Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group Incorporated Second Quarter 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 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 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 the projections provided by the Litigation Reform Act of 1995. All forward-looking statements made on this call are made as of the date hereof, and Silvercrest assumes no obligations 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. Good morning, everyone. Silvercrest is pleased to report strong results for the second quarter of 2021. The firm's discretionary assets under management, which drives revenue, increased 4.6% during the quarter to reach $22.9 billion. which represents a new high and a year-over-year increase of 32.4%. The firm's total AUM grew to 31 billion. Silvercrest concluded the quarter with 33.1 million in revenue, and the firm's adjusted EBITDA for the second quarter was 10.4 million, or a year-over-year increase of 56.7%. Adjusted diluted earnings per share for the second quarter increased 66.7% year-over-year to 45 cents per adjusted diluted earnings per share. Silvercrest's new business opportunities continue to grow thanks to a strong investment culture and results for high net worth and institutional clients alike. On July 28th, the company's board of directors approved a share repurchase program authorizing the company to repurchase up to $15 million of the company's outstanding Class A common stock. Also on July 28th, The company's board of directors approved an increase of approximately 6% of the company's quarterly dividend from $0.16 per share of Class A common stock to $0.17 per share. The upcoming dividend of $0.17 per share of common stock represents an annual yield of approximately 4.5% based on the closing price of the company's common stock on July 27th. The dividend will be paid on or about September 17th to shareholders of record as of close of business on September 10th. Those conclude my introductory remarks, so I'll turn it over to our CFO, Scott Gerard, to go through the financials, and then we'll take questions. Thanks, Rick.

As disclosed in our earnings release for the second quarter, discretionary AUM as of June 30th was $22.9 billion, and total AUM as of the end of the second quarter was $31 billion. Revenue for the quarter? was 33.1 million, and reported consolidated net income for the quarter was 5.7 million. Looking further into the second quarter, again, revenue was approximately 33.1 million. This represented a 38 percent increase over revenue of approximately 24 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 second quarter were $25.8 million, and this represented approximately a 14 percent increase from expenses of $22.7 million for the same period last year. This increase was primarily attributable to an increase in compensation and benefits expense of $5.1 million, partially offset by a decrease in G&A expenses of $2 million. Comp and benefits increased by 5.1 million or approximately 38% to 18.5 million for the second quarter, from 13.4 million for the three months ended June 30th last year. Increase was primarily attributable to increases in the accrual for bonuses, salaries and benefits expense, primarily as a result of merit-based increases and 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 outstanding. General and administrative expenses decreased by 2 million, or approximately 22 percent, to 7.3 million for the second quarter, from 9.3 million for the second quarter last year. This was primarily attributable to decreases in the fair value of contingent consideration related to the Cortina acquisition of 2.2 million, and portfolio and systems expense, partially offset by increases in sub-advisory and referral fees, occupancy and related expenses, and travel and entertainment expense. Reported consolidated net income was 5.7 million for the quarter, as compared to 0.8 million in the same period last year. Reported net income attributable to Silvercrest or to Class A shareholders for the second quarter was approximately 3.3 million, or 35 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 and non-recurring items, was approximately 10.4 million, or 31.5 percent of revenue for the second quarter, compared to 6.7 million, or 27.7 percent of revenue for the same period last year. 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 $6.7 million for the quarter, or $0.46 and $0.45 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. Looking at the first half of the year, revenue was approximately $64.3 million. representing approximately a 23 percent increase over revenue of $52.4 million for the first half last year. This increase was driven primarily by market appreciation, partially offset by net client outflows in discretionary AUM. Expenses for the first half were $51.3 million, representing approximately a 34 percent increase from expenses of $38.4 million for the first half last year. This increase was primarily attributable to increases in competent benefits, expense of $7.1 million, and G&A expenses of $5.8 million. Compensation increased by $7.1 million, or approximately 24 percent, to $36.1 million for the first half this year, from $29.1 million for the first half last year. The increase, again, was primarily attributable to increases in the accrual for bonuses Salaries and benefits expenses result in merit-based increases and newly hired staff and equity-based compensation expense due to an increase in the number of unvested restricted stock units and uninvested non-qualified stock options. General and administrative expenses increased by $5.8 billion or approximately 63% to $15.2 million for the first half this year from $9.3 million for the first half last year. This was primarily attributable to increases in the fair value of contingent consideration related to the Cortina acquisition of $6.1 million, occupancy and related costs, professional fees, and insurance expense, partially offset by decreases in travel and entertainment expense, portfolio and systems expense, depreciation and amortization, and office expense. The reported consolidated net income was $10 million for the first half as compared to 10.5 million for the first half last year. Reported net income attributable to Silvercrest, or to Class A shareholders, for the first half of this year was approximately 5.9 million, or 61 cents per basic and diluted Class A share. Adjusted EBITDA was approximately 20.1 million, or 31.2% of revenue for the first half, compared to 14.9 million, or 28.4 percent of revenue for the same period last year. Adjusted net income was approximately 12.9 million for the first half, or 89 cents and 87 cents for adjusted basic and diluted earnings per share, respectively. Looking quickly at the balance sheet, as of June 30th of this year, total assets were approximately 202.8 million, compared to 213.8 million as of the end of last year. Cash and cash equivalents were approximately $53.6 million at June 30th compared to $62.5 million at the end of last year. Total borrowings as of June 30th were $10.8 million. Lastly, total Class A stockholders' equity was approximately $73.7 million at June 30th. That concludes my remarks. I'll turn it over to Rick for a Q&A.