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.

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 consultants, with whom we were just 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 on these topics has changed.…

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. The increase in general and administrative expenses was primarily due to an increase in occupancy expense and this is because in 2012 we had a reversal of a lease abandonment liability for space that we reoccupied. So therefore this had the effect of reducing occupancy expense last year. Furthermore, this increase was primarily offset by a reduction in…

(Operator Instructions). We do have a question from Steven with Raymond James Associate. Please go ahead sir.

Hey guys, and by the way I hit star one a number of times and it just registered, so there might be some more people out there, just so you know.

Okay, thanks Steve.

Good, how are you’ll doing?

Well, thanks.

A couple of things for Scott. Scott, I think the AUM presentation, the role, is that done in the same manner as the S-1?

Correct.

Okay, can we look at this in a different way if you have those numbers? I think Moffett said you had three families that came in the quarter; how much did they account for?

This is Rick, Steve. Those three families which have rised to the level of our accounting and relationship accounted only for about $20 million in the quarter. When we look at a new relationship we measure it when its open and the month is opened. Additional flows for relationships account as existing flows in or out and they could have been substantial above that.

Okay, let me ask it a different way then. If we were to look at this as gross flows from new relationships, that would be the $20 million that you just sited.

Plus at least $62 million in new institutional accounts.

Okay, those were funded?

Yes.

Okay, and then what would be closed accounts if any?

There were no lost relationships, which is very important for our business. I think we talked about this quite a bit on the road show. As Moffett mentioned in his introductory remarks, this is a business where we are going after very high net worth individuals. It can be a very long courtship and quite lumpy in terms of quarter-to-quarter results. The business has grown substantially over time by attracting those assets, but then most importantly retaining them, so it’s more of an annuity once we’ve gained a client relationship. Our emphasis here has to be on superb client service if the business doesn’t work and maintaining that client relationship. So the fact we didn’t lose any relationships is very important. When you look at closed accounts, for the quarter there was only $1.4 million, which is hardly even worth mentioning, and accounts that were actually closed out, that was the amount of money that was left. That just means someone may have switched strategies or they harvested money out of an account before, actually closing it out. There may have been other net outflows as obviously you saw in our AUM numbers for things like taxes or other events, a natural close out or closed relationship, there’s nothing to speak of.

Okay, so the difference here is simply going to be client withdrawals from their accounts for normal reasons, including tax purposes and the like, Rick.

Precisely, and as we mentioned in the Q, the first and second quarters of the year, depending when cash is raised tend to be our heaviest outflows because of the tax season.

Okay, and then Richard if you could remind us, for modeling purposes what percentage of assets would be in fixed income?

Approximately 40%. It’s actually been decreasing slightly, but that’s a good example for modeling purposes. For those who may not be familiar, you may recall that we tend to see on a relationship across the board and therefore the marginal change in fee revenue from people switching from fixed income to equity matters, but people tend to have long-term asset allocations. We are focused on the fee basis for a relationship and the quality of the relationship and you don’t find huge differentials there over time.

Okay and then one more if I may. You recently hired a gentlemen, started up an office in Los Angeles. Anything new out on the West Cost?

I will mention that we are building out that office still, it is very new. I’m just going to anticipate a question, which is about M&A and mentioned that the firm is in discussions with various parties all the time and looking to build our various offices around the country and that remains a potential there as it does elsewhere and we have a good new business pipeline, including in Los Angeles.

Okay. All right, thanks guys.

Thank you Steve.

Thanks Steve.

We have another question from Michael with Sandler O'Neill. Please go ahead sir.

Guys, good morning. So first if I look at the shorter-term returns across your proprietary equity strategies, there is some underperformance relative to benchmark. So just wondering to what extent, if at all, that’s had any impact on your efforts to increasingly penetrate the institutional channel.

I would say that it hasn’t affected us at all. If anything the pipeline for institutional business has picked up. As Moffett mentioned, it remains robust and we feel very encouraged about the institutional attention we are getting. I also think there’s been a closing of any under performance over the past several months.

Its also the case if I may, the institutions are quite interested in making sure that you appear to your stated of discipline, even it happens to be slightly out of sync with the market, and we’ve done that for many years and they like that.

Got it, that’s helpful. Okay and then to come back to the M&A discussion, can you talk about what you’re seeing in terms of opportunities, competition and maybe pricing trends out there and how the market backdrop has maybe impacted potential discussions with firms if at all.

Sure Moffett, do you want me to take that one to start?

Yes, why not you do that.

Okay. We are seeing I think a little bit more interest in firms that would be willing to sell. The up-tick in the market of course means that they can potentially get us a better price for their business, even if it’s not based on an increase in multiples. Just due to their own revenue and profitability with a better market, it looks like a better time for some firms to talk. So I think there’s a little bit more action. The second part of your question has to do with competition. At the size firms we are typically speaking with and that we have started conversations with in a casual manner, I haven’t yet seen a lot of buyers at the table, maybe that were, our particular mix of business either appeals to those business in such a way that other intuitions aren’t as favorable as Silvercrest or that they are they just small enough that our larger aggregators, which we don’t consider ourselves aren’t in the market place for those businesses. We are really new back into the discussion, so we are just getting into it. So I wouldn’t want to comment further beyond that generalization.

Okay, that’s helpful. And then just maybe a final one for Scott. How should we be thinking about potential margin expansion over time? Is it mostly a function of continuing to ramp-up the intuitional business or are there opportunities to may be extract some further economies of scale as your legacy high net worth business continues to grow.

Yes, basically as we spoke about on the road show, to the extent that intuitional business does comprise a larger portion of our AUM, I think it will be an opportunity there to expand our margins as well and just as a discipline overall the firm is with 38 partners, we are constantly cognizant of effective cost management in running the business. We’ve all get a lot invested in the business. But you are correct; the institutional AUM mix represents an opportunity for margin expansion.

This is Rick. With regards to the second half of your clients, your question with regards to legacy clients, we have contracts with set [repeats] for the relationships. We tried to remain as unbiased as possible in dealing with our clients. Its one of our key selling points in terms of the quality of the service and transparency of our business to our clients. And as I had mentioned, the long term allocation serve our clients best and so you’re likely to see as Scott said, the major expansion more from the institutional side.

Okay, got it. Thanks for taking my questions.

You’re very welcome.

Thank you.

Thank you.

We have another question from Mr. Steven at Raymond James. Please go ahead sir.

Yes, I like being Mr. Steven. Just a quick one on the institutional front that Richard’s question reminds me off – Mike’s question, excuse me. The (inaudible), I think there was still some of the mandate that had not been funded. Has there been any movement there?

There has not. Okay, that’s all I have, thanks.

Thank you.

(Operator Instructions). There are no more callers in queue.

Okay, well thank you very much for attending our first investor conference call. Moffett, do you have any concluding remarks.

We look forward to reporting to you each quarter and thank you very much for your interest today.

Ladies and gentlemen, this does conclude the conference. You may all disconnect.