Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silvercrest Asset Management Group Inc. Q4 and full year 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 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're 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 floor over to Rick Huff, Chairman and CEO of Silvercrest. Please go ahead.

Good morning. Thank you for joining us for our fourth quarter and year-end 2025 results. Silvercrest's discussionary assets under management, which primarily drives the firm's revenue, decreased 1.2% during the fourth quarter from $24.3 billion to $24 billion. For the year 2025, total discretionary AUM increased by 3% from $23.3 billion to $24 billion aided by supportive markets and organic net new client accounts. Silvercrest added $124.5 million in organic new client accounts during the fourth quarter, bringing our full year 2025 organic new client account flows to $688.3 million. For the full year, organic new client acquisition registered one of the stronger levels over the past several years, underscoring receptivity to our investment capabilities and momentum across our marketing efforts. Total AUM decreased 1.6% during the fourth quarter to $37 billion. It increased 2% year over year from $36.5 billion with no revenue effect. As discussed in prior quarters, Our 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. As previously announced, we will adjust how the firm reports non-discretionary AUM in a future quarter. This adjustment will substantially lower our non-discretionary AUM on a one-time basis without revenue effect. providing investors with a clear picture of the AUM and economics that drive our business. As we emphasized throughout 2025 and conveyed in 2024, Silvercrest has embarked on significant strategic investments to promote growth opportunities across multiple fronts. 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 long-term strategic priorities. We continue to execute on these priorities in the fourth quarter and across the full year. Our strategic initiatives highlight silver price in both the institutional and wealth markets, and we have made meaningful progress on several key fronts. Our new business pipeline remains particularly robust with regards to our global and international equity strategies bolstered by outstanding performance. The firm continues to generate strong interest from institutional consultants and allocators globally. Our recent ranking of number six in NASDAQ investments fourth quarter 2025 brand awareness rankings among consultants in the mid-sized firm peer universe reflects the growing recognition of Silvercrest institutional capabilities. We have reorganized our international business development effort and now have professionals in London and Australia. We are nearly complete with our creating an Australian investment trust and a usage vehicle in Europe. We expect regulatory approval to do business in Europe through our new Dublin office to be completed within the second quarter. The firm also continues to invest in talent across the organization to drive new growth and successfully transition the business toward the next generation, further strengthening our investment leadership bench. These investments in people are central to our long-term competitive positioning. 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 investment capital. With significant initiatives for marketing and distribution in Europe, Oceania, and Asia, as well as in U.S.-based personnel, our compensation ratio remains elevated during the fourth quarter and for the full year 2025. We expect the compensation ratio to remain elevated for the foreseeable future as these investments mature and begin to contribute to revenue growth. For the full year 2025, total compensation and benefits expense was $83.9 million, representing 67% of revenue, compared to $76.7 million, or 62% of revenue, for 2024. We previously announced a new share repurchase program of $25 million in May 2025. As of the end of 2025, we almost completed that program and repurchased approximately a total of 50.4 million worth of shares. Our strong balance sheet supports ongoing capital returns, our substantial dividend, as well as the growth initiatives. Silvercrest also previously received shareholder approval to increase the number of shares issuable under our equity incentive plan, and we expect to begin rewarding shares to further motivate our professionals during this growth phase. Those conclude my introductory remarks. We'll take questions later after Scott presents the financials. Thank you, Scott.

Go ahead. Thanks, Rick. So it's disclosed in our earnings release for the fourth quarter. Discretionary AUM as of the end of 2025 was $24 billion, and total AUM as of the same period was $37 billion. Revenue for the quarter was $32 million, and reported consolidated net loss for the quarter was $0.1 million. Looking further at the fourth quarter, expenses for the quarter increased year over year by 2.8 million or 9.5%, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation and benefits for the quarter increased year over year by 2.6 million or 12.1%, primarily due to increases in salaries and benefits expenses, primarily as a result of merit-based increases and new hires and an increase in the accrual for bonuses. General and administrative expenses increased by $5.2 million or approximately 2.4%, primarily due to increase in professional fees and adjustment to our bad debt reserve, partially offset by decreases in depreciation and amortization and portfolio and systems expense. Reported net loss attributable to Silvercrest or to Class A shareholders for the fourth quarter was approximately 0.1 million or a penny per basic and diluted Class A share. Adjusted EBITDA, which we define as EBITDA, without giving effect to equity-based compensation expense and non-core and non-recurring items, was approximately 2.9 million or 8.9% of revenue for the quarter. Adjusted net income was which we defined as net income without giving effect to non-core, non-recurring items, and income tax expense, assuming a corporate rate of 26%, was approximately $2.3 million for the quarter, or $0.19 and $0.18 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 dilutive, we had 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 increased year over year by 1.7 million or 1.3%, primarily driven by market appreciation. In discretionary AUM, partially offset by net client outflows. Expenses for the full year increased year-over-year by 10 million, or 9.4%, primarily driven by increased compensation expense and general and administrative expenses. Looking further at compensation expense, it increased year-over-year by 7.3 million, or 9.5%. primarily due to increases in salaries and benefits expense, and as a result of merit-based increases along with new hires. Furthermore, the accrual for bonuses increased, and these were partially offset by a decrease in equity-based compensation expense. General and administrative expenses increased by $2.7 million, or approximately 9.2%, primarily due to increases in in professional fees or bad debt reserve, travel and entertainment expense, and occupancy and related expenses, partially offset by decreases in depreciation and amortization expense and trade error expense. Reported net income attributable to Silvercrest or to Class A shareholders for the full year was approximately $4.9 million or $0.56 per basic and diluted Class A share. Adjusted EBITDA was approximately $19.6 million or 15.7% of revenue for the full year. Adjusted net income was approximately $11.8 million for the full year or $1.91 for adjusted basic and diluted EPS respectively. Looking at the balance sheet, total assets at the end of 2025 were approximately $166.6 million compared to $194.4 million as of the end of 2024. Cash and cash equivalents at the end of 2025 were 44.1 million compared to 68.6 million at the end of 2024. Borrowings totaled approximately 4 million as of the end of 2025. Total Class A stockholders' equity was approximately 50.3 million at the end of 2025. And during the fourth quarter of last year, we repurchased Class A shares totaling approximately $7 million. We'll now turn it over to Q&A. Thank you.