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…

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…

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…

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.