SAMG - Earnings call transcript Q1 2020 | Silvercrest Asset Management Group Inc.

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Operator

Good morning and welcome to the Silvercrest Asset Management Group Inc.

First Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

Before we begin, let me remind you that during today’s call, Silvercrest will make forward-looking statements. Pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, all statements other than statements of historical facts, including 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. only events. on are projections expectations statements future about forward-looking predictions current based and These statements subject that forward-looking achievements and results These are of to there and of level statements are uncertainties, differ risks materially important made. performance factors activity, could to actual to cause or a number

entitled and strategy, quarterly the Among of implementation including on on Factors management in results, factors filed with failure these develop of ended maintain and factors year other and growth listed under and for XX-Q SEC. to XX-K the on the these brand the the ended report factors months with are net caption in incurrence Silvercrest focusing for annual report SEC, of XX, annual XX, X the XXXX, Risk fluctuations quarterly company’s March company’s losses, effects disclosed XXXX, the December a in Form Form adverse filings the

are forward-looking current made are events. these update statements believe, and based goal, forward-looking future its or on these date All and of expressions. project, as by statements projections no predictions this about predict, and of can expectations the identified obligation plan, cases, forward-looking to These will, similar the continue, may, words these anticipate, some likely, Silvercrest’s plural expect, In could, on be call hereof, as made other assumes statements Silvercrest negative such forward-looking words estimate, statements.

conference to over Silvercrest. Chairman the Rick like go CEO now Please turn would I of to and ahead. Hough,

Rick Hough

entered under Investment XXXX. its new assets its business of organic the the dislocations representing pandemic XXXX Silvercrest Asset market Chief from first growth of with the coronavirus as equity us growth the in morning late Silvercrest the a otherwise lows for of you market complete and new successful quarter XXXX recovery joining known OCIO high-end for Thank Group. of ongoing results execution Outsourced prior first and quarter thank management, this full its integration business; Officer, strategies; strategy; you and of to Management for

of the billion quarter XXXX, viral the by $XX.X same first under concluded billion the over offset a from billion market the depreciation the XXXX. $X In economic greater of period. over of $X.X assets billion Much quarter management, the time of in of unprecedented year-over-year of with that disruption was decrease client of Silvercrest midst $X.X inflows pandemic, first mostly

adjusted net each revenue, and net income adjusted and Our increased year-over-year. and adjusted earnings EBITDA share, income, margins substantially per GAAP

to growth million balance severe Silvercrest of has as a opportunities such both flexibility carries and March for substantial equivalents of time, business pandemic. in as Silvercrest $XX.X the market inherent events business. of and due level support cash reported reserves, that $X.XX manageable volatility of dividend sustained $XX.X XX, March dividend maintained always and even share new of stock. quarterly anticipates exogenous pays A for XXXX. corrections, of debt high-quality or in cash period of to XX cash preserve or a continuing a it current the annual dividend market as invest per of weather to sheet the Class Silvercrest generous $X.XX firm current the and in can currently million The to common while a an

disaster remotely. was crisis. was well prior continuity. Silvercrest’s infrastructure technology Silvercrest I prepared transitioned its am pleased during business for firm XXXX, entire to long quarter this cloud-based and recovery seamlessly The report firm to business unusually the and prepared. the operate operating first that of already to remotely critical

Our founded firm of X/XX. wake post in and the was the crash Bubble Tech

young crisis we a firm and vision, partners relatively the afterward. Our financial experienced as flourishing have a global long-term

firm’s steady with hands. mature clients guide our partners the have Our fortitude to

the improve represents current an great our caused value of its has and pandemic also it suffering, to organization the our While relationships, opportunity capabilities. solidify

quarter maintained industry-wide $XXX of during includes flows over Silvercrest proven million first we difficult opportunities. even half to to new in client we of management. ability Last continue active time experienced new ability net business client our trends That has of growing in provided our accounts. that OCIO asset the which proud net announced Silvercrest’s had growth. The remain a account business despite quarter, positive And flows, organic develop to clients new positive XXXX continue first environments. continues attracting

scratch, success. from continued are of and we growing proud We that business expect

has and high-net new in economic Silvercrest step for new current the and to as stressful others made management of activity. is Regardless growth. pursuing our environment to deploy and seek backward continue business its will initiative. its and new to slowing continue quality market investments institutional marketing will a The represents the many potentially investments OCIO successfully Nonetheless, business with make complement professionals, effectively worth capital organic opportunistically portfolio equity Silvercrest enhance to its environment, strategies

A a Class as dividend quarterly the stock June On share will the close about $X.XX April to record XXXX paid the or declared of company’s of business shareholders Directors dividend of XX. per of Board June XX, on common XX, be of and XXXX, of on

it I go Scott Thank Gerard to hand that, questions. take over over Scott? you. before we to With our will financials

Scott Gerard

Great. Thanks, Rick.

$XX.X last was increase flows XX, was $X.X as first XXXX, in AUM again, As quarter, including client quarter represented million, increase primarily release XXXX, revenue net our assets the same of on acquired Delving billion. driven This million X, into disclosed and AUM the July approximately a offset increased the by acquisition, March with depreciation. billion was total $XX.X the by income Revenue in $X.X consolidated under discretionary under net management $XX.X $XX.X Cortina in quarter was million. was quarter, assets XX, $XX.X of and management, for in approximately further which as March earnings for XXXX, over billion XX% market connection discretionary was partially period revenue the the for year. million, for of reported

is from to March values XXXX, day to our XX, primarily because $X.X billed Total XXXX, from pandemic. related revenue March market of of the last COVID-XX the the based December Cortina calendar in quarter. ended AUM XXXX, approximately was closing quarter advance from on market the for declines resulting Most the XX, acquisition previous XX, Revenue decreased of million.

First the revenue million, was decrease $X.X expenses compensation the for on period a year. quarter were XX, primarily quarter and Expenses was last increase and an million in from general $X.X decrease December based and values. attributable $XX.X approximately administrative a market of primarily $XX.X of million XXXX, for representing XXXX expense million. of in decrease to expenses XX% same benefits This

value addition staff in decrease Cortina and of due this to related acquisition. result contingent accrual offset the decrease consideration and of and depreciation fees professional related in the Cortina fair Cortina general increases bonuses, Cappiccille in increase resulting restricted an in the administrative of in the to of quarter consideration and to partially increases a amortization and increases compensation units. from decrease due of occupancy York as the merit-based including in related the related acquisition-related fair and partially The to in and the renovation stock related expense space assets newly unvested equity-based increase expenses acquisition, an primarily to was a increased by office Compensation decrease of the by City, our amortization expenses for expense of fees $X intangible the mainly year to to a value primarily hired offset in staff, of attributable for the to million New contingent number Cortina a in deal,

A which same effect to in million as revenue the to non-core define was $X.X consolidated and XX% compared for Reported quarter to equity-based giving period without last for items, as million shareholders $X.X revenue $X in quarter to Adjusted the XX.X% year. we non-recurring approximately net approximately for and for same to compensation diluted million $X.XX $X.X first or EBITDA the income per and Class the of compared million income of attributable million share. A or net the or period the was EBITDA, was of prior quarter basic or year. Reported expense $X.X Class XXXX Silvercrest

income of to approximately the income shares million $X.XX adjusted which net share end at Class share. actual we period Adjusted the compute reporting earnings add is by the giving units corporate earnings per to without to equal options EPS. outstanding non-core tax XX%, divided a and effect the adjusted and A basic basic total $X.X EPS, assuming quarter the to net outstanding as non-recurring Class and or per define stock diluted unvested adjusted net expense per and rate Adjusted of shares and diluted items and extent for B was dilutive, nonqualified income, we stock adjusted income for restricted as the to

the $XXX.X as and were of million million XX assets year. total XXXX. was were $XX.X last concludes to Total stockholders’ end Looking March as my Total at XX, quickly at $XX.X million XX, the of year XXXX, $XX.X equity at borrowings $XX.X this of to approximately year. of cash were million March balance That remarks. compared compared December this Cash A as XX XX year $XXX.X approximately approximately equivalents Class March million. this March million of sheet, as

turn now Q&A. for will it to I Rick over

Rick Hough

appreciate line We open now of for can questions. I the that, Scott. Thanks Thank very you. much. discussion

Operator

question ahead. our from of first Sumeet Sandler. Piper [Operator Instructions] comes go Please And Mody

Sumeet Mody

Thanks. doing Scott. guys you healthy. I Good hope Rick. are morning, Good staying morning, well

Rick Hough

morning. Good

Sumeet Mody

to last course ramped changed days have after at a over if least touch update certainly environment, of an has strategy touched into the all conversation? on couple months. last say at on M&A your from conversations of quarter, get this I to Just to wanted we this that March, wanted – last volatility up the perspective on few Things the or

Rick Hough

to can’t continually So and be we interested that Silvercrest on engage of and we’ve to Silvercrest selectively or reaching I because strategy an in, businesses changed ongoing we basis. interest periodically M&A say something the is may in out are carefully. that peers

and environment, see their only ramped sense going bit it’s probably Our has be close institutions, up a how to affecting in that with it’s touch really firms they businesses. think what they’re outreach I through, important the the peer how understand in

with we have about of we with just have a close We’re have made stay firms. sharing very the lot open sure and those ideas great business leaders And to the relationships. other that foster of and continued relationships

in businesses, be term in options and wait you acknowledge. revenues, that market leave than think been Often the are a amount environments, the the realign with people environment are more who for the are at who others to think willing occurs there of decide looking help may for and M&A. in values may will changed a basis volatility market reality these of to and boutique I strategic but asset frequent are this longer obviously I have talking about those recovery when on

crisis. Bubble the years this XX had years ago. Tech ago, crisis We We and financial had XX we now global the have

settle we a feel modification the at been some it’s major But time, periods in were into of of in time my for there and to M&A back not welcome unusual view go sheet powder, it of kind a prop now annuities, And lot businesses certainly, are basis environment that calls, at leverage forward. the to And front, market healthy the pretty there and you least a have their dry the may it’s on overvalued valuations And I of very I balance every to shakeout. least point about at on tremendous takes these and or open XX know sell-offs. many as If that you long be going years. optimistic up. a have a realignment valuations. Usually, flying sell-offs there up amount intermediate that from potential was of the things

Sumeet Mody

Makes sense.

the lowest Just quarter, down turning to kind came the it ‘XX, XX.X like on the the but it it’s side, of range, to discretionary to fee still XX. basis been that within rate XX XQ since points of in looks kind

the Just of is the worth? you okay to quarter is institutional that was year, feel kind bogey? rate by high net wondering going affected to And XX how XX in if mandates in it be an versus still

Rick Hough

as think years. XX bogey. high Yes, don’t for I it’s been we’ve as okay an

beginning-period at. Are think average, It came this fictional looking you’re looking conference at what our number we AUM, because And of looking in a AUM? you And We than net the of new that large if up end-of-period depends kind or quarter. average call. course, last on least I can it’s don’t at AUM you’re at institutional. get family But high the the over relationships like first pricing. quarter more institutional flows occurred during business had institutional worth were new business. average bill

for Our around time. come the really a basis been all over basis at points long or very They so, that moved ballpark have XX down past in not may but X it’s point years.

Sumeet Mody

guess involved I professionals, this strategies, still high-net good all presence guys and any that moment worth in opportunities? and that the there not commentary invest initiative, are were marketing wish you at anything then environment. this year of maybe the pursuing things in into on it. environment to I you thinking all Got the And one, are lean Thanks. this OCIO equity you from guys can the – take you there you kind any that Is appreciate in the But about? planning advantage verticals in of with are you

Rick Hough

No.

compatible together think one I strategic chosen And many on that pretty They those done that before executed worth the each we priorities well other. highly reinforce we have work strategies successfully going organization our our with to an all all and to have thing then other as high-net business. too picked are things. have

have in started, expanded are use which we is Again, build thesis value to business, own our goes policy support equity over right the of delivering a capital of is very what are do the worth now and portfolio high-net of growth is new of to in thesis strategy and the know. the the which just they proof remind in managers. we managers, to have the led created their policy client for institutional-quality quality. business, relationships of and select allocations, in the of fact you, investment born capabilities, portfolio clients our management by you are which we the relationship equity as same the institutional have effectively managers, The initiative. business, from have that investors equity what bringing as was group, worth services, they our with role and course, from done investments intellectual proof base that a managers audience. OCIO And important have otherwise and office now It an years. risk we out And are institutional business dual serves our I’ll capabilities. equity is of which well as So our we OCIO institutions handling are perspective high-net delivering is family asset well investment not we

part and compatible, have further of of story of the also we’re the We family business a about we into to to as diversify And advisory what kind go that. careful really businesses capability we’re be be be to have to we going and has to has feel be to that It doing. execute part ability bandwidth we single it something a it has successfully. would

in have potential Now strategies OCIO that growth an the hiring and business a wood we as additional equity, to that’s support and portfolio success. of managers, marketplace lot value, to chop a new as international value well

initiatives verticals So new success I don’t see exist. some us until we’ve into those in necessarily achieved further that already going

Sumeet Mody

makes that trying... just Yes, And it. got Okay, sense. then

Rick Hough

person add management new as and requires work. I contributes each whole and in brings would talent way to you right significant can portfolio in M&A, add business its the by other in adding and the or just different managers ways. It’s two own doing new

Sumeet Mody

you. flow just that Okay, but speaking, the to I backdrop to the XQ picture, guess, especially really organic couple of ‘XX. and solid compared see, nice the Thank you it there, got looked quarter, definitely questions in to some growth turning had a relatively of like it.

the quarter, about to progressing. those saw quarter wanted some the get update of Just initiative well, the an around wanted But last just OCIO OCIO and clients, as the it I new contribution. half then up made on makeup to how’s on color business get

Rick Hough

Yes.

institutional was OCIO, So the first part or sorry?

Sumeet Mody

the was of Kind the – of what the those in in the new business, just makeup general, was part clients? net First quarter. new the business

Rick Hough

Yes, okay.

pretty looked was quarter. net it because when business well even a had positive quarter, into of as existing that clients, decent taxes, July. new pandemic the out the in moved business you you We were at I point new with corona flows So although should know, the

normally quarters, quarter. pay potentially see may and – third there the in which So will second could to the taxes that we year earlier happen first in the was not be cash in in order raised

other you this a As for always headwind or well there’s business expenses. in taxes know,

going – just been be depends. just really high-net to a we it pointing not hit capital delayed bit a And tilted don’t flows the there first each know how out in year. about But that It it’s gains guess think worth I always have for it’s our year. just may was have so meaningful business But this shake out course. with it’s worth that’s recent years It normal inflows. new And that that’s to $XXX in business, outflows. million. a that was But I quarter. towards meant it

things nice for few rebalancing been door, new we’re some We over about not we reliant engine of business in single long the business as institutional past very had we’ve have of we is the on did time. also how years which one the One come diversified the a well. growth, but had

noted I’m quarter, third, remains think, in strong. be quite very over its I million net only, noted would as new OCIO greater has performance note. were absolute contributor fourth Our was the there last at business, a you I into than new meaningful continue $XX to absolute The The up time, say clients in but much optimistic balance high the of worth. And end it that $XX quarters. was the your that pipeline I don’t in And held first in maybe, about was our call, institutional, flows had but second, accounts. There as million. well will

Sumeet Mody

last that $X.X today? do spoke us how know but mean then you you the How the I I quarter about around view I that actionable? X-month give looks update on guess, of Okay, billion, great. can there And off today? you pipeline, that, just an touching

Rick Hough

Yes, yes.

X-month about it’s know, assessing, which last about in the for or on time pipeline, we’re you the I invited quite updated the we’re either mandate. the pipeline last spoke. time as we conservative where a highs everyone finals the And just historic we’re actionable was So

On off the to talking institutional side, I going hold think about pipeline. I’m

So much on business. is in now right kind hold of

active. be We’re continuing to very

the We’re close to consultants.

many equity as had hard times expect have get have I to share of We been not bit just in lot it’s things a environment. the imprudent our really And of among has for are macroeconomic like I’ve it The of we institutional frank a and consolidation there pipeline. did consultants, are as business. characterize flows. conversations up be as changed. And pipeline’s And relationships a It those ever. new lot navigating getting these uncertain. waiting cultivating we about as I or conversations feels also organizations which are it new just either on for are down, positive. how talked very a it’d But I’d because last or when dried There more large to they’ve nearly been calls clarity know that the organizations very the been rather very busy slowed quarter, are think unprecedented the our was. responsible

has performance periods. over done Our time very reasonable well

feel development more want But saying don’t out to that as it. so the bit business up want about I and think be is to I is certainly misunderstood an being the dried characterize time. very stretched new – pipeline I a not. over good issue. because There’s And just don’t do it or I there’s

Sumeet Mody

Yes, understand. Okay. I

Rick Hough

I’m I the that I side. little equity on should a didn’t more, was institutional say, –

to the saying characterized remain different equity last a I I’m as the beat on I it and pipeline optimistic business, institutional in a that. OCIO and more robust, the that short-term it business, little marches than confident pure On little is, time,

Sumeet Mody

it. Got

returns, an even saw see out historically and to just a just then bit to find alright. maintain grow dividend. guys this, Okay, XXbX-X preferred has know great easily the investing to can capital you out more method over I that like repurchases. wanted about And the been I pivot your but environment wanted put you guys month. while that, little in still to last It’s

anything if what you to that this was see of guys wanted quarter? philosophy actually in kind repurchased Just around and your

Rick Hough

well time, savings stock. The XXbX-X, purchases of – in of the for wish from the periodically, I don’t executed. at invest means I largest – I point. capital And more the and And some own could to time in to supporting wealth. you’ve done returning seen as own so investors. plan the I’m of filings. I We like it’s to it’s honestly. I quite believe, regularly have I as my a my being high business. largest yes, very favor personal I purchase personally was piece a have dividend that’s more, had the

least term, sustained with been before years a really stock have for discussions not ago, X.X the or now many back about we our of I how Yes, say, about cash I even that industry, I that to market capital. let glad was flow. would do what of argue. March the when think years at low at and in that we we’ve our of do And asked others supported use X have at balance a to buying dividend be could even the I our really, even this level very regards I are position issues had And short good the the me we just levels. a time, leverage, can I’m levels, sheet, to of period a have would in current our on premier compared look

around as also or may when creep over feel to that the XX% our quarter, come that. seen about, years. And mid-XXs said pushing high bit. kind XX%. talked as also prudent I’ve even XX% up invest in were I’ve we the recent I invest that. we also just you’ve XX% it’s public think it’s high I just do the They XX%, good have But to and it it’s So the as mid-XXs, a down went could we down or business, come most as the we been of up EBITDA in about be somewhere XX%. the business, margins It in or XX%. XX%,

the it’s don’t comments, build here. be that, course, but notable business be get it the close of Otherwise, declining annuity. into it market lows not a we to – I March. just running at usually static would end should We’re of forward-looking a

as which As you second March know, we’re drives quarter our reporting AUM XX, often of results.

So year-over-year, results. out to very pleased I’m pleased especially we from climb hole considering new we’re But had business the look terms compared tend companies our lag as cash to helps. going a results in hope is healthy continues to other with a see development. grow. We quarter of XXXX. But challenges. to going of result. we very be with business the that the good this some flow-generating fourth I that to that to of I’m

Sumeet Mody

the Yes, have helpful. the impact wanted second I I that quarter, wanted impacts and cleanup maybe guys what if maybe, should maybe question, update second I if quarter, on just for margins definitely but just kind obviously, was to talking wanted ties But just here, what at ratio of was, to idea you could compensation in how comfortable, one are an being I revenues and an of if the pressure about market to in there, into quarter accruing were last the but least Scott. get are it it could? with to still you kind you that get it like the of

Scott Gerard

Yes.

you We toward recurring the accrued cash our do our try that to noticed that. XX% and ratio. is And a plan we compensation manage first to to continue best are – for to quarter

where come years – there years, prior been have in that. years where under we’ve in many As

we just that. in came ‘XX, bit a For tiny over

with incentive that. a portion pool. implied manage there So Certainly, is ratio we’re comp going variable that to to continue our look in to

with revenue. will along that – move that’s So

our current on position that’s So that.

Sumeet Mody

Right. for question Thanks my taking guys.

Rick Hough

Thanks.

Scott Gerard

welcome. You are

Operator

our comes Sandy And next of ahead. Evaluate go Research. Instructions] from [Operator Mehta question Please

Sandy Mehta

the the all of along free My Yes, turmoil. is strong good EPS morning. on growth revenues the in market in quarter lines and despite flow. question cash Congratulations the

had EPS. In than than double EPS versus you you’ve out cash that saw is this expect strong more EPS. last reported flow free company, level that of turns cash Is flow free your structurally, has doubled. and trend should cash QX that? free higher for – been cash So see it’s whatever year, more to been regardless in that a continuing that be, flow the years, you the but that four versus much flow continuing, EPS, the vis-à-vis trend we strong Free

Rick Hough

some that first, Scott general then let with growth and expectations. comments I’ll up take follow more Sandy, on I’ll our and

Scott Gerard

How our items and Keep there which that we that Sandy. diluted Yes, you create looking disparity our several when looking when adjusted mind are in EPS business there. focus or on, you you at are doing? are at are EPS,

over acquisition, think back you we about amortization to XXXX. a a expense. XXXX, large Cortina equity-based layer compensation of as our result structure been past that made on of amount grant We the We’ve expense. August year of the back If compensation was had of a had had has meaningful in additional a amortized which in portion fully

you’ve that aren’t of EPS So comes affect got items diluted but continue that, as to when necessarily such will factors it adjusted to generation cash flow.

Rick Hough

was in and and going we the in – doesn’t That fourth are managers meaningful the XXXX. a was after and for in as earnings, asset look really much, like created of cash flow these environments With regards difficult XXXX, quarter decline. environment as performance into revenue the it generation which the business cash flow of proud retrospect, to a but and

stage you that – fully comparing through was to end depressed of the And the mix. a last year-over-year one to XXXX see we the we But it. quarter QX I to a the this plus kind look, as year, we’re year-over-year to that for of of disrupted full set take saw in XXXX part numbers, that’s so the an and expect that history. recovery XXXX of think increases that business and when larger firm’s a which the at or quarter on get our And annual wherever market results, result of we’ll from acquisition first And of hard the it basis least it’s quarter. largest ongoing short-term in

not optimistic other in events the out flow I’m do share. quickly build per accretive deals try Look, I think and a company over we a business earnings free our and to fashion as and to growing continue hurt result. can that’s it We growing the averaged be and market has activity. cash and earnings pretty

the shape least revenue to generation all a in side, skew I look that. talked to and flow the of think at they’re But basis. like may low think about a drivers cash market I’ve on a year-over-year acquisition a that firm continue good high from going doing to the an plus growth things market bit recovered I fully

Sandy Mehta

In last one markets the And strongly. Okay. April, very question. rebounded

that end to willing a presume your your also ask – the presume April are is month sharp growing that business with give AUM line we in should Can rebound we if markets? AUM. in I we So an you’ve The you number complete. seen you is or

Rick Hough

bills with between The I now not business you lot recovered then April four latter under lows or we be funds with a potential where of management March the is like which I that beginning when effectively the increasing of sit our based XX. market. mutual of retail-oriented number a May values. were, other that times very we for activity would presume an There’s the March XX, and part flows we misleading. that the give only bill, asset sponsored and also towards To June could bill a and as I at believe, be time year, in market a think actually by bit should has on business think started

presume But AUM entire into part two portfolio this in increased could muddy this that to has we at generally equity another at market. monthly we the the time. by our with bill, of even So with quarter waters can line months you think least of I or the getting before go

Sandy Mehta

much. very you Thank Great.

Rick Hough

are you. Thank You welcome.

Scott Gerard

Thank you.

Operator

Rick This session. Hough conference remarks. turn our like the concludes closing to back over any I would to question-and-answer for

Rick Hough

for Thank of quarter XXXX you. Thank our us for results. you first joining

company, or initiatives us, and so. that different I the to growing from very quarter. did whether business. this who’ve business done you ability proved forward about, fourth good our for to firm And the our in that’s high-net growth job, number speaking even look and managers worth business it management a XXXX excellent team, optimistic environment, OCIO portfolio any hire recovering or we’re the can the business job continue to new the to initiatives portfolio quarter joining or next different with the ways. has pleased in grow equity continue doing existing you Thank in with We’re institutional with of at of an organically The our the

Operator

now you has you now The may disconnect. for conference Thank today’s and attending concluded. presentation

Silvercrest Asset Management (SAMG) 3 May 202020 Q1 Earnings call transcript