Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Silvercrest Asset Management Group Inc (SAMG, Financial) reported a 5% increase in discretionary assets under management (AUM) during the third quarter, reaching $22.6 billion.
- The company's total AUM increased by 13% year over year, reaching $35.1 billion by the end of the third quarter.
- Silvercrest's pipeline of new institutional business opportunities increased by 20% during the third quarter, now standing at $1.2 billion.
- The firm is optimistic about securing significant organic net flows over the next two quarters, driven by a robust pipeline and market conditions.
- Silvercrest has successfully hired a high-quality team for its global equity strategy, positioning the firm for significant inflows in this high-demand area.
Negative Points
- Despite increased topline revenue, most business metrics are down due to higher expenses, particularly in compensation and benefits.
- Expenses for the quarter increased by 12% year over year, driven by increased compensation and benefits expenses.
- The company reported discretionary outflows during the quarter, although they were revenue neutral overall.
- General and administrative expenses increased by 13% year over year, primarily due to professional fees and portfolio and systems expenses.
- Cash and cash equivalents decreased from $70.3 million at the end of last year to $58.1 million as of September 30th, 2024.
Q & A Highlights
Q: Can you provide more details on the global strategies opportunity in terms of inflows and staffing? Also, an update on the outlook for new strategies and OCIO?
A: We have hired most of the primary portfolio management team and are considering adding another analyst. Our internal capabilities cover business development well. The opportunity for global equity is enormous, with high demand globally. Our pipeline is $1.2 billion, excluding potential global equity inflows. The OCIO portion of the pipeline is about $600 million, with the total portfolio at $1.6 billion.
Q: Can you update us on the buyback activity and how you view the use of cash for buybacks versus potential acquisitions?
A: We are actively buying back shares, viewing it as an acquisition by another means. The buyback plan is up to $12 million, with $1.4 million repurchased so far. This form of buyback allows flexibility to stop if an acquisition opportunity arises.
Q: Are you still aiming to get adjusted EBITDA margin back to 27% in the long term?
A: Yes, as a mature business, we aim for upper 20s EBITDA margin. We've been investing in growth and next-generation talent, which has temporarily impacted earnings. However, we expect to see the benefits of these investments over the next year.
Q: Are new hires being made at market rates or higher?
A: We hire at competitive rates. We don't need to overpay due to our strong culture and low employee turnover. Our firm offers an entrepreneurial environment with autonomy and purpose, attracting top talent.
Q: Can you provide a summary of the third quarter results and outlook?
A: We ended the third quarter with a $1 billion increase in AUM, a 5% quarter-over-quarter and 10% year-over-year increase. This revenue has not yet been recognized, providing good forward visibility. We are optimistic about net organic flows over the next few quarters due to our business development efforts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
