AssetMark Financial Holdings, Inc.

Good afternoon, everyone, and welcome to the Asset Marks Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question and answer session, and instructions will be given at that time. Today's call is being recorded. Now, I would like to turn the call over to Taylor Hamilton, Head of Investor Relations. Please go ahead, Mr. Hamilton.

Thank you. Good afternoon, everyone, and welcome to AssetMark's third quarter 2021 earnings conference call. Joining me are AssetMark's Chief Executive Officer, Natalie Wilson, and Chief Financial Officer, Gary Zyla. Today, they'll discuss results for the third quarter and provide an update to AssetMark's business outlook for the remainder of 2021 and 2022. Following our introductory remarks, we'll open up the call for questions. We also have an earnings presentation that Natalie and Gary will reference during their prepared remarks. It can be accessed on our IR website at ir.acidmark.com. Before we get started, I'd like to note that certain statements made during this conference call are forward-looking statements. These forward-looking statements represent our outlook only as the date of this call and actual results could differ materially. Additionally, during today's conference call, we'll be discussing net revenue, adjusted EBITDA, adjusted EBITDA margin, and adjusted net income, all of which are non-GAAP financial metrics. Please refer to our earnings press release and SEC filing for more information on forward-looking statements, risk factors associated with our business, and required disclosures related to non-GAAP financial information. With that, I'll turn the call over to my colleague. Natalie, take it away.

Thanks so much, Taylor, and good afternoon, everyone, and thank you for joining our third quarter earnings call. I hope everyone's doing well today. Starting on slide three, I just wanted to highlight that AssetMark continues to make a difference in the lives of our advisors and their clients, which has positioned us to deliver record results in the third quarter while also continuing to advance our strategy. Platform assets ended the third quarter at a record $86.8 billion, driven by an all-time high in net flows of $2.8 billion. This marks the third consecutive quarter of record-setting organic growth. Households and engaged advisors ended the third quarter at all-time highs. The growth of our households and engaged advisors points to the value of our platform as well as our expanded total addressable market, which we discussed on previous calls. We've also experienced record results for both top and bottom line financial metrics. Our net revenue was up a little less than 40% year-over-year to $101.5 million, making this the first quarter that net revenue has exceeded $100 million. Adjusted EBITDA was up more than 50% year-over-year to $44.8 million, and adjusted net income was up more than 60% to $29.9 million. Through the third quarter, year-to-date adjusted EBITDA and adjusted net income are more than those for the full year in 2020. Turning to slide four, our ecosystem empowers growth-oriented, independent, fee-based advisors of all sizes with the highest quality capabilities and services. We deliver a fully integrated technology platform, personalized and scalable service, and curated investment solutions. We provide everything an advisor needs to run a successful and growing business. While our value proposition seems simple, we are the only participant that's providing a comprehensive open architecture outsourced solution for IBD-affiliated advisors, REA, and hybrid advisors. This alone separates us from other providers in the industry. In order to execute on our strategy, we are focused on five key components, as we talked about last time. Similar to last quarter, I will discuss each of the five key areas of our growth and our strategy in detailed progress detailed progress we're making in each. The first component of our reframe growth strategy on slide five is to meet advisors where they are, catering to varying affiliations and new and growth-oriented or lifestyle advisors. Last quarter, we discussed how advisors continue to migrate to the RIA channel and how At the Mark Institutional, or AMI, looks to capitalize on the secular trend. Today, I want to discuss our target demographic and provide some color around how AcidMark Institutional is designed to help these advisors grow. Data from Cerulli shows that smaller RIA firms, or those with less than $500 million in assets, are growing at a much slower rate than larger RIA firms. As both business owners and practitioners, these smaller RIAs face many competing priorities and demands on their time. Therefore, they need to strategically outsource core parts of their operations in order to remain productive and profitable. In fact, findings from our 2019 impact of outsourcing study shows that advisors who outsource benefit from stronger client relationships, higher acquisition of new clients, increased client retention, and stronger asset management growth. Asimark Institutional offers these smaller RIAs and outsource solutions to help them grow. While still in the early innings, I do want to provide an update on Asimark Institutional. We are building a strong pipeline of qualified leads, and in this past quarter, we've expanded our Asimark Institutional leadership team to increase our focus on growing our RA offering. Lastly, Asimark Institutional was officially approved to participate in a leading custodian's RIA referral program. Now turning to slide six, the second component of our growth strategy is to deliver a holistic... deliver a holistic... differentiated experience to advisors and their clients, providing an end-to-end, easy-to-use platform designed to create meaningful conversations between advisors and their clients while also saving advisors time. As we discussed the past few quarters, we are building a financial wellness program with solutions to support meaningful wellness conversations between the advisor and their client. We greatly advanced our financial wellness vision this quarter by closing Voya and beginning our initial integration. One of the strategic rationales for the acquisition was to accelerate our financial wellness vision and expand our ability to attract advisors in core and adjacent channels. We are making progress in realizing this rationale. We've added a single sign-on from eWealth Manager, which is our advisor portal, allowing advisors to sign up for a free trial. We've been hosting live demonstrations of buoyant for all of our advisors. And our sales team is actively using Income Planner, a tool powered by Voyant, in income planning conversations between advisors and their clients. And lastly, we started discussing Voyant with several large broker-dealer partners. The early reaction from our advisors to Voyant has been fantastic. At our Platinum Summit in August, advisors mentioned wanting an alternative to current financial planning options and felt that Voyant was the perfect solution as the only financial planning tool that shows advisors both goals-based and cash flow-based planning side by side and allows them to show the trade-offs between the two. We are excited about our advisors' initial reaction to Voyant and plan to complete the integration of Voyant's financial planning capabilities in the fourth quarter. A third component of our growth strategy is to enable advisors to serve more investors across the wealth spectrum, varying life stages, and across generations. Let's turn to slide seven, where I want to share two exciting additions to our platform. First, this quarter we launched the Asimark PEP, or Pooled Employer Plan. According to our annual share and wallet study, retirement is one of the largest areas where advisors are doing business away from Asimark. We've been diligently focused on enhancing our retirement offering, which accounts for about $1.6 billion in platform assets at the end of the third quarter. The PEP allows us to provide a more complete retirement solution for our clients. According to Cerulli, 51% of employers with 50 workers or fewer do not have access to a retirement plan, while more than half of Americans either own or work for a small business. The PEP helps to close this retirement plan coverage gap for smaller employers by allowing employers of any size, industry, or location to band together in a single 401 plan. By doing so, smaller employers benefit from economies of scale and lower cost while also gaining access to diversified investment and enhanced fiduciary support normally reserved for larger plans. The PEP, while still very new, further enhances our retirement offering, and we are already seeing proposals from our advisors. Second, we launched a suite of separately managed accounts last quarter. This launch included 12 SMAs from 10 best-in-class investment managers, many of whom are new to the Asmar platform. They include large-cap growth, value and core, dividend equity, and fanatic growth strategies, among others. As investor preferences continue to evolve, separately managed accounts enable advisors to personalize clients' portfolios with targeted asset class exposure and manage their tax efficiency, as well as offering increased transparency through direct ownership of securities. This new suite of SMAs complements the wide range of investment solutions on the Asmark platform and can be combined in a single account with other eligible solutions. Since launched in early September, our advisors have submitted over 1,500 SMA proposals in the amount of about $375 million. The fourth component of our growth strategy, as seen on slide 8, is to help advisors grow and scale their businesses by offering turnkey advisor solutions and programs. This quarter, I want to talk a bit more about one of our established programs, business consulting, an offering which we believe is a huge competitive advantage for Asimark. The mission of our business consulting team is to help advisors build a business that is sustainable and successful so that they can help their clients achieve their financial dream. Our business consultants support our advisors and their businesses at every stage of growth through scalable guidance and by identifying opportunities to increase value, drive growth, and boost their firm's performance. In the simplest terms, our business consulting team helps drive advisor growth in business health, which in turn helps drive our company's growth. Over 500 advisors representing a quarter of our total platform assets are taking advantage of our business consulting services right now. These advisors exhibit higher engagement and lower overall redemption rates. Currently, our business consultants are actively reaching out to advisors to help them through their advisor growth plan, which basically means our consultants are helping advisors take a look at their goals for 2022 and consulting with them on how to achieve those goals. Turning to slide nine, the final component of our growth strategy is to pursue strategic transactions by adding capabilities and assets that improve our advisors' ability to serve their investors and expand their businesses. We are more deliberately focused on M&A than we have ever been before. We continue to look at every opportunity that comes across our desk and are in active dialogue with companies that we feel would be a strong fit for our platform. In addition, we continue to be a very disciplined buyer. And while M&A is serendipitous, we remain well positioned to execute on M&A as evidenced by our $50.4 million of cash on our balance sheet and $135 million remaining on our credit facility. In summary, the third quarter was the best in our company's history. We posted record results and have advanced our strategy of empowering our advisors to continue to grow while attracting new advisors to the Asimark platform. I'm now going to turn over the call to Gary to take us through a deeper dive in our quarterly results and to provide some color on our outlook for the remainder of 2021 and 2022. Thank you, Natalie.