AssetMark Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

10-Q 1 amk-10q_20200930.htm 10-Q amk-10q_20200930.htm

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 September 30, 2020


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, 10^th 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 October 31, 2020, the number of shares of the registrant’s common stock outstanding was 72,449,255.

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 September 30, 2020 and December 31, 2019	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019	5
	Condensed Consolidated Statements of Stockholder’s Equity for the Three and Nine Months Ended September 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59
	Signatures	60

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, including statements 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,” “should,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology that conveys uncertainty of future events or outcomes. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include 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, acquisition targets, addressable market, investments in new products, services and capabilities, our ability to close and execute on strategic transactions, our ability to comply with existing, modified and new laws and regulations applying to our business, and the impacts of the COVID-19 pandemic on our operations, demand from our customers and end investors and our operating results. These statements are only predictions based on our current expectations and projections about future events. There are important factors that 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, including those factors discussed in section titled “Risk Factors.” Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. 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. In addition, “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and 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. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements as predictions of future events.

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 SEC.

•

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

•

We operate in an intensely competitive industry, and this competition could hurt our financial performance.

•

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

•

Our clients that pay us an asset-based fee may seek to negotiate a lower fee percentage, 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 business.

•

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

•

We are exposed to data and cyber-security 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.

•

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

•

We may be subject to liability for losses that result from a breach of our fiduciary duties.

•

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

AssetMark Financial Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands except share data and par value)

	September 30, 2020		December 31, 2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	109,319	$	96,341
Restricted cash		9,125		9,000
Investments, at fair value		9,047		7,275
Fees and other receivables, net		7,462		9,679
Income tax receivable, net		15,392		3,994
Other current assets		10,012		6,565
Total current assets		160,357		132,854
Property, plant and equipment, net		7,436		7,067
Capitalized software, net		68,672		69,814
Other intangible assets, net		657,187		651,915
Operating lease right-of-use assets		28,509		—
Goodwill		338,848		327,310
Total assets	$	1,261,009	$	1,188,960
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	929	$	967
Accrued liabilities and other current liabilities		37,815		40,610
Total current liabilities		38,744		41,577
Long-term debt, net		121,934		121,692
Other long-term liabilities		15,556		16,440
Long-term portion of operating lease liabilities		32,838		—
Deferred income tax liabilities, net		150,795		150,390
Total long-term liabilities		321,123		288,522
Total liabilities		359,867		330,099
Commitments and contingencies		—		—
Stockholders’ equity:
Common stock, $0.001 par value (675,000,000 shares authorized and 72,449,255 and 72,390,080 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively)		72		72
Additional paid-in capital		836,634		796,406
Retained earnings		64,436		62,383
Total stockholders’ equity		901,142		858,861
Total liabilities and stockholders’ equity	$	1,261,009	$	1,188,960

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

AssetMark Financial Holdings, Inc.

Unaudited Condensed Consolidated Statements of Comprehensive Income

(in thousands except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue:
Asset-based revenue	$	103,808		$	99,211		$	304,170		$	276,547
Spread-based revenue		2,628			9,638			14,128			25,997
Other revenue		702			1,282			2,861			4,384
Total revenue		107,138			110,131			321,159			306,928
Expenses:
Asset-based expenses		33,431			33,532			98,530			93,259
Spread-based expenses		436			1,556			2,158			3,629
Employee compensation		42,802			42,054			131,663			109,428
General and operating expenses		15,947			16,028			48,695			41,455
Professional fees		3,636			3,723			10,627			10,578
Depreciation and amortization		8,670			7,523			25,826			22,032
Total expenses		104,922			104,416			317,499			280,381
Interest expense		1,344			2,512			4,445			10,567
Other (income) expense		(15	)		2,296			(4	)		2,296
Income (loss) before income taxes		887			907			(781	)		13,684
Provision for (benefit from) income taxes		(7,710	)		4,635			(2,834	)		11,364
Net income (loss)		8,597			(3,728	)		2,053			2,320
Unrealized gain on investments, net of tax		—			—			—			—
Net comprehensive income (loss)	$	8,597		$	(3,728	)	$	2,053		$	2,320
Net income (loss) per share attributable to common stockholders:
Basic		0.13			(0.05	)		0.03			0.03
Diluted		0.12			(0.05	)		0.03			0.03
Weighted average number of common shares outstanding, basic		67,282,040			69,275,000			67,211,341			69,275,000
Weighted average number of common shares outstanding, diluted		70,068,690			69,275,000			69,695,817			69,503,611

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

AssetMark Financial Holdings, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands except share data)

For the three months ended September 30, 2020 and 2019

	Common stock				Additional paid-in		Retained			Accumulated other comprehensive		Total stockholders’
	Shares		Amount		capital		earnings			income		equity
Balance at June 30, 2019		66,150,000	$	66	$	646,594	$	68,851		$	—	$	715,511
Net income (loss)		—		—		—		(3,728	)		—		(3,728	)
Share-based employee compensation		—		—		11,641		—			—		11,641
Initial public offering proceeds, net of expenses		6,250,000		6		124,204		—			—		124,210
Balance at September 30, 2019		72,400,000	$	72	$	782,439	$	65,123		$	—	$	847,634

Balance at June 30, 2020		72,390,080	$	72	$	823,528	$	55,839		$	—	$	879,439
Net income		—		—		—		8,597			—		8,597
Exercise of stock options		8,504		—		187		—			—		187
Issuance of common stock - vesting of restricted stock units		50,671		—		—		—			—		—
Share-based employee compensation		—		—		12,919		—			—		12,919
Balance at September 30, 2020		72,449,255	$	72	$	836,634	$	64,436		$	—	$	901,142

For the nine months ended September 30, 2020 and 2019

	Common stock				Additional paid-in		Retained			Accumulated other comprehensive			Total stockholders’
	Shares		Amount		capital		earnings			income			equity
Balance at December 31, 2018		66,150,000	$	66	$	635,096	$	63,846		$	3		$	699,011
Net income		—		—		—		2,320			—			2,320
Other comprehensive income (loss)		—		—		—		3			(3	)		—
2018 dividend reclassification		—		—		1,046		(1,046	)		—			—
Share-based employee compensation		—		—		22,093		—			—			22,093
Initial public offerings proceeds, net of expenses		6,250,000		6		124,204		—			—			124,210
Balance at September 30, 2019		72,400,000		72		782,439		65,123			—			847,634

Balance at December 31, 2019		72,390,080	$	72	$	796,406	$	62,383		$	—		$	858,861
Net income		—		—		—		2,053			—			2,053
Exercise of stock options		8,504		—		187		—			—			187
Issuance of common stock - vesting of restricted stock units		50,671		—		—		—			—			—
Share-based employee compensation		—		—		40,041		—			—			40,041
Balance at September 30, 2020		72,449,255	$	72	$	836,634	$	64,436		$	—		$	901,142

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

AssetMark Financial Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

	Nine Months Ended September 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,053		$	2,320
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization		25,826			22,032
Interest		456			478
Deferred income taxes		593			173
Share-based compensation		40,041			22,093
Impairment of right-of-use assets and property, plant, and equipment		2,381			—
Changes in certain assets and liabilities:
Fees and other receivables, net		2,853			(615	)
Receivables from related party		(42	)		(314	)
Other current assets		4,796			(1,461	)
Accounts payable, accrued expenses and other liabilities		(13,160	)		(10,972	)
Income tax receivable and payable		(11,398	)		(1,168	)
Net cash provided by operating activities		54,399			32,566
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Global Financial Private Capital, Inc.		—			(35,789	)
Purchase of WBI OBS Financial, Inc., net of cash received		(18,561	)		—
Purchase of investments		(1,896	)		(24	)
Sale of investments		12			—
Purchase of property and equipment		(2,288	)		(1,341	)
Purchase of computer software		(18,750	)		(14,990	)
Net cash used in investing activities		(41,483	)		(52,144	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options		187			—
Initial public offering proceeds		—			124,210
Payments on long-term debt		—			(126,250	)
Net cash (used in) provided by financing activities		187			(2,040	)
Net change in cash, cash equivalents, and restricted cash		13,103			(21,618	)
Cash, cash equivalents, and restricted cash at beginning of period		105,341			112,354
Cash, cash equivalents, and restricted cash at end of period	$	118,444		$	90,736
SUPPLEMENTAL CASH FLOW INFORMATION
Income taxes paid	$	8,807		$	11,783
Interest paid	$	3,985		$	10,076
Non-cash operating activities:
Non-cash changes to right-of-use assets	$	38,734		$	—
Non-cash changes to lease liabilities	$	40,078		$	—

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

AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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

Note 1. Organization and Nature of Business

These unaudited condensed consolidated financial statements include AssetMark Financial Holdings, Inc. and its subsidiaries, which include AssetMark Financial, Inc., which 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, WBI OBS Financial, Inc., OBS Holdings, Inc. and OBS Financial Services, Inc. (collectively, the “Company”).

The Company’s legal entity structure as of September 30, 2020 was as follows:

AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

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.

AssetMark Trust Company (“ATC”) is a licensed trust company incorporated under the laws of the State of Arizona on August 24, 1994 and 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, 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 Retirement Services, Inc. (“ARS”), formerly known as Aris Corporation of America, was incorporated under the laws of the State of Pennsylvania on April 30, 1974. ARS serves as the record-keeper and third-party administrator for the Aris Retirement product, which are 401(k) or 403(b) investment offerings utilized by small businesses.

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 FINRA licensing of those AssetMark associates who provide distribution support through promotion of the AssetMark programs and strategies that employ the Company’s mutual funds.

Global Financial Private Capital, Inc. (“GFPC”), formerly known as Global Financial Private Capital, LLC and renamed effective July 12, 2019, is a registered investment adviser that was incorporated under the laws of the State of Florida on June 7, 2004. GFPC provides a broad suite of integrated wealth management services for institutional and individual investors.

Global Financial Advisory, LLC (“GFA”) is an insurance services company that was incorporated under the laws of the State of Delaware on June 30, 2016. GFA provides insurance services on an intermediary basis and is not a policy writer.

WBI OBS Financial, Inc. (“OBL”), formerly known as WBI OBS Financial, LLC and renamed effective June 11, 2020, is a corporation that was incorporated under the laws of the State of Ohio on October 6, 2011. OBL is a holding company whose only assets are the share of common stock of OBS Holdings, Inc. (“OBF”). OBF is a corporation that was incorporated under the laws of the State of Ohio on April 14, 2000. OBF is a holding company whose only assets are the shares of common stock of OBS Financial Services, Inc. (“OBS”). OBS is a registered investment adviser that was incorporated under the laws of the State of Delaware on November 2, 2005. OBS provides a broad suite of integrated wealth management services for institutional and individual investors. See Note 3 for additional details on the acquisition completed February 29, 2020.

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 nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ended December 31, 2020 or any future period. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Certain prior year amounts in the Company’s Condensed Consolidated Statements of Comprehensive Income have been reclassified to conform to current year presentation. Specifically, amounts related to debt modification expense that were previously classified in general and operating expenses were reclassified to other expenses. There was no change to consolidated total revenue, net income or cash flows as a result of this change in classification.

Risks and Uncertainties

The COVID-19 pandemic continues to rapidly evolve and has adversely impacted global commercial activities. Management expects COVID-19 related changes in market and investor behaviors 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 the fourth quarter for 2020 and 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 and judgments or revise the carrying value of its assets or liabilities. The Company will update the estimates and assumptions underlying the consolidated financial statements in future periods as events and circumstances develop.

Recent Accounting Pronouncements – Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on-balance sheet and disclose key information about leasing arrangements. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize an ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases are classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The Company adopted the new standard on January 1, 2020 using the modified retrospective transition method with certain available transitional practical expedients, and elected to apply the short-term lease exemption (described below) to all of its classes of underlying assets. The standard had a material impact on the Company’s condensed consolidated balance sheets, but did not have an impact on the Company’s condensed consolidated statements of comprehensive income. The most significant impact was due to the recognition of ROU assets and lease liabilities for operating leases. Adoption of the standard had no impact on previously reported results. The Company determines if an arrangement is a lease at inception. Operating leases are included in other current assets, operating lease ROU assets, accrued liabilities and other current liabilities, and long-term portion of operating lease liabilities on the Company’s condensed consolidated balance sheets. The Company does not have material finance leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligations to make payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the remaining lease term. The Company uses an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components. The Company has elected to use the practical expedient to exclude the non-lease component from the lease for all asset classes. The majority of the Company’s lease agreements are facility leases. The Company’s leases have a weighted-average lease term of 7.3 years and used a weighted-average discount rate of 3.59% as of September 30, 2020.

Future minimum lease payments under non-cancellable leases as of September 30, 2020 are as follows:

Remainder of 2020	$	1,784
2021		6,053
2022		5,404
2023		5,343
2024		5,660
2025 and thereafter		19,198
Total	$	43,442

In January 2017, the FASB issued ASU 2017-04, Intangibles, Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which removes step 2 from the goodwill impairment test. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The Company adopted the ASU on January 1, 2020 and it did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

In July 2018, the FASB issued ASU 2018-11, Lease (Topic 842) Targeted Improvements, which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The Company adopted the ASU on January 1, 2020 and it did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-15, Intangibles, Goodwill and Other, Internal-Use Software (Subtopic 350-40), which provides guidance to evaluate the accounting for fees paid by a customer in a cloud computing arrangement. If a cloud computing arrangement includes a license to internal-use-software, then the software license is accounted for by the customer in accordance with Subtopic ASC 350-40. An intangible asset is recognized for the software license and a liability also recognized. The Company adopted the ASU on January 1, 2020 and it did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In October 2018, the FASB issued ASU 2018-17, Consolidation, Targeted Improvements to Related Party Guidance for Variable Interest Entities, which clarifies the determination as to whether a decision-making fee is a variable interest by requiring reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as an equivalent of a direct interest in its entirety. The Company adopted the ASU on January 1, 2020 and it did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

Recent Accounting Pronouncements – Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which removes certain exceptions to the general principles in Topic 740 and improves consistent application of U.S. GAAP by clarifying and amending existing guidance. The new standard is effective for the Company on January 1, 2021, with early adoption permitted. The Company is currently evaluating the effect that ASU 2019-12 will have on its consolidated financial statements.

Note 3. Acquisition of WBI OBS Financial, Inc.

On September 30, 2019, the Company entered into a unit purchase agreement to acquire WBI OBS Financial, Inc., subject to closing conditions that included approval from the Committee on Foreign Investment in the United States (“CFIUS”). On February 29, 2020, the Company closed the acquisition and paid a final purchase price of $21,339, net of working capital adjustments. The Company recorded goodwill of $11,538, adviser and trust relationships of $9,500 and deferred tax assets of $188 in connection with the acquisition.

AssetMark Financial Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 4. Goodwill and Intangible Assets

Goodwill

The Company’s goodwill balance was $338,848 and $327,310 as of September 30, 2020 and December 31, 2019, respectively. The Company, which has one reporting unit, performed an annual test for goodwill impairment in December for the years ended December 31, 2019 and 2018 and determined that goodwill was not impaired. The Company performed a qualitative test for goodwill impairment related to the COVID-19 pandemic and determined that an additional quantitative test was not necessary. Goodwill was not impaired as of September 30, 2020.

Intangible Assets

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

September 30, 2020	Gross carrying amount		Accumulated amortization			Net carrying amount		Estimated remaining useful life
Indefinite-lived intangible assets:
Broker-dealer relationships	$	570,480	$	—		$	570,480
Definite-lived intangible assets:
Trade names		45,830		(8,975	)		36,855	16 years
Broker-dealer license		11,550		(2,262	)		9,288	16 years
ATC regulatory status		23,300		(4,563	)		18,737	16 years
GFPC adviser relationships		14,250		(1,485	)		12,765	13 years
OBS adviser and trust relationships		9,500		(438	)		9,062	12 years
Total	$	674,910	$	(17,723	)	$	657,187

December 31, 2019	Gross carrying amount		Accumulated amortization			Net carrying amount		Estimated remaining useful life
Indefinite-lived intangible assets:
Broker-dealer relationships	$	570,480	$	—		$	570,480
Definite-lived intangible assets:
Trade names		45,830		(7,256	)

Price	25.94	EPS	-0
Shares	72	P/E	-3,825
MCap	1,878	P/FCF	75
Net Debt	31	EBIT	14
TEV	1,909	TEV/EBIT	137
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-13
10-Q	2020-06-30	Filed 2020-08-11
10-Q	2020-03-31	Filed 2020-05-13
10-K	2019-12-31	Filed 2020-03-13
10-Q	2019-09-30	Filed 2019-11-06
10-Q	2019-06-30	Filed 2019-08-28
S-1	2019-06-24	Public Filing

8-K	2021-02-23	Officers, Other Events
8-K	2021-02-11	Earnings, Exhibits, Exhibits
8-K	2020-12-30	Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K	2020-12-08	Regulation FD, Exhibits
8-K	2020-11-10
8-K	2020-08-27
8-K	2020-08-04
8-K	2020-06-08
8-K	2020-05-12
8-K	2020-05-05
8-K	2020-04-21
8-K	2020-03-26
8-K	2020-03-02
8-K	2020-02-26
8-K	2019-12-05
8-K	2019-11-05
8-K	2019-09-30
8-K	2019-08-28
8-K	2019-08-28
8-K	2019-07-22

EX-21.1	amk-ex211_8.htm
EX-31.1	amk-ex311_7.htm
EX-31.2	amk-ex312_10.htm
EX-32.1	amk-ex321_9.htm
EX-32.2	amk-ex322_6.htm

AMK 10Q Quarterly Report

AssetMark Earnings 2020-09-30