Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to the Silvercrest Asset Management Group Inc. Q2 2023 Earnings Conference Call. All participants will in listen-only mode. [Operator Instructions] After today’s presentation there will be an opportunity to ask question Please also note today’s event is being recorded.

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

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

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

Rick Hough

X.X% Discretionary billion Good quarter discretionary since $X.X first billion. increased $XX.X AUM, $X.X you. the of half Markets quarter the quarter billion. or billion increased by AUM thank which second $X.X morning Silvercrest Discretionary quarter our revenue, XXXX. and quarter primarily $XX.X the or or with billion over their $XX.X concluding billion firm’s of from the and the to under recovery increased and second XXXX, first XXXX. billion assets billion of total $X.X with has of during of the second total drives over The $XX.X continued increased of AUM for X.X% has XX.X% AUM XXXX year-over-year management

XXXX share. as of business diluted earnings is half adjusted Revenue, recover. markets for revenue basis with down remain the affected example, decline year-over-year first in the While X.X% EBITDA, a improving, most metrics XXXX. of per on adjusted fell for This our compared

for remains margin. of XXXX the the half Silvercrest’s the X.X% year-end EBITDA of healthy opportunities of robust. margin company historically new pipeline increase adjusted of a EBITDA Silvercrest for remains over first XX.X% and adjusted business represents XXXX

drive in future We well are business. investments on as the growth those to as opportunities focused

about of a A as of of $X.XX year, dividend stock. That’s company’s per declared new of Class increase of On an business will Board common prior be XX The dividend of of also September payout. July XX on to share the quarterly close on dividend September over X. shareholders or $X.XX the our Directors this of paid record

will questions. With it Scott, will Thanks. I turn and over take we then that, to

Scott Gerard

Again, $X.X AUM as second $XX.X June year XX of of release this June you, earnings of was this reported for Revenue consolidated and was as quarter quarter Rick. net the in million. was $XX.X quarter, disclosed total income our was and for the for as Thank year billion. $XX.X billion, discretionary AUM of million, XX the

a same by primarily represented This the on of of the million last discretionary more at X% a the second assets. $XX.X based for annual decrease in decrease million Revenue management period in bit fee $XX.X detail. average that decrease of and was year. revenue quarter Looking approximately non-discretionary the mix a approximately from driven

decrease the in administrative was million, a same expenses increase an expense $X.X compensation million. for expenses to offset of of $XX.X increase quarter increase attributable $XX.X the a primarily This and from Expenses second XX% partially in for last year. general were million, period $X.X representing by of and million approximately benefits

The million to million granting an merit-based and for the an compensation same second benefits in accrual the due decrease increase benefits X% to Compensation again or million of a a of increase $X.X from $XX as bonuses by million last expense for approximately to $XX.X quarter additional RSUs. increases by staff salaries period decreased $X.X $X.X year. offset for primarily attributable partially in million of was of in the the and and hired newly result primarily million, of decrease equity-based $X.X and

the to Cortina was a fees, by $X.X offset expenses, from to professional same and $X.X the an last $X.X of increases quarter Acquisition and travel million marketing in of systems for year. fair addition for increased expenses This adjustment value year decrease a in million consideration expense. million period related to in administrative partially to the attributable second to and last General and portfolio $X.X the contingent to by amortization, million entertainment expenses expenses reduction of and depreciation primarily

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

Adjusted diluted income prior for net items respectively. for to earnings giving income, was or effect and year. basic $X.XX or items, million same non-recurring period we effect was as EBITDA, as quarter rate define non-core the and equity-based Adjusted revenue per XX.X% net non-recurring of quarter and in which $X.XX $X.X to million and without million share, EBITDA the giving a which tax define compared of for non-core expense revenue the income XX.X% we of $X.X and approximately to assuming per compensation adjusted without $X.X expense approximately and or corporate XX%, the

to Class compute stock and as non-qualified per to the stock end of of we share shares outstanding EPS. the the income actual reporting the adjusted B the options to units to extent dilutive, is add adjusted shares equal unvested divided for And Class total outstanding adjusted by Adjusted EPS. period net diluted earnings restricted A basic and

for a million, increase half of increase $XX.X attributable of from for primarily compensation AUM. $X.X benefits half that year. million, of same decrease was in the was expense last from approximately first and the $XX.X And year, for period approximately expenses primarily decrease the XX% million increase driven represented at revenue client the in period to a was last depreciation by approximately approximately million. Expenses decrease and This $XX.X million administrative and by the outflows same an Looking representing revenue discretionary million. This partially expenses year. XX% a in of offset first general market of were net $XX.X $XX.X

for this of a year increase of an the by primarily of that granting in for half the $XX.X million there expense accrual from million, of decreased Compensation and result for partially newly and increase $X.X was compensation additional increases X% in $XX.X The merit-based of in $X.X of XXXX. of staff. million. was benefits first benefits bonuses decrease and half offset by an first approximately the expense again, attributable was to million decrease due RSUs. the equity-based And primarily a hired $X.X And to to million salaries

expenses Cortina XXXX. increased to value the Again, $XX.X consideration to fair half systems from entertainment of half $XX.X There and year recorded were marketing of contingent the was administrative expenses. also $XX.X in these portfolio of and million to of this Acquisition And was the amortization. first of the adjustment were this travel depreciation offset an expenses, million in expense, that year million and related first partially General and million to by primarily for the this in increases for half first by $X.X attributable decreases XXXX.

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

million year. this million approximately and $X.XX half $XX.X $XX.X of approximately EPS, respectively. for EBITDA for net year or revenue $X.X the half compared and XX.X% or the Adjusted Adjusted period million XX.X% revenue income or diluted the $X.XX for to adjusted was per first first last was of of same basic

year XXXX. June end the stockholders’ Total million of to compared June $XX.X Quickly this as million was as of equity at at equivalents were as year of approximately June the $XXX.X this of balance total compared year XX $XX.X looking of approximately as this of Total of this XX of cash $XX.X were year A were the end Cash borrowings June as of sheet. assets of XX And approximately million. $XXX.X million million Class of million. and $X.X to XXXX.

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

Rick Hough

Thanks, Scott.

now open for We’re questions.

Operator

Our Instructions] Pleas Mody Sumeet ahead today from question. question with go your [Operator first Piper from comes Sandler.

Sumeet Mody

the I’d Good search size OCIO of asset cited and the quarter, know $X I doing in with kind more opposed pipeline hope talk Can I meetings are equity the environment you how morning, today? actionable virtual classes. between to person. update some you as domestic pipeline slowness Hey, like almost environment time given has guys. that increased nicely evolved be to at would thanks. on kind an Thanks. of the billion the and about start in X-month you of well. search mentioned just last That maybe then but great.

Rick Hough

things firm, changed. it a be slow. bit The pipeline timeline to It’s for does still of and was historically high a good. environment to for feels which hasn’t bit search been fruition. a longer while for was come a this to quite Yes. That But seem the like

attributable of didn’t both those That’s we The total won the out for overall thinking win, And $X.XX in last fall billion mandates at in much growth X-month Sumeet. but terms, the down team, to which not as since from pipeline. so changed as about pipeline a well we both has looking is comment, is are my of our mandates, currently and mixture last it $X.X quarter. particular pipeline billion, that of some actionable the so pipeline,

also which $XXX million last of of In $XXX the million down mentioning. brought the number little are pipeline was things have we just It’s one quarter. was a did addition, that of OCIO. adjusted from We things taking I loss pipeline, as million the longer, a $XXX a But now pipeline. in because that

those back this think pipeline. months. it measure you over of the out X we So next happen took the as accurately come about But may into try items what the know, we to we will pretty pending X-month,

of is pipeline, didn’t that very well win things really we stand our now. we So right pipeline feel that’s the and the good a as things of pipeline. decline solid about mix It’s prospects, as a one, but readjustment where in still

Sumeet Mody

driven saw switch what to I just the office non-discretionary quarter, and did that helpful. talk Obviously, then like revenues by revenue. AUM the a I the talk about uptick really driver the Thanks, nice We if how you Great. in tied side. inflows. looks the isn’t wanted the you over in quarter? your Can inflow, know to wondering there? net family impact could you was directly about to drove

Rick Hough

much our would get on but A office revenue. services family revenue. an revenue It didn’t I AUM directly of in it non-discretionary not a that periodically have on tied it’s the to say Well, family related of at is all to of or office an assets assets lot in which Sure. the is in effect lot non-discretionary, tied to repriced. family basis, office the

as Some is of that be and bit of assets quite it market-influenced as not may it a equity, other private quite others.

we clients that pool that reporting We may assets. assets other didn’t or who add also have into for have responsibilities large of

uptick us. in meaningful for healthy a a revenue we of on fairly to assets. the as So have with clients. It well our would impact say that on. have the those value of of I clients in our speaks very speaks that with those to relationship meaningful it It assets we clients Obviously, the speaks saw them working responsibility both inflows large as and that But trust is to pool counseling negligible.

So to extent, positive. that quite good a is it

Sumeet Mody

then more me. Great. And one for

four trading kind Just done ago? in Any versus of color to the you’ve where on buyback the strategy repurchases nice in updates stock be repurchasing. some row Any the helpful. is months would today the a quarter, now it like X looks quarters given

Rick Hough

have have into been at we announced. don’t go more I not. to on buyback little on and comment a we active or that we which that are the the Yes. still Obviously, prices we market bit

very the don’t I but how thresholds our comment We’re out, strategy. or with turned specific program pleased on

Sumeet Mody

questions. Okay, the thanks taking for

Rick Hough

welcome, Sumeet. Thanks. You are

Operator

Please ahead question Our from go Research. next question. your Sandy from comes with Evaluate Mehta

Sandy Mehta

Rick Good Yes. morning, and Scott.

quarter, follow-up a earlier the presume during were there question. buybacks I QX? this Just on no

Scott Gerard

additional did Yes. No, back we QX. buy in some

Sandy Mehta

Okay.

business? Okay. the of you disclose size Fine. current OCI And the can

Rick Hough

$X.XXX that’s Yes, billion.

last quarter. million, over right but I’ve I’m up got last it a quarter, So sure $XXX from it’s believe. good maybe $XXX that not is million up here, I

Sandy Mehta

any or your range a the amount about higher modeling... should Okay. of absolute of we might little of quarter. any for SG&A the expenses percentage prepared comments the dollar being for bit And this terms be Good. in for you sort – Great. expenses ballpark what year of sales SG&A in balance commented guidance How or

Scott Gerard

earnout needed Yes, driver that the related year-over-year we you recall acquisition. liability mark-to-market change, quarter, of the Sandy, to the may Cortina each to the

adjustment. a basically noncash it’s So

that so that liability. zero, is And earnout now

a adjustments So reduction – had fair a year had value our we which liability, value expenses. we large reduced fair to a ago, large that

So driver that’s really the the of change.

earnout have expenses, of that mark-to-market. because as more So you in the XXXX, see them are you normalized the effect don’t

Sandy Mehta

percentage a of sort going be maybe it’s of sales, So XX% like to more XX% something to XX%, as or that?

Scott Gerard

we’ve have said, numbers we look do to was as especially the in seasonality half as past, mean, and the related get end we our our year. QX do our have the I amount if first SG&A, the reduction of some the toward But immaterial. to you I we this of year, – said like liability some expense earn-out at

Sandy Mehta

Great. so much. Okay. Thank you

Rick Hough

Sure, you. thank

Operator

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

Christopher Marinac

Thanks. Good morning.

question and that the Just of wanted EBITDA of quick with year? margin you kind over a comments range will still the on of terms prior the do to if in felt sort where comfortable

Rick Hough

Sure.

So the we which the was XX.X% time were since markets been the where as fees. but whole sat fact the was with public, firm, over hit we very is significant history much highest well XX.X%, is if of end got as performance look The which the before high generally very you margin. healthy have very the that that XXXX speaking, we around of at quarter, certainly a for we at of we

no level That was associated upper-XXs. So, in to it unless and/or obviously fees, the real that And EBITDA I market real high. have times costs many which further performance in we is have reaching them unusual. a really that with are are the of that acceleration seeing drive commented not you feasible

certainly to or think given where or new Right now, the are. quite hit P&L is sustainable. I We high, it for comfortable haven’t the that And are we a given EBITDA honest. so be the fact hires running significant investments, bit feels markets

were pause pretty to comes we at on a the from bet look up things creep there. I very contracts as that if think a good inflation if of could some to we fact, In steady-state even this number little and But is down changed. bit

business. comments the looking did I our opening the happen have of terms my And that growth. mention at I to In drive the we need to investments might are future, in what so mentioned in in do

share represents openly projecting, should If I that were to growing business you with in how a conversations we in thinking investments and as well could surprised that, have we even a margin am amount. going talking do in EBITDA to hit still I after I are what hires. margin, people. compounds is be growth in that and And as is am growth just And be that to all, some we earnings drive margin in invested a good that and know that would I would if be generally a we not not in the organic so that prudent way about so, are future. in follows very revenue down the a but until it to by to down What don’t But this meaningful to we one talk which those drive pushed to we if always short-term both well faster yet engage XX%, business. as And hires continue the bring per we so, as EBITDA do way making that capital. we

Christopher Marinac

Great. That’s of to where under don’t payoff scenario you see And under go lower, revenue in is helpful. that revenue relatively the scenario? to have really that inflection would terms you long wait quick that Rick,

Rick Hough

not I or a book we to of It’s clients business have one. buy, would that to don’t broker’s past. are brings business say of that tend do over in enamored It’s day depends. say, – it a model with lot the we a something

we we to bit it as So, and those tends make in advisory be a fiduciaries this with slower dealing business, are after driving people advice, investments.

of But we time it, the COVID off markets time. rising bit the that also some it at by was and a into or obscured perhaps at us. paid beginning recall investments for took may that the You made just

So, in accelerated combination, investments. everything faster our than

have the EBITDA one we quick to may of investments partners right, culture, benefit transparent course, in conversations expansion the correct ended of revenue of if make that’s which terms you one, high those compatible with was is we it and if reason will about but the the engage and those would timeline, XXXX. and talking both fact, a be why also always however at do, and define firms, it potential end When try the up And were In not a are such necessarily that. all or I I time. the margin we I to EBITDA

Christopher Marinac

quantifying Super. several next from standpoint? you Thanks And that for rates Rick, Scott a if longer, what mean any have for strategic a does you manage stay it Does on of that, just appreciate the higher I final business for how these quarters? in and it. terms point, impact interest

Rick Hough

thing, adding to it one our of income the P&L. for maintains Well, the possibility interest

the very year. it, a position we small cash for especially as you higher, next will haven’t short-term which buyback buyback, have relatively us with small meaningful the of out we of to-date. given end sizable really a and the February a had those way income, Much the cash that’s interest that’s nonetheless, which benefit at interest is ending But compensation, We building. pay know, rates, that’s building,

The market. is in have the other definitely would M&A effect it

it you years know, done, little are years bit. to seeing compared market taking compared is But has. recent are may many active as tighter. certainly slowing longer won’t get a financial and work to little still a that As deals quite a Deal you engineering reasonably ago. certainly to terms well It’s as getting

to helpful conversation. I think in that’s our us

welcome So, that I environment.

large capital for and normalized at generally and companies. think the the decisions I for allocation environment is economy good

fixed continually rising us about real earnings having what adjust, shift to that and expect real happen, necessarily. even market financial to was I on it depending toolbox us to from, help income and what much just fixed on marginal very our of the AUM. to And have that’s going think we though are a folks. based effect another then overall develop than would generally tool And rather a equity as and lower pretty capabilities a I revenue. if did speaking, in to them have A and you gives from don’t growth assets a whatever client compensation a be point does firm’s would our basis are fixed and I perspective, folks to more of attractive, lot a engineering issue income calling happens of income have fixed finally, quite yet industry make in. effect on income small say, on it balanced relationships most of the revenue

would I we are this So, rate sustained even is continue neutral positive. it a level say where to to that interest were of if

Christopher Marinac

Got it. helpful. Thanks background for this very all the morning,

Rick Hough

a pleasure talking thanks. to Always you Chris,

Operator

question Our Research. Sakai your Please comes next Singular from Instructions] [Operator from ahead with Chris go question.

Chris Sakai

just question can – next where average quarter decreased year? morning. Good a on Yes. about you versus management it the for of remainder this that the I talk had quarter year and and fee annual ago? your a how And see do you

Rick Hough

be very visibility future. what have capability predicting the or of little I it in could

is of itself. One the of drivers the market that biggest

declined, just see it as making often that’s coming and have more means average changed it will the because bit. you down with a comments versus much was markets I points our So, dissimilar equity, not basis very fixed income to before,

assets management. have institutional equity for management be under It’s discretionary it as markets result recovering. which larger quite regular came institutionally is The not find that the course, priced. could in been same OCIO, management the discretionary of equity, of a you asset well and Now, mandates bit down

XXst points – management stand our assets bring rate, we you would where of run this for those on of as the I quarter – should up you if down to we and It basis it on, the would assets the based quarter revenue reporting did a bit. we were remember, impute of that that of to are should a the based as quarter closing on receiving on values. XXth, year. actually be based is be last as over are that under So, points on noted June discretionary expect today, or And in March say, basis end you is for

for the is one I during what and always the is has further increased hope market not that the period quarter. driving that billing revenue quarter, The ahead. quarter helps. So, is

Chris Sakai

Okay. million. paying I term your then of Yes. loan And that you Thanks. just considered Have outstanding $X.X down? guess guys one on

Scott Gerard

a that, Well, year. the is required million amortization annual on amortization the $X.X

will it’s go. that to So, – months XX another got

on amortization we So, if some interest so the some overly into loan prudent. could But normal burdensome, changed is if not for reason, is drastically, the reason term now, right formula being for prepayments. always rate look the

Chris Sakai

Okay. Thanks. Great.

Operator

and I this ladies And time, at am no questions. additional showing gentlemen,

like Hough conclude for We question-and-answer Rick to back turn floor would will any the today’s I to session. closing over remarks.

Rick Hough

us. the in of of joining I this talk for and to the markets new our nice capabilities. the and Thanks morning of to you summer, appreciate a bit of Great. and It’s activity Thank end your we good for business Wish you recovering see fair the rest you. the pipeline all quarter. questions. will at a really attention third

Operator

Ladies that, today’s Thank and conference call conclude joining. we and gentlemen, you presentation. with for will

You now lines. your disconnect may

Silvercrest Asset Management (SAMG) 31 Jul 232023 Q2 Earnings call transcript