Silvercrest Asset Management Group, Inc. Class A Stock

Good morning, and welcome to the Silvercrest Asset Management Group Q2 2026 Earnings Conference Call. [Operator Instructions] 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, 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 hereof, and 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.

Good morning, and thanks for joining us for the second quarter of 2026 earnings call. Silvercrest made strategic progress during the second quarter, and the plan we described over the past 2 years is proceeding as we designed. Discretionary assets under management, which primarily drives the firm's revenue, increased 6.9% during the second quarter to $24.7 billion at June 30, 2026, and from $23.1 billion at March 31, 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 second quarters 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. I've got a 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 period. As discussed in prior quarters, nondiscretionary AUM are associated with a small portion of revenue. We will adjust how the firm reports nondiscretionary AUM next quarter, likely eliminating the nondiscretionary category. The adjustment will substantially lower reported nondiscretionary and total AUM on a onetime 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 first quarter outflows, we entered the third quarter with discretionary AUM meaningfully higher than the level that drove second quarter billing. 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 USD 350 million, to our Global Value strategy. 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. 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 the third quarter. With our Australian unit trust established, our UCITS vehicle and European licensing near completion, and 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, and 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 will join the firm next week, and 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 3 months ended June 30, 2026. As we have consistently communicated, our earnings and adjusted EBITDA reflect deliberate cost of significant investment program in the firm's history, 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. 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. Attracting and motivating our professionals and working to align their long-term interest 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.

Great. Thank you, Rick. And 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. 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. 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 expenses, especially related to our global initiatives and portfolio and systems expense.

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. Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and noncore and nonrecurring 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 noncore and nonrecurring 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. And to the extent dilutive, we add unvested restricted stock units and nonqualified stock options to the total shares outstanding to compute diluted adjusted EPS.

Looking at the first half 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 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.

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, an increase in the accrual for bonuses, equity-based compensation and severance expense.

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 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.

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. 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. 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.

That concludes my remarks, and we'll go into Q&A.

[Operator Instructions] The first question comes from Sandy Mehta from Evaluate.

There was a large jump in the general G&A and expenses. So those expenses have gone from 25% to 30.5% in the first half. And you have mentioned in your comments and in the press release that now that you are near the end of the licensing process in Australia and Europe that those expenses might come down meaningfully. So what should we expect as a normal run rate for G&A expenses going forward?

Yes, unclear. Sandy, I 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 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. But directionally, we should be seeing that decline, which will be a benefit to the company. So this is a directional comment, not a precise one.

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. 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 start-up type professional fees, those will go away post-licensure.

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

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

Yes. 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 the inflows into your Global and International strategies?

Sure, absolutely. Well, first of all, as I announced in the -- in my opening remarks, we received an AUD 0.5 billion investment. So that's now $2.5 billion. 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. 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. 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.

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. 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. 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. 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 opportunity 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 number, but it's in the multiple billions. And this is reasonable. This is not kind of a 2-year, 3-year pipeline. It's a better pipeline than that.

[Operator Instructions] The next question comes from Jim Marrone from Singular Research.

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

Okay. So we need to kind of -- in looking at the top line and the flows in AUM, I think there are 3 important points. 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. And given average AUM and when you're billing really only 4 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 in 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. 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. And so 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. A lot of those movements at the company between strategies don't really affect revenue that much because of the nature of how we see 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 million 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, and those outflows had 0 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.

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 performance -- relative performance issues. As Sandy just pointed out, that's been picking up. But that is something we're watching carefully, and we all have to be aware of.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Rick Hough for closing remarks.

Thank you for joining us to review the second quarter 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.

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

Good morning, and welcome to the Silvercrest Asset Management Group Inc. Q1 2026 Earnings Conference Call. [Operator Instructions] 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, and many factors could cause actual results to differ materially from 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 protection provided by the Litigation Reform Act of 1995. All forward-looking statements made in this call are as of the date hereof, and Silvercrest assumes no obligation to update them.

I now would like to turn the conference over to Rick Hough, Chairman and CEO of Silvercrest. Please go ahead.

Thank you, and thanks for joining us for this conference call for the first quarter of 2026. Silvercrest entered its 25th year in business at the beginning of the second quarter with clear strategic momentum, even as our first quarter results reflected near-term headwinds as we have anticipated and communicated. Discretionary assets under management, which primarily drives the firm's revenue, decreased 3.7% to $23.1 billion at March 31, 2026, from $24 billion as of December 31, primarily attributable to net institutional outflows. Organic new client account flows into the firm were $81 million for the first quarter, primarily from high net worth investors.

Year-over-year, discretionary AUM grew nearly 2% from $22.7 billion as of the end of March last year. Year-over-year, total AUM grew 1.1% to $35.7 billion, up from $35.3 billion as of March 31, 2025. Nondiscretionary AUM are associated with a very small portion of our overall revenue and can substantially change with little revenue effect. As we have previously announced, we will adjust how the firm reports nondiscretionary AUM in the future quarter, which will substantially lower reported nondiscretionary AUM on a onetime basis without any revenue effect, providing investors with a clearer picture of the AUM and economics that drive our business.

As we conveyed in our annual report throughout 2025, Silvercrest has embarked on the most significant investment program in its history to build a more enduring and globally capable firm for our next 25 years. We began these investments in earnest about 1.5 years ago, and it takes time for those investments, primarily intellectual capital and headcount to bear fruit. Our earnings and adjusted EBITDA continue to reflect the deliberate cost of this program. We continue to execute on our strategic priorities in the first quarter, and we are fully committed to its rationale and we'll continue to be transparent about the effect on our financial results.

Our new business pipeline remains particularly robust with regards to the firm's global and international equity strategies, bolstered by exceptional investment performance across the board. The firm continues to generate strong interest from institutional consultants and allocators globally, and our primary institutional objective for 2026 is to convert that pipeline into consultant approvals and funded mandates.

We have reorganized our international business development effort and now have professionals in London and Australia dedicated to the effort. Our Dublin office is on track to open later in 2026 following expected Bank of Ireland regulatory approval and which will allow us to proactively market our capabilities in Europe. We have created investment trust in both Ireland and Australia together materially expanding our distribution opportunity across Europe and Oceania. These milestones represent the culmination of a multiyear build that we expect to contribute meaningfully to positive flows in 2026 and beyond.

Finally, we opened our Atlanta and Singapore offices during the first quarter of 2026 and are beginning to see business development as a result. The firm continues to invest in talent across the organization and to execute on next-generation portfolio management transitions designed to protect our investment process and preserve our culture as well as deepen the bench for the years ahead. These transitions are deliberate and central to our long-term competitive positioning as we approach our 25th anniversary in 2027.

As previously discussed, Silvercrest will continue to adjust our compensation ratio to match compelling opportunities to organically grow the firm and build return on invested capital. With significant initiatives underway for marketing and distribution in Europe, Oceania and Asia as well as in U.S.-based personnel, our compensation ratio remains elevated. Total compensation and benefits expense was $21.1 million, representing 67.2% of revenue for the 3 months ended March 31, 2026, compared to $18.9 million or 60.2% of revenue for the same period of the prior year.

We expect the compensation ratio to remain elevated as these investments mature and begin contributing to revenue growth. Our balance sheet continues to support our strategic growth initiatives and our ongoing commitment to capital returns to shareholders. On May 6, 2026, the company's Board of Directors declared a quarterly dividend of $0.21 per share of Class A common stock. The dividend will be paid on or about June 19 to stockholders of record as of the close of business on June 12.

With that, I'll turn things over to Scott Gerard, our CFO, to discuss the financial results, and then we will take questions. Scott?

Thank you. So as disclosed in our earnings release for the first quarter, again, discretionary AUM as of March 31, 2026, was $23.1 billion, and total AUM as of the same period was $35.7 billion. Revenue for the quarter was $31.4 million, and reported consolidated net income for the quarter was $0.5 million. Revenue basically remained flat for the quarter compared to the first quarter of 2025. Expenses for the quarter increased year-over-year by $3.6 million or 13.5%, 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 $2.3 million or 12%, 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 and an increase in the accrual for bonuses. General and administrative expenses increased by $1.3 million or approximately 17.3%, primarily due to increases in professional fees, occupancy and travel and entertainment expenses. Reported net income attributable to Silvercrest or to Class A shareholders for the first quarter was approximately $0.2 million or $0.03 per basic and diluted Class A share.

Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and noncore, nonrecurring items, was approximately $3.7 million or 11.8% of revenue for the quarter. 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 $1.5 million for the quarter or $0.13 and $0.12 per adjusted basic and diluted EPS, respectively. Adjusted EPS is equal to adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS.

And to the extent dilutive, we had unvested restricted stock units and nonqualified stock options to the total shares outstanding to compute diluted adjusted EPS. On the balance sheet, total assets were approximately $133 million as of the end of March of this year compared to $166.6 million as of the end of last year. Cash and cash equivalents were approximately $11.6 million as of March 31 of this year compared to $44.1 million at the end of last year.

Borrowings totaled approximately $10 million as of the end of the first quarter. Total Class A stockholders' equity was approximately $46.9 million at the end of the first quarter. During the first quarter of this year, we repurchased Class A shares totaling approximately $1.9 million, which represented the completion of our previously announced $25 million stock repurchase plan.

That concludes my remarks, and we'll go into Q&A.

[Operator Instructions] And the first question comes from Sandy Mehta with Evaluate Research.

Yes. The global strategy, you mentioned that you're quite optimistic on that. Could you possibly give some more color on inflows in the pipeline? What sort of inflows you might see this year for the balance of this year?

Yes. So let me just start by saying not just the global value strategy, but our global strategy as well as emerging markets and international strategies all have outstanding top-tier, well beyond top quartile performance, which, of course, all consultants and institutions can see in the available databases, and that is proving to be a sustainable record. And so that bodes very well for potential inflows, especially as some of our competitor active managers have had some difficulties in that area. It takes a long time to see fruition of inflows.

Sandy, you have to introduce the capabilities to the consultants. They have to do their homework. They want to watch it, get to know the team and institution. Just to give you one example, an extremely large allocator has had, I think, 7 or 8 meetings with the team, including here in New York as well as elsewhere. The strategies are being rated by the large consultants. That is absolutely necessary in order to make those strategies acceptable to those allocators. That is a near-term project and should be completed very shortly. So that makes me optimistic about flows this year.

And then finally, we completed our trusts in both Europe and Australia, which took quite a significant amount of time. And those will be rated as soon as we have regulatory approval from the Bank of Ireland, we can start distributing that trust in Europe. Our trust in Australia is up and running and is looking to be rated. And we would expect inflows from both investors that handle monies for high net worth investors or at least retail asset management as well as from the larger institutions.

Now what does that mean for 2026? I can't firmly tell you. We're working on how to measure this pipeline because it's either a lot of money or 0 money in terms of a decision-making, right? And quite binary. But I can tell you that the pipeline we're looking at is in the billions of dollars. The issue with giving you that number, that is the high potential right now. But the expected return out of that is a little bit unknown since we are newly entered into the field with these capabilities. I remain highly optimistic to show progress in both AUM and revenue as a result, but I'm having a little difficulty, to be honest, with timing. So that's about as far as I can go comfortably to give you some idea about what we're trying to measure and where we are with the process.

Okay. Small-cap stocks in the U.S. are doing better this year. So are you seeing some more interest from a marketing perspective in small-cap strategies, growth and value?

Yes. So I think that -- and our small cap did quite well since September of last year, which is when small caps rallied. There has been performance issues because we are a higher quality manager. We have had some performance lagging, as you would expect, like most higher-quality active managers or active managers in general, given what has been performing in the marketplace. I think the improved performance of small cap has helped us preserve some AUM rather than necessarily attracting new AUM at this point.

I think we have to show some sustained better performance as well as get through what we have been very clear about a transitionary period between the senior managers on those capabilities. As I have mentioned in prior calls and in our annual update that part of the investments that we're making across the firm have been to make sure that we have clear succession planning for our capabilities, which we have been executing over the past 1.5 years or so.

It was great -- it's great to see the share count down 15% year-over-year. And I think it was mentioned that the prior authorization has been completed. What are your thoughts on further buybacks, please?

Yes. So I will -- I appreciate that. I will mention that we have been and remain committed to returning capital to shareholders, whether that is through our dividend, which remains quite high or through buybacks, of which we have done approximately $87 million over the past 5 years. If you look at our shareholder yield, which would be buybacks plus dividends relative to the market cap, it was 23% for 2025, maybe even a touch over. 21% or so on a fully diluted basis.

So it does reflect the aggressive share repurchase that you just mentioned. We have repurchased out of that $52 million Class A shares over the past 5 years. And the current yield is, I think, about 10.5%, maybe on a fully diluted basis, closer to 10%, maybe just over 9.5%. And the current yield is 6.1%, which we've continued to grow. The reason I give those statistics is, one, we have a record of this. I think people should be well apprised of it. Given the small cap nature of our stock and where we are in the investment cycle, I think it's really important as a leader of the firm to pay investors to own our shares and to see a regular return via either buybacks or -- and accretion or through that nice dividend yield.

We're at a low in cash right now, Sandy, because we just completed our bonus compensation payments, and now we're building cash up through the next year. As of year-end, to give you an idea where that stood before bonuses, I think it was about $44 million. It's probably down to about $11 million now. We've taken on some debt. We just thought that was prudent to have that facility being used and capable here for working capital as we make these investments. However, our cash flow even though we have cut into it quite heavily over the past 1.5 years.

And our facilities all mean that we can support both our ongoing growth initiatives as well as capital returns. I'm likely to take a slight pause with regards to capital returns right now as we wait for some of these investments to show progress and come to fruition. But it is high on our mind, something that we think is fundamentally important for shareholders, which is why I gave you the history and wanted to reemphasize my commitment to it as we make progress.

[Operator Instructions] And the next question comes from Jim Marrone with Singular.

Yes. My question is just with regards to the increase in the expenses, given that the revenue is flat and it kind of put pressure on your profit margin. So can you shed some light -- yes -- can you just shed some light with how much of that is just attributed to increased value of the equity markets? And given that the equity markets continue to churn at a high in the second quarter. Can we expect the same kind of pressure with regards to expenses and on the margin in the next quarter?

Yes. Right. So the tailwinds for the equity markets with regards to our AUM were pretty significant for 2024 and 2025. I would even say '23 through '25. It was a definite negative, as you might expect in 2022 for us. That is increasingly attenuated in part because of where we are exposed in the market. You have to keep in mind, we're a diversified wealth management firm, 70% of our assets are going to be invested in a way that's quite balanced and not necessarily levered directly to hot running equity markets, number one.

Number two, as you well known, the hottest spot in the market are large cap technology stocks, very, very concentrated, way more concentrated than we would normally have a wealth management client who needs a diversification in assets and can't have that kind of exposed risk as much as it's enticing and creates a fear of missing out. So we're just not going to run the same way as the equity markets.

And the capital gain, for example, at the firm over the first quarter was very, very, very small. And it probably ran at -- I'm just ballparking here, but I'm going to be very close. In the fourth quarter, if you had to annualize that, it probably would have been closer to $1.2 million on that $1 billion on an annualized basis. So a good bit down from total years of, say, 2024. And we're in a really unusual situation. The market could take a big hit from those large-cap stocks. They could decline meaningfully as they did at the beginning of the Iran war or when tariffs were announced. And it would have less an effect on this firm. We'll be much more stable.

In general, if there's a flight to quality, we will benefit. So that's one way that you should think about and look at our AUM. As for expenses, I should mention something else, sorry, which is that new client organic flows were very strong in 2024 for us, some of the strongest we had seen over the past several years. That was due to primarily new high net worth accounts as well as very large investment in our global value equity strategy. It was a pretty good quarter in the fourth quarter of last year on that basis, and it was okay for the first quarter of 2026.

The drawback there is that we saw institutional outflows from other parts of the business due to some performance concerns as well as fully funded pension plans and obligations. So as the firm is diversified, the nature of our flows have become a little more complicated. Now on the expense side, we're seeing increases in G&A with travel, as you might expect, and a heavy marketing push especially when we're going to further places in the globe. So that's a meaningful increase. There's a meaningful increase as well with regards to legal and other administrative expenses as we built these trusts.

But the biggest needle mover with regards to expenses is in intellectual capital and headcount. And to give you an idea of the magnitude of that and where it's hitting our earnings and EBITDA, we were running a 60% of revenue for compensation a year ago. We're now at 67% of revenue. So while we've been making this investment for going almost 2 years, the real momentum was from the beginning of last year to this year in terms of the number of people and initiatives required to make this happen.

I've mentioned in prior calls, filling out the analyst team, trading, operations, administration, of course, marketing has been completely rebuilt, including professionals in Australia and London. It includes internal marketing capabilities among other initiatives. At the same time, we're concentrated on growing the high net worth business. We've opened an Atlanta office. We hired a new senior portfolio manager there who is already seeing some inflows to the firm that will be reportable. So there's a lot going on, but the expense you're seeing has been primarily over the past year. It's early in the investment cycle.

As I was alluding to with Sandy's question, this could change very, very quickly with only a couple of mandates. It's just a matter of doing that homework, getting it done and being patient to see those flows as our capabilities get rated. So it's been a very, very significant and intentional investment. I remain highly excited about it. Hopefully, you've been on these calls long enough to know that I'm pretty conservative in my estimates over time and careful about what I say. So what I hope to deliver is starting to see progress on that revenue given what we started in earnest really only a year ago.

[Operator Instructions] All right. This does conclude our question-and-answer session. I would like to return the conference to Rick Hough for any closing comments.

Thank you. I very much appreciate you taking the time to join us today to talk about the first quarter of 2026. As I mentioned, we've accelerated our investments over the past year in earnest. We're excited about what we're building for the future to create a much more enduring and profitable business over the next 25 years. And I think we will see substantial progress in the quarters to come based on these investments that we have made, and I look forward to talking to you about them then. Thank you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Good morning, and welcome to the Silvercrest Asset Management Group Inc. Q4 and Full Year 2025 Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note today's 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. 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 floor over to Rick Hough, Chairman and CEO of Silvercrest. Please go ahead.

Good morning. Thank you for joining us for our fourth quarter and year-end 2025 results. Silvercrest's discretionary assets under management, which primarily drives the firm's revenue decreased 1.2% during the fourth quarter from $24.3 billion to $24 billion. For the year 2025, total discretionary AUM increased by 3% from $23.3 billion to $24 billion aided by supportive markets and organic net new client accounts. Silvercrest added $124.5 million in organic new client accounts during the fourth quarter, bringing our full year 2025 organic new client account flows to $688.3 million.

For the full year, organic new client acquisition registered one of the stronger levels over the past several years, underscoring receptivity to our investment capabilities and momentum across our marketing efforts. Total AUM decreased 1.6% during the fourth quarter to $37 billion. It increased 2% year-over-year from $36.5 billion with no revenue effect. As discussed in prior quarters, our nondiscretionary AUM are associated with only 4% of total revenue, mostly comprising fixed fee reporting and family office services. These assets have more than doubled over the past few years which artificially lowers the apparent average basis points we received for advising on AUM.

As previously announced, we will adjust how the firm reports nondiscretionary AUM in a future quarter. This adjustment will substantially lower our nondiscretionary AUM on a onetime basis without revenue effect, providing investors with a clear picture of the AUM and economics that drive our business. As we emphasize throughout 2025 and conveyed in 2024, Silvercrest has embarked on significant strategic investments to promote growth opportunities across multiple fronts as it takes time for those investments, primarily in intellectual capital and headcount to bear fruit, our earnings and adjusted EBITDA are substantially lower than the steady state business and reflect our concerted effort to invest capital to support long-term strategic priorities.

We continue to execute on these priorities in the fourth quarter and across the full year. Our strategic initiatives highlight Silvercrest in both the institutional and wealth markets, and we have made meaningful progress on several key fronts. Our new business pipeline remains particularly robust with regards to our global and international equity strategies bolstered by outstanding performance. The firm continues to generate strong interest from institutional consultants and allocators globally.

Our recent ranking of #6 in NASDAQ investments fourth quarter 2025 brand awareness rankings among consultants in the midsized firm peer universe reflects the growing recognition of Silvercrest's institutional capabilities. We have reorganized our international business development effort and now professionals in London and Australia. We are nearly complete with our creating an Australian investment trust and a UCITS vehicle in Europe. We expect regulatory approval to do business in Europe through our new Dublin office to be completed within the second quarter. The firm also continues to invest in talent across the organization to drive new growth and successfully transition the business towards the next generation, further strengthening our investment leadership bench. These investments in people are central to our long-term competitive positioning.

Also, as previously discussed, Silvercrest will continue to adjust our interim compensation ratio to match important investments in the business as long as we have compelling opportunities to organically grow the firm and build our return on investment capital. With significant initiatives for marketing and distribution in Europe, Oceania and Asia as well as in U.S.-based personnel, our compensation ratio remains elevated during the fourth quarter and for the full year 2025. We expect the compensation ratio to remain elevated for the foreseeable future as these investments mature and begin to contribute to revenue growth.

For the full year 2025, total compensation and benefits expense was $83.9 million, representing 67% of revenue compared to $76.7 million or 62% of revenue for 2024. We previously announced a new share repurchase program of $25 million in May 2025. As of the end of 2025, we almost completed that program and repurchased approximately a total of $50.4 million worth of shares. Our strong balance sheet supports ongoing capital returns or substantial dividend as well as the growth initiatives. Silvercrest also previously received shareholder approval to increase the number of shares issuable under our equity incentive plan, and we expect to begin rewarding shares to further motivate our professionals during this growth phase.

Those conclude my introductory remarks. We'll take questions later after Scott presents the financials. Thank you, Scott. Go ahead.

Thanks, Rick. So as disclosed in our earnings release for the fourth quarter discretionary AUM as of the end of 2025 was $24 billion and total AUM as of the same period was $37 billion. Revenue for the quarter was $32 million and reported consolidated net loss for the quarter was $0.1 million. Looking further at the fourth quarter, expenses for the quarter increased year-over-year by $2.8 million or 9.5%, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation benefits for the quarter increased year-over-year by $2.6 million or 12.1%, primarily due to increases in salaries and benefits expenses, primarily as a result of merit-based increases add new hires and an increase in new accrual for bonuses. General and administrative expenses increased by $0.2 million or approximately 2.4% primarily due to increase in professional fees an adjustment to our bad debt reserve, partially offset by decreases in depreciation and amortization and portfolio and systems expense, reported net loss attributable to Silvercrest or the Class A shareholders for the fourth quarter was approximately $0.1 million or $0.01 per basic and diluted Class A share.

Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and noncore and nonrecurring items, was approximately $2.9 million or 8.9% of revenue for the quarter. 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 $2.3 million for the quarter or $0.19 and $0.18 per adjusted basic and diluted EPS, respectively. Adjusted EPS is equal to adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS.

And to the extent dilutive, we had unvested restricted stock units and nonqualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking at the full year, revenue increased year-over-year by $1.7 million, or 1.3%, primarily driven by market appreciation in discretionary AUM, partially offset by net client outflows. Expenses for the full year increased year-over-year by $10 million or 9.4%, primarily driven by increased compensation expense and general and administrative expenses. Looking further compensation expense, it increased year-over-year by $7.3 million or 9.5%, primarily due to increases in salaries and benefits expense and as a result of merit-based increases along with new hires furthermore the accrual for bonuses increased and these were partially offset by a decrease in equity-based compensation expense.

General and administrative expenses increased by $2.7 million or approximately 9.2%, primarily due to increases in professional fees, our bad debt reserve travel and entertainment expense and occupancy and related expenses, partially offset by decreases in depreciation and amortization expense and trade expense. Reported net income attributable to Silvercrest or the Class A shareholders for the full year was approximately $4.9 million or $0.56 per basic and adjusted -- per basic and diluted Class A share. Adjusted EBITDA was approximately $19.6 million or 15.7% of revenue for the full year. Adjusted net income was approximately $11.8 million for the full year or $1.91 per adjusted basic and diluted EPS, respectively.

Looking at the balance sheet, total assets at the end of 2025 were approximately $166. 6 million compared to $194.4 million as of the end of 2024. Cash and cash equivalents at the end of 2025 were $44.1 million compared to $68.6 million at the end of 2024. Borrowings totaled approximately $4 million as of the end of 2025. Total Class A stockholders' equity was approximately $50.3 million at the end of 2025. And during the fourth quarter of last year, we repurchased Class A shares totaling approximately $7 million.

We'll now turn it over to Q&A.

[Operator Instructions] And our first question today comes from Sandy Mehta from Evaluate Research.

Yes, Rick and Scott -- the international -- the global international had very strong performance, as you mentioned and you talked about a strong pipeline and meaningful growth in AUM. Can you disclose how much AUM you presently have in these strategies and talk a little bit -- give us some more color on what you see in terms of the potential going forward in AUM growth?

Yes. So currently, we have over 2 billion across global and international strategies. There are multiple strategies in both international emerging markets and global -- and so that's off to a good start. And performance in those capabilities across the board is excellent. Furthermore, we bolstered the analyst staff and the resources in that capability over the past, call it, 2.5 years. And I think our pivot towards highlighting that capability came at just the right time, as you know, with regards to the relative performance in different markets. So that bodes well.

We have built out, as I mentioned in my preliminary comments, Sandy, the business development team on an international basis, we did not have people looking abroad explicitly, and we reorganized how we do institutional relationship and business development management at the firm. And we are continually building very excellent high-level consultant contacts that is primarily where I see the pipeline coming from. There is also going to be the ability for investors to invest directly in an Australian investment trust that we have launched there for investors and a UCITS vehicle, which can be used for any of Silvercrest's strategy in Europe.

And we expect our licensing for being able to market proactively in Europe to come through within the next couple of months through the Bank of Ireland currently. As you well know, we have to rely on reverse solicitation. So these efforts are all coming together about now. We also just got back from a 2-week road trip with consultants and investors in Australia where, as you know, we received a seed investment from a large superannuation fund. With regards to the pipeline, as you know from prior calls, it's become quite difficult to measure compared to the way we used to do it. It used to be, Sandy, that we would look at finals invite-only RFPs that were actionable within the next 6 months. It was a high-level confidence in the pipeline. The business just is not working that way anymore more.

So we've stopped reporting over at least the past year, the pipeline in those terms. Maybe it's even been 1.5 years. So what I'm giving you is color on what we're seeing and in terms of the meetings we have, the amount of AUM that can be allocated to our different strategies, the relative performance that we have, the multiple meetings following on our initial introductions all bode very well for significant flows. These strategies are largely not capacity constrained, as you would find in smaller-cap strategies. And so the potential is multiple billions of dollars. Very hard to say when that can land or how but we should start seeing flows sooner than later in 2026, which I'll be able to report as progress towards the pipeline that I've mentioned or at least fulfilling the potential of that pipeline.

Great. And compensation was up, as you mentioned, so 67% versus 62%. So when we look out to 2026 and 2027, where do you think comp should be? Is it going to be more a 67% or more 62%. What are you thoughts there?

Yes, it's going to depend entirely on some of those flows. There's still more hiring to do when you think about the office, I did mention in my remarks, but we've officially opened a physical office, hired a new portfolio manager in Atlanta. We have officially opened our office in Singapore important for that time zone and the flows throughout that region, that will likely be hiring there. We have space now in Dublin. We expect our office to open and have to do hiring there for portfolio management an outward-facing professionals once we have our license.

There is just an enormous amount of hiring represented in that 67%. It's going to entirely depend on the slow Sandy. What I look forward to doing is reporting progress on those flows so that people feel comfortable that we will be slowly bringing down that compensation ratio. But we still have hiring to go. So even with the growth in revenue, I expect it to be elevated for the foreseeable future, which is, I think, the way I phrased it in my introductory remarks, the firm historically has run the business in a 54% to 55%, sometimes 56% revenue model. I think it's not uncommon in our industry for people to be up at 60%.

So we're clearly doing a lot more than that. 62% at the end of 2024 was a couple percentage points higher than what you see in a lot of similar businesses. And we pushed it up even beyond that. So it's going to be for the foreseeable future and entirely dependent on those very substantial flows. But I don't expect it to come down a lot in the near term because we do still have some more hiring to do even if we get those flows. What I want to do is just report progress.

And Sandy, just a couple of things to note on the compensation. So our -- the percentages that you see in the release is total GAAP compensation expense. So our -- for 2025, our recurring cash comp ratio was about 62%. That was a few percentage points higher than 2024. To give you some perspective there. The other thing I wanted to mention with respect to our initiative in the EU from a regulatory standpoint, we are required to have a certain number of new hires in place before we can even receive our license and earn EUR 1 of revenue. So, yes that -- because of that, there's a lot of front-loading of expense that will be followed up by revenue at a later time, so you have that effect to keep in mind.

Yes. Thank you, Scott, for those 2 important comments with regards to the ratio and where we are as well as hiring in advance. Of course, any growth in revenue is preceded by the hiring of professionals. I think a good example was building out one of our global -- the value global equity team, multiple, multiple hires that culminated at the end of 2024 with our seed investment. So that's kind of the phase we're in right now, Sandy.

And just one last question. So the buyback is almost completed. What are your thoughts on another buyback? You have a lot of cash on the balance sheet. The share count has come down, which has been great. but you also mentioned stock grants and awards to employees. Can we be confident that if you do further buybacks that, that will offset any shares given to employees and the share count -- if there are buybacks will continue to decline?

Well, another way to look -- yes, I appreciate that. Another way to look at it is that we did the buybacks in advance of doing the equity awards. So what we'll be doing is just eating into the buybacks that we did, rather than do the awards and then do a buyback. Just think of it in reverse. It comes out to a similar place. We will consider buybacks and continue to. We love returning capital to investors in that way.

We think it's a very good use of capital. We, as owners of the business ourselves working in the firm as partners like accreting ourselves and being aligned with our external shareholders. So when you look at those factors were very favorable about doing that, and we're also like paying a high dividend to pay investors to have a very long-term vision for this company, especially as we go through this investment phase. So we'll continue to consider it depending where the stock price is. I won't commit to it, of course. We have multiple uses for capital right now, but it's always foremost in our mind when we think about the uses of capital for the business.

Yes. Thank you. It will be great if the share count continues to come down, and we look forward to that.

Okay, Sandy. -- near term, it's going to -- it's not going to come down since we're going to have these equity awards. We're just going to be coming -- going back the other way a bit after the buybacks. But I appreciate the comment and question.

[Operator Instructions] And at this time, it is showing no additional questions, I'd like to turn the floor back over to Chairman and CEO, Rick Hough, for any closing comments.

Great. Thank you again for joining us for the fourth quarter and year-end 2025 earnings call. We greatly appreciate our investors and those who are supportive of this long-term vision and our investment plans in the business. I'm quite confident they will bear fruit with patients, and I look forward to reporting on our progress in the coming quarters. Thank you so much.

And with that, everyone, we'll be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

Good morning, and welcome to the Silvercrest Asset Management Group Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that the 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, 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 hereof, and 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.

Good morning, and welcome joining us for the third quarter 2025 earnings call. Our discretionary assets under management, AUM, which primarily drives the firm's top line revenue, increased $687 million during the third quarter, primarily due to the beneficial equity markets. Silvercrest added $46.4 million in organic new client accounts during the third quarter and has added $564 million in new client accounts through the third quarter of 2025. Despite overall negative flows during the quarter, closed accounts were immaterial and new client account flows remain on pace to register one of the stronger levels of organic new client flows over the past several years. Silvercrest has added approximately $2 billion in organic new client accounts year-over-year. and we are primarily focused on organic new client acquisition and discretionary AUM as a result of our previously announced and ongoing heavy investments in growing the business.

Discretionary AUM now stands at $24.3 billion, which is a 3% sequential quarterly increase and an increase of 8% year-over-year. Assuming supportive markets and continued business development, we hope discretionary AUM will exceed all-time highs in the coming quarters. Total AUM at the end of the third quarter did hit a new high for the firm at $37.6 billion. Of that total, reported nondiscretionary AUM at quarter end comprised $13.3 billion. These nondiscretionary AUM are associated with only 4% of total revenue, mostly comprising fixed fee reporting and family office services.

These assets have more than doubled over the past few years, which artificially lowers the apparent average basis points we receive for advising on AUM. To better relay the average basis points of our asset management and advisory businesses, we expect in 2026 to adjust how the firm reports nondiscretionary AUM. This will substantially lower that nondiscretionary AUM on a onetime basis without any revenue effect, providing a clear picture of the business. Barring short-term market volatility, the increase in AUM bodes well for future revenue as Silvercrest primarily bills quarterly in advance. As previously announced and emphasized, Silvercrest has embarked on significant strategic investments to promote growth opportunities. As it takes time for those investments, primarily in intellectual capital and headcount, -- to bear fruit, our earnings and adjusted EBITDA are substantially lower than the steady-state business and reflect our concerted effort to invest capital to support our long-term strategic priorities.

Our strategic initiatives highlight Silvercrest in both the institutional and wealth market. The firm continues to invest in talent across the firm to drive new growth and successfully transition the business toward the next generation. Our new business pipeline remains robust, in particular with regards to our new global value equity strategy. Also, as previously discussed, Silvercrest will continue to adjust our interim compensation ratio to match important investments in the business as long as we have compelling opportunities to organically grow the firm and build our return on invested capital.

With important initiatives for marketing in Europe, Oceania and Asia as well as in U.S.-based personnel, our compensation ratio will remain elevated for the foreseeable future. We previously announced a new buyback program of $25 million in May 2025. As of the end of the third quarter of 2025, we have repurchased approximately $16 million worth of shares. Our strong balance sheet supports ongoing capital returns, our substantial dividend as well as our growth initiatives. Silvercrest also previously received shareholder approval to increase the number of shares issuable under our equity incentive plan. We expect to begin rewarding shares to further motivate our professionals in the near future.

We announced a dividend of $0.21 per share of Class A common stock, and that dividend will be paid around December 19 to stockholders of record.

With that, I will turn things over to Scott Gerard to discuss our financials, and then we will take questions. Thank you.

Thank you, Rick. As disclosed in our earnings release, for the third quarter, discretionary AUM as of September 30 of this year was $24.3 billion, and total AUM as of the same date was $37.6 billion. Revenue for the quarter was $31.3 million and reported consolidated net income for the quarter was $1.1 million. Looking at the third quarter, revenue for the quarter increased $0.9 million or 2.9% year-over-year. Expenses for the quarter increased year-over-year by $4 million or 15.4%, 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 $3.1 million or 16.8%, primarily due to increases in salaries and benefits expense, primarily as a result of both merit-based increases and new hires and an increase in the accrual for bonuses, partially offset by a decrease in equity-based compensation.

General and administrative expenses increased by $0.9 million or approximately 11.9%, primarily due to increases in professional fees, occupancy and related expenses and recruiting costs, partially offset by decreases in shareholder expenses and trade error expense. Reported net income attributable to Silvercrest or to Class A shareholders for the third quarter was approximately $0.6 million or $0.07 per basic and diluted Class A share. Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and noncore and nonrecurring items, was approximately $4.5 million or 14.5% of revenue for the quarter. 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 $2.4 million for the quarter or $0.19 per adjusted basic and diluted earnings per share.

Adjusted EPS is equal to adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS. And to the extent dilutive, we add unvested restricted stock units and nonqualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking at year-to-date September 30 of this year, revenue increased year-over-year by $1.7 million or 1.8%, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the 9 months ended September 30 of this year increased year-over-year by $7.1 million or 9.4%, primarily driven by increased compensation expense and general and administrative expenses.

Compensation expense for the 9 months ended September 30 this year increased year-over-year by $4.6 million or 8.5%, primarily due to increases in salaries as a result of both new hires and merit-based increases in addition to an increase in the accrual for bonuses, partially offset by a decrease in equity-based compensation expense. General and administrative expenses increased by $2.5 million through the 9 months ended September 30 this year or approximately 11.7%, primarily due to increase in professional fees, occupancy and related expenses, portfolio and systems expense and travel and entertainment expenses, partially offset by a decrease in trade error expense.

Reported net income attributable to Silvercrest or again, the Class A shareholders for the 9 months ended this year was approximately $5 million or $0.56 per basic Class A share and $0.55 per diluted Class A share. Adjusted EBITDA was approximately $16.8 million or 18% through the end of September of this year. Adjusted net income was approximately $9.6 million or $0.77 and $0.74 per adjusted basic and diluted EPS for the 9 months ended September 30 this year.

Looking at the balance sheet, total assets were approximately $157.6 million as of September 30 of this year compared to $194.4 million as of the end of last year. Cash and cash equivalents were approximately $36.1 million as of September 30. This compared to $68.6 million at December 31 of last year. There were no borrowings as of September 30. Total Class A stockholders' equity was approximately $58.9 million at September 30. And during the third quarter, we repurchased approximately $4.6 million worth of Class A shares.

That concludes my remarks. I'll now turn the call over for Q&A.

Thank you, Scott. We'll take questions at this time.

[Operator Instructions]

And our first question will come from Christopher Marinac of Janney Montgomery Scott.

Just want to talk a little bit about calibrating the timing of when the AUM and revenue kind of hit various points to get back to leveraging the expenses that you're having now. I understand the comment on the compensation that you mentioned in the remarks. And I just want to understand, do we think about this as maybe an 18-, 24-month time frame? Or is it any way to kind of give visibility on that?

Yes. So that's a great question. And obviously, we have multiple investments going on. So it depends on the time horizon for each one. Just very briefly, we have domestic expansion efforts. We are active in Asia/Australia. We are opening an Australian investment trust there. In order to get flows, we are working on our MiFID II with the Central Bank of Ireland in order to face Europe and actively market there, both to existing clients as well as to new institutional and family clients. And all of that also includes new marketing professionals, investment team here, et cetera. That is all on a short-term basis, kind of occurred, let's just call it over the past 1.5 years in its bulk.

Our headcount has gone up by about 15 to 20 people, I think it's exactly 15 people, say, over the past year-over-year. So that's a lot of hires and quite recent, even though we've started hitting EBITDA and earnings for these investments prior to that. The bulk of it has been quite recent. So when you put it all together, yes, you're looking at a longer time horizon of 18 to 24 months. However, we are done primarily with the investments we made in institutional marketing as well as in our global value equity team. And I expect flows for that in a much shorter term than that.

The pipeline is very large. And so I would look to that more like 6 months to 12 months, and we could see even some reasonable allocations in the fourth quarter or first quarter coming up here, which is -- which would obviously cover about 6 months. So all things being equal, that would start to creep into the profit side and start increasing the EBITDA and earnings on that basis alone. But there's still other investments to go. So the longer time horizon is probably more realistic. What I look forward to is really being able to report substantial progress that those investments will be making. The potential is very large. And I'm quite confident that it is going to pay off and that we will be able to report meaningful progress soon.

Great. And the progress clearly was also this quarter. So there was progress for sure in this last quarter. One related -- just goes back to kind of professional fees that you called out in the press release. Are any of those temporary? Or will you have new professional fees to kind of cover in future periods?

Yes, Chris, in our -- some of them are temporary, especially related to some of our global initiatives. And in our earnings release and 10-Q, there is a reconciliation from GAAP numbers to non-GAAP, where we isolate those nonrecurring items and add it back. So you can get some sense from that disclosure what is temporary.

Okay. Great. And then, Rick, to the extent you can comment on this, as you look out a couple of years, do we get back to where the EBITDA margin was? Does the EBITDA margin get recast because it's now going to be a different company with a different broader focus?

Yes, you look out further and it gets back to where it was barring any other new investments. Of course, where it was before included ongoing investments that were just on a much smaller scale. And we have a lot of wood to chop. So I expect we'll be getting back to that over that time frame. It's really just more about organically building completely new things here. If I were to strip everything away that we have done over the past 1.5 years, 2 years, we would be at a really historic EBITDA and earnings level.

Next question comes from Sandy Mehta of Evaluate Research.

The global strategy has a very strong performance over the last 5 years -- in 1, 3, 5 years. And you mentioned that you have a very large pipeline. There's interesting dynamics there. So the U.S. weighting is 73% of MSCI World. So that doesn't bode well for global strategies. But on the other hand, EAFE in emerging markets, international markets have outperformed the U.S. this year by 2x. So I think that bodes very well for Global. So can you just give us a little bit more color on what you're seeing from a marketing perspective, the pipeline and what clients are saying or consultants are saying, what do you see out there on Global?

Yes. Right. So 2 points. Number one is, while I have focused on the significant opportunities for the global value portfolio because of the size of the allocations it can receive and because it's new at the firm, that has colored my remarks. And that is also the strategy that received the large Australian superannuation fund seeding, not quite a year ago, about 9 months ago or so. And that is the performance you are referring to. And in fact, on a shorter time horizon since that investment, it has performed very, very well, which is really nice to be able to demonstrate to an investor and to other potential investors that this is a good strategy that they should be looking at given the trends that you noted. That strategy has freedom to change those balances and to move around against the benchmark as they seek relative value and outperformance in the portfolio.

That said, we have other international equity strategies at the firm that focus entirely on investing outside the United States, whether that's in developed international markets or in emerging markets. Those markets have been hot. And I'm very pleased to report that those capabilities led by a different investment team here at the firm have done extremely well and also have interest from investors in a growing pipeline. The mandates don't tend to be quite as large there, and they're a little different, but that has potential as well. So you add that -- those 2 together in covering both the global international and emerging market space, and it looks quite favorable for the firm.

In terms of what we are hearing or seeing our new centralized institutional marketing team and process has been highly engaged both with very significant sovereign pools of capital, and it includes other Australian superannuation trust. It includes pool capital for retail and other retirement assets. It includes interest in Europe, and it includes the globe's largest consulting firms. We rate extremely well, both on a performance basis for those strategies that I just went through as well as with regards to the compliance and high quality of the firm here and the institution that we've built. Silvercrest, despite being a fairly small asset management firm, also gets a lot of attention for its intellectual capital among those consultants I just shared with the firm yesterday that one of our update pieces from our investment policy team was one of the most read articles within the internal distribution of one of those large consultant firms, one of the globe's largest.

The pipeline itself is not measurable the way we used to measure it. I think we've talked about this in prior earnings calls. We used to have very rigorous standards around what we would announce on a call for the pipeline. And that was we were in finals or semifinals presentations. It was -- we were invited to put in an RFP or -- and we expected some form of decision within a 6-month period. The consultant industry and the way that marketing works now has changed very substantially since 2020, which is to say COVID. It gradually changed during that period of time. It became harder and harder for us to measure. And so we just are not confident with giving very strong numbers the way we used to be. Instead, I have chosen to provide color. I will say that from my thinking, it is a very large pipeline.

It is quite significant, especially in those international and global areas. for the firm, and I'm quite optimistic, as you heard in my answer to Christopher. If I can give harder numbers as we go along here and learn more about how it's working, I will do so. But unfortunately, I just don't have the same apples-to-apples or confidence in giving you the kind of numbers that I did before. As part of that effort, I should mention that we hired a professional who was one of the top institutional client representatives at a competitor firm, one of the larger asset managers in the United States. And globally, he has spent his career in Australia and in London, and his contacts have been extremely helpful to us as well.

I hope that helps. I'm happy to follow up with anything else, Sandy.

Yes. Yes, yes. Sure. And you already talked about expenses, and you said that you hired 15 key hires. The new hires, is most of the hiring done at this point of the senior people that you were hiring? Is that pace of incremental hires? Is that going to slow down?

We've done most of it that for building out the new equity strategy as well as the institutional team and all of the support work that goes along with that, including trading, et cetera, marketing support analysis. However, as I mentioned earlier, to Christopher, we have multiple initiatives going on. So there will be new hires for Europe. There will be new hires in Asia. There will be some new hires in -- domestically on the wealth side. So we are not done. However, as this initiative grows and those -- the investments we have been made to date produce revenue, it won't be as noticeable in terms of hitting our earnings and EBITDA because we'll have cash flow to fund those things.

Just as before we hit this very strong investment phase, we were hiring people and investing in the business all along and not hurting earnings or EBITDA when we did that previously. So -- you may -- depending how soon some of these big hits come along, it may not be as noticeable as it was as we continue to make those investments in the business. Just going back, say, several years pre-COVID and during that, we were investing in the next generation. I was hiring new portfolio managers here. We were investing across the business, and it was not affecting our EBITDA because we had such strong growth and cash flow. I expect that to accelerate and to happen as we move forward over time as the revenue starts coming in for these initiatives.

And where are you in terms of OCIO assets, currently?

OCIO is almost $2.2 billion and has a very strong pipeline. I usually don't talk about wins on the next quarter. I usually wait, but we just -- we just got a, I think, about a $70 million or so new foundation just joined us, I think, October 1 or 2. So it didn't quite make it in the numbers for this quarter. And I expect more from that team. The performance for the OCIO portfolio itself that gets uploaded and compared to our peers is very, very strong as well. I don't know if you see that, but they have outperformed quite nicely, which really helps us along with our differentiated service model.

And one last question from my side. Your share count has declined 11% year-over-year. You had the $16 million buyback. Do you disclose what price you bought the stock? Or can I ask you whether it's more at the $16.5 level or more at the $14.5 level?

Yes, we don't disclose it. I will say that it has been, from our thinking, a very, very favorable price. And I would -- also, I think in our last call, we pointed out that we did some pretty substantial block trades in the period just after we announced it. So if you looked at the price in June, you've got a good idea for a couple of those block trades. But we've been active in the market all along here. So you can assume that since the end of June through August and September that we were actively buying back stock. But no, we don't disclose the price. And I think we've got about -- on that point, about another $9 million, $8 million or $9 million to go, something in that range. Is that right, Scott?

Yes, that's correct. Yes.

[Operator Instructions] There are no further questions at this time. So that will conclude our question-and-answer session. I would like to turn the conference back over to Rick Hough for any closing remarks.

Right. Thank you very much for joining us for this third quarter of 2025 review. As you saw from my business update and the questions, thank you, Sandy and Christopher. This is a critical juncture for the company in terms of our investments. But hopefully, I convey that I expect those investments to pay off for this firm with some progress in the short term in getting back to more elevated levels of earnings and EBITDA as we move further along into 2027 and 2028. The efforts that we have taken to find really talented professionals to enhance our offerings and to grow the visibility of the firm, not just here in the United States, but in other markets with large pools of capital has been very important to us, and I think will have benefits into the future.

Thank you again, and we look forward to discussing the fourth quarter and year-end.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.