Good morning and welcome to the Silvercrest Asset Management Group Inc. Third Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. 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, 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.

Thank you. And thanks for joining us for the third quarter of 2024. Supportive markets and improving economic conditions helped Silvercrest's assets under management growth during the third quarter, pointing to improved top-line revenue. The firm also saw improved business development results and will report a robust pipeline of new business opportunities. A persistent trend of the market's recovery since 2022 has been the narrow leadership of Large Cap Growth equities. We noted during our second quarter earnings call that, despite progress in the market, Large Cap value and Small Cap stocks had actually declined during that quarter. We have been pleased to see broader company market participation throughout the third quarter and an increase in equities across the market cap spectrum, which benefits Silvercrest’s diversified wealth management business as well as our exposure to the Small Cap institutional business. The increases during the quarter bode well for future revenue. We are optimistic about securing significant organic net flows over the next two quarters. Silvercrest’s discretionary AUM increased by $1.0 billion during the quarter to $22.6 billion, primarily due to rising markets. This net increase in discretionary AUM, which drives revenue, represents a 5% increase since the second quarter and a year-over-year increase of 10% since the third quarter of 2023. New client accounts and relationships increased during the quarter, led by new Small Cap Opportunity mandates. While we report discretionary outflows during the quarter, the outflows were revenue neutral to the firm. Overall, total asset flows and market increases were a net positive for the firm and should drive an increase in fourth-quarter revenue. Total AUM at the end of the third quarter was $35.1 billion. And total AUM increased year-over-year from the third quarter of 2023, up 13%. Despite these increases, Silvercrest has been investing in the future growth of the business, which has resulted in higher total compensation and which we have adjusted for on a quarterly basis. As a result, while top-line revenue has increased, most metrics of the business are down due to these higher expenses. Silvercrest's pipeline of new institutional business opportunities increased during the third quarter by 20% and now stands at $1.2 billion. Importantly, the firm’s pipeline does not yet include potential mandates for our new Global Equity strategy which has a high capacity for significant inflows. Over the past two quarters, we have worked to build the infrastructure to support the team and strategy while undertaking business development. We are optimistic about near-term positive AUM flows and resulting revenue increases to result from the pipeline. I have consistently mentioned that Silvercrest has never had more business opportunities underway. We have made and will make investments to drive future growth in the business. We expect to make more hires to complement our outstanding professional team and to drive future growth. Silvercrest continues to accrue a higher interim percentage of revenue for compensation for this purpose, and, as mentioned, we will continue to adjust compensation levels to match these important investments in the business and will keep you informed of our plans and the progress of these investments. We continue to see substantial new opportunities globally for a firm with our high-quality capabilities, coupled with superior client service. Scott, why don't you address the financials, and then we'll take questions.

Great. Thanks, Rick. As disclosed in the release for the third quarter, discretionary AUM as of September 30th was $22.6 billion, and total AUM as of the end of the third quarter was $35.1 billion. Revenue for the quarter was $30.4 million, and reported consolidated net income for the quarter was $3.7 million. Looking further into the third quarter, revenue increased year-over-year by $0.7 million, or approximately 2%, primarily driven by increased discretionary AUM resulting from market appreciation partially offset by net client outflows. Expenses for the quarter increased year-over-year by $2.8 million, or 12%, primarily driven by increased compensation and benefits expense, and to a lesser extent, increased G&A expenses. Compensation and benefits for the quarter increased year-over-year by $1.9 million, or approximately 11%, primarily due to an increase in salaries and benefits and the accrual for bonuses. Based on the increased recurring cash compensation ratio over the past two years, due in part to the investment in the next generation of portfolio managers and other associates, we increased the amount of the interim variable compensation accrual to potentially narrow the adjustment in the fourth quarter. Also, compensation and benefits expense for the quarter increased year-over-year as a result of increases in salaries due to merit-based increases. General and administrative expenses increased by $0.9 million, or approximately 13%, primarily due to increases in professional fees, portfolio and systems expense. Reported net income attributable to Silvercrest or the Class A shareholders for the third quarter was approximately $2.3 million, or $0.24 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 and non-recurring items was approximately $6.3 million, or 20.9% 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 $3.8 million for the quarter, or $0.27 and $0.26 per adjusted basic and diluted earnings per share, respectively. Adjusted earnings per share is equal to adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS, and to the extent dilutive, we add unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking at year-to-date September 30th of this year, revenue increased year-over-year by $2.8 million, or approximately 3%, primarily driven by increased discretionary AUM, resulting from market appreciation partially offset by net client outflows. Expenses increased year-over-year by $6.9 million, or 10%, primarily driven by increased compensation benefits expense, and again, to a lesser extent, increased G&A. Compensation expense increased year-over-year by $4.8 million, or approximately 10%, again, primarily due to an increase in the accrual for bonuses and an increase in salaries due to merit-based increases. G&A expenses increased by $2.1 million, or approximately 11%, primarily due to increases in travel and entertainment expenses, occupancy expense, professional fees, portfolio and systems expense, recruiting expense, and trade error expense. Reported net income attributable to Silvercrest was approximately $7.9 million, or $0.83 per basic and diluted Class A share. Adjusted EBITDA was approximately $21 million, or 22.9% of revenue. And adjusted net income was approximately $12.9 million, or $0.93 and $0.89 per adjusted basic and diluted EPS, respectively. Taking a look at the balance sheet. Total assets were approximately $184.2 million as of September 30th, compared to $199.6 million as of December 31st of last year. Cash and cash equivalents were approximately $58.1 million as of September 30th, and this compared to December 31st of last year, which was at $70.3 million. There were no borrowings as of September 30th. Total Class A stockholders' equity was approximately $84.6 million as of the end of the third quarter, and we repurchased approximately $1.4 million of Class A shares. That concludes my remarks, and we'll now open up the call for Q&A.

We will now begin the question-and-answer session. The first question comes from Sandy Mehta with Evaluate Research. Please go ahead.

Yes, good morning, Rick and Scott. On the global strategies, could you provide some more details on the opportunity in terms of inflows, also in terms of the staffing? Have you fully staffed up the team, including the business development officers, as well as other new strategies that you've been developing several over the last few years? An update on the outlook for that in terms of inflows, and also an OCIO update, please.

Okay. Let me start with the global equity strategy. We have hired most of the primary portfolio management team of analysts and those executing the strategy. We have also hired administration and have trading covered, but that will be probably expanding a bit more. I could see us hiring another analyst. I think we're in the market for that now. With regards to business development, at this stage, we're well covered by our internal capabilities. And of course, the rest of the infrastructure at the firm to support a team like that is already here. We were able to attract this high-quality team in part because of the robustness of the infrastructure that we've built, oriented towards the institutional business across compliance, trading, operations, technology, strong financial controls, you name it. So we're getting close. Obviously, the key parts were the expensive parts early on when that team joined us in, I believe, the second quarter. We have spent the past few months not only making sure that we were ready to take on a significant amount of business, but introducing the capability to significant asset allocators globally. The opportunity is absolutely enormous for us. The team and its past has managed billions and billions of dollars, number one, so they have experience doing it and are well known in the marketplace. Number two, if you look at asset flows in the business, global equity, at least if you look at the international stage, is the highest in-demand capability right now. That is where a lot of flows are going, that and private equity. Third, when you look at the large families and institutions outside of the U.S., they very much want exposure to global equities. They do not divide the marketplace in quite the same way that we do in the United States, where we make much stronger distinctions between different asset classes in equity markets with the biggest exposure in the United States. So this gives us a really credible capability in talking to those larger families outside of the U.S., which as you know, has been an increasing part of our business. I have not included the potential for global equity in our pipeline. I announced in my introductory remarks that we have a pipeline now of $1.2 billion. That is up 20% or $200 million basically from the second quarter where we stood at $1 billion. So anything that would flow over the next couple of quarters into the global equity would be in addition to the pipeline of $1.2 billion. Obviously, since I spoke extensively about my expectations in my opening remarks, I'm very, very optimistic for quite significant inflows over the next two quarters, to the extent that we could even see nice organic, net organic flows for 2024, as a result of those flows. But we will keep you posted, and of course put out a press release when we think that is going to come to fruition. On the pipeline, I think I mentioned previously, of the last quarter, that the value equity pipeline had really reduced, but that has picked back up which is really nice to see. Our growth pipeline is smaller than it was in the second quarter and that is because we won a couple of really meaningful mandates. So that's really good news and the OCIO portion of the $1.2 billion pipeline stands at about $600 million. That portfolio, to answer your final question, is about $1.6 billion in total right now.

Okay. Thank you. Thank you so much. And just one follow-up. I believe you had some buybacks mentioned at the end of your comments. Can you update us on the buyback activity? Generally it's been very slow. And how do you look at the use of cash in terms of buybacks versus saving money for a potential acquisition which nobody knows when that may or may not happen. Thank you.

Yeah. Exactly. And if you looked at our past history, Sandy, we had a lot of cash on the balance sheet, and then boom, we had a really meaningful accretive acquisition when we merged with Cortina, which gave us the growth equity capabilities. In fact, the inflows that I just mentioned with the pipeline were primarily into the small cap opportunity portfolio, which is with that team. So yeah, all of a sudden you don't know when that's going to happen. We think it's really important to buy back shares when we have the cash to do so. And we think it's a compelling value. I view it as acquisition by another means. We're just buying ourselves instead of somebody else. However, it is slow to put to work, primarily because we have volume restrictions as we are in the market. And we are very active in the market. We're careful about it of course, but we're being much more aggressive this time around in the market than we were the last time we did a buyback, in order to affect as much of that buyback as soon as we can. The reason we chose this form of a buyback, in talking to our counselors and advisors at the different banks we work with and elsewhere, is because it does give us the flexibility to stop the buyback should something be coming to fruition. And we have the use of that cash if that were to happen. In the meantime, we're going to support our security and buy back shares as often as we can. And we will continue to reevaluate this as we go along and as cash builds.

Right. And Sandy, just a reminder that the plan we disclosed in the middle of August is an up to $12 million buyback plan. So we had roughly six weeks of available purchasing time through the end of the third quarter, and so that resulted in about $1.4 million repurchased.

Alright, great. Thank you so much.

You're welcome.

The next question comes from Chris Sakai with Singular Research. Please go ahead.

Yes, just a question on adjusted EBITDA margin. Are you still trying to get it back to 27% in the long-term?

Yes, long-term, this is a business that as a mature business runs into the upper 20s as an EBITDA margin. And so, yes, that's what we're aiming for. I was very clear over the past year and a half, two years, that we would be hitting earnings and EBITDA in order to set up the next stage of our company's growth. And also to be super prudent about the next generation and redundancy in the business, we have a history of very successfully transitioning the business to the next generation. And when I joined the firm, I'm an example of that, as are many of my colleagues. But going back 10 years, there was a gap in the middle between very senior people and very junior. We've really filled that in well, but we've also been able to successfully hire and then build new capabilities. The OCIO team would be an example of that, where we've been able to organically grow something from scratch. Let's not forget that I've mentioned in the past, it's not just about this global equity team. In order to win large mandates and serve the biggest families, it's all the rest of the infrastructure. And as you grow, you have to put a little bit more investment in that and then grow into it. You have to be credible that you have a very robust institutional quality offering if you are going to talk to families with a couple of hundred million dollars. And as we've grown in capacity fills, we have to invest in all aspects of the business in order to set the stage for the next piece of growth. We've also announced, I think in the second quarter, that we were greenfielding an organic growth opportunity in Atlanta. We have our full MAS license in Singapore. We have clients there now. We have employees. That is going to be important as we look at different time zones in dealing with not only clients but trading opportunities and global equity. So, this is a very broad, and we're investing in other business development. This is a very broad-based effort that we have always been successful at growing into. In the past, we didn't necessarily make as large investments and we were able to grow quickly through those investments. So there may have been a slight hiccup or a pull down in EBITDA, but we grew through it so it wasn't even noticeable. This, we're getting ahead of it just a bit, as I forecast that we would, but I'm quite optimistic that we're going to see the fruits of this over the next year.

Okay, sounds good. One question as well, for your new hiring, is this – can you give an idea, are you hiring salaries at market rates or are you hiring at higher than market rates? Can you give us an idea of that?

I would argue that we're hiring people at competitive rates. We do not need to overpay to attract people to our firm. This is an incredible place to work with a very strong culture. We have very low employee turnover. People really commit their careers here and we're very proud of that. When you have that kind of entrepreneurial environment where people have a lot of autonomy and purpose, you have to be competitive to get the best talent, but you certainly don't need to overpay.

Okay, great. Thanks.

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

Great, thank you. And thank you for joining us for our third quarter results. I appreciate the attention and the questions. Just to emphasize, we ended the third quarter with an AUM increase of $1 billion, which represents a nice quarter-over-quarter, 5% increase, and we're up 10% year-over-year. That is revenue that has not yet been recognized, so that's a good forward-looking visibility into the firm. And as I emphasized several times during the call, I'm quite optimistic about our net organic flows looking forward at least over the next couple of quarters. Thanks to the progress we've made with the business development investments that we've made in the business. Thanks so much for joining us. I look forward to updating everyone at the end of the fourth quarter.

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