Silvercrest Asset Management Group Inc.

Good morning, and welcome to the Silvercrest Asset Management Group Inc. Q1 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please send your conference specialist for pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note, this 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 statements that are made. Risk factors are disclosed in our filings with the SEC under the caption Risk Factors. For all such forward-looking statements, we claim protection provided by the Litigation Reform Act of 1995. All forward-looking statements made in this call are as of the date hereof, and Silvercrest assumes no obligation to update them. And now I'd like to take the conference over to Rick Hoff, Chairman and CEO of Silvercrest. Please go ahead.

Thank you, and thanks for joining us for this conference call for the first quarter of 2026. Silvercrest entered its 25th year in business at the beginning of the second quarter with clear strategic momentum, even as our first quarter results reflected near-term headwinds as we have anticipated and communicated. Discretionary assets under management, which primarily drives the firm's revenue, decreased 3.7% to $23.1 billion at March 31, 2026, from $24 billion as of December 31, primarily attributable to net institutional outflows. Organic new client account flows into the firm were $81 million for the first quarter, primarily from high net worth investors. Year-over-year discretionary AUM grew nearly 2% from $22.7 billion as of the end of March last year. Year-over-year, total AUM grew 1.1% to $35.7 billion, up from $35.3 billion as of March 31, 2025. Non-discretionary AUM are associated with a very small portion of our overall revenue and can substantially change with little revenue effects. As we have previously announced, we will adjust how the firm reports non-discretionary AUM in the future quarter, which will substantially lower reported non-discretionary AUM on a one-time basis without any revenue effect, providing investors with a clearer picture of the AUM and economics that drive our business. As we conveyed in our annual report throughout 2025, Silvercrest has embarked on the most significant investment program in its history. to build a more enduring and globally capable firm for our next 25 years. We began these investments in earnest about a year and a half ago, and it takes time for those investments, primarily intellectual capital and headcount, to bear fruit. Our earnings and adjusted EBITDA continue to reflect the deliberate cost of this program. We continue to execute on our strategic priorities in the first quarter, and we are fully committed to its rationale and will continue to be transparent about the effect on our financial results. Our new business pipeline remains particularly robust with regards to the firm's global and international equity strategies, bolstered by exceptional investment performance across the board. The firm continues to generate strong interest from institutional consultants and allocators globally, and our primary institutional objective for 2026 is to convert that pipeline into consultant approvals and funded mandates. We have reorganized our international business development effort and now have professionals in London and Australia dedicated to the effort. Our Dublin office is on track to open later in 2026 following the expected Bank of Ireland regulatory approval, and which will allow us to proactively market our capabilities in Europe. We have created investment trusts in both Ireland and Australia, together materially expanding our distribution opportunity across Europe and Oceania. These milestones represent the culmination of a multi-year build that we expect to contribute meaningfully to positive flows in 2026 and beyond. Finally, we opened our Atlanta and Singapore offices during the first quarter of 2026 and are beginning to see business development as a result. The firm continues to invest in talent across the organization and to execute on next generation portfolio management transitions designed to protect our investment process and preserve our culture, as well as deepen the bench for the years ahead. These transitions are deliberate and central to our long-term competitive positioning as we approach our 25th anniversary in 2027. As previously discussed, Silvercrest will continue to adjust our compensation ratio to match compelling opportunities to organically grow the firm and build return on invested capital. With significant initiatives underway for marketing and distribution in Europe, Oceania and Asia, as well as in U.S.-based personnel, our compensation ratio remains elevated. Total compensation and benefits expense was $21.1 million, representing 67.2% of revenue for the three months ended March 31, 2026, compared to $18.9 million, or 60.2% of revenue for the same period of the prior year. We expect the compensation ratio to remain elevated as these investments mature and begin contributing to revenue growth. Our balance sheet continues to support our strategic growth initiatives and our ongoing commitment to capital returns to shareholders. On May 6, 2026, the company's board of directors declared a quarterly dividend of 21 cents per share of Class A common stock. The dividend will be paid on or about June 19 to stockholders of record as of the close of business on June 12. With that, I'll turn things over to Scott Gerard, our CFO, to discuss the financial results, and then we will take questions.

Scott, thank you. So, as disclosed in our earnings release for the first quarter, again, discretionary AUM as of March 31st, 2026, was $23.1 billion, and total AUM as of the same period was $35.7 billion. Revenue for the quarter was $31.4 million. and reported consolidated net income for the quarter was 0.5 million. Revenue basically remained flat for the quarter compared to the first quarter of 2025. Expenses for the quarter increased year-over-year by 3.6 million, or 13.5 percent, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation and benefits expense for the quarter increased year-over-year by 2.3 million, or 12%, primarily due to increases in salaries and benefits expense, primarily as a result of merit-based increases and new hires, including new staff in Ireland, and an increase in the accrual for bonuses. General and administrative expenses increased by 1.3 million, or approximately 17.3%, primarily due to increases in professional fees, occupancy, and travel and entertainment expenses. Reported net income attributable to Silvercrest or to Class A shareholders for the first quarter was approximately $0.2 million or $0.03 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, non-recurring items, was approximately $3.7 million or 11.8 percent of revenue for the quarter. Adjusted net income, which we define as net income without giving effect to non-core, non-recurring items, and income tax expense, assuming a corporate rate of 26 percent, was approximately 1.5 million for the quarter, or 13 cents and 12 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 dilutive, we had unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. On the balance sheet, total assets were approximately $133 million as of the end of March of this year, compared to $166 million as of the end of last year. Cash and cash equivalents were approximately 11.6 million as of March 31st of this year compared to 44.1 million at the end of last year. Borrowings totaled approximately 10 million as of the end of the first quarter. Total Class A stockholders' equity was approximately 46.9 million at the end of the first quarter. During the first quarter of this year, we repurchased Class A shares totaling approximately $1.9 million, which represented the completion of our previously announced $25 million stock repurchase plan. That concludes my remarks, and we'll go with the Q&A.