Silvercrest Asset Management Group Inc. Reports Q3 2021 Results

NEW YORK, Nov. 4, 2021 /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, 2021.

Business Update

Silvercrest is pleased to report strong financial results for the third quarter of 2021, despite anemic markets and institutional rebalancing during the third quarter. The firm's discretionary assets under management ("AUM"), which drives revenue, increased 25.7% year over year. Commensurate with that increase, Silvercrest concluded the quarter with $33.5 million in revenue and quarterly Adjusted EBITDA1 of $10.3 million, representing year-over-year increases of 23.1% and 27.4% respectively. Adjusted Diluted Earnings Per Share1 increased 25.7% year over year to $0.44 per Adjusted Diluted Earnings Per Share.

Silvercrest sought to achieve $1.0 billion in AUM with its relatively new Outsourced Chief Investment Officer (OCIO) capability by the end of 2021. We are pleased to report that the OCIO business now has $1.1 billion in AUM. We have a strong new business pipeline of opportunities and crossing this AUM threshold will be helpful to building that business.

Silvercrest's new business opportunities continue to grow thanks to continued strong relative investment performance for high net worth and institutional clients alike.

During the third quarter, Silvercrest repurchased approximately 27 thousand shares of Class A common stock for approximately $0.4 million pursuant to its previously announced share repurchase program on July 28, 2021.

On November 2, 2021, the Company's Board of Directors declared a quarterly dividend of $0.17 per share of Class A common stock which represents an annual yield of approximately 4.1% based on the closing price of the Company's Class A common stock on November 3, 2021. The dividend will be paid on or about December 17, 2021 to shareholders of record as of the close of business on December 10, 2021.

Third Quarter 2021 Highlights

• Total assets under management ("AUM") of $31.0 billion, inclusive of discretionary AUM of $22.5 billion and non-discretionary AUM of $8.5 billion at September 30, 2021.
• Revenue of $33.5 million.
• U.S. Generally Accepted Accounting Principles ("GAAP") consolidated net income and net income attributable to Silvercrest of $6.4 million and $3.7 million, respectively.
• Basic and diluted net income per share of $0.38.
• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")1 of $10.3 million.
• Adjusted net income1 of $6.6 million.
• Adjusted basic and diluted earnings per share1, 2 of $0.46 and $0.44, respectively.

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

AUM at $31.0 billion

Silvercrest's discretionary assets under management increased by $4.6 billion, or 25.7%, to $22.5 billion at September 30, 2021 from $17.9 billion at September 30, 2020.  The increase was attributable to client inflows of $4.8 billion and market appreciation of $5.2 billion, partially offset by client outflows of $5.3 billion.  Silvercrest's total AUM increased by $6.6 billion, or 27.0%, to $31.0 billion at September 30, 2021 from $24.4 billion at September 30, 2020.  The increase was attributable to client inflows of $5.4 billion and market appreciation of $7.1 billion, partially offset by client outflows of $5.8 billion. 

Silvercrest's discretionary assets under management decreased by $0.4 billion, or 1.7%, to $22.5 billion at September 30, 2021 from $22.9 billion at June 30, 2021.  The decrease was attributable to client outflows of $1.3 billion and market depreciation of $0.2 billion, partially offset by client inflows of $1.1 billion.  Silvercrest's total AUM remained at $31.0 billion at September 30, 2021 and June 30, 2021.  This was attributable to client inflows of $1.2 billion and market appreciation of $0.2 billion, offset by client outflow of $1.4 billion.

Assets under management as of June 30, 2020 were impacted by the effects of COVID-19 on financial markets during the quarter ended March 31, 2020.

Third Quarter 2021 vs. Third Quarter 2020

Revenue increased by $6.3 million, or 23.1%, to $33.5 million for the three months ended September 30, 2021, from $27.2 million for the three months ended September 30, 2020. This increase was driven by market appreciation in discretionary assets under management, partially offset by net client outflows. Revenue for the quarter ended June 30, 2020 was primarily based on market values as of March 31, 2020, and as such was affected by declines in the financial markets caused by COVID-19 during the quarter ended March 31, 2020. 

Total expenses increased by $3.0 million, or 13.7%, to $25.3 million for the three months ended September 30, 2021 from $22.2 million for the three months ended September 30, 2020. Compensation and benefits expense increased by $3.6 million, or 23.9%, to $18.8 million for the three months ended September 30, 2021 from $15.2 million for the three months ended September 30, 2020. The increase was primarily attributable to an increase in the accrual for bonuses of $3.0 million, an increase in salaries and benefits of $0.4 million primarily as a result of merit-based increases,  newly hired staff, and an increase in equity-based compensation expense of $0.2 million due to an increase in the number of vested and unvested restricted stock units and unvested non-qualified stock options outstanding.  General and administrative expenses decreased by $0.6 million, or 8.0%, to $6.5 million for the three months ended September 30, 2021 from $7.1 million for the three months ended September 30, 2020. This was primarily attributable to a decrease in the adjustment to the fair value of contingent consideration related to the Cortina Acquisition of $1.0 million and a decrease in occupancy and related costs of $0.1 million primarily due to a decrease in cleaning and maintenance costs, partially offset by an increase in professional fees of $0.1 million, an increase in portfolio and systems expense of $0.2 and an increase depreciation and amortization expense of $0.1 million.

Consolidated net income was $6.4 million or 19.0% of revenue for the three months ended September 30, 2021 as compared to consolidated net income of $3.5 million or 12.8% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $3.7 million, or $0.38 per basic and diluted share for the three months ended September 30, 2021.   Our Adjusted Net Income1 was $6.6 million, or $0.46 per adjusted basic share and $0.44 per adjusted diluted share2 for the three months ended September 30, 2021.

Adjusted EBITDA1 was $10.3 million or 30.9% of revenue for the three months ended September 30, 2021 as compared to $8.1 million or 29.9% of revenue for the same period in the prior year.

Nine Months Ended September 30, 2021 vs. Nine Months Ended September 30, 2020

Revenue increased by $18.2 million, or 22.9%, to $97.8 million for the nine months ended September 30, 2021, from $79.6 million for the nine months ended September 30, 2020. This increase was driven by market appreciation in assets under management, partially offset by net client outflows.  Revenue for the first three quarters of 2020 was 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 the coronavirus (COVID-19) pandemic during the quarter ended March 31, 2020. 

Total expenses increased by $16.0 million, or 26.3%, to $76.6 million for the nine months ended September 30, 2021 from $60.6 million for the nine months ended September 30, 2020. Compensation and benefits expense increased by $10.7 million, or 24.1%, to $54.9 million for the nine months ended September 30, 2021 from $44.2 million for the nine months ended September 30, 2020. The increase was primarily attributable to an increase in the accrual for bonuses of $8.8 million, an increase in salaries and benefits of $1.1 million primarily as a result of merit-based increases and newly hired staff and an increase in equity-based compensation expense of $0.7 million due to an increase in the number of vested and unvested restricted stock units and unvested non-qualified stock options outstanding.  General and administrative expenses increased by $5.3 million, or 32.1%, to $21.7 million for the nine months ended September 30, 2021 from $16.4 million for the nine months ended September 30, 2020. This was primarily attributable to an increase in the adjustment to the fair value of contingent consideration related to the Cortina Acquisition of $5.1 million, an increase in trade errors of $0.3 million, an increase in professional fees of $0.1 million, an increase in sub-advisory and referral fees of $0.1 million and an increase in insurance expense of $0.1 million partially offset by a decrease in travel and entertainment expenses of $0.2 million as a result of the coronavirus pandemic, a decrease in portfolio and systems expense of $0.1 million and a decrease in depreciation and amortization of $0.1 million.

Consolidated net income was $16.4 million or 16.7% of revenue for the nine months ended September 30, 2021 as compared to $14.0 million or 17.5% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $9.6 million, or $0.99 per basic and diluted share for the nine months ended September 30, 2021.   Our Adjusted Net Income1 was $19.5 million, or $1.35 per adjusted basic share and $1.31 per adjusted diluted share2 for the nine months ended September 30, 2021.

Adjusted EBITDA1 was $30.4 million or 31.1% of revenue for the nine months ended September 30, 2021 as compared to $23.0 million or 28.9% of revenue for the same period in the prior year.

Liquidity and Capital Resources

Cash and cash equivalents were $65.9 million at September 30, 2021, compared to $62.5 million at December 31, 2020.  As of September 30, 2021, there was $9.9 million outstanding under our term loan with City National Bank and nothing outstanding on our revolving credit facility with City National Bank. 

Silvercrest Asset Management Group Inc.'s total equity was $75.5 million at September 30, 2021.  We had 9,653,214 shares of Class A common stock outstanding and 4,815,460 shares of Class B common stock outstanding at September 30, 2021.

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 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, 2020, 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.

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SOURCE Silvercrest Asset Management Group Inc.