Silvercrest Asset Management Group Inc (SAMG) (Q1 2024) Earnings Call Transcript Highlights: ...

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Sat, May 4, 2024, 1:04 AM 4 min read

Discretionary AUM: Increased by $0.8 billion or 3.7% to $22.7 billion.
Total AUM: Rose by $1.2 billion to $34.5 billion.
Revenue: Grew by 2.9% year-over-year to $30.3 million.
Net Income: Reported at $4.9 million for the quarter.
Expenses: Increased by 7.4% year-over-year, driven by higher compensation and benefits.
Adjusted EBITDA: Approximately $7.5 million or 24.6% of revenue.
Adjusted Net Income: Approximately $4.7 million.
EPS (Basic and Diluted for Class A Shares): $0.32.
Adjusted EPS (Basic and Diluted): $0.34 and $0.33 respectively.
Total Assets: $170.2 million as of March 31, 2024.
Cash and Cash Equivalents: $39.7 million as of March 31, 2024.
Total Borrowings: $1.8 billion as of March 31, 2024.
Total Class A Stockholders' Equity: Approximately $83.9 million as of the end of the first quarter.

Warning! GuruFocus has detected 3 Warning Signs with RPID.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Silvercrest Asset Management Group Inc reported a substantial increase in its business pipeline, rising from $700 million in Q4 2023 to $2 billion in Q1 2024, indicating strong potential for future growth.
The company has maintained high customer retention rates of over 98%, demonstrating strong client satisfaction and stability in its customer base.
Silvercrest Asset Management Group Inc has successfully expanded its international and global equity investment capabilities with new team hires, enhancing its service offerings and competitive edge in the market.
The firm's discretionary assets under management increased by $0.8 billion during the quarter, or 3.7%, to $22.7 billion, reflecting positive market appreciation and asset growth.
Silvercrest Asset Management Group Inc continues to attract substantial new business opportunities globally, despite international tensions, showcasing the firm's robust business model and appeal.

Negative Points

The company reported an increase in expenses for the quarter, up by $1.7 million or 7.4%, primarily driven by increased compensation and benefits expense, which could impact profitability if not managed effectively.
Silvercrest Asset Management Group Inc's net income and EBITDA margins are under pressure due to ongoing investments in new personnel and business development, which may affect short-term profitability.
There is uncertainty in the pull-through rate of the business pipeline, with large potential mandates making it difficult to predict future success accurately.
The firm has experienced net client outflows, which were partially offset by market appreciation, indicating challenges in maintaining or growing client assets under management.
Increased general and administrative expenses, including costs related to travel, entertainment, and professional fees, contributed to the overall rise in expenses, potentially impacting the firm's operational efficiency.

Q & A Highlights

Q: What caused the pipeline to jump so suddenly? A: Richard Hough, Chairman and CEO, explained that the substantial growth in the pipeline was primarily due to increased inclusion in consultant searches for the OCIO team and more client referrals, as their asset allocation and manager selection portfolio performed well against benchmarks.

Q: Could you discuss the existing assets and track record for your international strategy, and the impact of new hires on this strategy? A: Richard Hough noted that the existing international strategy managed about $300 million, primarily in deeper value spaces like global small-cap and emerging markets. The new team focuses on Global Value Equity, which complements the existing strategy with minimal overlap, potentially boosting the entire international book at Silvercrest.

Q: Can you remind us of the historical pull through of the pipeline and how you see the EBITDA margin evolving this year? A: Richard Hough mentioned that the pull-through rate varies significantly, especially with large potential mandates. He refrained from providing a specific percentage due to the variability. Regarding EBITDA margin, he indicated that while investments in new personnel might impact margins in the short term, he aims to push EBITDA margins back to mid to high 20% in a normalized environment.

Q: How should we think about the growth of nondiscretionary versus discretionary assets under management in the coming quarters? A: Richard Hough emphasized focusing on discretionary assets as they directly link to revenue. He explained that nondiscretionary assets often relate to project flat fees for capabilities like reporting, which are valuable but less directly tied to revenue growth.

Q: How should we anticipate compensation and benefits expense to evolve in the coming quarters? A: Richard Hough indicated that compensation and benefits expense might increase slightly as the firm continues to invest in growth. He expressed a preference for maintaining predictability in compensation expenses but acknowledged potential variability due to strategic investments.

Q: What are your expectations for the new global equity team and their contribution to the firm? A: Richard Hough expressed optimism about the new global equity team, noting their focus on Global Value Equity and their potential to attract large mandates, particularly from international investors. He expects this team to significantly enhance Silvercrest's competitive position in international markets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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