AssetMark Financial Holdings has achieved several records for the second quarter, driven by its success in attracting more financial advisors to its wealth management services. Despite reporting adjusted earnings per share of 55 cents, slightly below analysts' consensus estimates of 57 cents, the company's stock has seen a 2% increase on Thursday morning. With a year-to-date increase of 27%, AssetMark's stock is currently trading at around $29.21, just below its 52-week high of $33.
During the company's earnings call on Wednesday, CEO Natalie Wolfsen expressed her satisfaction with the results, highlighting positive forward-looking indicators such as organic growth and new advisor additions. AssetMark's revenue showed a significant growth of 21%, reaching $183 million, while its net income surged by 30% to $33 million. Operating expenses also witnessed an 18% increase, reaching $137 million mainly due to higher employee compensation. Notably, the company reported a remarkable 22.7% year-over-year increase in platform assets, reaching an all-time high of $100.8 billion. AssetMark also experienced a notable 24% increase in net flows, adding $1.7 billion compared to the previous year.
Buoyed by these impressive results, AssetMark has revised its growth outlook for 2023 and now expects platform assets to grow by 15% instead of the previously projected 10%. Additionally, the company anticipates adjusted EBITDA growth for 2023 to be 22%, up from the previous projection of 20%, partly fueled by stronger-than-anticipated market conditions. CFO Gary Zyla confidently stated during the earnings call that AssetMark is on track to achieve its best year in company history.
Leading financial analyst Jeff Schmitt from William Blair highlighted that AssetMark's success can be attributed to increased advisor productivity resulting from the recent introduction of new tax strategies, investment models, and an investment consulting program. Schmitt foresees a gradual increase in net flows and rates the stock as outperforming the market.
AssetMark Poised for Growth, According to Research Note
In an August 3 research note, analysts at AssetMark express optimism about the company's growth prospects. They anticipate that earnings per share (EPS) will see an average annual growth of over 20% in 2023 and 2024. This positive outlook is attributed to solid net flows, increased spread income, and expanded margins. The stock is currently trading at only 11 times the estimated 2024 EPS, well below historical levels in the mid-teens.
AssetMark, originally known as a turnkey asset management program, has been actively expanding its range of services to better serve its clients. Through strategic acquisitions, it has broadened its offerings. Noteworthy acquisitions include financial planning software provider Voyant in 2021 and technology provider Adhesion Wealth in 2022.
AssetMark recognizes the importance of continuous investment in its capabilities. Currently, the company is piloting a service aimed at assisting independent advisors with succession planning. As a significant portion of advisors expect to retire within the next ten years, many are seeking suitable successors to continue their practice. AssetMark aims to support this transition.
Headquartered in Concord, California, AssetMark primarily serves registered investment advisory firms, independent broker-dealers, and insurance broker-dealers. The growth of these sectors within wealth management has been instrumental in driving success for companies like AssetMark.
AssetMark offers custodial services through its subsidiary, AssetMark Trust Company. However, the platform also allows advisors to work with other custodians, such as Pershing, Fidelity, and Charles Schwab.
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