Silvercrest Asset Management Group Inc.

Good morning, and welcome to the Silvercrest Asset Management Group Inc. Quarter 1, 2021, 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 a 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 the future performance are forward-looking statements. They are based on the 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 the filings with the SEC under the caption risk factors. such forward-looking statements, we claim the protections provided by the Litigation Reform Act of 1995. All forward-looking statements made on this call are made as of 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.

Thanks very much for the introduction. Welcome to the first quarter results of 2021 for Silvercrest. Having been founded in the spring of 2002, Silvercrest has now begun its 20th year in business, which will culminate in our 20th anniversary celebration in April of 2022 next year. Silvercrest's founders and partners embarked on an entrepreneurial journey to create the foremost wealth and asset management boutique in the United States. We're very proud of having created an enduring firm founded on bedrock principles as well as a strong and proud culture. We remain dedicated to putting our clients first and creating a business that serves its clients with highly regarded institutional quality capabilities for generations. We've concluded the first quarter of 2021 and begin our 20th year in business with new highs in our asset management, revenue, and adjusted EBITDA. Silvercrest's discretionary AUM, which drives revenue, increased 6.3% from the fourth quarter of 2020 to reach $21.9 billion, which is an increase as well of 47% year-over-year from the first quarter of 2020. The firm's total AUM grew to $29 billion by the end of the first quarter of 2021. Silvercrest concluded the first quarter of this year with $31.2 million in revenue and and the firm's quarterly adjusted EBITDA was $9.7 million, or an annualized adjusted EBITDA run rate of $38.8 million. Adjusted diluted earnings per share increased 16.7% year-over-year to $0.42 per adjusted diluted share. The firm's first quarter 2021 adjusted EBITDA margin was 30.9%. With strong relative performance, Silvercrest, Institutional equity new business opportunities continue to grow across Silvercrest's suite of proprietary equity capabilities. Our new sub-advisory relationships added assets in the first quarter of 2021. We are optimistic about our growth prospects for this business with a robust new business pipeline. Silvercrest's organically built outsource chief investment officer offering continues to grow and its pipeline of opportunities has increased as well. That business more than doubled during 2020, and we hope to cross the important billion-dollar AOM threshold during 2021. We've hired new high-net-worth portfolio management professionals for the wealth management business 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. 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 organic growth. Upon launching our 20th year, we remain a mature and tested team with a long-term vision intent on building the business upon a sustainable and enduring platform. As with industry consolidation 20 years ago, there's now unprecedented change in technology, asset management, and there are ways of consolidation once again that threaten the business models dedicated to the best interests of the client. We have a lot to accomplish to continue building the premier wealth and asset management boutique in the nation. Silvercrest has implemented a successful long-term organic growth plan, and we plan to continue that growth trajectory in high cash flow generation, both organically and through careful strategic acquisitions. On May 4, 2021, our Board of Directors declared a quarterly dividend of $0.16 per share of Class A common stock. And that dividend will be paid on or about June 18th of this year to shareholders of record as of the close of business on June 11th. With those introductory remarks, I will now turn it over to Scott Gerard to review the financials, and then we will open it up for questions.

Scott. Thanks, Rick. As disclosed in our earnings release for the first quarter, discretionary AUM as of March 31st, 2021, was $21.9 billion. and total AUM as of March 31st, 2021, was $29 billion. Revenue for the quarter was $31.2 million, and reported consolidated net income for the quarter was $4.3 million. Looking more specifically at the quarters year over year, again, the first quarter revenue was approximately $31.2 million. That represented a 10% increase over revenue of approximately $28.4 million for the same period last year. This increase was driven primarily by market appreciation partially offset by net client outflows in discretionary AUM. Expenses for the first quarter were $25.5 million. That represented approximately a 62% increase from expenses of $15.8 million for the same period last year. This increase was primarily attributable to increases in G&A expenses and compensation and benefits expense of $7.9 million and $1.9 million respectively. Comp and benefits expense increased by $1.9 million or approximately 12% to $17.6 million for the three months ended March 31st of this year. That was an increase from $15.7 million for the three months ended March 31st of last year. The increase was primarily attributable to increases in the accrual for bonuses salaries and benefits expense primarily as a result of merit-based increases, annually 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 outstanding. P&A increased by $7.9 million to $7.9 million for the three months ended March 31st of this year from $43,000 for the three months ended March March 31st of last year. This was primarily driven by increases in the fair value of contingent consideration related to the Cortina acquisition of $8.3 million. In addition, there were some increases in occupancy and related expenses and professional fees, which were partially offset by decreases in travel and entertainment expense as a result of the pandemic and portfolio and systems expense. Reported consolidated net income was $4.3 million for the quarter as compared to $9.7 million in the same period last year. Reported net income attributable to Silvercrest or to Class A shareholders for the first quarter of this year was approximately $2.6 million or $0.26 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 and non-recurring items, was approximately $9.7 million or 30.9% of revenue for the quarter compared to $8.2 million or 29% of revenue for the same period last 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 $6.2 million for the quarter compared or 43 cents and 42 cents per adjusted basic and diluted earnings per share respectively. 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 EPS. Taking a quick look at the balance sheet, total assets were approximately 192.2 million as of March 31st of this year, compared to 213.8 million as of the end of last year. Cash and cash equivalents were approximately 42.6 million at March 31st, 2021. This compared to 62.5 million at December 31st of last year. Keep in mind our cash at March 31st of this year is net of 2020 related incentive compensation paid during the first quarter of 2021. Total borrowings as of March 31st of this year were $11.7 million and total class A stockholders equity was approximately $71.8 million as of the end of the first quarter of this year. That concludes my remarks. I'll turn the call over to Rick for a Q&A. Thanks very much, Scott. We're now