassified $30.5 million from spread-based expenses to offset spread-based revenue to account for interest credited to customer accounts on a net basis for the three months and year ended December 31, 2023. Expenses related to interest credited to customer accounts were recorded in spread-based expense in prior periods and were not material.

Set forth below is a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for the three months and year ended December 31, 2023 and 2022 (unaudited).

 Three months ended December 31, 2023 Three months ended December 31, 2022
Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments Adjusted
Revenue:           
Asset-based revenue$141,268  $  $141,268  $124,684  $  $124,684 
Spread-based revenue(4) 7,399      7,399   33,144      33,144 
Subscription-based revenue 4,051      4,051   3,317      3,317 
Other revenue 5,465      5,465   2,988      2,988 
Total revenue 158,183      158,183   164,133      164,133 
Operating expenses:           
Asset-based expenses 42,550      42,550   35,671      35,671 
Spread-based expenses(4) (21,808)     (21,808)  4,994      4,994 
Employee compensation(1) 48,993   (7,499)  41,494   44,478   (5,296)  39,182 
General and operating expenses(1) 25,545   (1,972)  23,573   24,173   (246)  23,927 
Professional fees(1) 5,718   (431)  5,287   8,082   (1,981)  6,101 
Depreciation and amortization(2) 9,467   (2,180)  7,287   8,008   (1,810)  6,198 
Total operating expenses 110,465   (12,082)  98,383   125,406   (9,333)  116,073 
Interest expense 2,319      2,319   2,313      2,313 
Other expenses, net(1) (438)  79   (359)  (238)  60   (178)
Income before income taxes 45,837   12,003   57,840   36,652   9,273   45,925 
Provision for income taxes(3) 11,202   2,681   13,883   11,059   591   11,650 
Net income$34,635    $43,957  $25,593    $34,275 

(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 adjustments to normalize our estimated tax rate in determining adjusted net income.
(4) The Company reclassified $30.5 million from spread-based expenses to offset spread-based revenue to account for interest credited to customer accounts on a net basis for the three months ended December 31, 2023. Expenses related to interest credited to customer accounts were recorded in spread-based expense in prior periods and were not material.

 Year Ended December 31, 2023 Year Ended December 31, 2022
Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments Adjusted
Revenue:           
Asset-based revenue$553,483 $  $553,483  $534,182  $  $534,182 
Spread-based revenue(4) 120,262     120,262   63,409      63,409 
Subscription-based revenue 15,179     15,179   13,020      13,020 
Other revenue 19,575     19,575   7,695      7,695 
Total revenue 708,499     708,499   618,306      618,306 
Operating expenses:           
Asset-based expenses 162,420     162,420   154,100      154,100 
Spread-based expenses(4) 1,244     1,244   8,182      8,182 
Employee compensation(1) 190,616  (23,231)  167,385   166,330   (18,209)  148,121 
General and operating expenses(1) 98,302  (5,075)  93,227   90,122   (4,322)  85,800 
Professional fees(1) 26,852  (2,347)  24,505   25,186   (5,235)  19,951 
Depreciation and amortization(2) 35,544  (8,715)  26,829   31,149   (6,996)  24,153 
Total operating expenses 514,978  (39,368)  475,610   475,069   (34,762)  440,307 
Interest expense 9,108     9,108   6,520      6,520 
Other expenses, net(1) 16,947  (18,062)  (1,115)  (43)  (135)  (178)
Income before income taxes 167,466  57,430   224,896   136,760   34,897   171,657 
Provision for income taxes(3) 44,347  9,629   53,976   33,499   7,699   41,198 
Net income$123,119   $170,920  $103,261    $130,459 

(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 adjustments to normalize our estimated tax rate in determining adjusted net income.
(4) The Company reclassified $30.5 million from spread-based expenses to offset spread-based revenue to account for interest credited to customer accounts on a net basis for the year ended December 31, 2023. Expenses related to interest credited to customer accounts were recorded in spread-based expense in prior periods and were not material.

Set forth below is a summary of the adjustments involved in the reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for three months and year ended December 31, 2023 and 2022 (unaudited), broken out by compensation and non-compensation expenses (unaudited).

  Three Months Ended December 31, 2023 Three Months Ended December 31, 2022
(in thousands) Compensation Non-
Compensation
 Total Compensation Non-
Compensation
 Total
Net income     $34,635      $25,593 
Acquisition-related amortization(1) $  $2,180   2,180  $  $1,810   1,810 
Expense adjustments(2)  3,373   2,403   5,776   1,516   2,227   3,743 
Share-based compensation  4,126      4,126   3,780      3,780 
Other (income) expense, net     (79)  (79)     (60)  (60)
Tax effect of adjustments(3)  (1,799)  (882)  (2,681)  (1,335)  744   (591)
Adjusted net income $5,700  $3,622  $43,957  $3,961  $4,721  $34,275 


  Year Ended December 31, 2023 Year Ended December 31, 2022
(in thousands) Compensation Non-
Compensation
 Total Compensation Non-
Compensation
 Total
Net income     $123,119      $103,261 
Acquisition-related amortization(1) $  $8,715   8,715  $  $6,996   6,996 
Expense adjustments(2)  6,843   25,749   32,592   4,333   9,557   13,890 
Share-based compensation  16,388      16,388   13,876      13,876 
Other (income) expense, net     (265)  (265)     135   135 
Tax effect of adjustments(3)  (5,575)  (4,054)  (9,629)  (4,370)  (3,329)  (7,699)
Adjusted net income $17,656  $30,145  $170,920  $13,839  $13,359  $130,459 

(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 adjustments to normalize our estimated tax rate in determining adjusted net income.

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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