Silvercrest Asset Management Group Inc. 2026 Q3 Earnings Call

Please go ahead. Good morning, and thanks for joining us for our third quarter 2026 results.

Silvercrest continued its strategic initiatives during the third quarter, and we continue to progress with the plan we have described over the past two years. Discretionary assets under management, which drives the firm revenue, decreased $939.2 million during the third quarter to $23.8 billion, primarily due to weaker markets. Of that, $753 million had a revenue effect. The third quarter's weaker markets followed unusually strong second quarter markets, with the result that capital growth has contributed $1.7 billion in new AUM this year to date. Net flows for the quarter were essentially flat at $58.3 million. Silvercrest added $182.2 million in organic new client accounts, which was the best quarter during 2026, and our net flows included an affirming $373 million follow-on investment in the firm's Global Value Equity strategy.

Offsetting outflows during the quarter were primarily attributable to seasonal high-net-worth client withdrawals for tax payments, as well as some institutional outflows. While total AUM stands at $36.2 billion, we have discussed in prior quarters that non-discretionary AUM are associated with a small portion of revenue, as most of non-discretionary AUM represents flat fee family office and related services. Therefore, changes in the level of non-discretionary AUM do not correlate to revenue change. We will adjust how the firm reports non-discretionary at the end of the first quarter of 2027, likely eliminating the non-discretionary AUM category altogether. This adjustment will substantially lower reported non-discretionary and total AUM on a one-time basis, but without revenue effect. We seek to provide investors with a clear picture of the discretionary AUM and the flows and economics that drive our business.

Year-to-date revenue increased 2% year-over-year, reflecting a recovery in average AUM levels weighed down by first quarter outflows. Our estimated annual run rate increased by a similar percentage year-over-year since September 30, 2025. We announced during the third quarter that we received our full MiFID license through the Central Bank of Ireland. We also opened our Dublin office to serve both high-net-worth and institutional clients in Europe. With the completion of our Atlanta and Dublin offices, our UCITS fund, the Australian Trust, and regulatory licensing, we do expect administrative and legal costs associated with these initiatives to decline and begin contributing revenue. Our institutional pipeline has continued to grow substantially and remains robust, particularly in our global and international equity strategies, which continue to deliver exceptional performance. Our pipeline quality has also improved with more possible AUM, as well as in number of opportunities.

We completed progress on building our global infrastructure and distribution for our current revenue push. We also have achieved important third-party ratings for our strategies and vehicles, and we continue to seek additional ratings with major global consultants to further open institutional distribution channels. As previously discussed, Silvercrest will continue to adjust our compensation ratio to match compelling opportunities to organically grow the business. Total compensation and benefits expense was $62.9 million, representing 66.3% of revenue for the nine months ended September 30, 2026. As we have consistently communicated, our earnings and Adjusted EBITDA reflect the deliberate cost of the most significant investment program in the firm's history, and we expect the compensation ratio to remain elevated as these investments mature. We have discussed with and reminded investors, shareholders approved an increase in the number of shares issuable under our Equity Incentive Plan.

Intellectual capital at Silvercrest is Silvercrest's most important resource, and we've made substantial investments in excellent talent. We intend to imminently make equity grants to the professionals who are building our business and executing our strategy. Attracting and motivating our professionals and working to align their long-term interests with those of our shareholders is fundamental to how we intend to grow the firm and compound value through this investment cycle and beyond. On October 28th, the company's board of directors declared a quarterly dividend of $0.21 per share of Class A common stock. The dividend will be paid on or about December 18, 2026, to stockholders of record as of the close of business on December 11th, 2026. Those are my preliminary remarks on the business. Scott Gerard, our CFO, will speak to the financials, and then we'll be available for questions.

Thank you. Great. Thanks, Rick.

Discretionary AUM as of September 30th of this year was $23.8 billion, and total AUM as of September 30th was $36.2 billion. Revenue for the quarter was $32.7 million, and reported consolidated net income for the quarter was $1.2 million. Looking at the quarter, revenue increased year-over-year by $1.4 million, primarily driven by an increase in the average annual management fee. Expenses for the quarter increased year-over-year by $0.8 million or 2.9%, primarily driven by increased general and administrative expenses, partially offset by a decrease in compensation and benefits expense.

Compensation and benefits expense for the quarter decreased year-over-year by $0.5 million or 2.1%, primarily due to a decrease in the accrual for bonuses and severance, partially offset by increases in salaries and benefits expenses, primarily as a result of merit-based increases in new hires, including new staff in Ireland, and increased equity-based compensation expense. General and administrative expenses increased by $1.3 million, or approximately 16%, primarily due to increases in professional fees, travel and entertainment expense, and portfolio and systems expense. Reported net income attributable to Silvercrest or the Class A shareholders for the quarter was approximately $0.6 million, or $0.08 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 $4.4 million or 13.5% 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%, was approximately $1.9 million for the quarter, or $0.16 per adjusted basic and diluted EPS. 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. To the extent diluted, we add unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking year-to-date, revenue increased year-over-year by $1.5 million, also driven by an increase in the average annual management fee. Year-to-date expenses increased year-over-year by $7.6 million, or 9.2%, driven by increased compensation and benefits expense and general and administrative expenses.

Year-to-date compensation benefits increased year-over-year by $3.5 million, or 5.9%, primarily due to increases in salaries and benefits, primarily as a result of both merit-based increases in newly hired staff, as well as an increase in the accrual for bonuses, equity-based compensation, and severance expense. Year-to-date general and administrative expenses increased by $4.1 million, or approximately 17.2%, primarily due to increase in professional fees, occupancy and related expenses, travel and entertainment expenses, and portfolio and systems expense. Year-to-date reported net income attributable to Silvercrest or to Class A shareholders was approximately $1.1 million, or $0.14 per basic and diluted Class A share. Year-to-date adjusted EBITDA was approximately $11.6 million, or 12.2% of revenue. Year-to-date adjusted net income was approximately $4.6 million, or $0.38 per adjusted basic and diluted EPS.

Looking at the balance sheet, total assets were approximately $146.3 million as of the end of September of this year, compared to $166.6 million as of the end of 2025. Cash and cash equivalents were approximately $27.8 million as of the end of September, compared to $44.1 million at the end of last year. Borrowings totaled approximately $9 million as of September 30th. Total Class A stockholders' equity was approximately $45.5 million at the end of September of this year. That concludes my remarks, and I'll now turn it over for Q&A.