Silvercrest Asset Management's (SAMG) CEO Richard Hough on Q2 2016 Results - Earnings Call Transcript

| About: Silvercrest Asset (SAMG)

Silvercrest Asset Management Group (NASDAQ:SAMG)

Q2 2016 Earnings Conference Call

August 05, 2016 08:30 AM ET

Executives

Richard Hough - Chairman and CEO

Scott Gerard - CFO

Analysts

Operator

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] As a reminder, this conference 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 fact, including statements regarding future events and developments, and Silvercrest's future performances, 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 they are important factors that could cause actual results, level of activity, performance or achievements 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 our 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 believe, 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, please begin.

Richard Hough

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 bad quarter where Slivercrest adding $242 million in new planned assets in accounts. The firms best new business development quarter sense the first quarter of 2014 our new business was generated by both the ultra-high net worth and institutional businesses including new institutional sub-advisory relationship that we launched just over a year ago.

We remain proud of Slivercrest ability to maintain its organic growth. Total discretionary assets in the 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 permits grown while maintaining a fee basis for assets in the management and its margins while investing in the business. As noted after the first quarter of this year our new business pipeline is fully rebuild since the market term loan at 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 our strong performance.

Each of the firm’s six primary equity strategies that outperformed did relevant benchmarks for nearly all measured period as well as since inception. We’ve remained focus on finding selective and prudent acquisitions in money center cities and we believe Silvercrest growth, culture and premier brand in this fast growing RIA business makes the desirable business partner for many firms looking for new solution.

We’re optimistic about completing our organic growth with those accretive acquisitions. Silvercrest maintains the strong balance sheet but light leverage and meaningful cash and the company continues to maintain its generous evident 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 the business on September 9, 2016.

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

Scott Gerard

Thanks Rick. 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 19.3 million, representing approximately a 4% increase over a revenue of 18.5 million for the same period of last year. This increase is 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 expense of 13.9 million for the same period last year. This increase was primarily attributable to increase in compensation and benefits expense of 1.4 million and G&A expenses of 0.5 million.

So comp and benefits expense increased primarily due to the 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 acquisition and an increased in the accrual for incentive bonuses.

G&A expenses increased primarily because of the increased investment research costs, increased amortization expense related to intangibles acquired as part of the Jamison acquisition and increase 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 of the 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 we define as net income without giving effect to non-recurring items and 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 and 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 7% increase over the revenue of $36 million for the same period last year. Again, this is 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 again to increase 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 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 of the prior 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 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 compare 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.

Richard Hough

Thank you very much, Scott. I hope you’re taking calls at this time.

Question-and-Answer Session

Operator

Richard Hough

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 same continued organic growth and hopefully some acquisition opportunities in the near future.

Operator

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.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!