AssetMark Reports $100.8B Platform Assets for Second Quarter 2023

August 02, 2023 at 16:15 PM EDT

CONCORD, Calif., Aug. 02, 2023 (GLOBE NEWSWIRE) -- AssetMark Financial Holdings, Inc. (NYSE: AMK) today announced financial results for the quarter ended June 30, 2023.

Second Quarter 2023 Financial and Operational Highlights

Net income for the quarter was $32.9 million, or $0.44 per share.
Adjusted net income for the quarter was $41.2 million, or $0.55 per share, on total revenue of $183.2 million.
Adjusted EBITDA for the quarter was $60.4 million, or 33.0% of total revenue.
Platform assets increased 22.7% year-over-year to $100.8 billion. Quarter-over-quarter platform assets were up 4.7%, due to market impact net of fees of $2.9 billion, and quarterly net flows of $1.7 billion.
Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 7.3%.
More than 2,700 new households and 188 new producing advisors joined the AssetMark platform during the second quarter. In total, as of June 30, 2023, there were over 9,300 advisors (over 3,000 were engaged advisors) and over 247,000 investor households on the AssetMark platform.
We realized an 20.2% annualized production lift from existing advisors for the second quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.

“AssetMark continues to grow, adding 188 new producing advisors and $1.7 billion of net flows in the second quarter. We ended the quarter with over $100 billion of platform assets, an all-time high. Our financial results were strong, highlighted by all-time highs in revenue, adjusted EBITDA, adjusted net income and adjusted EPS – each of which increased by more than 20% year-over-year. Our 2023 Net Promoter Score was a record 72, eclipsing our previous record by 5 points – a powerful testament to the value we bring to our over 9,300 advisors,” said AssetMark CEO Natalie Wolfsen. “The first half of the year has been outstanding, and I am excited to deliver what we have planned for advisors in the second half of 2023.”

Second Quarter 2023 Key Operating Metrics

	2Q22		2Q23		Variance per year
Operational metrics:
Platform assets (at period-beginning) (millions of dollars)	90,818		96,203		5.9	%
Net flows (millions of dollars)	1,363		1,695		24.3	%
Market impact net of fees (millions of dollars)	(10,054	)	2,864		NM
Acquisition impact (millions of dollars)	-		-		NM
Platform assets (at period-end) (millions of dollars)	82,127		100,762		22.7	%
Net flows lift (% of beginning of year platform assets)	1.5	%	1.9	%	40 bps
Advisors (at period-end)	8,688		9,323		7.3	%
Engaged advisors (at period-end)	2,663		3,032		13.9	%
Assets from engaged advisors (at period-end) (millions of dollars)	74,994		93,109		24.2	%
Households (at period-end)	220,172		247,934		12.6	%
New producing advisors	193		188		(2.6	%)
Production lift from existing advisors (annualized %)	17.4	%	20.2	%	280 bps
Assets in custody at ATC (at period-end) (millions of dollars)	63,055		74,074		17.5	%
ATC client cash (at period-end) (millions of dollars)	3,700		2,942		(20.5	%)

Financial metrics:
Total revenue (millions of dollars)	151		183		21.2	%
Net income (millions of dollars)	25.3		32.9		29.7	%
Net income margin (%)	16.8	%	17.9	%	110 bps
Capital expenditure (millions of dollars)	10.0		11.2		12.7	%

Non-GAAP financial metrics:
Adjusted EBITDA (millions of dollars)	49.6		60.4		21.7	%
Adjusted EBITDA margin (%)	32.8	%	33.0	%	20 bps
Adjusted net income (millions of dollars)	32.4		41.2		27.2	%
Note: Percentage variance based on actual numbers, not rounded results All metrics include Adhesion data, except "New producing advisors," "Production lift from existing advisors" and ATC related metrics

Webcast and Conference Call Information

AssetMark will host a live conference call and webcast to discuss its second 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: August 2, 2023
Time: 2:00 p.m. PT; 5:00 p.m. ET
Phone: Listeners can pre-register for the conference call here: https://www.netroadshow.com/events/login?show=ff486112&confId=52727. Upon registering, you will be provided with participant dial-in numbers, a 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 August 2, 2023.

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 over 1,000 employees. Today, the AssetMark platform serves 9,300 financial advisors and roughly 247,000 investor households. As of June 30, 2023, the company had $100.8 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 press release, including our business strategies, our operating and financial performance and general market, economic and business conditions. Other potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, which is on file with the Securities and Exchange Commission and available on our investor relations website at http://ir.assetmark.com. Additional information will be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, which is expected to be filed on August 4. All information provided in this release is based on information available to us as of the date of this press release and any forward-looking statements contained herein are based on assumptions that we believe are reasonable as of this date. Undue reliance should not be placed on the forward-looking statements in this press release, which are inherently uncertain. We undertake no duty to update this information unless required by law.

AssetMark Financial Holdings, Inc.
Unaudited Condensed Consolidated Balance Sheets
(in thousands except share data and par value)

	June 30, 2023			December 31, 2022
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	172,818		$	123,274
Restricted cash		14,000			13,000
Investments, at fair value		16,395			13,714
Fees and other receivables, net		20,482			20,082
Income tax receivable, net		—			265
Prepaid expenses and other current assets		16,532			16,870
Total current assets		240,227			187,205
Property, plant and equipment, net		7,635			8,495
Capitalized software, net		100,335			89,959
Other intangible assets, net		689,388			694,627
Operating lease right-of-use assets		21,289			22,002
Goodwill		487,292			487,225
Other assets		17,671			13,417
Total assets	$	1,563,837		$	1,502,930
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,763		$	4,624
Accrued liabilities and other current liabilities		78,638			69,196
Income tax payable, net		13,797			—
Total current liabilities		94,198			73,820
Long-term debt, net		93,496			112,138
Other long-term liabilities		17,110			15,185
Long-term portion of operating lease liabilities		27,097			27,924
Deferred income tax liabilities, net		147,497			147,497
Total long-term liabilities		285,200			302,744
Total liabilities		379,398			376,564
Stockholders’ equity:
Common stock, $0.001 par value (675,000,000 shares authorized and 74,172,080 and 73,847,596 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively)		74			74
Additional paid-in capital		950,920			942,946
Retained earnings		233,602			183,503
Accumulated other comprehensive loss		(157	)		(157	)
Total stockholders’ equity		1,184,439			1,126,366
Total liabilities and stockholders’ equity	$	1,563,837		$	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 June 30,					Six Months Ended June 30,
		2023			2022		2023		2022
Revenue:
Asset-based revenue	$	137,336		$	139,249	$	268,375	$	281,325
Spread-based revenue		37,271			7,150		75,534		9,105
Subscription-based revenue		3,693			3,259		7,237		6,577
Other revenue		4,932			1,549		8,648		2,503
Total revenue		183,232			151,207		359,794		299,510
Operating expenses:
Asset-based expenses		39,344			40,266		76,778		81,953
Spread-based expenses		8,003			641		14,560		1,046
Employee compensation		48,099			39,973		95,010		80,263
General and operating expenses		24,354			22,223		50,043		44,282
Professional fees		8,372			5,494		13,765		11,227
Depreciation and amortization		8,684			7,711		17,112		15,180
Total operating expenses		136,856			116,308		267,268		233,951
Interest expense		2,137			1,488		4,484		2,647
Other expense (income), net		(288	)		78		19,577		206
Income before income taxes		44,527			33,333		68,465		62,706
Provision for income taxes		11,650			7,993		18,366		15,147
Net income		32,877			25,340		50,099		47,559
Net comprehensive income	$	32,877		$	25,340	$	50,099	$	47,559
Net income per share attributable to common stockholders:
Basic	$	0.44		$	0.34	$	0.68	$	0.65
Diluted	$	0.44		$	0.34	$	0.67	$	0.65
Weighted average number of common shares outstanding, basic		73,986,326			73,631,588		73,938,510		73,601,852
Weighted average number of common shares outstanding, diluted		74,505,158			73,692,278		74,325,580		73,651,172

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

	Six Months Ended June 30,
		2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	50,099		$	47,559
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		17,112			15,180
Interest (income) expense, net		(45	)		407
Share-based compensation		7,974			6,173
Debt acquisition cost write-down		92			130
Changes in certain assets and liabilities:
Fees and other receivables, net		(863	)		(3,145	)
Receivables from related party		480			(333	)
Prepaid expenses and other current assets		2,954			3,887
Accounts payable, accrued liabilities and other current liabilities		13,614			(13,236	)
Income tax receivable and payable, net		14,062			(1,354	)
Net cash provided by operating activities		105,479			55,268
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Adhesion Wealth		(3,000	)		—
Purchase of investments		(1,528	)		(1,780	)
Sale of investments		257			361
Purchase of property and equipment		(469	)		(1,222	)
Purchase of computer software		(20,920	)		(17,180	)
Purchase of convertible notes		(4,275	)		—
Net cash used in investing activities		(29,935	)		(19,821	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt, net		—			122,508
Payments on revolving credit facility		—			(115,000	)
Payments on term loan		(25,000	)		(3,125	)
Net cash (used in) provided by financing activities		(25,000	)		4,383
Net change in cash, cash equivalents, and restricted cash		50,544			39,830
Cash, cash equivalents, and restricted cash at beginning of period		136,274			89,707
Cash, cash equivalents, and restricted cash at end of period	$	186,818		$	129,537
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid, net	$	4,298		$	16,905
Interest paid	$	5,736		$	1,376
Non-cash operating and investing activities:
Non-cash changes to right-of-use assets	$	1,795		$	2,161
Non-cash changes to lease liabilities	$	1,795		$	2,161

Explanations and Reconciliations of Non-GAAP Financial Measures

In addition to our results determined in accordance with U.S. generally accepted accounting principles (“GAAP”), we believe adjusted EBITDA, adjusted EBITDA margin and adjusted net income, all of which are non-GAAP measures, are useful in evaluating our performance. We use adjusted EBITDA, adjusted EBITDA margin and adjusted net income to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that such non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, such non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with GAAP.

Other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization and less interest income), further adjusted to exclude certain non-cash charges and other adjustments set forth below. Adjusted EBITDA margin is defined as adjusted EBITDA divided by total revenue. Adjusted EBITDA and adjusted EBITDA margin are useful financial metrics in assessing our operating performance from period to period because they exclude certain items that we believe are not representative of our core business, such as certain material non-cash items and other adjustments such as share-based compensation, strategic initiatives and reorganization and integration costs. We believe that adjusted EBITDA and adjusted EBITDA margin, viewed in addition to, and not in lieu of, our reported GAAP results, provide useful information to investors regarding our performance and overall results of operations for various reasons, including:

non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, share-based compensation expense is not a key measure of our operating performance; and
costs associated with acquisitions and the resulting integrations, debt refinancing, restructuring, litigation and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance.

We use adjusted EBITDA and adjusted EBITDA margin:

as measures of operating performance;
for planning purposes, including the preparation of budgets and forecasts;
to allocate resources to enhance the financial performance of our business;
to evaluate the effectiveness of our business strategies;
in communications with our board of directors concerning our financial performance; and
as considerations in determining compensation for certain employees.

Adjusted EBITDA and adjusted EBITDA margin have limitations as analytical tools, and should not be considered in isolation to, or as substitutes for, analysis of our results as reported under GAAP. Some of these limitations are:

adjusted EBITDA and adjusted EBITDA margin do not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;
adjusted EBITDA and adjusted EBITDA margin do not reflect changes in, or cash requirements for, working capital needs;
adjusted EBITDA and adjusted EBITDA margin do not reflect interest expense on our debt or the cash requirements necessary to service interest or principal payments; and
the definitions of adjusted EBITDA and adjusted EBITDA margin can differ significantly from company to company and as a result have limitations when comparing similarly titled measures across companies.

Set forth below is a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted EBITDA for the three and six months ended June 30, 2023 and 2022 (unaudited).

	Three Months Ended June 30,						Three Months Ended June 30,
(in thousands except for percentages)		2023			2022		2023		2022
Net income	$	32,877		$	25,340		17.9	%	16.8	%
Provision for income taxes		11,650			7,993		6.4	%	5.3	%
Interest income		(2,509	)		(227	)	(1.4	)%	(0.2	)%
Interest expense		2,137			1,488		1.2	%	1.0	%
Depreciation and amortization		8,684			7,711		4.7	%	5.1	%
EBITDA	$	52,839		$	42,305		28.8	%	28.0	%
Share-based compensation⁽¹⁾		4,152			3,031		2.3	%	2.0	%
Reorganization and integration costs⁽²⁾		3,556			3,313		2.0	%	2.2	%
Acquisition expenses⁽³⁾		(140	)		799		(0.1	)%	0.5	%
Business continuity plan⁽⁴⁾		—			105		—		0.1	%
Other (income) expense, net		(10	)		78		—		0.1	%
Adjusted EBITDA	$	60,397		$	49,631		33.0	%	32.9	%

	Six Months Ended June 30,						Six Months Ended June 30,
(in thousands except for percentages)		2023			2022		2023		2022
Net income	$	50,099		$	47,559		13.9	%	15.9	%
Provision for income taxes		18,366			15,147		5.1	%	5.1	%
Interest income		(4,560	)		(258	)	(1.3	)%	(0.1	)%
Interest expense		4,484			2,647		1.2	%	0.9	%
Amortization/depreciation		17,112			15,180		4.8	%	5.1	%
EBITDA	$	85,501		$	80,275		23.7	%	26.9	%
Share-based compensation⁽¹⁾		7,974			6,173		2.2	%	2.1	%
Reorganization and integration costs⁽²⁾		5,465			6,319		1.5	%	2.1	%
Acquisition expenses⁽³⁾		173			934		0.1	%	0.3	%
Business continuity plan⁽⁴⁾		(6	)		220		—		0.1	%
Accrual for SEC matter⁽⁵⁾		20,000			—		5.6	%	—
Other expense, net		77			206		—		0.1	%
Adjusted EBITDA	$	119,184		$	94,127		33.1	%	31.6	%

(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.

(5) “Accrual for SEC matter” represents an accrual recognized based on the SEC matter further discussed in Note 12 of notes to unaudited condensed consolidated financial statements in our Quarterly Report on Form 10-Q for the quarter ended June 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 and six months ended June 30, 2023 and 2022 (unaudited), broken out by compensation and non-compensation expenses (unaudited).

	Three Months Ended June 30, 2023										Three Months Ended June 30, 2022
(in thousands)	Compensation		Non- Compensation			Total			Compensation				Non- Compensation		Total
Share-based compensation⁽¹⁾	$	4,152	$	—		$	4,152		$	3,031			$	—	$	3,031
Reorganization and integration costs⁽²⁾		1,204		2,352			3,556			1,209				2,104		3,313
Acquisition expenses⁽³⁾		—		(140	)		(140	)		—				799		799
Business continuity plan⁽⁴⁾		—		—			—			(2		)		107		105
Other (income) expense, net		—		(10	)		(10	)		—				78		78
Total adjustments to adjusted EBITDA	$	5,356	$	2,202		$	7,558		$	4,238			$	3,088	$	7,326


	Three Months Ended June 30, 2023						Three Months Ended June 30, 2022
(in percentages)	Compensation		Non- Compensation		Total		Compensation		Non- Compensation		Total
Share-based compensation⁽¹⁾	2.3	%	—		2.3	%	2.0	%	—		2.0	%
Reorganization and integration costs⁽²⁾	0.7	%	1.3	%	2.0	%	0.8	%	1.4	%	2.2	%
Acquisition expenses⁽³⁾	—		(0.1)%		(0.1)%		—		0.5	%	0.5	%
Business continuity plan⁽⁴⁾	—		—		—		—		0.1	%	0.1	%
Other (income) expense, net	—		—		—		—		0.1	%	0.1	%
Total adjustments to adjusted EBITDA margin %	3.0	%	1.2	%	4.2	%	2.8	%	2.1	%	4.9	%

	Six Months Ended June 30, 2023								Six Months Ended June 30, 2022
(in thousands)	Compensation		Non- Compensation			Total			Compensation			Non- Compensation		Total
Share-based compensation⁽¹⁾	$	7,974	$	—		$	7,974		$	6,173		$	—	$	6,173
Reorganization and integration costs⁽²⁾		2,269		3,196			5,465			1,995			4,324		6,319
Acquisition expenses⁽³⁾		100		73			173			—			934		934
Business continuity plan⁽⁴⁾		—		(6	)		(6	)		(2	)		222		220
Accrual for SEC matter⁽⁵⁾		—		20,000			20,000			—			—		—
Other (income) expense, net		—		77			77			—			206		206
Total adjustments to adjusted EBITDA	$	10,343	$	23,340		$	33,683		$	8,166		$	5,686	$	13,852

	Six Months Ended June 30, 2023						Six Months Ended June 30, 2022
(in percentages)	Compensation		Non- Compensation		Total		Compensation		Non- Compensation		Total
Share-based compensation⁽¹⁾	2.2	%	—		2.2	%	2.1	%	—		2.1	%
Reorganization and integration costs⁽²⁾	0.6	%	0.9	%	1.5	%	0.7	%	1.4	%	2.1	%
Acquisition expenses⁽³⁾	0.1	%	—		0.1	%	—		0.3	%	0.3	%
Business continuity plan⁽⁴⁾	—		—		—		—		0.1	%	0.1	%
Accrual for SEC matter⁽⁵⁾	—		5.6	%	5.6	%	—		—		—
Other (income) expense, net	—		—		—		—		0.1	%	0.1	%
Total adjustments to adjusted EBITDA margin %	2.9	%	6.5	%	9.4	%	2.8	%	1.9	%	4.7	%

(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.

Adjusted net income represents net income before: (a) share-based compensation expense, (b) amortization of acquisition-related intangible assets, (c) acquisition and related integration expenses, (d) restructuring and conversion costs and (e) certain other expenses. Reconciled items are tax effected using the income tax rates in effect for the applicable period, adjusted for any potentially non-deductible amounts. We prepared adjusted net income to eliminate the effects of items that we do not consider indicative of our core operating performance. We have historically not used adjusted net income for internal management reporting and evaluation purposes; however, we believe that adjusted net income, viewed in addition to, and not in lieu of, our reported GAAP results, provides useful information to investors regarding our performance and overall results of operations for various reasons, including the following:

non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, share-based compensation expense is not a key measure of our operating performance;
costs associated with acquisitions and related integrations, restructuring and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance; and
amortization expense can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; as such, the amortization of intangible assets obtained in acquisitions is not considered a key measure of our operating performance.

Adjusted net income does not purport to be an alternative to net income or cash flows from operating activities. The term adjusted net income is not defined under GAAP, and adjusted net income is not a measure of net income, operating income or any other performance or liquidity measure derived in accordance with GAAP. Therefore, adjusted net income has limitations as an analytical tool and should not be considered in isolation to, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

adjusted net income does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;
adjusted net income does not reflect changes in, or cash requirements for, working capital needs; and
other companies in the financial services industry may calculate adjusted net income differently than we do, limiting its usefulness as a comparative measure.

The schedule set forth below presents the Company’s GAAP results from the Condensed Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 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 and six months ended June 30, 2023 and 2022 (unaudited).


	Three Months Ended June 30,						Six Months Ended June 30,
		2023				2022	2023					2022
Revenue:
Asset-based revenue	$	137,336		$	139,249			$	268,375		$	281,325
Spread-based revenue		37,271			7,150				75,534			9,105
Subscription-based revenue		3,693			3,259				7,237			6,577
Other revenue		4,932			1,549				8,648			2,503
Total revenue		183,232			151,207				359,794			299,510
Operating expenses:
Asset-based expenses		39,344			40,266				76,778			81,953
Spread-based expenses		8,003			641				14,560			1,046
Adjusted employee compensation⁽¹⁾		42,743			35,735				84,667			72,097
Adjusted general and operating expenses⁽¹⁾		23,731			20,561				48,536			41,365
Adjusted professional fees⁽¹⁾		6,783			4,146				12,009			8,664
Adjusted depreciation and amortization⁽²⁾		6,504			5,982				15,180			11,723
Total adjusted operating expenses		127,108			107,331				249,308			216,848
Interest expense		2,137			1,488				4,484			2,647
Adjusted other expenses, net⁽¹⁾		(278	)		—				(500	)		—
Adjusted income before income taxes		54,265			42,388				106,502			80,015
Adjusted provision for income taxes⁽³⁾		13,023			9,962				25,560			18,804
Adjusted net income	$	41,242		$	32,426			$	80,942		$	61,211
Net income per share attributable to common stockholders:
Adjusted earnings per share	$	0.55		$	0.44			$	0.67		$	0.83
Weighted average number of common shares outstanding, diluted		74,505,158			73,692,278				74,325,580			73,651,172

(1) Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above.
(2) Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.
(3) Consists of the provision for income taxes under U.S. GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization, and share-based compensation beginning in 2022.

Set forth below is a reconciliation from net income, the most directly comparable GAAP financial measure, to adjusted net income for the three and six months ended June 30, 2023 and 2022 (unaudited).

	Three Months Ended June 30, 2023									Three Months Ended June 30, 2022
Reconciliation of Non-GAAP Presentation	GAAP			Adjustments			Adjusted			GAAP		Adjustments			Adjusted
Revenue:
Asset-based revenue	$	137,336		$	—		$	137,336		$	139,249	$	—		$	139,249
Spread-based revenue		37,271			—			37,271			7,150		—			7,150
Subscription-based revenue		3,693			—			3,693			3,259		—			3,259
Other revenue		4,932			—			4,932			1,549		—			1,549
Total revenue		183,232			—			183,232			151,207		—			151,207
Operating expenses:
Asset-based expenses		39,344			—			39,344			40,266		—			40,266
Spread-based expenses		8,003			—			8,003			641		—			641
Employee compensation⁽¹⁾		48,099			(5,356	)		42,743			39,973		(4,238	)		35,735
General and operating expenses⁽¹⁾		24,354			(623	)		23,731			22,223		(1,662	)		20,561
Professional fees⁽¹⁾		8,372			(1,589	)		6,783			5,494		(1,348	)		4,146
Depreciation and amortization⁽²⁾		8,684			(2,180	)		6,504			7,711		(1,729	)		5,982
Total operating expenses		136,856			(9,748	)		127,108			116,308		(8,977	)		107,331
Interest expense		2,137			—			2,137			1,488		—			1,488
Other expenses, net⁽¹⁾		(288	)		10			(278	)		78		(78	)		—
Income before income taxes		44,527			9,738			54,265			33,333		9,055			42,388
Provision for income taxes⁽³⁾		11,650			1,373			13,023			7,993		1,969			9,962
Net income	$	32,877					$	41,242		$	25,340				$	32,426

(1) Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.
(2) Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above other than share-based compensation.
(3) Consists of the provision for income taxes under GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization, and share-based compensation beginning in 2022.

	Six Months Ended June 30, 2023								Six Months Ended June 30, 2022
Reconciliation of Non-GAAP Presentation	GAAP		Adjustments			Adjusted			GAAP		Adjustments			Adjusted
Revenue:
Asset-based revenue	$	268,375	$	—		$	268,375		$	281,325	$	—		$	281,325
Spread-based revenue		75,534		—			75,534			9,105		—			9,105
Subscription-based revenue		7,237		—			7,237			6,577		—			6,577
Other revenue		8,648		—			8,648			2,503		—			2,503
Total revenue		359,794		—			359,794			299,510		—			299,510
Operating expenses:
Asset-based expenses		76,778		—			76,778			81,953		—			81,953
Spread-based expenses		14,560		—			14,560			1,046		—			1,046
Employee compensation⁽¹⁾		95,010		(10,343	)		84,667			80,263		(8,166	)		72,097
General and operating expenses⁽¹⁾		50,043		(1,507	)		48,536			44,282		(2,917	)		41,365
Professional fees⁽¹⁾		13,765		(1,756	)		12,009			11,227		(2,563	)		8,664
Depreciation and amortization⁽²⁾		17,112		(4,354	)		12,758			15,180		(3,457	)		11,723
Total operating expenses		267,268		(17,960	)		249,308			233,951		(17,103	)		216,848
Interest expense		4,484		—			4,484			2,647		—			2,647
Other expenses, net⁽¹⁾		19,577		(20,077	)		(500	)		206		(206	)		—
Income before income taxes		68,465		38,037			106,502			62,706		(17,309	)		80,015
Provision for income taxes⁽³⁾		18,366		7,194			25,560			15,147		3,657			18,804
Net income	$	50,099				$	80,942		$	47,559				$	61,211

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 and six months ended June 30, 2023 and 2022 (unaudited), broken out by compensation and non-compensation expenses (unaudited).

	Three Months Ended June 30, 2023									Three Months Ended June 30, 2022
(in thousands)	Compensation			Non- Compensation			Total			Compensation			Non- Compensation			Total
Net income							$	32,877								$	25,340
Acquisition-related amortization⁽¹⁾		—		$	2,180			2,180		$	—		$	1,729			1,729
Expense adjustments⁽²⁾		1,204			2,212			3,416			1,207			3,010			4,217
Share-based compensation		4,152			—			4,152			3,031			—			3,031
Other (income) expense, net		—			(10	)		(10	)		—			78			78
Tax effect of adjustments⁽³⁾		(1,285	)		(88	)		(1,373	)		(996	)		(973	)		(1,969	)
Adjusted net income	$	4,071		$	4,294		$	41,242		$	3,242		$	3,844		$	32,426

	Six Months Ended June 30, 2023									Six Months Ended June 30, 2022
(in thousands)	Compensation			Non- Compensation			Total			Compensation			Non- Compensation			Total
Net income							$	50,099								$	47,559
Acquisition-related amortization⁽¹⁾	$	—		$	4,354			4,354		$	—		$	3,457			3,457
Expense adjustments⁽²⁾		2,369			23,263			25,632			1,993			5,480			7,473
Share-based compensation		7,974			—			7,974			6,173			—			6,173
Other (income) expense, net		—			77			77			—			206			206
Tax effect of adjustments⁽³⁾		(2,482	)		(4,712	)		(7,194	)		(1,919	)		(1,738	)		(3,657	)
Adjusted net income	$	7,861		$	22,982		$	80,942		$	6,247		$	7,405		$	61,211

Media:
Alaina Kleinman
Head of PR & Communications
alaina.kleinman@assetmark.com

SOURCE: AssetMark Financial Holdings, Inc.

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