Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group, Inc. Third Quarter 2025 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 that the 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, and 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 over to Rick Huff, Chairman and CEO of Silvercrest. Please go ahead.

Good morning and welcome. Joining us for the third quarter 2025 earnings call. Our discretionary assets under management, AUM, which primarily drives the firm's top-line revenue, increased $687 million during the third quarter, primarily due to the beneficial equity markets. Silvercrest added $46.4 million in organic new client accounts during the third quarter and has added $564 million in new client accounts through the third quarter of 2025. Despite overall negative flows during the quarter, closed accounts were immaterial, and new client account flows remain on pace to register one of the stronger levels of organic new client flows over the past several years. Silvercrest has added approximately $2 billion in organic new client accounts year over year, and we are primarily focused on organic new client acquisition and discretionary AUM as a result of our previously announced and ongoing heavy investments in growing the business. Discretionary AUM now stands at $24.3 billion, which is a 3% sequential quarterly increase and an increase of 8% year over year. Assuming supportive markets and continued business development, we hope discretionary AUM will exceed all-time highs in the coming quarters. Total AUM at the end of the third quarter did hit a new high for the firm at $37.6 billion. Of that total, reported non-discretionary AUM at quarter end comprised $13.3 billion. These non-discretionary AUM are associated with only 4% of total revenue, mostly comprising fixed fee reporting and family office services. These assets have more than doubled over the past few years, which artificially lowers the apparent average basis points we receive for advising on AUM. To better relay the average basis points of our asset management and advisory businesses, we expect in 2026 to adjust how the firm reports non-discretionary AUM. This will substantially lower that non-discretionary AUM on a one-time basis without any revenue effect, providing a clear picture of the business. Barring short-term market volatility, the increase in AUM bodes well for future revenue as Silvercrest primarily builds quarterly in advance. As previously announced and emphasized, Silvercrest has embarked on significant strategic investments to promote growth opportunities. As it takes time for those investments, primarily in intellectual capital and headcount, to bear fruit, our earnings and adjusted EBITDA are substantially lower than the steady state business and reflect our concerted effort to invest capital to support our long-term strategic priorities. Our strategic initiatives highlight silver cuts in both the institutional and wealth markets. The firm continues to invest in talent across the firm to drive new growth and successfully transition the business toward the next generation. Our new business pipeline remains robust, in particular with regards to our new global value equity strategy. Also, as previously discussed, Silvercrest will continue to adjust our interim compensation ratio to match important investments in the business as long as we have compelling opportunities to organically grow the firm and build our return on invested capital. With important initiatives for marketing in Europe, Oceania, and Asia, as well as in U.S.-based personnel, Our compensation ratio will remain elevated for the foreseeable future. We previously announced a new buyback program of $25 million in May 2025. As of the end of the third quarter of 2025, we have repurchased approximately $16 million worth of shares. Our strong balance sheet supports ongoing capital returns, our substantial dividend, as well as our growth initiatives. Silvercrest also previously received shareholder approval to increase the number of shares issuable under our equity incentive plan. We expect to begin rewarding shares to further motivate our professionals in the near future. We announced a dividend of 21 cents per share of Class A common stock, and that dividend will be paid around December 19th to stockholders of record. With that, I will turn things over to Scott Gerard to discuss our financials, and then we will take questions. Thank you.

Thank you, Rick. As disclosed in our earnings release, for the third quarter, discretionary AUM as of September 30th of this year was $24.3 billion, and total AUM as of the same date was $37.6 billion. Revenue for the quarter was $31.3 million. and reported consolidated net income for the quarter was $1.1 million. Looking at the third quarter, revenue for the quarter increased $0.9 million or 2.9% year-over-year. Expenses for the quarter increased year-over-year by $4 million or 15.4% primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation benefits expense for the quarter increased year over year by 3.1 million, or 16.8%, primarily due to increases in salaries and benefits expense, primarily as a result of both merit-based increases and new hires, and an increase in the accrual for bonuses, partially offset by a decrease in equity-based compensation. General and administrative expenses increased by 0.9 million, or approximately 11.9%, primarily due to increases in professional fees, occupancy and related expenses, and recruiting costs, partially offset by decreases in shareholder expenses and trade error expense. Reported net income attributable to Silvercrest or to Class A shareholders for the third quarter was approximately 0.6 million, or 7 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 and non-recurring items, was approximately 4.5 million, or 14.5% 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%, was approximately 2.4 million for the quarter, or 19 cents per adjusted basic and diluted earnings per share. 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 dilutive, we add unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking at year-to-date, September 30th of this year, revenue increased year-over-year by $1.7 million or 1.8%, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the nine months ended September 30th of this year increased year-over-year by $7.1 million or 9.4%, primarily driven by increased compensation expense and general and administrative expenses. Compensation expense for the nine months ended September 30th this year increased year-over-year by $4.6 million, or 8.5% primarily due to increases in salaries as a result of both new hires and merit-based increases, in addition to an increase in the accrual for bonuses, partially offset by a decrease in equity-based compensation expense. General and administrative expenses increased by $2.5 million through the nine months ended September 30th this year, or approximately 11.7%, primarily due to increase in professional fees, occupancy and related expenses, portfolio and systems expense, and travel and entertainment expenses, partially offset by a decrease in trade error expense. Reported net income attributable to Silvercrest or again, the Class A shareholders for the nine months ended this year was approximately 5 million or 56 cents per basic Class A share and 55 cents per diluted Class A share. Adjusted EBITDA was approximately 16.8 million or 18% through the end of September of this year. Adjusted net income was approximately 9.6 million for $0.77 and $0.74 per adjusted basic and diluted EPS for the nine months ended September 30th this year. Looking at the balance sheet, total assets were approximately $157.6 million as of September 30th of this year compared to $194.4 million as of the end of last year. Cash and cash equivalents were approximately $36.1 million as of September 30th, as compared to $68.6 million at December 31st of last year. There were no borrowings as of September 30th. Total Class A stockholders' equity was approximately $58.9 million in September 30th. And during the third quarter, we repurchased approximately $4.6 million worth of Class A shares. That concludes my remarks. I'll now turn the call over for Q&A.