| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Risks and Uncertainties Estimates and assumptions about future events and their effects on the Company cannot be determined with certainty and therefore require the exercise of judgment. The Company is not aware of any specific events or circumstances that would require the Company to update its estimates, assumptions or judgments or revise the carrying value of its assets or liabilities. The Company will update the estimates and assumptions underlying the consolidated financial statements in future periods as events and circumstances develop. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). For the year ended December 31, 2022, the Company reclassified $6,611 in the accompanying consolidated statements of income and comprehensive income from spread-based expenses to offset spread-based revenue to account for interest credited to customer accounts on a net basis in order to correct an immaterial error. The adjustment had no effect on the current year or previous years’ reported net income, earnings per-share, balance sheet, stockholders’ equity, and cash flows. Management has deemed the error to be immaterial to the financial statements taken as a whole. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Segment Information The Company operates as one operating segment. The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to intangible assets and goodwill, useful lives of intangible assets and property and equipment, internal use software, income taxes and contingent liabilities, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Concentration of Credit Risk and Significant Clients and Suppliers The Company’s financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company deposits its cash primarily with two financial institutions, and accordingly, such deposits regularly exceed federally insured limits. Foreign Currency Policy The Company’s functional currency is the US Dollar, and the related gains and losses from foreign currency denominated transactions and the remeasurement of foreign currency denominated balance sheet accounts are included in other (income) expense, net in the consolidated statements of income and comprehensive income. Geographic Sources of Revenue Revenues attributable to customers outside of the United States totaled $16,054, $14,484, and $6,926 in the years ended December 31, 2023, 2022, and 2021 respectively. No single customer accounted for more than 10% of the Company’s revenue in any of the periods presented. There were no customers that represented more than 10% of the Company’s accounts receivable balance as of December 31, 2023 and 2022, respectively. Cash, Cash Equivalents and Restricted Cash Certificates of deposit, money market funds and other time deposits with original maturities of three months or less are considered cash equivalents. Restricted cash consists of certificate of deposits the Company maintains in liquid capital in accordance with Arizona Revised Statutes requirements governing trust companies. See Note 18 for details regarding capital requirements. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows: December 31, 2023 2022 2021 Cash and cash equivalents $ 217,680 $ 123,274 $ 76,707 Restricted cash 15,000 13,000 13,000 Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 232,680 $ 136,274 $ 89,707 Investment Securities The Company’s investments primarily comprise of equity and debt security investments for the Company’s rabbi trust and investment securities funds. The Company may sell these securities at any time for use in its current operations or for other purposes. These funds invest in securities which are actively traded and fair values for these securities are based on quoted market prices. Unrealized holding gains and losses are reported as other (income) expense, net. Realized gains and losses from sales are determined on a specific-identification basis. Dividend and interest income are recognized when earned. Fees and Other Receivables Fee and other receivables represent service fees and advisory fees receivable, interest earned on cash assets custodied through ATC as well as miscellaneous custody fees in arrears. Fee and other receivables are recorded at the invoiced amount, net of allowances. These allowances are based on historical experience and evaluation of potential risk of loss associated with delinquent accounts. The allowance for doubtful accounts was $179 and $39 as of December 31, 2023 and 2022, respectively. Fair Value Measurements The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and other accrued expenses, approximate their fair values due to their relatively short maturity. The accounting guidance for fair value measurements establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: • Level 1 – Observable inputs that reflect quoted prices for identical assets or liabilities in active markets. • Level 2 – Inputs that are directly or indirectly observable in the marketplace. • Level 3 – Unobservable inputs that are supported by little or no market activity. As of each reporting period, all assets recorded at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. See Note 9 for more information regarding fair value measurements. Business Combinations When the Company acquires a business, management allocates the purchase price to the net tangible and identifiable intangible assets acquired. Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires management to make significant estimates in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on market and income approaches that include significant unobservable inputs. These estimates are inherently uncertain and unpredictable. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Goodwill, Acquired Intangible Assets and Impairment of Long-Lived Assets Goodwill represents the excess purchase consideration of an acquired business over the fair value of the net tangible and identifiable intangible assets. Goodwill is evaluated for impairment annually on October 31, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate or a significant decrease in expected cash flows. An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value. The Company has the option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount and determine whether further action is needed. If after assessing the totality of events or circumstances, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. If after assessing the totality of events or circumstances it is determined that it is more likely than not that the carrying value of the reporting unit may exceed its fair value when considering qualitative factors, a quantitative goodwill impairment evaluation is performed. No impairment charges related to goodwill were recorded during the years ended December 31, 2023, 2022 and 2021. Indefinite-lived intangible assets are tested for impairment annually and whenever events or changes in circumstances indicate the carrying value of indefinite-lived intangible assets may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, attrition of broker-dealers or enterprise customers, or changes in expected future cash flows. An impairment exists if the carrying value of the indefinite-lived intangible asset exceeds its fair value. The Company’s indefinite-lived intangible assets consist of broker-dealer relationships and enterprise distribution channel customer relationships. No impairment charges related to indefinite-lived intangible assets were recorded during the years ended December 31, 2023, 2022 and 2021. There were no changes in the indefinite useful life assigned to indefinite-lived intangible assets during the years ended December 31, 2023, 2022 and 2021. AssetMark’s broad array of wealth management solutions are sold to individual investors through financial advisers associated with broker-dealers. The Company has long-standing, established relationships with these broker-dealers that are expected to result in future revenue and profit. While the relationships with the broker-dealers are contractual, the agreements have no fixed expiration dates or renewal terms, and there have been no instances of terminated agreements by either side to-date. Based on the foregoing, the acquired relationships with broker-dealers are identified and valued as a discrete indefinite-lived intangible asset. Acquired indefinite-lived intangible assets also consists of enterprise distribution channel relationships with financial institutions that are expected to result in future revenue and profit. While these relationships are contractual, they have no fixed expiration date and are expected to be renewed indefinitely. No such contracts have been terminated by either side to date. No impairment charges related to indefinite-lived intangible assets were recorded during the years ended December 31, 2023, 2022 and 2021. Acquired definite-lived intangible assets consist of assets resulting from the Company’s acquisitions. Acquired definite-lived intangible assets are recorded at fair value on the date of acquisition and amortized over their estimated useful lives on a straight-line basis. The carrying amounts of long-lived assets, including property and equipment, capitalized internal-use software, and acquired definite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated. Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to the future undiscounted cash flows that the assets or the asset group are expected to generate. If the carrying value of the assets are not recoverable, the impairment recognized is measured as the amount by which the carrying value exceeds its fair value. No impairment charges related to long-lived assets and acquired definite-lived intangible assets were recorded during the years ended December 31, 2023, 2022 and 2021. Property and Equipment Property and equipment consist primarily of hardware, furniture and equipment and leasehold improvements. Depreciation is calculated on a straight‑line basis over the estimated useful lives of the related asset, generally three The following table shows balances of major classes of depreciable assets as of the date shown: December 31, 2023 2022 Computer software and equipment $ 10,727 $ 9,760 Furniture and equipment 4,502 3,918 Leasehold improvements 8,951 7,649 Total property and equipment 24,180 21,327 Less: accumulated depreciation (15,415) (12,832) Property, plant and equipment, net $ 8,765 $ 8,495 Capitalized Internal-Use Software The Company capitalizes certain costs incurred during the application development stage in connection with software development for its platform and internal use. Costs related to the preliminary project activities and post-implementation activities are expensed as incurred. Capitalized costs are recorded as part of capitalized software, net on the Company’s consolidated balance sheets. Maintenance and training costs are expensed as incurred. Capitalized internal-use software costs are amortized on a straight-line basis over the software estimated useful life, which is generally five years to nine years. The Company records amortization related to capitalized internal-use software within depreciation and amortization expense in the consolidated statements of income and comprehensive income. The Company evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. There were impairments of $393, $303 and $426 of internally developed software during the years ended December 31, 2023, 2022 and 2021, respectively. Amortization expense for the years ended December 31, 2023, 2022 and 2021 was $22,476, $19,737 and $28,280, respectively. Accumulated amortization was $158,930 and $136,858 as of December 31, 2023 and 2022, respectively. Revenue Recognition The Company accounts for its revenue arrangements in accordance with FASB Topic 606 - Revenue from Contracts with Customers (“ASC 606”). The Company recognizes revenue from services related to asset-based revenue, spread-based revenue, subscription-based revenue and other revenue. • Asset-based revenue — The Company primarily derives revenue from fees assessed against customer’s assets under management or administration for services the Company provides to its customers. Such services include investment manager due diligence and research, portfolio diagnostics, proposal generation, investment model management, rebalancing and trading, portfolio performance reporting and monitoring solutions, billing, and back office and middle-office operations and custody services. Investment decisions for assets under management or administration are made by the Company’s customers. The fee arrangements are based on a percentage applied to the customers’ assets under management or administration. The performance obligation is satisfied over time because the customer is receiving and consuming the benefits as they are provided by the Company. Fees are generally calculated, billed and collected quarterly in advance on the preceding quarter-end customer asset values, and are recognized as revenue at the time the services are provided in the period. Fees related to assets under management or administration increase or decrease based on values of existing customer accounts. The values are affected by inflows or outflows of customer funds and market fluctuations. • Spread-based revenue — The Company’s spread-based revenue is derived from providing Complete Cash Solutions to banks and clients. Spread-based revenue consists of the interest rate return earned on cash custodied at ATC. ATC utilizes third-party banks that accept deposits of client cash to generate interest from deposits which earns spread income for the Company. A portion of the proceeds from those investments are credited to client accounts. ATC is paid interest-rate sensitive fees calculated by reference to such deposits. The Company recognizes interest paid to clients on a net basis as the payment to the end clients is consideration payable to the customer and reduces the transaction price accordingly. The performance obligation is satisfied over time because the banks and clients are receiving and consuming the benefits of the Complete Cash Solutions as they are provided by the cash sweep provider. • Subscription-based revenue — Subscription-based revenue represents revenue recognized from subscription fee arrangements in connection with financial planning and wealth management software solutions for use as a hosted application. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the solution is made available to the customer. • Other revenue — Other revenue consists primarily of interest earned on operating cash held by the Company. The Company has applied the practical expedient to recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period would have been one year or less. These costs are included in asset-based expenses on the consolidated statements of income and comprehensive income. Asset-Based Expenses Asset-based expenses are costs incurred by the Company directly related to the generation of asset-based revenue. Fees paid to third-party strategists, investment managers, proprietary fund sub-advisers and investment advisers are calculated based on a percentage of the customers’ assets under management or administration. As a practical expedient, these costs are paid monthly and quarterly in advance on the preceding quarter-end customer asset values, and expensed as incurred over the period of time that the services are expected to be provided to customers, since the amortization of costs are in one year or less. See Note 12 for a breakout of these costs. Spread-Based Expenses The Company recognizes spread-based expenses when costs are incurred. Spread-based expenses relate to expenses paid to ATC’s third-party administrator for administering the custodian’s Complete Cash Solutions program. Share-Based Compensation Share-based compensation related to stock options and stock appreciation rights issued to officers and directors is measured based on the grant date fair value of the award and is recognized on a straight-line basis over the requisite service period. The Company uses the Black-Scholes options pricing model to estimate the fair value of stock options and equity-settled stock appreciation rights. The risk-free interest rate is the U.S. Treasury Yield that corresponds with the expected term. Expected volatility is estimated based on the volatility of a group of comparable public companies. The expected term was estimated using the simplified method due to limited historical information. The Company does not expect to pay dividends on its common shares. The Company uses the Lattice-Based pricing model to estimate the fair value of cash-settled stock appreciation rights. The risk-free interest rate is the U.S. Treasury Yield that corresponds with the expected term. Expected volatility is estimated based on the volatility of a group of comparable public companies. The expected term was estimated using the simplified method due to limited historical information. The Company does not expect to pay dividends related to the cash-settled stock appreciation rights. The suboptimal exercise multiple is estimated using published academic studies. The Company classifies cash-settled stock appreciation rights as liabilities and is included in accrued liabilities and other current liabilities in the Company's consolidated balance sheets. Cash-settled stock appreciation rights are accounted for at fair value and remeasured at each reporting date with any increases, or decreases, in the fair value will increase, or decrease, the associated liabilities and result in adjustments to income for the associated valuation losses or gains. Share-based compensation related to restricted stock awards and restricted stock units are measured on the grant date fair value of the award based on intrinsic value and are recognized on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur. See Note 15 for additional information related to share-based compensation . Operating Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in prepaid expenses and other current assets, operating lease right-of-use (“ROU”) assets, accrued liabilities and other current liabilities, and long-term portion of operating lease liabilities on the Company’s consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligations to make payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the remaining lease term. The Company uses an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components. The Company has elected to use the practical expedient to exclude the non-lease component from the lease for all asset classes. The majority of the Company’s lease agreements are facility leases. See Note 11 for additional information related to leases. Income Taxes The Company uses the asset-and-liability method of accounting for income taxes. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to apply to taxable income for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce its deferred tax assets to the net amount that the Company believes is more likely than not to be realized. In assessing the need for a valuation allowance, the Company has considered its historical levels of income, existence of available offsetting deferred tax liabilities, expectations of future taxable income and ongoing tax planning strategies. The Company recognizes and measure tax benefits from uncertain tax positions using a two-step approach. The first step is to evaluate the tax position taken or expected to be taken by determining if the weight of available evidence indicates that it is more likely than not that the tax position will be sustained in an audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. Significant judgment is required to evaluate uncertain tax positions. Although the Company believes that it has adequately reserved for its uncertain tax positions, it can provide no assurance that the final tax outcome of these matters will not be materially different. The Company evaluates its uncertain tax positions on a regular basis and evaluations are based on a number of factors, including changes in facts and circumstances, changes in tax law, correspondence with tax authorities during the course of an audit and effective settlement of issues. The Company follows the policy of releasing residual tax effects from accumulated other comprehensive income based on a portfolio approach , whereby the Company releases the residual tax effects only after the entire accumulated other comprehensive income adjustment has been reversed (e.g., when all available-for-sale debt securities are sold). The Company did not make an election to reclassify the income tax effects of the Tax Cuts and Jobs Act from accumulated other comprehensive income to retained earnings. Net Income per Share Basic net income per share is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The computation of diluted net income per share is similar to the computation of basic net income per share, except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if dilutive potential shares of common stock had been issued. Recently Adopted Accounting Pronouncements In August 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers . The amendments in this update require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts. The Company adopted the new guidance prospectively on January 1, 2023. The adoption of ASU 2021-08 did not have a material impact on the Company's consolidated financial statements. Recent Accounting Pronouncements – Issued Not Yet Adopted In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures. The amendments in this update expands the annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The guidance becomes effective for the Company's annual fiscal period in 2024 and interim fiscal periods in 2025. Early adoption of the standard is permitted. The Company is currently evaluating the effect that ASU 2023-07 will have on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures. The amendments in this update improve the effectiveness of income tax disclosures about income tax information through improvements primarily related to the rate reconciliation and income taxes paid information. The guidance becomes effective for the Company beginning January 1, 2025. Early adoption of the standard is permitted. The Company is currently evaluating the effect that ASU 2023-09 will have on its consolidated financial statements. |
