AssetMark(US:AMK)2020-05-13 20:31Financial Performance - Total revenue for Q1 2020 was $114.9 million, an increase of $22.6 million or 24.5% from $92.3 million in Q1 2019[66] - Net income for Q1 2020 was $2.7 million, or $0.04 per share, compared to $2.8 million, or $0.04 per share, in Q1 2019[66] - Adjusted net income for Q1 2020 was $17.7 million, up from $12.7 million in Q1 2019[66] - Total revenue for Q1 2020 was $115 million, compared to $92 million in Q1 2019[81] - Adjusted EBITDA for Q1 2020 was $28.4 million, up from $22.7 million in Q1 2019[81] - Total revenue for the three months ended March 31, 2020, was $2,736,000, compared to $2,811,000 for the same period in 2019, reflecting a net income margin of 2.4% in 2020 versus 3.0% in 2019[104] - Adjusted EBITDA for the three months ended March 31, 2020, was $28,375,000, representing a margin of 24.7%, compared to $22,730,000 and a margin of 24.6% in 2019[104] - Adjusted net income for Q1 2020 was $14.2 million, compared to $797,000 in Q1 2019, reflecting a significant increase[112] - Total revenue for Q1 2020 was $114.9 million, up 24.5% from $92.3 million in Q1 2019, driven by a $22.6 million increase in asset-based revenue[128] Asset Management - Platform assets reached $56.0 billion as of March 31, 2020, a 12.7% increase from $49.7 billion as of March 31, 2019[67] - Engaged advisers increased to 2,138 as of March 31, 2020, an 8.7% rise from 1,967 as of March 31, 2019[67] - The company completed the acquisition of OBS, adding approximately $2.1 billion in platform assets and 499 new financial adviser relationships[65] - The annual cohort of new producing advisers grew 63% from 548 in 2014 to 894 in 2019[70] - Asset-based revenue increased by 27.2% to $105.7 million in Q1 2020, primarily due to growth in platform assets and advisory fees[129] - Spread-based revenue rose by 5.3% to $8.0 million in Q1 2020, attributed to higher cash balances at ATC despite lower interest rates[130] - Other revenue decreased by 24.3% to $1.3 million in Q1 2020, mainly due to lower interest income from reduced cash balances[131] - Assets in custody at AssetMark Trust Company (ATC) at period-end were significant, with ATC client cash accounting for 8% of total assets in custody as of March 31, 2020[92] Expenses and Costs - Total operating expenses increased by 35.8% to $111.4 million in Q1 2020, with significant rises in employee compensation and general operating expenses[128] - Employee compensation rose by 36.4% to $43.5 million in Q1 2020, largely due to increased share-based compensation following the IPO[135] - Asset-based expenses increased by 24.6% to $35.0 million in Q1 2020, driven by higher strategist and investment management costs[133] - Spread-based expenses surged by 169.7% to $1.3 million in Q1 2020, due to higher interest-credited payments to clients[134] - General and operating expenses increased by $7.1 million, or 57.5%, from $12.3 million in Q1 2019 to $19.4 million in Q1 2020, driven by higher costs in events, insurance, and software[136] - Professional fees rose by $1.4 million, or 60.6%, from $2.4 million in Q1 2019 to $3.8 million in Q1 2020, primarily due to increased consulting and audit fees[137] - Depreciation and amortization expense increased by $1.5 million, or 21.9%, from $6.9 million in Q1 2019 to $8.4 million in Q1 2020, partly due to amortization related to acquisitions[138] - Share-based compensation for the three months ended March 31, 2020, was $13,188,000, representing 11.5% of total expenses, compared to 5.7% in 2019[106] - The company incurred acquisition expenses of $3,577,000 during the period, reflecting ongoing strategic initiatives[104] Cash Flow and Debt - Cash flows from operating activities increased by $6.5 million in Q1 2020 compared to Q1 2019, primarily due to increased share-based compensation and depreciation[150] - Cash used in investing activities increased by $20.9 million in Q1 2020 compared to Q1 2019, mainly due to the OBS acquisition and increased capital expenditures[151] - As of March 31, 2020, cash and cash equivalents were $80.2 million, down from $96.3 million in the same period in 2019[144] - The company had $123.7 million of the Term Loan outstanding as of March 31, 2020, with a maturity in November 2025[145] Operational Risk - Operational risk includes potential losses from improper transaction execution and deficiencies in technology systems[163] - Increased transaction volumes during the COVID-19 pandemic have heightened operational risk exposure[163] - Financial losses from operational risk may rise during periods of high market volatility[163] - Business continuity plans are in place for critical systems to mitigate operational risks[163] - Specific policies and procedures are continuously enhanced to manage operational risk across the organization[163] - Control mechanisms ensure adherence to operational policies and corporate limits[163] - The company relies on employee and system efficiency to process a large number of transactions[163] - Regulatory sanctions and reputational damage are potential consequences of operational failures[163] - Redundancies are built into systems to address operational risk appropriately[163] - The company aims to identify and manage operational risk at various departmental levels[163]