Silvercrest Asset Management's Q3 2025 Earnings Call: Contradictions Emerge on Expansion Timelines, OCIO Pipeline, EBITDA Margins, and Investment Strategy

Date of Call: October 31, 2025

Financials Results

• Revenue: $31.3M, up $0.9M or 2.9% YOY
• EPS: $0.07 per basic and diluted Class A share (reported net income attributable to Class A ~ $0.6M); adjusted EPS $0.19 per adjusted share

Guidance:

• Discretionary AUM expected to continue growing and could exceed prior all‑time highs if markets remain supportive.
• Firm expects investments in talent and global marketing to depress near‑term EBITDA but to drive revenue growth over time.
• Management anticipates return toward prior EBITDA/earnings levels over an 18–24 month horizon, with some flows and EBITDA lift possible in 6–12 months.
• One‑time reporting change expected in 2026 to reclassify nondiscretionary AUM (no revenue effect).
• Declared dividend $0.21/share payable ~Dec 19; ~$8–9M of $25M buyback remains.

Business Commentary:

* Asset Under Management (AUM) Growth: - Silvercrest Asset Management Group reported discretionary AUM of $24.3 billion, up 3% sequentially and 8% year-over-year. - The growth was primarily driven by beneficial equity markets, organic new client accounts, and strong market appreciation.

• Revenue and Expense Trends:
• Revenue for the third quarter was $31.3 million, increasing 2.9% year-over-year.

• Expenses for the quarter increased by $4 million or 15.4%, primarily due to increased compensation and benefits expense and general and administrative expenses.

• Shareholder Returns and Buyback Program:

• The company announced a new buyback program of $25 million in May 2025, with approximately $16 million worth of shares repurchased by the end of Q3.

• This reflects the company's strong balance sheet and commitment to supporting ongoing capital returns.

• International Expansion and Global Strategy:

• Silvercrest has a strong pipeline for its global value equity strategy and is actively marketing in Europe, Oceania, and Asia.
• The global strategy, with a performance history of over 5 years, has attracted significant interest from investors, including Australian superannuation funds.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted discretionary AUM up $687M in Q3 to $24.3B (3% sequential, 8% YOY) and total AUM a record $37.6B; emphasized a 'very large' pipeline, successful global value seed, and expectation that investments will pay off, driving eventual EBITDA/earnings recovery.

Q&A:

• Question from Christopher Marinac (Janney Montgomery Scott LLC, Research Division): Do you see an 18–24 month timeframe to get AUM/revenue to leverage expenses, or can you give visibility on timing?
  Response: Timelines vary by initiative; overall longer horizon of 18–24 months but institutional marketing and the global value equity strategy could drive flows in 6–12 months and begin improving EBITDA sooner.

• Question from Christopher Marinac (Janney Montgomery Scott LLC, Research Division): Are the increased professional fees you called out temporary or recurring?
  Response: Some professional fees are temporary and tied to global initiatives; see the GAAP to non‑GAAP reconciliation in the earnings release/10‑Q that isolates nonrecurring items.

• Question from Christopher Marinac (Janney Montgomery Scott LLC, Research Division): As you look out a couple of years, does the EBITDA margin return to prior levels or get recast?
  Response: Management expects to return to prior EBITDA levels over time barring new investments; current strategic hires and investments depress margins until associated revenue materializes.

• Question from Sandy Mehta (Evaluate Research Limited): Can you give more color on marketing, the pipeline and client/consultant interest in the global strategy?
  Response: Pipeline is very large but hard to quantify post‑COVID; global value has strong multi‑year performance and received an Australian superannuation seed, institutional marketing is engaging large sovereign/super funds and consultants with favorable reception.

• Question from Sandy Mehta (Evaluate Research Limited): Have you completed most senior hires or will hiring continue?
  Response: Most hires for the new equity strategy and institutional team are done, but additional hires are planned for Europe, Asia and U.S. wealth; future hiring should be offset as new revenue emerges.

• Question from Sandy Mehta (Evaluate Research Limited): What are OCIO assets currently?
  Response: OCIO is about $2.2B with a strong pipeline; recent ~$70M foundation win occurred after quarter end and OCIO performance has outperformed peers.

• Question from Sandy Mehta (Evaluate Research Limited): Can you disclose the buyback prices or indicate roughly the price range?
  Response: Management does not disclose buyback prices, characterized purchases as very favorable, and noted approximately $8–9M remains under the $25M program.

Contradiction Point 1

Expansion and Investment Timeline

It involves differing expectations for the timeline of returns from the firm's investments in expansion and new initiatives, which directly impacts financial expectations and strategic planning.

How will AUM and revenue growth align with current expense levels to enable leverage? Is an 18-24 month timeline expected, or can visibility be provided? - Christopher Marinac(Janney Montgomery Scott LLC)

2025Q3: Multiple investments are ongoing, with timelines varying. The expansion includes domestic, Asian/Australian, and European efforts, impacting headcount by around 15 people in the last year. While bulk investments occurred within the past 1.5 years, some investments, particularly in institutional marketing and the global value equity team, are expected to yield returns within the next 6 to 12 months. The firm anticipates meaningful progress in the coming quarters. - Richard Hough(CEO)

Can you analyze expenses and the timing between additional revenue and expenses? - Christopher Marinac(Janney Montgomery Scott)

2025Q1: We expect increasing margins year-over-year driven by growth in our global value and international value teams. Investments in Southeast Asia and Europe will take more time to bear fruit. We plan to grow into our investments by year-end 2026, with a focus on improving operating leverage. - Richard Hough(CEO)

Contradiction Point 2

OCIO Asset Pipeline

It involves the assessment of the OCIO asset pipeline, which is crucial for understanding the potential growth and future revenue of the company's OCIO business.

What's the current status of your OCIO assets? - Sandy Mehta (Evaluate Research Limited)

2025Q3: OCIO assets are nearly $2.2 billion with a strong pipeline. Recent wins include a $70 million foundation. The performance of the OCIO portfolio has been strong, enhancing the firm's service model. - Richard Hough(CEO)

Is the OCIO pipeline meeting expectations? Will it contribute more to the overall mix? - Christopher William Marinac (Janney Montgomery Scott LLC, Research Division)

2025Q2: The pipeline has come down, but we expect it to improve. We have a $100 million mandate final coming up, which could increase our OCIO business by 5% if successful. We are working to strengthen the pipeline and build the business. - Richard Hough(CEO)

Contradiction Point 3

EBITDA Margin Expectations

It involves expectations regarding the company's EBITDA margin, which is a crucial financial metric for assessing profitability and efficiency.

Over the next few years, will the EBITDA margin return to previous levels? Will the EBITDA margin be recast as the company becomes one with a broader focus? - Christopher Marinac(Janney Montgomery Scott LLC)

2025Q3: The EBITDA margin will return to previous levels barring further new investments. The firm has significantly grown its capabilities, and once the current investments bear fruit, the company will resemble its historic highs in earnings and EBITDA. - Richard Hough(CEO)

Can you provide more details on the pipeline and your outlook for OCI and global growth? - Sandy Mehta(Evaluate Research Limited)

2025Q1: We expect the revenue to grow faster than expenses, leading to an improvement in our operating leverage with the resulting margin expansion for the full year. - Richard Hough(CEO)

Contradiction Point 4

Investment and Hiring Strategy

It highlights differing perspectives on the timing and impact of investments on the company's ability to leverage expenses and achieve financial targets.

How can we align AUM and revenue milestones with current expense leverage? Is an 18–24-month timeframe appropriate, or can you provide visibility? - Christopher Marinac (Janney Montgomery Scott LLC, Research Division)

2025Q3: Multiple investments are ongoing, with timelines varying. The expansion includes domestic, Asian/Australian, and European efforts, impacting headcount by around 15 people in the last year. While bulk investments occurred within the past 1.5 years, some investments, particularly in institutional marketing and the global value equity team, are expected to yield returns within the next 6 to 12 months. The firm anticipates meaningful progress in the coming quarters. - Richard Hough(CEO, President & Chairman)

Can you and Scott discuss operating leverage over the next few years, particularly whether you still expect to achieve it as you execute the pipeline and focus on profitable throughput? - Christopher Marinac (Janney Montgomery Scott)

2024Q4: In a steady state without making personnel investments, we could reach high 20s for an EBITDA margin and potentially near 32% with performance fees. However, given investments in new opportunities and hiring, it will take time to achieve these margins. The medium-term target is to get there by 2026, assuming everything falls into place. - Richard Hough(Chairman and CEO)