Q4 2024 Silvercrest Asset Management Group Inc Earnings Call
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Speaker Change: Good morning, and welcome to the Silvercrest asset Management Group, Inc, Q4, and full year 'twenty 'twenty four earnings conference call.
Speaker Change: All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Speaker Change: After todays presentation, there will be an opportunity to ask questions.
Speaker Change: Please note today's event is being recorded.
Speaker Change: Before we begin let me remind you that during today's call certain statements may 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. Many factors could cause actual results to differ materially from the statements that are made.
Speaker Change: Those factors are disclosed in our filings with the SEC under the caption risk factors.
Speaker Change: For all such forward looking statements we claim the protection provided by the litigation Reform Act of 1995.
Speaker Change: All forward looking statements made on this call are made as of the date hereof and Silvercrest assumes no obligation to update them.
Speaker Change: I would now like to turn the conference call over to Rick Hough, Chairman and CEO of Silvercrest. Please go ahead.
Rick Hough: Thank you and good morning, welcome to our first quarter 2025 earnings call.
Speaker Change: I will get to my business update.
Speaker Change: The quarter, but I wanted to highlight the nature of our.
High net worth and asset management firms strategically given the amount of initiatives that we have underway that I referenced in my business update silver.
Speaker Change: Silvercrest has an independent wealth management firm and we combined top quality asset management expertise with high levels of customer service or customer facing investment professionals to provide that customized advice and service to our well over 600 Ultra high net worth individuals and institutions is strong and we have consistently enjoyed annual <unk>.
Speaker Change: Customer retention rates of over 98% most of our revenue comes from recurring management fees, which we'll hear more about to that.
Speaker Change: We've built our investment capabilities to serve the complex needs of our clients who require sophisticated solution across all public markets private markets.
Speaker Change: Private credit as well as bespoke solutions for significant individual holdings.
Speaker Change: These capabilities support silvercrest, leading market position serving wealthy families.
Speaker Change: Select institutions in a manner that generates industry, leading client retention and stable revenues. We've accomplished this with average assets under management of over $50 million per relationship and that helps generate the profitability and cash flows that we enjoy as a firm and which we have been investing over the past year and future growth of the business.
Speaker Change: Importantly, the depth of our high quality asset management and intellectual capital is proof of thesis to the wealthiest families globally and we'll talk more about our ambitions is the firm is growing well.
Speaker Change: We concluded 2024 with strong net organic flows to date, new strategic investments made over the past year that are already bearing fruit.
Speaker Change: Firmed garnered $1 4 billion in the fourth quarter, a $1 5 billion during 2024 in new client assets under management inflows the best year for new organic client inflows since at least 2015.
Speaker Change: The fourth quarter was primarily bolstered by winning a successful seed investment in our global value equity strategy of $1 $3 billion, which is $2 billion, Australia in partnership with C. Bus one of Australia's largest superannuation funds the increases during the quarter bode well for future revenue and we remain highly optimistic about <unk>.
Speaker Change: Securing more significant organic flows over the course of 2025 to increase our return on invested capital.
Speaker Change: Total AUM as of year end 2024 reached $36 5 billion as of December 31.
Speaker Change: Up nine 6% from $33 3 billion at year end 'twenty.
Speaker Change: 2023, discretionary AUM, which drives our revenue rose six 4% to $23 3 billion from $21 9 billion overall total asset flows and market increases were a net positive for the firm and will drive an increase in future revenue revenue for the year increased five 3% to 120.
Speaker Change: $3 7 million from $117 4 million.
Speaker Change: With Q4 revenue up 12% over Q4, 2000 $23 million to $32 million from $28 5 million strategically in addition to building the firm's new global value equity strategy from scratch, we have higher business development and market leads in Atlanta in Singapore, we have our full M. A S licensed for doing business.
Speaker Change: In Singapore, and we'll be opening an office with significant European assets and growth opportunities. We also will be pursuing more initiatives better highlight silvercrest in both the institutional and wealth markets. The firm also has invested in talent across the firm to drive new growth and successfully transitioned the business toward the next generation.
Speaker Change: <unk> developed a new and stronger institutional consulting relationships during 2024 with new investment opportunities to develop our strategies. Our pipeline remains robust as a result, we are optimistic about securing significant new organic flows importantly, the firm's pipeline does not yet include mandates for our global value equity.
Speaker Change: Strategy, which is a high capacity for significant new assets. We have worked hard over the past year to build the infrastructure team and strategy, while undertaking business development.
Speaker Change: As with our third quarter call, we envision more positive AUM flows and resulting revenue increases as I've discussed throughout the past year Silvercrest has never had more business opportunities.
Speaker Change: Those initiatives are beginning to bear results, we have made and will continue to make investments to drive future growth. We expect to make more hires that complement our outstanding professional team to drive that growth and silvercrest continues to accrue a higher interim percentage of revenue for compensation for this purpose and as mentioned we will continue to adjust compensation accruals.
Speaker Change: To match these important investments in the business, we will keep you informed of our plans and the progress of these investments and look forward to taking questions and talking about this this morning.
Speaker Change: And I'll turn it over to our CFO Scott Gerard for the financials, and then we'll get to that okay great.
Scott Gerard: Thanks, Rick.
Speaker Change: As far as our earnings release for the fourth quarter discretionary AUM.
Speaker Change: As of December 31st 2024 was $23 3 billion and totally AUM as of the end of 2024 was $36 5 billion revenue for the fourth quarter was 32 million and reported consolidated net income for the quarter was $2 7 million revenue.
Speaker Change: For the quarter increased year over year by $3 4 million or 12%, primarily driven by increased discretionary AUM, resulting from net client inflows, partially offset by market depreciation.
Speaker Change: <unk> for the quarter increased year over year by $5 million or one 7%, primarily driven by increased general and administrative expenses, partially offset by a decrease.
Speaker Change: Compensation and benefits expense comps.
Speaker Change: Compensation and benefits expense for the quarter decreased year over year by <unk> 8 million or three 4% primarily due to a decrease in the accrual for bonuses.
Speaker Change: Based on the increased recurring cash compensation ratio over the past few years due in part to the investment in the next generation of portfolio managers and other associates, we increase the amount of the interim variable compensation accrual during 2024 Janeiro, the adjustment in the fourth quarter.
Speaker Change: We intend to use the same accrual management in 2025 also compensation and benefits expense for the quarter increased year over year as a result of increases in salaries due to merit based increases and newly hired staff.
Speaker Change: General and administrative expenses increased by $1 3 million or approximately 18, 5% primarily due to increases in professional fees and portfolio and systems expense.
Speaker Change: Reported net income attributable to silvercrest or the <unk>.
Speaker Change: <unk> shareholders for the fourth quarter was approximately $1 6 million or 17.
Speaker Change: Per basic and diluted class a share.
Speaker Change: Adjusted EBITDA, which we define as EBITDA without giving effect to equity based compensation expense and noncore and nonrecurring items was approximately $5 1 million or 15, 9% of revenue for the quarter.
Speaker Change: Adjusted net income, which we define as net income without giving effect to noncore and non recurring items and income tax expense, assuming a corporate rate of 26% was approximately $2 9 million for the quarter or 21.
Speaker Change: And 20 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 add unrestrict.
Speaker Change: The.
Unvested restricted stock units and nonqualified stock options to the total shares outstanding to compute diluted adjusted EPS.
Speaker Change: Looking at the full year revenue ended the full year 2024.
Speaker Change: As an increase year over year by $6 2 million or five 3%, primarily driven by increased discretionary AUM, resulting from market appreciation, partially offset by net client outflows expenses increased year over year by $7 5 million or seven 5% primarily driven.
Speaker Change: By increased compensation and benefits expense and to a lesser extent increased G&A expenses.
Compensation and benefits increased year over year by $4 million or five 6%, primarily due to increases in equity based compensation salaries due to merit based increases and newly hired staff and the accrual for bonuses.
Speaker Change: G&A expenses increased by $3 4 million or approximately 13, 1% primarily due to increases in professional fees portfolio and systems expense occupancy and related costs and trade. Our expense reported net income attributable to silvercrest for 2024 was $9 5 billion.
Speaker Change: Or a dollar per basic and diluted class a share adjusted EBITDA was approximately $26 1 million or 21, 1% of revenue for all of 2024.
Speaker Change: And adjusted net income was approximately $15 8 million for 2024 or $1 15, and $1 10 per adjusted basic and diluted EPS, respectively.
Speaker Change: Looking at the balance sheet total assets were approximately $194 4 million as of the end of 2024 compared to $199 6 million as at the end of 2023 cash and cash equivalents were approximately $16 6 million as of the end of 2020.
Speaker Change: Four compared to $73 million as of the end of 2023.
Speaker Change: There were no borrowings as of the end of 2024 and total class a stockholders equity was approximately $80 7 million at the end of last year that concludes my remarks, I will turn it over to Rick for Q&A. Thanks, very much Scott we will take questions.
Rick Hough: Some extended commentary I think this morning.
Rick Hough: Ladies and gentlemen at this time, we'll begin the question and answer session. If you'd like to ask a question you May Press Star and then one using a touchtone telephone to withdraw your questions you May press star and two.
Rick Hough: If you are using a speaker phone, we do ask that you. Please pick up the handset prior depressing the keys to ensure the best sound quality.
Rick Hough: Once again that is star and then one to join the question queue.
Rick Hough: Pause momentarily to assemble the roster.
Rick Hough: Okay.
Speaker Change: Our first question today comes from Sandy Mehta from evaluate research. Please go ahead with your question.
Sandy Mehta: Yes, good morning, congratulations on the strong.
Speaker Change: Ganic inflows.
Speaker Change: Could you comment a little bit more on the pipeline amount.
Speaker Change: And currently also in upbeat on OCI.
Speaker Change: What where you are in assets and the outlook there and.
Speaker Change: I understand that your pipeline.
Speaker Change: Pipeline does not include global prospects a little bit.
More commentary on you know do you see global inflows. This year 2025, and what are the opportunities there this year and next year. Thank you.
Rick Hough: Great. Thank you appreciate it Sandy first of all on the pipeline I believe at the end of.
Speaker Change: Last year.
Speaker Change: We had a pipeline of.
Speaker Change: One 2 billion.
Speaker Change: That pipeline has now increased to one point.
Speaker Change: 6 billion.
Speaker Change: That includes some wins out of the pipeline. So the pipeline actually decreased due to some wins did not include the global team, but for example, our growth.
Speaker Change: Our team in Milwaukee, which joined US in 2019 had some really nice inflows I think about $68 million to their strategies net.
Speaker Change: Our 67 net.
Speaker Change: In the fourth quarter.
Speaker Change: And we.
Speaker Change: We feel really good about that because we've got a transition in our leadership of that team and performance.
Speaker Change: In that particular strategy remains strong with.
Speaker Change: With regards to the pipeline over all.
Speaker Change: It includes a significant <unk> mandate.
Speaker Change: And we're seeing increased or CIO opportunities to answer your question about that.
<unk> now stands at $1 6 billion I definitely expect that to increase.
Speaker Change: During 2025 based on what I'm seeing.
Speaker Change: I should comment of course that assumes steady markets and as we know markets have been down recently.
Speaker Change: So on a steady state basis, where we stand today.
Speaker Change: A nice pipeline.
Speaker Change: In an increase there.
Speaker Change: I have included only about $100 million in the pipeline for global value, which you just asked about.
Speaker Change: Part of that is because the nature of measuring our pipeline is becoming a lot more difficult.
Speaker Change: And hard to measure and so.
Speaker Change: We tried to add something for global value into the pipeline, but most of this as you noted in your question is really about the traditional capabilities.
Speaker Change: <unk> that we've had at the firm for some time.
Rick Hough: I'll get back to global but let me talk about the pipeline for just a second sandy because I think this is important.
Rick Hough: For the past several years or many years, we have defined the pipeline as.
Rick Hough: Either files or semi finals, and the search for for the capability or an invite only search by an institution or consultants that we think is actionable in the next six months.
Rick Hough: So if we get a win it falls out of the pipeline if we get a loser falls out of the pipeline if something in terms of timing extends beyond the six months it comes out of the pipeline.
Rick Hough: A couple of times over the past two years or three years, we've seen searches take longer than they used to and we've had the pipeline come down because it wasn't it wasn't going to happen in the next six months.
Rick Hough: The problem with our measuring the pipeline now.
Rick Hough: Is that we are seeing way less rfps that used to be a very important part of the business is filling out rfps, it's just not being driven that way anymore.
Rick Hough: More typically you present information to a consultant or institution, you don't know really to what extent they have a search or not and you get a phone call that you won something you don't necessarily even know you're in a final is the semi finals. So it's just not working that way anymore. So despite the size of the pipeline, which I think is.
Rick Hough: Very strong.
<unk> has increased.
Largely according to those rules I gave you it is becoming increasingly hard to measure and therefore, it's going to be increasingly hard for us to give you apples to apples comparison to the past.
Rick Hough: I don't know, how we're going to resolve that to be honest.
Rick Hough: I think we will start handicapping the opportunities, we see and soft certainly numbers, but that becomes a little fuzzier and less concrete and what we've we've given you before this is part of the reason to get back to the global.
Rick Hough: <unk> equity team. This is part of the reason why we really haven't put the opportunity there into our pipeline.
Rick Hough: As you know in the third quarter call last year, I was very optimistic about inflows and.
In part, it's because I knew about the conversations we were having with potential seed investors for that capability.
Rick Hough: But I didn't think it would be realistic at that size of the sea and not knowing what kind of conclusion, we come to you to put it into the pipeline at that time and sure enough it worked out.
Rick Hough: For that team we built it from scratch, we're really proud of having the quality affirm and infrastructure to attract the kind of talent that we did.
Rick Hough: With no AUM on the payroll and then to get off to the races with that with that investment as I said in the third quarter I think the opportunity for that team is in the billions and billions of dollars.
Rick Hough: When we can Ken.
Rick Hough: Garner that over the course of 2025 and 2006.
Rick Hough: Is.
Rick Hough: A little up in the air which is not not why it's in the pipeline.
Rick Hough: And of course, our performance has to hang in there I'm pleased to report that so far in 2025 our performance.
Rick Hough: Very good and that strategy in part helped by international market is doing quite well.
Rick Hough: Well, it's where that's in that portfolio have been have been place.
Rick Hough: I expect significant new inflows for that capability this year.
Rick Hough: I think we will get.
Rick Hough: Follow on institutional investors.
Rick Hough: From Europe and from Asia.
Rick Hough: I will say that the to give you an idea of the pipeline.
Rick Hough: The number of meetings request for information has been very very strong.
Rick Hough: From people, who can allocate very large sums of capital to this strategy. In addition, we have opened up new consulting relationships that have a much more global perspective that we haven't had it for.
Rick Hough: And that includes within consulting firms.
Rick Hough: That we're mostly focused on our domestic capabilities. So highly optimistic performance is strong and the potential is enormous but it's a little hard for me to give you a figure.
Rick Hough: But I think.
Rick Hough: What happened in the fourth quarter is just to start and I expect to capitalize that in 2025 and throughout 2026, I think I covered all the bases.
Rick Hough: Sandy, but feel free to follow up.
Sandy Mehta: Oh no no great. Thanks. Thank you so much and just one last question on my side.
Rick Hough: The.
Rick Hough: Expenses compensation expense G&A expense is this the level that we should expect going forward for both those categories.
Rick Hough: I would expect it for the foreseeable future we've tried to be very careful about adjusting that compensation ratio every quarter.
Rick Hough: And to keep investors up to speed with how investments are panning out.
Rick Hough: We are taking a very close look at expenses elsewhere in the firm and I think I'll get into this later, but.
Rick Hough: The the innovations in technology and some of the productivity that we're seeing operationally eventually will will help us lower that and fall to the bottom line, it's a little premature to say that.
Rick Hough: At this time.
Rick Hough: But I'm absolutely astounded by the potential for productivity gains in the business over the medium term.
Rick Hough: And by that I need through the end of 2026 27.
But I think for this year, if we would be.
Rick Hough: Smart and prudent to conservatively say, yes expected expected at this level now.
Let's talk about investments in personnel.
Rick Hough: The team that we brought on board and the infrastructure around it is expensive that was.
Rick Hough: Of course, a meaningful part of the increase in compensation and we had no revenue to offset it until perhaps two weeks of the fourth quarter.
Rick Hough: End of December two weeks and so we'll have a full year revenue this year and that team is now.
Rick Hough: Paying for itself.
Rick Hough: Obviously that doesn't get us down to.
The compensation ratio that we would like to see yet.
Rick Hough: But in pretty short order that will be a nicely profitable team at the firm, but we're making other investments as I pointed out we're hiring other portfolio managers. It takes time for them to become highly profitable the firm, we hired a market and business development lead in the high net worth space, We've never had a pure business development lead interestingly.
Rick Hough: To open our Atlanta office, where we will be hiring pms.
Rick Hough: We have added two.
Rick Hough: Singapore to get that effort going.
Rick Hough: And so we've got other initiatives across the firm firm, including institutional business development that we're going to be making that will continue at least for the foreseeable future to to lead to higher compensation expenses. Obviously I think this is money very well set to increase our return on investment capital.
Rick Hough: And.
Rick Hough: We're excited about those opportunities, but youre seeing a lot of initiatives kind of.
Rick Hough: In those numbers all at once.
Rick Hough: Great. Thank you so much all the best Thank you.
Rick Hough: Thank you.
Our next question comes from Christopher Merrimack from Janney Montgomery Scott. Please go ahead with your question.
Christopher Merrimack: I. Thank you Patrick good morning, good morning.
Rick Hough: Hey, how are you.
Speaker Change: Good I wanted to ask you and Scott about expenses, just kind of continuing the conversation further.
Speaker Change: What's the thought about operating leverage in the big picture, it's not as much about a given quarter as it is kind of where youre going this year next year and as you execute on the pipeline do you still feel that you're going to get operating leverage on the sort of profitable throughput and then I have a follow up.
Speaker Change: I do.
Chris: So it's Chris.
Chris: Chris if I were to run the company.
Chris: In a steady state without making personnel.
Investments, we would at least up back up into the high Twenty's for an EBITDA margin.
Chris: When we had really great bull markets.
Chris: For our assets ending at 2021 and performance fees, we had an all time high of around 32% EBITDA margin.
Chris: Given the leverage in the institutional business that we're seeing in the new opportunities.
Chris: Getting back there is absolutely within the realm of possibility is just going to take some time, if I were to remove some folks who are not yet profitable to the firm what we've made investments and just sort of run it with where we are we would pop back up.
Chris: So near and medium term target it would be to get back there assuming ic's investments.
Chris: And just ran a.
Chris: Steady state business, but.
Chris: That's not going to serve our growth in the medium term.
Chris: Got it and as medium term possible as of 2026 target not to get too specific but just sort of thing.
Chris: Look if everything falls into place I think I think it is yes.
Chris: Alright, great careful as you know about about forecasting what that looks like especially the high net worth side.
Chris: And OCI is a bit of a hybrid it's a bit lumpy.
Chris: And hard to predict I haven't actually more visibility into the institutional pipeline.
Chris: But where we're headed directionally.
Chris: That alone.
Chris: Part to get us there.
Chris: Great and then can you remind us about additional investments just thinking I guess out loud about the global.
Chris: The Global fund is there do you have everything in place for that now with the launch or is there additional hirings and therefore expense this year.
Chris: Have almost everything in place there'll be more expenses.
We hired another analyst on that team after we brought over the initial team.
There is this is development needs there because there's just so much activity and coverage that we need to have in Europe in Asia and Australia.
Chris: And by that I am not talking multiple hires here, but there is definitely higher there we have a need for.
Chris: More client relation support there these aren't big numbers at this stage.
Chris: We hired new trader for that team.
Chris: And we will probably I mentioned the client associate we need someone working on a settlement and.
Chris: In addition in addition to that they are not big needle movers, but there is more investment to be made.
Chris: Sure.
Speaker Change: Great and last question from me just goes on so I guess sort of a big picture from geopolitical risk. It feels like it's been three years. We've had this elevated geopolitical concerns that feeding more inquiries into silvercrest, and therefore more business opportunities or is that just noise and you still have your.
Speaker Change: Business plan and separate from that yeah. Great question, obviously, the volatility globally increases some risk but on balance it has benefited the firm and driven.
Speaker Change: Assets and interest to.
Speaker Change: Us.
Speaker Change: As a solution.
Speaker Change: We you May recall this we are working with the significant.
Speaker Change: Family, maybe families now, but at least one very significant family in Poland.
Speaker Change: That came about after the Russian invasion of Ukraine, and concerned about what was happening in eastern Europe.
Speaker Change: That is an incredibly dynamic and growing economy of well it is.
Speaker Change: Underserved by firms like ours in fact globally. The U S. As well ahead of other places with regards to our fiduciary model for managing assets. So on balance. It's absolutely has a lot to do with our focus on serving other places and it was because of ink.
Speaker Change: Coming inquiries and the fact that we have the tools to serve both these families as well as institutional investors.
Speaker Change: I'm fairly optimistic however, about the global scene.
Speaker Change: In the medium to long term a lot of it is noise.
Speaker Change: And obviously I'm, hoping for some peaceful resolution like anyone would.
Speaker Change: What we're seeing happening globally.
Speaker Change: But at the end of the day.
Speaker Change: When people want to secure their assets and see them grow and have alternatives given whatever situation. They are in their countries, that's going to benefit the United States and benefit firms.
Speaker Change: Like ours.
Speaker Change: The new consultant relationships, we are seeing the new inquiries that we're seeing.
Speaker Change: The new conversations that we're having with families.
Speaker Change: Yes.
Speaker Change: Quite meaningful.
Speaker Change: In fact I will be.
Speaker Change: <unk> likely to Poland myself, given the interest that we have there in early April I will be in Asia at the end of April our business development team spent two weeks in Australia recently, they will be spending at least a week maybe two weeks in.
Speaker Change: Europe, given the opportunities there.
Speaker Change: <unk>.
Speaker Change: We are highly likely to be pursuing.
Speaker Change: License and the European Union right now, we can only receive incoming inquiries, we'd like to be more aggressive and pursue opportunities.
Speaker Change: So that is something we will be working hard on in 2025 as well as I mentioned, we got our SaaS licenses, Singapore that took years.
Speaker Change: It is important for us to be in that time zone.
Speaker Change: We started building that really didn't talked about it on any earnings calls because we wanted to get it done we wanted to assess the opportunity before we put more capital into it.
Speaker Change: And honestly I was a little concerned how that might be viewed by investors what is silvercrest.
Speaker Change: Extending itself to the other side of the world given the nature of our business here in the United States.
Speaker Change: We did that with the knowledge that we had ambitions to be serving.
Speaker Change: Well in.
Speaker Change: Southeast Asia as well as knowing.
Speaker Change: That's the pools of money available to us both on the wealth side and institutional side and Australia now it makes total sense given the length of those economies and the need to be in a time zone closer to.
Speaker Change: Sydney and Melbourne so.
Speaker Change: Along with the talent there.
Speaker Change: So that's now coming together and hangs together quite nicely for our future ambitions I hope that certainly covers kind of what youre getting at.
Speaker Change: No that's great. Thanks, a lot for the background and for hosting US all this morning.
Speaker Change: Youre welcome.
Speaker Change: Once again, if you would like to ask a question. Please press star and one.
Speaker Change: Our next question comes from Chris Sakai from singular research. Please go ahead with your question.
Chris Sakai: Yes, hi, good morning.
Speaker Change: Good morning, just wanted to ask about.
Chris Sakai: Can you can you explain it.
Speaker Change: What sort of hurdles are you facing.
Speaker Change: And this international expansion into these other countries.
Speaker Change: How.
Speaker Change: Is that adding to cost.
Speaker Change: Are you facing regulation hurdles.
Speaker Change: So.
Speaker Change: I wanted to be careful about how I'd characterize.
Speaker Change: We're not.
Speaker Change: Rapidly expanding into other countries with regards to our infrastructure, Singapore is really the only one right now outside of the United States.
Speaker Change: We've always been quite prudent with when we decided to go somewhere and careful with our capital.
Speaker Change: We need to have a very compelling reason to physically be located somewhere.
Speaker Change: <unk>.
Speaker Change: So really when we're talking about this we're talking about flows into our capabilities from these other places, which silvercrest has always had from day. One we've worked with very significant European clients and that's only grown I think I've mentioned before we have clients that are very meaningful to the firm in South America and the Netherlands.
Speaker Change: Yes.
Speaker Change: Work with a number of very large industrial families in Germany.
Speaker Change: That required zero infrastructure on the ground, what we're reaching.
Speaker Change: Now is the need really for getting over the regulatory hurdles you just mentioned with regards to the appropriate licenses in order to solicit business in certain countries. It's certainly a barrier in Europe.
Speaker Change: But at this stage I don't necessarily need a physical location I think theyre going to be ways for us to do that.
Speaker Change: And if we do do it.
Speaker Change: We are likely to do it in a very light way to start.
Speaker Change: And we'll do it because the opportunity presents itself to create a profitable business Singapore.
Speaker Change: It's a very business friendly place working with the regulatory regulators there.
Speaker Change: It was good.
Speaker Change: It takes time and.
Speaker Change: Sure.
Speaker Change: We've gotten through those hurdles without.
Speaker Change: An issue.
Speaker Change: And.
Speaker Change: I think this firm.
Speaker Change: He is of a size and quality in terms of our operations.
Speaker Change: That we don't have a difficult time surmounting dose those hurdles for getting licensing.
Speaker Change: We do extremely well and operational due diligence across the board in terms of our controls.
Speaker Change: And infrastructure consultants look at that very closely well that translates very well in terms of what the regulators look at it as well. So it's just a part of doing business and I wouldn't say that it's.
Speaker Change: A headwind or significant.
Speaker Change: <unk> for this firm, we just need to work through it.
Speaker Change: Okay great.
Speaker Change: So can you explain what are some of the things I'm seeing Atlanta that draws you there.
Speaker Change: Am I getting a sense that there's greater growth opportunities outside the U S is that a good way to think about it.
Speaker Change: There's two ways to think about this.
Speaker Change: Number one yes, there is.
Speaker Change: Very significant growth opportunities outside the U S.
Speaker Change: The United States has a very robust and mature wealth management and asset management business from banks to multiple very large RIAA, serving the wealthy and others.
Speaker Change: That's good it's a very competitive environment, we succeeded well and one of the most competitive environments in the world.
Speaker Change: Wealth is growing globally.
Speaker Change: Arguably at a faster rate than it necessarily is within the United States.
Speaker Change: Obviously, Europe isn't growing, particularly fast, but there are lots of places in the world.
Speaker Change: That is so you combine the fact that places like Europe or Australia.
Speaker Change: Our Asia.
Speaker Change: Underserved by what I would call the RIAA model.
Speaker Change: That's the opportunity for first movers, who can bring capabilities like this firm to those places to garner.
Speaker Change: Assets to stand above others in the field.
Speaker Change: In the United States.
Speaker Change: The economy is growing at 2%, let's just say just to round it.
Speaker Change: That typically means that well is growing at 2% now it may be going and larger segments of the wealthier as we know from wealth disparities.
Speaker Change: But generally speaking.
Speaker Change: You are moving business from one firm to another very often big banks.
Speaker Change: Silvercrest, we get our opportunities at new well.
Speaker Change: But those opportunities.
Speaker Change: Our <unk>.
Speaker Change: Just greater a number as we look out across.
Speaker Change: Across the world. So it is both growing well as well as a differentiated business model and places that where wealth is emerging or that is just lagging behind the United States with regards to kind of the way that firms like <unk>.
Speaker Change: Ours do business. So it's a combination of those things next to Atlanta in the United States and the United States, There's been a tremendous trend of rolling up as you know.
Speaker Change: A lot of smaller.
Speaker Change: <unk> backed by private equity that has pushed multiples up on terms.
Speaker Change: And it makes it much harder to play the M&A game responsibly with Investor capital.
Speaker Change: This firm has a history of being able to grow organically, we feel confident in our ability to do that and.
Speaker Change: We do do an acquisition.
Speaker Change: We are going to be very selective.
Speaker Change: It has to be a high net worth firm.
Speaker Change: With compatible culture in a money center growing city in the United States.
Speaker Change: That is a well run business.
Speaker Change: That we think can then grow organically.
Speaker Change: After we have merged it's not going to be a question of us of just hoping for a multiple accretion and doing an acquisition.
Speaker Change: Atlanta and the southeast.
Speaker Change: Among if not the fastest growing region in the United States.
Speaker Change: For wealth, so we really felt the need to be there.
Speaker Change: Same time.
Speaker Change: In order to drive organic growth generally across the high net worth segment itself Silvercrest I felt we needed to.
Speaker Change: Get full time business development for that and both too.
Speaker Change: Our existing portfolio managers as well as to grow in a new region, if youre not there it's.
Speaker Change: Harder to do in our referral business.
Speaker Change: So.
Speaker Change: Given our success.
Speaker Change: And capabilities of what we have we thought it was time to just go into one of those money center cities and do it ourselves much better use of investor capital not to pay out.
Speaker Change: Tens and tens of millions of dollars potentially to be in a new city. When we can make a much smaller investment and and grow organically.
Speaker Change: Yes in the short term that means hitting EBITDA and earnings I've been talking about it for three years or two years before we even did it.
Speaker Change: And now we're executing on that plan.
Speaker Change: Okay, great. Thanks.
Speaker Change: And ladies and gentlemen at this time in showing no additional questions I would like to turn the floor back over to Rick Hough for closing remarks.
Rick Hough: Great. Thank you so much and thank you everyone for joining us as you can tell from my comments not unlike the third quarter I'm very enthusiastic about the initiatives, we're taking and the potential for growth of the firm at an organic level.
Speaker Change: We have.
Speaker Change: A large pipeline.
We will continue to update you on how we are measuring that.
Speaker Change: Highly optimistic about what we can do with the global value equity team.
Speaker Change: The fact that we're getting traction is raising our visibility.
Speaker Change: <unk> in a way that is very intentional.
Speaker Change: As I said in my very opening remarks.
Speaker Change: Our strategy has always been to hire and build very strong intellectual capital at the firm.
Speaker Change: That.
Speaker Change: Is proof of thesis to our very large families and OCI O.
Speaker Change: And the wealth management business about the quality of the firm and what we're doing as an asset management firm.
Speaker Change: And it's allowing us to take new initiatives.
Speaker Change: That should compound the organic growth and provide us over the medium terms very nice.
Speaker Change: Returns so I look forward to updating you on these initiatives.
Speaker Change: As it works out over over time.
Speaker Change: The.
Speaker Change: The <unk>.
Speaker Change: Patience of our investors with regards to investments.
Speaker Change: He is already starting to be borne out with which we greatly appreciate and.
Speaker Change: Ah.
Speaker Change: I think it will be quite enlightening as we go through 2025 Directionally.
Speaker Change: I think theres, one more investor question, which I'm happy to take sorry to interrupt my concluding remarks there.
Speaker Change: Yes, Sir we do have Peter Katz from Harold in Lantern investments. Please go ahead with your question.
Peter Katz: Hi, Rick Hi, Scott Congratulations on the progress Youre, making I am a long term investor I just find it just as a follow up.
Peter Katz: Your thoughts on dividend and buyback policy.
Speaker Change: Thanks, Peter Yeah.
Speaker Change: We have no debt and a lot of cash and we have always felt in this business, especially at a small company like ours said, it's very important to return capital to our investors and we have a history of doing that.
Speaker Change: Sure.
Speaker Change: In the past when I've been asked about our cash and dividends.
Speaker Change: Or buybacks.
Speaker Change: I have.
Speaker Change: Cautiously conveyed that.
Speaker Change: There can be of use for cash.
That becomes very apparent.
Speaker Change: If we were to do a deal you may recall as a longtime shareholder.
Speaker Change: We're going into 2019 with a significant amount of cash.
Speaker Change: And.
Speaker Change: That and some that was used for.
Speaker Change: Our merger with Cortina, which was.
Speaker Change: Very good for the company.
And are highly accretive.
Speaker Change: That possibility is always out there and so I want to be careful about how we think about it.
Speaker Change: We did feel it was appropriate once again to do a buyback and we're working through that in the markets.
Speaker Change: Think long term that's a very very good use of capital and we will continue to look at buybacks.
Speaker Change: As we move along here depending what.
Speaker Change: Our alternative use of capital or as you can imagine we're in discussions.
Speaker Change: We haven't talked about M&A in a while but we're in discussions all the time with firms and so that is a possibility and the possibility for the use of our cash in the meantime, we're going to organically grow the company, but we're in a position where we feel we can continue to return capital that way we will.
Speaker Change: And.
Speaker Change: I think it's been good and we like it.
Speaker Change: So.
Speaker Change: I'm not trying to say, we're going to do more right now we're still working from what we announced previously but it's always under consideration.
Number one on the dividend, we think it's important to continually pay that out at a high level.
Speaker Change: To make sure that this stock is providing a very good yield to yield to our investors over the years and we want to do it in a prudent way our general goal Peter is to keep it high which it is.
Speaker Change: And to increase it but at a rate, where we feel even with the dramatic downturn in markets.
Speaker Change: And therefore revenue we can still sustain it for.
Speaker Change: Good period of time, and I would say at this level we can.
Speaker Change: Market could really fall off along with their revenue and we would not have to change the dividend policy for an extended period of time.
Speaker Change: We're comfortable with our payout ratio.
Speaker Change: But I hope that gives you some idea of how we're looking at it because I do think given the small size of our company. The fact that it's a financial and its a small cap value stock and we know how small cap value in general has done compared to large cap growth in other parts of the market is very important to return cap.
Speaker Change: I'll pay a high dividend to our investors who are long term investors like yourself.
Speaker Change: Terrific. Thank you.
Speaker Change: Youre welcome.
Speaker Change: There are any other questions.
Speaker Change: Okay, once again and again.
Speaker Change: I am not showing any additional questions at this time.
Speaker Change: Alright, Thank you and I think I made my concluding remarks, so I'd just thank everyone for their time and attention. This morning, I look forward to speaking with you in the next quarter.
Speaker Change: Yeah.
Speaker Change: And with that ladies and gentlemen, we will conclude today's conference call and presentation. We do thank you for joining you may now disconnect your lines.
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