Silvercrest Asset Management Group Inc. (SAMG)

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Silvercrest Asset Management Group Inc. (SAMG)

Q2 2013 Earnings Conference Call

August 14, 2013; 08:30 a.m. ET


Moffett Cochran - Chairman, Chief Executive Officer

Rick Hough - President, Chief Operating Officer

Scott Gerard - Chief Financial Officer


Steven - Raymond James Associate

Michael - Sandler O'Neill



Good morning and welcome to the Silvercrest Asset Management Group’s, second quarter investor call.

Mr. Moffett Cochran, you may now begin.

Moffett Cochran

Good morning. I’m CEO of Silvercrest. Joining me today is Scott Gerard, our CFO and Rick Hough, our President.

We are very pleased to be reporting our first quarterly earnings as a public company. As Scott and Rick will report in greater detail, it was a good quarter for Silvercrest. Substantial year-over-year increases were recorded in AUM, revenue, EBITDA and net income for the same periods in 2012. In particular, we are pleased to see our EBITDA margin above 30% for the quarter and for the six months ending June 30.

Before turning it over to Rick and Scott, I would like to make a few general comments. Two months ago we were on the verge of ticking off a road show, which culminated in our initial public officering of June 27 of this year. As we traveled the country telling out story, we made the following points at every stop.

One, in the ultra high net worth space we saw almost unlimited growth potential, if we were able to continue to deliver excellent service and performance to these clients. Two, in the institutional space we felt we were at an inflection point with institutional consultancy, which only reflects beginning to get traction. And three, in the M&A space we felt that our ability to do additional deals would be greatly enhanced by the cash and public stock that will come from the IPO.

We also emphasized that the growth we felt confident we would achieve was the uneven, unpredictable and would require patience. Based on our record of success in each of these areas however, we were confident the patient investor would be well rewarded. Now that we are 48 days into the life of a public company, none of our views of these topics has changed.

In the ultra high net worth space, Silvercrest continues to have meetings and conversations with individuals of extraordinary wealth. Because there is no deadline for action however, these conversations were not brought for closure until the client decides he or she is completely comfortable with the outcome; sometimes this takes weeks, sometimes it takes years. In any event it is unpredictable and we will not expect to make predictions of this sort.

In the quarter ended June 30, our new business success was somewhat muted, although the second quarter of each yeah is characterized by substantial high flows to the taxing authorities.

During the quarter we gained three new relationships. In the institutional space we continue to be invited into the final presentations for institutional managers seeking new management and we continue to win a good number of mandates from this effort. In the quarter ended June 30, we were awarded an intuitional mandate totaling $62 million and in the current quarter-to-date we await decision on a number of mandates. Our institutional pipeline is large and growing and looks encouraging.

During the IPO process we largely suspended our efforts to identify merger or acquisition incentives. Now that the IPO is behind us, we are reactivating that effort, which is a priority for us.

Moving forward on this book, we intend to follow the same formula we have used to-date. Projects, small firms, these clients and principals are culturally compatible with our own, integrated fully with Silvercrest and build out the acquired business on the new Silvercrest platform.

We intend to focus only on firms located in major moneyed centers in the US. In addition to gaining clients or relationship managers, we will be alert to the opportunities to do acquisitions, which would expand our sweet and core investment capabilities as well.

Scott Gerard and Rick Hough will now provide a more detailed analysis of our operations for the second quarter and year-to-date 2013, following which we will open it up for a few questions. Scott, Rick.

Scott Gerard

Thank you Moffett. As everyone here read in our earnings release for the second quarter, AUM as of June 30 was $13.9 billion, revenue for the quarter was $14.5 million and reported net income for the quarter was $5.5 million.

Please keep in mind that the results for the three and six months ended June 30, 2013 are those of our accounting predecessor, Silvercrest L.P., and as a result, our statement of operations and cash flows, do not take into consideration changes related to our IPO, given that our shares only commence trading on June 27.

Revenue for the second quarter was $14.5 million, representing approximately a 12% increase over revenue $12.9 million for the same period last year. This increase is driven primarily by growth in our management and advisory fees as a result of increased AUM.

Expenses for the second quarter were $8.7 million, representing approximately a 16% increase over expense of $7.5 million for the same period last year. This increase was primarily attributable to increases in compensation and benefits expense of $1.1 million and to a much lesser extent general and administrative expenses.

Our increase in compensation and benefits expense was primarily attributable to a special one-time non-principal bonus expense of approximately $750,000, directly related to the IPO, which was paid in July 2013 upon the confirmation of the offering. The balance of the increase in compensation benefit expense is due to both merit increases and increased headcount.

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