Q3 2023 Silvercrest Asset Management Group Inc Earnings Call
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Speaker 1: Good morning and welcome to the SilverCrest Asset Management Group, Inc. Q3 2023 Earnings Conference call. All participants will be on listen only mode.
Good morning, and welcome to the Silvercrest Asset Management Group, Inc. Q3, 2023 earnings Conference call all participants will be in listen only mode.
Speaker 1: Should you need assistance, please send to a conference specialist by pressing the star key followed by zero.
Should you need assistance. Please signal conference specialist spray Christmas Darcie, followed by zero.
Speaker 1: After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.
After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded.
Speaker 1: Before we begin, let me remind you that during today's call, certain statements made regarding our future performance are forward-looking statements.
Before we begin let me remind you that during today's call certain statements made regarding our future performance are forward looking statements there'd.
Speaker 1: 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.
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.
Speaker 1: Those factors are disclosed in the filings with the SEC under the caption Risk Factors.
Those factors are disclosed in the filings with the SEC under the caption risk factors.
Speaker 1: For all such forward-looking statements, we claim the protection provided by the Litigation Reform Act of 1995.
All such forward looking statements we claim the protection provided by the litigation Reform Act of 1995.
Speaker 1: All forward-looking statements made on this call are made as of the date thereof, and Silvercrest assumes no obligation to update
All forward looking statements made on this call are made as of the date hereof and Silvercrest assumes no obligation to update them.
Speaker 1: I would now like to turn the conference over to Rick Huff, Chairman and CEO of SilverQuest. Please go ahead.
Now I'd like to turn the conference or to Rick Hough, Chairman and CEO of Silvercrest. Please go ahead.
Speaker 2: Good morning, thanks for joining us for this third quarter 2023 results of Silvercrest.
Good morning, and thanks for joining us for this third quarter 2023 results of Silvercrest.
Speaker 2: The uncertain and more volatile markets during this past quarter had an outsized effect on our assets and the management.
The uncertain and more volatile markets. During this past quarter had an outsized effect on our assets under management.
Speaker 2: with Silvercrests, including the quarter with the total AUM of 31.2 billion, and discretionary AUM of 20.5 billion. The discretionary AUM, which primarily drives a revenue, decreased by a billion dollars from the second quarter, and discretionary AUM has increased by 1.1 billion, or 5.7 percent year over year. since the third quarter.
With silvercrest, concluding the quarter with a total of $31 2 billion in discretionary AUM of 25 billion.
Discretionary in your language, primarily drives our revenue decreased by $1 billion from the second quarter and discretionary AUM has increased by $1 1 billion or five 7% year over year.
Since the third quarter of 2022.
Speaker 2: The firm's total AUM is increased by 3.8 billion or 13.9% year over year from 27.4 billion to 31.2 billion.
The firm's total AUM has increased by $3 8 billion or 13, 9% year over year from $27 4 billion to $31 2 billion revenue increased two 3% year over year for the third quarter of 2023 compared to the same period in 2022, and our revenue decreased six point to pursue.
Speaker 2: Revenue increased 2.3% year over year for the third quarter of 2023 compared to the same period in 2022 and our revenue decreased 6.2% for the nine months ended September 30, 2023.
For the nine months ended September 32023, most business metrics remain down on a year over year and year to date basis higher expenses during the third quarter. This year negatively impacted our adjusted EBITDA and the adjusted EBITDA margin.
Speaker 2: Most business metrics remain down on a year over a year and year-to-date basis. Higher expenses during the third quarter this year negatively impacted our adjusted EBITDA in the adjusted EBITDA margin.
Speaker 2: And the year-to-date decline in revenue affected the adjusted ebit, the adjusted ebit, the margin, and are adjusted to limited earnings per share.
Year to date decline in revenue affected adjusted EBITDA, the adjusted EBITDA margin and our adjusted diluted earnings per share, but silvercrest adjusted EBITDA margin of 26, 9% and 27, 3% for the three and nine months ended September 30.
Speaker 2: Silvercrest suggested EBITDA margin of 26.9% and 27.3% for the three and nine months ended September 30.
Speaker 2: We may be healthy for the company. Silvercress pipeline of new business opportunities remain solid that we weaken since the second quarter. This is the result of slower decision making, not lost opportunities for the firm. We attribute this to a changing and uncertain business environment, higher interest rates and geopolitical concerns.
It means healthy for the company Silvercrest pipeline of new business opportunities remains solid, but we have weakened since the second quarter. This is the result of slower decision, making not lost opportunities for the firm we attribute this to a changing and uncertain business environment higher interest rates and geopolitical concerns we're focused on these new opportunities.
Speaker 2: We're focused on these new opportunities as well as investments to drive future growth in the business, including value added higher.
It is as well as investments to drive future growth in the business, including value added hires on October 31st the company's board of directors declared a quarterly dividend of <unk> 19 per share of class a common stock and that dividend will be paid on or about December 15th 2023 that I'll hand, it over to Scott Gerard to go through our financials and then we will.
Speaker 2: On October 31st, the company's board of directors declared a quarterly dividend of 19 cents per share of Class B common stock, and that dividend will be paid on our about December 15th, 2023. Then I'll hand it over to Scott Gerard to go draw our financials, and then we will pay questions. Thanks. Great, thanks for it.
Take questions. Thanks, great. Thanks, Rick.
Speaker 2: As disclosed in our earnings release for the third quarter, discretionary AUM as of September 30th of this year was $20.5 billion, and total AUM as of the same date was $31.2 billion. Revenue for the quarter was $29.7 million, and reported consolidated net income for the quarter was $5.4 million.
Disclosed in our earnings release for the third quarter discretionary AUM as of September 30. This year was 20.5 billion and total au am as at the same date was $31 2 billion revenue for the quarter was $29 7 million and reported consolidated net income.
For the quarter was $5 4 million.
Speaker 2: Looking further at the quarter, again, revenue of 29.7 million represented approximately a 2% increase from revenue approximately 29 million for the same period last year. This increase was driven by an increase in the average annual management fee based on the mix of discretionary and non-discussionary assets.
Looking further at the quarter again revenue of 29.7 billion represented approximately a 2% increase from revenue of approximately 29 million for the same period last year. This increase was driven by an increase in the average annual management fee based on the mix of discretionary and non discretion.
Larry assets.
Speaker 2: Expenses for the third quarter were 23.2 million, representing approximately a 6% increase from expenses of 21.9 million for the same period last year. This increase was primarily attributable to an increase in GNA expenses of 0.8 million, and an increase in compensation and benefits expense of 0.4 million.
Expenses for the third quarter were $23 2 million, representing approximately a 6% increase from expenses of $21 9 million for the same period last year.
The increase was primarily attributable to an increase in G&A expenses of <unk> 8 million and an increase in compensation and benefits expense of $44 million.
Speaker 2: Looking further, common benefits expense. It increased approximately 3% to 16.7 million from the third quarter from 16.3 million for the same period last year.
Looking further comp and benefits expense.
<unk> increased approximately 3% to $16 7 million for the third quarter from 16.3 million for the same period last year. The increase was primarily attributable to an increase in salaries and benefits appoint 3 million primarily as a result of merit based increases and newly hired staff.
Speaker 2: The increase is primarily attributable to an increase in salaries and benefits of $0.3 million. Primarily as a result of merit-based increases and new higher staff.
And an increase in equity based compensation and a point 1 billion due to the granting of additional R. S years.
Speaker 2: an increase in equity-based compensation of .1 million due to the granting of additional RSEs.
General and administrative expenses increased by <unk> 8 million to six and a half million for the third quarter from $5 7 million for the same period last year. This was primarily attributable to an adjustment to the fair value of contingent consideration related to the Cortina acquisition of negative point 3 million recall.
Speaker 2: General and administrative expenses increased by $0.8 million to $6.5 million for the third quarter, from $5.7 million for the same period last year. This was primarily attributable to an adjustment to the fair value of contingent consideration related to the Cortina acquisition of negative $0.3 million recorded during the third quarter of 2022, in addition to increases in portfolio and systems expense.
During the third quarter of 2022 in addition to increases in portfolio and systems expense travel and entertainment expense occupancy marketing expense as well and these were partially offset by lower professional fees.
Speaker 2: Travel and entertainment expense, occupancy, marketing expense as well. And these were partially offset by lower professional.
Speaker 2: Reporter consolidated net income was 5.4 million per quarter, this compared to 5.6 million in the same period last year.
Reported consolidated net income was $5 4 million for the quarter as compared to $5 6 million in the same period last year.
Speaker 2: reported net income attributable to silver crusts or to class A shareholders. For the third quarter of this year was approximately 3.2 million or 34 cents per basic and diluted class A share.
Reported net income attributable to silvercrest or to class a shareholders for the third quarter of this year was approximately $3 2 million or <unk> 34 per basic and diluted class a share.
Speaker 2: Adjusted EBITDA, which we defined as EBITDA without giving effect to equity-based compensation expense and non-core and non-recurring items was approximately 8 million or 26.9% of revenue for the quarter compared to 8.2 million or 28.1% of revenue for the same period in the prior year.
Adjusted EBITDA, which we define as EBITDA without giving effect to equity based compensation expense and noncore and nonrecurring items was approximately $8 million or 26, 9% of revenue for the quarter compared to $8 2 million or 28, 1% of revenue for the same period in the prior year.
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Speaker 2: adjusted net income which we defined as net income without giving effect to non-core and non-recurring items.
Adjusted net income, which we define as net income without giving effect to noncore and nonrecurring items and income tax expense, assuming a blended corporate rate of 26% was approximately $5 1 billion for the quarter or <unk> 37, and 36 cents per adjusted basic and diluted.
Speaker 2: and income tax expenses, assuming a blended corporate rate of 26% was approximately 5.1 million for a quarter, or 37 cents and 36 cents per adjusted basic and diluted EPS respectively.
P S respectively.
Speaker 2: Adjusted EPS is equal to adjusted net income, divided by the actual class A and class B shares outstanding as the end of the reporting period for adjusted basic EPS. And 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. And to the extent diluted we add unvested restricted stock options to compute diluted adjusted EPS.
Adjusted EPS is equal to adjusted net income.
And by the actual class a and class B shares outstanding as of the end of the reporting period for adjusted basic EPS and to the extent dilutive, we add unvested restricted stock units and nonqualified stock options to the total shares outstanding to compute diluted adjusted EPS.
Yes.
Looking at the nine months of this year revenue was approximately $88 9 million and this was approximately a 6% decrease from revenue of approximately $94 7 million for the same period last year.
Speaker 2: of this year, revenue was approximately $80.9 million, and this was approximately a 6% decrease from revenue of approximately $94.7 million for the same period last year. This decrease was driven by a decrease in the average annual management fee based on the mix of discretionary and non-scrassionary assets. Also, you know, market is...
This decrease was driven by a decrease in the average annual management fee based on the mix of discretionary and non discretionary assets.
Also market impacts as well.
Expenses for the nine months ended September 30 of this year were $69 1 million, representing approximately a 15% increase from expenses of $60 3 million for the same period last year.
Speaker 2: expenses for nine months ended September 30th of this year were 69.1 million, representing approximately 15% increase from expensive 60.3 million per cent period last year.
Speaker 2: This increase was attributable to an increase in DNA expenses of 11.7 million, partially offset by a decrease in compensation and benefits expense of 2.9 million. Looking further at compensation.
This increase was attributable to an increase in G&A expenses of 11 7 million, partially offset by a decrease in compensation and benefits expense of $2 9 million.
Looking further at compensation and benefits expense represented approximately a 6% decrease to $50 million for the nine months ended September 30 of this year from 52.9 million for the same period last year. The decrease was primarily attributable to a decrease in the accrual for bonuses.
Speaker 2: represented approximately a 6% decrease to 50 million for the nine months and in September 30 of this year, from 52.9 million for the same period last year. The decrease was primarily attributable to a decrease in your cruel for bonuses of 4.3 million, partially offset by an increase in salary and benefits expense of 1.1 million, and an increase in equity-based compensation expense of 0.3 million.
A $4 3 million, partially offset by an increase in salary and benefits expense of $1 1 million and an increase in equity based compensation expenses of 23 billion.
General and administrative expenses increased by 11 point 70 million to $19 1 billion for year to date September 30 this year.
Speaker 2: General and administrative expenses increased by $11.7 million to $19.1 million per year to date September 30th this year, from $7.4 million for the same period last year. This was primarily attributable to an adjustment to the fair value of contingent considerability.
From $7 4 million for the same period last year.
This was primarily attributable to an adjustment to the fair value of contingent consider really.
Speaker 2: consideration related to Cortina of 10.9 million and that was a negative 10.9 million so a reduction to expense That was recorded during the nine months end of September 30th of 2022
Consideration related to Cortina $10 9 million and that was a negative 10.9 billion. So a reduction to expense that was recorded during the nine months ended September 32022.
Speaker 2: increases in portfolio and systems expense, professional fees, occupancy, marketing and depreciation and amortization expense, partially offset by a decrease in sub-advisory and referral.
Increases in portfolio and systems expense professional fees occupancy marketing and depreciation and amortization expense, partially offset by a decrease in sub advisory and referral fees reported consolidated net income was $15 8 million for year to date September 30 of this year.
Speaker 2: Reported consolidated net income was $15.8 million for year-to-date September 30th this year, compared to $27.5 million in the same period last year. Reported net income attributable to the Class A shareholders for year-to-date September 30th of this year was approximately $9.5 million, or $1.01 and $1.00 per basic and diluted Class A share, respectively.
<unk> compared to $27 5 million in the same period last year reported net income attributable to class a shareholders for year to date September 30 of this year was approximately $9 5 million or dollar one and the dollar per basic and diluted class a share respectively.
Speaker 2: Adjusted EBITDA was approximately 24.3 million or 27.3% of revenue for a year to date, September 30th this year compared to 27.6 million or 29.1% of revenue for the same period last year.
Adjusted EBITDA was approximately $24 3 million or 27, 3% of revenue for year to date September 30 of this year compared to $27 6 million or 29, 1% of revenue for the same period last year.
Speaker 2: adjusted net income was approximately 15.1 million per year to date this year or $1.08 and $1.05 per adjusted basic and diluted EPS respectively.
Adjusted net income was approximately $15 1 million for year to date. This year were $1 eight and $1 five per adjusted basic and diluted EPS, respectively.
Speaker 2: Looking at the balance sheet, total assets as of September 30th of this year were 191.3 million compared to 212.7 million as of the end of last year. Caching cash equivalents were approximately 50.9 million as of September 30th of this year compared to 77.4 million at the end of 2022. Total borrowings as of September 30th of this year were 3.6 million. The end of last year were 3.6 million.
Looking at the balance sheet total assets as of September 30 of this year were $191 3 million compared to $212 7 billion as at the end of last year.
Cash and cash equivalents were approximately $58 9 million as of September 30 of this year compared to $77 4 million at the end of 2022 total borrowings as of September 30th of this year were $3 6 million.
Speaker 2: Total Class A stockholders' equity was approximately $83.6 million as of September 30th this year.
Total class a stockholders equity was approximately $83 6 million as of September 30 of this year.
Speaker 3: That concludes my remarks, so I'll turn it over to Rick for Q&A. Great, thanks Scott. Look forward to keeping questions at this time. We will now begin the...
That concludes my remarks, I'll turn it over to Rick for Q&A.
Thanks, Scott look forward to taking questions at this time.
We will now begin the question and answer session.
To ask a question you May Press Star then one you touched on something.
Speaker 1: If using a speaker phone, please pick up your hands and be sure it doesn't keep. To withdraw your question, please press start and two.
Excuse me speaker phone, please pick up your hands before Keith.
So a strong a question. Please press star then two.
At this time, we will pause momentarily to assemble our roster.
Speaker 1: Our first question will come from Sandy Mehta with Evaluate Research. You may now go ahead.
Our first question will come from Sandy Mehta with evaluate research.
You May now go ahead.
Speaker 4: Yes, good morning. Rick, could you talk a little bit more about the pipeline? You have said in your comments that they remain solid, but there's been some slowness.
Yes, good morning, Rick could you talk a little bit more about the pipeline you have said in your comments that they remained solid but theres been some slowness.
Speaker 4: in people taking action. And are you seeing that from institutional investors or is it more of the consultants?
In people, taking action and are you seeing that from institutional investors or is it more of a consultative and now that the fed yesterday has signaled that they may be at a pause do you think that things will you know people would be more decisions going forward. Thank you.
Speaker 4: And now that the Fed yesterday has signaled that, you know, they may be at a pause, do you think that things will, you know, people will be taking more decisions going forward? Thank you. Right. Yeah, you're welcome.
Yep, you're welcome and in fact I'm just on that note when I when I mentioned in my introductory comments that with.
Speaker 2: Just on that note, when I mentioned in my introductory comments that we're just seeing a pretty uncertain business environment and sort of.
We're just seeing a pretty uncertain business environment, and it's sort of just very slow decision, making it's one of the few times that if any in the past 10 years I've ever commented on on the larger.
Speaker 2: It's one of the few times, if any, in the past 10 years I've ever commented on the larger.
Speaker 2: environment. We've done really well in this firm through a variety of conditions.
Environment.
We've done really well in this from June through a variety of conditions.
Speaker 2: And one of the most measurable things at our company is the institutional pipeline. So I'm mostly, to answer your question, characterizing the institutional business. But, you know, you feel a lot of uncertainness and probably slower decision-making on the HynetWorth side. It's just a little harder to measure. And the timelines for those mandates, it just looks very different from the institutional business. So I know it for sure for the institutional business. And.
And one of the most measurable things at our company as the institutional pipeline, so I'm mostly.
To answer your question characterizing the institutional business.
But you know you feel a lot of uncertainty and probably solar decision, making on the high net worth side, just a little harder to measure and the timelines for those mandates.
It looks very different from the institutional business. So I know it for sure for the institutional business and.
Speaker 2: Basically it's driven in part by clients who have withdrawn searches or are just waiting and seeing, but also probably some consultants. All things being equal, I'm sure consultants would rather have the opportunity to move things along and drive the process. So perhaps that means it's a little bit more institutional client driven.
Basically it's driven in part by clients, who have withdrawn searches or just waiting and seeing but I'll also probably some consultants and all things being equal I'm sure consultants would rather have the opportunity to move things, along and and drive and drive the process. So perhaps that means it's a little bit more institutional.
Client driven.
The pipeline was $1 3 billion for different institutional parts of the business that includes our U S value equity capability, our U S growth capability as well as the.
Speaker 2: The pipeline was $1.3 billion for different institutional parts of the business, that includes
Speaker 2: our U.S. value equity capability, our U.S. growth capability, as well as the international and OCIO capabilities. And at the end of the second quarter, I reported $1.3 billion. And just to remind everyone, those were opportunities where we were invited, invite-only RFP processes, or we were a finalist or semifinalist.
International and Oc I O our capabilities and at the end of the second quarter I reported $1 3 billion.
And just to remind everyone. Those were opportunities where we were invited invite only RFP processes or we were a finalist or semi finalist.
Speaker 2: with kind of a six-month actionable period of time. And I had actually lowered the pipeline at that time because things were taking longer than six months. It was one of the few times, if ever, that we just took opportunities out of the pipeline because it's not how we measure it.
With kind of a six month actionable a period of time and I had actually lowered the pipeline at that time, because things were taking longer than six months. It was one of the few times if ever.
That we just took opportunities out of the pipeline because it's not how we measure it and that has occurred again for this quarter. So these are.
Speaker 2: And that has occurred again for this quarter. So these are situations where we're still in the running, where there may be an opportunity, but it's moving past the six month window that we're comfortable measuring. And I want to make sure when I talk to our investors that we're making an apples to apples comparison from one period or a year to another.
These are situations, where we're still in the running now where there may be an opportunity, but it's moving past the six month window that we're comfortable measuring and I want to make sure when I talk to our investors that we're making an apples to apples comparison from one period or year two.
Sure.
Speaker 2: And that pipeline, which was 1.3 billion last quarter, is now at 810 million, so pretty substantial.
And that pipeline, which was $1 3 billion last quarter is now at $810 million, so a pretty substantial.
Speaker 2: drop. But again, most of that is just due to the extended timelines for decision making or even things.
Drop but again most of that is just due to the extended timelines for decision, making or even things just flat out put on hold.
Speaker 2: flat out put on hold, where there will not be a decision or search until perhaps the sponsoring institution feels a little more comfortable with the environment.
Where they will not be a decision or or search until perhaps the is sponsoring institution feels a little more.
Comfortable with the environment.
Speaker 2: We've had periods of time where that pipeline has actually gone to zero. There was a period in COVID where our pipeline dropped to nothing and it came right back. So we'll see what it means. We just want to be really clear about what we're seeing out there. Your final point in your question was about the Fed. And I would agree that should the Fed
We've had periods of time, where that pipeline is actually gone to zero. There was a period in COVID-19, where where our pipeline dropped to nothing and it came right back. So we'll see what it means we just want to be really clear about what we're seeing.
Out there to your final point in your question was about the.
Chad.
And I would agree that should the fed or interest rates themselves start.
Speaker 2: or interest rates themselves start to decrease, that could be helpful. I think, you know, one reason we don't have a broadening out in the markets is
To start to decrease.
That could be helpful. I think one reason, we don't have a broadening out in the markets is is due to higher interest rates, which can cause financing pressure for many companies of course and it changes capital allocation decisions right when it's moving around as much.
Speaker 2: is due to higher interest rates, which can cause financing pressure for many companies, of course. And it changes capital allocation decisions, right? When it's moving around as much as it has and has increased as much as it has, really changes a lot of analysis of making it best.
As it has and has increased as much as it has really changes a lot of analysis of making investments.
Speaker 2: So, I'll take other questions, but that's an extended comment on both the environment related to the pipeline.
Oh.
So I'll take all the questions, but that's an extended comment on both the environment related to the pipeline.
Speaker 4: And just one follow-up, the OCI business, OCIO continues to grow?
And just one follow up on the OCI business, Oh CIO continues to grow.
Speaker 2: The OCIO business continues to have really good opportunities. I expect a very near-term win there. We'll see, but I expect that. And it remains at basically $1.5 billion.
The CIO business continues to have really good opportunities I expect.
Very near term win there.
Well, we'll see but I expect that and.
It remains at basic.
Basically one 5 billion.
Speaker 2: In assets under management, it's about the same, very similar to what I reported at the end of the second quarter, but keep in mind that the markets were down during the quarter. So, you know, that's a relatively positive report.
And in assets under management, it's about the same very similar to what I reported at the end of the second quarter, but keep in mind that the markets are.
Where were down during the quarter. So you know that's a relatively positive report.
Great. Thank you.
Youre welcome.
Our next question will come from Christopher Merrimack with Janney Montgomery Scott.
Speaker 1: Our next question will come from Christopher Marinak with Janie Montgomery Scott. You may now go ahead.
You May now go ahead.
Hey, good morning, Good morning, Scott just wanted to ask first about the discretionary versus non discretionary AUM. There's trade that's going to continue to shift over the next year and maybe just related pricing question too.
Speaker 5: Hey, good morning, working. Good morning, Scott. Just wanted to ask first about the discretionary versus non discretionary AUM. Or there's trying to continue to shift in the next year and maybe just related pricing question too.
Speaker 2: Yeah, okay. Yes, it has gone up quite substantially over the past recent, I don't know, 12 months to 18 months, as you've noticed, at a higher rate than I think we've ever really experienced with the company. I think year over year, to your point, it's up something like 34%.
Yeah, Okay, yes, it has gone up quite substantially.
Over the past.
Recent I don't know 12 months to 18 months as you've noticed.
At a at a at a higher rate than I think we've ever really experienced with the company I think.
Year over year to your point, it's up something like 34%.
Speaker 2: That is a function primarily of our family office services, the assets related to non-discretionary work.
That is a function primarily of our family office services the assets related to non discretionary work.
Speaker 2: is usually project fee for services rendered. I should note, by the way, that a fair bit of OCIO, capabilities, if not the vast majority of it, is also in nondiscretionary, and that's the nature of those relationships, and those have more of a basis point relationship. So.
He is usually a project fee for services rendered I should note by the way that a fair bit of OCI O.
Capabilities, if not the vast majority of it is also in non discretionary and that's the nature of those relationships and those have more of a basis point relationship itself.
Speaker 2: On the family office side, I expect the increases due to that to moderate. There is not really a change in the amount of revenue we get, that's just a function of us doing reporting work.
On the family office side, I expect the increases due to that to moderate.
There is not really a change in the amount of revenue we get that's just a function of us doing reporting work.
Speaker 2: and other tracking and balance sheet work on behalf of extremely wealthy clients who have often non-liquid holdings, private equity, real estate operating businesses that we for...
And other tracking and balance sheet work on behalf of extremely.
Our wealthy clients.
You have often non liquid holdings private equity real estate operating businesses that we.
For.
Speaker 2: supervisory reasons have to report as non-discretionary assets under management. So whether that goes up a lot or down a lot.
The supervisory reasons have to report.
As non discretionary assets under management, so whether that goes up a lot or down a lot.
Speaker 2: It really doesn't change revenue on that side. With the OCIO business, if you think about most of that, a billion and a half being in there, as non-discretionary, then yes.
It really doesn't change revenue on that side with the Oc Io business.
You'd think about most of that 1 billion that are happening in there.
And as non discretionary then yes.
Speaker 2: to the extent that that business continues to grow, which we're quite optimistic about and continue to make progress on, as you know, that number will increase and that is additive to revenue and we'll have a closer tie to kind of the economics of total AUM. Does that help?
To the extent that that business continues to grow well, which we're quite optimistic about and continue to make progress on as you know.
That number will increase and that is additive to revenue.
And we will have a closer closer tied to kind of the economics of total.
Does that help.
Speaker 5: Yes, it does. That's great. Thank you for that. And I guess just to relate a question about this kind of the pricing and basis points, I know it's been sort of trending for a while, and it's kind of more secular. I'm just kind of curious if this environment leads that to change at any different pace.
Yes. It does that's great. Thank you for that and I guess, just a related question about those kind of a pricing as basis points I know, it's been sort of trending for a while that's kind of more secular I'll just kind of curious if this environment leads that to change any any type of pace.
Speaker 2: You know, if you could ask your question another way, I'm not sure I quite followed it. I'll just say one thing before you clarify. You know, one thing we have to watch is backing into total basis points by taking our total assets under management as the denominator with revenue. You know, as a denominator is misleading because you're putting in a lot of assets that don't really have basis.
I E.
If you could ask your question another way I'm not sure I quite.
Followed it I'll just say one thing before before you clarify.
You know one thing we have to watch it.
Backing into total basis points by taking our total assets under management.
Yeah as the denominator with revenue denominator is misleading because you are putting in a lot of revenue are assets that don't really have basis points associated with them. So to the extent that family office assets under management non discretionary increase which I described before it looks like the basis points that we're getting for.
Speaker 2: associated with them so to the extent that family office assets under management and on discretionary increase, which I described before, looks like the basis points that we're getting for, for the business is going down when that is not, in fact, the case. But I'm not sure that's what you were asking.
So the business is going down when that is not in fact.
Case, but I'm not sure. That's what you were asking about yes, absolutely Rick.
Speaker 2: No, actually, Rick, that you actually hit it right there because that was kind of where I was going. So that point or five at the point. So really don't be too caught up in that basis point slippage based on that. Yeah, you've precisely taken primarily look at discretionary assets and their management as the driver of revenue. Of course, you know, we
You actually hit it right there because that was that was kind of where I was going so yeah.
So really don't be too caught up in that basis point slippage space.
Precisely take primarily look at discretionary assets under management has the driver of revenue of course, you know, we see the the OCI or business, which is basis points and it looks more like the institutional business and pricing by the way.
Speaker 2: the OCEIO business, which is basis points, and looks more like the institutional business in pricing, by the way, is in there, and there's some influence, but it's still.
<unk> is in there and there's some influence but it's still.
Speaker 2: you know, small compared to the overall enterprise. In fact, you know, the one and a half billion compared to our discretionary assets of 20.5, you know.
You know a small compared to the overall.
Enterprise in fact, you know the one 5 billion compared to our discretionary assets at a 25 puts it around four 5%.
Great and last question. If I may just has to do with sort of expenses and hiring if you have some some delayed decision, making a general as you talked about does that make any impact on the next couple of quarters on higher so I'm just sort of how you spend that the oh multi.
Speaker 5: Great. The last question for me just has to do with sort of expenses and hiring. If you have some delayed decision-making in general, as you talked about, does that make any impact in the next couple quarters on hires? I'm just wondering how you spend at the
Speaker 2: company. Yeah, I don't think it affects our decision making.
Multi company.
Yeah.
I don't think it affects our decision making.
Speaker 2: This is a company that over 20 years has been through multiple business environments, including the global financial crisis. When, and of course we were private company then, it was really hard to manage through. There was a lot to deal with. And my partners and I have been through it. We know what to do. We know how to handle large spend.
This is a company that you know over 20 years has been through multiple business environments, including the global financial crisis when and.
And of course, where we were a private company then it's really hard to manage three there was a lot to deal with and.
My partners and I have been through we know what to do we know how to handle our expenses.
Speaker 2: We're not done when it comes to capital allocation or you know, too tight. We're not gonna hurt the business with slowly things down or delaying or decision making. We just wanna be really ourselves. I'm speaking about Silvercrest. Really careful about how we deploy our cash and of course, our watching expenses more close.
We're not done when it comes to capital allocation or you know too tight we're not going to hurt the business with slowing things down or delaying or decision, making we just want to be really ourselves I'm speaking about silvercrest really careful about how we deploy our cash in of course are watching expenses more closely.
Speaker 2: than ever, but we're in an enviable position of having a lot of dry powder.
Than ever but we're in an enviable position of having a lot of dry powder.
Speaker 2: We unlike other folks are not having to digest a lot of unwieldy acquisitions and need to make expensive operational changes.
We unlike.
Other folks are not having to digest, a lot of unwieldy acquisitions and need.
You need to make our expensive operational changes.
Speaker 2: and let alone worry about our debt load. So, you know, that money is to invest and create good return on invested capital for.
Yeah, let alone worry about our debt load. So you know that money is to invest and create a good return on invested capital for for our investors and just as we saw in 2019, when we merged with Cortina you never know when that's going to be a great opportunity.
Speaker 2: for our investors. And just as we saw in 2019, when we merged with Cortina, you never know when there's gonna be a great opportunity for that cash. And I alluded to the fact that we have.
For that cash and I alluded to the fact that we have.
Speaker 2: number of new business opportunities in my opening remarks and that refers to both the pipeline kind of a new business that I talked about earlier in a question but it also
A number of new business opportunities.
In our in my opening remarks, and that refers to both the pipeline kind of new business that I talked about earlier in a question, but it also.
Speaker 2: speaks to hires, I'm having a lot of conversations. It speaks to other ways to advance the business from an investment perspective. And if anything, it's busier for us. On that score than it has been in quite some time. Any number of different types of initiatives underway, it's actually quite busy. So.
Speaks to hires I'm, having a lot of conversations it speaks to other ways to advance the business from an investment perspective.
And if anything it's busier for us on that score than it has been in quite some time.
Any number of different types of initiatives underway, it's actually quite busy so.
Speaker 2: It's not going to change my decision-making. The slowness in decision-making that I'm seeing really has to do with potential clients.
It's not going to change my decision, making the slowness in decision, making that I'm seeing really has to do with potential clients institutions and just a sense of the business environment. In general. This includes the feedback and things that we're hearing from other management teams.
Speaker 2: institutions and just the sense of the business environment in general. This includes the feedback and things that we're hearing from other management teams, you know, in their own earnings reports because we are investors. We are in the middle of the markets, which is one of the advantages of this firm.
In their own earnings reports, because we are investors we are in the middle of the market, which is one of the advantages of <unk>.
This of this firm.
Speaker 2: I think, you know, that…
And I think you know.
That's cool.
Could.
Speaker 2: be prolonged into 2024. I really don't know. I'm not an economist. I run a good business, and that's all I'm focused on. On the expense side.
They'd be prolonged into 2024, I really don't know I'm not an economist I run a good business and that's you know that's all I'm focused on on the expense side.
Speaker 2: We haven't really made any new hires or changes since I last gave everyone an update. It has been difficult on the expense side because a lot of vendors and companies have been increasing prices with inflation.
We haven't really made any.
New hires or changes you know since I last gave everyone an update it.
It has been difficult on the expense side, because a lot of vendors and companies have been increasing prices with inflation and that's going in one direction, while the stock markets have been going in the other so that creates a little more.
Speaker 2: And that's going in one direction while the stock markets have been going in the other. So that creates a little more stress and management issues. You know, then I would like to have, but we're used to it. We've done this before. It's nothing new. It's part of paying in our business.
Stress and management issues.
I would like to have but we're used to it and we've done this before it's nothing new it's part of being in our business.
Speaker 2: And as I highlighted, we continue with a very good even dumb margin covering around 27%. That is not unusual for the business.
And as I highlighted we you know we continue with a very good.
EBITDA margin hovering around 27% that is that is not unusual for the business.
Speaker 2: And it looks pretty good overall. And I don't expect that trend to change, barring some dramatic market effect.
And it looks pretty good overall, and I don't expect that trend to change.
Barring.
Some dramatic market effect.
Speaker 5: Sounds good, Rick. Thanks for all the background this morning. We appreciate it. Yeah, you're very welcome.
Sounds good thanks for all the background. This morning, we appreciate it.
Yeah.
Welcome.
Again, if you have a question. Please press Star then one.
Speaker 1: Our next question will come from Chris Sakai with Singular Research. You may now go ahead.
Our next question will come from Chris Sakai singular reach research you.
You May now go ahead, Chris.
Yeah.
Speaker 6: Hi, good morning Rick. Just a question on you mentioned the M&A environment. Can you comment on are you seeing any any good acquisition targets out there?
Hi, good morning, Rick.
Just.
A question on you mentioned the M&A.
The M&A environment.
Can you comment on are you seeing any any good acquisition targets out there.
Speaker 2: Yes, we always see potential M&A targets. It is kind of just a theme of my job.
Yes, we are.
Always see see potential M&A targets.
It is kind of a just that theme of my job and I'm regularly talking to other executives in companies.
Speaker 2: regularly talking to other executives and companies.
Speaker 2: What we're looking for is quite select in the marketplace.
What we're looking for is quite select in the marketplace.
Speaker 2: I've described before that this is a high net worth business. It's not ultra high net worth. They're average clients.
I've described before that this is a high net worth business, if not ultra high net worth our average client.
Speaker 2: is, for the size company we are, is well above most of our peers and continues to be at anywhere between $35 and $40 million as an average. Our median is lower. I want to have a good firm with good planning,
Is it for the size company, we are as well above most of our peers and it continues to be at anywhere between 35 and $40 million as an average or median is lower.
I I want to have a good firm.
With good planning.
Succession, if it can be done I'd like to.
Speaker 2: Succession, if it can be done, I'd like to at least know how to fix that.
So at least know how to fix that.
Speaker 2: that can organically grow post acquisition by Silvercrest. That is not as common as you might think. The hindered work business can be quite slow growing organically X markets witness the environment we're in. And I want them in key places where I'm interested in having a location. If it's not a bullpun in the or a Milwaukee Boston or Richmond.
That can organically grow post acquisition by Silvercrest that is not as common as you might think the high net worth business can be quite slow growing organically ex markets witnessed the the environment, we're in and I want them in key places, where I'm interested in and having a location if it's.
Not a bolt on in New York, or Milwaukee, Boston or or or Richmond.
Speaker 2: And so there are only so many terms that really fit the criteria that I'm looking for that are, that check all the boxes and they have to be ready at the right time.
And so there are only so many firms that really fit the criteria that I'm looking for.
That are there.
And that checks all the boxes and they have to be ready at the right time I would say, it's quite active in discussions I alluded in the last question. The fact that where we're always looking at these things and disease that includes hires by the way that can advance the company on behalf of our shareholders and I would just characterize it as a busy period now.
Speaker 2: I would say it's quite active in discussions. I alluded in the last question and the fact that we're always looking at these things and busy, that includes hires, by the way, that can advance the company behalf of our shareholders. And I would just characterize it as a busy period. I have no idea if any of those will land and I wouldn't want to...
I have no idea if any of those will land and I wouldn't want to.
Speaker 2: Suggest anything is imminent to to anyone on the call. You just don't know. There's so many things that can change between Conversations now and what ultimately happens, but I'll conclude by saying we are quite active
Suggest anything's imminent two Janney one on the call you just don't know Theres. So many things that can change between conversations now and what ultimately happens.
I'll conclude by saying we are quite active.
Okay. Thanks for that.
Speaker 2: Yeah, Chris, I'll just add one other thing. Sorry. We're also, as I predicted in the last couple calls, the increase in interest rates, while it's not welcome in some ways,
Yeah, Chris I'll, just add one other thing sorry, we're also as I predicted in the last couple of calls the increase in interest rates, while it's not welcome in some ways certainly its effect on markets and and and People's outlook combined with not to mention the geopolitical concerns that we have.
Speaker 2: Certainly it's effect on market and people's outlook combined, not to mention the geopolitical concerns that we have.
Speaker 2: that I think it's just part of the general feeling people have. I've actually welcomed it because I think it will lead to more rational capital allocation decisions ultimately, you know, finally people are getting paid, you know, for their fixed income. It just creates a lot of disruption in the meantime, but I'm seeing a moderating in the market that's actually healthy on the M&A side from my perspective.
That I think it's just part of the general feeling people that I've actually welcomed it because they think it will lead to more rational.
Capital allocation decisions ultimately.
Finally people are getting paid for for their fixed income.
It just creates a lot of disruption in the meantime, but I'm seeing moderating in the market, but that that's actually healthy on the M&A side from my perspective.
Okay, great. Thanks, Thanks to that and then.
Speaker 6: And the question was on, there was a slight outtick in travel and entertainment expense. My question there is, is this coming basically what we should expect coming out of COVID and what should we expect it without expense going forward?
My other question was on.
There was a slight uptick in and travel and entertainment expense.
My question. There is is this coming basically what we should expect coming out of Covid and what what should we expect that without expense going forward.
Yes, you can expect that to increase coming out of our out of Covid.
Speaker 2: Yes, you can expect that to increase coming out of COVID. It's pretty variable, so I'm not going to provide guidance what I think is going to happen in the future. My general view, and I know Scott shares this as their CFO , is this is a good thing. Yeah, you want to see that increasing. This means we're out there, we're active. Our clients want to see us. We're seeing prospects. And.
It's pretty variable so.
I'm not going to provide guidance, what I think what's going to happen in the future My General view and I know Scott shares. This is our CFO is this is a good thing you want to see that increasing this means we're out there. We're active our clients wanted to see is we're seeing prospects.
And.
Speaker 2: You know, even, for example, on that just that's a high net worth side, but on the institutional side, so much of it was via zoom and and no travel and it's way better to meet prospective clients.
Even for example on that just that's a high net worth side, but on the institutional side.
So much of it was via zoom and no travel and it's way better to meet prospective clients consultants and others face to face and that is starting to occur more often as well so yeah.
Speaker 2: consultants and others face-to-face. And that is starting to occur more often as well. So, yes, I would expect a more normalized environment. When it was lower during COVID, we made that point. I don't know what that might look forward to going forward. And I should point out there's also been more international opportunities. I've talked about that in the past. So, that's a little bit more expensive travel as well.
Yes, I would expect a more normalized environment. When he was lower during COVID-19. We made that point I don't know what that might look forward to going going forward and I should point out. There's also been more international opportunities I've talked about that enough in the past so that's a little bit more expensive travel as well.
Okay, great. Thanks for the answers.
Welcome.
Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Rick Hough for any closing remarks.
This concludes our question and answer session.
I would like to turn the conference back over to Rick Hough for any closing remarks.
Speaker 2: Great, thank you very much. I really appreciate all of our shareholders for joining us today for the update on the third quarter.
Great. Thank you very much I really appreciate all of our shareholders.
For joining us today for the update on the third quarter.
Speaker 2: As we navigate this interesting environment, and I think we've got tremendous opportunities ahead. This is a company, as I said before, that has been through.
As we navigate this this interesting environment and.
I think we've got tremendous opportunities ahead. This is a company as I said before.
That has been through.
Environments like this for 22 years running this business through all sorts of ups and ups and downs that we've successfully navigated any number of issues and grown our business profitably.
Speaker 2: environments like this for 22 years running this business through all sorts of ups and downs and we've successfully navigated any number of issues and grown our business profitably.
Speaker 2: The kind of uncertainty that we face creates opportunity whenever one of our businesses is affected and we're feeling very good about that in the team that we have here and our partners in terms of how we work hard to position ourselves for success. So I look forward to talking to you again soon and really appreciate everyone joining us.
Uncertainty that we face creates opportunity.
Whenever one of our businesses is affected and.
Really very good about that and the team that we have here in our partners in terms of how we work hard to position ourselves for success.
So I look forward to talking to you again soon and I really appreciate everyone joining us thanks, so much.
The conference has now concluded thank you for it.
Speaker 1: The conference has not concluded. Thank you for attending today's presentation. You may now disconnect.
Today's presentation you may now disconnect.