Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group Inc. first quarter 2022 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 today's call contains certain statements made regarding our future performance and our 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 these statements made. Those factors are disclosed in our filings with the SEC under the caption risk factors. For all such factor-looking statements, we claim the protections provided by the Litigations Reform Act of 1995. All four looking statements made on this call are as made of the date of hear of, and Silvercrest assumes no obligation to update them. I would like to turn the conference over to Mr. Rick Huff, Chairman and CEO of Silvercrest. Please go ahead, sir.

Thank you. Good morning, and thanks for joining us for the first quarter of 2022 results and call. We concluded this quarter with the celebration of our 20th anniversary in business. We actually opened the first day of the second quarter in 2002. Despite the volatile economic conditions and markets, we're pleased with Silvercrest's continued stable progress over time. Our tenure has proven that the firm has the professional resources, ability, and strategy to execute through difficult periods to build a sustainable and enduring business. Silvercrest's discretionary assets under management, our AUM, which drives revenue, increased to $23.8 billion from the first quarter of 2021, which was a year-over-year increase of 8.7%. Primarily due to the volatile equity markets during the first quarter of 2022, Silvercrest's discretionary AUM declined by 5.2% from December 31, 2021, which also led to a quarterly decline in revenue and adjusted EBITDA. Along with the continued progress in growing AUM year-over-year, the firm's revenue increased 7.3% from Q1 2021, with a $33.5 million increase in revenue for the quarter ended March 31, 2022. The firm's quarterly adjusted EBITDA was approximately 10.3 million, or an annualized adjusted EBITDA run rate of 41 million, and grew year-over-year by 6.2%. Adjusted diluted earnings per share increased 7.1% year-over-year to 45 cents per adjusted diluted share, and the firm's first quarter 2022 adjusted EBITDA margin was 30.6%, which is a consistently high number for Silvercrest. Silvercrest's high net worth business grew its relationships during the first quarter, and we are pleased with incoming opportunities. Our net flows were muted as compared with historical norms. Silvercrest's institutional equity new business was solid during the first quarter, and our opportunities remain excellent across Silvercrest's suite of proprietary equity capabilities. Our sub-advisory relationships continued to add assets during the first quarter of 2022. Market volatility and uncertainty have created long-term opportunities that typically benefit the high quality of Silvercrest's capabilities. We have a lot to accomplish to continue building the premier wealth and asset management boutique in the nation, and we embrace those challenges that come with change. On May 3rd, the company's board of directors declared a quarterly dividend of 17 cents per share of Class A common stock, and the dividend will be paid on or about June 17th to shareholders of record as of the close of business on June 10th. With that, I'll turn it over to you, Scott, for the financials, and then we'll take questions. Thanks. Thanks, Rick.

Again, it's disclosed in our earnings release for the first quarter, discretionary AUM as of March 31st of this year was $23.8 billion, and total AUM as of March 31st of this year was $31.2 billion. Revenue for the quarter was $33.5 million, and reported consolidated net income for the quarter was $12.4 million. Revenue for the first quarter was approximately $33.5 million, representing approximately a 7% increase over revenue of approximately $31.2 million for the same period last year. This increase was driven primarily by market appreciation and net client inflows in discretionary AUM. Expenses for the first quarter were $18.1 million, representing approximately a 29% increase percent decrease from expenses of $25.5 million for the same period last year. This decrease was primarily attributable to a decrease in G&A expenses of $8.5 million, partially offset by an increase in compensation expense of $1 million. Compensation and benefits expense increased by $1 million, or approximately 6 percent, to $18.7 million for the first quarter this year, from $17.6 million for the three months ended March 31st of last year. The increase is primarily attributable to an increase in the accrual for bonuses and benefits expense and salaries expense primarily as a result of merit-based increases and newly hired staff 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. outstanding. General and administrative expenses decreased by $8.5 million to negative $0.6 million for the three months ended March 31st of this year from $7.9 million for the three months ended March 31st of 2021. This was primarily attributable to decreases in the fair value adjustment to the contingent consideration related to the Cortina acquisition of $8.8 million and occupancy and related costs, partially offset by increases in travel and entertainment expense, portfolio and systems expense, and sub-advisory and referral fee expense. Reported consolidated net income was $12.4 million for the quarter, as compared to $4.3 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 $7.6 million, or $0.77 per basic and diluted Class A share. Adjusted EBITDA, which we defined as EBITDA without giving effect to equity-based compensation expense at non-core, non-recurring items, was approximately $10.3 million, or 30.6 percent of revenue for the quarter, compared to $9.7 million, or 30.9 percent of revenue for the same period last year. Adjusted net income, which we define as net income without giving effect to non-core, non-recurring items, and income tax expense, assuming a corporate rate of 26 percent, was approximately 6.7 million for the quarter, or 46 cents and 45 cents for 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 diluted, we had unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Quickly looking at the balance sheet, total assets were approximately 197.9 million as of March 31st of this year. compared to $229.3 million as of the end of 2021. Cash and cash equivalents were approximately $57 million in March 31st of this year, compared to $85.7 million at the end of 2021. Total borrowings as of March 31st of this year were $8.1 million, and total Class A stockholders' equity was approximately $86.3 million at March 31st of this year. That concludes my remarks. I'll turn it over to Rick for Q&A. Thanks very much, Scott.