Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group, Inc. fourth quarter and year-end 2020 earnings conference call. All participants will be in 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, certain statements made regarding our future performance are forward-looking statements. They are based on our current expectations and projections, which are subject to a number of risks and uncertainties, and many factors could cause actual results to differ materially from the statements that are made. Those factors are disclosed in our filings with the SEC under the caption risk factors. For all such forward-looking statements, We claim that the protection is provided by the Litigation Reform Act of 1995. All forward-looking statements made on this call are made as the date hereof, and Silvercrest assumes no obligation to update them. I would now like to turn the conference over to Rick Huff, Chairman and CEO of Silvercrest. Please go ahead.

Good morning. Thank you, and welcome to our fourth quarter in year-end results for 2020. Silvercrest ended the fourth quarter of 2020 and the year on a high note, paving the way for a very good start to 2021 with a potential new high revenue run rate. Silvercrest's discretionary assets under management, which drive revenue, increased 15% during the fourth quarter to reach $20.6 billion due to both organic as well as market growth. The firm's total assets under management grew to $27.8 billion by the end of the fourth quarter. These new AUM high watermarks for the firm represent increases of 10.8% in total AUM and 9.6% in discretionary AUM year over year from the end of 2019 to the end of 2020. The firm's financial measurements all meaningfully improved for fiscal year 2020 over 2019. Revenue increased 5.7% to $108 million from $102 million. The firm's adjusted EBITDA increased 6%. to 30 million and adjusted diluted earnings per share increased 9.4% to $1.28 per share from $1.17 per share. The firm's full 2020 adjusted EBITDA margin was 28.1%. Our outsourced chief investment officer initiative won its first OCIO clients during the third quarter of 2019 and we ended 2019 with 300 million in OCIO AUM That business has more than doubled during 2020 to over 700 million, and we hope to cross the important $1 billion AUM threshold during 2021. We're proud of building our OCIO capability organically from scratch, and our team and performance track record remains strong. The OCIO new business pipeline has grown, and we expect continued success in the OCIO business during 2021. With strong relative performance, Silvercrest's institutional equity new business opportunities are rebuilding across the product suite. We expect new sub-advisory relationships to continue adding new AUM and for search activity to pick up during 2021. We've hired new high net worth portfolio management professionals during 2020 and will continue to add new talent, both to maintain a high level of client service and to grow the business. Silvercrest has a track record of growing new talent and will continue to do so. especially with the current M&A environment for wealth management firms remaining active and expensive. We believe our brand, culture, capabilities, and technological innovation make Silvercrest a premier partner for select businesses and professionals. Regardless of the environment, Silvercrest will continue to seek to effectively deploy capital to complement our organic growth. I'll be asking for questions after Scott Trard's presentation, our CFO.

Thanks, Rick. As disclosed in our earnings release for the fourth quarter, discretionary AUM as of December 31st, 2020 was $20.6 billion, and total AUM as of the end of 2020 was $27.8 billion. Revenue for the quarter was $28.4 million, and reported consolidated net income for the quarter was $3.5 million. Looking further into the quarter, again, revenue was $28.4 million, which represented approximately a 2 percent increase over revenue of $27.8 million for the same period last year. This increase was driven by net client inflows and market appreciation in discretionary AUM. Expenses for the fourth quarter were $25.1 million, representing approximately a 6 percent increase from expenses of $23.7 million for the same period last year. This increase was primarily attributable to an increase in compensation and benefits expense of 0.6 million and an increase in G&A of 0.8 million. Comp and benefits increased by 0.6 million or approximately 3% to 18.2 million for the three months ended December 31st, 2020 from 17.6 million for the quarter ended in the prior year. The increase is primarily attributable to increases in the accrual for bonuses, salary and benefits expense primarily as a result of merit-based increases in newly hired staff, and equity-based compensation expense due to an increase in the number of unvested restricted stock units and unvested non-qualified stock options. G&A expenses increased by 0.8 million or approximately 13 percent to 6.9 million for the fourth quarter of 2020 from 6.1 million for the fourth quarter of 2019. This was primarily attributable to increases in the fair value of contingent consideration related to the Cortina acquisition and occupancy and related expenses partially offset by decreases in professional fees, travel and entertainment expenses as a result of the pandemic, and lower portfolio and systems expense. Reported consolidated net income was $3.5 million for the quarter. This compared to $4.2 million in the same period last year. Reported net income attributable to Silvercrest or the Class A shareholders for the fourth quarter of 2020 was approximately $1.9 million or 20 cents per basic and diluted Class A share. Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and non-core, non-recurring items, was approximately 7.3 million, or 25.7% of revenue for the fourth quarter of 2020, compared to 7.3 million, or 26.3% of revenue for the same period in 2019. Adjusted net income, which we define 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 $4.4 million for the quarter, or $0.31 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 add unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted earnings per share. Looking at the full year, revenue for 2020 was approximately $108 million, representing approximately a 6 percent increase over a revenue of $102 million for the same period in 2019. This increase was primarily driven by net client inflows and market appreciation in discretionary assets under management, including $1.7 billion in assets under management acquired on July 1st of 2019 in connection with the Cortina acquisition. Expenses for the year ended December 31st, 2020 were $85.1 $7 million, representing approximately a 3% increase from expenses of $83.3 million in 2019. Compensation and benefits expense increased approximately $2.3 million during the year ended 2020 compared to the same period in 2019. G&A expenses increased by approximately $0.1 million during 2020 compared to 2019. Looking further into compensation and benefits, it increased by $2.3 million, or approximately 4%, to $62.4 million for 2020 from $60 million for 2019. The increase was primarily attributable to an increase in the accrual for bonuses, salaries expense primarily as a result of merit-based increases, and newly hired staff, including the addition of Cortina staff. and benefits costs partially offset by a decrease in equity-based compensation expense due to a decrease in the number of unvested restricted stock units and unvested non-qualified stock options. G&A expenses basically remain flat at $23.3 million for 2020. The increase was attributable to increases in the fair value of contingent consideration related to the Cortina, Neosho, and Capicelli acquisitions. Depreciation and amortization expense related mainly to the amortization of intangible assets related to the Cortina acquisition and to the renovation of our office space in New York City. We saw increases in occupancy and related expenses, primarily due to additional cleaning due to the pandemic. for increased portfolio and systems expense and insurance costs. These increases were partially offset by decreases in the fair value of contingent consideration related to the Jameson acquisition, lower travel and entertainment expense as a result of the pandemic, in addition to lower professional fees, office expenses, and storage and moving expenses. Reported consolidated net income was approximately $17.5 million for 2020, compared to $15.4 million for 2019. Reported net income attributable to Silvercrest, or again the Class A shareholders for 2020, was approximately $10 million, or $1.05 per basic and diluted Class A share. Adjusted EBITDA was approximately $30.3 million, or 28.1% of revenue for 2020 compared to 28.6 million or 28% of revenue for 2019. Adjusted net income was approximately 18.6 million for 2020 or $1.29 and $1.28 per adjusted basic and diluted earnings per share respectively. Looking quickly at the balance sheet, total assets as of the end of 2020 were approximately 213 This compared to $214.2 million at the end of 2019. Cash and cash equivalents at the end of 2020 were approximately $62.5 million, which compared to $52.8 million at the end of 2019. As of December 31st, 2020, total borrowings were $12.6 million. And as of the end of 2020, total Class A stockholders' equity was approximately $70.7 million. That concludes my remarks, and I'll turn it over to Rick for Q&A.