•

Net income for the quarter was $12.3 million, or $0.17 per share.

•

Adjusted net income for the quarter was $29.9 million, or $0.40 per share, on total revenue of $139.7 million.

•

Adjusted EBITDA for the quarter was $44.8 million, or 32.0% of total revenue.

•

Platform assets increased 29.1% year-over-year and 2.6% quarter-over-quarter to $86.8 billion, aided by quarterly record net flows of $2.8 billion and partially offset by a negative market impact net of fees of $0.6 billion. Year-to-date annualized net flows as a percentage of beginning-of-year platform assets were 12.5%.

•

More than 6,500 new households and 201 new producing advisors joined the AssetMark platform during the third quarter. In total, as of September 30, 2021 there were over 8,500 advisors (approximately 2,750 were engaged advisors) and over 203,000 investor households on the AssetMark platform.

•

We realized a 23.7% annualized production lift from existing advisors for the third quarter, indicating that advisors continued to grow organically and increase wallet share on our platform.  

3Q21

3Q20

Variance per year

Operational metrics:

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

84,594

63,229

33.8

%

Net flows (millions of dollars)

2,830

1,209

134.1

%

Market impact net of fees (millions of dollars)

$

(598

)

2,816

NM

Acquisition impact (millions of dollars)

—

—

NM

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

86,826

67,254

29.1

%

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

3.8

%

2.0

%

180 bps

Advisors (at period-end)

8,552

8,473

0.9

%

Engaged advisors (at period-end)

2,749

2,398

14.6

%

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

79,667

60,043

32.7

%

Households (at period-end)

203,004

182,683

11.1

%

New producing advisors

201

171

17.5

%

Production lift from existing advisors (annualized %)

23.7

%

18.7

%

26.6

%

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

65,656

47,989

36.8

%

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

2,611

2,656

(1.7

%)

Financial metrics:

Total revenue (millions of dollars)

140

107

30.4

%

Net income (loss) (millions of dollars)

12.2

8.6

42.5

%

Net income (loss) margin (%)

8.8

%

8.0

%

80 bps

Capital expenditure (millions of dollars)

9.3

8.3

11.3

%

Non-GAAP financial metrics:

Adjusted EBITDA (millions of dollars)

44.8

29.3

52.6

%

Adjusted EBITDA margin (%)

32.0

%

27.4

%

460bps

Adjusted net income (millions of dollars)

29.9

18.2

64.5

%

•

Date: November 9, 2021

•

Time: 2:00 p.m. PT; 5:00 p.m. ET

•

Phone: Listeners can pre-register for the conference call here: https://www.incommglobalevents.com/registration/q4inc/9023/assetmark-financial-holdings-inc-q3-2021-earnings-conference-call/. 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 November 9, 2021.

September 30,

2021

December 31,

2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

50,448

$

70,619

Restricted cash

12,000

11,000

Investments, at fair value

13,872

10,577

Fees and other receivables, net

9,776

8,891

Income tax receivable, net

11,154

8,596

Prepaid expenses and other current assets

11,305

13,637

Total current assets

108,555

123,320

Property, plant and equipment, net

7,788

7,388

Capitalized software, net

71,994

68,835

Other intangible assets, net

706,623

655,736

Operating lease right-of-use assets

23,315

27,496

Goodwill

440,757

338,848

Other assets

2,145

1,965

Total assets

$

1,361,177

$

1,223,588

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

1,024

$

2,199

Accrued liabilities and other current liabilities

47,724

43,694

Total current liabilities

48,748

45,893

Long-term debt, net

115,000

75,000

Other long-term liabilities

17,190

16,302

Long-term portion of operating lease liabilities

29,288

31,820

Deferred income tax liabilities, net

159,475

149,500

Total long-term liabilities

320,953

272,622

Total liabilities

369,701

318,515

Stockholders’ equity:

Common stock, $0.001 par value (675,000,000 shares authorized and 73,548,557 and 72,459,255 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively)

74

72

Additional paid-in capital

923,511

850,430

Retained earnings

67,891

54,571

Total stockholders’ equity

991,476

905,073

Total liabilities and stockholders’ equity

$

1,361,177

$

1,223,588

Three Months Ended

September 30,

Nine Months Ended

September 30,

2021

2020

2021

2020

Revenue:

Asset-based revenue

$

134,152

$

103,808

$

374,655

$

304,170

Subscription-based revenue

3,172

—

3,172

—

Spread-based revenue

1,235

2,628

6,513

14,128

Other revenue

1,108

702

2,375

2,861

Total revenue

139,667

107,138

386,715

321,159

Operating expenses:

Asset-based expenses

38,697

33,431

110,609

98,530

Spread-based expenses

(484

)

436

1,060

2,158

Employee compensation

44,051

42,802

150,800

131,663

General and operating expenses

18,794

15,947

52,599

48,695

Professional fees

5,071

3,636

14,349

10,627

Depreciation and amortization

10,648

8,670

29,849

25,826

Total operating expenses

116,777

104,922

359,266

317,499

Interest expense

1,061

1,344

2,606

4,445

Other income (expense), net

119

(15

)

82

(4

)

Income (loss) before income taxes

21,710

887

24,761

(781

)

Provision for (benefit from) income taxes

9,460

(7,710

)

11,441

(2,834

)

Net income

12,250

8,597

13,320

2,053

Net comprehensive income

$

12,250

$

8,597

$

13,320

$

2,053

Net income per share attributable to common

   stockholders:

Basic

$

0.17

$

0.13

$

0.19

$

0.03

Diluted

0.17

0.12

0.19

0.03

Weighted average number of common shares

   outstanding, basic

72,921,794

67,282,040

71,764,582

67,211,341

Weighted average number of common shares

   outstanding, diluted

73,566,777

70,068,690

71,940,398

69,695,817

Nine Months Ended September 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

13,320

$

2,053

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

29,849

25,826

Interest

540

456

Deferred income taxes

226

593

Share-based compensation

48,079

40,041

Impairment of right-of-use assets and property, plant, and equipment

—

2,381

Changes in certain assets and liabilities:

Fees and other receivables, net

(594

)

2,853

Receivables from related party

(91

)

(42

)

Prepaid expenses and other current assets

4,866

4,796

Accounts payable, accrued liabilities and other current liabilities

14

(13,160

)

Income tax receivable, net

(2,308

)

(11,398

)

Net cash provided by operating activities

93,901

54,399

CASH FLOWS FROM INVESTING ACTIVITIES

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

—

(18,561

)

Purchase of Voyant, Inc., net of cash received

(124,236

)

—

Purchase of investments

(2,435

)

(1,896

)

Sale of investments

173

12

Purchase of property and equipment

(652

)

(2,288

)

Purchase of computer software

(26,016

)

(18,750

)

Net cash used in investing activities

(153,166

)

(41,483

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from credit facility draw down

75,000

—

Payments on credit facility

(35,000

)

—

Proceeds from exercise of stock options

94

187

Net cash provided by financing activities

40,094

187

Net change in cash, cash equivalents, and restricted cash

(19,171

)

13,103

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

81,619

105,341

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

$

62,448

$

118,444

SUPPLEMENTAL CASH FLOW INFORMATION

Income taxes paid

$

15,977

$

8,807

Interest paid

1,870

3,985

Non-cash operating activities:

Non-cash changes to right-of-use assets

(1,176

)

38,734

Non-cash changes to lease liabilities

(1,176

)

40,078

Common stock issued in acquisition of business

24,910

-

•

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.

•

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 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.

Three Months Ended

September 30,

Three Months Ended

September 30,

(in thousands except for percentages)

2021

2020

2021

2020

Net income

$

12,250

$

8,597

8.8

%

8.0

%

Provision for (benefit from) income taxes

9,460

(7,710

)

6.8

%

(7.2

)%

Interest income

(18

)

(111

)

—

(0.1

)%

Interest expense

1,061

1,344

0.8

%

1.3

%

Amortization/depreciation

10,648

8,670

7.6

%

8.1

%

EBITDA

33,401

10,790

24.0

%

10.1

%

Share-based compensation⁽¹⁾

7,974

12,919

5.7

%

12.1

%

Reorganization and integration costs⁽²⁾

2,315

101

1.7

%

0.1

%

Acquisition expenses⁽³⁾

948

3,014

0.7

%

2.8

%

Business continuity plan⁽⁴⁾

4

42

—

—

Office closures⁽⁵⁾

—

2,479

—

2.3

%

Unrealized loss (gain) in investments

119

(15

)

0.1

%

—

Adjusted EBITDA

$

44,761

$

29,330

32.2

%

27.4

%

Nine Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands except for percentages)

2021

2020

2021

2020

Net income

$

13,320

$

2,053

3.4

%

0.6

%

Provision for (benefit from) income taxes

11,441

(2,834

)

3.0

%

(0.9

)%

Interest income

(116

)

(842

)

—

(0.3

)%

Interest expense

2,606

4,445

0.7

%

1.4

%

Amortization/depreciation

29,849

25,826

7.7

%

8.1

%

EBITDA

57,100

28,648

14.8

%

8.9

%

Share-based compensation⁽¹⁾

48,079

40,041

12.4

%

12.5

%

Reorganization and integration costs⁽²⁾

8,094

248

2.1

%

0.1

%

Acquisition expenses⁽³⁾

5,236

10,239

1.4

%

3.2

%

Business continuity plan⁽⁴⁾

136

1,383

—

0.4

%

Office closures⁽⁵⁾

167

2,479

—

0.8

%

Unrealized loss (gain) in investments

82

(4

)

—

—

Adjusted EBITDA

$

118,894

$

83,034

30.7

%

25.9

%

(1)

“Share-based compensation” represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our former parent company, and RSA, restricted stock unit, stock option, and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.

(2)

“Reorganization and integration costs” includes costs related to the departure of our former chief executive officer in March 2021, our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.

(3)

“Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.

(4)

“Business continuity plan” includes incremental compensation and other costs that are directly related to operations while transitioning to a remote workforce and other costs due to the COVID-19 pandemic.

(5)

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

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020

(in thousands)

Compensation

Non-

Compensation

Total

Compensation

Non-

Compensation

Total

Share-based compensation⁽¹⁾

$

7,974

$

—

$

7,974

$

12,919

$

—

$

12,919

Reorganization and integration costs⁽²⁾

1,484

831

2,315

101

—

101

Acquisition expenses⁽³⁾

178

770

948

1,409

1,605

3,014

Business continuity plan⁽⁴⁾

—

4

4

—

42

42

Office closures⁽⁵⁾

—

—

—

—

2,479

2,479

Unrealized loss (gain) in investments

—

119

119

—

(15

)

(15

)

Total adjustments to adjusted EBITDA

$

9,636

$

1,724

$

11,360

$

14,429

$

4,111

$

18,540

Three Months Ended September 30, 2021

Three Months Ended September 30, 2020

(in percentages)

Compensation

Non-

Compensation

Total

Compensation

Non-

Compensation

Total

Share-based compensation⁽¹⁾

5.7

%

—

5.7

%

12.1

%

—

12.1

%

Reorganization and integration costs⁽²⁾

1.1

%

0.6

%

1.7

%

0.1

%

—

0.1

%

Acquisition expenses⁽³⁾

0.1

%

0.5

%

0.6

%

1.3

%

1.5

%

2.8

%

Business continuity plan⁽⁴⁾

—

—

—

—

—

—

Office closures⁽⁵⁾

—

—

—

—

2.3

%

2.3

%

Unrealized loss (gain) in investments

—

—

—

—

—

—

Total adjustments to adjusted EBITDA margin %

6.9

%

1.1

%

8.0

%

13.5

%

3.8

%

17.3

%

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

(in thousands)

Compensation

Non-

Compensation

Total

Compensation

Non-

Compensation

Total

Share-based compensation⁽¹⁾

$

48,079

$

—

$

48,079

$

40,041

$

—

$

40,041

Reorganization and integration costs⁽²⁾

4,417

3,677

8,094

250

(2

)

248

Acquisition expenses⁽³⁾

1,403

3,833

5,236

4,858

5,381

10,239

Business continuity plan⁽⁴⁾

12

124

136

1,082

301

1,383

Office closures⁽⁵⁾

—

167

167

—

2,479

2,479

Unrealized loss (gain) in investments

—

82

82

—

(4

)

(4

)

Total adjustments to adjusted EBITDA

$

53,911

$

7,883

$

61,794

$

46,231

$

8,155

$

54,386

Nine Months Ended September 30, 2021

Nine Months Ended September 30, 2020

(in percentages)

Compensation

Non-

Compensation

Total

Compensation

Non-

Compensation

Total

Share-based compensation⁽¹⁾

12.4

%

—

12.4

%

12.5

%

—

12.5

%

Reorganization and integration costs⁽²⁾

1.1

%

1.0

%

2.1

%

0.1

%

—

0.1

%

Acquisition expenses⁽³⁾

0.4

%

1.0

%

1.4

%

1.5

%

1.7

%

3.2

%

Business continuity plan⁽⁴⁾

—

—

—

0.3

%

0.1

%

0.4

%

Office closures⁽⁵⁾

—

—

—

—

0.8

%

0.8

%

Unrealized loss (gain) in investments

—

—

—

—

—

—

Total adjustments to adjusted EBITDA margin %

13.9

%

2.0

%

15.9

%

14.4

%

2.6

%

17.0

%

(1)

“Share-based compensation” represents granted share-based compensation in the form of Class C Common Units (which are incentive units) of AssetMark Holdings LLC, our former parent company, and RSA, restricted stock unit, stock option, and stock appreciation right grants by us to certain of our directors and employees. Although this expense occurred in each measurement period, we have added the expense back in our calculation of adjusted EBITDA because of its noncash impact.

(2)

“Reorganization and integration costs” includes costs related to the departure of our former chief executive officer in March 2021, our functional reorganization within our Operations, Technology and Retirement functions as well as duplicate costs related to the outsourcing of back-office operations functions. While we have incurred such expenses in all periods measured, these expenses serve varied reorganization and integration initiatives, each of which is non-recurring. We do not consider these expenses to be part of our core operations.

(3)

“Acquisition expenses” includes employee severance, transition and retention expenses, duplicative general and administrative expenses and other professional fees related to acquisitions.

(4)

“Business continuity plan” includes incremental compensation and other costs that are directly related to operations while transitioning to a remote workforce and other costs due to the COVID-19 pandemic.

(5)

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

•

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 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.

Non-GAAP Presentation

Three months ended

September 30,

Nine months ended

September 30,

(in thousands)

2021

2020

2021

2020

Revenue:

Asset-based revenue

$

134,152

$

103,808

$

374,655

$

304,170

Subscription-based revenue

3,172

—

3,172

—

Spread-based revenue

1,235

2,628

6,513

14,128

Other revenue

1,108

702

2,375

2,861

Total revenue

139,667

107,138

386,715

321,159

Adjusted operating expenses:

Asset-based expenses

38,697

33,431

110,609

98,530

Spread-based expenses

(484

)

436

1,060

2,158

Adjusted employee compensation ⁽¹⁾

34,415

28,373

96,889

85,432

Adjusted general and operating expenses ⁽¹⁾

17,712

12,107

46,198

41,483

Adjusted professional fees ⁽¹⁾

4,548

3,350

12,949

9,680

Adjusted depreciation and amortization ⁽²⁾

4,679

3,562

13,664

10,502

Total adjusted operating expenses

99,567

81,259

281,369

247,785

Interest expense

1,061

1,344

2,606

4,445

Adjusted other expense, net ⁽¹⁾

—

—

—

—

Adjusted income before income taxes

39,039

24,535

102,740

68,929

Adjusted provision for income taxes ⁽³⁾

9,174

6,379

24,143

17,921

Adjusted net income

$

29,865

$

18,156

$

78,597

$

51,008

Adjusted earnings per share

$

0.40

$

0.25

$

1.07

$

0.70

Adjusted number of common shares outstanding,

     diluted ⁽⁴⁾

74,687,043

72,798,865

73,680,825

72,633,854

Adjusted EBITDA ⁽⁵⁾

$

44,761

$

29,330

$

118,894

$

83,034

(1)

Consists of the adjustments to EBITDA listed in the adjusted EBITDA reconciliation table above.

(2)

Relates to intangible assets established in connection with HTSC’s acquisition of our Company in 2016.

(3)

Consists of the provision for income taxes under US GAAP and the estimated tax impact of expense adjustments and acquisition-related amortization.

(4)

Consists of the outstanding shares at period-end and the full dilutive impact of unvested equity awards which includes restricted stock awards, restricted stock units, stock options and stock appreciation rights.

(5)

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 in the ‘Adjusted EBITDA and Adjusted EBITDA Margin’ section above.

Reconciliation of Non-GAAP Presentation.

Three months ended

September 30, 2021

Three months ended

September 30, 2020

(in thousands)

GAAP

Adjustments

Adjusted

GAAP

Adjustments

Adjusted

Revenue:

Asset-based revenue

$

134,152

$

—

$

134,152

$

103,808

$

—

$

103,808

Subscription-based revenue

3,172

—

3,172

—

—

—

Spread-based revenue

1,235

—

1,235

2,628

—

2,628

Other revenue

1,108

—

1,108

702

—

702

Total revenue

139,667

—

139,667

107,138

—

107,138

Operating expenses: