AssetMark(US:AMK)2019-11-06 00:01Financial Performance - Total revenue for Q3 2019 was $110.1 million, an increase of $17.2 million or 18.5% from $92.9 million in Q3 2018[60] - Net loss for Q3 2019 was $3.7 million, or $0.05 per share, compared to net income of $10.4 million, or $0.16 per share, in Q3 2018[60] - Adjusted EBITDA for Q3 2019 was $29.2 million, up $5.5 million or 23.0% from $23.8 million in Q3 2018[60] - Total revenue for the nine months ended September 30, 2019, was $307 million, compared to $266 million for the same period in 2018[72] - Adjusted net income for Q3 2019 was $17.1 million, compared to $16.3 million in Q3 2018[72] - Net income for the nine months ended September 30, 2019, was $2,320,000, compared to $29,410,000 for the same period in 2018, reflecting a significant decline[102] - Adjusted net income for the nine months ended September 30, 2019, was $46,463,000, compared to $46,517,000 for the same period in 2018, indicating a stable performance despite the drop in net income[102] - Net comprehensive income decreased by $14.1 million, or 136.0%, from a net income of $10.4 million in Q3 2018 to a net loss of $3.7 million in Q3 2019[128] - Net comprehensive income decreased by $27.1 million, or 92.1%, from $29.4 million in 2018 to $2.3 million in 2019, despite a $17.2 million increase in total revenue[143] Asset Growth - Platform assets reached $57.9 billion as of September 30, 2019, a 21.0% increase from $47.9 billion as of September 30, 2018[61] - Engaged advisers on the platform increased to 2,159 as of September 30, 2019, a 13.5% rise from 1,903 as of September 30, 2018[61] - Positive net flows indicate that the amount of assets added to client accounts exceeds the amount of assets withdrawn, contributing to platform asset growth[74] - Engaged advisers, defined as those with at least $5 million in platform assets, contribute significantly to total platform assets[76] - New producing advisers (NPAs) represent the number of advisers who invested their first client assets on the platform during the period[78] Revenue Sources - Total revenue includes asset-based revenue, spread-based revenue, and other revenue sources, indicating overall financial performance[82] - Asset-based revenue accounted for approximately 90.1% of total revenue for the three months ended September 30, 2019, down from 93.1% in the same period of 2018[104] - Asset-based revenue increased by $12.7 million, or 14.7%, from $86.5 million in Q3 2018 to $99.2 million in Q3 2019, primarily due to increased platform and advisory fees[116] - Spread-based revenue rose by $4.2 million, or 78.3%, from $5.4 million in Q3 2018 to $9.6 million in Q3 2019, driven by higher cash balances and increased interest rates[117] - Asset-based revenue for the nine months ended September 30, 2019, was $276.5 million, an increase of $27.7 million, or 11.1%, compared to $248.8 million in the same period of 2018[132] - Spread-based revenue for the nine months ended September 30, 2019, increased by $12.1 million, or 87.2%, from $13.9 million in 2018 to $26.0 million in 2019[133] Expenses and Costs - Total expenses increased by $31.6 million, or 40.7%, from $77.6 million in Q3 2018 to $109.2 million in Q3 2019, leading to a net loss of $3.7 million in Q3 2019[115] - Employee compensation increased by $14.5 million, or 52.8%, from $27.5 million in Q3 2018 to $42.1 million in Q3 2019, largely due to share-based compensation growth[121] - Total expenses related to acquisitions and integrations for the nine months ended September 30, 2019, were $14,473,000, compared to $2,044,000 for the same period in 2018, indicating increased costs associated with growth strategies[102] - Share-based compensation for the three months ended September 30, 2019, was $11,641,000, significantly higher than $1,517,000 for the same period in 2018[101] - General and operating expenses grew by $11.3 million, or 34.7%, from $32.5 million in 2018 to $43.8 million in 2019, primarily due to $3.3 million in GFPC-related costs[138] Cash Flow and Financial Position - Cash flows from operating activities decreased by $9.3 million in the nine months ended September 30, 2019, primarily due to a decrease in net income of $27.1 million[150] - Cash used in investing activities increased by $40.0 million in the nine months ended September 30, 2019, due to the $35.8 million purchase price for the GFPC acquisition[153] - As of September 30, 2019, the company had cash and cash equivalents of $83.2 million and restricted cash of $7.5 million[144] - The company established a credit facility consisting of a $250.0 million term loan and a $20.0 million revolving credit facility, with $123.7 million of the term loan remaining outstanding as of September 30, 2019[147] - As of September 30, 2019, total contractual obligations amounted to $373.5 million, with $25.2 million due in less than 1 year and $283.0 million due beyond 5 years[158] Risk Management and Operational Considerations - Operational risk management is critical, with policies and procedures in place to mitigate risks associated with transaction processing and technology deficiencies[164] - Interest expense for the period reflects fluctuations based on the Term Loan, which may impact future financial performance[113] - General and operating expenses are expected to increase due to costs associated with being a publicly traded company, including legal and accounting compliance[110] - The company anticipates an increase in employee compensation expenses due to additional non-cash share-based compensation and headcount growth to support its strategy[109] - Interest payments on the Term Loan are calculated using a forecasted rate, with a margin of 3.50% that can step down to 3.25% based on leverage ratio achievements[163]