Welcome to the Silvercrest Asset Management Group Q2-2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Before we begin, let me remind you that during today's call, certain statements made regarding our future performance are forward-looking statements. They are based on current expectations and projections, which are subject to a number of risks and uncertainties, 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 Huff, 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've described over the past two years is proceeding as we designed. Discretionary assets under management, which primarily drives the firm's revenue, increased 6.9% during the 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 or 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 points. 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, non-discretionary AUM are associated with a small portion of revenue. We will adjust how the firm reports non-discretionary AUM next quarter, likely eliminating the non-discretionary category. The adjustment will substantially lower reported non-discretionary and total AUM on a one-time basis without any revenue effect. We seek to provide investors with a clearer picture of the discretionary AUM and economics that drive our business. While revenue is 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 Australian $500 million contribution, that's approximately $350 million to our global value strategy. That strategy now manages $2.5 billion. Silvercrest institutional business now stands at $9.8 billion in AUM, up from $8.7 billion at the end of 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 usage 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. you. We've now achieved important third-party ratings for our strategies in 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 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 is $20.5 million, representing 66.6% of revenue for the three months ended June 30, 2026. As we have consistently communicated, our earnings and adjusted EBITDA reflect deliberate costs 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 interests with those of our shareholders is fundamental to how we intend to grow the firm and compound value through this investment cycle and beyond. Look forward to taking your questions later in the call. Scott Gerard, our CFO, will now review the financials. Great.

Thank you, Rick. And as disclosed, our discretionary AUM as of June 30th 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 percent primarily due to increases in salaries and benefits expense primarily as a result of merit-based increases and new hires, including new staff in Ireland, an increase in the accrual for bonuses, and increased equity-based compensation expense. General and administrative expenses increased by $1.5 million, or approximately 19.3%, primarily due to increases in professional fees, travel and entertainment expense, especially related to our global initiatives, and portfolio and systems expense. 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 non-core and non-recurring items, was approximately $3.4 million or 11.2% of revenue for the quarter. Adjusted net income, which we define as net income without giving effect to non-core and non-recurring items, And income tax expense, assuming a corporate rate of 26%, was approximately $1.2 million for the quarter, or $0.10 per adjusted basic and diluted EPS. Adjusted earnings per share is equal to adjusted net income, divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS. 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 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 and 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 total assets were approximately $139.9 million as of June 30th 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 30th of this year, compared to $44.1 million at the end of last year. Borrowings totaled approximately $9.5 million as of June 30th 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.

Thank you, Scott.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we'll pause momentarily to assemble the roster. The first question comes from Sandy Mehta from Evaluate. Please go ahead.

Yes, good morning. 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 your licensing process in Australia and Europe, that those expenses might come down meaningfully. So what should we expect as a normal run rate for GMA expenses going forward?

Yeah, 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. um there are some ratings done there's still some more to go but directionally we should be seeing that decline uh which will be a benefit to the to the company so this is directional comment uh 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 startup type professional fees, those will go away post-licensure.

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

With regards to small-cap value and the small-cap institutional business, it absolutely helps.

It certainly helps us with future retention of assets, some of the outflows that we have commented on and experienced have been on the value book so there's no doubt that to pick up in performance should be should be helpful I hope that answers your question yeah okay and you it was great to see incremental flows into global and the performance there has been strong any further color that you can give us on influence into your global and international strategy?

Sure, absolutely. Well, first of all, as I announced in my opening remarks, we received a half billion Australian dollar investment. So that's now a two and a half billion. So having really meaningful assets in the strategy is obviously a very important hurdle for any large allocators, 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 opportunities well into the billions of dollars, and the lack of precision is just that it's hard for me to put a probability on that large a number, but it's in the multiple billions. And this is, you know, reasonable. This is not kind of a two-year, three-year pipeline. It's a better pipeline than that. Great. All the best. Thank you. You're welcome. Thanks.

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

Morning, Jim.

Good morning. 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, you know, we need to kind of, in looking at the top line and the flows in AUM, I think there are three important points. One is that, you know, we're billing at a real low first quarter, at the end of the first quarter. However, AUM is up substantially over the past year, but tiny is everything. And given average AUM, when you're billing really only four times a year, revenues haven't yet caught up to it. As I mentioned, the discretionary AUM, which drives revenue, is effectively at an all-time high where we sit today, given the investment we just received from Australia. It puts us, you know, in the ballpark of $25 billion, $24.7 billion for the quarter. That's point number one. Point number two, we normally see higher outflows for the high net worth business in the second quarter for taxes. We also see some in the third quarter, not nearly as much, but that is often a seasonal event. And 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 fee our wealth management clients. We like to remain as unbiased as possible as fiduciaries, and therefore we seek, where possible, to avoid the conflict of fee compensation. The next point would be that 200 or 200 plus million of those outflows that you saw in the second quarter were related to certain family relationships with flat fee type arrangements or other arrangements. and those outflows had zero revenue effect on the top line as a result. We're doing a substantial amount of work, have special arrangements with them, and they can see very large cash flows in or out of different things, and it doesn't really affect the company or its revenue. 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.

Yes, thank you so much for that clarity.

You're welcome.

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

Thank you for joining us to review the second quarter 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.

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