Silvercrest Asset Management Group Inc. Reports Q4 and Year-end 2016 Results

For the Three Months
Ended December 31,

For the Year Ended
December 31,

(in thousands except per share amounts or as indicated)

2016

2015

2016

2015

Revenue

$

21,192

$

19,211

$

80,262

$

75,138

Income before other income (expense), net

$

3,326

$

3,947

$

14,636

$

16,957

Net income

$

2,487

$

2,165

$

9,982

$

11,085

Net income attributable to Silvercrest

$

1,286

$

874

$

5,015

$

5,324

Net income per basic and diluted share

$

0.15

$

0.11

$

0.62

$

0.68

Adjusted EBITDA¹

$

5,889

$

5,770

$

22,453

$

21,858

Adjusted EBITDA margin¹

27.8

%

30.0

%

28.0

%

29.1

%

Adjusted net income¹

$

2,632

$

2,537

$

9,836

$

10,672

Adjusted basic earnings per share^{1, 2}

$

0.20

$

0.20

$

0.76

$

0.84

Adjusted diluted earnings per share^{1, 2}

$

0.19

$

0.19

$

0.72

$

0.78

Assets under management at period end (billions)

$

18.6

$

18.1

$

18.6

$

18.1

Average assets under management (billions)³

$

18.3

$

17.9

$

18.4

$

18.0

Discretionary assets under management (billions)

$

13.8

$

12.1

$

13.8

$

12.1

¹

Adjusted measures are non-GAAP measures and are explained and reconciled to the comparable GAAP measures in Exhibits 3 and 4.

² 

Adjusted basic and diluted earnings per share measures for the year ended December 31, 2016 are based on the number of shares of Class A common stock and Class B common stock outstanding as of December 31, 2016.  Adjusted diluted earnings per share are further based on the addition of unvested deferred equity units, restricted stock units, and performance units to the extent dilutive at the end of the reporting period.

³ 

We have computed average AUM by averaging AUM at the beginning of the applicable period and AUM at the end of the applicable period.

Exhibit 1

Silvercrest Asset Management Group Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts or as noted)

For the year ended December 31,

2016

2015

2014

(Unaudited)

Revenue

Management and advisory fees

$

76,185

$

71,759

$

65,026

Performance fees and allocations

322

11

221

Family office services

3,755

3,368

4,225

Total revenue

80,262

75,138

69,472

Expenses

Compensation and benefits

49,009

42,856

40,290

General and administrative

16,617

15,325

13,860

Total expenses

65,626

58,181

54,150

Income before other income (expense), net

14,636

16,957

15,322

Other income (expense), net

Other income (expense), net

(105)

1,268

876

Interest income

61

72

69

Interest expense

(228)

(261)

(381)

Equity income from investments

304

18

1,208

Total other income (expense), net

32

1,097

1,772

Income before provision for income taxes

14,668

18,054

17,094

Provision for income taxes

(4,686)

(6,969)

(6,386)

Net income

9,982

11,085

10,708

Less: net income attributable to non-controlling interests

(4,967)

(5,761)

(5,933)

Net income attributable to Silvercrest

$

5,015

$

5,324

$

4,775

Net income per share:

Basic

$

0.62

$

0.68

$

0.63

Diluted

$

0.62

$

0.68

$

0.63

Weighted average shares outstanding:

Basic

8,031,161

7,855,038

7,600,739

Diluted

8,038,177

7,855,038

7,600,739

Exhibit 2

Silvercrest Asset Management Group Inc.

Consolidated Statements of Operations

(Unaudited and in thousands, except share and per share amounts or as noted)

For the three months ended December 31,

2016

2015

Revenue

Management and advisory fees

$

19,991

$

18,267

Performance fees and allocations

322

11

Family office services

879

933

Total revenue

21,192

19,211

Expenses

Compensation and benefits

13,619

11,116

General and administrative

4,247

4,148

Total expenses

17,866

15,264

Income before other income (expense), net

3,326

3,947

Other income (expense), net

Other income (expense), net

(6)

255

Interest income

14

18

Interest expense

(54)

(70)

Equity income from investments

304

18

Total other income (expense), net

258

221

Income before provision for income taxes

3,584

4,168

Provision for income taxes

(1,097)

(2,003)

Net income

2,487

2,165

Less: net income attributable to non-controlling interests

(1,201)

(1,291)

Net income attributable to Silvercrest

$

1,286

$

874

Net income per share:

Basic

$

0.15

$

0.11

Diluted

$

0.15

$

0.11

Weighted average shares outstanding:

Basic

8,062,041

7,948,273

Diluted

8,072,623

7,948,273

Exhibit 3

Silvercrest Asset Management Group Inc.

Reconciliation of GAAP to non-GAAP ("Adjusted") Adjusted EBITDA Measure

(Unaudited and in thousands, except share and per share amounts or as noted)

Adjusted EBITDA

Three Months Ended
December 31,

Year Ended
December 31,

2016

2015

2016

2015

Reconciliation of non-GAAP financial measure:

Net income

$

2,487

$

2,165

$

9,982

$

11,085

Provision for income taxes

1,097

2,003

4,686

6,969

Delaware Franchise Tax

47

45

182

190

Interest expense

54

70

228

261

Interest income

(14)

(18)

(61)

(72)

Depreciation and amortization

652

682

2,664

2,359

Equity-based compensation

811

808

3,228

1,524

Other adjustments (A)

755

15

1,544

(458)

Adjusted EBITDA

$

5,889

$

5,770

$

22,453

$

21,858

Adjusted EBITDA Margin

27.8

%

30.0

%

28.0

%

29.1

%

(A)

Other adjustments consist of the following:

Client Reimbursement

$

-

$

46

$

-

$

46

Acquisition costs (a)

-

159

22

281

Severance

(6)

-

-

48

Non-acquisition expansion costs (b)

84

71

310

361

Other (c)

677

(261)

1,212

(1,194)

Total other adjustments

$

755

$

15

$

1,544

$

(458)

(a)

For the three and twelve months ended December 31, 2016, respectively, represents legal fees of $0 and $12 related to the Cappiccille acquisition and professional fees of $0 and $10 related to the Jamison Acquisition.  For the three and twelve months ended December 31, 2015, respectively, primarily represents legal fees of $3 and $105 and other professional fees of $144 and $164 associated with the Jamison acquisition.     

(b)

For the three and twelve months ended December 31, 2016, respectively, represents $84 and $310 of accrued earnout related to our Richmond, VA office expansion.  For the three and twelve months ended December 31, 2015, respectively, represents $71 and $292 of accrued earnout and $0 and $69 of professional fees related to our Richmond, VA office expansion. 

(c) 

For the three and twelve months ended December 31, 2016, respectively, represents a sign on bonus of $102 and $364 paid to a new employee, compensatory incentive fees of $322 and $322 paid to a former Marathon Capital Group, LLC principal, costs associated with the upgrade of our telephone system of $24 and $82, software implementation costs of $0 and $13, professional fees related to a mock compliance audit of $0 and $78, professional fees related to a mock Sarbanes 404 audit of $43 and $43, a fair value adjustment to the Milbank contingent purchase price consideration of $80 and $80, a fair value adjustment to the Jamison contingent purchase price consideration of $79 and $79 and a true-up adjustment to our tax receivable agreement of $30 and $152.  This was partially offset by a fair value adjustment to the Cappiccille contingent purchase price consideration of ($7) and ($7).  For the three and twelve months ended December 31, 2015, respectively, represents professional fees of $0 and $57 related to the initial award agreements of restricted stock unit grants, relocation expenses for a specific partner of $28 and $28, software implementation costs of $40 and $40, professional fees of $49 and $49 related to a telecom project and compensatory incentive fees of $11 and $11 paid to a former Marathon Capital Group, LLC principal.  This was offset by a fair value adjustment to the Milbank contingent purchase price consideration of ($82) and ($82), a fair value adjustment to the Jamison contingent purchase price consideration of ($87) and ($87) and a true-up adjustment to our tax receivable agreement of ($219) and ($1,209). The adjustment in fair value of the tax receivable agreement is the result in a reduction in future effective corporate tax rate in New York City as a result of a law change. The reduction in the future effective corporate tax rate will result in less tax benefits being recognized by the Company from future amortization reducing its liability pursuant to the tax receivable agreement. 

Exhibit 4

Silvercrest Asset Management Group Inc.

Reconciliation of GAAP to non-GAAP ("Adjusted")

Adjusted Net Income and Adjusted Earnings Per Share Measures

(Unaudited and in thousands, except per share amounts or as noted)

Adjusted Net Income and Adjusted Earnings Per Share

Three Months Ended
December 31,

Year Ended
December 31,

2016

2015

2016

2015

Reconciliation of non-GAAP financial measure:

Consolidated net income

$

2,487

$

2,165

$

9,982

$

11,085

Consolidated GAAP provision for income taxes

1,097

2,003

4,686

6,969

Delaware Franchise Tax

47

45

182

190

Other adjustments (See A in Exhibit 3)

755

15

1,544

(458)

Adjusted income before provision for income taxes

$

4,386

$

4,228

$

16,394

$

17,786

Adjusted provision for income taxes:

Adjusted provision for income taxes (40% assumed tax rate)

(1,754)

(1,691)

(6,558)

(7,114)

Adjusted net income

$

2,632

$

2,537

$

9,836

$

10,672

GAAP net income per share (B):

Basic and diluted

$

0.15

$

0.11

$

0.62

$

0.68

Adjusted earnings per share/unit (B):

Basic

$

0.20

$

0.20

$

0.76

$

0.84

Diluted

$

0.19

$

0.19

$

0.72

$

0.78

Shares/units outstanding:

Basic Class A shares outstanding

8,074

7,990

8,074

7,990

Basic Class B shares/units outstanding

4,866

4,695

4,866

4,695

Total basic shares/units outstanding

12,940

12,685

12,940

12,685

Diluted Class A shares outstanding (C)

8,085

7,990

8,085

7,990

Diluted Class B shares/units outstanding (D)

5,595

5,666

5,595

5,666

Total diluted shares/units outstanding

13,680

13,656

13,680

13,656

(B)

GAAP earnings per share is strictly attributable to Class A shareholders.  Adjusted earnings per share takes into account earnings attributable to both Class A and Class B shareholders. 

(C) 

Includes 10,582 unvested restricted stock units as of December 31, 2016.

(D) 

Includes 728,674 unvested restricted stock units as of December 31, 2016.  Includes 4,911 unvested deferred equity units and 966,510 unvested restricted stock units at December 31, 2015.

Exhibit 5

Silvercrest Asset Management Group Inc.

Consolidated Statements of

Financial Condition

(in thousands)

December 31,
2016

December 31,
2015

(Unaudited)

Assets

Cash and cash equivalents

$

37,517

$

31,562

Restricted certificates of deposit and escrow

-

587

Investments

335

32

Receivables, net

6,270

4,502

Due from Silvercrest Funds

2,876

4,330

Furniture, equipment and leasehold improvements, net

2,411

2,425

Goodwill

25,168

24,682

Intangible assets, net

13,404

15,331

Deferred tax asset – tax receivable agreement

20,221

21,498

Prepaid expenses and other assets

4,079

3,262

Total assets

$

112,281

$

108,211

Liabilities and Equity

Accounts payable and accrued expenses

$

4,485

$

4,031

Accrued compensation

23,797

21,786

Notes payable

2,486

4,514

Deferred rent

436

852

Deferred tax and other liabilities

14,993

15,391

Total liabilities

46,197

46,574

Commitments and Contingencies

Equity

Preferred Stock, par value $0.01,

10,000,000 shares authorized; none issued and outstanding

-

-

Class A Common Stock, par value $0.01,

50,000,000 shares authorized; 8,074,197 and 7,989,749 issued and outstanding as of
December 31, 2016 and 2015, respectively

81

80

Class B Common Stock, par value $0.01,

25,000,000 shares authorized; 4,866,303 and 4,695,014 issued and outstanding as of
December 31, 2016 and 2015, respectively

48

46

Additional Paid-In Capital

41,260

40,951

Retained earnings

5,916

4,758

Total Silvercrest Asset Management Group Inc.'s equity

47,305

45,835

Non-controlling interests

18,779

15,802

Total equity

66,084

61,637

Total liabilities and equity

$

112,281

$

108,211

Exhibit 6

Silvercrest Asset Management Group Inc.

Total Assets Under Management

(Unaudited and in billions)

Total Assets Under Management:

Three Months Ended
December 31,

% Change From
December 31,

2016

2015

2015

Beginning assets under management

$

17.9

$

17.6

1.7

%

Gross client inflows

1.4

0.9

66.7

%

Gross client outflows

(1.3)

(0.9)

44.4

%

Market appreciation

0.6

0.5

0.0

%

Ending assets under management

$

18.6

$

18.1

2.8

%

Year Ended
December 31,

% Change From
December 31,

2016

2015

2015

Beginning assets under management

$

18.1

$

17.9

1.1

%

Gross client inflows

4.9

4.6

6.5

%

Gross client outflows

(5.4)

(3.7)

46.0

%

Market appreciation (depreciation)

1.0

(0.7)

242.9

%

Ending assets under management

$

18.6

$

18.1

2.8

%

Exhibit 7

Silvercrest Asset Management Group Inc.

Discretionary Assets Under Management

(Unaudited and in billions)

Discretionary Assets Under Management:

Three Months Ended
December 31,

% Change From
December 31,

2016

2015

2015

Beginning assets under management

$

13.2

$

11.8

11.9

%

Gross client inflows

1.3

0.8

75.0

%

Gross client outflows

(1.2)

(0.8)

50.0

%

Market appreciation

0.5

0.3

33.3

%

Ending assets under management

$

13.8

$

12.1

14.1

%

Year Ended
December 31,

% Change From
December 31,

2016

2015

2015

Beginning assets under management

$

12.1

$

11.6

4.3

%

Gross client inflows

4.6

4.3

7.0

%

Gross client outflows

(4.2)

(3.4)

23.5

%

Market appreciation (depreciation)

1.3

(0.4)

425.0

%

Ending assets under management

$

13.8

$

12.1

14.1

%

Exhibit 8

Silvercrest Asset Management Group Inc.

Non-Discretionary Assets Under Management

(Unaudited and in billions)

Non-Discretionary Assets Under Management:

Three Months Ended
December 31,

% Change From
December 31,

2016

2015

2015

Beginning assets under management

$

4.7

$

5.8

-19.0

%

Gross client inflows

0.1

0.1

0.0

%

Gross client outflows

(0.1)

(0.1)

0.0

%

Market appreciation

0.1

0.3

-66.7

%

Ending assets under management

$

4.8

$

6.0

-20.0

%

Year Ended
December 31,

% Change From
December 31,

2016

2015

2015

Beginning assets under management

$

6.0

$

6.3

-4.8

%

Gross client inflows

0.3

0.3

0.0

%

Gross client outflows

(1.2)

(0.3)

-300.0

%

Market (depreciation)

(0.3)

(0.2)

-50.0

%

Ending assets under management

$

4.8

$

6.0

-20.0

%

Exhibit 9

Silvercrest Asset Management Group Inc.

Assets Under Management

(Unaudited and in billions)

Three Months Ended
December 31,

2016

2015

Total AUM as of September 30,

$

17.894

$

17.621

Discretionary AUM:

Total Discretionary AUM as of September 30,

13.222

11.795

New client accounts/assets

0.134

0.087

(1)

Closed accounts

(0.007)

(0.120)

(2)

Net cash inflow/(outflow)

(0.028)

(0.015)

(3)

Non-discretionary to discretionary AUM

0.000

0.000

(4)

Market appreciation

0.480

0.330

Change to Discretionary AUM

0.579

0.282

Total Discretionary AUM as of December 31,

13.800

12.077

Change to Non-Discretionary AUM

0.128

0.243

(5)

Total AUM as of December 31,

$

18.601

$

18.146

Year Ended
December 31,

2016

2015

Total AUM as of January 1,

$

18.147

$

17.893

Discretionary AUM:

Total Discretionary AUM as of January 1,

12.077

11.584

New client accounts/assets

0.648

1.330

(1)

Closed accounts

(0.152)

(0.223)

(2)

Net cash inflow/(outflow)

(0.173)

(0.245)

(3)

Non-discretionary to discretionary AUM

0.001

0.005

(4)

Market appreciation (depreciation)

1.399

(0.374)

Change to Discretionary AUM

1.723

0.493

Total Discretionary AUM as of December 31,

13.800

12.077

Change to Non-Discretionary AUM

(1.269)

(0.241)

(5)

Total AUM as of December 31,

$

18.601

$

18.146

(1)

Represents new account flows from both new and existing client relationships

(2)

Represents closed accounts of existing client relationships and those that terminated

(3)

Represents periodic cash flows related to existing accounts

(4)

Represents client assets that converted to Discretionary AUM from Non-Discretionary AUM

(5)

Represents the net change to Non-Discretionary AUM

Exhibit 10

Silvercrest Asset Management Group Inc.

Equity Investment Strategy Composite Performance^{1, 2}

As of December 31, 2016

(Unaudited)

PROPRIETARY EQUITY PERFORMANCE

ANNUALIZED PERFORMANCE

AS OF 12/31/16

INCEPTION

1-YEAR

3-YEAR

5-YEAR

7-YEAR

INCEPTION

Large Cap Value Composite

4/1/02

14.7

8.6

14.4

12.3

8.3

Russell 1000 Value Index

17.3

8.6

14.8

12.7

7.3

Small Cap Value Composite

4/1/02

30.2

10.5

16.8

15.7

11.7

Russell 2000 Value Index

31.7

8.3

15.1

13.1

8.7

Smid Cap Value Composite

10/1/05

29.4

11.4

16.6

14.6

10.5

Russell 2500 Value Index

25.2

8.2

15.0

13.5

8.0

Multi Cap Value Composite

7/1/02

19.0

10.0

15.8

14.0

9.6

Russell 3000 Value Index

18.4

8.6

14.8

12.8

8.1

Equity Income Composite

12/1/03

22.9

10.9

16.1

14.5

11.9

Russell 3000 Value Index

18.4

8.6

14.8

12.8

8.3

Focused Value Composite

9/1/04

21.2

11.0

16.2

13.5

11.1

Russell 3000 Value Index

18.4

8.6

14.8

12.8

8.0

¹ 

Returns are based upon a time weighted rate of return of various fully discretionary equity portfolios with similar investment objectives, strategies and policies and other relevant criteria managed by Silvercrest Asset Management Group LLC ("SAMG LLC"), a subsidiary of Silvercrest. Performance results are gross of fees and net of commission charges. An investor's actual return will be reduced by the advisory fees and any other expenses it may incur in the management of the investment advisory account. SAMG LLC's standard advisory fees are described in Part 2 of its Form ADV. Actual fees and expenses will vary depending on a variety of factors, including the size of a particular account. Returns greater than one year are shown as annualized compounded returns and include gains and accrued income and reinvestment of distributions. Past performance is no guarantee of future results. This piece contains no recommendations to buy or sell securities or a solicitation of an offer to buy or sell securities or investment services or adopt any investment position. This piece is not intended to constitute investment advice and is based upon conditions in place during the period noted. Market and economic views are subject to change without notice and may be untimely when presented here. Readers are advised not to infer or assume that any securities, sectors or markets described were or will be profitable. SAMG LLC is an independent investment advisory and financial services firm created to meet the investment and administrative needs of individuals with substantial assets and select institutional investors. SAMG LLC claims compliance with the Global Investment Performance Standards (GIPS^®).

² 

The market indices used to compare to the performance of Silvercrest's strategies are as follows: 

The Russell 1000 Index is a capitalization-weighted, unmanaged index that measures the 1000 smallest companies in the Russell 3000. The Russell 1000 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 2000 Index is a capitalization-weighted, unmanaged index that measures the 2000 smallest companies in the Russell 3000. The Russell 2000 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 2000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 2500 Index is a capitalization-weighted, unmanaged index that measures the 2500 smallest companies in the Russell 3000. The Russell 2500 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 2000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 3000 Value Index is a capitalization-weighted, unmanaged index that measures those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth.