Silvercrest Asset Management Group(SAMG) - 2024 Q3 - Quarterly Results

Executive Summary Q3 2024 Performance Highlights Silvercrest reported strong AUM growth in Q3 2024, with total AUM reaching $35.1 billion and discretionary AUM at $22.6 billion, while revenue increased, GAAP net income and Adjusted EBITDA declined due to higher expenses Q3 2024 Key Performance Highlights | Metric | Q3 2024 (Millions USD) | | :----------------------------------- | :--------------------- | | Total Assets Under Management (AUM) | $35,100 | | Discretionary AUM | $22,600 | | Revenue | $30.4 | | GAAP Consolidated Net Income | $3.7 | | Net Income Attributable to Silvercrest | $2.3 | | Basic and Diluted Net Income per Share | $0.24 | | Adjusted EBITDA | $6.3 | | Adjusted Net Income | $3.8 | | Adjusted Basic EPS | $0.27 | | Adjusted Diluted EPS | $0.26 | Business Update and Outlook Market Conditions and AUM Growth Supportive markets and broader market participation contributed to Silvercrest's AUM growth in Q3 2024, with discretionary AUM increasing 5% QoQ and 10% YoY, despite net client outflows - Broader market participation throughout the third quarter and an increase in equities across the market cap spectrum benefited Silvercrest's diversified wealth management business and small cap institutional business[2] AUM Growth (Q3 2024) | Metric | Q3 2024 (Billions USD) | QoQ Change | YoY Change | | :------------------------- | :--------------------- | :--------- | :--------- | | Discretionary AUM | $22.6 | +5% | +10% | | Total AUM | $35.1 | +5.1% | +13% | - Discretionary outflows during the third quarter were revenue neutral to the firm[3] Business Development and Future Investments Silvercrest's institutional business pipeline grew 20% to $1.2 billion, with future growth expected from new strategies and hires, though this has led to higher compensation expenses - The pipeline of new institutional business opportunities increased by 20% during the third quarter, reaching $1.2 billion[4] - The firm is optimistic about near-term positive AUM flows and resulting revenue increases, including potential mandates for a new Global Equity strategy[4] - Silvercrest is investing in future growth by building infrastructure, developing new strategies, and planning more hires, which has resulted in higher total compensation[3][5] Dividend Announcement The Board of Directors approved a quarterly dividend of $0.20 per share of Class A common stock, payable in December 2024 Quarterly Dividend Details | Metric | Value | | :-------------- | :---------------- | | Quarterly Dividend | $0.20 per share | | Record Date | December 13, 2024 | | Payment Date | December 20, 2024 | Financial Performance Overview Key Financial and AUM Metrics (Summary Table) This section presents Silvercrest's key GAAP and non-GAAP financial metrics and AUM for Q3 and 9M 2024, showing performance trends against 2023 Comparative GAAP and Non-GAAP Financial Measures and AUM | Metric (in thousands except as indicated) | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | $30,424 | $29,704 | $91,689 | $88,868 |\ | Income before other income (expense), net | $4,457 | $6,519 | $15,670 | $19,788 |\ | Net income | $3,730 | $5,380 | $13,025 | $15,825 |\ | Net income margin | 12.3% | 18.1% | 14.2% | 17.8% |\ | Net income attributable to Silvercrest | $2,252 | $3,216 | $7,917 | $9,505 |\ | Net income per basic share | $0.24 | $0.34 | $0.83 | $1.01 |\ | Net income per diluted share | $0.24 | $0.34 | $0.83 | $1.00 |\ | Adjusted EBITDA | $6,346 | $8,000 | $21,031 | $24,297 |\ | Adjusted EBITDA Margin | 20.9% | 26.9% | 22.9% | 27.3% |\ | Adjusted net income | $3,801 | $5,136 | $12,921 | $15,055 |\ | Adjusted basic earnings per share | $0.27 | $0.37 | $0.93 | $1.08 |\ | Adjusted diluted earnings per share | $0.26 | $0.36 | $0.89 | $1.05 |\ | Assets under management at period end (billions) | $35.1 | $31.2 | $35.1 | $31.2 |\ | Average assets under management (billions) | $34.2 | $31.6 | $34.3 | $30.1 |\ | Discretionary assets under management (billions) | $22.6 | $20.5 | $22.6 | $20.5 | Non-GAAP Financial Measures Explanation Silvercrest utilizes non-GAAP measures such as Adjusted EBITDA and Adjusted Net Income to offer a clearer view of recurring earnings and profitability, complementing GAAP figures - Adjusted EBITDA represents net income before provision for income taxes, interest income, interest expense, depreciation and amortization, further adjusted for specific non-recurring items and including partner incentive allocations[22] - Adjusted Net Income reflects recurring net income, excluding certain non-recurring professional fees, losses, and impairment charges, and applies an assumed blended corporate tax rate of 26%[22] - Adjusted Earnings Per Share is calculated by dividing Adjusted Net Income by the total basic or diluted Class A and Class B shares outstanding, providing a perspective of recurring earnings per share for the company as a whole[23] Detailed Financial Results Three Months Ended September 30, 2024 vs. 2023 For Q3 2024, Silvercrest experienced a modest revenue increase driven by market appreciation, but a significant rise in total expenses, particularly compensation, led to a decline in consolidated net income and Adjusted EBITDA Revenue Analysis Q3 2024 revenue increased by $0.7 million or 2.4% year-over-year, primarily driven by market appreciation despite net client outflows Q3 Revenue Comparison | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | YoY Change | YoY Growth Rate | | :------ | :--------------------- | :--------------------- | :--------- | :-------------- | | Revenue | $30.4 | $29.7 | +$0.7 | +2.4% | - The revenue increase was driven by market appreciation, partially offset by net client outflows[13] Expense Analysis Total expenses for Q3 2024 rose by $2.8 million or 12.0% year-over-year, mainly due to higher compensation and benefits, including increased bonuses and merit-based salary adjustments Q3 Expense Comparison | Expense Category | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | YoY Change | YoY Growth Rate | | :--------------------------- | :--------------------- | :--------------------- | :--------- | :-------------- | | Total Expenses | $26.0 | $23.2 | +$2.8 | +12.0% | | Compensation and Benefits | $18.6 | $16.7 | +$1.9 | +11.4% | | General and Administrative | $7.4 | $6.5 | +$0.9 | +13.4% | - Compensation and benefits increased primarily due to higher accruals for bonuses ($0.7M), severance ($0.2M), equity-based compensation ($0.2M), and merit-based salary increases ($0.8M)[14] Net Income and Adjusted EBITDA Q3 2024 saw consolidated net income decline by $1.7 million and Adjusted EBITDA by $1.7 million year-over-year, with margins also decreasing significantly Q3 Profitability Comparison | Metric | Q3 2024 (Millions USD) | Q3 2023 (Millions USD) | YoY Change | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | | Consolidated Net Income | $3.7 | $5.4 | -$1.7 |\ | Net Income Margin | 12.3% | 18.1% | -5.8 pp |\ | Net Income Attributable to Silvercrest | $2.3 | $3.2 | -$0.9 |\ | Basic/Diluted EPS | $0.24 | $0.34 | -$0.10 |\ | Adjusted Net Income | $3.8 | $5.1 | -$1.3 |\ | Adjusted Basic EPS | $0.27 | $0.37 | -$0.10 |\ | Adjusted Diluted EPS | $0.26 | $0.36 | -$0.10 |\ | Adjusted EBITDA | $6.3 | $8.0 | -$1.7 |\ | Adjusted EBITDA Margin | 20.9% | 26.9% | -6.0 pp | Nine Months Ended September 30, 2024 vs. 2023 For the first nine months of 2024, Silvercrest saw revenue growth, but a larger increase in total expenses, particularly compensation and general & administrative costs, resulted in a decrease in consolidated net income and Adjusted EBITDA Revenue Analysis Nine-month revenue increased by $2.8 million or 3.2% year-over-year, driven by market appreciation, partially offset by net client outflows Nine-Month Revenue Comparison | Metric | 9M 2024 (Millions USD) | 9M 2023 (Millions USD) | YoY Change | YoY Growth Rate | | :------ | :--------------------- | :--------------------- | :--------- | :-------------- | | Revenue | $91.7 | $88.9 | +$2.8 | +3.2% | - The revenue increase was driven by market appreciation, partially offset by net client outflows[17] Expense Analysis Total expenses for the nine months rose by $6.9 million or 10.0% year-over-year, primarily due to higher compensation and benefits, including increased bonuses and merit-based salary adjustments Nine-Month Expense Comparison | Expense Category | 9M 2024 (Millions USD) | 9M 2023 (Millions USD) | YoY Change | YoY Growth Rate | | :--------------------------- | :--------------------- | :--------------------- | :--------- | :-------------- | | Total Expenses | $76.0 | $69.1 | +$6.9 | +10.0% | | Compensation and Benefits | $54.8 | $50.0 | +$4.8 | +9.6% | | General and Administrative | $21.3 | $19.1 | +$2.1 | +11.1% | - Compensation and benefits increased primarily due to higher accruals for bonuses ($3.0M), severance ($0.2M), equity-based compensation ($0.3M), and merit-based salary increases ($1.3M)[18] Net Income and Adjusted EBITDA Nine-month consolidated net income declined by $2.8 million and Adjusted EBITDA by $3.3 million year-over-year, with margins also decreasing Nine-Month Profitability Comparison | Metric | 9M 2024 (Millions USD) | 9M 2023 (Millions USD) | YoY Change | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | | Consolidated Net Income | $13.0 | $15.8 | -$2.8 |\ | Net Income Margin | 14.2% | 17.8% | -3.6 pp |\ | Net Income Attributable to Silvercrest | $7.9 | $9.5 | -$1.6 |\ | Basic/Diluted EPS | $0.83 | $1.01 | -$0.18 |\ | Adjusted Net Income | $12.9 | $15.1 | -$2.2 |\ | Adjusted Basic EPS | $0.93 | $1.08 | -$0.15 |\ | Adjusted Diluted EPS | $0.89 | $1.05 | -$0.16 |\ | Adjusted EBITDA | $21.0 | $24.3 | -$3.3 |\ | Adjusted EBITDA Margin | 22.9% | 27.3% | -4.4 pp | Assets Under Management (AUM) Analysis Total AUM Total AUM increased to $35.1 billion at September 30, 2024, representing a 12.5% year-over-year and 5.1% quarter-over-quarter increase, driven by market appreciation despite net client outflows Total AUM Changes (YoY & 9M) | Metric | Q3 2024 (Billions USD) | Q3 2023 (Billions USD) | YoY Change | YoY Growth Rate | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | :-------------- | | Ending Total AUM | $35.1 | $31.2 | +$3.9 | +12.5% |\ | Market Appreciation (9M) | $3.3 | $1.3 | +$2.0 | +153.8% |\ | Net Client Flows (9M) | ($1.5) | $1.0 | -$2.5 | -250.0% | - Total AUM increased by $1.7 billion (5.1%) from June 30, 2024, to $35.1 billion, driven by $1.9 billion in market appreciation, partially offset by $0.2 billion in net client outflows[12] Discretionary AUM Discretionary AUM grew to $22.6 billion at September 30, 2024, an increase of 10.2% year-over-year and 4.6% quarter-over-quarter, primarily due to market appreciation offsetting net client outflows Discretionary AUM Changes (YoY & 9M) | Metric | Q3 2024 (Billions USD) | Q3 2023 (Billions USD) | YoY Change | YoY Growth Rate | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | :-------------- | | Ending Discretionary AUM | $22.6 | $20.5 | +$2.1 | +10.2% |\ | Market Appreciation (9M) | $2.3 | $0.3 | +$2.0 | NM |\ | Net Client Flows (9M) | ($1.6) | ($0.7) | -$0.9 | +128.6% | - Discretionary AUM increased by $1.0 billion (4.6%) from June 30, 2024, to $22.6 billion, driven by $1.3 billion in market appreciation, partially offset by $0.3 billion in net client outflows[12] Non-Discretionary AUM Non-discretionary AUM reached $12.5 billion at September 30, 2024, marking a 16.8% year-over-year increase, supported by market appreciation and positive net client flows Non-Discretionary AUM Changes (YoY & 9M) | Metric | Q3 2024 (Billions USD) | Q3 2023 (Billions USD) | YoY Change | YoY Growth Rate | | :----------------------------------- | :--------------------- | :--------------------- | :--------- | :-------------- | | Ending Non-Discretionary AUM | $12.5 | $10.7 | +$1.8 | +16.8% |\ | Market Appreciation (9M) | $1.0 | $1.0 | $0.0 | 0.0% |\ | Net Client Flows (9M) | $0.1 | $1.7 | -$1.6 | -94.1% | - For the three months ended September 30, 2024, non-discretionary AUM increased by $0.7 billion, driven by $0.6 billion in market appreciation and $0.1 billion in net client inflows[39] Liquidity and Capital Resources Liquidity and Capital Resources Silvercrest's cash and cash equivalents decreased to $58.1 million at September 30, 2024, from $70.3 million at December 31, 2023, with no outstanding borrowings and total equity at $84.6 million Liquidity and Capital Resources | Metric | Sep 30, 2024 (Millions USD) | Dec 31, 2023 (Millions USD) | Change (Millions USD) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $58.1 | $70.3 | -$12.2 |\ | Total Equity | $84.6 | $82.7 | +$1.9 |\ | Class A Common Stock Outstanding | 9,503,410 | 9,478,997 | +24,413 |\ | Class B Common Stock Outstanding | 4,406,295 | 4,431,105 | -24,810 | - As of September 30, 2024, there was nothing outstanding under the company's term loan or revolving credit facility with City National Bank[21] Equity Investment Strategy Performance Equity Investment Strategy Composite Performance Silvercrest provides composite performance data for various equity investment strategies, including Large Cap Value and Small Cap Growth, comparing them against relevant Russell indices Equity Investment Strategy Composite Performance as of September 30, 2024 | Composite Strategy | Inception Date | 1-Year Return (%) | 3-Year Return (%) | 5-Year Return (%) | 7-Year Return (%) | Inception Return (%) | | :-------------------------- | :------------- | :---------------- | :---------------- | :---------------- | :---------------- | :------------------- | | Large Cap Value Composite | 4/1/02 | 31.1 | 9.6 | 12.5 | 12.0 | 9.9 |\ | Russell 1000 Value Index | | 27.8 | 9.0 | 10.7 | 9.5 | 8.1 |\ | Small Cap Value Composite | 4/1/02 | 26.7 | 7.3 | 10.6 | 7.8 | 10.5 |\ | Russell 2000 Value Index | | 25.9 | 3.8 | 9.3 | 6.6 | 8.0 |\ | Smid Cap Value Composite | 10/1/05 | 27.9 | 5.1 | 9.1 | 7.5 | 9.6 |\ | Russell 2500 Value Index | | 26.6 | 6.1 | 10.0 | 7.8 | 7.9 |\ | Multi Cap Value Composite | 7/1/02 | 27.6 | 5.7 | 10.2 | 9.2 | 9.7 |\ | Russell 3000 Value Index | | 27.6 | 8.7 | 10.6 | 9.3 | 8.6 |\ | Equity Income Composite | 12/1/03 | 24.8 | 7.4 | 8.5 | 8.8 | 11.0 |\ | Russell 3000 Value Index | | 27.6 | 8.7 | 10.6 | 9.3 | 8.7 |\ | Focused Value Composite | 9/1/04 | 23.6 | 1.9 | 6.4 | 6.1 | 9.4 |\ | Russell 3000 Value Index | | 27.6 | 8.7 | 10.6 | 9.3 | 8.5 |\ | Small Cap Opportunity Composite | 7/1/04 | 25.9 | 4.7 | 12.0 | 10.8 | 11.1 |\ | Russell 2000 Index | | 26.8 | 1.8 | 9.4 | 7.4 | 8.2 |\ | Small Cap Growth Composite | 7/1/04 | 18.9 | -5.2 | 12.0 | 10.9 | 10.4 |\ | Russell 2000 Growth Index | | 27.7 | -0.4 | 8.8 | 7.6 | 8.5 |\ | Smid Cap Growth Composite | 1/1/06 | 24.3 | -5.8 | 13.0 | 12.9 | 10.7 |\ | Russell 2500 Growth Index | | 25.2 | -0.7 | 9.7 | 9.4 | 9.5 | Corporate Information Conference Call Details Silvercrest will host a conference call on November 1, 2024, to discuss the Q3 2024 results, featuring CEO Richard R. Hough III and CFO Scott A. Gerard - A conference call to discuss the results is scheduled for November 1, 2024, at 8:30 am (Eastern Time)[24] - Listeners can access the call by dialing 1-844-836-8743 (US) or 1-412-317-5723 (International), or via a live webcast on www.silvercrestgroup.com[24](index=24&type=chunk) Forward-Looking Statements and Risk Factors This release contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially; readers should consult the company's Form 10-K for comprehensive risk factors - This release contains forward-looking statements that are subject to risks, uncertainties, and assumptions, and are only predictions based on current expectations[25] - Important factors that could cause actual results to differ materially are disclosed under 'Risk Factors' in the annual report on Form 10-K for the year ended December 31, 2023[25][26] About Silvercrest Silvercrest Asset Management Group Inc. is an independent, employee-owned registered investment adviser founded in April 2002, offering traditional and alternative investment advisory and family office services - Silvercrest was founded in April 2002 as an independent, employee-owned registered investment adviser[27] - The company provides traditional and alternative investment advisory and family office services to wealthy families and select institutional investors[27] - Silvercrest operates with offices in New York, Boston, Virginia, New Jersey, California, and Wisconsin[27]