Silvercrest Asset Management Group Inc. (SAMG) stock intrinsic value fair value estimate & owner earnings analysis

Silvercrest Asset Management is a New York-based wealth manager for wealthy families, endowments and foundations, with growing institutional and international mandates. It earns almost all of its revenue as a percentage of the assets it manages on a discretionary basis: $24.7 billion at June 30, 2026, a record high. Revenue was a record $125.3 million in 2025 and was flat in the first half of 2026 at $62.2 million. Every client relationship can be ended on no notice, so revenue depends on two things: where markets are, and whether clients stay. HOW YOU OWN IT. The listed Class A shares own about 65% of the operating partnership. The firm's principals own the remaining 35% through partnership units that convert one-for-one into Class A shares. Reported cash flow covers the whole partnership, so we divide it by all units (about 11.9 million) rather than by the 7.75 million Class A shares alone. Two further items reduce what a Class A share is worth. First, corporate income tax is paid only on the listed company's share of profits, so we charge that tax to Class A holders alone instead of spreading it across all units. Second, the listed company owes its principals about $9.4 million under a tax-sharing agreement signed at the IPO, roughly $1.21 per Class A share. WHAT THE BUSINESS EARNS NOW. We start from operating cash, remove timing swings in bonus accruals and bills, and subtract equity-based pay and the capital spending needed to keep going. Amortisation of client lists bought in past acquisitions is added back as a sunk cost. Clients from those books do drift away over time, and that attrition is visible in the firm's net outflows, so we carry it in the growth path. From 2016 to 2024 this measure ran between $1.03 and $2.38 per unit, typically around $1.40. It fell to $0.64 in 2025 and to about $0.27 for the first half of 2026, against $0.75 a year earlier. The cause is costs, not revenue. Compensation rose from 62% of revenue in 2024 to 67% in 2025 and stayed there in 2026, driven by merit raises, new hires, higher bonus accruals and a $3.9 million earnout bonus accrued in 2025. Other costs have also stepped up: professional fees roughly doubled, and travel and systems costs rose. These support a build-out of institutional and international distribution, including a Singapore office opened in May 2025 and an EU licence application. Management says the plan is proceeding as designed, which tells us the spending is intended to continue. Four consecutive quarters at this cost level is enough for us to treat it as the business as it stands today. We no longer assume a return to the older, leaner cost structure unless the firm actually delivers it. Discretionary client flows have been negative three years running: net discretionary outflows of $1.1 billion in 2023, $0.7 billion in 2024 and $1.3 billion in 2025, offset by market gains. Gross new money is still arriving. Organic new accounts were $111 million in Q2 2026, and an A$500 million institutional contribution was funded in July 2026. That mandate is on a low-fee schedule (about 0.15%), so it adds assets far faster than it adds revenue. BASE CASE (about $7.40 per share). Revenue edges up from the higher asset level the firm entered Q3 2026 with, and costs stay where they are now. Owner earnings are about $5.7 million for 2026 and $7.0 million in 2027, then hold near $7.5 million a year (about $0.63 per unit), roughly the 2025 level. The 2027 step-up rests on the record discretionary assets and the July mandate already in hand. No margin recovery, no international payoff and no market growth is assumed. On that basis the business is worth about $126 million, against $9.8 million of bank debt and finance leases and the $9.4 million tax-sharing obligation. After the corporate-tax adjustment, that leaves about $7.40 per Class A share. BEAR CASE (about $2.00 per share). A market decline like 2008-09 cuts revenue by about a quarter for two years, from $127 million to roughly $95 million. Bonuses flex down, but salaries and the enlarged fixed costs do not, so the firm burns about $6 million and then $4 million of cash in those years. Assets regrow afterward. Outflows continue as acquired client books age, and a senior team leaves with its relationships. Earnings settle around $4 million a year. The business is worth about $53 million. The firm can carry its small term loan through this, because it holds roughly $40 million of cash before the annual bonus payout each year and can cut its dividend. After the $9.8 million of debt and the tax-sharing obligation, about $2.00 per share remains. BULL CASE (about $18.90 per share). The firm brings compensation back to the 62% of revenue it actually ran at in 2023-24, while the institutional build-out keeps adding mandates. Institutional assets already rose from $8.7 billion to $9.8 billion in Q2 2026. Owner earnings climb back to the roughly $18 million a year the business earned in 2023-24 and hold there. The business is worth about $286 million, or about $18.90 per share after debt, the tax-sharing obligation and corporate tax. No growth beyond that level is credited. MARGIN OF SAFETY PRICE: $4.00. We are not confident about the earnings level. The business earns a third to a half of what it earned two years ago, and it is not yet clear how much of the new cost base management will choose to keep. Plausible bad outcomes would hit this business hard, because every client can leave on no notice and relationships are concentrated in a small group of principals. A market drawdown on top of today's cost base would push it to losses. What protects owners is the balance sheet: debt is only $9.5 million, and there are no large fixed obligations beyond leases. The firm should survive, but shareholders could be left with little. If we are wrong about costs, the value moves a long way in either direction: a return to the old cost structure is worth well over $15, and a downturn on the current one is worth around $2. The $0.84 annual dividend is not covered by first-half 2026 earnings, so the price does not count on it over the holding period. From $4.00, the median case alone implies roughly double that value within a few years without relying on the dividend, and a return of the old cost discipline implies a multiple of it. The bear case value is about half that price, which is why the margin-of-safety price is not set higher. WHAT CHANGED SINCE OUR PREVIOUS ANALYSIS. We previously treated 2025's weakness as mostly temporary and expected a recovery toward the firm's older earnings level. Two more quarters of the same cost structure in 2026, together with management's statement that the investment programme continues, show the higher costs are a standing feature for now. That lowers our estimates across the board. The earlier figures were also prepared on a different basis for debt and the tax-sharing agreement, so they are not directly comparable. WHAT COULD NOT BE PINNED DOWN. The filings do not say whether the $3.9 million earnout bonus will recur, or exactly which hires and fees belong to the international programme. Management identifies under $0.5 million of 2025 costs as international. We treated the whole cost base as ongoing until it is shown otherwise.