NEW YORK, March 7, 2019 /PRNewswire/ -- Silvercrest Asset Management Group Inc. (NASDAQ: SAMG) (the "Company" or "Silvercrest") today reported the results of its operations for the quarter and year ended December 31, 2018.

Business Update

Silvercrest completed 2018 with record calendar-year revenue. The firm achieved an 8% increase in 2018 year-over-year revenue to $98.7 million. Net income and Adjusted net income¹ grew from $12.5 million to $17.4 million and $13.1 million to $17.9 million, respectively; and Silvercrest maintained its Adjusted EBITDA margin¹ of 30% for full year 2018, as compared with 30.5% for full year 2017, despite investments in new initiatives.

While Silvercrest experienced organic growth for most of 2018, including net new asset flows, the fourth quarter of 2018 was difficult, experiencing both negative flows as well as market declines during a volatile quarter for the markets. After achieving a new high of $16.6 billion in discretionary assets under management to end the third quarter of 2018, the firm ended the fourth quarter and year-end 2018 with $14.2 billion in discretionary assets under management and $19.0 billion in total assets under management.

In January 2019, Silvercrest announced the acquisition of a new institutional-quality international equity strategy. We expect the capability to benefit both our high net worth client base and resonate with institutional investors. We have completed our business integration and are bringing the strategy to market. During 2018, the firm also made investments to grow its institutional asset management, the outsourced CIO and family office businesses. Silvercrest firmly believes that re-investment in our business and in our clients will create the greatest long-term value for shareholders. We remain prepared to use our capital for additional strategic initiatives, the hiring of intellectual capital and potential acquisitions, including new asset management capabilities.

While the current M&A environment remains expensive, Silvercrest continues to actively evaluate selective and prudent acquisitions with culturally compatible firms to complement our organic growth, investment capabilities and professional talent, including the potential to expand into new geographies.

As previously announced on February 14, 2019, Silvercrest raised its quarterly dividend to $0.15 per share of Class A common stock from $0.14 per share of Class A common stock, representing a 7.1% increase in the dividend.

Fourth Quarter 2018 Highlights

• Total Assets Under Management ("AUM") of $19.0 billion, inclusive of discretionary AUM of $14.2 billion and non-discretionary AUM of $4.8 billion at December 31, 2018.
                                       
• Revenue of $24.8 million.
                                         
• U.S. Generally Accepted Accounting Principles ("GAAP") consolidated net income and net income attributable to Silvercrest of $5.2 million and $2.9 million, respectively. 
                                                  
• Basic and diluted net income per share of $0.35.
                                           
• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")¹ of $8.6 million.
                                         
• Adjusted net income¹ of $5.3 million.
                                             
• Adjusted basic and diluted earnings per share^{1, 2} of $0.40 and $0.39, respectively.

The table below presents a comparison of certain GAAP and non-GAAP ("adjusted") financial measures and AUM.

AUM at $19.0 billion

Silvercrest's discretionary assets under management declined by $1.8 billion, or 11.3%, to $14.2 billion at December 31, 2018 from $16.0 billion at December 31, 2017.  The decrease was attributable to market depreciation of $1.4 billion and net client outflows of $0.4 billion.  Silvercrest's total AUM declined by $2.3 billion, or 10.8%, to $19.0 billion at December 31, 2018 from $21.3 billion at December 31, 2017.  The decrease was attributable to market depreciation of $1.1 billion and net client outflows of $1.2 billion.

Fourth Quarter 2018 vs. Fourth Quarter 2017

Revenue increased by $0.4 million, or 1.5%, to $24.8 million for the three months ended December 31, 2018, from $24.5 million for the three months ended December 31, 2017. This increase was driven primarily by growth in our management and advisory fees as a result of an increase in average management fees partially offset by a decrease in performance fees. 

Total expenses increased by $0.3 million, or 1.4%, to $19.6 million for the three months ended December 31, 2018 from $19.3 million for the three months ended December 31, 2017.  Compensation and benefits expense decreased by $0.3 million, or 2.0%, to $14.2 million for the three months ended December 31, 2018 from $14.5 million for the three months ended December 31, 2017. The decrease was primarily attributable to a decrease in the accrual for bonuses of $0.6 million, partially offset by an increase in salaries expense of $0.2 million primarily as a result of merit-based increases and newly hired staff.  General and administrative expenses increased by $0.6 million, or 12.0%, to $5.4 million for the three months ended December 31, 2018 from $4.8 million for the three months ended December 31, 2017. The increase was primarily attributable to an increase in occupancy costs of $0.1 million mainly due to an increase in rent expense associated with the extension of the lease for our office space in New York, an increase in professional fees of $0.2 million, an increase in portfolio and systems expenses of $0.1 million due to an increase in accrued soft dollar-related research costs, an increase in the fair value of earnout payments related to the acquisition of Jamison Eaton & Wood, Inc. of $0.1 million and an increase in recruiting costs of $0.1 million related to newly hired staff, partially offset by a decrease in depreciation and amortization of $0.2 million.

Consolidated net income was $5.2 million or 21.1% of revenue for the three months ended December 31, 2018 as compared to $1.9 million or 7.8% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $2.9 million, or $0.35 per basic and diluted share for the three months ended December 31, 2018.   Our Adjusted Net Income¹ was $5.3 million, or $0.40 per adjusted basic share and $0.39 per adjusted diluted share² for the three months ended December 31, 2018.

Adjusted EBITDA¹ was $8.6 million or 34.6% of revenue for the three months ended December 31, 2018 as compared to $7.6 million or 31.0% of revenue for the same period in the prior year.

Year Ended December 31, 2018 vs. Year Ended December 31, 2017

Revenue increased by $7.3 million, or 8.0%, to $98.7 million for the year ended December 31, 2018, from $91.4 million for the year ended December 31, 2017. This increase was driven primarily by growth in our management and advisory fees as a result of an increase in average management fees partially offset by a decrease in performance fees. 

Total expenses increased by $6.5 million, or 9.2%, to $77.5 million for the year ended December 31, 2018 from $71.0 million for the year ended December 31, 2017.  Compensation and benefits expense increased by $3.8 million, or 7.0%, to $57.9 million for the year ended December 31, 2018 from $54.1 million for the year ended December 31, 2017. The increase was primarily attributable to an increase in the accrual for bonuses of $3.5 million and an increase in salaries expense of $0.3 million primarily as a result of merit-based increases and newly-hired staff.  General and administrative expenses increased by $2.7 million, or 16.2%, to $19.6 million for the year ended December 31, 2018 from $16.8 million for the year ended December 31, 2017. This increase was primarily due to an increase in occupancy and related costs of $1.3 million mainly due to an increase in rent expense associated with the extension of the lease for our office space in New York, and increase in recruiting costs of $0.4 million related to newly-hired staff, an increase in shareholder-related expenses of $0.1 million, an increase in the fair value of earnout payments related to the acquisition of Jamison of $0.1 million, an increase in professional fees of $0.3 million due to increased audit fees for services related to the Tax Cuts and Jobs Act and the requirements of Section 404 of the Sarbanes-Oxley Act, as well as increased legal fees, an increase in sub-advisory and referral fees of $0.1 million related to increased sub-advised revenue and an increase in portfolio and systems expenses of $0.7 million due to an increase in accrued soft dollar-related research costs.  This was partially offset by a decrease in depreciation and amortization of $0.4 million.

Consolidated net income was $17.4 million or 17.6% of revenue for the year ended December 31, 2018 as compared to $12.5 million or 13.7% of revenue for the same period in the prior year.  Net income attributable to Silvercrest was $9.6 million, or $1.16 per basic and diluted share for the year ended December 31, 2018.   Our Adjusted Net Income¹ was $17.9 million, or $1.33 per adjusted basic share and $1.30 per adjusted diluted share² for the year ended December 31, 2018.

Adjusted EBITDA¹ was $29.6 million or 30.0% of revenue for the year ended December 31, 2018 as compared to $27.9 million or 30.5% of revenue for the same period in the prior year.

Liquidity and Capital Resources

Cash and cash equivalents were $69.3 million at December 31, 2018, compared to $53.8 million at December 31, 2017. Silvercrest L.P. had notes payable of $0 at December 31, 2018 and $0.7 million at December 31, 2017.  As of December 31, 2018, there was nothing outstanding on our revolving credit facility with City National Bank. 

Total Silvercrest Asset Management Group Inc.'s equity was $56.0 million at December 31, 2018.  We had 8,518,096 shares of Class A common stock outstanding and 4,934,103 shares of Class B common stock outstanding at December 31, 2018.

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.  
                                                       
• 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% for periods beginning on January 1, 2018 as a result of the Tax Cuts and Jobs Act, and 40% for periods prior to 2018.  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.  
                                                       
• 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 deferred equity units, restricted stock units and performance units 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 March 8, 2019, 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 1-866-394-9665 or for international listeners the call may be accessed by dialing 1-253-237-1128.  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 report contains, and from time to time our management may make, forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking words such as "may", "might", "will", "should", "expects", "intends", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue", the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions, may include projections of our future financial performance, future expenses, anticipated growth strategies, descriptions of new business initiatives and anticipated trends in our business or financial results. 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 from whom we derive a substantial portion of our assets under management, 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, 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, 2017 which is accessible on the SEC'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 and California, Silvercrest provides traditional and alternative investment advisory and family office services to wealthy families and select institutional investors.

 

 

 

 

(A)     Other adjustments consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

View original content:http://www.prnewswire.com/news-releases/silvercrest-asset-management-group-inc-reports-q4-and-year-end-2018-results-300808891.html

SOURCE Silvercrest Asset Management Group Inc.