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Form 10-Q AssetMark Financial Hold For: Jun 30

August 8, 2022 4:34 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One) 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

 

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to

 

Commission File Number: 001-38980

 

ASSETMARK FINANCIAL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

 

 

30-0774039

(I.R.S. Employer

Identification Number)

 

 

 

 

 

 

 

1655 Grant Street, 10th Floor

Concord, California 94520

(Address of principal executive offices)

 

 

 

 

 

 

 

 

 

(925) 521-2200

(Registrant’s telephone number, including area code)

 

 

 

 

 

 

 

 

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

AMK

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  

As of July 31, 2022, the number of shares of the registrant’s common stock outstanding was 73,844,811.

 

 

 

 


 

ASSETMARK FINANCIAL HOLDINGS, INC.

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page No.

 

Special Note Regarding Forward-Looking Statements

2

 

Summary of Risk Factors

3

 

 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited)

4

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

4

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021

5

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021

6

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021

7

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

35

 

 

 

 

PART II.  OTHER INFORMATION

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 3.

Defaults Upon Senior Securities

56

Item 4.

Mine Safety Disclosures

57

Item 5.

Other Information

57

Item 6.

Exhibits

58

 

Signatures

59

 

 

 

1


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. For example, statements in this Form 10-Q regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “would,” “could,” “should,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of these terms and other comparable terminology that conveys uncertainty of future events or outcomes. In addition, any statements that refer to projections of our future financial performance and financial results; our anticipated growth strategies and anticipated trends in our business; our expectations regarding our industry outlook, market position, liquidity and capital resources, addressable market, investments in new products, services and capabilities; our ability to execute on strategic transactions; our ability to comply with existing, modified and new laws and regulations applying to our business; the impacts of the COVID-19 pandemic on our operations; demand from our customers and end investors; and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions based on our current expectations and projections about future events and are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and are subject to risks, uncertainties and assumptions, including those identified under “Item 1A. Risk Factors,” any of which could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. While we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. We are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations, except as required by law. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements as predictions of future events.

 

2


 

SUMMARY OF RISK FACTORS

Our business is subject to numerous risks and uncertainties, any one of which could materially adversely affect our results of operations, financial condition or business. These risks include, but are not limited to, those listed below. This list is not complete, and should be read together with the section titled “Risk Factors” in this Quarterly Report on Form 10-Q, as well as the other information in this Quarterly Report on Form 10-Q and the other filings that we make with the U.S. Securities and Exchange Commission (the “SEC”).

 

 

Our revenue may fluctuate from period to period, which could cause our share price to fluctuate.

 

 

We operate in an intensely competitive industry, with many firms competing for business from financial advisers on the basis of the quality and breadth of investment solutions and services, ability to innovate, reputation and the prices of services, among other factors, and this competition could hurt our financial performance.

 

 

We derive nearly all of our revenue from the delivery of investment solutions and services to clients in the financial advisory industry and our revenue could suffer if that industry experiences a downturn.

 

 

Investors that pay us asset-based fees may seek to negotiate lower fees, choose to use lower-revenue products or cease using our services, which could limit the growth of our revenue or cause our revenue to decrease.

 

 

Investors may redeem or withdraw their investment assets generally at any time. Significant changes in investing patterns or large-scale withdrawal of investment funds could have a material adverse effect on our results of operations, financial condition or business.

 

 

Changes in market and economic conditions (including as a result of the ongoing COVID-19 pandemic, or geopolitical conditions or events) could lower the value of assets on which we earn revenue and could decrease the demand for our investment solutions and services.

 

We may be subject to liability for losses that result from a breach of our or a third party’s fiduciary duties.

 

We are exposed to data and cybersecurity risks that could result in data breaches, service interruptions, harm to our reputation, protracted and costly litigation or significant liability.

 

 

Our controlling stockholder is subject to supervision by regulatory authorities in the People’s Republic of China (“PRC”) and must comply with certain PRC laws and regulations that may influence our controlling stockholder’s decisions relating to our business.

 

 

We are subject to extensive government regulation in the United States, and our failure or inability to comply with these regulations or regulatory action against us could adversely affect our results of operations, financial condition or business.

 

 

Failure to properly disclose conflicts of interest could harm our reputation, results of operations or business.

 

 

Control by our principal stockholder could adversely affect our other stockholders.

3


 

PART I.  FINANCIAL INFORMATION

Item 1. Financial Statements.

AssetMark Financial Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands except share data and par value)

 

 

 

June 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

116,537

 

 

$

76,707

 

Restricted cash

 

 

13,000

 

 

 

13,000

 

Investments, at fair value

 

 

13,225

 

 

 

14,498

 

Fees and other receivables, net

 

 

12,497

 

 

 

9,019

 

Income tax receivable, net

 

 

7,630

 

 

 

6,276

 

Prepaid expenses and other current assets

 

 

13,252

 

 

 

14,673

 

Total current assets

 

 

176,141

 

 

 

134,173

 

Property, plant and equipment, net

 

 

7,916

 

 

 

8,015

 

Capitalized software, net

 

 

81,364

 

 

 

73,701

 

Other intangible assets, net

 

 

705,351

 

 

 

709,693

 

Operating lease right-of-use assets

 

 

22,576

 

 

 

22,469

 

Goodwill

 

 

437,154

 

 

 

436,821

 

Other assets

 

 

3,103

 

 

 

2,090

 

Total assets

 

$

1,433,605

 

 

$

1,386,962

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,246

 

 

$

2,613

 

Accrued liabilities and other current liabilities

 

 

50,313

 

 

 

56,249

 

Total current liabilities

 

 

52,559

 

 

 

58,862

 

Long-term debt, net

 

 

115,203

 

 

 

115,000

 

Other long-term liabilities

 

 

15,100

 

 

 

16,468

 

Long-term portion of operating lease liabilities

 

 

28,368

 

 

 

28,316

 

Deferred income tax liabilities, net

 

 

159,257

 

 

 

158,930

 

Total long-term liabilities

 

 

317,928

 

 

 

318,714

 

Total liabilities

 

 

370,487

 

 

 

377,576

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.001 par value (675,000,000 shares authorized and 73,745,114 and 73,562,717 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively)

 

 

74

 

 

 

74

 

Additional paid-in capital

 

 

935,243

 

 

 

929,070

 

Retained earnings

 

 

127,801

 

 

 

80,242

 

Total stockholders’ equity

 

 

1,063,118

 

 

 

1,009,386

 

Total liabilities and stockholders’ equity

 

$

1,433,605

 

 

$

1,386,962

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

4


AssetMark Financial Holdings, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based revenue

 

$

139,249

 

 

$

124,690

 

 

$

281,325

 

 

$

240,503

 

Spread-based revenue

 

 

7,150

 

 

 

2,672

 

 

 

9,105

 

 

 

5,278

 

Subscription-based revenue

 

 

3,259

 

 

 

 

 

 

6,577

 

 

 

 

Other revenue

 

 

1,549

 

 

 

680

 

 

 

2,503

 

 

 

1,267

 

Total revenue

 

 

151,207

 

 

 

128,042

 

 

 

299,510

 

 

 

247,048

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset-based expenses

 

 

40,266

 

 

 

35,818

 

 

 

81,953

 

 

 

71,912

 

Spread-based expenses

 

 

641

 

 

 

868

 

 

 

1,046

 

 

 

1,544

 

Employee compensation

 

 

39,973

 

 

 

39,447

 

 

 

80,263

 

 

 

106,749

 

General and operating expenses

 

 

22,223

 

 

 

16,316

 

 

 

44,282

 

 

 

33,805

 

Professional fees

 

 

5,494

 

 

 

5,018

 

 

 

11,227

 

 

 

9,278

 

Depreciation and amortization

 

 

7,711

 

 

 

9,730

 

 

 

15,180

 

 

 

19,201

 

Total operating expenses

 

 

116,308

 

 

 

107,197

 

 

 

233,951

 

 

 

242,489

 

Interest expense

 

 

1,488

 

 

 

774

 

 

 

2,647

 

 

 

1,545

 

Other expenses, net

 

 

78

 

 

 

(22

)

 

 

206

 

 

 

(37

)

Income before income taxes

 

 

33,333

 

 

 

20,093

 

 

 

62,706

 

 

 

3,051

 

Provision for income taxes

 

 

7,993

 

 

 

10,107

 

 

 

15,147

 

 

 

1,981

 

Net income

 

 

25,340

 

 

 

9,986

 

 

 

47,559

 

 

 

1,070

 

Net comprehensive income

 

$

25,340

 

 

$

9,986

 

 

$

47,559

 

 

$

1,070

 

Net income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.14

 

 

$

0.65

 

 

$

0.02

 

Diluted

 

$

0.34

 

 

$

0.14

 

 

$

0.65

 

 

$

0.02

 

Weighted average number of common shares outstanding,

     basic

 

 

73,631,588

 

 

 

71,922,179

 

 

 

73,601,852

 

 

 

71,176,386

 

Weighted average number of common shares outstanding,

     diluted

 

 

73,692,278

 

 

 

72,155,068

 

 

 

73,651,172

 

 

 

71,231,337

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

5


AssetMark Financial Holdings, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands except share data)

 

For the three months ended June 30, 2022 and 2021

 

 

Common stock

 

 

Additional

paid-in

 

 

Retained

 

 

Total

stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

equity

 

Balance at March 31, 2021

 

 

72,459,255

 

 

$

72

 

 

$

883,858

 

 

$

45,655

 

 

$

929,585

 

Net income

 

 

 

 

 

 

 

 

 

 

 

9,986

 

 

 

9,986

 

Share-based compensation

 

 

 

 

 

 

 

 

6,676

 

 

 

 

 

 

6,676

 

Issuance of common stock - vesting of restricted stock units

 

 

81,409

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Balance at June 30, 2021

 

 

72,540,664

 

 

$

73

 

 

$

890,534

 

 

$

55,641

 

 

$

946,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2022

 

 

73,594,027

 

 

$

74

 

 

$

932,212

 

 

$

102,461

 

 

$

1,034,747

 

Net income

 

 

 

 

 

 

 

 

 

 

 

25,340

 

 

 

25,340

 

Share-based compensation

 

 

 

 

 

 

 

 

3,031

 

 

 

 

 

 

3,031

 

Issuance of common stock - vesting of restricted stock units

 

 

151,087

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

73,745,114

 

 

$

74

 

 

$

935,243

 

 

$

127,801

 

 

$

1,063,118

 

 

 

 

For the six months ended June 30, 2022 and 2021

 

 

Common stock

 

 

Additional

paid-in

 

 

Retained

 

 

Total

stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

earnings

 

 

equity

 

Balance at December 31, 2020

 

 

72,459,255

 

 

$

72

 

 

$

850,430

 

 

$

54,571

 

 

$

905,073

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,070

 

 

 

1,070

 

Share-based compensation

 

 

 

 

 

 

 

 

40,104

 

 

 

 

 

 

40,104

 

Issuance of common stock - vesting of restricted stock units

 

 

81,409

 

 

 

1

 

 

 

 

 

 

 

 

 

1

 

Balance at June 30, 2021

 

 

72,540,664

 

 

$

73

 

 

$

890,534

 

 

$

55,641

 

 

$

946,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

73,562,717

 

 

$

74

 

 

$

929,070

 

 

$

80,242

 

 

$

1,009,386

 

Net income

 

 

 

 

 

 

 

 

 

 

 

47,559

 

 

 

47,559

 

Share-based compensation

 

 

 

 

 

 

 

 

6,173

 

 

 

 

 

 

6,173

 

Issuance of common stock - vesting of restricted stock units

 

 

182,176

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

221

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

73,745,114

 

 

$

74

 

 

$

935,243

 

 

$

127,801

 

 

$

1,063,118

 

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

6


 

AssetMark Financial Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income

 

$

47,559

 

 

$

1,070

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

15,180

 

 

 

19,201

 

Interest

 

 

407

 

 

 

370

 

Deferred income taxes

 

 

 

 

 

226

 

Share-based compensation

 

 

6,173

 

 

 

40,104

 

Debt acquisition write-down

 

 

130

 

 

 

 

Changes in certain assets and liabilities:

 

 

 

 

 

 

 

 

Fees and other receivables, net

 

 

(3,145

)

 

 

47

 

Receivables from related party

 

 

(333

)

 

 

(43

)

Prepaid expenses and other current assets

 

 

3,887

 

 

 

1,913

 

Accounts payable, accrued liabilities and other current liabilities

 

 

(13,236

)

 

 

(5,220

)

Income tax receivable and payable, net

 

 

(1,354

)

 

 

(4,383

)

Net cash provided by operating activities

 

 

55,268

 

 

 

53,285

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchase of investments

 

 

(1,780

)

 

 

(1,927

)

Sale of investments

 

 

361

 

 

 

174

 

Purchase of property and equipment

 

 

(1,222

)

 

 

(421

)

Purchase of computer software

 

 

(17,180

)

 

 

(16,974

)

Net cash used in investing activities

 

 

(19,821

)

 

 

(19,148

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from revolving credit facility draw down

 

 

 

 

 

75,000

 

Proceeds from issuance of long-term debt, net

 

 

122,508

 

 

 

 

Payments on revolving credit facility

 

 

(115,000

)

 

 

 

Payments on term loan

 

 

(3,125

)

 

 

 

Net cash provided by financing activities

 

 

4,383

 

 

 

75,000

 

Net change in cash, cash equivalents, and restricted cash

 

 

39,830

 

 

 

109,137

 

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

 

 

89,707

 

 

 

81,619

 

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

 

$

129,537

 

 

$

190,756

 

SUPPLEMENTAL CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

Income taxes paid

 

$

16,905

 

 

$

7,672

 

Interest paid

 

$

1,376

 

 

$

985

 

Non-cash operating activities:

 

 

 

 

 

 

 

 

Non-cash changes to right-of-use assets

 

$

2,161

 

 

$

(2,140

)

Non-cash changes to lease liabilities

 

$

2,161

 

 

$

(2,140

)

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

7


 

AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

All dollar amounts presented are in thousands other than per share amounts for all notes.

Note 1. Overview

Organization and Nature of Business

These unaudited condensed consolidated financial statements include AssetMark Financial Holdings, Inc. (“AFHI” or the “Company”) and its subsidiaries. AFHI is the parent company of AssetMark, Inc., AssetMark Trust Company, AssetMark Brokerage, LLC, AssetMark Retirement Services, Inc., Global Financial Private Capital, Inc., Global Financial Advisory, LLC, Voyant, Inc., Voyant UK Limited, Voyant Financial Technologies Inc. and Voyant Australia Pty Ltd (collectively, the “Company”). We completed an internal restructuring on January 1, 2022, whereby AssetMark Financial, Inc. (formerly a direct, wholly owned subsidiary of AFHI) merged with and into AFHI, at which time AFHI automatically became the direct parent company of AssetMark, Inc., AssetMark Trust Company, AssetMark Brokerage, LLC, AssetMark Retirement Services, Inc., Global Financial Private Capital, Inc., Global Financial Advisory, LLC, Voyant, Inc., Voyant UK Limited, Voyant Financial Technologies Inc. and Voyant Australia Pty Ltd.

The Company offers a broad array of wealth management solutions to individual investors through financial advisers by providing an open-architecture product platform along with tailored client advice, asset allocation options, practice management, support services and technology to the financial adviser channel. The following is a description of the products and services offered by our primary operating subsidiaries.

AssetMark, Inc. (“AMI”) is a registered investment adviser that was incorporated under the laws of the State of California on May 13, 1999. AMI offers a broad array of wealth management solutions to individual investors through financial advisers by providing an open-architecture product platform along with tailored client advice, asset allocation options, practice management, support services and technology solutions to the financial adviser channel. AMI serves as investment adviser to the Company’s proprietary GuideMark Funds, GuidePath Funds and the Savos Dynamic Hedging Fund, each of which is a mutual fund offered to clients of financial advisers.

AssetMark Trust Company (“ATC”) is a licensed trust company and was incorporated under the laws of the State of Arizona on August 24, 1994. ATC is regulated by the Arizona Department of Insurance and Financial Institutions. ATC provides custodial recordkeeping services primarily to investor clients of registered investment advisers (including AMI) located throughout the United States.

AssetMark Brokerage, LLC (“AMB”) is a limited-purpose broker-dealer located in Concord, California and was incorporated under the laws of the State of Delaware on September 25, 2013. AMB’s primary function is to distribute the mutual funds of the Company and to sponsor the Financial Industry Regulatory Authority licensing of those AssetMark associates who provide distribution support through promotion of the AssetMark programs and strategies that employ the Company’s mutual funds.

Voyant, Inc. (“Voyant”) is a SaaS-based financial planning, wellness and client digital engagement solutions company that was originally formed in Texas on December 29, 2005 and was converted to a Delaware corporation on November 21, 2008.

Note 2. Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation have been included. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ended December 31, 2022 or any future period. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited condensed consolidated financial statements and related notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

8

 


AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Risks and Uncertainties

The COVID-19 pandemic continues to evolve and has adversely impacted global commercial activities. Management expects COVID-19 related changes in market and investor behaviors to continue to impact our asset- and spread-based revenue. However, given the uncertainty around the duration and extent of the COVID-19 pandemic, management cannot predict the impact on the Company’s results of operations, financial condition or liquidity in subsequent periods.

Estimates and assumptions about future events and their effects on the Company cannot be determined with certainty and therefore require the exercise of judgment. The Company is not aware of any specific events or circumstances that would require the Company to update its estimates, assumptions or judgments or revise the carrying value of its assets or liabilities. The Company will update the estimates and assumptions underlying the condensed consolidated financial statements in future periods as events and circumstances develop.

Geographic Sources of Revenue

Revenues attributable to customers outside of the United States totaled $3,632 and $7,163 in the three months and six months ended June 30, 2022, respectively. There were no revenues attributable to customers outside of the United States for the three months and six months ended June 30, 2021.

 

Recent Accounting Pronouncements – Not Yet Adopted

In August 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this Update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The guidance is effective for the Company beginning in the fiscal year ending December 31, 2023 and will be applied prospectively upon adoption.

 

Note 3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

 

 

 

June 30, 2022

 

 

December 31, 2021

 

Prepaid expenses

 

$

8,057

 

 

$

9,355

 

Operating lease right-of-use assets

 

 

4,199

 

 

 

4,198

 

Other

 

 

996

 

 

 

1,120

 

Total

 

$

13,252

 

 

$

14,673

 

 

Note 4. Business Combinations

 

Acquisition of Voyant, Inc.

On July 1, 2021, the Company completed its acquisition of Voyant, Inc. The Company used the preliminary estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. During the three months ended June 30, 2022, the company finalized its acquisition accounting, resulting in an adjustment to goodwill of $333.

 

Acquisition of Adhesion Wealth Advisor Solutions, Inc.

On June 13, 2022, the Company entered into an agreement to acquire Adhesion Wealth Advisor Solutions, Inc. The transaction is subject to customary closing conditions, including regulatory approval.

 

Note 5. Goodwill and Other Intangible Assets

Goodwill

9


AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

The Company’s goodwill balance was $437,154 and $436,821 as of June 30, 2022 and December 31, 2021, respectively. The Company performed an annual test for goodwill impairment in December for the years ended December 31, 2021 and 2020 and determined that goodwill was not impaired. The Company performed a qualitative analysis of factors and determined that goodwill was not impaired as of June 30, 2022.

Other Intangible Assets

Information regarding the Company’s intangible assets is as follows:

 

June 30, 2022

 

Gross carrying

amount

 

 

Accumulated

amortization

 

 

Net carrying

amount

 

 

Estimated remaining useful life

Indefinite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Broker-dealer relationships

 

$

570,480

 

 

$

 

 

$

570,480

 

 

 

Voyant enterprise distribution channel customer

     relationships

 

 

32,100

 

 

 

 

 

 

32,100

 

 

 

Definite-lived intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

 

45,830

 

 

 

(12,985

)

 

 

32,845

 

 

14 years

Broker-dealer license

 

 

11,550

 

 

 

(3,273

)

 

 

8,277

 

 

14 years

ATC regulatory status

 

 

23,300

 

 

 

(6,602

)

 

 

16,698

 

 

14 years

Voyant non-enterprise distribution channel

     customer relationships

 

 

9,500

 

 

 

(