Q2 2026 Silvercrest Asset Management Group Inc Earnings Call

July 31, 2026

Speaker #1: Good morning, and welcome to the Silvercrest Asset Management Group Q2, 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Operator: Good morning. Welcome to the Silvercrest Asset Management Group Q2 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a 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 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. 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.

Speaker #1: 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 are forward-looking statements.

Speaker #1: They are based on current expectations and projections. Which are subject to a number of risks and uncertainties, and many factors could cause actual results to differ materially from the statements that are made.

Speaker #1: 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.

Speaker #1: All forward-looking statements made on this call are made as of the date hereof, and Silvercrest assumes no obligation to update them. I would now like to turn the conference over to Richard Hough, Chairman and CEO of Silvercrest.

Operator: All forward-looking statements made on this call are made as of the date hereof. Silvercrest assumes no obligation to update them. I would now like to turn the conference over to Rick Hough, Chairman and CEO of Silvercrest. Please go ahead.

Speaker #1: Please go ahead.

Speaker #2: Good morning, and thank you for joining us for the second quarter 2026 earnings call. Silvercrest made strategic progress during the second quarter, and the plan we've described over the past two years is proceeding as we designed.

Richard R. Hough III: Good morning. Thanks for joining us for the Q2 2026 earnings call. Silvercrest made strategic progress during the Q2. The plan we've described over the past two years is proceeding as we designed. Discretionary assets under management, which primarily drives the firm's revenue, increased 6.9% during the Q2 to $24.7 billion at 30 June 2026. From $23.1 billion at 31 March 2026, driven by market appreciation partially offset by net client outflows. Outflows during the quarter were primarily attributable to seasonal high net worth client withdrawals for tax payments, consistent with prior Q2s, as well as institutional outflows. Over $200 million of those outflows will have no revenue effect at the firm. Year-over-year, discretionary AUM grew 4.2% from $23.7 billion. Total AUM increased 3.6% during the quarter to $37.0 billion. Excuse me one moment.

Rick Hough: Good morning. Thanks for joining us for the Q2 2026 earnings call. Silvercrest made strategic progress during the Q2. The plan we've described over the past two years is proceeding as we designed. Discretionary assets under management, which primarily drives the firm's revenue, increased 6.9% during the Q2 to $24.7 billion at 30 June 2026. From $23.1 billion at 31 March 2026, driven by market appreciation partially offset by net client outflows. Outflows during the quarter were primarily attributable to seasonal high net worth client withdrawals for tax payments, consistent with prior Q2s, as well as institutional outflows. Over $200 million of those outflows will have no revenue effect at the firm. Year-over-year, discretionary AUM grew 4.2% from $23.7 billion. Total AUM increased 3.6% during the quarter to $37.0 billion. Excuse me one moment.

Speaker #2: Discretionary assets under management, which primarily drive the firm's revenue, increased 6.9% during the second quarter to $24.7 billion at June 30, 2026, up from $23.1 billion at March 31, 2026.

Speaker #2: Driven by market appreciation, partially offset by net client outflows. Outflows during the quarter were primarily attributable to seasonal high-net-worth client withdrawals for tax payments, consistent with prior second quarters, as well as institutional outflows.

Speaker #2: Over 200 million of those outflows will have no revenue effect at the firm. Year over year, discretionary AUM grew 4.2% from 23.7 billion. Total AUM increased 3.6% during the quarter to 37.0 billion.

Speaker #2: Excuse me, one moment. I've got to catch in my throat. Excuse me. Thank you. Organic new client account flows were 111 million for the second quarter, up from 81 million in the first quarter and 80 million in the prior year.

Richard R. Hough III: I've got a catch in my throat. Excuse me. Thank you. Organic new client account flows were $111 million for the Q2, up from $81 million in the Q1. $80 million in the prior year period. As discussed in prior quarters, non-discretionary AUM are associated with a small portion of revenue. We will adjust how the firm reports non-discretionary AUM next quarter, likely eliminating the non-discretionary category. The adjustment will substantially lower reported non-discretionary and total AUM on a one-time basis without any revenue effect. We seek to provide investors with a clearer picture of the discretionary AUM and economics that drive our business. While revenue was flat year-over-year, reflecting average AUM levels weighed down by Q1 outflows, we entered the Q3 with discretionary AUM meaningfully higher than the level that drove Q2 billing.

Rick Hough: I've got a catch in my throat. Excuse me. Thank you. Organic new client account flows were $111 million for the Q2, up from $81 million in the Q1. $80 million in the prior year period. As discussed in prior quarters, non-discretionary AUM are associated with a small portion of revenue. We will adjust how the firm reports non-discretionary AUM next quarter, likely eliminating the non-discretionary category. The adjustment will substantially lower reported non-discretionary and total AUM on a one-time basis without any revenue effect. We seek to provide investors with a clearer picture of the discretionary AUM and economics that drive our business. While revenue was flat year-over-year, reflecting average AUM levels weighed down by Q1 outflows, we entered the Q3 with discretionary AUM meaningfully higher than the level that drove Q2 billing.

Speaker #2: As discussed in prior quarters, non-discretionary AUM is associated with a small portion of revenue. We will adjust how the firm reports non-discretionary AUM next quarter, likely eliminating the non-discretionary category.

Speaker #2: The adjustment will substantially lower reported non-discretionary and total AUM on a one-time basis, without any revenue effect. We seek to provide investors with a clearer picture of the discretionary AUM and the economics that drive our business.

Speaker #2: While revenue is flat year over year, reflecting average AUM levels, weighed down by first-quarter outflows, we enter the third quarter with discretionary AUM meaningfully higher than the level that drove second-quarter billing.

Speaker #2: In fact, our discretionary AUM is now at an all-time high for the firm. Our institutional pipeline has grown substantially and remains robust, particularly in our global and international equity strategies.

Richard R. Hough III: In fact, our discretionary AUM is now at an all-time high for the firm. Our institutional pipeline has grown substantially and remains robust, particularly in our global and international equity strategies, which continue to deliver exceptional performance. This week, we received and are investing an AUD 500 million contribution, that's approximately $350 million, to our Global Value strategy. That strategy now manages $2.5 billion. Silvercrest institutional business now stands at $9.8 billion in AUM, up from $8.7 billion at the end of Q1. Our OCIO business, which the firm built from inception, now manages $2.9 billion. We've made significant progress on our global infrastructure and distribution build-out and are entering the revenue phase. We expect to complete our MiFID license through the Central Bank of Ireland by the end of Q3.

Rick Hough: In fact, our discretionary AUM is now at an all-time high for the firm. Our institutional pipeline has grown substantially and remains robust, particularly in our global and international equity strategies, which continue to deliver exceptional performance. This week, we received and are investing an AUD 500 million contribution, that's approximately $350 million, to our Global Value strategy. That strategy now manages $2.5 billion. Silvercrest institutional business now stands at $9.8 billion in AUM, up from $8.7 billion at the end of Q1. Our OCIO business, which the firm built from inception, now manages $2.9 billion. We've made significant progress on our global infrastructure and distribution build-out and are entering the revenue phase. We expect to complete our MiFID license through the Central Bank of Ireland by the end of Q3.

Speaker #2: Which continue to deliver exceptional performance. This week, we received in our investing an Australian $500 million contribution. That's approximately $350 million USD to our global value strategy.

Speaker #2: That strategy now manages $2.5 billion. Silvercrest's institutional business now stands at $9.8 billion in AUM, up from $8.7 billion at the end of the first quarter.

Speaker #2: Our OCIO business, which the firm built from inception, now manages $2.9 billion. We've made significant progress on our global infrastructure and distribution build-out, and are entering the revenue phase.

Speaker #2: We expect to complete our MiFID license through the Central Bank of Ireland by the end of the third quarter. With our Australian unit trust established, our UCITS vehicle and European licensing near completion, the administrative and legal costs associated with these initiatives will decline meaningfully as the distribution access they create begins to contribute.

Richard R. Hough III: With our Australian unit trust established, our UCITS vehicle and European licensing near completion, the administrative and legal costs associated with these initiatives will decline meaningfully as the distribution access they create begins to contribute. We've now achieved important third-party ratings for our strategies and vehicles, we are working on additional ratings with major global consultants, which we expect to further open institutional distribution channels worldwide. We continue to invest in the firm's talent. Our Dublin head of office and our first Dublin-based portfolio manager join the firm next week, we look forward to making announcements about these impressive professionals. As previously discussed, Silvercrest will continue to adjust our compensation ratio to match compelling opportunities to organically grow the business. Total compensation and benefits expense was $20.5 million, representing 66.6% of revenue for the three months ended 30 June 2026.

Rick Hough: With our Australian unit trust established, our UCITS vehicle and European licensing near completion, the administrative and legal costs associated with these initiatives will decline meaningfully as the distribution access they create begins to contribute. We've now achieved important third-party ratings for our strategies and vehicles, we are working on additional ratings with major global consultants, which we expect to further open institutional distribution channels worldwide. We continue to invest in the firm's talent. Our Dublin head of office and our first Dublin-based portfolio manager join the firm next week, we look forward to making announcements about these impressive professionals. As previously discussed, Silvercrest will continue to adjust our compensation ratio to match compelling opportunities to organically grow the business. Total compensation and benefits expense was $20.5 million, representing 66.6% of revenue for the three months ended 30 June 2026.

Speaker #2: We've now achieved important third-party ratings for our strategies and vehicles, and we are working on additional ratings with major global consultants, which we expect to further open institutional distribution channels worldwide.

Speaker #2: We continue to invest in the firm's talent. Our Dublin head of office and our first Dublin-based portfolio manager joined the firm last week, and we look forward to making announcements about these impressive professionals.

Speaker #2: As previously discussed, Silvercrest will continue to adjust our compensation ratio to match compelling opportunities to organically grow the business. Total compensation and benefits expenses were $20.5 million, representing 66.6% of revenue.

Speaker #2: For the three months ended June 30, 2026. As we have consistently communicated, our earnings and adjusted EBITDA reflect the deliberate cost of the most significant investment program in the firm's history.

Richard R. Hough III: As we have consistently communicated, our earnings and adjusted EBITDA reflect deliberate cost of significant investment program in the firm's history, we expect the compensation ratio to remain elevated as these investments mature. As previously announced, our shareholders approved an increase in the number of shares issuable under our equity incentive plan. Intellectual capital is Silvercrest's most important resource, we intend to imminently make equity grants to the professionals who are building our business and executing our strategy. Attracting and motivating our professionals and working to align their long-term interests with those of our shareholders is fundamental to how we intend to grow the firm and compound value through this investment cycle and beyond. Look forward to taking your questions later in the call. Scott Gerard, our CFO, will now review the financials.

Rick Hough: As we have consistently communicated, our earnings and adjusted EBITDA reflect deliberate cost of significant investment program in the firm's history, we expect the compensation ratio to remain elevated as these investments mature. As previously announced, our shareholders approved an increase in the number of shares issuable under our equity incentive plan. Intellectual capital is Silvercrest's most important resource, we intend to imminently make equity grants to the professionals who are building our business and executing our strategy. Attracting and motivating our professionals and working to align their long-term interests with those of our shareholders is fundamental to how we intend to grow the firm and compound value through this investment cycle and beyond. Look forward to taking your questions later in the call. Scott Gerard, our CFO, will now review the financials.

Speaker #2: And we expect the compensation ratio to remain elevated as these investments mature. As previously announced, our shareholders approved an increase in the number of shares issuable under our Equity Incentive Plan.

Speaker #2: Intellectual capital is Silvercrest's most important resource, and we intend to imminently make equity grants to the professionals who are building our business and executing our strategy.

Speaker #2: Attracting and motivating our professionals and working to align their long-term interests with those of our shareholders is fundamental to how we intend to grow the firm and compound value through this investment cycle and beyond.

Speaker #2: We look forward to taking your questions later in the call. Scott Gerard, our CFO, will now review the financials.

Speaker #3: Great. Thank you, Rick. As disclosed, our discretionary AUM as of June 30 of this year was $24.7 billion, and total AUM as of the same period was $37 billion.

Scott A. Gerard: Great. Thank you, Rick. As disclosed, our discretionary AUM as of 30 June of this year was $24.7 billion, total AUM as of the same period was $37 billion. Revenue for the quarter was $30.8 million, reported consolidated net income for the quarter was $0.5 million.

Scott Gerard: Great. Thank you, Rick. As disclosed, our discretionary AUM as of 30 June of this year was $24.7 billion, total AUM as of the same period was $37 billion. Revenue for the quarter was $30.8 million, reported consolidated net income for the quarter was $0.5 million.

Speaker #3: Revenue for the quarter was $30.8 million, and reported consolidated net income for the quarter was $0.5 million. Revenue for the quarter increased year over year by $0.1 million, primarily driven by market appreciation and partially offset by net client outflows.

Scott A. Gerard: Revenue for the quarter increased year over year by $0.1 million, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the quarter increased year over year by $3.2 million or 12%, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation and benefits expense for the quarter increased year over year by $1.7 million, or 8.9%, primarily due to increases in salaries and benefits expense, primarily as a result of merit-based increases and new hires, including new staff in Ireland, an increase in the accrual for bonuses, and increased equity-based compensation expense. General and administrative expenses increased by $1.5 million, or approximately 19.3%, primarily due to increases in professional fees, travel and entertainment expense, especially related to our global initiatives, and portfolio and systems expense.

Scott Gerard: Revenue for the quarter increased year over year by $0.1 million, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the quarter increased year over year by $3.2 million or 12%, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation and benefits expense for the quarter increased year over year by $1.7 million, or 8.9%, primarily due to increases in salaries and benefits expense, primarily as a result of merit-based increases and new hires, including new staff in Ireland, an increase in the accrual for bonuses, and increased equity-based compensation expense. General and administrative expenses increased by $1.5 million, or approximately 19.3%, primarily due to increases in professional fees, travel and entertainment expense, especially related to our global initiatives, and portfolio and systems expense.

Speaker #3: Expenses for the quarter increased year over year by $3.2 million, or 12%, primarily driven by increased compensation and benefits expense, as well as general and administrative expenses.

Speaker #3: Compensation and benefits expense for the quarter increased year over year by $1.7 million, or 8.9%, primarily due to increases in salaries and benefits expense, primarily as a result of merit-based increases and new hires, including new staff in Ireland, as well as an increase in the accrual for bonuses and increased equity-based compensation expense.

Speaker #3: General and administrative expenses increased by $1.5 million, or approximately 19.3%, primarily due to increases in professional fees, travel and entertainment expense—especially related to our global initiatives—and portfolio and systems expense.

Speaker #3: Reported net income attributable to Silvercrest, or to Class A shareholders, for the second quarter was approximately $0.2 million, or $0.02 per basic and diluted Class A share.

Scott A. Gerard: Reported net income attributable to Silvercrest or to Class A shareholders for the Q2 was approximately $0.2 million or $0.02 per basic and diluted Class A share. Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and non-core, non-recurring items, was approximately $3.4 million or 11.2% of revenue for the quarter. Adjusted net income, which we define as net income without giving effect to non-core and non-recurring items and income tax expense assuming a corporate rate of 26%, was approximately $1.2 million for the quarter, or $0.10 per adjusted basic and diluted EPS. 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.

Scott Gerard: Reported net income attributable to Silvercrest or to Class A shareholders for the Q2 was approximately $0.2 million or $0.02 per basic and diluted Class A share. Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and non-core, non-recurring items, was approximately $3.4 million or 11.2% of revenue for the quarter. Adjusted net income, which we define as net income without giving effect to non-core and non-recurring items and income tax expense assuming a corporate rate of 26%, was approximately $1.2 million for the quarter, or $0.10 per adjusted basic and diluted EPS. 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.

Speaker #3: Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense, and non-core and non-recurring items, was approximately 3.4 million or 11.2% of revenue for the quarter.

Speaker #3: Adjusted net income, which we define as net income without giving effect to non-core and non-recurring items, and income tax expense assuming a corporate rate of 26%, was approximately $1.2 million for the quarter, or $0.10 per adjusted basic and diluted EPS.

Speaker #3: Adjusted earnings per share equals adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS. To the extent diluted, we add unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS, looking at the first half of the year.

Scott A. Gerard: 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 H1 of the year, revenue increased year over year by $0.1 million. Again, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the H1 increased year over year by $6.8 million or 12.8%, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation and benefits expense for the H1 increased year over year by $3.9 million or 10.5%, primarily due again to increase in salaries and benefits, primarily as a result of merit-based increases, increase in the accrual for bonuses, equity-based compensation, and severance expense.

Scott Gerard: 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 H1 of the year, revenue increased year over year by $0.1 million. Again, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the H1 increased year over year by $6.8 million or 12.8%, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation and benefits expense for the H1 increased year over year by $3.9 million or 10.5%, primarily due again to increase in salaries and benefits, primarily as a result of merit-based increases, increase in the accrual for bonuses, equity-based compensation, and severance expense.

Speaker #3: Revenue increased year over year by $0.1 million, again primarily driven by market appreciation and partially offset by net client outflows. Expenses for the first half increased year over year by $6.8 million, or 12.8%, primarily driven by increased compensation and benefits expense and general and administrative expenses.

Speaker #3: Compensation and benefits expense for the first half increased year over year by 3.9 million or 10.5%, primarily due again to increase in salaries and benefits primarily as a result of merit-based increases and increase in the accrual for bonuses equity-based compensation and severance expense.

Speaker #3: General and administrative expenses increased by 2.8 million or approximately 18.3%, primarily due to increases in professional fees, occupancy and related expenses, travel and entertainment expenses, and portfolio and systems expense.

Scott A. Gerard: General and administrative expenses increased by $2.8 million or approximately 18.3%, primarily due to increases in professional fees, occupancy and related expenses, travel and entertainment expenses, and portfolio and systems expense. Reported net income attributable to the Class A shareholders for the H1 was approximately $0.4 million or $0.05 per basic and diluted Class A share. Adjusted EBITDA was approximately $7.2 million or 11.5% of revenue for the H1, and adjusted net income was approximately $2.6 million for the H1 or $0.22 per basic, adjusted and diluted EPS. Looking at the balance sheet, total assets were approximately $139.9 million as of 30 June of this year compared to $166.6 million as of the end of last year. Cash and cash equivalents were approximately $20.7 million as of 30 June of this year compared to $44.1 million at the end of last year.

Scott Gerard: General and administrative expenses increased by $2.8 million or approximately 18.3%, primarily due to increases in professional fees, occupancy and related expenses, travel and entertainment expenses, and portfolio and systems expense. Reported net income attributable to the Class A shareholders for the H1 was approximately $0.4 million or $0.05 per basic and diluted Class A share. Adjusted EBITDA was approximately $7.2 million or 11.5% of revenue for the H1, and adjusted net income was approximately $2.6 million for the H1 or $0.22 per basic, adjusted and diluted EPS. Looking at the balance sheet, total assets were approximately $139.9 million as of 30 June of this year compared to $166.6 million as of the end of last year. Cash and cash equivalents were approximately $20.7 million as of 30 June of this year compared to $44.1 million at the end of last year.

Speaker #3: Reported net income attributable to the Class A shareholders for the first half was approximately $0.4 million, or $0.05 per basic and diluted Class A share. Adjusted EBITDA was approximately $7.2 million, or 11.5% of revenue for the first half, and adjusted net income was approximately $2.6 million for the first half, or $0.22 per basic adjusted and diluted EPS.

Speaker #3: Looking at the balance sheet, total assets were approximately 139.9 million as of June 30 of this year, compared to 166.6 million as of the end of last year.

Speaker #3: Cash and cash equivalents were approximately 20.7 million as of June 30 of this year, compared to 44.1 million at the end of last year.

Speaker #3: Borrowings totaled approximately $9.5 million as of June 30 of this year, and for the same period, total Class A stockholders' equity was approximately $46 million.

Scott A. Gerard: Borrowings totaled approximately $9.5 million as of 30 June of this year. Total Class A stockholders' equity was approximately $46 million for the same period. That concludes my remarks, and we'll go into Q&A.

Scott Gerard: Borrowings totaled approximately $9.5 million as of 30 June of this year. Total Class A stockholders' equity was approximately $46 million for the same period. That concludes my remarks, and we'll go into Q&A.

Speaker #3: That concludes my remarks, and we'll now move into the Q&A.

Speaker #2: Thank you, Scott.

Richard R. Hough III: Thank you, Scott.

Rick Hough: Thank you, Scott.

Speaker #3: Yeah.

Scott A. Gerard: Yeah.

Scott Gerard: Yeah.

Speaker #1: We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble the roster. The first question comes from Sandy Mehta from Evaluate. Please go ahead.

Speaker #1: To withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble the roster. The first question comes from Sandy Mehta from Evaluate.

Speaker #1: Please go ahead.

Speaker #4: Yes, good morning. There was a large jump in general G&A and expenses, so those expenses have gone from 25% to 30.5% in the first half. You have mentioned in your comments and in the press release that, now that you are near the end of your licensing process in Australia and Europe, those expenses might come down meaningfully.

Sandy Mehta: Yes, good morning. There was a large jump in the general G&A and expenses. Those expenses have gone from 25% to 30.5% in the H1. You have mentioned in your comments and in the press release that now that you are near the end of your licensing process in Australia and Europe, those expenses might come down meaningfully. What should we expect as a normal run rate for G&A expenses going forward?

Speaker #4: So, what should we expect as expenses going forward?

Speaker #3: Yeah. Unclear. Sandy, appreciate you asking. I hesitate to give you a precise figure. I just directionally want everyone to understand that with the completion of the Australian trust, with the near completion by the end of the third quarter of the usage as well as our work with the central bank of Ireland, expenses will come down.

Richard R. Hough III: Yeah. Sandy, appreciate you asking. I hesitate to give you a precise figure. I just directionally want everyone to understand that with the completion of the Australian trust, with the near completion by the end of Q3 of the UCITS, as well as our work with the Central Bank of Ireland, expenses will come down. There are some ratings done. There's still some more to go. Directionally, we should be seeing that decline, which will be a benefit to the company. This is directional comment, not a precise one. Right. I'll elaborate on that, Sandy, just to say that there will be some recurring expenses, such as statutory subsidiary audits in Ireland, similar to what we've experienced in Singapore. There will be a certain level of legal and accounting fees and other administrative fees that will be ongoing.

Rick Hough: Yeah. Sandy, appreciate you asking. I hesitate to give you a precise figure. I just directionally want everyone to understand that with the completion of the Australian trust, with the near completion by the end of Q3 of the UCITS, as well as our work with the Central Bank of Ireland, expenses will come down. There are some ratings done. There's still some more to go. Directionally, we should be seeing that decline, which will be a benefit to the company. This is directional comment, not a precise one. Right. I'll elaborate on that, Sandy, just to say that there will be some recurring expenses, such as statutory subsidiary audits in Ireland, similar to what we've experienced in Singapore. There will be a certain level of legal and accounting fees and other administrative fees that will be ongoing.

Speaker #3: There are some ratings done. There are still some more to go, but directionally, we should be seeing that decline, which will be a benefit to the company.

Speaker #3: So, this is a directional comment, not a precise one.

Speaker #2: Right. And I'll elaborate on that, Sandy, just to say that there will be some recurring expenses, such as statutory subsidiary audits in Ireland, similar to what we've experienced in Singapore.

Speaker #2: So, there will be a certain level of legal and accounting fees, and other administrative fees, that will be ongoing. But a lot of the startup-type professional fees—those will go away post-licensure.

Richard R. Hough III: A lot of the startup-type professional fees, those will go away post-licensure.

Rick Hough: A lot of the startup-type professional fees, those will go away post-licensure.

Speaker #4: Okay. Looking at year-to-date overall markets, small cap and value, after a while, both have done really well year-to-date. So, does that help you in terms of your marketing effort?

Sandy Mehta: Okay. Looking at year-to-date overall markets, small cap and value, after a while, both have done really well year-to-date. Does that help you in terms of your marketing effort? Are you seeing more interest in those types of strategies?

Speaker #4: Are you seeing more interest in those types of strategies?

Speaker #3: With regards to small cap value and the small cap institutional business, it absolutely helps. It certainly helps us with future retention of assets. Some of the outflows that we have commented on and experienced have been on the value book.

Richard R. Hough III: With regards to small cap value and the small cap institutional business, absolutely helps. Certainly helps us with future retention of assets. Some of the outflows that we have commented on and experienced have been on the value book. There's no doubt that the pickup in performance should be helpful. I hope that answers your question.

Rick Hough: With regards to small cap value and the small cap institutional business, absolutely helps. Certainly helps us with future retention of assets. Some of the outflows that we have commented on and experienced have been on the value book. There's no doubt that the pickup in performance should be helpful. I hope that answers your question.

Speaker #3: So there's no doubt that the pickup in performance should be helpful. I hope that answers your question.

Speaker #4: Yeah.

Sandy Mehta: Yeah.

Speaker #3: Okay.

Speaker #4: Okay. And it was great to see incremental flows into global; the performance there has been strong. Any further color that you can give us on inflows into your global and international strategies?

Richard R. Hough III: Okay.

Rick Hough: Okay.

Sandy Mehta: Okay. It was great to see incremental flows into global. The performance there has been strong. Any further color that you can give us on inflows into your global and international strategies?

Speaker #3: Sure, absolutely. Well, first of all, as I announced in my opening remarks, we received a half-billion Australian dollar investment, so that's now a total of $2.5 billion.

Richard R. Hough III: Sure. Absolutely. Well, first of all, as I announced in my opening remarks, we received a half billion AUD investment, that's now at AUD two and a half billion. Having really meaningful assets in the strategy is obviously a very important hurdle for any large allocator, especially if they're looking at large allocations. We have the Australian trust open. We expect imminently to be able to announce ratings that will make that trust available to investors in Australia, especially wealth investors and others. That's the purpose of that trust. We are looking forward to the commencement of flows in that strategy through that trust, and we look forward to making those announcements via press release when appropriate. We're in the process now of multiple ratings discussions, which will really open up the door to consultants globally to be recommending that vehicle.

Rick Hough: Sure. Absolutely. Well, first of all, as I announced in my opening remarks, we received a half billion AUD investment, that's now at AUD two and a half billion. Having really meaningful assets in the strategy is obviously a very important hurdle for any large allocator, especially if they're looking at large allocations. We have the Australian trust open. We expect imminently to be able to announce ratings that will make that trust available to investors in Australia, especially wealth investors and others. That's the purpose of that trust. We are looking forward to the commencement of flows in that strategy through that trust, and we look forward to making those announcements via press release when appropriate. We're in the process now of multiple ratings discussions, which will really open up the door to consultants globally to be recommending that vehicle.

Speaker #3: So, having really meaningful assets in the strategy is obviously a very important hurdle for any large allocator, especially if they're looking at large allocations.

Speaker #3: We have the Australian trust open. We expect imminently to be able to announce ratings that will make that trust available to investors in Australia, especially wealth investors and others that's the purpose of that trust.

Speaker #3: So, we are looking forward to the commencement of flows in that strategy through that trust, and we look forward to making those announcements via press release when appropriate.

Speaker #3: We're in the process now of multiple ratings discussions, which will really open up the door to consultants globally to be recommending that vehicle. I think, given its very strong, consistent performance along with a consistent process and team, that we will do quite well as we go forward.

Richard R. Hough III: I think given its very strong, consistent performance, along with a consistent process and team, that we will do quite well as we go forward. The pipeline itself, as I've mentioned before, is a little harder to measure than it used to be, given the change in the institutional business and how consultants work. The pipeline in general is strong across the global value team, the focused Emerging Markets, and international teams. They also have very strong outperformance. Our growth equity teams have very strong performance, and their pipeline has been building substantially. The total pipeline that we see right now of potential opportunity is well into the $billions. The lack of precision is just that it's hard for me to put a probability on that large a number. It's in the multiple $billions. This is reasonable.

Rick Hough: I think given its very strong, consistent performance, along with a consistent process and team, that we will do quite well as we go forward. The pipeline itself, as I've mentioned before, is a little harder to measure than it used to be, given the change in the institutional business and how consultants work. The pipeline in general is strong across the global value team, the focused Emerging Markets, and international teams. They also have very strong outperformance. Our growth equity teams have very strong performance, and their pipeline has been building substantially. The total pipeline that we see right now of potential opportunity is well into the $billions. The lack of precision is just that it's hard for me to put a probability on that large a number. It's in the multiple $billions. This is reasonable.

Speaker #3: The pipeline itself, as I've mentioned before, is a little harder to measure than it used to be, given the change in the institutional business and how consultants work.

Speaker #3: But the pipeline in general is strong across the Global Value team, the Focused Emerging Markets, and International teams. They also have very, very, very strong outperformance.

Speaker #3: And our growth equity teams have very strong performance, and their pipeline has been building substantially. So the total pipeline that we see right now of potential opportunities is well into the billions of dollars, and the lack of precision is just that it's hard for me to put a probability on that large a number.

Speaker #3: But it's in the multiple billions, and this is reasonable. This is not a two-year or three-year pipeline; it's a better pipeline than that.

Richard R. Hough III: This is not kind of a two-year, three-year pipeline. It's a better pipeline than that.

Rick Hough: This is not kind of a two-year, three-year pipeline. It's a better pipeline than that.

Speaker #4: Great. All the best. Thank you.

Sandy Mehta: Great. All the best. Thank you.

Speaker #3: You're welcome. Thanks.

Richard R. Hough III: You're welcome. Thanks.

Rick Hough: You're welcome. Thanks.

Speaker #1: Again, if you have a question, please press star one on your touchtone phone. The next question comes from Jim Marone from Singular Research. Please go ahead.

Operator: Again, if you have a question, please press star one on your touch-tone phone. The next question comes from Jim Morone from Singular Research. Please go ahead.

Operator: Again, if you have a question, please press star one on your touch-tone phone. The next question comes from Jim Moroney from Singular Research. Please go ahead.

Speaker #3: Good morning, Jim.

Jim Morone: Morning, Jim.

Jim Moroney: Morning, Jim.

Speaker #2: Great.

Jim Morone: Good morning.

Jim Moroney: Good morning.

Speaker #4: Good morning. My question is just with regards to the top line and the offset from the new client flows going out. So, can you just reflect on that?

Richard R. Hough III: Good morning.

Rick Hough: Good morning.

Jim Morone: My question is just with regards to the top line and just the offset from the new client flows going out. Can you just reflect on that? Is that a reflection of risk off by your clients, or are they moving to other firms? Can you maybe just shed some light on that?

Jim Moroney: My question is just with regards to the top line and just the offset from the new client flows going out. Can you just reflect on that? Is that a reflection of risk off by your clients, or are they moving to other firms? Can you maybe just shed some light on that?

Speaker #4: Is that a reflection of risk-off by your clients, or are they moving to other firms? Can you maybe just shed some light on that?

Speaker #3: Okay, so we need to, kind of, in looking at the top line and the flows in AUM, I think there are three important points.

Richard R. Hough III: Okay. In looking at the top line and the flows in AUM, I think there are three important points. One is that we were billing at a real low Q1, at the end of Q1. AUM is up substantially over the past year, but timing is everything, and given average AUM, and when you're billing really only four times a year, revenues haven't yet caught up to it. As I mentioned, the discretionary AUM, which drives revenue, is effectively at an all-time high where we sit today, given the investment we just received from Australia. It puts us in the ballpark of $25 billion, $24.7 billion for the quarter. That's point number one. Point number two, we normally see higher outflows for the high net worth business in Q2 for taxes.

Rick Hough: Okay. In looking at the top line and the flows in AUM, I think there are three important points. One is that we were billing at a real low Q1, at the end of Q1. AUM is up substantially over the past year, but timing is everything, and given average AUM, and when you're billing really only four times a year, revenues haven't yet caught up to it. As I mentioned, the discretionary AUM, which drives revenue, is effectively at an all-time high where we sit today, given the investment we just received from Australia. It puts us in the ballpark of $25 billion, $24.7 billion for the quarter. That's point number one. Point number two, we normally see higher outflows for the high net worth business in Q2 for taxes.

Speaker #3: One is that we were billing at a real low first quarter at the end of the first quarter. AUM is up substantially over the past year, but timing is everything.

Speaker #3: And given average AUM, and when you're billing really only four times a year, revenues haven't yet caught up to it. As I mentioned, the discretionary AUM, which drives revenue, is effectively at an all-time high where we sit today.

Speaker #3: Given the investment we just received from Australia, it puts us in the ballpark of $25 billion—$24.7 billion for the quarter. That's point number one.

Speaker #3: Point number two, we normally see higher outflows for the high net worth business in the second quarter. For taxes, we also see some in the third quarter—not nearly as much—but that is often a seasonal event.

Richard R. Hough III: We also see some in Q3, not nearly as much, but that is often a seasonal event. Next point, our high net worth clients generally are here to have their wealth managed with a very long-term view. Stable asset allocation, management of their cash flows and needs, along with a whole host of other requirements in managing significant family wealth, and the complexities involved around it, whether that's estate and trust issues, whether it is aspirations for their wealth with regards to charitable giving, lifestyle, et cetera. Most of our high net worth clients, the vast majority of them, Jim, are not here because of a particular capability. We don't tend to see hot flows in or out because of a risk-on or risk-off environment. There may be internal flows between fixed income or credit opportunities and equity, depending where someone is with their overall wealth.

Rick Hough: We also see some in Q3, not nearly as much, but that is often a seasonal event. Next point, our high net worth clients generally are here to have their wealth managed with a very long-term view. Stable asset allocation, management of their cash flows and needs, along with a whole host of other requirements in managing significant family wealth, and the complexities involved around it, whether that's estate and trust issues, whether it is aspirations for their wealth with regards to charitable giving, lifestyle, et cetera. Most of our high net worth clients, the vast majority of them, Jim, are not here because of a particular capability. We don't tend to see hot flows in or out because of a risk-on or risk-off environment. There may be internal flows between fixed income or credit opportunities and equity, depending where someone is with their overall wealth.

Speaker #3: Next point, our high net worth clients generally are here to have their wealth managed. But the very long-term view, stable asset allocation, management of their cash flows and needs, along with the whole host of other requirements in managing significant family wealth—and the complexities involved around it—whether that's state and estate and trust issues, or aspirations for their wealth with regards to charitable giving, lifestyle, etc.

Speaker #3: Most of our high net worth clients, the vast majority of them, Jim, are not here because of a particular capability. And so we don't tend to see hot flows in or out because of a risk on or risk off environment.

Speaker #3: There may be internal flows between fixed income, or credit opportunities, and equity. Depending on where someone is with their overall wealth, a lot of those movements at the company between strategies don't really affect revenue that much, because of the nature of how we fee our wealth management clients.

Richard R. Hough III: A lot of those movements at the company between strategies don't really affect revenue that much because of the nature of how we fee our wealth management clients. We like to remain as unbiased as possible as fiduciaries, and therefore, we seek where possible to avoid the conflict of fee compensation. The next point would be that $200 or $200-plus million of those outflows that you saw in Q2 were related to certain family relationships with flat fee type arrangements or other arrangements, and those outflows had zero revenue effect on the top line as a result. We're doing a substantial amount of work, have special arrangements with them, and they can see very large cash flows in or out of different things, and it doesn't really affect the company or its revenues.

Rick Hough: A lot of those movements at the company between strategies don't really affect revenue that much because of the nature of how we fee our wealth management clients. We like to remain as unbiased as possible as fiduciaries, and therefore, we seek where possible to avoid the conflict of fee compensation. The next point would be that $200 or $200-plus million of those outflows that you saw in Q2 were related to certain family relationships with flat fee type arrangements or other arrangements, and those outflows had zero revenue effect on the top line as a result. We're doing a substantial amount of work, have special arrangements with them, and they can see very large cash flows in or out of different things, and it doesn't really affect the company or its revenues.

Speaker #3: We like to remain as unbiased as possible as fiduciaries and therefore we seek where possible to avoid the conflict of fee compensation. The next point would be that 200 or 200-plus million of those outflows that you saw in the second quarter were related to certain family relationships with flat fee type arrangements, or other arrangements.

Speaker #3: And those outflows had zero revenue effect on the top line as a result. We're doing a substantial amount of work, have special arrangements with them, and they can see very large cash flows in or out of different things, and it doesn't really affect the company or its revenue.

Speaker #3: The final point is that most of the outflows, since we're focused on that on the top line, were from the institutional business on the value side of the business, which has had some relative performance issues, as Sandy just pointed out.

Richard R. Hough III: The final point is that most of the outflows, since we're focused on that on the top line, were from the institutional business on the value side of the business, which has had some relative performance issues. As Sandy just pointed out, that's been picking up. That is something we're watching carefully, and we all have to be aware of.

Rick Hough: The final point is that most of the outflows, since we're focused on that on the top line, were from the institutional business on the value side of the business, which has had some relative performance issues. As Sandy just pointed out, that's been picking up. That is something we're watching carefully, and we all have to be aware of.

Speaker #3: That's been picking up. But that is something we're watching carefully. And we all have to be aware of.

Speaker #4: Yes, thank you so much for that clarity.

Jim Morone: Yes. Thank you so much for that clarity.

Jim Moroney: Yes. Thank you so much for that clarity.

Speaker #3: You're welcome.

Richard R. Hough III: You're welcome.

Rick Hough: You're welcome.

Speaker #1: Again, if you have a question, please press star one. This concludes our question and answer session. I would like to turn the conference back over to Rick Hough for closing remarks.

Operator: Again, if you have a question, please press star one. This concludes our question and answer session. I would like to turn the conference back over to Rick Hough for closing remarks.

Speaker #3: Thank you for joining us to review the second quarter questions. I look forward to updating you on further progress in our expansion and investment plans as we go to future quarters.

Richard R. Hough III: Thank you for joining us to review Q2 of this year and for the questions. I look forward to updating you on further progress in our expansion and investment plans. As we go to future quarters, I would ask investors who are interested to pay attention to upcoming press releases. We are going to, given the amount of activity, likely have more news to share intra-quarter, whether that's new hires that are important to the firm or some of the ratings with consultants and others that I have mentioned. Thanks again for joining us and look forward to talking to you soon. Thank you.

Rick Hough: Thank you for joining us to review Q2 of this year and for the questions. I look forward to updating you on further progress in our expansion and investment plans. As we go to future quarters, I would ask investors who are interested to pay attention to upcoming press releases. We are going to, given the amount of activity, likely have more news to share intra-quarter, whether that's new hires that are important to the firm or some of the ratings with consultants and others that I have mentioned. Thanks again for joining us and look forward to talking to you soon. Thank you.

Speaker #3: I would ask investors who are interested to pay attention to upcoming press releases. We are going to, given the amount of activity, likely have more news to share intra-quarter.

Speaker #3: Whether that's new hires that are important to the firm, or some of the ratings with consultants and others that I had mentioned. Thanks again for joining us, and we look forward to talking to you soon.

Speaker #3: Thank you.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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