Avantax, Inc. (NASDAQ: AVTA), a leading provider of
technology-enabled, tax-intelligent financial solutions, today
announced financial results for the third quarter ended
September 30, 2023.
Third Quarter Highlights and Recent
Developments
- Reported total revenue of $192.3 million for the third quarter.
This represents an increase of 16.5% compared to the third quarter
of the prior year.
- Continued to deliver net positive asset flows for the seventh
consecutive quarter with approximately $673.0 million for the third
quarter.
- Ended the third quarter with total client assets of $82.3
billion, $42.0 billion of which were advisory assets, representing
51.1% of total client assets.
- Added approximately $563.7 million of newly recruited
assets during the third quarter.
- Ended the third quarter with $106.4 million in cash and cash
equivalents.
- Cash sweep balances ended the third quarter at $2.8 billion,
which was relatively flat to the second quarter.
- During the third quarter, we repurchased approximately 0.4
million shares of our common stock for aggregate purchase
consideration of approximately $9.1 million.
Summary Financial Performance: Q3 2023 |
|
($ in millions, except
per share amounts) |
Q3 2023 |
|
Q3 2022 |
|
Change |
GAAP: |
|
|
|
|
|
Revenue |
$ |
192.3 |
|
|
$ |
165.0 |
|
|
16.5 |
% |
|
|
|
|
|
|
Income (loss) from continuing operations, net of income taxes |
$ |
(1.5 |
) |
|
$ |
0.3 |
|
|
(600.0 |
)% |
Income (loss) from discontinued operations, net of income
taxes |
|
— |
|
|
|
(22.2 |
) |
|
100.0 |
% |
Net Income (Loss) |
$ |
(1.5 |
) |
|
$ |
(21.8 |
) |
|
93.1 |
% |
Net Income (Loss) per share — Basic: |
|
|
|
|
|
Continuing operations |
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
(500.0 |
)% |
Discontinued operations |
|
— |
|
|
|
(0.47 |
) |
|
100.0 |
% |
Net Income (Loss) per share — Basic |
$ |
(0.04 |
) |
|
$ |
(0.46 |
) |
|
91.3 |
% |
Net Income (Loss) per share — Diluted: |
|
|
|
|
|
Continuing operations |
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
(500.0 |
)% |
Discontinued operations |
|
— |
|
|
|
(0.46 |
) |
|
100.0 |
% |
Net Income (Loss) per share — Diluted |
$ |
(0.04 |
) |
|
$ |
(0.45 |
) |
|
91.1 |
% |
Non-GAAP: |
|
|
|
|
|
Adjusted EBITDA (1) |
$ |
34.1 |
|
|
$ |
17.0 |
|
|
100.6 |
% |
Net Income (1) |
$ |
13.5 |
|
|
$ |
7.8 |
|
|
73.1 |
% |
Net Income per share — Diluted (1) |
$ |
0.36 |
|
|
$ |
0.16 |
|
|
125.0 |
% |
_________________________ Note: Totals may not foot due to
rounding.
(1) See reconciliations of all non-GAAP to GAAP
measures presented in this release in the tables below, including
the definitions in the notes to such tables.
Acquisition
On September 9, 2023, Avantax entered into an Agreement and Plan
of Merger (the “Merger Agreement”) with Aretec
Group, Inc., a Delaware corporation that does business as Cetera
Holdings (“Parent”), and C2023 Sub Corp., a
Delaware corporation and a wholly-owned subsidiary of Parent
(“Acquisition Sub”) whereby Parent will acquire
all of the issued and outstanding equity of Avantax (the
“Merger”) in an all-cash transaction valuing
Avantax at approximately $1.2 billion, inclusive of Avantax’s net
debt. On the terms and subject to the conditions of the Merger
Agreement, holders of shares of Avantax common stock (other than
Excluded Shares and Dissenting Shares (each, as defined in the
Merger Agreement)) will receive $26.00 per share in cash, without
interest and less any required tax withholdings. Upon the closing
of the transactions contemplated by the Merger Agreement, Avantax
will operate as a privately-held company. The closing remains
subject to customary closing conditions, including approval by
Avantax’s stockholders. Avantax expects the closing to occur by the
end of November 2023.
In light of the pending closing pursuant to the Merger
Agreement, we will not be hosting a third quarter 2023 earnings
conference call or take follow-up questions from the investment
community.
About Avantax®
Avantax, Inc. (NASDAQ: AVTA) delivers tax-intelligent wealth
management solutions for Financial Professionals, tax professionals
and CPA firms, supporting our goal of minimizing clients’ tax
burdens through comprehensive tax-intelligent financial planning.
We have two distinct, but related, models within our business: the
independent Financial Professional model and the employee-based
model. We refer to our independent Financial Professional model as
Avantax Wealth Management®. Avantax Wealth Management works with a
nationwide network of Financial Professionals operating as
independent contractors and offers its services through its
registered broker-dealer, which is a leading U.S. tax-focused
independent broker-dealer, registered investment advisor (RIA), and
insurance agency subsidiaries. We refer to our employee-based model
as Avantax Planning Partners℠. Avantax Planning Partners offers
services through its RIA and insurance agency by partnering with
CPA firms to provide their consumer and small-business clients with
holistic financial planning and advisory services. Collectively, we
had $82.3 billion in total client assets as of September 30,
2023. For more information on Avantax, visit www.avantax.com.
Source: Avantax
Investor Relations Contact:Dee LittrellAvantax, Inc.(972)
870-6463IR@avantax.com
Media Contacts:Tony Katsulos Avantax, Inc.(972)
870-6654tony.katsulos@avantax.com
Kendra GalanteStreetCred PR for Avantax(402)
740-2047kendra@streetcredpr.comavantax@streetcredpr.com
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
including without limitation, statements regarding the outlook of
Avantax, Inc. (the
“Company”), the
anticipated business strategy and corporate focus of the Company
following consummation of the sale of our tax software business
(the “TaxAct Sale”), the intended use of proceeds
from the TaxAct Sale, the expected timing of the consummation of
the Merger, plans for the Company following the Merger, and the
anticipated effects of the Merger on the Company’s business and
Cetera Financial Group. Forward-looking statements provide current
expectations of future events based on certain assumptions and
include any statement that does not directly relate to any
historical or current fact. Forward-looking statements can also be
identified by words such as “anticipates,” “believes,” “plans,”
“expects,” “future,” “intends,” “may,” “will,” “would,” “could,”
“should,” “estimates,” “predicts,” “potential,” “continues,”
“target,” “outlook,” and similar terms and expressions, but the
absence of these words does not mean that the statement is not
forward-looking. Actual results may differ significantly from
management’s expectations due to various risks and uncertainties
including, but not limited to: our ability to effectively compete
within our industry; our ability to generate strong performance for
our clients and the impact of the financial markets on our clients’
portfolios; our expectations concerning the revenues we generate
from fees associated with the financial products that we
distribute; our ability to attract and retain financial
professionals, employees, and clients, as well as our ability to
provide strong client service; the impact of significant interest
rate changes; our ability to maintain our relationships with
third-party partners, providers, suppliers, vendors, distributors,
contractors, financial institutions, industry associations, and
licensing partners, and our expectations regarding and reliance on
the products, tools, platforms, systems, and services provided by
these third parties; political and economic conditions and events
that directly or indirectly impact the wealth management industry;
our ability to respond to rapid technological changes, including
our ability to successfully release new products and services or
improve upon existing products and services; our future capital
requirements and the availability of financing, if necessary; the
impact of new or changing legislation and regulations (or
interpretations thereof) on our business, including our ability to
successfully address and comply with such legislation and
regulations (or interpretations thereof) and increased costs,
reductions of revenue, and potential fines, penalties, or
disgorgement to which we may be subject as a result thereof; risks,
burdens, and costs, including fines, penalties, or disgorgement,
associated with our business being subjected to regulatory
inquiries, investigations, or initiatives, including those of the
Financial Industry Regulatory Authority, Inc. and the Securities
and Exchange Commission (the “SEC”); any
compromise of confidentiality, availability, or integrity of
information, including cyberattacks; risks associated with legal
proceedings, including litigation and regulatory proceedings; our
ability to close, finance, and realize all of the anticipated
benefits of acquisitions, as well as our ability to integrate the
operations of recently acquired businesses, and the potential
impact of such acquisitions on our existing indebtedness and
leverage; our ability to retain employees and acquired client
assets following acquisitions; our ability to manage leadership and
employee transitions, including costs and time burdens on
management and our board of directors related thereto; our ability
to develop, establish, and maintain strong brands; our ability to
comply with laws and regulations regarding privacy and protection
of user data; our assessments and estimates that determine our
effective tax rate; our ability to protect our intellectual
property and the impact of any claim that we infringed on the
intellectual property rights of others; risks related to goodwill
and acquired intangible asset impairment; our failure to realize
the expected benefits of the TaxAct Sale; disruptions to our
business and operations resulting from our compliance with the
terms of the transition services agreement entered into in
connection with the TaxAct Sale; disruptions or adverse effects on
our business prospects, financial condition, and results of
operations caused by the proposed acquisition of the Company by
Cetera; our inability to timely and successfully close the proposed
acquisition of the Company by Cetera; provisions within our
Agreement and Plan of Merger with Cetera that could discourage
competing acquisition proposals from third parties or adversely
affect future acquisition proposals in the event the proposed
acquisition of the Company by Cetera is terminated; and our ability
to mitigate and manage risks caused by yield curve, duration and
interest rate fluctuations, and other macroeconomic factors upon
our business and financing arrangements through derivative
transactions pursuant to our recently implemented hedging policy. A
more detailed description of these and certain other factors that
could affect actual results is included in the Company’s most
recent Annual Report on Form 10-K and most recent Quarterly Report
on Form 10-Q filed with the SEC. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to
update any forward-looking statements to reflect events or
circumstances after the date hereof, except as may be required by
law.
|
AVANTAX, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS) |
(Unaudited) (In thousands, except per share amounts) |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue |
$ |
192,343 |
|
|
$ |
165,032 |
|
|
$ |
557,251 |
|
|
$ |
494,104 |
|
Operating expenses: |
|
|
|
|
|
|
|
Cost of revenue |
|
117,684 |
|
|
|
105,809 |
|
|
|
336,783 |
|
|
|
341,443 |
|
Engineering and technology |
|
2,352 |
|
|
|
2,617 |
|
|
|
7,264 |
|
|
|
6,733 |
|
Sales and marketing |
|
26,298 |
|
|
|
23,770 |
|
|
|
79,902 |
|
|
|
70,826 |
|
General and administrative |
|
33,011 |
|
|
|
23,792 |
|
|
|
91,747 |
|
|
|
69,388 |
|
Acquisition and integration |
|
(100 |
) |
|
|
416 |
|
|
|
(17 |
) |
|
|
(4,710 |
) |
Depreciation |
|
4,142 |
|
|
|
3,343 |
|
|
|
11,318 |
|
|
|
8,428 |
|
Amortization of acquired intangible assets |
|
6,404 |
|
|
|
6,342 |
|
|
|
18,973 |
|
|
|
19,435 |
|
Total operating expenses |
|
189,791 |
|
|
|
166,089 |
|
|
|
545,970 |
|
|
|
511,543 |
|
Operating income (loss) from continuing operations |
|
2,552 |
|
|
|
(1,057 |
) |
|
|
11,281 |
|
|
|
(17,439 |
) |
Interest expense and other,
net |
|
(5,115 |
) |
|
|
(158 |
) |
|
|
(8,919 |
) |
|
|
(423 |
) |
Income (loss) from continuing operations before income taxes |
|
(2,563 |
) |
|
|
(1,215 |
) |
|
|
2,362 |
|
|
|
(17,862 |
) |
Income tax benefit (expense) |
|
1,068 |
|
|
|
1,536 |
|
|
|
(524 |
) |
|
|
22,582 |
|
Income (loss) from continuing operations |
|
(1,495 |
) |
|
|
321 |
|
|
|
1,838 |
|
|
|
4,720 |
|
Discontinued operations |
|
|
|
|
|
|
|
Income (loss) from discontinued operations before gain on disposal
and income taxes |
|
— |
|
|
|
(22,352 |
) |
|
|
— |
|
|
|
74,165 |
|
Pre-tax gain on disposal |
|
— |
|
|
|
— |
|
|
|
2,539 |
|
|
|
— |
|
Income (loss) from
discontinued operations before income taxes |
|
— |
|
|
|
(22,352 |
) |
|
|
2,539 |
|
|
|
74,165 |
|
Income tax benefit (expense) |
|
— |
|
|
|
190 |
|
|
|
(618 |
) |
|
|
(26,681 |
) |
Income (loss) from discontinued operations |
|
— |
|
|
|
(22,162 |
) |
|
|
1,921 |
|
|
|
47,484 |
|
Net
income (loss) |
$ |
(1,495 |
) |
|
$ |
(21,841 |
) |
|
$ |
3,759 |
|
|
$ |
52,204 |
|
|
|
|
|
|
|
|
|
Basic net income (loss) per
share: |
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
$ |
0.05 |
|
|
$ |
0.10 |
|
Discontinued operations |
|
— |
|
|
|
(0.47 |
) |
|
|
0.04 |
|
|
|
0.99 |
|
Basic net income (loss) per share |
$ |
(0.04 |
) |
|
$ |
(0.46 |
) |
|
$ |
0.09 |
|
|
$ |
1.09 |
|
Diluted net income (loss) per
share: |
|
|
|
|
|
|
|
Continuing operations |
$ |
(0.04 |
) |
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
$ |
0.10 |
|
Discontinued operations |
|
— |
|
|
|
(0.46 |
) |
|
|
0.05 |
|
|
|
0.96 |
|
Diluted net income (loss) per share |
$ |
(0.04 |
) |
|
$ |
(0.45 |
) |
|
$ |
0.09 |
|
|
$ |
1.06 |
|
Weighted average shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
36,921 |
|
|
|
47,847 |
|
|
|
39,971 |
|
|
|
47,981 |
|
Diluted |
|
36,921 |
|
|
|
49,016 |
|
|
|
40,940 |
|
|
|
49,153 |
|
|
|
|
|
|
|
|
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
Net income (loss) |
$ |
(1,495 |
) |
|
$ |
(21,841 |
) |
|
$ |
3,759 |
|
|
$ |
52,204 |
|
Other comprehensive loss, net of tax |
|
(982 |
) |
|
|
— |
|
|
|
(13,043 |
) |
|
|
— |
|
Comprehensive income (loss) |
$ |
(2,477 |
) |
|
$ |
(21,841 |
) |
|
$ |
(9,284 |
) |
|
$ |
52,204 |
|
|
AVANTAX, INC. |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In thousands, except per share amounts) |
|
|
September 30,2023 |
|
December 31,2022 |
|
(Unaudited) |
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
106,435 |
|
|
$ |
263,928 |
|
Accounts receivable, net |
|
24,680 |
|
|
|
24,117 |
|
Commissions and advisory fees receivable |
|
22,177 |
|
|
|
20,679 |
|
Prepaid expenses and other current assets |
|
32,944 |
|
|
|
15,027 |
|
Total current assets |
|
186,236 |
|
|
|
323,751 |
|
Long-term assets: |
|
|
|
Property, equipment, and software, net |
|
49,932 |
|
|
|
53,041 |
|
Right-of-use assets, net |
|
18,126 |
|
|
|
19,361 |
|
Goodwill, net |
|
266,279 |
|
|
|
266,279 |
|
Acquired intangible assets, net |
|
256,867 |
|
|
|
266,002 |
|
Other long-term assets |
|
48,239 |
|
|
|
35,081 |
|
Total long-term assets |
|
639,443 |
|
|
|
639,764 |
|
Total assets |
$ |
825,679 |
|
|
$ |
963,515 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
3,771 |
|
|
$ |
7,531 |
|
Commissions and advisory fees payable |
|
15,033 |
|
|
|
13,829 |
|
Accrued expenses and other current liabilities |
|
49,798 |
|
|
|
111,212 |
|
Current deferred revenue |
|
4,241 |
|
|
|
4,583 |
|
Current lease liabilities |
|
5,107 |
|
|
|
5,139 |
|
Current portion of long-term debt |
|
11,813 |
|
|
|
— |
|
Total current liabilities |
|
89,763 |
|
|
|
142,294 |
|
Long-term liabilities: |
|
|
|
Long-term debt, net |
|
248,388 |
|
|
|
— |
|
Long-term lease liabilities |
|
27,797 |
|
|
|
30,332 |
|
Deferred tax liabilities, net |
|
15,584 |
|
|
|
20,819 |
|
Long-term deferred revenue |
|
3,701 |
|
|
|
4,396 |
|
Other long-term liabilities |
|
36,759 |
|
|
|
22,476 |
|
Total long-term liabilities |
|
332,229 |
|
|
|
78,023 |
|
Total liabilities |
|
421,992 |
|
|
|
220,317 |
|
|
|
|
|
Stockholders’ equity: |
|
|
|
Common stock, par value $0.0001 per share—900,000 shares
authorized; 43,530 shares issued and 36,807 shares outstanding as
of September 30, 2023; 51,260 shares issued and 48,079 shares
outstanding as of December 31, 2022 |
|
4 |
|
|
|
5 |
|
Additional paid-in capital |
|
1,391,702 |
|
|
|
1,636,134 |
|
Accumulated deficit |
|
(825,783 |
) |
|
|
(829,542 |
) |
Accumulated other comprehensive loss |
|
(13,043 |
) |
|
|
— |
|
Treasury stock, at cost—6,723 shares as of September 30, 2023
and 3,181 shares as of December 31, 2022 |
|
(149,193 |
) |
|
|
(63,399 |
) |
Total stockholders’ equity |
|
403,687 |
|
|
|
743,198 |
|
Total liabilities and stockholders’ equity |
$ |
825,679 |
|
|
$ |
963,515 |
|
|
AVANTAX, INC. |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(Unaudited) (In thousands) |
|
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
Operating activities: |
|
|
|
Net income |
$ |
3,759 |
|
|
$ |
52,204 |
|
Less: Income from discontinued operations, net of income taxes |
|
1,921 |
|
|
|
47,484 |
|
Income from continuing operations |
|
1,838 |
|
|
|
4,720 |
|
Adjustments to reconcile income from continuing operations to net
cash from operating activities: |
|
|
|
Depreciation and amortization of acquired intangible assets |
|
30,291 |
|
|
|
27,863 |
|
Stock-based compensation |
|
17,678 |
|
|
|
14,782 |
|
Change in the fair value of acquisition-related contingent
consideration |
|
— |
|
|
|
(5,320 |
) |
Reduction of right-of-use lease assets |
|
1,235 |
|
|
|
1,103 |
|
Deferred income taxes |
|
(1,043 |
) |
|
|
(599 |
) |
Amortization of debt discount and issuance costs |
|
871 |
|
|
|
— |
|
Accretion of lease liabilities |
|
1,405 |
|
|
|
1,522 |
|
Other non-cash items |
|
4,610 |
|
|
|
4,218 |
|
Changes in operating assets and liabilities, net of acquisitions
and disposals: |
|
|
|
Accounts receivable, net |
|
(551 |
) |
|
|
(2,505 |
) |
Commissions and advisory fees receivable |
|
(1,498 |
) |
|
|
4,587 |
|
Prepaid expenses and other current assets |
|
(16,533 |
) |
|
|
(3,755 |
) |
Other long-term assets |
|
(17,276 |
) |
|
|
(14,829 |
) |
Accounts payable |
|
(3,760 |
) |
|
|
(5,047 |
) |
Commissions and advisory fees payable |
|
1,204 |
|
|
|
(4,137 |
) |
Lease liabilities |
|
(3,972 |
) |
|
|
(3,788 |
) |
Deferred revenue |
|
(1,037 |
) |
|
|
(1,447 |
) |
Accrued expenses and other current and long-term liabilities |
|
(77,023 |
) |
|
|
(7,459 |
) |
Net cash provided (used) by operating activities from continuing
operations |
|
(63,561 |
) |
|
|
9,909 |
|
Investing activities: |
|
|
|
Purchases of property, equipment, and software |
|
(8,257 |
) |
|
|
(12,601 |
) |
Asset acquisitions |
|
(8,017 |
) |
|
|
(3,743 |
) |
Net cash used by investing activities from continuing
operations |
|
(16,274 |
) |
|
|
(16,344 |
) |
Financing activities: |
|
|
|
Proceeds from credit facilities, net of debt discount and issuance
costs |
|
261,543 |
|
|
|
— |
|
Payments on credit facilities |
|
(3,375 |
) |
|
|
(35,906 |
) |
Acquisition-related fixed and contingent consideration
payments |
|
(287 |
) |
|
|
(14,548 |
) |
Stock repurchases |
|
(337,192 |
) |
|
|
(35,000 |
) |
Proceeds from issuance of stock through employee stock purchase
plan |
|
1,584 |
|
|
|
2,324 |
|
Proceeds from stock option exercises |
|
2,203 |
|
|
|
481 |
|
Tax payments from shares withheld for equity awards |
|
(4,346 |
) |
|
|
(2,090 |
) |
Net cash used by financing activities from continuing
operations |
|
(79,870 |
) |
|
|
(84,739 |
) |
Net cash used by continuing
operations |
|
(159,705 |
) |
|
|
(91,174 |
) |
Net cash provided by operating
activities from discontinued operations |
|
— |
|
|
|
69,508 |
|
Net cash provided (used) by
investing activities from discontinued operations |
|
2,212 |
|
|
|
(4,552 |
) |
Net cash provided by financing
activities from discontinued operations |
|
— |
|
|
|
— |
|
Net cash provided by
discontinued operations |
|
2,212 |
|
|
|
64,956 |
|
Net decrease in cash and cash
equivalents |
|
(157,493 |
) |
|
|
(26,218 |
) |
Cash and cash equivalents,
beginning of period |
|
263,928 |
|
|
|
100,629 |
|
Cash and cash equivalents, end
of period |
$ |
106,435 |
|
|
$ |
74,411 |
|
|
|
|
|
Supplemental cash flow
information: |
|
|
|
Cash paid for income taxes |
$ |
99,966 |
|
|
$ |
2,408 |
|
Cash paid for interest |
$ |
11,422 |
|
|
$ |
23,005 |
|
|
|
|
|
|
|
|
|
AVANTAX, INC.Revenue
Recognition(Unaudited) (In thousands)
Revenues by major category are presented below:
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Total revenue: |
|
|
|
|
|
|
|
Advisory |
$ |
108,393 |
|
$ |
95,070 |
|
$ |
309,234 |
|
$ |
306,394 |
Commission |
|
43,351 |
|
|
41,788 |
|
|
126,662 |
|
|
132,278 |
Asset-based |
|
33,444 |
|
|
21,147 |
|
|
100,524 |
|
|
33,774 |
Transaction and fee |
|
7,155 |
|
|
7,027 |
|
|
20,831 |
|
|
21,658 |
Total revenue |
$ |
192,343 |
|
$ |
165,032 |
|
$ |
557,251 |
|
$ |
494,104 |
|
AVANTAX,
INC.Reconciliations of Non-GAAP Financial Measures
to the Nearest Comparable GAAP Measures
(1)(Unaudited) (In thousands)
Adjusted EBITDA Reconciliation
(1) |
|
|
|
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net
income (loss) (2) |
$ |
(1,495 |
) |
|
$ |
(21,841 |
) |
|
$ |
3,759 |
|
|
$ |
52,204 |
|
Less:
Income (loss) from discontinued operations, net of income
taxes |
|
— |
|
|
|
(22,162 |
) |
|
|
1,921 |
|
|
|
47,484 |
|
Income (loss) from continuing operations, net of income taxes |
|
(1,495 |
) |
|
|
321 |
|
|
|
1,838 |
|
|
|
4,720 |
|
Stock-based compensation |
|
6,585 |
|
|
|
4,964 |
|
|
|
17,678 |
|
|
|
14,782 |
|
Depreciation and amortization of acquired intangible assets |
|
10,546 |
|
|
|
9,685 |
|
|
|
30,291 |
|
|
|
27,863 |
|
Interest expense and other, net |
|
5,854 |
|
|
|
158 |
|
|
|
12,337 |
|
|
|
423 |
|
Acquisition and integration—Excluding change in the fair value of
acquisition-related contingent consideration |
|
(100 |
) |
|
|
416 |
|
|
|
(17 |
) |
|
|
610 |
|
Acquisition and integration—Change in the fair value of
acquisition-related contingent consideration |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,320 |
) |
Contested proxy and other legal and consulting costs |
|
— |
|
|
|
(250 |
) |
|
|
694 |
|
|
|
3,865 |
|
Executive transition costs |
|
— |
|
|
|
— |
|
|
|
6,412 |
|
|
|
— |
|
Merger transaction costs |
|
7,763 |
|
|
|
— |
|
|
|
7,763 |
|
|
|
— |
|
TaxAct transaction related costs |
|
2,069 |
|
|
|
3,237 |
|
|
|
6,228 |
|
|
|
3,439 |
|
Reorganization costs |
|
3,938 |
|
|
|
— |
|
|
|
8,904 |
|
|
|
— |
|
Hedging program start-up costs |
|
— |
|
|
|
— |
|
|
|
583 |
|
|
|
— |
|
Income tax (benefit) expense |
|
(1,068 |
) |
|
|
(1,536 |
) |
|
|
524 |
|
|
|
(22,582 |
) |
Adjusted EBITDA (1) |
$ |
34,092 |
|
|
$ |
16,995 |
|
|
$ |
93,235 |
|
|
$ |
27,800 |
|
|
Non-GAAP Net Income and Non-GAAP Net Income Per Share
Reconciliation (1) |
|
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net income (loss) (2) |
$ |
(1,495 |
) |
|
$ |
(21,841 |
) |
|
$ |
3,759 |
|
|
$ |
52,204 |
|
Less: Income (loss) from
discontinued operations, net of income taxes |
|
— |
|
|
|
(22,162 |
) |
|
|
1,921 |
|
|
|
47,484 |
|
Income (loss) from continuing operations, net of income taxes |
|
(1,495 |
) |
|
|
321 |
|
|
|
1,838 |
|
|
|
4,720 |
|
Amortization of acquired
intangible assets |
|
6,404 |
|
|
|
6,342 |
|
|
|
18,973 |
|
|
|
19,435 |
|
Acquisition and
integration—Excluding change in the fair value of
acquisition-related contingent consideration |
|
(100 |
) |
|
|
416 |
|
|
|
(17 |
) |
|
|
610 |
|
Acquisition and
integration—Change in the fair value of acquisition-related
contingent consideration |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,320 |
) |
Contested proxy and other
legal and consulting costs |
|
— |
|
|
|
(250 |
) |
|
|
694 |
|
|
|
3,865 |
|
Executive transition
costs |
|
— |
|
|
|
— |
|
|
|
6,412 |
|
|
|
— |
|
Merger transaction costs |
|
7,763 |
|
|
|
— |
|
|
|
7,763 |
|
|
|
— |
|
TaxAct transaction related
costs |
|
2,069 |
|
|
|
3,237 |
|
|
|
6,228 |
|
|
|
3,439 |
|
Reorganization costs |
|
3,938 |
|
|
|
— |
|
|
|
8,904 |
|
|
|
— |
|
Hedging program start-up
costs |
|
— |
|
|
|
— |
|
|
|
583 |
|
|
|
— |
|
Unrealized MTM derivative
losses (gains) |
|
(239 |
) |
|
|
— |
|
|
|
637 |
|
|
|
— |
|
Tax impact of adjustments to
GAAP net income (loss) |
|
(4,823 |
) |
|
|
(2,315 |
) |
|
|
(11,601 |
) |
|
|
(5,234 |
) |
Non-GAAP Net Income (1) |
$ |
13,517 |
|
|
$ |
7,751 |
|
|
$ |
40,414 |
|
|
$ |
21,515 |
|
Per diluted share: |
|
|
|
|
|
|
|
Net income (loss) (2) (3) |
$ |
(0.04 |
) |
|
$ |
(0.45 |
) |
|
$ |
0.09 |
|
|
$ |
1.06 |
|
Less: Income (loss) from
discontinued operations, net of income taxes |
|
— |
|
|
|
(0.46 |
) |
|
|
(0.05 |
) |
|
|
(0.96 |
) |
Income (loss) from continuing operations, net of income taxes |
|
(0.04 |
) |
|
|
0.01 |
|
|
|
0.04 |
|
|
|
0.10 |
|
Amortization of acquired
intangible assets |
|
0.18 |
|
|
|
0.13 |
|
|
|
0.46 |
|
|
|
0.40 |
|
Acquisition and
integration—Excluding change in the fair value of
acquisition-related contingent consideration |
|
— |
|
|
|
0.01 |
|
|
|
— |
|
|
|
0.01 |
|
Acquisition and
integration—Change in the fair value of acquisition-related
contingent consideration |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.11 |
) |
Contested proxy and other
legal and consulting costs |
|
— |
|
|
|
(0.01 |
) |
|
|
0.02 |
|
|
|
0.08 |
|
Executive transition
costs |
|
— |
|
|
|
— |
|
|
|
0.16 |
|
|
|
— |
|
Merger transaction costs |
|
0.21 |
|
|
|
— |
|
|
|
0.19 |
|
|
|
— |
|
TaxAct transaction related
costs |
|
0.05 |
|
|
|
0.07 |
|
|
|
0.15 |
|
|
|
0.07 |
|
Reorganization costs |
|
0.10 |
|
|
|
— |
|
|
|
0.22 |
|
|
|
— |
|
Hedging program start-up
costs |
|
— |
|
|
|
— |
|
|
|
0.01 |
|
|
|
— |
|
Unrealized MTM derivative
losses (gains) |
|
(0.01 |
) |
|
|
— |
|
|
|
0.02 |
|
|
|
— |
|
Tax impact of adjustments to
GAAP net income (loss) |
|
(0.13 |
) |
|
|
(0.05 |
) |
|
|
(0.28 |
) |
|
|
(0.11 |
) |
Non-GAAP Net Income per share — Diluted (1) |
$ |
0.36 |
|
|
$ |
0.16 |
|
|
$ |
0.99 |
|
|
$ |
0.44 |
|
Diluted weighted average shares outstanding |
|
37,791 |
|
|
|
49,016 |
|
|
|
40,940 |
|
|
|
49,153 |
|
|
Notes to Reconciliations of Non-GAAP Financial Measures to
the Nearest Comparable GAAP Measures |
|
|
(1) |
We define Adjusted EBITDA as net
income (loss), determined in accordance with GAAP, excluding the
effects of discontinued operations, stock-based compensation,
depreciation and amortization of acquired intangible assets,
interest expense and other, net, acquisition and integration costs,
contested proxy and other legal and consulting costs, executive
transition costs, Merger transaction costs, TaxAct transaction
related costs, reorganization costs, hedging program start-up
costs, and income tax (benefit) expense. Interest expense and
other, net primarily consists of interest expense, net, unrealized
mark-to-market (“MTM”) derivative losses (gains)
for our interest rate cap derivative instruments, and other
non-operating income. It does not include the income associated
with the transition services agreement signed in connection with
the TaxAct Sale as this income offsets costs included within income
from continuing operations, or realized income or loss associated
with our interest rate cap derivative instruments. Acquisition and
integration costs primarily relate to the acquisitions of Avantax
Planning Partners and 1st Global. Hedging program start-up costs
include consulting and accounting costs incurred for the
implementation of our cash sweep interest rate hedging program.
Merger transaction costs include consulting and legal costs
incurred for the plan of merger with Aretec Group, Inc., an
affiliate of Cetera Financial Group. Inc. |
|
|
|
We believe that Adjusted EBITDA
provides meaningful supplemental information regarding our
performance. We use this non-GAAP financial measure for internal
management and compensation purposes, when publicly providing
guidance on possible future results, and as a means to evaluate
period-to-period comparisons. We believe that Adjusted EBITDA is a
common measure used by investors and analysts to evaluate our
performance, that it provides a more complete understanding of the
results of operations and trends affecting our business when viewed
together with GAAP results, and that management and investors
benefit from referring to this non-GAAP financial measure. Items
excluded from Adjusted EBITDA are significant and necessary
components to the operations of our business and, therefore,
Adjusted EBITDA should be considered as a supplement to, and not as
a substitute for or superior to, GAAP net income (loss). Other
companies may calculate Adjusted EBITDA differently and, therefore,
our Adjusted EBITDA may not be comparable to similarly titled
measures of other companies. |
|
|
|
We define Non-GAAP Net Income
(Loss) as net income (loss), determined in accordance with GAAP,
excluding the effects of discontinued operations, amortization of
acquired intangible assets, acquisition and integration costs,
contested proxy and other legal and consulting costs, executive
transition costs, Merger transaction costs, TaxAct transaction
related costs, reorganization costs, hedging program start-up
costs, unrealized MTM derivative losses (gains) for our interest
rate cap derivative instruments, and the related tax impact of
those adjustments. Unrealized MTM derivative losses (gains) include
the unrealized portion of gains and losses that are caused by
changes in the fair values of derivatives which do not qualify for
hedge accounting treatment under GAAP. It does not include realized
income or loss associated with these instruments. The tax impact of
these adjustments is determined using the income tax rates in
effect for the applicable period, adjusted for any potentially
non-deductible amounts. |
|
|
|
We believe that Non-GAAP Net
Income (Loss) and Non-GAAP Net Income (Loss) per share provide
meaningful supplemental information to management, investors, and
analysts regarding our performance and the valuation of our
business by excluding items in the statement of comprehensive
income (loss) that we do not consider part of our ongoing
operations or that have not been, or are not expected to be,
settled in cash. Additionally, we believe that Non-GAAP Net Income
(Loss) and Non-GAAP Net Income (Loss) per share are common measures
used by investors and analysts to evaluate our performance and the
valuation of our business. Non-GAAP Net Income (Loss) and Non-GAAP
Net Income (Loss) per share should be evaluated in light of our
financial results prepared in accordance with GAAP and should be
considered as a supplement to, and not as a substitute for or
superior to, GAAP net income (loss) and GAAP net income (loss) per
share. Other companies may calculate Non-GAAP Net Income (Loss) and
Non-GAAP Net Income (Loss) per share differently, and, therefore,
these measures may not be comparable to similarly titled measures
of other companies. |
|
|
(2) |
As presented in the unaudited
condensed consolidated statements of comprehensive income
(loss). |
|
|
(3) |
Any difference in the “per
diluted share” amounts between this table and the condensed
consolidated statements of operations is due to using different
diluted weighted average shares outstanding in the event that there
is GAAP net loss but Non-GAAP Net Income and vice versa. |
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