Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries AssetMark Reports $108.9B Platform Assets for Fourth Quarter 2023 By: AssetMark, Inc. via GlobeNewswire February 21, 2024 at 16:15 PM EST 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 Varianceper yearOperational 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 — NMPlatform 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 bpsAdvisors (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 bpsAssets 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 bpsCapital 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 bpsAdjusted net income (millions of dollars)$34.3 $44.0 28.3% Note: Percentage variance based on actual numbers, not rounded resultsAll 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 Varianceper yearOperational 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 NMAcquisition impact (millions of dollars) 6,896 — NMPlatform 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 bpsAdvisers (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 bpsAssets 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% NMCapital 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 bpsAdjusted net income (millions of dollars)$130.5 $170.9 31.0% Note: Percentage variance based on actual numbers, not rounded resultsAll 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, 2024Time: 2:00 p.m. PT; 5:00 p.m. ETPhone: 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; andcosts 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; andas 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; andthe 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 TotalShare-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 TotalShare-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 TotalShare-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 TotalShare-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; andamortization 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; andother 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 EndedDecember 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, 2022Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments AdjustedRevenue: 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, 2022Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments AdjustedRevenue: 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 TotalNet 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 TotalNet 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, CFAHead of Investor RelationsInvestorRelations@assetmark.com Media: Alaina KleinmanHead of PR & Communicationsalaina.kleinman@assetmark.com SOURCE: AssetMark Financial Holdings, Inc. Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. By accessing this page, you agree to the following Privacy Policy and Terms and Conditions.
AssetMark Reports $108.9B Platform Assets for Fourth Quarter 2023 By: AssetMark, Inc. via GlobeNewswire February 21, 2024 at 16:15 PM EST 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 Varianceper yearOperational 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 — NMPlatform 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 bpsAdvisors (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 bpsAssets 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 bpsCapital 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 bpsAdjusted net income (millions of dollars)$34.3 $44.0 28.3% Note: Percentage variance based on actual numbers, not rounded resultsAll 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 Varianceper yearOperational 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 NMAcquisition impact (millions of dollars) 6,896 — NMPlatform 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 bpsAdvisers (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 bpsAssets 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% NMCapital 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 bpsAdjusted net income (millions of dollars)$130.5 $170.9 31.0% Note: Percentage variance based on actual numbers, not rounded resultsAll 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, 2024Time: 2:00 p.m. PT; 5:00 p.m. ETPhone: 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; andcosts 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; andas 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; andthe 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 TotalShare-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 TotalShare-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 TotalShare-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 TotalShare-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; andamortization 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; andother 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 EndedDecember 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, 2022Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments AdjustedRevenue: 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, 2022Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments AdjustedRevenue: 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 TotalNet 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 TotalNet 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, CFAHead of Investor RelationsInvestorRelations@assetmark.com Media: Alaina KleinmanHead of PR & Communicationsalaina.kleinman@assetmark.com SOURCE: AssetMark Financial Holdings, Inc.
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 Varianceper yearOperational 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 — NMPlatform 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 bpsAdvisors (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 bpsAssets 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 bpsCapital 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 bpsAdjusted net income (millions of dollars)$34.3 $44.0 28.3% Note: Percentage variance based on actual numbers, not rounded resultsAll 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 Varianceper yearOperational 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 NMAcquisition impact (millions of dollars) 6,896 — NMPlatform 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 bpsAdvisers (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 bpsAssets 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% NMCapital 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 bpsAdjusted net income (millions of dollars)$130.5 $170.9 31.0% Note: Percentage variance based on actual numbers, not rounded resultsAll 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, 2024Time: 2:00 p.m. PT; 5:00 p.m. ETPhone: 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; andcosts 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; andas 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; andthe 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 TotalShare-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 TotalShare-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 TotalShare-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 TotalShare-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; andamortization 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; andother 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 EndedDecember 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, 2022Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments AdjustedRevenue: 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, 2022Reconciliation of Non-GAAP PresentationGAAP Adjustments Adjusted GAAP Adjustments AdjustedRevenue: 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 TotalNet 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 TotalNet 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, CFAHead of Investor RelationsInvestorRelations@assetmark.com Media: Alaina KleinmanHead of PR & Communicationsalaina.kleinman@assetmark.com SOURCE: AssetMark Financial Holdings, Inc.