AssetMark Reports $100.8B Platform Assets for Second Quarter 2023

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

%

(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.Adjusted Net Income

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

non-cash equity grants made to employees at a certain price and point in time do not necessarily reflect how our business is performing at any particular time; as such, share-based compensation expense is not a key measure of our operating performance;

costs associated with acquisitions and related integrations, restructuring and conversions can vary from period to period and transaction to transaction; as such, expenses associated with these activities are not considered a key measure of our operating performance; and

amortization expense can vary substantially from company to company and from period to period depending upon each company’s financing and accounting methods, the fair value and average expected life of acquired intangible assets and the method by which assets were acquired; as such, the amortization of intangible assets obtained in acquisitions is not considered a key measure of our operating performance.

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

adjusted net income does not reflect all cash expenditures, future requirements for capital expenditures or contractual commitments;

adjusted net income does not reflect changes in, or cash requirements for, working capital needs; and

other companies in the financial services industry may calculate adjusted net income differently than we do, limiting its usefulness as a comparative measure.

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 EndedJune 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

(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 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

(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.Contacts Investors:Taylor J. Hamilton, CFAHead of Investor [email protected]

Media: Alaina KleinmanHead of PR & [email protected]

SOURCE: AssetMark Financial Holdings, Inc.

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