Silvercrest Asset Management Group Inc. Reports Q4 and Year-end 2013 Results

NEW YORK, March 13, 2014 /PRNewswire/ -- Silvercrest Asset Management Group Inc. (NASDAQ: SAMG) (the "Company" or "Silvercrest") today reported the results of its operations for the quarter and year ended December 31, 2013.

Business Update

Silvercrest has experienced strong growth in assets under management for the twelve months ended December 31, 2013. We also have experienced strong revenue growth in the three-month period ending December 31, 2013. As of December 31, 2013, assets under management had risen to $15.7 billion from $14.6 billion as of September 30, 2013, due to strong organic growth and investment performance. We are pleased with these results as well as with continued progress in growing our institutional business.

Fourth Quarter 2013 Highlights

• Assets Under Management ("AUM") of $15.7 billion at December 31, 2013
• Revenue of $17.2 million
• U.S. Generally Accepted Accounting Principles ("GAAP") consolidated net income and net income attributable to Silvercrest of $4.0 million and $2.0 million, respectively.
• Basic and diluted net income per share of $0.32
• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")¹ of $4.5 million
• Adjusted net income¹ of $1.9 million
• Adjusted basic and diluted earnings per share¹ of $0.16 and $0.15, respectively.

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

AUM Increased to $15.7 billion

Silvercrest's AUM increased by $4.5 billion, or 40.2%, to $15.7 billion at December 31, 2013 from $11.2 billion at December 31, 2012.  The increase was attributable to $2.3 billion in market appreciation in addition to net client inflows of $2.2 billion, related primarily to the Ten-Sixty Asset Management, LLC ("Ten-Sixty") asset acquisition.

Silvercrest's AUM increased by $1.1 billion, or 10.9%, to $11.2 billion at December 31, 2012 from $10.1 billion at December 31, 2011. The increase was attributable to net client inflows.   

Fourth Quarter 2013 vs. Fourth Quarter 2012

Revenue increased by $3.0 million, or 21.3%, to $17.2 million for the three months ended December 31, 2013, from $14.1 million for the three months ended December 31, 2012. This increase was driven primarily by growth in the Company's management and advisory fees as a result of increased AUM.

Total expenses increased by $5.3 million, or 51.7%, to $15.4 million for the three months ended December 31, 2013 from $10.2 million for the three months ended December 31, 2012. This increase was primarily attributable to an increase in compensation and benefits expense of $6.1 million.  General and administrative expenses decreased by $0.9 million for the three months ended December 31, 2013 from the same period in the prior year.  The increase in compensation and benefits expense was primarily attributable to an increase in the accrual for bonuses of $5.1 million as a result of the recognition of partner incentive payments as compensation expense that began in the third quarter of this year subsequent to the completion of our IPO.  Prior to our IPO, partner incentive payments were treated as distributions of net income when paid.   General and administrative expenses decreased primarily as a result of incurring fees for services rendered in the prior year in connection with a planned initial public offering that was withdrawn in 2012. 

Consolidated net income was $4.0 million.  Net income attributable to Silvercrest was $2.0 million, or $0.32 per basic and diluted share for the three months ended December 31, 2013.   The Company's Adjusted Net Income¹ was $1.9 million, or $0.16 and $0.15 per adjusted basic and diluted share⁴, respectively, for the three months ended December 31, 2013.

Adjusted EBITDA¹ was $4.5 million or 26.3% of revenue for the three months ended December 31, 2013 as compared to $4.0 million or 28.9% of revenue for the same period in the prior year.

Year Ended December 31, 2013 vs. Year Ended December 31, 2012

Revenue increased by $8.4 million, or 16.2%, to $60.1 million for the year ended December 31, 2013, from $51.7 million for the year ended December 31, 2012. This increase was driven primarily by growth in the Company's management and advisory fees as a result of increased AUM.

Total expenses increased by $10.7 million, or 32.7%, to $43.5 million for the year ended December 31, 2013 from $32.8 million for the year ended December 31, 2012. This increase was primarily attributable to an increase in compensation and benefits expense of $11.2 million partially offset by a decrease in general and administrative expenses of $0.5 million.  The increase in compensation and benefits expense was primarily attributable to an increase in the accrual for bonuses of $5.1 million as a result of the recognition of partner incentive payments as compensation expense that began in the third quarter of this year subsequent to the completion of our IPO.   Prior to our IPO, partner incentive payments were treated as distributions of net income when paid.  Also, special non-principal bonuses of $0.8 million that were paid in July 2013 upon completion of Silvercrest's initial public offering, an increase in salaries and benefits expense of $0.8 million and $0.2 million, respectively, as a result of both merit increases and increased headcount, and increased equity-based compensation expense of $0.8 million, primarily due to an increase in the fair value of the Company's previously issued deferred equity units.  The decrease in general and administrative expenses was primarily due to a reduction in professional fees of $2.5 million as a result of incurring fees for services rendered in the prior year in connection with a planned initial public offering that was withdrawn in 2012.  Furthermore, our sub-advisory fees decreased by $0.3 million as a result of the Ten-Sixty Asset Management, LLC acquisition.  Partially offsetting these decreases was a $0.8 million charge for payments to be made through November 2014 to a relative of our former Chief Executive Officer, an increase in occupancy expense of $0.6 million due to the reversal of a lease abandonment liability in 2012 that was originally recorded in 2009 in connection with reoccupying space in our headquarters resulting in reduced occupancy expenses in 2012, and an increase in various expenses totaling $0.8 million.     

The portion of the results for the year ended December 31, 2013 represented by the results for the six months ended June 30, 2013 are those of the Company's accounting predecessor, Silvercrest L.P., and as a result, did not take into consideration changes related to the Company's initial public offering³.  Consolidated net income was $17.2 million.  Net income attributable to Silvercrest was $13.7 million, or $1.68 per basic and $1.63 per diluted share/unit for the year ended December 31, 2013.  Weighted average shares/units for the year ended December 31, 2013 includes weighting for our units outstanding, on a converted basis, as of the completion of our initial public offering in addition to the weighted average Class A shares outstanding for the six months ended December 31, 2013.

Silvercrest's Adjusted Net Income¹ was $7.7 million, or $0.64 and $0.62 per adjusted basic and diluted share⁴, respectively, for the year ended December 31, 2013.

Adjusted EBITDA¹ was $17.3 million or 28.8% of revenue for the year ended December 31, 2013 as compared to $14.7 million or 28.4% of revenue for the same period in the prior year.

¹ Adjusted measures are non-GAAP measures and are explained and reconciled to the comparable GAAP measures in Exhibits 3 and 4.

² The Company has computed average AUM by averaging AUM at the beginning of the applicable period and AUM at the end of the applicable period.

³ The Company became the general partner of Silvercrest L.P. on June 26, 2013, but net income of Silvercrest L.P. was allocated to the Company effective July 2013 as allocable net income prior to July 2013 was de minimis.  Accordingly, the portion of the Consolidated Statements of Operations for the year ended December 31, 2013 represented by the six months ended June 30, 2013 does not represent earnings attributable to the Class A stockholders.

⁴Adjusted basic and diluted earnings per share measures for the year ended December 31, 2013 are based on the number of shares of Class A common stock and Class B common stock outstanding as of December 31, 2013.

Liquidity and Capital Resources

Cash and cash equivalents were $27.1 million at December 31,2013, compared to $13.4 million at December 31, 2012. Silvercrest L.P. had notes payable of $8.3 million at December 31, 2013 and $3.3 million at December 31, 2012.    As of December 31, 2013, the principal balance on our revolving credit facility with City National Bank was $3.0 million.  In July 2013, Silvercrest completed its initial public offering of 4,790,684 of its Class A common shares at $11.00 per share (the "IPO").  Silvercrest's stock began trading on June 27, 2013 on NASDAQ under the symbol "SAMG".  The net proceeds from the IPO, which were received on July 2, 2013, were $47.8 million.  In connection with the IPO, the Company used a portion of the net proceeds to purchase 3,540,684 Class B units from partners of Silvercrest L.P. for $35.4 million.  The amounts due to Silvercrest L.P. partners were paid out on July 2, 2013.  Furthermore, on July 12, 2013, Silvercrest sold an additional 718,603 shares of its Class A common stock at $11.00 per share pursuant to the underwriters' exercise in full of the over-allotment option that Silvercrest granted to the underwriters in connection with its IPO.  The net proceeds from this exercise, which were received on July 12, 2013, were $7.4 million.

Total stockholders' equity was $41.2 million at December 31, 2013.  The Company had 7,522,974 million shares of Class A common stock outstanding and 4,464,617 million shares of Class B common stock outstanding at December 31, 2013.

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, the Company supplements its 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 the Company's operations between periods and over time. Investors should consider the Company's non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

Conference Call

The Company will host a conference call on March 14, 2014, at 8:30am (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 1-866-394-9665 or for international listeners the call may be accessed by dialing 1-253-237-1128.  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

Certain statements in this release, and other written or oral statements made by or on behalf of the Company, are "forward-looking statements" within the meaning of the federal securities laws. Statements regarding future events and developments and Silvercrest's future performance, as well as management's current expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. These forward-looking statements are only predictions based on current expectations and projections about future events. These forward-looking statements are subject to a number of risks and uncertainties, and there are important factors that could cause actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. Among the important factors that could cause actual results, level of activity, performance or achievements to differ materially from those indicated by such forward-looking statements are: fluctuations in quarterly and annual results, 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 in the Company's filings with the Securities and Exchange Commission, including those factors listed under the caption entitled "Risk Factors" in the Company's prospectus dated June 26, 2013, filed with the Securities and Exchange Commission in accordance with Rule 424(b) and the Securities Act of 1933, as amended. The Company undertakes no obligation to update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.  Any discrepancies included in this release between totals and the sums of the amounts listed are due to rounding.

About Silvercrest

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

¹ Returns are based upon a time weighted rate of return of various fully discretionary equity portfolios with similar investment objectives, strategies and policies and other relevant criteria managed by SAMG LLC. Performance results are gross of fees and net of commission charges. An investor's actual return will be reduced by the advisory fees and any other expenses it may incur in the management of the investment advisory account.   SAMG LLC's standard advisory fees are described in Part 2 of its Form ADV. Actual fees and expenses will vary depending on a variety of factors, including the size of a particular account. An investor's actual return will be reduced by the advisory fees and any other expenses it may incur in the management of the investment advisory account.  Investment management fees have a compounding effect on cumulative results.  For example, assume SAMG LLC achieves a 10% annual return prior to the deduction of fees each year for a period of 10 years.  If an annual investment management fee of 1% of assets under management for the 10 year period were charged, the resulting annual average return after fees would be reduced to 8.9%.  Returns greater than one year are shown as annualized compounded returns and include gains and accrued income and reinvestment of distributions. Past performance is no guarantee of future results. This piece contains no recommendations to buy or sell securities or a solicitation of an offer to buy or sell securities or investment services or adopt any investment position. This piece is not intended to constitute investment advice and is based upon conditions in place during the period noted. Market and economic views are subject to change without notice and may be untimely when presented here. Readers are advised not to infer or assume that any securities, sectors or markets described were or will be profitable.  SAMG LLC is an independent investment advisory and financial services firm created to meet the investment and administrative needs of individuals with substantial assets and select institutional investors. SAMG LLC claims compliance with the Global Investment Performance Standards (GIPS^®).

² The market indices used to compare to the performance of Silvercrest's strategies are as follows: 

The Russell 1000 Index is a capitalization-weighted, unmanaged index that measures the 1000 smallest companies in the Russell 3000. The Russell 1000 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 2000 Index is a capitalization-weighted, unmanaged index that measures the 2000 smallest companies in the Russell 3000. The Russell 2000 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 2000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 2500 Index is a capitalization-weighted, unmanaged index that measures the 2500 smallest companies in the Russell 3000. The Russell 2500 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 2000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 3000 Value Index is a capitalization-weighted, unmanaged index that measures those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth.

These model portfolios are not actual strategies in which clients can invest or allocate assets.  They are hypothetical combinations of: (i) internally-managed strategies in which clients are invested and (ii) externally-managed funds or products in which clients are invested.  We track three such portfolios depending on the overall strategy by which the securities purchased may be characterized.  They are Income, Growth, and Balanced (Income and Growth).  The returns shown assume annual rebalancing and reinvestment of dividends over the entirety of each of the periods shown.   Some of the underlying returns used to calculate each portfolio's returns were net of fees and some were gross of fees. The rates of return for each of the three portfolios are presented gross of investment management fees and custody fees, but include the deduction of estimated brokerage commissions and transaction costs. An investor's actual return on a portfolio of the type shown would be reduced by the advisory fees and any other expenses it may incur in the management of the investment advisory account. For example, assume the Firm achieves a 10% annual return prior to the deduction of fees each year for a period of 10 years. If an annual investment management fee of 1% of assets under management for the 10 year period were charged, the resulting annual average return after fees would be reduced to 8.9%. Silvercrest's standard annual asset-based fee schedule is described in Part 2 of its Form ADV, and outsourced Manager's standard annual asset-based fee schedules are described in Part 2 of each of their Form ADVs. Actual fees and expenses will vary depending on a variety of factors, including the size of a particular account. Generally, investment management fees are charged based upon the size of the portfolio, computed quarterly. An investor's actual result would be different from those portrayed in the models. A reader should not infer or assume that any portfolio is appropriate to meet the objectives, situation or needs of a particular investor, as the implementation of any financial strategy, and the purchase or sale of any security, should only be made after consultation with an attorney, tax advisor and investment advisor.  Past performance is no indication of future results.

The benchmark is a composite of the S&P 500 Index, the Barclays Capital Aggregate Index, and the HFRI Fund of Funds Composite Index.  Each index's blend is rebalanced annually.  Index returns do not reflect a deduction for fees or expenses.  Investors cannot invest directly in any of these indices.  

The market indices used to compare to the performance of Silvercrest's strategies are as follows: 

The Barclays Capital Aggregate Index is an index of investment grade government and corporate bonds with a maturity of more than one year.

The S&P 500 Index is a capitalization-weighted, unmanaged index that measures 500 widely held US common stocks of leading companies in leading industries, representative of the broad US equity market.

The HFRI Fund of Funds Composite Index is an index that is equal weighted, net of fees, and comprised of over 1,500 funds which report to Hedge Fund Research.

SOURCE Silvercrest Asset Management Group Inc.

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