Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group, Inc. first quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event 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 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 achievements to differ materially, 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 a growth strategy, failure to develop and maintain the Silvercrest brand, and other factors disclosed in the company's filings with the SEC, including these factors listed under the caption entitled Risk Factors in the company's annual report on Form 10-K for the year ended December 31, 2019, and quarterly report on Form 10-Q for the three months ended March 31, 2020, 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 turn the conference over to Rick Huff, Chairman and CEO of Silvercrest. Please go ahead.

Thank you, and thank you for joining us this morning for the first quarter of 2020 results for Silvercrest Asset Management Group. Silvercrest entered the first quarter of 2020 prior to the ongoing coronavirus pandemic and market dislocations with successful execution of its business strategy, complete integration of its new growth equity strategies, organic growth and its outsourced chief investment officer, otherwise known as OCIO business, and a new high in assets under management representing a full recovery from the market lows of late 2018. In the midst of the unprecedented economic disruption of the viral pandemic, Silvercrest concluded the first quarter of 2020 with $20.6 billion in assets under management, a year-over-year decrease of $0.2 billion from the first quarter of 2019. Much greater market depreciation of $2.2 billion over that time was mostly offset by client inflows of $2 billion over the same periods. Our revenue, net income, adjusted net income, and adjusted EBITDA margins and GAAP and adjusted earnings per share each increased substantially year over year. SilverCust has always maintained a high-quality balance sheet and substantial cash reserves, both to preserve flexibility for new growth opportunities and to weather market volatility inherent in the business due to severe market corrections or exogenous events such as the current pandemic. Silvercrest reported 32.8 million in cash and cash equivalents as of March 31st and carries a manageable level of debt of 15.3 million as of March 31st, 2020. Silvercrest currently pays a generous quarterly dividend of 16 cents or an annual dividend of 64 cents per Class A share of common stock. The firm anticipates that it can support the current dividend for a sustained period of time, even while continuing to invest in the business. I'm pleased to report that during the first quarter of 2020, the firm seamlessly transitioned its entire business to operate remotely, the firm long prepared for disaster recovery and business continuity. Silvercrest's critical technology infrastructure was already cloud-based and operating remotely prior to this crisis. Silvercrest was unusually well-prepared. Our firm was founded in the wake of the tech bubble crash and post-9-11. Our partners have a long-term vision, and we experienced the global financial crisis as a relatively young firm flourishing afterward. Our firm's partners have the fortitude to guide our clients with mature, steady hands. While the current pandemic has caused great suffering, it also represents an opportunity to solidify our relationships and prove the value of our organization and its capabilities. The first quarter of 2020 experienced net positive organic flows, which includes $163 million in new client accounts. Silvercrest has maintained a proven ability over time to continue attracting net positive asset flows despite industry-wide trends in active management, and we remain proud of our ability to continue growing the business even during difficult environments. Last quarter, we announced that our first OCIO clients had provided half of Silvercrest's new client account growth. That business continues to develop new opportunities. We are proud of growing that business from scratch, and we expect continued success. The current economic environment is stressful and the market represents a step backward for our business, as with many others, potentially slowing new business activity. Nonetheless, Silvercrest has successfully made investments and will continue to make investments in new high net worth portfolio management professionals, marketing its institutional quality equity strategies, and pursuing its new OCIO initiative. Regardless of the environment, Silvercrest will continue to opportunistically seek to effectively deploy capital to enhance and complement its organic growth. On April 28, 2020, the company's Board of Directors declared a quarterly dividend of $0.16 per share of Class A common stock, and the dividend will be paid on or about June 19, 2020 to shareholders of record as of the close of business on June 12. With that, I will hand it over to Scott Gerard to go over our financials before we take questions. Thank you. Scott?

Great. Thanks, Rick. As disclosed in our earnings release for the first quarter, Discretionary AUM as of March 31, 2020 was $14.9 billion, and total AUM as of March 31, 2020 was $20.6 billion. Revenue for the quarter was $28.4 million, and reported consolidated net income for the quarter was $9.7 million. Delving further into the quarter, again, revenue was approximately $28.4 million, which represented approximately a 26% increase. over revenue of $22.6 million for the same period last year. This increase was driven primarily by increased net client flows in discretionary assets under management, including $1.7 billion in assets under management acquired on July 1, 2019, in connection with the Cortina acquisition, partially offset by market depreciation. Revenue for the quarter ended March 31st, 2020 related to the Cortina acquisition was approximately 2.9 million. Total AUM decreased from December 31st, 2019 to March 31st, 2020, primarily because of market declines resulting from the COVID-19 pandemic. Most of our revenue is built in advance based on closing market values from the last day of the previous calendar quarter. First quarter 2020 revenue was primarily based on December 31st, 2019 market values. Expenses for the quarter were $15.8 million, representing approximately a 15% decrease from expenses of $18.6 million for the same period last year. This decrease was primarily attributable to a decrease in general and administrative expenses of $5.2 million and an increase in compensation and benefits expense of $2.4 million. Compensation increased primarily as a result of merit-based increases in newly hired staff, including the addition of Cortina staff and an increase in the accrual for bonuses, partially offset by a decrease in equity-based compensation expense due to a decrease in the number of unvested restricted stock units. The decrease in general and administrative expenses for the quarter of this year was primarily attributable to a $6 million decrease in the fair value of contingent consideration related to the Cortina acquisition, partially offset by increases in professional fees due to increases in acquisition-related fees resulting from the Cortina deal, depreciation and amortization expense related mainly to amortization of intangible assets related to Cortina, and to the renovation of our office space in New York City, occupancy and related expenses and an increase in the fair value of contingent consideration related to the Capicelli acquisition. Reported consolidated net income was $9.7 million for the quarter as compared to $3 million in the same period last year. Reported net income attributable to Silvercrest or to Class A shareholders for the first quarter of 2020 was approximately $5.5 million or $0.59 per basic and diluted Class A share. Adjusted EBITDA which we defined as EBITDA without giving effect to equity-based compensation expense and non-core and non-recurring items was approximately 8.2 million or 29% of revenue for the quarter compared to 5.8 million or 25.5% of revenue for the same period in the prior year. Adjusted net income, which we defined as net income without giving effect to non-core and non-recurring items and income tax expense assuming a corporate rate of 26% was approximately 5.1 million for the quarter or 36 cents per adjusted basic and diluted earnings per 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 had unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking quickly at the balance sheet, total assets were approximately 189.2 million as of March 31st, 2020, compared to 214.2 million as of December 31st, 2019. Cash and cash equivalents were approximately 32.8 million at March 31st of this year, compared to 52.8 million at the end of last year. Total borrowings as of March 31st of this year were $15.3 million. Total Class A stockholders' equity was approximately $69.8 million as of March 31st of this year. That concludes my remarks. I'll now turn it over to Rick for a Q&A.