Silvercrest Asset Management Group Inc. Reports Q4 and Year-end 2020 Results

NEW YORK, March 4, 2021 /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, 2020.

Business Update

Silvercrest ended the fourth quarter of 2020 and the year on a high note, paving the way for a good start to 2021 with a potential new high revenue run rate. Silvercrest discretionary asset under management, which drive revenue, increased 15% during the fourth quarter to reach $20.6 billion, due to both organic as well as market growth. The firm's total assets under management under management ("AUM") grew to $27.8 billion by the end of the fourth quarter. These new AUM high watermarks for the firm represent increases of 10.8% in total AUM and 9.6% in discretionary AUM year over year from the end of 2019 to the end of 2020.

The firm's financial measurements all meaningfully improved for fiscal year 2020 over 2019. Revenue increased 5.7% to $108 million from $102 million; the firm's Adjusted EBITDA¹ increased 6.0% to $30 million from $29 million; and adjusted diluted earnings per share¹ increased 9.4% to $1.28 from $1.17 per share. The firm's full year 2020 adjusted EBITDA margin¹ was 28.1%.

Silvercrest's Outsourced Chief Investment Officer ("OCIO") initiative won its first OCIO clients during the third quarter of 2019, and we ended 2019 with $300 million in OCIO AUM. That business more than doubled during 2020, to over $700 million, and we hope to cross the important $1 billion AUM threshold during 2021. We are proud of building our OCIO capability organically from scratch. Our team and performance track record remain strong, our OCIO new business pipeline has grown, and we expect continued success in the OCIO business during 2021.

With strong relative performance, Silvercrest's institutional equity new business opportunities are rebuilding across our product suite. We expect new sub-advisory relationships to continue adding new AUM and for search activity to pick up during 2021.

We have hired new high net worth portfolio management professionals and will continue to add new talent, both to maintain a high level of client service and to grow the business. Silvercrest has a track record of growing new talent and will continue to do so, especially with the current M&A environment for wealth management firms remaining active and expensive. We believe our brand, culture, capabilities and technological innovation make Silvercrest a premier partner for select businesses and professionals. Regardless of the environment, Silvercrest will continue to seek to effectively deploy capital to complement our organic growth.

Fourth Quarter 2020 Highlights

• Total Assets Under Management ("AUM") of $27.8 billion, inclusive of discretionary AUM of $20.6 billion and non-discretionary AUM of $7.2 billion at December 31, 2020.
• Revenue of $28.4 million.
• U.S. Generally Accepted Accounting Principles ("GAAP") consolidated net income and net income attributable to Silvercrest of $3.5 million and $1.9 million, respectively. 
• Basic and diluted net income per share of $0.20.
• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")¹ of $7.3 million.
• Adjusted net income¹ of $4.4 million.
• Adjusted basic and diluted earnings per share^{1, 2} of $0.31.

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

AUM at $27.8 billion

Silvercrest's discretionary assets under management increased by $1.8 billion, or 9.6%, to $20.6 billion at December 31, 2020 from $18.8 billion at December 31, 2019.  The increase was attributable to client inflows of $3.8 billion and market appreciation of $1.5 billion, partially offset by client outflows of $3.5 billion.  Silvercrest's total AUM increased by $2.7 billion, or 10.8%, to $27.8 billion at December 31, 2020 from $25.1 billion at December 31, 2019.  The increase was attributable to client inflows of $4.2 billion and market appreciation of $2.3 billion, partially offset by client outflows of $3.8 billion. 

Silvercrest's discretionary assets under management increased by $2.7 billion, or 15.1%, to $20.6 billion at December 31, 2020 from $17.9 billion at September 30, 2020.  The increase was attributable to client inflows of $1.2 billion and market appreciation of $2.6 billion, partially offset by client outflows of $1.1 billion.  Silvercrest's total AUM increased by $3.4 billion, or 13.9%, to $27.8 billion at December 31, 2020 from $24.4 billion at September 30, 2020.  The increase was attributable to client inflows of $1.3 billion and market appreciation of $3.3 billion, partially offset by client outflow of $1.2 billion.

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

Fourth Quarter 2020 vs. Fourth Quarter 2019

Revenue increased by $0.6 million, or 2.1%, to $28.4 million for the three months ended December 31, 2020, from $27.8 million for the three months ended December 31, 2019. This increase was driven by market appreciation during the current quarter. 

Total expenses increased by $1.4 million, or 5.7%, to $25.1 million for the three months ended December 31, 2020 from $23.7 million for the three months ended December 31, 2019. Compensation and benefits expense increased by $0.6 million, or 3.4%, to $18.2 million for the three months ended December 31, 2020 from $17.6 million for the three months ended December 31, 2019. The increase was primarily attributable to increases in the accrual for bonuses of $0.2 million, salaries and benefits of $0.3 million primarily as a result of merit-based increases and newly hired staff and equity based compensation expense of $0.1 million due to an increase in the number of unvested restricted stock units and unvested non-qualified stock options outstanding.  General and administrative expenses increased by $0.8 million, or 13.1%, to $6.9 million for the three months ended December 31, 2020 from $6.1 million for the three months ended December 31, 2019. This was primarily attributable to increases in the fair value of contingent consideration related to the Cortina Acquisition of $1.4 million and occupancy and related expenses of $0.1 million partially offset by decreases in professional fees of $0.3 million, travel and entertainment expenses of $0.4 million as a result of the coronavirus pandemic and portfolio and systems expense of $0.1 million.

Consolidated net income was $3.5 million or 12.4% of revenue for the three months ended December 31, 2020 as compared to consolidated net income of $4.2 million or 15.2% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $1.9 million, or $0.20 per basic and diluted share for the three months ended December 31, 2020.   Our Adjusted Net Income¹ was $4.4 million, or $0.31 per adjusted basic and adjusted diluted² share for the three months ended December 31, 2020.

Adjusted EBITDA¹ was $7.3 million or 25.7% of revenue for the three months ended December 31, 2020 as compared to $7.3 million or 26.3% of revenue for the same period in the prior year.

Year Ended December 31, 2020 vs. Year Ended December 31, 2019

Revenue increased by $5.8 million, or 5.7%, to $108.0 million for the year ended December 31, 2020, from $102.2 million for the year ended December 31, 2019. This increase was driven by net client inflows and market appreciation in discretionary assets under management. 

Total expenses increased by $2.4 million, or 2.9%, to $85.7 million for the year ended December 31, 2020 from $83.3 million for the year ended December 31, 2019. This increase was attributable to an increase in compensation and benefits expense of $2.3 million and an increase in general and administrative expenses of $0.1 million.  Compensation and benefits expense increased by $2.3 million, or 3.9%, to $62.4 million for the year ended December 31, 2020 from $60.0 million for the year ended December 31, 2019. The increase was primarily attributable to an increase in the accrual for bonuses of $1.5 million, an increase in salaries expense of $1.8 million primarily as a result of merit-based increases and newly-hired staff, including the addition of Cortina staff, and an increase in benefits costs of $0.6 million, partially offset by a decrease in equity based compensation expense of $1.6 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 $0.1 million, or 0.4%, to $23.3 million for the year ended December 31, 2020 from $23.2 million for the year ended December 31, 2019. The increase was primarily attributable to increases in the fair value of contingent consideration related to the Cortina Acquisition of $1.1 million, 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, occupancy and related expenses of $0.4 million related to the increased costs of cleaning due to the coronavirus pandemic, portfolio and systems expenses of $0.4 million, insurance costs of $0.1 million, the fair value of contingent consideration related to the Neosho Acquisition of $0.2 million and the fair value of contingent consideration related to the Cappiccille Acquisition of $0.2 million.  These increases were partially offset by decreases in the fair value of contingent consideration related to the Jamison Acquisition of $0.1 million, travel and entertainment expenses of $0.9 million as a result of the coronavirus pandemic, professional fees of $1.3 million, office expense of $0.1 million as a result of the coronavirus pandemic, printing costs of $0.1 million, charitable donations of $0.1 million, telephone related expenses of $0.1 million and storage and moving expenses of $0.4 million.

Consolidated net income was $17.5 million or 16.2% of revenue for the year ended December 31, 2020 as compared to $15.4 million or 15.1% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $10.0 million, or $1.05 per basic and diluted share for the year ended December 31, 2020.   Our Adjusted Net Income¹ was $18.6 million, or $1.29 per adjusted basic share and $1.28 per adjusted diluted share² for the year ended December 31, 2020.

Adjusted EBITDA¹ was $30.3 million or 28.1% of revenue for the year ended December 31, 2020 as compared to $28.6 million or 28.0% of revenue for the same period in the prior year.

Liquidity and Capital Resources

Cash and cash equivalents were $62.5 million at December 31, 2020, compared to $52.8 million at December 31, 2019.  As of December 31, 2020, there was $12.6 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 $70.7 million at December 31, 2020.  We had 9,650,692 shares of Class A common stock outstanding and 4,721,646 shares of Class B common stock outstanding at December 31, 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 March 5, 2021, 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.