Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quarterly revenue increased year over year by $1.3 million or 4.2%.
- Total AUM at the end of the second quarter was $33.4 billion, a 4.7% increase year over year.
- Silvercrest announced the hiring of a high-quality global equity investment team to complement international strategies.
- The firm's pipeline of new institutional business opportunities remains strong, with significant potential mandates for the new global equity team.
- The Company's Board of Directors approved a 5% increase in the quarterly dividend, rising from $0.19 per share to $0.2 per share.
Negative Points
- Discretionary AUM decreased by $1.1 billion during the quarter to $21.6 billion, primarily due to the loss of institutional mandates.
- Expenses for the quarter increased year over year by $2.5 million or 10.6%, driven by higher compensation and benefits expenses.
- Net client outflows partially offset the increased discretionary AUM resulting from market appreciation.
- The firm's pipeline of new institutional business opportunities decreased during the second quarter to $1 billion.
- General and administrative expenses increased by $0.7 million or approximately 11.3%, primarily due to increases in professional fees and recruiting expenses.
Q & A Highlights
Q: On a relative performance has been strong. So what exactly are you hearing from consultants and institutional clients and what is causing the minor outflows?
A: Relative performance has been strong, particularly in the value book. Some outflows are due to fully funded plans reallocating, which is beyond our control. A significant outflow was from a large institution consolidating their managers and bringing money management internally. Despite this, we have seen inflows from wealth investors and others, and our new global equity team is expected to attract significant institutional mandates.
Q: In terms of this new global strategy and opportunity, can you quantify the potential? Is this a multi-billion dollar opportunity?
A: Yes, it is definitely a multi-billion-dollar opportunity over the next few years. We are currently developing the pipeline by meeting with potential allocators and consultants. The relationships that have come with the new team are promising, and we expect significant inflows in the near future.
Q: Where are you in terms of OCIO assets now?
A: OCIO assets are about $1 billion, with a pipeline of almost $600 million. The pipeline is more diversified now, making it more reliable. We expect steady contributions from this segment going forward.
Q: Are we looking at higher compensation expenses for this year and next year due to key new hires?
A: Yes, we are making significant investments in new talent and technology, which will result in higher compensation expenses this year. Our long-term target remains at 55% of revenue, but we are currently running at 57-58% due to these investments. We will update these numbers as justified.
Q: Is it unusual to accrue extra salary and bonuses at this time of year?
A: It is normal to accrue extra salary and bonuses based on estimates. Given our current hiring mode, it is prudent to adjust the variable compensation accrual accordingly to avoid large adjustments at year-end.
Q: Can you explain the pipeline change from March to June?
A: The pipeline decreased due to winning some mandates and losing a large one. We are rigorous in managing the pipeline, and sometimes opportunities fall outside the six-month window. The current pipeline is more diversified and dependable, with contributions from OCIO, growth, international, and emerging markets strategies.
Q: How have recent changes in the equity market post-June 30th resonated with your business?
A: The broadening of the market in the third quarter has been very welcome and helpful. Small-cap performance is crucial for our institutional business, and the recent regime change is positive. However, the focus needs to shift from the Fed to fundamental business and earnings for a healthy market.
Q: Any closing remarks?
A: We are excited about the new intellectual capital we've attracted, which opens up new opportunities with significant asset allocators and families. We look forward to updating you at the end of the third quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
