Silvercrest Asset Management Group Inc. Reports Q3 2020 Results

NEW YORK, Nov. 5, 2020 /PRNewswire/ -- Silvercrest Asset Management Group Inc. (NASDAQ: SAMG) (the "Company" or "Silvercrest") today reported the results of its operations for the quarter ended September 30, 2020.

Business Update

Silvercrest's discretionary assets under management, which drive top-line revenue, grew approximately 4% during the third quarter to $17.9 billion as of September 30, 2020. The growth in discretionary assets under management was supported by markets increasing asset values by $0.7 billion, along with $0.2 billion in new client accounts. These increases were offset by outflows of $0.2 billion, primarily for tax payments as a result of delayed tax deadlines due to the coronavirus crisis. The firm's total assets under management during the quarter increased approximately 3% to end the third quarter with $24.4 billion in total assets under management.

Due to this year's market recovery, continued organic growth, and our accretive acquisition in the second half of 2019, the firm's revenue, adjusted net income¹, adjusted EBITDA¹ and adjusted EBITDA margins¹ for the nine months ended September 30, 2020 have each grown year over year. For the nine months ended September 30, 2020, adjusted diluted earnings per share¹ increased approximately 13% year over year.

Silvercrest's Outsourced Chief Investment Officer (OCIO) contributed meaningfully to new business development in the third quarter and is poised to cross important AUM thresholds to be considered for new mandates. We continue to be proud of our progress in that business.

Silvercrest's institutional asset management pipeline is also rebuilding, along with new initiatives, and we expect the institutional business to improve and contribute new AUM to the firm.

Regardless of the environment, Silvercrest will continue to opportunistically seek to effectively deploy capital to enhance and complement its organic growth. Silvercrest has successfully made investments to organically grow the business—and will continue to make investments—with its cash flow and reserves. We have hired new high net worth portfolio management professionals in New York and will continue to add new talent, both to maintain a high level of client service and to grow the business.

On November 4, 2020, the Company's Board of Directors declared a quarterly dividend of $0.16 per share of Class A common stock.  The dividend will be paid on or about December 18, 2020 to shareholders of record as of the close of business on December 11, 2020.

Third Quarter 2020 Highlights

• Total Assets Under Management ("AUM") of $24.4 billion, inclusive of discretionary AUM of $17.9 billion and non-discretionary AUM of $6.5 billion at September 30, 2020.
• Revenue of $27.2 million.
• U.S. Generally Accepted Accounting Principles ("GAAP") consolidated net income and net income attributable to Silvercrest of $3.5 million and $2.1 million, respectively.
• Basic and diluted net income per share of $0.22.
• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")¹ of $8.1 million.
• Adjusted net income¹ of $5.1 million.
• Adjusted basic and diluted earnings per share^{1, 2} of $0.35.

The table below presents a comparison of certain GAAP and non-GAAP ("adjusted") financial measures and AUM.

AUM at $24.4 billion

Silvercrest's discretionary assets under management increased by $0.4 billion, or 2.3%, to $17.9 billion at September 30, 2020 from $17.5 billion at September 30, 2019.  The increase was attributable to client inflows of $5.0 billion, partially offset by client outflows of $4.5 billion and market depreciation of $0.1 billion.  Silvercrest's total AUM increased by $0.9 billion, or 3.8%, to $24.4 billion at September 30, 2020 from $23.5 billion at September 30, 2019.  The increase was attributable to client inflows of $5.3 billion and market appreciation of $0.4 billion, partially offset by client outflows of $4.9 billion. 

Silvercrest's discretionary assets under management increased by $0.6 billion, or 3.5%, to $17.9 billion at September 30, 2020 from $17.3 billion at June 30, 2020.  The increase was attributable to client inflows of $0.8 billion and market appreciation of $0.7 billion, partially offset by client outflows of $0.9 billion.  Silvercrest's total AUM increased by $0.6 billion, or 2.5%, to $24.4 billion at September 30, 2020 from $23.8 billion at June 30, 2020.  The increase was attributable to client inflows of $0.9 billion and market appreciation of $0.7 billion, partially offset by client outflow of $1.0 billion.

Assets under management as of September 30, 2020 as compared to September 30, 2019 and June 30, 2020 continued to be impacted by the effects of COVID-19 on financial markets during the quarter ended March 31, 2020.

Third Quarter 2020 vs. Third Quarter 2019

Revenue decreased by $0.6 million, or 2.4%, to $27.2 million for the three months ended September 30, 2020, from $27.8 million for the three months ended September 30, 2019. This decrease was driven by the continued impact of COVID-19 on the financial markets during the quarter ended March 31, 2020 which caused a reduction in assets under management, as well as net client outflows during the quarter ended September 30, 2020. This was partially offset by market appreciation during the current quarter. 

Total expenses increased by $0.7 million, or 3.2%, to $22.2 million for the three months ended September 30, 2020 from $21.5 million for the three months ended September 30, 2019. Compensation and benefits expense increased by $0.1 million, or 0.3%, to $15.2 million for the three months ended September 30, 2020 from $15.1 million for the three months ended September 30, 2019. The increase was primarily attributable to an increase in salaries and benefits of $0.3 million primarily as a result of merit-based increases and newly hired staff, partially offset by a decrease in equity based compensation expense of $0.2 million due to a decrease in the number of unvested restricted stock units and unvested non-qualified stock options outstanding.  General and administrative expenses increased by $0.7 million, or 10.0%, to $7.1 million for the three months ended September 30, 2020 from $6.4 million for the three months ended September 30, 2019. This was primarily attributable to an increase in the fair value of contingent consideration related to the Cortina Acquisition of $1.7 million and an increase in portfolio and systems expenses of $0.2 million partially offset by a decrease in professional fees of $0.9 million, a decrease in travel and entertainment expenses of $0.2 million as a result of the coronavirus pandemic, a decrease in office expense of $0.1 million as a result of the coronavirus pandemic and a decrease in storage and moving expenses of $0.1 million.

Consolidated net income was $3.5 million or 12.8% of revenue for the three months ended September 30, 2020 as compared to consolidated net income of $4.8 million or 17.3% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $2.1 million, or $0.22 per basic and diluted share for the three months ended September 30, 2020.   Our Adjusted Net Income¹ was $5.1 million, or $0.35 per adjusted basic and adjusted diluted² share for the three months ended September 30, 2020.

Adjusted EBITDA¹ was $8.1 million or 29.9% of revenue for the three months ended September 30, 2020 as compared to $8.9 million or 32.1% of revenue for the same period in the prior year.

Nine Months Ended September 30, 2020 vs. Nine Months Ended September 30, 2019

Revenue increased by $5.3 million, or 7.1%, to $79.6 million for the nine months ended September 30, 2020, from $74.3 million for the nine months ended September 30, 2019. This increase was driven by net client inflows in discretionary assets under management, including $1.7 billion in assets under management acquired on July 1, 2019 in connection with the Cortina Acquisition, partially offset by net client outflows and market depreciation during the quarter ended March 31, 2020. Cortina revenue for the nine months ended September 30, 2020 was $8.4 million. Revenue for the first three quarters of 2020 is primarily based on market values as of the end of the respective prior quarter, and as such was partially affected by declines in the financial markets caused by COVID-19 during the quarter ended March 31,2020. 

Total expenses increased by $1.0 million, or 1.8%, to $60.6 million for the nine months ended September 30, 2020 from $59.6 million for the nine months ended September 30, 2019. Compensation and benefits expense increased by $1.7 million, or 4.1%, to $44.2 million for the nine months ended September 30, 2020 from $42.5 million for the nine months ended September 30, 2019. The increase was primarily attributable to an increase in salaries and benefits expense of $2.1 million primarily as a result of merit-based increases and newly hired staff, including the addition of Cortina staff and an increase in the accrual for bonuses of $1.3 million, partially offset by a decrease in equity based compensation expense of $1.7 million due to a decrease in the number of unvested restricted stock units and unvested non-qualified stock options outstanding.  General and administrative expenses decreased by $0.7 million, or 3.9%, to $16.4 million for the nine months ended September 30, 2020 from $17.1 million for the nine months ended September 30, 2019. The decrease was primarily attributable to a decrease in the fair value of contingent consideration related to the Cortina Acquisition of $0.5 million, a decrease in travel and entertainment expenses of $0.5 million as a result of the coronavirus pandemic, a decrease in professional fees of $1.0 million, a decrease in office expense of $0.1 million as a result of the coronavirus pandemic, a decrease in printing costs of $0.1 million and a decrease in storage and moving expenses of $0.3 million partially offset by an increase in depreciation and amortization expense of $0.8 million related mainly to the amortization of intangible assets related to the Cortina Acquisition and to the renovation of our office space in New York City, an increase in occupancy and related expenses of $0.3 million related to the increased costs of cleaning due to the coronavirus pandemic, an increase in portfolio and systems expenses of $0.5 million, an increase in the fair value of contingent consideration related to the Jamison Acquisition of $0.1 million and an increase in the fair value of contingent consideration related to the Cappiccille Acquisition of $0.1 million.

Consolidated net income was $14.0 million or 17.5% of revenue for the nine months ended September 30, 2020 as compared to $11.2 million or 15.1% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $8.1 million, or $0.85 per basic and diluted share for the nine months ended September 30, 2020.   Our Adjusted Net Income¹ was $14.1 million, or $0.98 per adjusted basic share and $0.97 per adjusted diluted share² for the nine months ended September 30, 2020.

Adjusted EBITDA¹ was $23.0 million or 28.9% of revenue for the nine months ended September 30, 2020 as compared to $21.3 million or 28.6% of revenue for the same period in the prior year.

Liquidity and Capital Resources

Cash and cash equivalents were $48.2 million at September 30, 2020, compared to $52.8 million at December 31, 2019.  As of September 30, 2020, there was $13.5 million outstanding under our term loan with City National Bank and nothing outstanding on our revolving credit facility with City National Bank. 

Total Silvercrest Asset Management Group Inc.'s equity was $69.5 million at September 30, 2020.  We had 9,544,607 shares of Class A common stock outstanding and 4,827,731 shares of Class B common stock outstanding at September 30, 2020.

Non-GAAP Financial Measures

To provide investors with additional insight, promote transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making, we supplement our consolidated financial statements presented on a basis consistent with GAAP with Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Earnings Per Share which are non-GAAP financial measures of earnings.  These adjustments, and the non-GAAP financial measures that are derived from them, provide supplemental information to analyze our operations between periods and over time. Investors should consider our non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

• EBITDA represents net income before provision for income taxes, interest income, interest expense, depreciation and amortization.
• We define Adjusted EBITDA as EBITDA without giving effect to the Delaware franchise tax, professional fees associated with acquisitions or financing transactions, gains on extinguishment of debt or other obligations related to acquisitions, impairment charges and losses on disposals or abandonment of assets and leaseholds, client reimbursements and fund redemption costs, severance and other similar expenses, but including partner incentive allocations, prior to our initial public offering, as an expense. We feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted EBITDA, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring earnings of the Company, taking into account earnings attributable to both Class A and Class B shareholders.
• Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by total revenue. We feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted EBITDA Margin, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring profitability of the Company, taking into account profitability attributable to both Class A and Class B shareholders.
• Adjusted Net Income represents recurring net income without giving effect to professional fees associated with acquisitions or financing transactions, losses on forgiveness of notes receivable from our principals, gains on extinguishment of debt or other obligations related to acquisitions, impairment charges and losses on disposals or abandonment of assets and leaseholds, client reimbursements and fund redemption costs, severance and other similar expenses, but including partner incentive allocations, prior to our initial public offering, as an expense. Furthermore, Adjusted Net Income includes income tax expense assuming a blended corporate rate of 26%. We feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted Net Income, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring income of the Company, taking into account income attributable to both Class A and Class B shareholders.
• Adjusted Earnings Per Share represents Adjusted Net Income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic Adjusted Earnings Per Share, and to the extent dilutive, we add unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted Adjusted Earnings Per Share. As a result of our structure, which includes a non-controlling interest, we feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted Earnings Per Share, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring earnings per share of the Company as a whole as opposed to being limited to our Class A common stock.

Conference Call

The Company will host a conference call on November 6, 2020, at 8:30 am (Eastern Time) to discuss these results. Hosting the call will be Richard R. Hough III, Chief Executive Officer and President and Scott A. Gerard, Chief Financial Officer. Listeners may access the call by dialing 1-844-836-8743 or for international listeners the call may be accessed by dialing 1-412-317-5723.  An archived replay of the call will be available after the completion of the live call on the Investor Relations page of the Silvercrest website at http://ir.silvercrestgroup.com/.

Forward-Looking Statements and Other Disclosures

This release contains, and from time to time our management may make, forward-looking statements within the meaning of  Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.  These forward-looking statements are subject to risks, uncertainties and assumptions.  These statements are only predictions based on our current expectations and projections about future events. Important factors that could cause actual results, level of activity, performance or achievements to differ materially from those indicated by such forward-looking statements include but are not limited to: incurrence of net losses, fluctuations in quarterly and annual results, adverse economic or market conditions, our expectations with respect to future levels of assets under management, inflows and outflows, our ability to retain clients from whom we derive a substantial portion of our assets under management, our ability to maintain our fee structure, our particular choices with regard to investment strategies employed, our ability to hire and retain qualified investment professionals, the cost of complying with current and future regulation coupled with the cost of defending ourselves from related investigations or litigation, failure of our operational safeguards against breaches in data security, privacy, conflicts of interest or employee misconduct, our expected tax rate, and our expectations with respect to deferred tax assets,  adverse economic or market conditions, including the continued adverse effects of the coronavirus pandemic, incurrence of net losses, adverse effects of management focusing on implementation of a growth strategy, failure to develop and maintain the Silvercrest brand and other factors disclosed under "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2019 which is accessible on the SEC's website at www.sec.gov.  We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

About Silvercrest

Silvercrest was founded in April 2002 as an independent, employee-owned registered investment adviser. With offices in New York, Boston, Virginia, New Jersey, California and Wisconsin, Silvercrest provides traditional and alternative investment advisory and family office services to wealthy families and select institutional investors.

 

 

SOURCE Silvercrest Asset Management Group Inc.