Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group Inc. Q4 and Full Year 2024 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. Before we begin, let me remind you that during today's call, certain statements made regarding our future performance are forward-looking statements. They are based on current expectations and projections, which are subject to a number of risks and uncertainties. Many factors could cause actual results to differ materially from the statements that are made. Those factors are disclosed in our filings with the SEC under the caption risk factors. For all such forward-looking statements, we claim the protections provided by the Litigation Reform Act of 1995. All forward-looking statements made on this call are made as of the date hereof, and Silvercrest assumes no obligation to update them. I would now like to turn the conference call over to Rick Huff, Chairman and CEO of Silvercrest. Please go ahead.

Thank you, and good morning. Welcome to our first quarter 2025 earnings call. I will get to my business update for the quarter, but I wanted to highlight the nature of our high net worth and asset management firm strategically, given the amount of initiatives that we have underway that I referenced in my business update. Silvercrest is an independent wealth management firm, and we combine top quality asset management expertise with high levels of customer service. Our customer-facing investment professionals who provide that customized advice and service to our well over 600 ultra-high net worth individuals and institutions is strong, and we have consistently enjoyed annual customer retention rates of over 98 percent. Most of our revenue comes from recurring management fees, which we'll hear more about today. We've built our investment capabilities to serve the complex needs of our clients who require a sophisticated solution across all public markets, private markets, private credit, as well as bespoke solutions for significant individual holdings. These capabilities support Silvercrest's leading market position serving wealthy families and select institutions in a manner that generates industry-leading client retention and stable revenues. We've accomplished this with average assets under management of over $50 million per relationship, and that helps generate the profitability and cash flows that we enjoy as a firm and which we have been investing over the past year in future growth of the business. Importantly, the depth of our high-quality asset management and intellectual capital is proof of thesis to the wealthiest families globally, and we'll talk more about our ambitions as the firm is growing. We concluded 2024 with strong net organic flows due to new strategic investments made over the past year that are already bearing fruit. The firm garnered $1.4 billion in the fourth quarter and $1.5 billion during 2024 in new client assets under management inflows, the best year for new organic client inflows since at least 2015. The fourth quarter was primarily bolstered by winning a successful seed investment in our global value equity strategy of $1.3 billion, which is $2 billion Australian, in partnership with CBUS, one of Australia's largest superannuation funds. The increases during the quarter bode well for future revenue, and we remain highly optimistic about securing more significant organic flows over the course of 2025 to increase our return on invested capital. Total AUM as of year-end 2024 reached $36.5 billion as of December 31st, up 9.6 percent from $33.3 billion at year-end 2023. Discretionary AUM, which drives our revenue, rose 6.4% to $23.3 billion from $21.9 billion. Overall, total asset flows and market increases were net positive for the firm and will drive an increase in future revenue. Revenue for the year increased 5.3% to $123.7 million from $117.4 million. with Q4 revenue up 12% over Q4 2023 to $32 million from $28.5 million. Strategically, in addition to building the firm's new global value equity strategy from scratch, we have hired business development and market leads in Atlanta and Singapore. We have our full MAS license for doing business in Singapore, and we'll be opening an office. With significant European assets and growth opportunities, we also will be pursuing more initiatives that will highlight Silvercrest in both the institutional and wealth markets. The firm also has invested in talent across the firm to drive new growth and successfully transition the business toward the next generation. Silvercrest developed new and stronger institutional consulting relationships during 2024 with new investment opportunities to develop our strategies. Our pipeline remains robust. As a result, we are optimistic about securing significant new organic flows, importantly, The firm's pipeline does not yet include mandates for our global value equity strategy, which is a high capacity for significant new assets. We have worked hard over the past year to build the infrastructure team and strategy while undertaking business development. As with our third quarter call, we envision more positive AUM flows and resulting revenue increases. As I've discussed throughout the past year, Silvercrest has never had more business opportunities. Those initiatives are beginning to bear results. We have made and will continue to make investments to drive future growth. We expect to make more hires to complement our outstanding professional team to drive that growth. And Silvercrest continues to accrue a higher interim percentage of revenue for compensation for this purpose. And as mentioned, we will continue to adjust compensation accruals to match these important investments in the business. We will keep you informed of our plans and the progress of these investments. Look forward to taking questions and talking about this this morning. And I'll turn it over to our CFO, Scott Gerrard, for the financials, and then we'll get to that. Thank you. Scott Gerrard, CFO, Financials & Thank you, Rick.

Thanks, Rick. As disclosed in our earnings release for the fourth quarter, discretionary AUM as of December 31st, 2024, was $23.3 billion, and total AUM as of the end of 2024 was $36.5 billion. Revenue for the fourth quarter was $32 million, and reported consolidated net income for the quarter was 2.7 million. Revenue for the quarter increased year-over-year by 3.4 million, or 12 percent, primarily driven by increased discretionary AUM resulting from net client inflows partially offset by market depreciation. Expenses for the quarter increased year-over-year by 0.5 million, or 1.7 percent, primarily driven by increased general and administrative expenses, partially offset by a decreased compensation and benefits expense. Compensation and benefits expense for the quarter decreased year-over-year by 0.8 million, or 3.4 percent, primarily due to a decrease in the accrual for bonuses. Based on the increased recurring cash compensation ratio over the past few years, due in part to the investment in the next generation of portfolio managers and other associates, We increased the amount of the interim variable compensation accrual during 2024 to narrow the adjustment in the fourth quarter. We intend to do the same accrual management in 2025. Also, compensation and benefits expense for the quarter increased year over year as a result of increases in salaries due to merit-based increases and newly hired staff. General and administrative expenses increased by 1.3 million or approximately 18.5 percent, primarily due to increases in professional fees and portfolio and systems expense. Reported net income attributable to Silvercrest or the Class A shareholders for the fourth quarter was approximately 1.6 million or 17 cents per basic and diluted Class A share. Adjusted EBITDA, which we defined as EBITDA without giving effect to equity-based compensation expense and non-core, non-recurring items, was approximately 5.1 million or 15.9 percent of revenue for the quarter. Adjusted net income, which we defined as net income without giving effect to non-core and non-recurring items, and income tax expense assuming a corporate rate of 26 percent was approximately 2.9 million for the quarter, or 21 cents and 20 cents per adjusted basic and diluted EPS, respectively. Adjusted EPS 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 basic adjusted EPS. And to the extent diluted, we add unrestricted-unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking at the full year, revenue ended the full year 2024 as an increase year-over-year by 6.2 million, or 5.3 percent, primarily driven by increased discretionary AUM, resulting from market appreciation partially offset by net client outflows. Expenses increased year-over-year by $7.5 million, or 7.5%, primarily driven by increased compensation and benefits expense, and to a lesser extent, increased G&A expenses. Compensation and benefits increased year-over-year by $4 million, or 5.6%, primarily due to increases in equity-based compensation, salaries due to merit-based increases in newly hired staff, and the accrual for bonuses. G&A expenses increased by $3.4 million, or approximately 13.1 percent, primarily due to increases in professional fees, portfolio and systems expense, occupancy and related costs, and trade error expense. Reported net income attributable to Silvercrest for 2024 was $9.5 million, or $1 per basic and diluted Class A share. Adjusted EBITDA was approximately $26.1 million, or 21.1 percent of revenue for all of 2024. And adjusted net income was approximately $15.8 million for 2024, or $1.15 and $1.10 per adjusted basic and diluted EPS, respectively. Quickly looking at the balance sheet, total assets were approximately $194.4 million as of the end of 2024, compared to $199.6 million as of the end of 2023. Cash and cash equivalents were approximately $68.6 million as of the end of 2024, compared to $70.3 million as of the end of 2023. There were no borrowings as of the end of 2024, and total Class A stockholders' equity was approximately $80.7 million at the end of last year. That concludes my remarks. I'll turn it over to Rick for Q&A.