Q2 2025 Silvercrest Asset Management Group Inc Earnings Call
Good morning and welcome to the Silver Crest Asset Management Group. Second quarter 2025 earnings conference call. All participants will be in listen-only mode. Should you need assistance? Please signally, conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. Please note this event is being recorded.
Before we begin, let me remind you that during today's call certain statements made regarding our future performance or forward-looking statements, they are based on current expectations and projections, which are subject to a number of risks, and uncertainties. And many factors could cause actual results to differ materially from the statements that are made. Those factors are disclosed in our filings with the SEC. Under the caption risk factors for all, such forward-looking statements, we claim the protections provided by the litigation Reform Act of 1995 all forward-looking statements made on this. Call are made as of the date of hero of and Silver Crest assumes. No obligation to update update them.
I would like now to turn the conference over to Rick Huff chairman and CEO of Silver Crest. Please go ahead.
Great. Thank you. And thank you for joining us for the second quarter of 2025 update.
Our discretionary assets under management increased a billion dollars, during the second quarter primarily due to strong markets. While our net flows were negative silver cost added 80 million in organic, new client accounts. And we've added half a billion in new client accounts during the first half of 2025 that is on Pace to be 1 of the stronger levels of organic new client flows over the past several years.
So procrastinated approximately 2 billion in organic new client accounts, over the past 4 quarters.
Our discretionary AUM, which drives the revenue now stands at 23.7 billion which is a 4.4% sequential quarterly increase and an increase of 9.7% year-over-year, our total AUM at the end of the second quarter. Hit a new high for the firm at 36.7 billion.
Barring short-term Market volatility to increase in AUM, boats. Well for future revenue and Silver. Krust primarily bills quarterly in advance.
Silvercrest, strategic Investments continue to promote growth and our earnings and adjusted. EBA job. Reflect a concerted effort to invest Capital to support our long-term strategic priorities.
We remain highly optimistic about securing more significant organic flows over the course of 2025 and 2026 as our investments, bear fruit.
Our strategic initiative is to highlight Silver Crest in both the institutional and wealth markets. The firm continues to invest in talent across the organization to drive new growth and successfully transition the business toward the next generation of professionals. Our new business pipeline remains robust.
Continue to Monitor and adjust, our interim, compensation ratio in a 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 completed a 12 million stock repurchase program at the beginning of the second quarter. And as a result, we announced a new buyback program of 25 million on May 23rd of this year, our strong balance sheet supports ongoing Capital returns, as well as our growth initiatives.
We will continue to look for opportunities to return Capital to or create shareholders especially as we invest in the business.
On July 30th. The company's board of directors approved, an increase of 5% of the company's quarterly dividend from 20 cents per share of class, a common stock to 21 cents per share of class a common stock. The dividend will be paid on or about September 19th to stockholders of record as of the close of business on September 12th.
We'll take questions after we get through the financials which I uh, will have Scott Garrard our CFO address now. Thank you.
Great, thanks. Rick, as disclosed in our earnings release for the second quarter, discretionary AUM as of June 30th of this year was $23.7 billion, and total AUM as of the same period was $36.7 billion.
Revenue for the quarter was 30.7 million and reported Consolidated. Net income for the quarter was 3.1 billion.
revenue for the quarter decreased year-over-year, by 0.3 million or
1%, primarily driven by a decrease in the average annual management fee rate. Due to the mixing AUM, expenses for the quarter increased year-over-year by $0.9 million or 3.7%, primarily driven by increased compensation and benefits expense and GNA. Expenses for compensation and benefits for the quarter increased year-over-year by $0.3 million, or 1.7%, primarily due to increases in salaries and benefits expenses, mainly as a result of merit-based increases and new hires, which drove the higher recurring cash compensation ratio.
Partially offsetting the salary increases were decreases in the approval for bonuses and equity-based compensation.
G&A expenses, increased by 6 million, or approximately 8.8%, primarily due to increases in professional fees, occupancy and related, expenses, marketing and advertising, shareholder expenses and traveling and entertainment expenses, reported net income attributable to the Silver Crest or the class A shareholders. For the second quarter was approximately
1.9 million or 21 cents per basic and diluted Class A share adjusted ibida, which we Define as zubaydah without giving effect to equity. Based compensation expense, and non-core, and non-recurring items was approximately 5.7 million or 18.7% of revenue for the quarter.
Adjusted net income, which we defined as net income without giving effect to non-core and on recurring items and income tax expense. Assuming a corporate rate of 26% was approximately 3.3 million for the quarter or 26 Cents and 25 cents per adjusted basic and diluted earnings per share respectively.
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 diluted, we add unvested restricted stock units, and non-qualified stock options to the total shares outstanding to compute diluted adjusted eps.
looking at the first half of the Year Revenue, uh, increased year-over-year by 0.8 million or 1.3%, primarily driven by market appreciation and partially offset by net client outflows expenses for the first half increased year-over-year by 3.1 million or 6.3% primarily driven by increased
Compensation and benefits expense and GNA expenses.
Compensation and benefits expense for the first half increased year-over-year by 1.5 million or 4.2%. Primarily, again, due to increases in salaries and benefits expense, as a result of merit-based increases and new hires, partially offset, by decreases in the acru, for bonuses and Severance expense.
Professional fees occupancy and related expenses. Shareholder costs marketing costs.
And portfolio and systems expense.
Reported net income attributable to Silver Crest or the class A shareholders. For the first half was approximately 4.4 million or 47 cents per basic and diluted class a share.
Adjusted ibida, was approximately 12.2 million or 19.7% of revenue for the first half?
Adjusted net income was approximately 7.2 million for the first half or 57 cents and 54 cents per adjusted basic and diluted EPS respectively.
Looking at the balance sheet, total assets were approximately $152.7 million as of June 30th of this year, compared to $194.4 million as of the end of last year. Cash and cash equivalents were approximately $30 million as of June 30th, compared to 68.66% at the end of last year. There were no borrowings as of June 30th of this year.
Total Class A stockholders' equity was approximately $64.6 million on June 30.
We repurchased Class A shares totaling approximately 15.3 million. During the second quarter, that concludes my remarks. Now, I will turn the call over for Q&A.
Thank you, Scott. We're ready to take questions at this time.
We will now begin the question-and-answer session. To ask a question on your touchtone phone, if you're using a speakerphone, please pick up your handset before pressing the keys to withdraw your question. Please press star, then 2.
Our first question comes from Sandy meta of evaluate research.
Please go ahead.
Yes, uh, good morning, Rick and Scott.
Um uh can you talk a little bit about the the pipeline? Uh you uh, you mentioned that you're optimistic in the second half and going forward.
I understand that you're not getting hard numbers, uh, for the pipeline but just talk in general about, uh, what you're seeing and also, uh, it was encouraging to see that. I I noticed that you included the, uh, Global value composite performance numbers, uh, in your, uh, uh, for performance, uh, update there and uh, the numbers look very good. So, uh, hopefully that you know, should lead to some influence going forward.
Sure, um, let me address, uh, starting with that Global value team. Um, since you raised that last and and then I'll get into the pipeline because, um, as you know, we, we've been measuring, uh, or struggling exactly how to measure the the pipeline, compared to how we've done in the past. First of all, we hired, um, the team to run the, the the global value Equity strategy, um, about a year ago. Um, we had some building out of that team to do, uh, We've uh, added analysts we've added trading. Uh, we had to set up obviously relationships for that. Those things custody. Uh, We've added Professionals for marketing, uh, support. Um, and, uh, we are currently in process, uh, across the firm of centralizing institutional distribution for better coordination and, uh, given, uh, the interest that we have globally, we are in the process of hiring an intern.
We certainly are having a lot of discussions. We are not measuring very much in the pipeline, uh, for that capability, um, because of of the nature of where we are with conversations. Um, so if I give you a pipeline number, I will I will convey that that is, um, what we can very clearly measure for most of our strategies. Um, but does not include, uh, the softer things, um, that, uh, comprise a much larger pipeline, uh, the pipeline that we can very clearly measure which is to say, uh, invite only, uh, capabilities finals. Um, or semi-finals and 6-month actionable pipeline is about 200 million that is doubled, uh, since the last quarter. Um, but, um, I can safely say that the, the pipeline is much, much larger than that. In terms of what we, we think the
possibilities are going to be over the next year and a half.
Um, and as you noted, um the performance is is excellent. Uh, thank you Sandy.
Um, the uh, uh, I think you mentioned, uh, 15.3 million, uh, stock was bought back. Can you mention with the average price was or how many shares bought back? I noticed the share count, um, for for this quarter was down 4.4% year-over-year, which is encouraging to see. Sure. Yeah, well, so first of all, we've been able to, to put the money to work and purchase back our stock a lot faster than we had previously. Uh, we were much more aggressive in taking advantage of block trades. Um, so, um, you know, we we have, we've already purchased as you saw 15.3 million. Um, it took us much longer to do 12 million in the prior, uh, buyback. Uh, and so, you know, we have an approximate 10 million dollars to go um, and and we'll see what that is. Um I don't have the average price uh safe. To say, we've been very happy of what we've, what we've been buying it back at.
Uh, Scott, did we announce an average price, or do you happen to have that?
Prices.
Okay. Okay. Okay. And just 1 final question you you mentioned, um, uh, you know, returning capital or probably, uh, or perhaps the creative Acquisitions, anything on the horizon, anything that you're seeing different in terms of possible.
Acquisitions or, you know, buying a team or hiring a team.
Um, we're we're always in conversations with different Folks at different stages. Um,
And I, I really don't handicap that, um, because deals are done until they're done at the last, uh, at the last minute, right? Things can fall apart. So, I hesitate to mention it but we, we are active that the market remains expensive. Um, as you might imagine. However, there are going to be firms with a ultra high net worth audience that do business in a way that's compatible with us, that really desires, the kind of culture that we have very special on it at at Silver Crest. And that finally may be in a key strategic Place, uh, for the firm and where we have visibility to organically, uh, grow the business. So those are all the, the pieces. Um, that really need, uh, to come together Sandy. What I have said to your point about, um, the use of capital. Look, we increase the dividend again. Uh, that's 1 way of returning value and to pay our shareholders and an ongoing basis. Um but I have also said that I will do BuyBacks if the price is
Compelling, uh which is equivalent to doing an acquisition of of of a company. I know very well and feel very strongly uh in our ability to grow. Uh, so that those are the levers but I'm not going to comment more on on on the likelihood of m&a just suffice it to say that we're we're always looking at opportunities with regards to lift outs. Um those 2 um are are have potential and um it I think it actually the the possibility for that as increased a bit. Um compared to, let's just say the prior 5 years uh which is an interesting um uh development uh final point on that on the average price. Um since we are still on the mic Market that you know there's only so much. I want to reveal about our strategy there.
All the best. Thank you so much. Thank you, Sandy.
As a reminder, if you have a question, please press star then 1.
Our next question comes from Christopher Marinette of Janney Montgomery Scott.
Go ahead.
Hey, good morning, Rick and Scott. Thank you for hosting us this morning. Um, I wanted to ask a little bit about the sort of, I think it's been a multi quarter, kind of Revenue shift, in terms of mix. So as we look at um, Revenue, maybe on a basis point, um, of of AUM.
Is that shift kind of over? Or is it going to continue to evolve? And then also um, just curious on your uh, thought about um, how the next few quarters look uh as far as sort of getting more operating leverage through the income statement.
Yeah, okay, so, with regards to the AUM shift, I mean, the the the mixed shift it's um, mostly driven by, uh, institutional mandates which which have a lower AUM and or Ocio not wealth. The where we are in the wealth Market has been, uh, pretty solid and and, and, and quite sticky. Um, so if we make, uh, more progress, which I expect in the institutional Market, especially with new capabilities, you can expect to see, uh, the basis point per AUM, continue to come down a bit. Um, on the other hand, it's as, you know, a nicely leveraged business and it has a lot of operating leverage once you really get it going. Um, so, um, I I really don't. Um,
Think it's a hugely material issue. Um, if anything, it's, it's to the benefit of the firm long term. Uh, once we get to scale after all, we've done a lot of hirings. And, um, we need to AUM flows to, to justify that.
Operating Leverage is going to take time. I've talked about our strategy through 2026, we still have hires to go. We have initiatives in right now alone in Atlanta.
In uh, uh, Dublin. So we have access to the EU. Um, we're working on a on a trust. We've already started our our process with the Central Bank of Ireland that allows us to directly Market very important to us.
Um, we have Singapore. Um, we we've got building out the institutional team.
Uh so um you you start adding that up and it's it's quite a we've added to family office services and we also have transitions happening at the company. So
Um, it's going to take a while for us to get the operating leverage. Um, but once the flows, um, if well if they continue which has been a pretty good pace and um, the the hiring will eventually slow. We should see significant operating leverage on par with what we used to have at the firm before. We started making these these Investments.
Got it, great. So timing is still a a a a a factor in this but again oh for sure. Yeah, yeah, okay, yeah, we make we we we're very pleased.
At, uh, at the progress we've made. Um, we've only just hired some of these folks including, you know, some of the marketing organization.
Um, a lot can change quickly but you know, we do have a lot of initiatives, so, you know, keep looking through through this year.
Understood and the same is going to go for the GNA extension ratio of the comp ratio, and then, even down margin, it's all kind of part of the same point you're making. Yeah, they are. They all are related. Um, obviously there's there's more travel for marketing right now and that's unrelated to revenue, its Revenue yet to come. So that pushes up GNA. We have identified some Savings in GNA, um, that'll that'll help a bit, um, and, and that'll be coming across in a couple of quarters. Um, but um, that activity goes right in line, with, with the heavy marketing, that we're doing to organically grow the company,
Great. And last question for me, just to get a little more granular on the Ocio business, um, is that pipeline as good as you wanted it to be, is it going to contribute more to the overall mix? I know it. It is, you know, cross through, uh, you know, certain size barriers a quarter, or 2 ago.
Yeah. Um, did that pipeline come down a bit? Um, it could be stronger. Um, it has been stronger, so I would like to see that increased. Um, we have uh,
Finals coming up as part of the pipeline for 100 million. Um,
Uh, in this next quarter.
Uh, I think I'd mentioned previously, that Ocio team actually won a family office of 300 million, a couple of quarters ago, that's now, um,
Uh so um you know there's going to be progress there. The hundred million dollar mandate were we to win it, right? Not would you never never know. It would be a nice uh, you know, 5% or so increase. Uh, but uh, that pipeline has been stronger and um, whereas s working to build it,
great, thank you for all the background today and for taking our questions,
Yeah, you're welcome. Good to talk to you as always.
This concludes our question and answer session. I would like to turn the conference back over to Mr. Rick Huff, for any closing remarks.
Thank you very much. Thanks for joining us, uh, for uh, our second quarter call as we've mentioned, there's a tremendous number of initiatives at the firm uh, in order to to continue uh building a world-class Enterprise and um to uh gather organic flows. Uh, we've got a pretty good new client track record over the past 4, uh, quarters and we hope to continue that progress, um, to, to show these Investments are paying off for our investors. Thank you so much for joining us and look forward to talking to everyone at the end of next quarter.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect