Silvercrest Asset Management Group Inc. Reports Q3 2023 Results

NEW YORK, Nov. 02, 2023 (GLOBE NEWSWIRE) — Silvercrest Asset Management Group Inc. (NASDAQ: SAMG) (the “Company” or “Silvercrest”) today reported the results of its operations for the quarter ended September 30, 2023.

Business Update

Uncertain and more volatile markets had an outsized effect on assets under management (“AUM”) during the third quarter of 2023, with Silvercrest concluding the quarter with Total AUM of $31.2 billion and Discretionary AUM of $20.5 billion.

Discretionary AUM, which primarily drives revenue, decreased by $1.0 billion from the second quarter. Discretionary AUM has increased by $1.1 billion or 5.7% year-over-year, since the third quarter of 2022. The firm’s Total AUM has increased by $3.8 billion or 13.9% year-over-year from $27.4 billion to $31.2 billion.

Revenue increased 2.3% year-over-year for the third quarter of 2023 compared to the same period in 2022. Revenue decreased 6.2% for the nine months ended September 30, 2023. Most business metrics remain down on a year-over-year and year-to-date basis. Higher expenses during the third quarter this year negatively impacted Adjusted EBITDA¹ and the Adjusted EBITDA Margin¹.   The year-to-date decline in revenue affected Adjusted EBITDA¹, the Adjusted EBITDA Margin¹and Adjusted Diluted Earnings per Share^1,2, but Silvercrest’s Adjusted EBITDA Margin¹ of 26.9% and 27.3% for the three and nine months ended September 30, 2023, respectively, remains healthy for the company.

Silvercrest’s pipeline of new business opportunities remain solid but have weakened since the second quarter. This is the result of slower decision-making, not lost opportunities. We attribute this to a changing and uncertain business environment, higher interest rates, and geopolitical concerns. We are focused on those new opportunities as well as investments to drive future growth in the business, including value-added hires.

On October 31, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.19 per share of Class A common stock. The dividend will be paid on or about December 15, 2023 to shareholders of record as of the close of business on December 8, 2023.

Third Quarter 2023 Highlights

• Total AUM of $31.2 billion, inclusive of discretionary AUM of $20.5 billion and non-discretionary AUM of $10.7 billion at September 30, 2023.
• Revenue of $29.7 million.
• U.S. Generally Accepted Accounting Principles (“GAAP”) consolidated net income and net income attributable to Silvercrest of $5.4 million and $3.2 million, respectively.Â
• Basic and diluted net income per share of $0.34.
• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”)¹ of $8.0 million.
• Adjusted net income¹ of $5.1 million.
• Adjusted basic and diluted earnings per share^{1, 2} of $0.37 and $0.36, respectively.

The table below presents a comparison of certain GAAP and non-GAAP (“Adjusted”) financial measures and AUM.

AUM at $31.2 Billion

Silvercrest’s discretionary assets under management increased by $1.1 billion, or 5.7%, to $20.5 billion at September 30, 2023, from $19.4 billion at September 30, 2022. The increase was attributable to market appreciation of $1.8 billion partially offset by net client outflows of $0.7 billion.  Silvercrest’s total AUM increased by $3.8 billion, or 13.9%, to $31.2 billion at September 30, 2023, from $27.4 billion at September 30, 2022. The increase was attributable to market appreciation of $2.9 billion and net client inflows of $0.9 billion.Â

Silvercrest’s discretionary assets under management decreased by $1.0 billion, or 4.7%, to $20.5 billion at September 30, 2023, from $21.5 billion at June 30, 2023. The decrease was attributable to market depreciation of $0.8 billion and net client outflows of $0.2 billion. Silvercrest’s total AUM decreased by $0.7 billion, or 2.2%, to $31.2 billion at September 30, 2023, from $31.9 billion at June 30, 2023. The decrease was attributable to market depreciation of $0.5 billion and net client outflows of $0.2 billion.

Third Quarter 2023 vs. Third Quarter 2022

Revenue increased by $0.7 million, or 2.3%, to $29.7 million for the three months ended September 30, 2023, from $29.0 million for the three months ended September 30, 2022. This increase was driven by an increase in the average annual management fee based on the mix of discretionary and non-discretionary assets.

Total expenses increased by $1.2 million, or 5.7%, to $23.2 million for the three months ended September 30, 2023, from $21.9 million for the three months ended September 30, 2022. Compensation and benefits expense increased by $0.4 million, or 2.6%, to $16.7 million for the three months ended September 30, 2023, from $16.3 million for the three months ended September 30, 2022. The increase was primarily attributable to an increase in salaries and benefits of $0.3 million primarily as a result of merit-based increases and newly hired staff and an increase in equity-based compensation of $0.1 million due to the granting of additional RSUs. General and administrative expenses increased by $0.8 million, or 14.6%, to $6.5 million for the three months ended September 30, 2023, from $5.7 million for the three months ended September 30, 2022. This was primarily attributable to an adjustment to the fair value of contingent consideration related to the Cortina Acquisition of ($0.3) million recorded during the three months ended September 30, 2022, increases in portfolio and system expenses of $0.2 million, travel and entertainment expenses of $0.2 million, occupancy and related costs of $0.1 million and marketing expenses of 0.1 million, partially offset by a decrease in professional fees of $0.1 million.

Consolidated net income was $5.4 million or 18.1% of revenue for the three months ended September 30, 2023, as compared to consolidated net income of $5.6 million or 19.4% of revenue for the same period in the prior year. Net income attributable to Silvercrest was $3.2 million, or $0.34 per basic share and diluted share for the three months ended September 30, 2023. Our Adjusted Net Income¹ was $5.1 million, or $0.37 per adjusted basic share and $0.36 per adjusted diluted share² for the three months ended September 30, 2023.

Adjusted EBITDA¹ was $8.0 million or 26.9% of revenue for the three months ended September 30, 2023, as compared to $8.2 million or 28.1% of revenue for the same period in the prior year.

Nine Months Ended September 30, 2023 vs. Nine Months Ended September 30, 2022

Revenue decreased by $5.8 million, or 6.2%, to $88.9 million for the nine months ended September 30, 2023, from $94.7 million for the nine months ended September 30, 2022. This decrease was driven by a decrease in the average annual management fee based on the mix of discretionary and non-discretionary assets.

Total expenses increased by $8.8 million, or 14.6%, to $69.1 million for the nine months ended September 30, 2023, from $60.3 million for the nine months ended September 30, 2022. Compensation and benefits expense decreased by $2.9 million, or 5.6%, to $50.0 million for the nine months ended September 30, 2023, from $52.9 million for the nine months ended September 30, 2022. The decrease was primarily attributable to a decrease in the accrual for bonuses of $4.3 million partially offset by an increase in salaries and benefits of $1.1 million primarily as a result of merit-based increases and newly hired staff an increase in equity-based compensation of $0.3 million due to the granting of additional RSUs. General and administrative expenses increased by $11.7 million, or 159.2%, to $19.1 million for the nine months ended September 30, 2023, from $7.4 million for the nine months ended September 30, 2022. This was primarily attributable to an adjustment to the fair value of contingent consideration related to the Cortina Acquisition of ($10.9) million recorded during the nine months ended September 30, 2022, increases in portfolio and system expenses of $0.5 million, professional fees of $0.1 million, occupancy and related costs of $0.1 million, marketing expenses of 0.1 million and depreciation and amortization expense of $0.1 million, partially offset by a decrease in sub-advisory and referrals fees of $0.1 million.

Consolidated net income was $15.8 million or 17.8% of revenue for the nine months ended September 30, 2023, as compared to consolidated net income of $27.5 million or 29.0% of revenue for the same period in the prior year. Net income attributable to Silvercrest was $9.5 million, or $1.01 per basic share and $1.00 per diluted share for the nine months ended September 30, 2023. Our Adjusted Net Income¹ was $15.1 million, or $1.08 per adjusted basic share and $1.05 per adjusted diluted share² for the nine months ended September 30, 2023.

Adjusted EBITDA¹ was $24.3 million or 27.3% of revenue for the nine months ended September 30, 2023, as compared to $27.6 million or 29.1% of revenue for the same period in the prior year.

Liquidity and Capital Resources

Cash and cash equivalents were $58.9 million at September 30, 2023, compared to $77.4 million at December 31, 2022. As of September 30, 2023, there was $3.6 million outstanding under our term loan with City National Bank and nothing outstanding on our revolving credit facility with City National Bank.Â

Silvercrest Asset Management Group Inc.’s total equity was $83.6 million at September 30, 2023. We had 9,342,259 shares of Class A common stock outstanding and 4,544,804 shares of Class B common stock outstanding at September 30, 2023.

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. Â

• 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.Â

• 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 (“RSUs”) 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 3, 2023, 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. A live, listen-only webcast will also be available via the investor relations section of www.silvercrestgroup.com. 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; 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, 2022, which is accessible on the U.S. Securities and Exchange Commission’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.

Silvercrest Asset Management Group Inc.

Contact: Richard Hough
212-649-0601
[email protected]

Exhibit 1

Exhibit 2

(A) Other adjustments consist of the following:

(a) For the nine months ended September 30, 2023, represents professional fees of $5 related to the acquisition of Cortina. For the three months ended September 30, 2022, represents insurance costs of $5 related to the acquisition of Cortina. For the nine months ended September 30, 2022, represents insurance costs of $22 and professional fees of $10 related to the acquisition of Cortina.   Â

(b) For the three months ended September 30, 2023, represents an adjustment to the fair value of the tax receivable agreement of $40, an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives, $23 related to moving costs and software implementation costs of $8. For the nine months ended September 30, 2023, represents an adjustment to the fair value of the tax receivable agreement of $40, an ASC 842 rent adjustment of $144 related to the amortization of property lease incentives, $35 related to moving costs, software implementation costs of $28 and a fair value adjustment to the Cortina contingent purchase price consideration of ($2). For the three months ended September 30, 2022, represents a fair value adjustment to the Cortina contingent purchase price consideration of ($343), an adjustment to the fair value of the tax receivable agreement of ($93), an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives and expenses related to obtaining a business license of $26. For the nine months ended September 30, 2022, represents a fair value adjustment to the Cortina contingent purchase price consideration of ($10,943), an adjustment to the fair value of the tax receivable agreement of ($93), an ASC 842 rent adjustment of $144 related to the amortization of property lease incentives, expenses related to obtaining a business license of $26 and expenses related to the Coronavirus pandemic of $6.

Exhibit 3

(A) See A in Exhibit 2.

(B) GAAP earnings per share is strictly attributable to Class A shareholders. Adjusted earnings per share takes into account earnings attributable to both Class A and Class B shareholders.

(C) Includes 23,732 and 31,974 unvested restricted stock units at September 30, 2023 and 2022, respectively.

(D) Includes 264,037 and 120,772 unvested restricted stock units at September30, 2023 and 2022, respectively, and 147,506 and 252,904 unvested non-qualified options at September 30, 2023 and 2022, respectively.

Exhibit 4

Exhibit 5

Exhibit 6

Exhibit 7

Exhibit 8

(1) Represents new account flows from both new and existing client relationships.
(2) Represents closed accounts of existing client relationships and those that terminated.
(3) Represents periodic cash flows related to existing accounts.
(4) Represents client assets that converted to Discretionary AUM from Non-Discretionary AUM.
(5) Represents the net change to Non-Discretionary AUM.

Exhibit 9