Silvercrest Asset Management Group Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; filed March 2, 2022. The company provides investment management, wealth advisory and family-office services to ultra-high-net-worth individuals and institutional investors. Reported figures are consolidated unless otherwise noted.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $131.6 million | $108.0 million | +21.9% |
| Income before other income (expense) | $30.5 million | $22.3 million | +37.0% |
| Net income, consolidated | $24.9 million | $17.5 million | +42.7% |
| Net income attributable to Silvercrest | $14.7 million | $10.0 million | +47.5% |
| Net income margin | 19.0% | 16.2% | +2.8 percentage points |
| Adjusted EBITDA (non-GAAP) | $43.4 million | $30.3 million | +43.4% |
| Adjusted EBITDA margin (non-GAAP) | 33.0% | 28.1% | +4.9 percentage points |
- Management and advisory fees rose 22.4% to $127.0 million; family-office services revenue rose 7.9% to $4.5 million. Performance-fee revenue was $0.1 million.
- Assets under management (AUM) increased 16.2% to $32.3 billion from $27.8 billion. The reported AUM bridge shows $4.3 billion of market appreciation and $0.2 billion of net client flows. Average AUM rose to $30.1 billion from $26.5 billion. Discretionary AUM was $25.1 billion; non-discretionary AUM was $7.2 billion.
- Total expenses rose 17.9% to $101.1 million. Compensation and benefits increased 16.3% to $72.6 million, including $34.8 million of partner incentive payments; general and administrative expenses rose 22.3% to $28.5 million.
- Operating cash flow was $44.3 million, investing cash outflow $0.9 million, and financing cash outflow $20.1 million. Cash increased $23.2 million to $85.7 million.
- Credit-facility borrowings were $9.0 million at year-end, down from $12.6 million; no revolving-facility borrowings were outstanding. The company reported compliance with loan covenants. Operating lease liabilities were $32.4 million.
- FY2021 dividends paid to Class A shareholders totaled $6.4 million, or $0.66 per share. The company also repurchased 33,083 shares for approximately $0.5 million.
Fourth-quarter comparison
Q4 2021 revenue was $33.8 million, compared with $28.4 million in Q4 2020. Consolidated net income was $8.6 million versus $3.5 million; net income attributable to Silvercrest was $5.1 million versus $1.9 million. Quarterly figures are unaudited.
Outlook, commentary and risks
- No formal revenue, earnings or AUM guidance is provided. Management said it expected cash generated by operations to meet liquidity needs over the next 12 months and intended to continue quarterly dividends, subject to board discretion, cash availability and credit-facility restrictions.
- The company said COVID-19-related effects and market volatility could continue to affect AUM and revenue, and specifically disclosed an expectation that the pandemic’s negative impact on revenue levels would continue into 2022. This outlook is uncertain.
- Revenue depends heavily on market-valued AUM: management estimated that a 10% change in average 2021 AUM, all else equal, would change annual revenue by approximately $13.2 million. Market declines, client withdrawals, investment underperformance, fee pressure and client concentration are material risks.
- Client and strategy concentration is significant: the top 50 client relationships represented approximately 59% of AUM. Discretionary accounts generated approximately 96% of investment management fees. Most client agreements may be terminated on short or no notice.
- A notable unusual item was a $5.7 million increase in the estimated fair value of Cortina acquisition contingent consideration, recorded in general and administrative expense. Cortina contingent consideration totaled $16.3 million at year-end; total estimated acquisition contingent consideration was $18.0 million. The amount depends on forecasts and other unobservable valuation inputs.
- The tax receivable agreement requires payment to principals of 85% of qualifying realized or deemed tax savings. The recorded liability was approximately $9.2 million; acceleration or early termination could affect liquidity.
- No material pending or threatened legal proceedings were reported. Deloitte issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Most important facts for investors to verify
- Whether AUM growth and positive net flows continue, and how much future fee revenue depends on market appreciation rather than client inflows.
- Client and strategy concentration, retention, investment performance and potential effects of portfolio-manager departures.
- The assumptions and eventual cash payments associated with Cortina’s earnout and the broader acquisition contingent-consideration liabilities.
- Cash available after dividends, partner distributions, debt service, lease commitments and tax receivable agreement payments; confirm revolving-credit availability and maturity terms.
- The basis for management’s expectation of continued COVID-19-related revenue pressure into 2022 and whether subsequent results support that assessment.
- Non-GAAP Adjusted EBITDA and margin reconciliations: FY2021 Adjusted EBITDA includes $5.9 million of adjustments, including the Cortina contingent-consideration fair-value adjustment.