Good day, ladies and gentlemen, and welcome to the Silvercrest Asset Management Fourth Quarter and Year-End 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

Before we begin, let me remind you that during today’s call, Silvercrest will make forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact, including statements regarding future events and developments in Silvercrest’s future performance as well as management’s current expectations, beliefs, plans, estimates or projections relating to the future are forward-looking statements.

These forward-looking statements are only predictions based on current expectations and projections about future events.

These forward-looking statements are subject to a number of risks and uncertainties, and there are important factors that could cause actual results, level of activity, performance or achievements to differ materially to statements made.

Among these factors are fluctuations in quarterly and annual results, incurrence of net losses, adverse effects of management focusing on implementation of a growth strategy, failure to develop and maintain the Silvercrest brand and other factors disclosed in the Company’s filings with the SEC, including those factors listed under the caption entitled Risk Factors in the Company’s annual report on Form 10-K for the year ended December 31, 2017, filed with the SEC.

In some cases, these statements can be identified by forward-looking words such as believe, expect, anticipate, plan, estimate, likely, may, will, could, continue, project, predict, goal, the negative or plural of these words and other similar expressions.

These forward-looking statements are predictions based on Silvercrest’s current expectations and its projections about future events. All forward-looking statements made on this call are made as of the date hereof and Silvercrest assumes no obligation to update these forward-looking statements.

I would now like to introduce your host for today’s conference, Mr. Rick Hough. You may begin..

Good morning and thank you for joining us for our fourth quarter and year-end results for 2017. Silvercrest achieved record revenues and assets under management to conclude our fourth quarter and the full year.

Our total assets under management increased by $0.7 billion during the fourth quarter, which is driven by capital markets performance as well as net new client organic growth. Silvercrest concluded 2017 with discretionary assets under management of $16 billion, representing a year-over-year increase of 16% and a new high for the firm.

Silvercrest’s total assets under management stood at $21.3 billion as of year-end. Silvercrest’s results have been driven by our continued execution of the disciplined growth strategy, and the fourth quarter of 2017 represented the firm’s ninth straight quarter of net organic growth.

Silvercrest has now delivered 18 quarters of positive or breakeven asset flows, with 15 of those quarters being positive. Silvercrest has maintained its adjusted EBITDA margins while investing in the business on behalf of clients and future growth.

We continue to invest in the next generation of high-quality talent and have funded new growth initiatives, including our previously announced new OCIO business. Silvercrest’s proprietary value equity strategies continued their strong long-term performance in 2017.

Each of the firm’s six primary equity strategies have outperformed their relevant benchmarks for nearly all measured periods, as well as since inception. Silvercrest’s performance supports continued opportunity in the institutional marketplace and presents a compelling and competitive offering to our high net worth clients and prospects.

Silvercrest continues to evaluate selective and prudent acquisitions to complement our great organic growth, capabilities and professional talent, including the potential to expand into new geographies. All of us at Silvercrest are grateful for the long-term support of our clients and shareholders.

With that, I’ll turn it over to Scott for our financials before going on to questions. Thank you..

Thanks, Rick. And as disclosed in our earnings release, for the fourth quarter, discretionary AUM as of December 31, 2017 was $16 billion, and total AUM as of the same period was $21.3 billion. Revenue for the fourth quarter was $24.5 million, and reported consolidated net income for the quarter was $1.9 million.

Delving deeper into the quarter, again, $24.5 million of revenue; that was representing approximately a 15% increase over revenue of $21.2 million for the same period last year. This increase was driven primarily by growth in our management and advisory fees as a result of increased AUM.

Expenses for the fourth quarter were $19.3 million, representing approximately an 8% increase from expenses of $17.9 million for the same period last year, and this is primarily attributable to an increase in compensation and benefits expense of $0.9 million and general and administrative expenses of $0.6 million.

And comp and benefits increased primarily because of an increase in the accrual for bonuses compared to the prior year, in addition to increased salary expense as result of merit-based increases.

The increase in general and administrative expenses during the fourth quarter compared to the prior year was primarily due to an increase in occupancy and related costs as result of our new lease in New York City, which took effect on October 1, 2017.

In addition to that, we had increases in professional fees, travel and related costs, insurance, expense and sub-advisory and referral fees because that was related to increased sub-advised revenue.

These increases were partially offset by reductions in investment research costs and that’s because of a lower amount of soft dollar-related research cost conversions, our business taxes came in lower, and we had both decreased client reimbursements and a decrease in the fair value of our earnout payments related to the Milbank and Jamison acquisitions.

Reported consolidated net income was $1.9 million for the fourth quarter and this compared to $2.5 million in the same period last year. Reported net loss attributable to Silvercrest or to Class A shareholders for the fourth quarter 2017 was approximately 80,000 or a penny per basic and diluted Class A share.

Driving this net loss for the quarter were approximately $2 million of one-time net charges, related to the partial write-offs of deferred tax assets and related tax receivable agreement liability, due to the reduction in the federal corporate tax rate that was recently enacted.

Adjusted EBITDA which we define as EBITDA without giving effect to equity based compensation expense and non-core and non-recurring items, was approximately $7.6 million or 31% of revenue for the quarter, compared to $5.9 million or 27.8% of revenue for the same period in the prior year.

Adjusted net income, which we define as net income without giving effect to non-core and non-recurring items and income tax expense assuming a corporate rate of 40% was approximately $3.6 million for the quarter, or $0.27 per adjusted basic share and $0.26 per adjusted diluted share.

Adjusted earnings per share is equal to adjusted net income, divided by the actual Class A and Class B shares outstanding as of the end of the reporting period, for a basic adjusted EPS, and to the extent dilutive, we had unvested restricted stock units to the total shares outstanding to compute diluted adjusted EPS. Looking at the full year.

Revenue for 2017 was $91.4 million, representing approximately a 14% increase over revenue of $80.3 million for the same period last year, again this was driven primarily by growth in management and advisory fees due to increased AUM.

Expenses for the year ended 2017 were $71 million, representing approximately an 8% increase from expenses of $65.6 million for the same period last year. This increase was primarily attributed to increases in compensation and benefits of $5.1 million, partially offset by decreases in general and administrative expense of $0.2 million.

And comp and benefits again was up because of increased bonus accrual and increased salary expenses.

General and administrative, the change there was primarily due to occupancy and related costs, as mentioned earlier, in addition to some of the other same items, sub-advised fees and insurance costs, offset by decreases in research costs as a result of lower soft dollar conversions.

For the year, reported consolidated net income was $12.5 million, and that compared to $10 million in the same period a year ago. Reported net income attributable to Silvercrest or to Class A shareholders for 2017 was $5.3 million or a $0.66 per basic and diluted share.

Again, in that income of $5.3 million were the $2 million of one-time net charges related to the net tax write-offs due to the change in corporate rate. Adjusted EBITDA was approximately $27.9 million, or 30.5% of revenue for 2017 and that compared to $22.5 million or 28% of revenue in prior year.

Adjusted net income was $13.1 million for 2017 or $0.99 per adjusted basic share and $0.95 per adjusted diluted share. Quickly looking at the balance sheet. Total assets were approximately $117.4 million, as of 12/31/17 and that compared to $112.3 million as of the prior year.

Cash and cash equivalents were approximately $53.8 million at the end of 2017 that compared to $37.5 million at the end of 2016. Notes payable was approximately $0.7 million at the end of 2017 and that compared to $2.5 million as of the end of 2016. Lastly, total Class A stockholders’ equity was approximately $49.1 million at the end of 2017.

That concludes my remarks. I’ll now turn it over to Rick for Q&A..

Wonderful. Thank you, Scott. Look forward to taking questions about 2017..

[Operator Instructions] Our first question comes from Andrew Disdier with Sandler O’Neill. Your line is now open..

So, last quarter, we knew that -- so you disclosed some color around the OCIO in the shares?.

Yes..

And we had about $50 million expected to hit during 4Q ‘17 and a pipeline of about $1.8 billion.

So, I was just hoping we could get an update on the OCIO initiative?.

Sure. So, we have added another resource to that team with experience in particular on risk reporting work to round out our initiatives. We will be building a little bit more and the business development side for that initiative. The pipeline is very similar to what I stated in the fourth quarter.

It’s come down just a bit, a couple of opportunities, we didn’t get. But we’ve got a world class team. We have yet to hit some of the presentations and finals represented in that pipeline, one very large one and particular. So, there is potential volatility there, but also a potential big win for us, should we be able to get it.

This is an initiative that we’ve just announced, and it’s going to take some time to ramp up and get a following, not unlike when we launched our equity strategies at Silvercrest. But, it’s a terrific team, a great offering, it’s very robust, and at this point, pretty built-out.

We just need to get some swings at the plate, so that we can deliver some AUM..

Understood. And then, just to clarify, on the $50 million win that was disclosed last quarter or last call I should say….

Yes..

Is that expected to hit this quarter? Did that….

No. That has come in at this point..

That has come in?.

Yes. That’s old news. And that’s last quarter. Yes..

Right. I just wanted to ensure everything panned out as expected. Understood..

As expected. Yes..

Got it. And….

Go ahead..

I guess just around some commentary right there, around the build-out of the resources associated with the OCIO base.

When you see a build-out on the business development side, is that additional I guess sales team members or is it additional concentration from the current resources available to Silvercrest?.

It’s a mix. We’ve got enough new institutional business opportunities going on, as well as the significant size of our existing equity business that we really need to expand the sales side of the team in order to handle the relationships and make the best go of our OCIO initiative, as well as the equity initiative.

At well over $4 billion now in the institutional business, there aren’t awful lot of meetings and coverage required. We, as you know on a couple of different platforms and -- so, it’s to concentrate on both and sort of realign where we’re putting our resources to drive organic growth, going forward..

Understood, understood.

And thinking about some of the institutional push, as I look at third-party data for the equity income strategy in particular, seeing extremely strong performance relative to peers, so seeing top quartile rankings for the trailing one year performance rank and top decile performance rankings across the three, five and 10-year periods.

So, I guess in context, can you just discuss the build-out there, and then, I guess the progression that you’ve seen, particularly given the strength in the underlying performance?.

Yes. Thanks for mentioning it. We’re extraordinarily proud that we have been able to maintain a performance across most of our equity capabilities over a sustained period of time. We’ve focused very concertedly on the small cap equity capability when we went to the institutional marketplace.

That was a capacity constrained capability and a place we knew we could concentrate our efforts and get a following. You can only spend so much time in one place. And once we soft closed that capability as we previously announced, we’ve been turning our attention to SMid-cap, just a little higher up in the cap size, equity income as well as large cap.

Despite the good outperformance that you’re seeing in equity income and of course in the industry, it’s against the backdrop of many institutions, indexing larger cap equities. We think worm is going to turn. We have proven that you can add value in an active management. And value has been somewhat out of favor, as you also know.

And we’ve proven that we can continue delivering -- deliver value there. So, we are seeing an uptick in interest in equity income for precisely the reason you noticed. No doubt that on the data basis our outperformance is popping and getting the attention of consultants and other institutions.

We have a very aggressive marketing schedule, going forward, with regards to SMid-cap equity income and large cap equity income would be a particular area of focus, and we like the opportunities that we see there..

Great. And I guess, we’ll the keep the Q&A going a little bit longer..

I am happy to talk as long as you like..

Yes.

So, I guess aside from the OCIO initiative, could you discuss some of the other underlying flow trends from the quarter?.

Yes, sure. So, on the quarter, we had -- it should be mentioned that it was one of our stronger quarters in a while. In fact, I think it was our strongest net organic growth quarter since the first quarter of 2017. And if you look at the combined growth of 2017, it was the best organic growth year that we’ve had since 2014. So, it was very strong.

One thing that I’ve always warned our investors to pay attention to, is the fact that when we are dealing with the core ultrahigh net worth business which is good 80% of our revenue and AUM, people die, they have living expenses, unfortunately they get divorced and there are other things in their lives.

So, there is always a bit of a leak in the bucket. And we’ve been very pleased that we have been able to add assets on a net basis from our existing client base, not just from new clients, and that trend continued in the fourth quarter. It’s not uncommon to have from existing high net worth clients a negative outflow.

And really we’ve only had a couple of negative outflow quarters over the past several from that existing client base.

So, our clients are still making money and still entrusting more funds to our fiduciary care in part because of our great performance, but also because we have just absolutely terrific portfolio management teams on the client service side. That could change for the second quarter.

As you know, when there are good capital gain years, we have to pay taxes and that can present an outflow. And I am not projecting anything, because I don’t know what it might be, but that’s something to just be aware of as a potential very short-term drag compared to where we are.

With regards to new accounts and net increases, we had $170 million, approximately, in new organic assets added to the firm. That was led by our institutional business as well as the OCIO new business; couple other smaller things in there in addition to $the 50 million that you noted before.

So, this past quarter, it was a bit more weighted towards the institutional and OCIO side. That said there was close to $67 million of that 160 that was kind of net new cash flow into the firm. And that was both due to high net worth probably in that 40-plus-million of as well as to the institutional business. I’m sorry, it was mostly high net worth.

I apologize. It was actually a slight net outflow on the institutional side, when you look at existing clients due to rebalancing. So, new business weighted towards institutional and OCIO; existing business, while net positive was mostly high net worth. So in sum, when you put the two together, somewhat balanced..

And as you were making -- providing color right there, some theme that we have been seeing across the institutional space, maybe more on the private equity side is the consolidation of money managers.

And do you think that is a -- there is a similar trend going on with ultra-high net worth families and individuals?.

Good question. I think, they’ve also desired a bit more simplicity than institutional managers. And we have not been a firm that has tended to over-diversify and diversify away any returns.

Secondly, our own strong internal equity capability has meant that we have a strong following among our existing client base and in a sense that could represent already consolidation of manager to some extent. So, I wouldn’t necessarily call it a trend that affects us. I can’t speak to the broader industry facts.

It’s definitely true on the institutional side, no doubt. And that includes the trend towards passive, which I think as I said earlier is a trend that may turn in active management’s favor going forward..

Thank you very much for taking the questions, gentlemen..

You’re welcome. Just comment, since you brought up the intuitional business and when I talked about the mix of flows. We haven’t lost an institutional account in the last quarter. And while we have some nice new business, the client withdrawals from our existing institutional business exceeded net new inflows.

And that’s been a trend now going almost a couple of years, where we’ve got this high class problem of great outperformance. So, institutions have been rebalancing.

The positive side, of course is that has increased the pipeline opportunity for institutional new business has put us in very good stead with consultants and has led to great client retention as well as assets that are growing with the market.

So, a high-class problem, it’s a very slight drag each quarter as institutions rebalance, which is why we continue to look for meaningful sub-advisory relationships which would be pools of assets that being increased by the sponsoring institution.

Do we have any other questions?.

[Operator Instructions] And I’m showing no further questions. I would like to turn the call back over to Rick for closing remarks..

All right. Thank you very much. Thanks for joining us for an update on the fourth quarter as well as 2017. I’m extraordinarily proud of the team that we have built here.

We have a very consistent, professional group that delivers very high-quality service to our high net worth clients and an institutional team that is highly motivated and backed by very strong performance among our proprietary equity strategies.

With the new OCIO business and the continued progress in our growth over the past few years, I am quite excited about what we can achieve with this team going forward. And I greatly appreciate all of our investors’ support, advice to the firm and long-term view on what we are trying to achieve here at Silvercrest. Thank you very much..

Ladies and gentlemen, thank you for your participation in today’s conference. This does conclude the program. You may now disconnect. Everyone, have a great day..