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
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®
Source: Avantax
Investor Relations Contact:
(972) 870-6463
IR@avantax.com
Media Contacts:
(972) 870-6654
tony.katsulos@avantax.com
StreetCred PR for Avantax
(402) 740-2047
kendra@streetcredpr.com
avantax@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. | |||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |||||||||||||||
(Unaudited) (In thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
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) | |||||||
2023 | 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 | |||||
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 | 4 | 5 | |||||
Additional paid-in capital | 1,391,702 | 1,636,134 | |||||
Accumulated deficit | (825,783 | ) | (829,542 | ) | |||
Accumulated other comprehensive loss | (13,043 | ) | — | ||||
(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 | |||||||
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 Ended | Nine Months Ended | ||||||||||
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 Ended | Nine Months Ended | ||||||||||||||
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 | — | |||||||||||
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 Ended | Nine Months Ended | ||||||||||||||
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 | — | |||||||||||
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 | — | |||||||||||
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, |
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, | |
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. |
Source: Avantax
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