Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the Silvercrest Asset Management Group, Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please also note, this event is being recorded.

me regarding that forward-looking our let certain today's statements. begin, made statements future we remind during you call, Before performance are subject that could cause They projections, results to risks current on from actual uncertainties to the materially are statements and factors are of made. a many expectations and differ number are based which and factors Risk Factors. caption are under SEC the disclosed Those in the our filings with

statements of assumes made hereof, protections For this all provided the XXXX. such All Reform Litigation and to claim made forward-looking forward-looking are them. by Act on date call as no statements, the the update we of obligation Silvercrest

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

Richard Hough

AUM, XXXX fourth XX.X% Good finished revenue, declined of in calendar results. year morning and $XX.X Total year the in billion. billion for Discretionary AUM primarily quarter our us thanks $XX.X with of year-end XXXX. a and management and AUM the Silvercrest joining during total XX.X% volatile of for during year quarter which calendar XXXX drives at XXXX discretionary XXXX. assets declined fourth our the

from significantly with Revenue This and full fourth and declined to compared XX.X% $XX for fourth decline and the million quarter XXXX. diluted respectively consequently XXXX, full EBITDA the respectively quarter in share. and fell year and adjusted Adjusted EBITDA X.X% for affected year revenue adjusted per our XXXX. earnings $X.X XXXX, million

earnings quarter diluted per declined $X.XX fourth respectively. and adjusted Our XXXX, the also $X.XX year to and share full for

margin healthy in year. the respectively firm's remains last full and the adjusted of margin XXXX EBITDA and markets the while XX% for light was for from historically XXXX. year-end XX%, for declining margin Silvercrest adjusted down especially Our the EBITDA the company, of year adjusted EBITDA quarter XX.X% fourth

our to fourth conditions which over a by $XX.X and market quarter discretionary quarter or the of couple quality stated one $X.X Silvercrest billion of opportunities market X.X% and the XXXX create relationship Silvercrest typically new the new asset high the fourth quarters result, million capabilities, relationship gained development also We've uncertainty during quarter, volatility years. long-term and increased XXXX maintain $XXX as during of the third volatile and solid in past relaxed is suite benefited the that billion. of of that management year-end relative Silvercrest better over their capabilities The year, AUM have of performance. is

pipeline during Our new the of increased also business opportunities quarter.

common XXX,XXX finally, Investment AUM now Class of outsource A quarter. the approximately $X.X $X.XX million the during shares Chief initiative Officer stock manages repurchased Silvercrest of firm's for approximately And billion. fourth

then it Thank conclude Gerard, preliminary will Those you. our Scott questions. turn CFO, my remarks. and we to We'll over take

Scott Gerard

Great. Thanks Rick.

for fourth as and $XX.X disclosed was and the of quarter, AUM the $X.X our XXXX XXXX was million As end reported in total earnings income as $XX.X XXst, net billion, for the was discretionary was quarter million. billion. December $XX.X for Revenue consolidated of release quarter AUM of the

million further AUM. and outflows XX% of for over revenue decrease was client the in is by represented driven this into fourth depreciation XXXX, revenue $XX.X the period approximately and net again, This a million of approximately Looking discretionary year. decrease same market last quarter primarily $XX.X

of as benefits last administrative to salaries from Compensation expenses of year. the a increase to This decrease by quarter a and newly less quarter a year. primarily and and million, an expense, primarily for merit-based last in million, or same X% compensation was fourth approximately million expense in $X.X for increase XXXX accrual for were the the decrease fourth than primarily $XX.X X% period hired increases million partially bonuses was by million. expenses benefits to an general from the for increase $XX.X and for and The $X Expenses period attributable this of representing decrease increase million $X $XX.X staff. result the in same was $XX.X offset of million and and of benefits attributable

an adjustment by of fourth million million for entertainment administrative quarter decrease the travel $X.X in primarily fees. the to million $X.X from expenses period This for and partially to consideration related $X.X the attributable offset a and XXXX of value million, the $X.X Cortina of expenses fair to contingent General professional the XXXX. acquisition in in decreased to and was by same increase

Silvercrest diluted A of Reported XXXX Class income to $X.XX per million Reported for $X.X the and a A $X.X was net million income basic the last This was in to net for $X.X Class approximately million share. shareholders compared period quarter. year. consolidated or attributable same quarter the fourth or

which without year. compensation same effect as or in EBITDA, compared for based the giving items, $X.X we defined of to period the Adjusted non-core, the and non-recurring million revenue or was EBITDA XX.X% for XX.X% prior $XX revenue quarter expense equity million of to approximately

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

was partially AUM. same was XXXX in year. full revenue representing decrease This offset by primarily X% $XXX.X market over the year, the approximately driven period Looking million, at depreciation, million client net of for last a inflows decrease for approximately by $XXX.X revenue discretionary

XX% last expenses to million were of for billion period was This expense, from Expenses approximately same and compensation for and $XX.X general administrative and XXXX million, respectively. decreases decrease of decrease primarily $X expenses $XX.X a the representing year. $XXX.X attributable in million,

for a the accrual approximately to for million million $XX.X was attributable year. the compared equity-based $XX.X in and decreases due the The primarily stock by X% a benefits offset unvested the in increase as of partially period was to bonuses units benefits increases same stock in and salaries and expense decrease to restricted an outstanding, primarily merit-based options for decrease compensation expense hired year result last The and number unvested compensation in of decrease to staff. newly non-qualified

the million from in approximately year. fair and and trade decreased in increases and million costs This decreases errors XXXX travel to of acquisition to administrative fees consideration $XX for value was period expenses offset and by million $XX.X the General the or attributable the related partially Occupancy Cortina $XX.X and contingent for $XX.X expense, same portfolio to primarily in professional by of expense. XX% entertainment systems million. related and prior

attributable income year. Reported in the income Reported diluted period per net $XX.X was the the December or same share. Silvercrest Class net consolidated approximately year $XX.X year million A million, for the was and ended XXst, prior basic to for in compared million to $X.XX $XX.X XXXX

adjusted $XX.X $XX.X was EBITDA revenue for and Adjusted million XXXX. revenue $X.XX and per respectively. Adjusted basic or was to $XX $X.XX income or approximately net for or for diluted EPS, million XXXX million approximately of XXXX of XX% XX% compared

million XXXX, $XXX.X assets XXXX. end end XXXX. were end the and to cash XXXX to Quickly of at approximately looking the of compared the sheet. the Total at at million equivalents XXXX of were equity XXXX. million the $X.X approximately balance end borrowings the end $XX.X $XX.X and million Class of of A At end the as were of approximately stockholders' $XX.X of Total compared as total was $XXX.X million at cash of million

concludes remarks. That I'll now my Q&A. Rick turn it for over financial to

Richard Hough

Great. We're quarter fourth about now the Thanks available year. the Scott. questions for in

Operator

Thank you.

session. begin now [Operator We Instructions] will the question-and-answer

Moody comes Please go with -- me -- ahead. excuse question first Mody Piper from Sumeet The Sandler.

Sumeet Mody

morning, guys. Good Thanks.

Richard Hough

Good morning.

Sumeet Mody

wanted Just good start -- morning. to

international then, you million the just So, last progressing was pipeline. mentioned distribution I start update just over wanted you're institutional to the the how secondly what the were $XXX billion. that's AUM, just the the how at of effort, you on below now the that was wanted could pipe and to $X opportunity view couple pipeline years. on OCIO see touch also know next there specifically you OCIO, And on you if AUM that in and around X.XX And with quarter

Richard Hough

Sure.

we'll OCIO. that's nice really for a with So, us. Obviously, start pickup the

that effect markets. to the going be in that quarter fourth Some the the is of in increase we saw

S&P business the was But helps. order up think on the into of I new X%, which one the also platform. have OCIO we

So, includes part meaningful is wins, that which a great. those of

dollar for this billion the declined business several the up I've a you threshold said the important in be have to billion few firm. being in that getting dollar were projected right over market. a really market I know, before We will as against player us it, for And before, the XXXX. was As

billion, feel I at we're So, that there. almost good $X.X quite really not

more couple wins. a Just

as pipeline I And is on probably just well. for solid. looking well. think something, capability million, that, up has really or something of it's $XXX is like under the $XXX The that million That that. increased order as has It picked

the good feel we business there. about opportunities So,

business, pipeline from since institutional all of I as end of I on now, third of usually for the that is the billion asked total but is the question capabilities and the it, the our including up might well of ahead side get general get billion at $X.XX $X.XX OCIO, the pipeline quarter.

that small. oriented Yeah. international with picked has value importantly, But had they up capability nicely the increased. question performance value. do most and has to current strategy. the a second definitely in are Your environment, pipeline It's very That

the the off to strategy. fundamentals of parts and helped risk market And in return of some has definitely volatility so, their kind and the

some wealth And allocations strategy. seen more great. we've into that's our internally that So, also from clients

Sumeet Mody

for Thanks It's helpful. that. so much

Richard Hough

Sure.

Sumeet Mody

focus growth seems it maybe at? comfortable haven't maybe U.S. talked the are round outs. are any you're is most growth, just then, yet? into scaling is team being today sides, there a just penetrated out of more like across regions you perspective the you find interesting within on list kind small I but institutional product value that you today, kind know about overall, and from growth of where Or you where strategy organic some the it And the

Richard Hough

Yeah.

to institutional So, with regards we this professionals to down got growth. see pipeline strategy, both relative And in and that. remains with is performance hold happy they the with capacity We've for outperformance The And them with value absolutely very value really where environment. that grown in I'm also has a outstanding commensurately it's nice The kind their value been to has plenty the market. through of can Their great. strong. pipeline build our performance deliver, are. overall of Milwaukee growth equity really

institutional the good for necessarily as time. those am not I an at look, to outs I lift strategies. asset there, business things for now. -- We've but focused we company we're the that got or main other strategies so, really enhance expect pieces on And this need building management looking

attention With given you the look more or that low and PE rate change at in more more allocators less been what strategy, in being there's might paid only environment, we there's other interest so interest few ago. types to distressed the credit seeing clients And more interest expect, has capabilities rates. even a to that's possibility. many years of We different were as than whether the of and credit

I'm So, say looking got to be as can't it to build there may that. enough We've add trying an try I is. or to but here opportunity there, aggressively

se opportunities nothing the really much fit. Midwest. business Regionally, is we being city nice net great them It because just and to as great circumstance was growth They It was We had reason the know, great the different something us right Midwesterners. in in the with high per Milwaukee was on. And strategy. partners It was the it focused But I'm, team a business. well another think be you The find to a entirely. a more looking excellent. have of the for always to when cultural do in a we about I'm isn't region. great It's Geography of been country. institutional work a important worth strategy. regions with could for that went that's to

Sumeet Mody

just And last Scott. then maybe Thanks. one Great. one for

should fair are guys this the about year? XXXX, in just average you're -- you growth $X for quarter know for growth rate we pretty on just much Is year-over-year. I under million XX% rate are a costs, impacts assume for of some that in run XXXX? G&A the a for G&A On under that What think XXXX over maybe

Scott Gerard

Yeah.

we to I best think our -- are up in built-in lines their common is and expense. the normalizing best I so can either to various negotiate imagine, I expense we would to going the That's travel negotiate some -- related that services noteworthy pandemic, our fees. pretty because of started the do would in that as you covers certainly one some of in fees, try seen entertainment other as in increases much has that we're down some to use, a of professional services environment now XXXX reasonable historical into what as and XXXX lower agreements such our the level. even research -- was that what than levels. And of inflationary in nominal more well And fees that you've But expect and say G&A continue. to to we, or as much hiking do a

Sumeet Mody

Great. questions, my Thanks taking for guys.

Richard Hough

Sure.

Scott Gerard

Sure. Thank you.

Operator

Christopher with go Please Janney ahead. Marinac The Scott. next question Montgomery comes from

Christopher Marinac

see thinking good there's you and forwards in what's can kind some business of margin Rick, environment? in there. but of and the factors just Hey, kind EBITDA and you noise unique the how morning. Scott about know I unfolding talk going realistic this QX,

Richard Hough

I'll Scott able may start, be detail. fill Yeah. Thanks to but some Chris. in

sit all, recent you this in if XX% we growth at the in are think have and company, prior what with for fourth noted quarter, of is go EBITDA XX% some First note in we, to the spurts. historical your you our line actually I the fourth of right may EBITDA quarter where morning this for

So, And peers, good quite the we about looks year. feel really to that, considering good. compared even some

XX% ago good that of hitting a was EBITDA, not performance in that. As a year to which year year XX%, was multiple In I we fees, for up by was Obviously, saw performance fees. XXXX, kind were really we leading historically last driven when years said, high. part, that

So, you're true looking at business. kind of the

better So, look it's the markets as quite and will recover. only sustainable

personnel There's It a we EBITDA about our were to we in intellectual calls, company. that. the I talked which hidden in and growing. is We've capital another was would important which strategy, point because grow here, in done several margins making the that be bit investments

They're Well, growth to performers mentioned. happy business were like high We we're different that to than high be those investment but were just side. little more faster takes even a of with worth pay. compensation your time recognizing Milwaukee, hit increased sort So, growing payoff we paying making become a the team example going A would EBITDA That's strategies the performance. good little to and very also were bit. in in net margin obvious. especially we they've due decline investments. a in to money I It's with the ours, markets, long on a off,

view history. good we I very a of there. some those It's growth or very this level. investments sustainable So, see see it from And fees increases competitors. I get the view as compared It's as level. a in I with from performance if to line you good

that, to Anything to add Scott?

Scott Gerard

it the our that quarter only at of results. fourth with thing The is lot up typically on end is based Yeah. trend that the is us I'll you year see we true compensation add pools full and of a the year

levels, then the margin fourth A margin fourth see you year. EBITDA XX.X%, saw of a EBITDA it north you levels So bit atypical quarter little ago, was our quarter. fourth XX% year of margin adjusted quarter this and may why that's was -- in

reflects said, all investments in markets develop staff in year this where time Rick new revenue business that So, takes down. to levels a their were and what

in provide quarter that EBITDA unusual to to movement see year fourth some not each for in just the color Silvercrest of it's So market. that related

Richard Hough

great below I you at that that managed that year, there's or last point. around happened compensation, look it one XXXX, help of right good went XXXX, which even and we've -- we're get we because compensation that went approximately I at XX% calendar us well. obviously but And performance this very average quarter not hurt and is would the and which bulk figured And year out we We're the had of well. we upside, you it. can look if done trends we'd true, trend, long-term XX% XXXX there and in the in the a long-term, the which well It's just on below add Yeah. above there revenue years. XXXX. the of year in accruing fourth kind quarter-over-quarter, as you quarter-over not of you of a hanging business, even just the with adjustment. in at historically fees

have margin, XX.X%, just point Scott's right to the that, we exactly year XX% where which XX%, may fourth last this on you you sit. is When And made the hit average you quarter. year the you're quarter would EBITDA for XX% to expect more like and fourth at

So, need about comparison comparing be what period you careful -- think here. I where we're we're to

Christopher Marinac

then by helpful. But the some in additional could you sort the of points on year-to-year? basis how in pressure I a that. influenced to all revenue be just mix you've is as general I of bit this the little any appreciate of parts very other know of you core down at successful managed And sort the this to continue No, business. side compared gets the you charge. that's continue can on fees there from

Richard Hough

I it's mix. No, think, more

business -- institutional had including which increased has and a the OCIO, which big As nicely. grows accelerated,

You're in discretionary going has lower you to know, have fees lot that But as a more business, leverage it. assets. on

fee you've those with the margin the wins. you just of EBITDA that looking So, sort get enhanced missed at basis,

fee years of plus basis. always have worth full been business. very business high very I have don't they negotiated worth largest for from end, fees in the pricing at look very that and aggressively from very, service the side institutional different the clients for The net net pointed has steady asked a high top that the the past institutional out

fee That's that high the the reputation lowered really a families, that problem. from I'd really associating from and basis won well. So, level firm as the aura class of benefits has as wealth. have we've of a more the of rather large that bit

side, the been The other. say, institutional pressure same about in fees would one dramatically or way we've past experienced decade. on I the the has changing Nothing that

in a depending there's significant but it's when trend we around, get of go move funds. cash in discern flows the or course, allocate don't pretty But with firm their going noticed where there, been noise and to they and I across that's So, then where people haven't anything I stable.

Christopher Marinac

very background. it. you for that Thank much I appreciate Understood.

Richard Hough

Yeah.

Chris. welcome. You're Thanks

Operator

from The ahead. Chris Please with comes next Singular go question Research. Sakai

Chris Sakai

Good morning. Yes. Hi.

Richard Hough

Good morning.

Chris Sakai

out Can you you talk environment? seeing the acquisition are How about there? valuations

Richard Hough

Yeah.

I've ability to very things. continue for reset bit. and to had a -- view, it's hurdle their of down of the highly be interest my just unlike environment very come rate some higher levered Silvercrest, definitely in to higher debt the rolling up constrained those have high valuations in and participating observed mediocre and with who balance industry businesses for couple is a the high So, have Obviously, that. interest rate in a going pricing sheets

deals So, much deals in it's much scrutiny careful is terms bit. and comes emphasis more a seeing the and that, deal coming the earnouts, I'm of emphasis much on more et on how much of with down more What more AUM cetera. projecting those over

restrictions of form tighter getting view price reduction deal as could a you So, in the terms of the as well.

So of players market. of I've it's kind had yes, stepping And the out some been seen very down who a bit. coming also active

has it's of as definitely going. an that's The potentially down indicator deals come substantially well. So where number

all about I else. color that's a can So haven't seen I the give. lot

Chris Sakai

outflows for what you for were Okay. client drivers about the then, this main can that. And quarter? talk Thanks

Richard Hough

There's life. bucket leak in this in in a always expenses normal business. Just the

that pension down. to may be due winding were funds outflows the of Some

And kind so, a that. see -- out of you for you see drip

always both outflows. Obviously, it's saw very kind of business, -- got for in why and one the -- events is outflows forward steps worth primarily that back. quarter right? This second year, normal we third large it's in in caused were in the quarter, some two tax this the high of you've early There taxes, Some living. the net significant

which it's It's Outputs this there. a low this we -- It a negative, other. have moderate. quarter what were wasn't one is unusual pretty was. quarter little Very or way the positive often, sometimes

beyond So, that. much color I can't you give

basis, account was closed the On low. it very

years and was It low we've XXXX. one this had for the accounts that of entire closed lowest fact, since XXXX it In quite was year.

than new basis the that talking was maintained, we we've five. since flows, whole in merger. at of best Cortina did a years and best -- terms the certainly the or a on it of or as past but XXXX new really some a was of of in And So, new very we've relationships regardless the of relationships, last of XXXX XXXX. quarter accounts was we're business, distorted year bit year new the in net for better $XXX that or maintained because was well good that XXXX number one relationship relationships, year the looks million. of quarter the our outflows, about for It actually

all acquired those the better relationships for out you If is take assets XXXX of from that years. actually than new

I in So, argue environment. would especially the pretty solid,

Chris Sakai

the Okay. answers. for Thanks. Thanks

Richard Hough

You're welcome.

Operator

The comes [ph] Management Call from go Please Corporation. next with VTAG Timothy question Capital ahead.

Timothy Call

Management Yeah. Corporation. That's Capital The

So, very is balance clean. sheet your

Your cash income on And would times your net expected line, with versus than interest not I and rising XX draw interest expense. receivables net almost more equal, was interest being your all of that wondering have positive? you're cash why your income I -- your liabilities combined. credit

Scott Gerard

uses I mean, cash it. strategic on to have we our and We our do get Yeah. long some for tie of cash up typically the yield we some when cash. initiatives don't too invested have

weigh meaningful, banking on that strategic reduce from need we bank that our do I based for transactions. some any we something our what look receive We at But income also which needs and would our credits definitely cash. our for we is call, strategically, that fees helps

Timothy Call

make the interest cash would putting half that Maybe composite. in you the money market

Scott Gerard

Yeah. Thank you.

Timothy Call

It what for looks on you back you stock? when balance Good comment factors And you decision can -- your great. go in buy when making sheet.

Richard Hough

can, cash the desire appreciate where opportunities needed discussions marketplace primarily the significant of the one or maybe having ourselves. managers ability in question. quality It's weighing bit our would we're a purchase past. the which that this highest the in Yeah. against be we I've talked to about asset I and

forces I those we was think Cortina get of to XXXX that acquisition is made And the prolonged when teams in hit. know a things we with while great going joined join example, are that important. we want aspect cultural to us to is It never know very good The takes with. discussion. when a a You one to

our to do conversations. step was sudden. biggest and merger So, of we're those it cash history And required very all up and the about significant a us careful for in

And so a we some dry -- keeping that of powder against. reason that big is that weigh we're

As you easy last this know, year. also not to stock it's bit latest as look filing. always work that to. the we've we'd buy We to a go in to quite like back We've still got more revealed

Scott, think, I $X got we've another million?

Scott Gerard

$X.X About million. Yeah.

Richard Hough

so or million buybacks. potential transparent as market. the active been about knows, it. everyone $X.X And in we've been in We've

might through As we we that front do that what again, for the I we stated. will, on reasons work reassess

Timothy Call

you. Thank

Richard Hough

are You welcome.

Scott Gerard

you. Thank

Operator

[Operator Instructions]

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

Richard Hough

the year, compared to fourth Great. think our and a us mentioned, quarter-to-quarter the or not another good in quarter to business, able both quarter. continuing what quarter in of to OCIO our much nice while and have over the the very that performance just elsewhere. as calendar nice joining into this XXXX, able we've was quite have It Thanks and a feel returned on to Notable to about and progress was we little I to context for so the really year. we good do expenses for quarter were and important a fourth results. been year-over-year, calendar reversal distorted throughout and control year-end see It's reprieve I built maintain also I first keep quarter year XXXX we opportunities pipelines. margins

free much of any the Feel us. at forward at to you quarter. talking time. to Thanks joining so next out to reach end to Look for us

Operator

Thank concluded. now today's has you for attending conference The presentation.

You may disconnect. now

Silvercrest Asset Management (SAMG) 3 Mar 232022 Q4 Earnings call transcript