Silvercrest Asset Management Group Inc.

Good morning, everyone, and welcome to the Silvercrest Asset Management Group Incorporated third quarter 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please see a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's 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're based on current expectations and projections, which are subject to a number of risks and uncertainties. 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, and Silvercrest assumes no obligation to update them. I would now like to turn the conference call over to Rick Huff, Chairman and CEO of Silvercrest. Sir, please go ahead.

Thank you very much, and thanks for joining us today for our third quarter results. Volatile market conditions continue to affect Silvercrest assets under management in the third quarter of 2022. The firm's discretionary AUM, which drives revenue, decreased to $19.4 billion as of the end of the third quarter from $22.5 billion as of the end of the same period in 2021. The firm's third quarter 2022 revenue decreased year-over-year to $29 million from $33.5 million. Total AUM now stands at $27.4 billion. The firm's quarterly adjusted EBITDA was approximately $8.2 million, an annualized adjusted EBITDA run rate of $32.8 million. Silvercrest's third quarter 2022 adjusted EBITDA margin was 28.1%, a healthy margin in light of declining AUM and the associated revenue. Silvercrest added relationships during the third quarter, and new accounts partially offset outflows for taxes and rebalancing. Silvercrest's suite of proprietary equity capabilities have maintained solid performance, and our sub-advisory relationships continued to add assets during the third quarter of 2022. And Silvercrest also launched a large-cap value unit investment trust during the quarter. Silvercrest repurchased approximately 286,000 shares of Class A common stock for approximately $5.2 million during the third quarter. Market volatility and uncertainty create long-term opportunities that have typically benefited the high quality of Silvercrest capabilities, and we look forward to more stable markets in the future. On November 1st, the company's board of directors declared a quarterly dividend of $0.18 per share of Class A common stock. That dividend will be paid on or about December 16th to shareholders of record as of the close of business on December 9th. Scott will now go through the financial stats, and then we'll take questions.

Great. Thanks, Rick. And again, just disclosed in our earnings release for the third quarter, discretionary AUM as of September 30th of this year was $19.4 billion, and total AUM as of the same period was $27.4 billion. Revenue for the quarter was $29 million, and reported consolidated net income for the quarter was $5.6 million. More detail about the third quarter, again, revenue was approximately $29 million. That represented approximately a 13 percent decrease over revenue of approximately $33.5 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 third quarter were $21.9 million, representing approximately a 13% decrease from expenses of $25.3 million for the same period last year. This decrease was primarily attributable to decreases in compensation and benefits expense of $2.5 million and general and administrative expenses of $0.9 million. Compensation benefits expense decreased by 2.5 million or approximately 13 percent to 16.3 million for the three months ended September 30th of this year from 18.8 million for the three months ended the same period a year ago. 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 and newly hired staff. General and administrative expenses decreased $5.9 million to $5.7 million for the three months ended September 30th of this year from $6.5 million for the same period a year ago. This was primarily attributable to decreases in the fair value adjustment to the contingent consideration related to the Cortina acquisition of $1 million and a decrease in trade errors, partially offset by an increase in travel and entertainment expense. Reported consolidated net income was $5.6 million for the quarter, as compared to $6.4 million in the same period last year. Reported net income attributable to Silvercrest, or to Class A shareholders for the third quarter of this year, was approximately $3.4 million, or 35 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, non-recurring items, was approximately 8.2 million or 28.1 percent of revenue for the quarter, compared to 10.3 million or 30.9 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, and income tax expense, assuming a corporate rate of 26%, was approximately $5 million for the quarter, or $0.35 and $0.34 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 nine months, revenue was approximately 94.7 million, which represented a 3 percent decrease over revenue of approximately 97.8 million for the same period last year. This decrease was driven primarily by market depreciation, partially offset by net client inflows in discretionary AUM. Expenses for the nine months ended September 30th of this year were 60.3 million, representing approximately a 21 percent decrease from expenses of 76.6 million for the same period last year. This decrease was primarily attributable to decreases in both compensation and benefits expense and general and administrative expenses of $2 million and $14.3 million respectively. Compensation expense decreased by $2 million or approximately 4 percent to $52.9 million for the nine months ended September 30th of this year from $54.9 million for the same period last year. The decrease is primarily attributable to decreases in the accrual for bonuses and equity-based compensation expense due to a decrease in the number of unvested restricted stock units and unvested non-qualified stock options outstanding, partially offset by an increase in salaries and benefits expense as a result of merit-based increases and newly hired staff. General and administrative expenses decreased by $14.3 million, or approximately 66 percent to $7.4 million for the nine months ended September 30th of this year, from $21.7 billion for the same period last year. This was primarily attributable to decreases in the fair value of contingent consideration related to the Cortina acquisition of $15.5 million, occupancy and related costs, and trade errors partially offset by increases in travel and entertainment expense professional fees, and portfolio and systems expense. Reported consolidated net income was $27.5 million for the nine months ended September 30th of this year. This compared to $16.4 million in the same period last year. Reported net income attributable to Silvercrest for the nine months ended this year was approximately $16.8 million, or $1.70 per basic and diluted Class A share. Adjusted EBITDA was approximately 27.6 million or 29.1 percent of revenue for the nine months ended September 30th of this year, compared to 30.4 million or 31.1 percent of revenue for the same period last year. Adjusted net income was approximately 17.5 million for the nine months ended this year, or $1.22 and $1.19 per adjusted basic and diluted EPS respectively. Quickly looking at the balance sheet, total assets as of September 30th were $205.1 million compared to $229.3 million as of the end of last year. Cash and cash equivalents were approximately $67.4 million at September 30th, this compared to $85.7 million at the end of last year. As of September 30th of this year, total borrowings were $6.3 million And total Class A stockholders' equity was approximately $87.1 billion as of September 30th of this year. That concludes my remarks. I'll turn it over to Rick now for Q&A. Thanks, Scott. Look forward to questions. Thank you.