Q1 2025 Silvercrest Asset Management Group Inc Earnings Call
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Speaker Change: Good morning, and welcome to the Silvercrest Asset Management Group, Inc. Q1, 2025 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing star key followed by zero.
Speaker Change: After today's presentation there'll be an opportunity to ask questions. Please note. This event is being recorded before we begin let me remind you that during todays call certain statements made regarding our future performance are forward looking statements.
Speaker Change: 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 those factors are disclosed in our filings with the S. E C. Under the caption risk factors for all such forward looking.
Speaker Change: Since we claim the protection provided by the litigation Reform Act of 1995, all forward looking statements made on this call are made as of the date hereof and Silvercrest assumes no obligation to update that I would now like to turn the conference over to Rick Hough, Chairman and CEO of <unk>.
Speaker Change: Silvercrest. Please go ahead.
Speaker Change: Good morning, everyone and welcome to our first quarter 2025 conference call for Silvercrest, we experienced strong new client organic flows point 4 billion. During the first quarter. This year, the new assets under management to follow on the significant new client flows of $1 4 billion in the fourth quarter of <unk>.
Speaker Change: <unk> 24 for a total of 1.8 billion over the past two quarters do client accounts, our first quarters, new client account flow wasn't itself stronger than some recent years in total and silvercrest strategic investments continue to promote our growth the increases during the quarter bode well for future revenue and.
Speaker Change: We remain highly optimistic about securing more significant organic flows over the course of 'twenty 'twenty five as we discussed during our last call.
Speaker Change: Total AUM did decline during the quarter as a result of highly volatile markets amidst global economic and trade concerns and our discretionary AUM now stands at $22 7 billion as at the end of the quarter, which is flat year over year and our total AUR was $34 3 billion.
Speaker Change: We expect continued market volatility to affect our short term results in top line revenue that said, we believe market and economic dislocations present meaningful opportunities for our business.
Speaker Change: Strategically we will continue to pursue more initiatives to better highlight silvercrest in both the institutional and wealth markets. The firm has invested in talent across the firm to drive new growth and successfully transitioned the business toward our next generation the new business pipeline remains robust, so where costs will continue to monitor and adjust our inner.
Speaker Change: Compensation ratio to match important investments in the business as long as we have compelling opportunities to grow the firm and build our return on invested capital. We will keep you informed of our plans and the progress of these investments. We also completed a $12 million stock repurchase program. We will continue to look for opportunities to return capital to.
Speaker Change: <unk> or accrete shareholders, especially as we invest in the business a strong balance sheet supports ongoing capital returns as well as our growth initiatives.
Speaker Change: On May 5th the company declared a quarterly dividend of 20 cents per share of class a common stock and that will be paid on or about June 20th of this year.
Speaker Change: Stockholders of record Scott will now cover our financial highlights and then well go to questions over to you Scott.
Scott: Thank you Rick.
Scott: As disclosed in our earnings release for first quarter discretionary AUM as of March 31 was $22 7 billion and total AUM as of the same period was 35 3 billion revenue for the quarter was 31 4 million and reported consolidated net income for.
Scott: The quarter was $3 9 million.
Scott: Revenue for the quarter increased year over year by $1 1 million or three 7%, primarily driven by market appreciation during the 12 month period expense.
Scott: Expenses for the quarter increased year over year by $2 2 million or 9%, primarily driven by increased compensation and benefits expense and general and administrative expenses compensation expense for the quarter increased year over year by $1 2 million or six 9%.
Scott: Primarily due to increases in equity based compensation and salaries and benefits expenses, primarily as a result of merit based increases partially offset by decreases in the accrual for bonuses.
Scott: The decrease in severance expense Jenny.
Scott: General and administrative expenses increased by 1 million.
Scott: Approximately 14, 6% primarily due to increases in professional fees portfolio systems expense recruiting costs marketing and advertising and travel and entertainment expenses.
Scott: Net income attributable to silvercrest or to class a shareholders for the first quarter was approximately $2 5 million or <unk> 26 cents per basic and diluted class a share.
Scott: Adjusted EBITDA, which we define as EBITDA without giving effect to equity based compensation expense and noncore and nonrecurring items was approximately $6 5 million or 27% of revenue for the quarter.
Scott: Adjusted net income, which we define as net income without giving effect to noncore and nonrecurring items and income tax expense, assuming a corporate rate of 26% was approximately $3 9 million for the quarter or 29 cents in 2007 cents per adjusted basic and diluted.
Scott: Earnings per share respectively.
Scott: Adjusted earnings per share is equal to adjusted net income divided by the actual class a and class B shares outstanding as of the end of the reporting period for basic adjusted EPS and to the extent dilutive, we had unvested restricted stock units and nonqualified stock options to the total shares outstanding.
Sandy: Sandy to compute diluted adjusted EPS looking quickly at the balance sheet total assets were approximately $159 9 million as of March 31, compared to 194 4 billion as of the end of 2024 cash and cash equivalents were approximately.
Sandy: The $36 3 million as of March 31, compared to $68 6 million at the end of 2024. Please keep in mind that cash at March 31st is net of the pay out of 2024.
Sandy: There were no borrowings as of March 31, and total class a stockholders equity was approximately 80 million as of the end of the first quarter of this year that concludes my remarks, I'll now turn the call over for Q&A.
Sandy: Yeah.
Speaker Change: I think Scott, we're ready to take questions. Thank you.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys to withdraw your question.
Speaker Change: Please press Star then two at this time, we will pause momentarily to assemble our roster.
Sandy Mehta: Our first question comes from Sandy Mehta with evaluate research. Please go ahead.
Sandy Mehta: Yeah. Thank you good morning.
Sandy Mehta: Could you comment and give it a little bit more color on the pipeline and what youre seeing for OCI as well as global going forward.
Speaker Change: Sure. Thanks, Andy Good morning couple of broad comments on that on the pipeline.
With regards to OCC I O and the pipeline overall.
Speaker Change: I think I mentioned last quarter, we're in an environment, where the nature of searches has really changed a lot.
Speaker Change: It's no longer really in our S. P game, it's about cultivating consultant relationships, putting yourself in a position where you're invited.
Speaker Change: To participate in a search and very often you're you're getting a call.
Speaker Change: Our incoming identifying that there's interest in one of our strategies, yeah, and asking us to participate.
Speaker Change: So we've been working very hard on building those relationships. So we've always had very good consultant relationships sandy domestically, we've been expanding them internationally and part of the investment that we've been making are in the firm has been.
Speaker Change: To make sure that we're making taking advantage of those opportunities, especially abroad. So some of the hiring is with regards to <unk>.
Speaker Change: Our.
Speaker Change: Client care and in business development with the with those consultants.
Speaker Change: So that said I I had mentioned that I'm not going to be measuring the pipeline going forward as we had in the past traditionally we had a great process of being able to keep it keep shareholders up to date on an apples to apples basis, but we're we're we're beginning to feel that that's not quite credible so I'm going to speak this morning.
Speaker Change: More about the color of what we're feeling and happy to talk more about it Jeff.
Speaker Change: Generally speaking I feel very very confident about the pipeline we have in global value in particular as I've said the potential there is absolutely enormous.
Speaker Change: The number of contacts that we have globally are very strong.
Speaker Change: And Ah I feel optimistic not only about a very large seek a second seed investment at some point in 2025.
Speaker Change: Follow on flows into that strategy, we're about to complete the.
Speaker Change: The building of an Australian trust, along with potential distribution. So that we can take in.
Speaker Change: Other other assets aside from institutional assets in that strategy, we are working on a UCITS.
Speaker Change: In Europe for that and other strategies at the firm.
Speaker Change: So I'm quite optimistic Oh C O O C. I O pipeline has slowed lots of activity in the pipeline, but nothing I would measure really strongly in our pipeline and I remain optimistic that those flows will pick back up.
Speaker Change: Currently that strategy stands at about one $8 billion at the firm.
Speaker Change: Our international value strategies have put up absolutely top tier great numbers.
Speaker Change: There's lots of good activity around that and I feel quite strong about our ability to build those those assets. So there's quite a few areas of the firm that I feel strongly about in terms of our growth looking out over the next two or three years, which should which should really.
Speaker Change: Help.
Speaker Change: So generally as you would take for my introductory remarks quite positive tone about what we're seeing now.
Speaker Change: The the only negative I would point out is that of course, we had a pull back in a U M. Due to volatile market Sandy and that overwhelmed I you know good news, it's going to happen at our size nothing we can do about it as you know that's just part of the business, it's going to come up and helped us sometimes it's going to hurt us.
Speaker Change: So important to look at what's happening organically and I feel very strongly that the organic picture looks very good. However, when you have market turmoil like this as much as or like the opportunities for the company and what we can do and we've always performed well.
Speaker Change: In those environments happy to talk more about it.
Speaker Change: It also means that asset allocators, not unlike investors generally in the high net worth space or elsewhere kind of looking around taking a pause thinking carefully about what they're going to do so the effect of this volatility uncertainty about global trade and the global macro environment.
Speaker Change: It certainly can hurt us short term as it did in the first quarter, obviously markets have become more constructive since then thankfully.
Speaker Change: Although they were down I guess in April as well to some extent. It also affects the search environment. So we are going through a little bit a period here of hesitation that we've got to work through but it doesn't change my medium to long term optimistic tone.
Speaker Change: Mhm.
And in the global area. Your team is now fully built out and how's the investment performance resolved is that still didn't quite satisfactory.
Speaker Change: Just about fully built out we're still working on those consultant a REIT business relationships that I that I told you about.
Speaker Change: And as as the assets grow there there may be some other things that will add but we've added analysts we've added business development support we've added international trading.
Speaker Change: Et cetera, so yeah, we're getting there.
Speaker Change: I'm sorry, the second part of your question Sandeep was performance.
Sandeep: Yes, it was good.
Sandeep: Performance is outstanding and very very good not only against the value benchmark they measure against but against the core benchmark, which interestingly we've been beating.
Sandeep: So we're going into the market not just with a great a great win and a potential big pipeline, but we're going into the market with very very strong performance and that performance by the way was was very good.
Sandeep: Despite the volatile markets. It was not just relative outperformance, we had good absolute performance and that strategy so quite remarkable.
Sandeep: Okay, great and the AR. It was good to see the buyback so could you just update us.
Sandeep: What price are.
Sandeep: You bought back stock and where are you now on the authorization looking forward on the buyback.
Sandeep: Yeah, we're done with the buyback we authorized 12 million.
Sandeep: We finished it I believe what are we in May we finished it last month, we felt really good about the buyback over the past two months or so we were able you may have noticed a really nice volume uptick in our stock we were able to effect.
Sandeep: Some block trades, which was part of that higher volume.
Sandeep: We've been working closely to identify where where we can buy stock back. So we felt great about that execution, we felt good about being able to.
Sandeep: To.
Sandeep: To do it in volume rather than being subject to just the daily volume restrictions and we'll be looking at that.
Sandeep: And perhaps some other things going forward, if we were to announce another buyback.
Sandeep: Buyback with regards to buybacks in in particular Theres a reason I mentioned it in my introductory remarks, I think at a time when we see so much opportunity that we have to invest in the business and admittedly.
Sandeep: Hit EBITDA and earnings the way, we have that it makes sense, if we have the capital.
Sandeep: To accrete shareholders or return capital depending on what their wishes may be.
Sandeep: At the same time that that we're doing that.
Sandeep: And we're in a really nice position with a super healthy balance sheet.
Sandeep: And in capital structure, where we can we can contemplate such a thing I think it's a great investment on behalf of shareholders.
Sandeep: Given the potential I see and so we will be evaluating that once again since that $12 million a buyback at these is complete.
Sandeep: Yeah.
Sandeep: Alright, great. Thank you.
Sandeep: You're welcome Sandy.
Speaker Change: Our next question comes from Chris Sakai with singular research. Please go ahead good morning, Chris.
Chris Sakai: Yes, good morning.
Chris Sakai: Just wanted to talk ask about the global expansion, how are things in Europe, and Singapore and can you add some color as to the a O N are there.
Chris Sakai: Yeah, I'm, the a well is a little difficult and I'm not going to go about measuring that in our calls Chris because we have clients and maybe domiciled in South Asia.
Chris Sakai: Or in Europe, but they may have accounts here in the United States or other offshore places.
Speaker Change: Yet they themselves, we consider south southeast Asian or.
Speaker Change: European clients, we've long had them and that includes across both the institutional and high net worth businesses given the global nature of families. In particular, it you'd be hard pressed to say, sometimes whether they're in new York, Singapore or or or Europe.
Speaker Change: So I'll give you more color instead of absolute AUM numbers, because we've always had those clients and in particular, we see strong opportunity based on the meetings, we're having and in fact, new clients that we've we've received and I'll talk about the build out with regards to Europe.
Speaker Change: On the high net worth side first and foremost we've always had very significant relationships there.
Speaker Change: Netherlands, Switzerland, Germany U K.
Speaker Change: And offshore places that you you would consider quote unquote European we also have new relationships as you know in Poland, which is an incredibly fast growing economy, I think I've mentioned before.
Speaker Change: As an example, now wealthier per capita than the U K and we'll soon on a per capita basis surpassed Japan, meaning this year and next year a real Dynamo.
Speaker Change: In in Europe, and we're excited to be kind of an early mover with some of those families.
Speaker Change: What we're changing is the fact that we would like to be able to proactively market in Europe, we can't do that right now we can only take inbound.
Speaker Change: Calls and people who are expressing interest in silvercrest, reaching out to us. So we've done well with people just reaching out to us.
Speaker Change: But what we have done and we'll be spending capital on Chris is.
Speaker Change: We've established a European entity.
Speaker Change: We are going through the process.
Speaker Change: Working with the regulators so that we are licensed to proactively market and be a fully licensed participant in the European market will be pursuing.
Speaker Change: A U K presence as well and had been laying the groundwork for that frankly for for probably six years, we're very diligent and careful before we step in and can't commit meaningful amounts of capital and so that process is proceeding and we will have our European license. So that we can do much more proactively market.
Speaker Change: I would say within the next ought to be conservative eight to 10 months, but I think it'll be sooner than that could be as soon as six months something like that.
Speaker Change: And.
Speaker Change: And in Southeast Asia as you know we are fully licensed and Singapore. The M. A S. A we now have people there we will be adding people there given the opportunities that we see in the end the meetings, we've been having with prospective clients. We do have clients in South East Asia, including in Singapore, I just got back from.
Speaker Change: A trip with potential partners in O C. I O clients as well as to meet talent, who can bring in a U M. So we'll keep you posted on that we've taken a very long steady approach again. This has been a multiyear effort that we've been very careful about committed capital to until we we know that we can succeed and we're kind of.
Speaker Change: At that point, where I feel we can we can do so on the institutional side are you will know that the global value strategy in particular, our international value strategy as well.
Speaker Change: <unk> are seeing significant interest from that side of the planet are whether that's in and we'll just call it broader Asia or in Australia.
Speaker Change: That remains very very promising it's very important for us to have a presence in that time zone to help a debt to help us execute that business with regards to Europe. We've always had institutional business in Europe, we have people who distribute for us.
Speaker Change: There we have a good relationship I've mentioned before with Edmond de Rothschild.
Speaker Change: There are other partners, we're working with who.
Speaker Change: Who will be marketing on our behalf I told you about the usage just a moment ago that we're building on behalf of the global value strategy in other strategies.
Speaker Change: So those obviously are all European based flows and I expect a lot more to come up that given our consultant relationships.
Speaker Change: Okay, great. Thanks for that answer and just one on the share buyback can you share any color on a potentially a new buyback in the amount there and how much that would be.
Speaker Change: I think I've given comments that we're very seriously looking at it Chris and why we would want to execute it as weak.
Speaker Change: Especially as we make investments that are at least for the in the meantime have a higher compensation ratio for the firm and therefore.
Speaker Change: <unk> hit our earnings and EBITDA were very conscious of that we feel great about what we're doing we forecast what we redoing explicitly for a long time before we did it and I think we've strategically laid out our plan I'd like to return capital to our shareholders or accrete them. While we do this so that they can benefit.
Speaker Change: At what I think is a good entry point.
Speaker Change: As we see this growth occur just as they've announced are these new accounts that have come in in the past two quarters.
Speaker Change: But we will assess the amount and when that may occur.
Speaker Change: Ready to make announcements along those lines at this time.
Speaker Change: Okay, great. Thanks for answers.
Chris Sakai: Thank you Chris appreciate the questions.
Speaker Change: Again, if you have a question. Please press Star then one.
Christopher Merrimack: Next question comes from Christopher Merrimack with Janney Montgomery Scott. Please go ahead.
Christopher Merrimack: Hi, Christopher Good morning, Hey, good morning, Thanks for hosting US. This morning are Rick in short I wanted to drill down on expenses and kind of the timing of sort of getting additional revenue versus expenses. Its the old fashioned operating leverage question I know yeah Super.
Speaker Change: For the quarter Super hard.
Christopher Merrimack: It's hard to give clarity to to be honest, but yeah. Okay go ahead.
Christopher Merrimack: But the big picture is still to kind of get that positive crack as you think about a year to year and perhaps we should think about this year over year and less quarter to quarter, but I'm. Just curious how you think about that in the big picture, it's less about next quarter and more about kind of how you look at more of the business. So I know, it's a long term focus and go yeah. It really is and I think the last call I talked about.
Working through this through the end of 2026 and part of the reason is this let's tear apart that that they are.
Christopher Merrimack: And obviously this is a much longer play than that.
Christopher Merrimack: You were asking about the operating leverage I get it I think we're gonna grow into it but let's let's let's break it apart first of all we have the investments we've made in the global value equity team. You know, we built out a lot about out on that team, but there's a bit more to come but the pipeline there is huge absolutely enormous.
Christopher Merrimack: I do think as I've mentioned across that the international value team, which is separate from the global value team as you know and our other growth and value I could equity capabilities are hurt right now.
Christopher Merrimack: A bit of by the by the global macro environment and trade environment, just as the markets came down so the search environment was slowing a bit but I feel very strongly that the opportunity is significant.
Christopher Merrimack: That team on its own is going to go it's going to grow year over year definitely through those costs and start giving us leverage and of course, it's a nicely leverage ripple business, which will benefit the entire a firm so I feel strongly about that.
Christopher Merrimack: These flows can be so big that I hesitate to give you a forecast on what that can really mean for the firm timing is everything of course and you know there's there's a lot of variability when you were talking about large flows like that so the best I can say is that I'm.
Christopher Merrimack: <expletive>.
Christopher Merrimack: And I would hesitate to say.
Christopher Merrimack: But very bright then we have the investments in southeast Asia, which has been ongoing and are the new investments, we're making in Europe. We're also as you know building out our organic growth and and Atlanta, Georgia. So you know there are people, we're hiring there and have been.
Christopher Merrimack: There are capital expenditures with regards to those locations. They hang together with the global impression, we're making with our strategies, we've always done things, where the institutional business is applicable and related to the high net worth business I'm not building a fab.
Christopher Merrimack: Firm, where you're doing something disparate over there and and you know you've got strategy be that doesn't hang together with attracting very significant large families.
Christopher Merrimack: Those by the nature of the high net worth business are slower growing the advantage. There of course Christopher is that they are very very sticky assets and a very different business. Once you get that crank going and we have a history of being able to organically grow that business, which is incredibly.
Christopher Merrimack: For cold.
Christopher Merrimack: So that's going to take a bit more time as we as we lean into it but in our experience.
Christopher Merrimack: When you have the kind of environment, we do.
Christopher Merrimack: When you have the quality of the firm that we do and the nature of what we can do on an institutional level for these families that help silvercrest stand apart we succeed.
Christopher Merrimack: M L.
Christopher Merrimack: And that requires a bit more patience. So the ultimate leverage obviously is going to be on the institutional side.
Christopher Merrimack: And the faster growth is going to be on that side not surprisingly adds more leverage of the business can grow faster. The other investments we make are going to be slower.
Christopher Merrimack: And stickier.
Christopher Merrimack:
Christopher Merrimack: It's very hard to say how that plays out.
Christopher Merrimack: But that's going to be a longer term game for sure. So.
Christopher Merrimack: So I do expect to see increasing margins year over year, especially as that as markets even out at some point as we could get to some trade deals that should add operating leverages I would love to see the pendulum start swinging back towards our normalized EBITDA margins. It's certainly my ex.
Christopher Merrimack: Spectation that year over year, when we will make progress we're not going to be back to normal however, and the high twenty's or low thirties, unless unless they were really really big flaw.
Christopher Merrimack: Flows and have supportive markets at the same time, so therefore, I'm still looking out at least through the end of 2026, and we'll keep folks updated but look I feel very good we've seen almost 2 billion in net.
Christopher Merrimack: New client accounts over the past two quarters.
Christopher Merrimack: Hum.
Christopher Merrimack: Yeah.
Christopher Merrimack: We were only hurt by the declining.
Christopher Merrimack: Markets in the first quarter the closed accounts were very attenuated.
Christopher Merrimack: And so with a bit more supportive markets and some more flows you know that's some pretty significant progress already, especially if I were to parse investments. So I feel good year over year feel great as we look through 2026.
Christopher Merrimack: Great.
Christopher Merrimack: It required more color than you know the firm's stats I can't predict the future fully.
Christopher Merrimack: Yep understood and I guess at the end of the day, you know as long as I've covered you, we see the AUR and come in and then your ability to retain that has been very good obviously, a big move quarter to quarter, but that's the point, we're going to bring that out you would then exactly.
Christopher Merrimack: I will also mentioned we might take we might take a bit of a pause.
Christopher Merrimack: And I'm I'm, not I'm, not saying that I already know anything we were only a month into this quarter, but we may take a pause in the second quarter. That's okay. The reason I say that is clearly the search environments affected by the current global macroeconomic environment, Okay, let's look through that so what.
Christopher Merrimack: This is a long term business number one number two.
Christopher Merrimack: The day, you know theres always the potential for some tax outflows during the second quarter. There were two tax payments you know.
Christopher Merrimack: That are that are do that's always going to be a bit of a headwind even with supportive markets. We see that every year last year was again, a very very good capital gains ear for a lot of our clients I don't know, how that's going to shake out, but it's it's worth keeping in mind.
Christopher Merrimack: And and then you know we need to support markets as well.
Christopher Merrimack: Great and last question for me you know there's been a lot of macro conversation in the last five six weeks about international investors pulling capital from the U S and going back home.
Christopher Merrimack: Any of that.
Christopher Merrimack: Is that an issue for silvercrest at all or can you work through that given some of the other global strategies now employed.
Christopher Merrimack: We can wait for we can work through that first of all the the the vast majority of our assets are U S based so.
Christopher Merrimack: Not not a significant issue.
Christopher Merrimack: For us.
Christopher Merrimack: Secondly, we do have a global strategy are we have an emerging market strategy. We have an international strategy are those are you know by definition are purchasing companies.
Christopher Merrimack: And around the world and from what I see there's tons of capital that needs to go into those strategies and whether it's a local currency or U S. I don't I don't see that changing the United States as the world's largest economy are when we buy things for the rest of the world.
Christopher Merrimack: The rest of the world ends up with dollars there's dollars have to go somewhere.
Christopher Merrimack: And I don't I don't see that significantly are affecting us or or or changing the environment. I just got back from Asia I didn't see any personally as I said subjective color there maybe talk and at the margins there may be some of those moves but.
Christopher Merrimack: Look it's a big World, we're a small company, there's a lot of opportunity and we were meeting with people because they were interested so.
Christopher Merrimack: I don't think that's a really significant issue for us at this time.
Speaker Change: Right right. Thank you for the background I appreciate all the information today.
Speaker Change: Youre welcome Christopher Thanks for the questions.
Speaker Change: This concludes our question and answer session.
Speaker Change: Like to turn the conference back over to Rick Hough for any closing remarks.
Speaker Change: Thank you I appreciate everyone joining us for this first quarter of 2025 call. Our the good questions also greatly appreciate our shareholders who have been encouraging with regards to our long term strategy and the investments. We're making are just wanted to make it clear to anyone.
Scott and I are always available to take questions talk about what we're up to and works pretty excited over the next call it year.
Speaker Change: And certainly very excited for for beyond that given what we're building at the firm. Thanks, again and look forward to talking to everyone. Soon.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.