Silvercrest Asset Management Group(SAMG) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total assets under management (AUM) grew to $25.1 billion as of December 31, 2019, with discretionary AUM at $18.8 billion, marking new highs for the firm [8] - Revenue for Q4 2019 was $27.8 million, a 12% increase from $24.8 million in Q4 2018, primarily driven by the acquisition of Cortina [16][17] - Reported consolidated net income for Q4 2019 was $4.2 million, down from $5.2 million in the same period last year [21] - Full-year revenue for 2019 was approximately $102.2 million, a 4% increase from $98.7 million in 2018 [25] - Adjusted EBITDA for 2019 was approximately $28.6 million, or 28% of revenue, compared to $29.6 million, or 30% of revenue in 2018 [30] Business Line Data and Key Metrics Changes - The OCIO business doubled to $300 million in AUM during Q4 2019, contributing significantly to new client account growth [10] - Silvercrest's institutional asset management AUM reached $6 billion, with strong three and five-year track records across equity strategies [12] - Revenue related to the Cortina acquisition for the full year was approximately $6.2 million, starting from July 1, 2019 [26] Market Data and Key Metrics Changes - The current M&A environment for wealth management firms remains active and expensive, with Silvercrest being selective in its approach [14] - The institutional pipeline stands at approximately $3.6 billion, indicating strong potential for future growth [49] Company Strategy and Development Direction - Silvercrest aims to continue attracting net positive asset flows into its high-quality equity capabilities despite industry trends toward passive investment vehicles [11] - The company is focused on organic growth and diversifying talent, having invested in new high net worth portfolio management professionals [13] - Silvercrest plans to opportunistically deploy capital to complement organic growth, particularly in the current M&A environment [14] Management's Comments on Operating Environment and Future Outlook - Management expressed a long-term constructive outlook despite short-term economic disruptions, emphasizing the importance of maintaining client relationships during market volatility [54][56] - The company sees potential for active management to outperform passive strategies, particularly in times of market volatility [55] - Management highlighted the importance of disaster recovery and business continuity plans in light of recent global events [56][90] Other Important Information - Total borrowings as of December 31, 2019, were $16.2 million, with total Class A stockholders' equity at approximately $65 million [34] - The company has a conservative approach to leveraging its capital, indicating room for future M&A opportunities [71] Q&A Session Summary Question: Update on the M&A environment and 2020 activity levels - Management indicated that they are actively engaged in conversations with potential targets and are selective about acquisitions, focusing on cultural fit and organic growth potential [40][45] Question: Institutional channel flows and pipeline update - The institutional pipeline is strong at approximately $3.6 billion, with good performance in large cap strategies helping to offset volatility [49][50] Question: Correlation between market state and unit revenue - Management noted that revenue is significantly influenced by the last day of each quarter, and while market declines can impact revenue, the effect is not one-to-one [85][88] Question: Response to coronavirus and employee safety measures - The company has implemented protocols for employee safety, including remote work capabilities and limited travel [90][91]