Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group, Inc. Second Quarter 2022 Earnings Conference Call. Our 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 protections provided by the Litigation Reform Act of 1995. All forward-looking statements made on this call are made as of the date hereof in 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. Good morning, everyone. Welcome to our second quarter of 2022 results and earnings call. Volatile economic and marketing conditions primarily affected Silvercrest's performance in the second quarter of 2022. The firm also experienced net outflows due to substantial client tax payments The firm's discretionary assets and management, which drives our revenue, decreased to $20.4 billion as of the end of the second quarter of 2022 from $22.9 billion as of the end of the same period last year in 2021. The firm's second quarter 2022 revenue decreased year-over-year to $32.2 million, and our total AUM now stands at $28.7 billion. The firm's quarterly adjusted EBITDA was approximately 9.2 million and analyzed adjusted EBITDA run rate of 36.7 million. Silvercrest's second quarter 2022 adjusted EBITDA margin was 28.5%, a healthy margin in light of declining AUM and associated revenue. Silvercrest increased relationships during the second quarter and new accounts increased over the first quarter, partially offsetting outflows for client tax payments. Silvercrest's institutional equity new business opportunities increased during the second quarter. Our suite of proprietary equity capabilities continued solid outperformance, which pretends good future growth in the business. Our sub-advisory relationships continued to add assets during the second quarter of 2022. Market volatility and uncertainty create long-term opportunities that typically benefit the high quality of Silvercrest's capabilities, and we look forward to more stable markets. Our tenure in the business has proven that our firm has the professional resources, ability, and strategy to execute through difficult periods to build a growing and enduring business. We're pleased with Silvercrest's continued stable progress over time. On July 27, 2022, the Board of Directors declared a quarterly dividend of 18 cents per share of Class A common stock. That dividend will be paid on or about September 23, 2022, to shareholders of record as of the close of business on September 16th. That was an increase of one penny over our previous dividend. I'll now turn it over to Scott, and then we'll take questions following his presentation. Scott?

Thanks, Rick. As disclosed in our earnings release for the second quarter, discretionary AUM as of June 30th of this year was $20.4 billion, and total AUM as of June 30th of this year was $28.7 billion. Revenue for the quarter was $32.1 million. and reported consolidated net income for the quarter was 9.5 million. Looking further at the quarter, again, revenue was 32.2 million, representing approximately a 3% decrease over revenue of approximately 33.1 million for the same period last year. This decrease was driven primarily by market depreciation and net client outflows in discretionary AUM. Expenses for the second quarter were 20.2 million, representing approximately a 21 percent decrease from expenses of $25.8 million for the same period last year. This decrease is primarily attributable to decreases in compensation and benefits expense of $.5 million and general and administrative expenses of $5 million. Compensation and benefits decreased by $.5 million or approximately 3 percent to 18 million for the three months ended June 30th of this year, from 18.5 million for the three months ended June 30th of 2021. The decrease was primarily attributable to a decrease in the accrual for bonuses, partially offset by an increase in salaries and benefits expense, as a result of merit-based increases in newly hired staff. General and administrative expenses decreased by 5 million to 2.3 million, for the three months ended June 30th of this year from 7.3 million for the three months ended June 30th of 2021. This was primarily attributable to decreases in the fair value adjustment to the contingent consideration related to the Cortina acquisition of 5.7 million, trade errors and occupancy and related costs partially offset by increases in travel and entertainment expense portfolio and systems expense, professional fees, and shareholder-related expenses. Reported consolidated net income was $9.5 million for the quarter as compared to $5.7 million in the same period last year. Reported net income attributable to Silvercrest or to Class A shareholders for the second quarter of this year was approximately $5.8 million or 58 cents 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 $9.2 million, or 28.5 percent of revenue for the quarter, compared to $10.4 million, or 31.5 percent 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, An income tax expense assuming a corporate rate of 26% was approximately $5.8 million for the quarter or $0.40 and $0.39 for adjusted basic and diluted EPS respectively. Adjusted EPS 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 unfested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking at the first half, revenue was 65.7 million, and that represented approximately a 2 percent increase over revenue of 64.3 million for the same period last year. This increase was driven primarily by net client inflows in discretionary AUM, partially offset by market depreciation. Expenses for the first half were 38.3 million, representing approximately a 25 percent decrease from expenses of 51.3 million for the same period last year. This decrease was primarily attributable to a decrease in general and administrative expenses of 13.5 million, partially offset by an increase in compensation expense of 0.5 million. Compensation expense increased by 0.5 million, or approximately 1 percent, to $36.6 million for the first half of this year, from $36.1 million for the first half last year. The increase was primarily attributable to an increase in salaries and benefits expense, primarily as a result of merit-based increases and newly hired staff, partially offset by decreases in the accrual for bonuses and equity-based compensation expense due to a decrease in the number of unvested restricted stock units, and uninvested non-qualified stock options outstanding. General and administrative expenses decreased by $13.5 million or approximately 89 percent to $1.7 million for the first half of this year from $15.2 million for the first half of last year. This was primarily attributable to decreases in the fair value of contingent consideration related to the Cortina acquisition of $14.5 million occupancy and related costs, trade errors, partially offset by increases in travel and entertainment expense, portfolio and systems expense, professional fees, shareholder-related expenses, and sub-advisory and referral fees. Reported consolidated net income was $21.9 million for the first half of this year, and that compared to $10 million in the same period last year. Reported net income attributable to Silvercrest or to Class A shareholders for the first half of this year was approximately $13.3 million, or $1.35 per basic and diluted Class A share. Adjusted EBITDA was approximately $19.4 million, or 29.6 percent of revenue for the first half of this year, and that compared to $20.1 million, or 31.2 percent of revenue for the same period last year. Adjusted net income was approximately $12.5 million for the first half, or 86.83 cents per adjusted basic and diluted EPS respectively. Looking at the balance sheet, total assets at June 30th were approximately 207.3 million compared to 229.3 million as of the end of last year. Cash and cash equivalents were approximately 67.6 million at June 30th of this year, and that compared to 85.7 million at the end of last year. Total borrowings as of June 30th of this year were $7.2 million, and total Class A stockholders' equity was approximately $90.7 million at June 30th of this year. That concludes my remarks. I'll turn it over to Rick for Q&A. Thanks, Scott.