Silvercrest Asset Management Group Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; the filing also reports fourth-quarter results. Silvercrest is a wealth manager providing investment management and family-office services to ultra-high-net-worth individuals and institutions. Year-end assets under management (AUM) were $33.3 billion.
Financial results and key metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $117.4 million | $123.2 million |
| Income before other income (expense), net | $18.8 million | $38.6 million |
| Net income | $15.2 million | $30.8 million |
| Net income attributable to Silvercrest | $9.1 million | $18.8 million |
| Net income margin | 12.9% | 25.0% |
| Adjusted EBITDA (non-GAAP) | $26.9 million | $32.0 million |
| Adjusted EBITDA margin (non-GAAP) | 22.9% | 26.0% |
| Operating cash flow | $21.0 million | $23.4 million |
| Year-end AUM | $33.3 billion | $28.9 billion |
- Revenue fell 4.7%, primarily because lower AUM in earlier periods weighed on fees despite the year-end AUM recovery. Management and advisory fees declined 5.0% to $112.8 million; family-office fees rose 2.8% to $4.6 million. No performance-fee revenue was recorded in 2023.
- Average AUM increased to $31.1 billion from $30.6 billion, while the average management fee rate declined to 0.38% from 0.40%.
- AUM increased 15.2% during 2023. The filing’s AUM bridge attributes approximately $3.8 billion to market appreciation and $0.6 billion to net client flows.
- Cash and cash equivalents were $70.3 million at year-end, down from $77.4 million. Term-loan borrowings were $2.7 million, down from $6.3 million; the revolving facility had no outstanding borrowings. The company reported compliance with credit-facility covenants.
- Operating, investing and financing cash flows were $21.0 million, negative $3.9 million and negative $24.2 million, respectively. Financing uses included $7.0 million of Class A dividends, $7.8 million of partner distributions and $5.7 million of share repurchases.
- Year-end total assets were $199.6 million, total liabilities $77.8 million and total equity $121.8 million. Operating lease liabilities were $26.3 million.
Changes versus the prior comparable period
- Profitability weakened sharply: net income fell about 51%, and Adjusted EBITDA declined about 16% year over year.
- Total expenses increased 16.5% to $98.6 million. General and administrative expense nearly doubled, mainly because fair-value changes in contingent acquisition consideration increased expense by $11.8 million for Cortina and $0.3 million for Neosho. In 2022, the Cortina valuation adjustment had reduced expense substantially.
- Fourth-quarter revenue was $28.5 million versus $28.5 million in the prior-year quarter. Fourth-quarter net loss was $0.6 million, including a $1.0 million loss before other income (expense), net. The filing attributes the annual expense increase principally to contingent-consideration remeasurement.
- Discretionary AUM rose to $21.9 billion from $20.9 billion, while non-discretionary AUM rose to $11.4 billion from $8.0 billion.
Outlook, commentary, risks and unusual items
- No specific revenue, earnings or AUM guidance is provided. Management expects cash needs for the next 12 months to be met primarily from operating cash flow and says it believes liquidity is sufficient for operations and commitments over that period.
- Management’s stated growth priorities include organic client growth, selective hiring and acquisitions, expanding institutional and outsourced-CIO business, and increasing family-office services. The filing describes these as plans, not quantified forecasts.
- Key risks include market declines and client withdrawals reducing fee-generating AUM; fee pressure and shifts toward lower-fee strategies; dependence on key professionals and concentrated clients or strategies; intense competition; regulatory, litigation, cybersecurity and operational risks; and execution and integration risks from acquisitions.
- Client concentration is notable: the top 50 relationships represented approximately 63% of AUM. Discretionary managed accounts generated approximately 96% of management and advisory fee revenue. The small-cap value strategy was closed to new investors as of the filing date.
- The tax receivable agreement requires payment to principals of 85% of qualifying tax savings. The recorded liability was approximately $8.8 million; an early termination or change of control could accelerate payments and affect liquidity.
- The company reported no material pending or threatened legal proceedings, no material cybersecurity impact to date, and effective internal control over financial reporting. Deloitte issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether AUM growth is sustained by net flows as well as market appreciation, and whether the non-discretionary AUM increase converts into fee revenue.
- The drivers and potential recurrence of contingent-consideration expense, including the valuation assumptions and remaining acquisition obligations.
- Cash-flow durability, dividend and repurchase levels, lease commitments, debt-facility terms and the timing or size of tax receivable agreement payments.
- Client and strategy concentration, retention of key investment professionals, and investment performance relative to benchmarks. Reported strategy returns are gross of advisory fees and do not assure future results.
- Reconcile annual and quarterly profit trends and assess non-GAAP measures alongside GAAP results; Adjusted EBITDA and adjusted earnings exclude specified items and are not substitutes for GAAP measures.