Silvercrest Asset Management Group Inc (SAMG) 2016 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Silvercrest Asset Management Group Inc. Q2 Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) And as a reminder, this call 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. These forward-looking statements are only predictions based on current expectations and projections about future events.

These forward-looking statements are subject to a number of risks and uncertainties, and there are important factors that could cause actual results, level of activity, performance, or achievement to differ materially than the statements made. Among these factors are fluctuations in quarterly and annual results, incurrence of net losses, adverse effects of Management focusing on implementation of the growth strategy, failure to develop and maintain the Silvercrest brand, and other factors disclosed in the Company's filings with the SEC, including those factors listed under the caption entitled, Risk Factors in the Company's Annual Report on form 10-K for the year ended December 31, 2015 filed with the SEC.

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

I would now like to introduce your host for today's conference Rick Hough, Chairman and CEO. Sir, you may begin.

Thank you very much and welcome to our earnings call for the second quarter ending June 30, 2016.

During the quarter Silvercrest experienced meaningful organic growth during the -- that quarter, with Silvercrest adding $242 million in new client assets and accounts, the firm's best new business development quarter since the first quarter of 2014. Our new business was generated by both the ultra-high net worth in institutional businesses, including new institutional sub-advisory relationships that we launched just over a year ago. We remain proud of Silvercrest's ability to maintain its organic growth.

Total discretionary assets under management, which now stand at $12.6 billion, represent a full recovery of discretionary assets from the market downturn we experienced during the third quarter of 2015. Total assets under management are now $17.2 billion. Consistent with the firm's continued organic growth and the improved market conditions, our top-line revenue for the six months of 2016 increased to $38.6 million which is a 7.3% improvement over the first half of 2015. The firm has grown while maintaining its fee basis for assets under management and its margins, while investing in the business.

As noted after the first quarter of this year, our new business pipeline has fully rebuilt since the market turmoil of the third quarter of 2015, reflecting the maturity of our business and marketing efforts. That pipeline delivered the anticipated growth we expected and remains robust. Importantly, Silvercrest's proprietary value equity strategies have maintained their strong performance. Each of the firm's six primary equity strategies have outperformed the relevant benchmarks for nearly all measured periods, as well as since inception.

We remain focused on finding selective and prudent acquisitions in money-center cities, and we believe Silvercrest's growth, culture and premier brand in the fast-growing RIA business, makes it a desirable business partner for many firms looking for a new solution. We are optimistic about complementing our organic growth with those accretive acquisitions. Silvercrest maintains a strong balance sheet, with light leverage and meaningful cash and the Company continues to maintain its generous dividend policy.

On August 2, of this year, the Company's Board of Directors declared a quarterly dividend of $0.12 per share of Class A common stock. That dividend will be paid on or about September 16, to shareholders of record as of the close of business on September 9, 2016.

Thank you very much. We'll take questions after Scott presents the financials. Scott?

Thanks Rick. So as disclosed in our earnings release for the second quarter, discretionary AUM as of June 30, 2016 was $12.6 billion and total AUM as of June 30, was $17.2 billion, revenue for the quarter was $19.3 million and reported consolidated net income for the quarter was $2.1 million. Looking further at the second quarter, again revenue was $19.3 million representing approximately a 4% increase over revenue of $18.5 million for the same period last year. This increase was driven primarily by growth in our management and advisory fees as a result of increased AUM.

Expenses for the second quarter were $15.8 million, representing approximately a 14% increase from expenses of $13.9 million for the same period last year. This increase was primarily attributable to increases in compensation and benefits expense of $1.4 million and G&A expense of $0.5 million. So comp and benefits increased primarily because of higher equity-based compensation expense as a result of the restricted stock unit grants that we made in August of last year. Increased salary expense as a result of both merit-based increases and increased headcount due to the Jamison and Cappiccille acquisitions and an increase in the accrual for incentive bonuses.

G&A expenses increased primarily because of increased investment in research costs, increased amortization expense related to intangibles acquired as part of the Jamison acquisition and increased sub-advisory and referral fees. Reported consolidated net income was $2.1 million for the quarter as compared to $3.3 million in the same period last year. Reported net income attributable to Silvercrest or the Class A shareholders for the second quarter of 2016 was $0.9 million or $0.12 per basic and diluted Class A share.

Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and non-recurring items, was approximately $5.4 million or 28% of revenue for the quarter, compared to $5.4 million or 28.9% of revenue for the same period last year. Adjusted net income, which again as we defined as net income without giving effect to non-recurring items and the income tax expense assuming a corporate rate of 40% was $2.3 million for the quarter or $0.18 per adjusted basic share and $0.17 per adjusted diluted share.

Adjusted earnings per share is equal to 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 EPS. And to the extent dilutive, we add unvested deferred equity units, restricted stock units and performance units to the total shares outstanding to compute diluted adjusted EPS.

Looking at the first half of the year, revenue was $38.6 million representing approximately a 7% increase over revenue of $36 million for the same period last year. Again this was driven primarily by growth in our management and advisory fees as a result of increased AUM.

Expenses for the first half were $31.5 million, representing approximately a 16% increase from expenses of $27.2 million for the same period last year. This increase was primarily attributable against the increases in comp and benefits expense of $3 million and G&A expenses of $1.2 million. And again, comp and benefits expense increased as a result of the restricted stock unit grants made last year and salary increases based on both merit increases and as a result of the Jamison and Cappiccille acquisitions. G&A similarly increased as a result of increased investment research costs, sub-advisory fees and amortization related to the Jamison acquisition.

Reported consolidated net income was $4.6 million for the first half that compared to $6.1 million in the same period last year and reported net income attributable to the Class A shareholders for the first half was $2.2 million or $0.28 per basic and diluted Class A share.

Adjusted EBITDA, which again is the EBITDA without giving effect to equity-based comp and non-recurring items, was approximately $10.7 million or 27.6% of revenue for the first half. This compared to $10.3 million or 28.7% of revenue for the same period last year. Adjusted net income for the first half was $4.6 million or $0.36 per adjusted basic share and $0.34 per adjusted diluted share.

Looking at the balance sheet, total assets were approximately $95.6 million as of June 30, compared to $108.2 million as of the end of last year. Our cash and cash equivalents as of June 30 were $21.3 million, this compared to $31.6 million at the end of last year. Notes payable was approximately $3.6 million at June 30 and it was approximately $4.5 million at the end of last year. Total Class A stockholders' equity was $46.3 million at June 30.

So that concludes my remarks. I'll now turn it back over to Rick and then for Q&A.

Thank you very much, Scott. And we'll be taking calls at this time.

(Operator Instructions) And I'm showing no questions in the queue at this time.

Great. Thanks very much. And thank you for joining us for our earnings call for the second quarter of this year. We remain optimistic about executing our strategy as we have and are seeing continued organic growth and hopefully some acquisition opportunities in the near future. Thank you very much.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.