AssetMark Financial Holdings, Inc.

Good afternoon, everyone, and welcome to AssetMark's fourth quarter 2022 earnings conference call. Currently, all participants are in listen mode only. Later, we will conduct a question and answer session, and instructions will be given at that time. Today's call is being recorded. Now, I'd 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 fourth quarter 2022 earnings conference call. Joining me are AssetMark's Chief Executive Officer, Natalie Wilson, and Chief Financial Officer, Gary Zyla. Today, they'll discuss the results for the fourth quarter and provide an update to AssetMark's business outlook for 2023. 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.assetmark.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 filings 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 colleagues. Natalie, take it away.

Thank you, Taylor, and good afternoon, and welcome to our fourth quarter earnings call. I hope everyone is doing well today. Before we begin, I'd like to formally welcome Adhesion Wealth to the AssetMark family. AssetMark and Adhesion have a shared mission, and we couldn't be more excited to have them join our team. I would also like to thank our over 9,200 advisor clients and nearly 1,000 teammates. 2022 is a record year for Asimark, and it would not have been possible without the loyalty of our clients and the dedication of our team. As we start 2023, we are the top independent TAMP as measured by platform assets, as well as the top TAMP as measured by advisors, having just won Wealth Advisor's Top Overall TAMP Award in January. I could not be prouder of the year we had in 2022 and how we have started off in 2023. My prepared remarks today will focus on our evolution and growth in 2022. I will then provide a detailed analysis of each of our five growth pillars, highlighting the progress we are making on each. Finally, I'll preview our strategic focus in 2023. Gary will then discuss the financial and operating results for the fourth quarter and introduce our 2023 outlook. Starting on slide three, in 2022, we continued our evolution from a TAMP to a holistic, full-service wealth management platform. On December 16, 2022, we closed the acquisition of Adhesion Wealth to complement our end-to-end outsourcing offering. In addition, we continue to optimize our digital ecosystem to provide advisors with a differentiated experience that champions client engagement and drives advisor efficiency. To further enable our advisors to serve diverse clients across the wealth spectrum, we expanded our investment platform to include improved income planning capabilities, personalized investment solutions, and enhanced tax loss harvesting services. As advisors increasingly focus on serving their clients, we expanded our turnkey business programs and invested meaningfully in our personalized consulting services, both of which foster advisor growth and efficiency. Simply put, we executed on our strategy, which allowed us to achieve record results in 2022. Now let's turn to slide four to highlight these results. While doing so, I'd also like to take a step back and provide some perspective on how we've grown since our IPO in 2019. In 2022, we served more advisors and investors than ever before, supporting over 9,200 advisors who used our platform to help more than 241,000 investor households. Since our IPO in July of 2019, we have added more than 85,000 households, approximately 1,400 total advisors, and 750 engaged advisors. Additionally, we achieved record financial and operating results and matched our all-time high net promoter score. Full year net revenue for 2022 was a record $456 million and is up more than 20% year over year and almost 60% from our IPO. 2022 adjusted EBITDA was up 27% to nearly $200 million, and adjusted net income was up more than 26% to $130 million. We also continue to scale our business as evidenced by our ability to expand adjusted EBITDA margin 270 basis points in 2022. Since our IPO in just three years, we have doubled the earnings of the company and expanded adjusted EBITDA margins a robust 600 basis points. well above our historical guidance of 50 to 100 basis points a year. Now let me turn your attention to our growth strategy. As I do every quarter, I want to give you an update on how we are moving the ball forward in each key pillar. Starting with the first component on slide five, we're meeting advisors where they are. In December, we closed on the acquisition of adhesion wealth, welcoming more than 560 advisors and close to 16,000 households. Adhesion, the industry's second largest model marketplace with over 400 asset managers, provides its clients with outsourced overlay portfolio management services, client engagement technologies, and tailored managed account solutions for TAMPs and RIA enterprises. At the heart of both Adhesion and AssetMarks is the proven concept that outsourcing leads advisors to a better quality of life, ability to grow and scale, and better investor outcomes. Adhesion will greatly amplify our ability to serve the rapidly expanding RIA market, allowing us to serve different advisor profiles and to significantly increase our total addressable market. RIAs will no longer have to choose between fully leveraging our curated investment solution or fully relying on Adhesion's model marketplace. They can now choose to do either or both at AFMARC. We believe both full outsourcers and those that are leveraging the marketplace will benefit from our consulting services, community of like-minded advisors, and the open architecture nature of our offering. Adhesion has a strong plan for growth this year, and we will look forward to sharing their progress during future earnings calls. Now turning to slide six, the second component of our growth strategy is to deliver a holistic, differentiated experience to advisors and their clients. We're pleased with the growth of Voyant in 2022, especially during the second half of the year. Excluding foreign exchange pressures, revenue from Voyant was up approximately 13% year-over-year, driven by an uptick in both enterprise and advisor consumer licenses. Enterprise advisor licenses are up more than 50% year-on-year, driven by a new deal with the retail arm of TD Bank in Canada, which added more than 5,000 licenses for the quarter. Boyance continues to gain traction in existing geographies, including the UK and Canada, and they are also progressing well in high-potential expansion geographies. For example, they've experienced excellent momentum in Australia with strong year-over-year license growth. We're excited about Boyance's prospects and the diversification of revenue it brings to Asimark. Third component of our growth strategy is to enable advisors to serve more investors across the wealth spectrum, varying life stages and generations. Let's turn to slide seven to discuss this more. There's no denying that 2022 was a difficult macro environment for advisors and their clients. Inflation surged to 40-year highs, causing the Fed to increase rates seven times throughout the year. This led to historic losses in bond markets and highly volatile global equity markets. Advisors needed timely education and actionable solutions to lead their clients through these difficult times. In response to this environment, we launched our Market Volatility Toolkit, which helps advisors get informed, feel confident, and stay in front of their clients' questions and concerns. Since launch, the toolkit has had over 9,600 page views from over 1,800 unique users. Our events also continue to be highly valuable for our advisors. In 2022, we held over 70 in-person events with over 2,300 advisors in attendance. Our 2022 events net promoter score was the highest it's been since 2018 at 72. Additionally, just next week, we will be hosting over 600 of our top advisors at our annual Gold Forum. This event is our largest ever, topping last year's events attendance by nearly 40%. We also leveraged webinars in 2022 to provide timely information given the ever-changing market. Last year, we hosted 49 webinars with over 8,100 advisors attending. Not only did we do an excellent job of being there for our advisors, we also added new investment solutions to our platform, expanding our eligible client wallet. In April, we launched four new ESG strategies as part of our values-driven investment program. Since launch, we've had over 2,100 proposals submitted, totaling $194 million. In July, we reopened Sabo's fixed income ladder strategies, a proprietary strategy of Asset Marks. This strategy aims to smooth out fluctuations in equity markets, inflation, and interest rates using a disciplined buy and hold approach. Since reopening, we have already had over 2,900 proposals submitted, totaling over $834 million. In October, we launched three new market volatility strategies for advisors to leverage during these uncertain times. It's been just a few months since launch, but we've already had over 900 proposals submitted, totaling 82 million. We will continue to educate our advisors and provide them with the best solutions possible to enable them to serve investors. Now let's turn our attention to slide eight and the fourth component of our growth strategy. While 2022 was challenging for investors, it was equally challenging for our advisors and their businesses. Over the last year, we have invested heavily into business programs to help advisors grow and scale. This is largely driven by our business consulting team, which provides our advisors individualized guidance by helping them to identify actionable opportunities to increase their efficiency and to grow and scale over time. As I've mentioned in previous earnings calls, I firmly believe that our business consultants and the program-based support are a competitive advantage for Asimark and are one of the key reasons why advisors continue to win. Over the last year, we grew our business consulting team over 40% while also launching programs to help with some of our advisors' most pressing needs. For example, in January 2022, we launched Wealth Builder Prospecting, Since launch, this tool has been used by over 600 advisors with strong lead generation and conversion metrics. Last February, we launched AssetMark Marketing Advantage. Celebrating its one-year anniversary this month, Marketing Advantage has been used by hundreds of advisors during its first year. Finally, we expanded our Advisor Acceleration Academy, which I discussed last quarter. We hosted a total of three classes with over 280 advisors for the year. We just finished our last class in December, and the results from all participants were off the charts. Finally, we kicked off 2023 with our investment consulting program. A pilot program right now, this investment consulting provides select advisors direct access to advisors' investment consulting team so that they can benefit from guidance in creating customized model portfolios that leverage the strategies available on our platform. It takes great pride in our ability to help advisors grow and scale. It's why they win and then we win. Turning to slide nine, which is the final component of our growth strategy, we pursue strategic transactions by adding capabilities and assets that improve advisors' ability to serve investors and expand their businesses. Even after purchasing adhesion for $46 million, we still have about $450 million in purchasing power for future M&A opportunities. We are also doing a great job of increasing our purchasing power each quarter because of our strong cash generation. As always, we are proactively looking at all opportunities that we feel will benefit our advisors and their clients. Now let's turn to slide 10. While 2022 was a record year, there were challenges and we are not taking our foot off the gas. Investors need more guidance, support, and advice than ever before. A recent Suruli study found that 44% of investors agree that they need more advice than they've received in the past. In 2023, in response to this and other trends, we'll continue to focus on executing our growth strategy. In short, we will expand our RA offering with adhesion, we will continue our re-platforming efforts, we will expand our fixed income and SMA offering, and we will focus on helping advisors grow and scale their business through enhancements to our advisor benefits program and our service capabilities in addition to our investment consulting program, which I discussed a little earlier. Our strategy is working. We are well-positioned to help advisors grow, which in turn will help asset markets grow. I could not be more excited about the opportunity ahead. I'll now turn the call over to Gary, who will take us through a deeper dive into our fourth quarter 2022 results and discuss our 2023 outlook.