Silvercrest Asset Management Group Inc. (SAMG) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the Consolidated Financial Statements and the related notes to those statements included later in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements as a result of many known and unknown factors, including, but not limited to, those discussed in “Item 1A - Risk Factors” of this Annual Report on Form 10-K. See “Cautionary Notice Regarding Forward-Looking Statements” located above in “Item 1 – Business” of this Annual Report on Form 10-K.

Overview

We are a full-service wealth management firm focused on providing financial advisory and related family office services to ultra-high net worth individuals and institutional investors. In addition to a wide range of investment capabilities, we offer a full suite of complementary and customized family office services for families seeking a comprehensive oversight of their financial affairs. During the twelve months ended December 31, 2024, our assets under management increased 9.6% from $33.3 billion to $36.5 billion.

The business includes the management of funds of funds, and other investment funds, collectively referred to as the “Silvercrest Funds”. Silvercrest L.P. has issued restricted stock units exercisable for 205,079 Class B units which entitle the holders thereof to receive distributions from Silvercrest L.P. to the same extent as if the underlying Class B units were outstanding. Net profits and net losses of Silvercrest L.P. will be allocated, and distributions from Silvercrest L.P. will be made, to its current partners pro rata in accordance with their respective partnership units (and assuming the Class B units underlying all restricted stock units are outstanding).

The historical results of operations discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations include those of Silvercrest L.P. and its subsidiaries. As the general partner of Silvercrest L.P., we control its business and affairs and, therefore, consolidate its financial position and results with ours. The interests of the limited partners’ collective 32.9% partnership interest in Silvercrest L.P. as of December 31, 2024 are reflected in non-controlling interests in our consolidated financial statements.

This Item 7 generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023. Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 7, 2024.

Key Performance Indicators

When we review our performance, we focus on the indicators described below:

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(1)
EBITDA, a non-GAAP measure of earnings, represents net income before provision for income taxes, interest income, interest expense, depreciation and amortization. We define Adjusted EBITDA as EBITDA without giving effect to items, including but not limited to professional fees associated with acquisitions or financing transactions, gains on extinguishment of debt or other obligations related to acquisitions, losses on disposals or abandonment of assets and leaseholds, severance and other similar expenses, but including partner incentive allocations, prior to our initial public offering, as an expense. We use this non-GAAP financial measure to assess the strength of our business. These adjustments and the non-GAAP financial measures that are derived from them provide supplemental information to analyze our business from period to period. Investors should consider these non-GAAP financial measures in addition to, and not as a substitute for financial measures in accordance with GAAP. See “Supplemental Non-GAAP Financial Information” for a reconciliation of non-GAAP financial measures.

(2)
Adjusted EBITDA margin, a non-GAAP measure of earnings, is calculated by dividing Adjusted EBITDA by total revenue.

(3)
We have computed average assets under management by averaging assets under management at the beginning of the applicable period and assets under management at the end of the applicable period.

Revenue

We generate revenue from management and advisory fees, performance fees and family office services fees. Our management and advisory fees are generated by managing assets on behalf of separate accounts and acting as investment adviser for various investment funds. Our performance fees relate to assets managed in external investment strategies in which we have a revenue sharing arrangement and in funds in which we have no partnership interest. Our management and advisory fees and family office services fees income is recognized through the course of the period in which these services are provided. Income from performance fees is recorded at the conclusion of the contractual performance period when all contingencies are resolved. In certain arrangements, we are only entitled to receive performance fees and allocations when the return on assets under management exceeds certain benchmark returns or other performance targets.

The discretionary investment management agreements for our separately managed accounts do not have a specified term. Rather, each agreement may be terminated by either party at any time, unless otherwise agreed with the client, upon written notice of termination to the other party. The investment management agreements for our private funds are generally in effect from year to year, and may be terminated at the end of any year (or, in certain cases, on the anniversary of execution of the agreement) (i) by us upon 30 or 90 days’ prior written notice and (ii) after receiving the affirmative vote of a specified percentage of the investors in the private funds that are not affiliated with us, by the private fund on 60 or 90 days’ prior written notice. The investment management agreements for our private funds may also generally be terminated effective immediately by either party where the non-terminating party (i) commits a material breach of the terms subject, in certain cases, to a cure period, (ii) is found to have committed fraud, gross negligence or willful misconduct or (iii) becomes bankrupt, becomes insolvent or dissolves. Each of our investment management agreements contains customary indemnification obligations from us to our clients. The tables below set forth the amount of assets under management, the percentage of management and advisory fees revenues, the amount of revenue recognized, and the average assets under management for discretionary managed accounts and for private funds for each period presented.

Discretionary Managed Accounts

Private Funds

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Our management and advisory fees are primarily driven by the level of our assets under management. Our assets under management increase or decrease based on the net inflows or outflows of funds into our various investment strategies and the investment performance of our clients’ accounts. In order to increase our assets under management and expand our business, we must develop and market investment strategies that suit the investment needs of our target clients and provide attractive returns over the long term. Our ability to continue to attract clients will depend on a variety of factors including, among others:

•
our ability to educate our target clients about our classic value investment strategies and provide them with exceptional client service;

•
the relative investment performance of our investment strategies, as compared to competing products and market indices;

•
competitive conditions in the investment management and broader financial services sectors;

•
investor sentiment and confidence; and

•
our decision to close strategies when we deem it to be in the best interests of our clients.

The majority of management and advisory fees that we earn on separately-managed accounts are based on the value of assets under management on the last day of each calendar quarter. Most of our management and advisory fees are billed quarterly in advance on the first day of each calendar quarter. Our basic annual fee schedule for management of clients’ assets in separately managed accounts is: (i) for managed equity or balanced portfolios, 1% of the first $10 million and 0.60% on the balance, (ii) for managed fixed income only portfolios, 0.40% on the first $10 million and 0.30% on the balance, (iii) for the municipal value strategy, 0.65%, (iv) for Cortina’s equity portfolios, 1% on the first $25 million, 0.90% on the next $50 million and 0.80% on the balance, (v) for outsourced chief investment officer portfolios, 0.40% on the first $50 million, 0.32% on the next $50 million and 0.24% on the balance and (vi) for the global value equity strategy, 0.15% per annum on the first AUD1.5 billion, 0.14% per annum on the next AUD1.5 billion, 0.11% per annum on the next AUD1.0 billion, 0.08% per annum on the next AUD1.0 billion and 0.05% per annum above AUD5.0 billion. Our fee for monitoring non-discretionary assets can range from 0.05% to 0.01%, but can also be incorporated into an agreed-upon fixed family office service fee. The majority of our client relationships pay a blended fee rate because they are invested in multiple strategies.

Management fees earned on investment funds that we advise are calculated primarily based on the net assets of the funds. Some funds calculate investment fees based on the net assets of the funds as of the last business day of each calendar quarter, whereas other funds calculate investment fees based on the value of net assets on the first business day of the month. Depending on the investment fund, fees are paid either quarterly in advance or quarterly in arrears. For our private funds, the fees range from 0.25% to 1.5% annually. Certain management fees earned on investment funds for which we perform risk management and due diligence services are based on flat fee agreements customized for each engagement.

Average annual management fee is calculated by dividing our actual revenue earned over a period by our average assets under management during the same period (which is calculated by averaging quarter-end assets under management for the applicable period). Our average management fee was 0.35%, 0.38% and 0.40% for the years ended December 31, 2024, 2023 and 2022, respectively. Changes in our total average management fee rates are typically the result of changes in the mix of our assets under management and increased concentration in our equities strategies whose fee rates are higher than those of other investment strategies. Advisory fees are also adjusted for any cash flows into or out of a portfolio, where the cash flow represents greater than 10% of the previous quarter-end market value of the portfolio. These cash flow-related adjustments were insignificant for the years ended December 31, 2024, 2023 and 2022. Silvercrest L.P. has authority to take fees directly from external custodian accounts of its separately managed accounts.

Our management and advisory fees may fluctuate based on a number of factors, including the following:

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changes in assets under management due to appreciation or depreciation of our investment portfolios, and the levels of the contribution and withdrawal of assets by new and existing clients;

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allocation of assets under management among our investment strategies, which have different fee schedules;

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allocation of assets under management between separately managed accounts and advised funds, for which we generally earn lower overall advisory fees; and

•
the level of our performance with respect to accounts and funds on which we are paid incentive fees.

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Our family office services capabilities enable us to provide comprehensive and integrated services to our clients. Our dedicated group of tax and financial planning professionals provide financial planning, tax planning and preparation, partnership accounting and fund administration, and consolidated wealth reporting, among other services. Family office services income fluctuates based on both the number of clients for whom we perform these services and the level of agreed-upon fees, most of which are flat fees. Therefore, non-discretionary assets under management, which are associated with family office services, do not typically serve as the basis for the amount of family office services revenue that is recognized.

Expenses

Our expenses consist primarily of compensation and benefits expenses, as well as general and administrative expense including rent, professional services fees, data-related costs and sub-advisory fees. These expenses may fluctuate due to a number of factors, including the following:

•
variations in the level of total compensation expense due to, among other things, bonuses, awards of equity to our employees and partners of Silvercrest L.P., changes in our employee count and mix, and competitive factors; and

•
the level of management fees from funds that utilize sub-advisors will affect the amount of sub-advisory fees.

Compensation and Benefits Expense

Our largest expense is compensation and benefits, which includes the salaries, bonuses, equity-based compensation and related benefits and payroll costs attributable to our principals and employees. Our compensation methodology is intended to meet the following objectives: (i) support our overall business strategy; (ii) attract, retain and motivate top-tier professionals within the investment management industry; and (iii) align our employees’ interests with those of our equity owners. We have experienced, and expect to continue to experience, a general rise in compensation and benefits expense commensurate with growth in headcount and with the need to maintain competitive compensation levels.

The components of our compensation and benefits expenses for the years ended December 31, 2024, 2023 and 2022 are as follows:

(1)
For the years ended December 31, 2024, 2023 and 2022, $31,140, $31,289 and $32,262 of partner incentive payments were included in cash compensation and benefits expense, respectively.

During 2024, 2023 and 2022, Silvercrest L.P. granted restricted stock units (“RSU”) to existing Class B unit holders. During 2024 and 2022, Silvercrest L.P. granted non-qualified options (“NQO”) to an existing Class B unit holder. Information regarding restricted stock units can be found in Note 16. “Equity-Based Compensation” in the accompanying consolidated financial statements.

General and Administrative Expenses

General and administrative expenses include occupancy-related costs, professional and outside services fees, office expenses, depreciation and amortization, sub-advisory fees and the costs associated with operating and maintaining our research, trading and portfolio accounting systems. Our costs associated with operating and maintaining our research, trading and portfolio accounting systems and professional services expenses generally increase or decrease in relative proportion to the number of employees retained by us and the overall size and scale of our business operations. Sub-advisory fees will fluctuate based on the level of management fees from funds that utilize sub-advisors.

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Other Income

Other income is derived primarily from investment income arising from our investments in various private investment funds that were established as part of our investment strategies. We expect the investment components of other income, in the aggregate, to fluctuate based on market conditions and the success of our investment strategies. Performance fees earned from those investment funds in which we have a partnership interest have been earned over the past few years as a result of the achievement of various high water marks depending on the investment fund. These performance fees are recorded based on the equity method of accounting. The majority of our performance fees over the past few years have been earned from our fixed income-related funds.

Non-Controlling Interests

We are the general partner of Silvercrest L.P. and control its business and affairs and, therefore, consolidate its financial results with ours. In light of the limited partners’ interests in Silvercrest L.P., we reflect their partnership interests as non-controlling interests in our consolidated financial statements.

Provision for Income Tax

We are subject to taxes applicable to C-corporations. Our effective tax rate, and the absolute dollar amount of our tax expense, will be offset by the benefits of the tax receivable agreement entered into with our Class B stockholders.

Acquisitions

On December 13, 2018, we executed an Asset Purchase Agreement (the “Neosho Asset Purchase Agreement”) by and among the Company, Silvercrest L.P. (“SLP”), Silvercrest Asset Management Group LLC (“SAMG LLC”) and Neosho Capital LLC (“Neosho” or the “Seller”), and Christopher K. Richey, Alphonse I. Chan, Robert K. Choi and Vincent G. Pandes, each such individual a principal of Neosho, to acquire certain assets of Neosho. The transaction contemplated by the Neosho Asset Purchase Agreement closed on January 15, 2019 and is referred to herein as the “Neosho Acquisition”.

Information regarding the Neosho Acquisition can be found in Note 3. “Acquisitions” in the accompanying consolidated financial statements.

Operating Results

Revenue

Our revenues for the years ended December 31, 2024, 2023 and 2022 are set forth below:

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The growth in our assets under management from January 1, 2022 to December 31, 2024 is described below:

(1)
Less than 5% of assets under management generate performance fees.

1
Returns are based upon a time weighted rate of return of various fully discretionary equity portfolios with similar investment objectives, strategies and policies and other relevant criteria managed by Silvercrest Asset Management Group LLC (“SAMG LLC”), a subsidiary of Silvercrest. Performance results are gross of fees and net of commission charges. An investor’s actual return will be reduced by the advisory fees and any other expenses it may incur in the management of the investment advisory account. SAMG LLC’s standard advisory fees are described in Part 2 of its Form ADV. Actual fees and expenses will vary depending on a variety of factors, including the size of a particular account. Returns greater than one year are shown as annualized compounded returns and include gains and accrued income and reinvestment of distributions. Past performance is no guarantee of future results. This report contains no recommendations to buy or sell securities or a solicitation of an offer to buy or sell securities or investment services or adopt any investment position. This report is not intended to constitute investment advice and is based upon conditions in place during the period noted. Market and economic views are subject to change without notice and may be untimely when presented here. Readers are advised not to infer or assume that any securities, sectors or markets described were or will be profitable. SAMG LLC is an independent investment advisory and financial services firm created to meet the investment and administrative needs of individuals with substantial assets and select institutional investors. SAMG LLC claims compliance with the Global Investment Performance Standards (GIPS®).

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2
The market indices used to compare to the performance of our strategies are as follows:

The Russell 1000 Index is a capitalization-weighted, unmanaged index that measures the 1000 smallest companies in the Russell 3000. The Russell 1000 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth values.

The Russell 2000 Index is a capitalization-weighted, unmanaged index that measures the 2000 smallest companies in the Russell 3000. The Russell 2000 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 2000 Index companies with lower price-to-book ratios and lower expected growth values. The Russell 2000 Growth Index is a capitalization-weighted, unmanaged index that includes those Russell 2000 Index companies with higher price-to-book ratios and higher forecasted growth.

The Russell 2500 Index is a capitalization-weighted, unmanaged index that measures the 2500 smallest companies in the Russell 3000. The Russell 2500 Value Index is a capitalization-weighted, unmanaged index that includes those Russell 2000 Index companies with lower price-to-book ratios and lower expected growth values. The Russell 2500 Growth Index is a capitalization-weighted, unmanaged index that includes those Russell 2500 Index companies with higher price-to-book ratios and higher forecasted growth.

The Russell 3000 Value Index is a capitalization-weighted, unmanaged index that measures those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth.

Year Ended December 31, 2024 versus Year Ended December 31, 2023

Our total revenue increased by $6.2 million, or 5.3%, to $123.7 million for year ended December 31, 2024, from $117.4 million for year ended December 31, 2023. This increase was driven by market appreciation in discretionary assets under management partially offset by net client outflows.

Assets under management increased by $3.2 billion, or 9.6%, to $36.5 billion at December 31, 2024 from $33.3 billion at December 31, 2023. Our increase in assets under management for the year ended December 31, 2024 was attributable to an increase in discretionary assets under management of $1.4 billion and an increase in non-discretionary assets under management of $1.8 billion. The increase in our discretionary assets under management was driven by market appreciation and net client inflows. With respect to our discretionary assets under management, equity assets increased by 7.3% during the year ended December 31, 2024 and fixed income assets increased by 6.2% during the same period. With respect to our discretionary assets under management, most of our increase came from our energy infrastructure, SMID growth, large cap growth and multi cap growth strategies with composite returns of 42.1%, 20.9%, 20.5%, and 17.9%, respectively, for the year ended December 31, 2024. Compared to the year ended December 31, 2023, there was a decrease of $0.3 billion of client inflows and an increase of $0.9 billion in client outflows. Our market appreciation during the year ended December 31, 2024 constituted a 10.4% rate of increase in our total assets under management compared to December 31, 2023, as compared to our market appreciation during the year ended December 31, 2023 which constituted a 11.4% rate of increase in our total assets under management compared to December 31, 2022. Sub-advised fund management revenue remained flat at $1.2 million for the years ended December 31, 2024 and 2023. Proprietary fund management revenue remained flat at $2.9 million for the years ended December 31, 2024 and 2023. As of December 31, 2024, the composition of our assets under management was 64% in discretionary assets, which includes both separately managed accounts and proprietary and sub-advised funds, and 36% in non-discretionary assets which represent assets on which we provide portfolio reporting but do not have investment discretion.

Family office services revenue decreased by $0.3 million, or 6.1%, to $4.3 million for the year ended December 31, 2024 from $4.6 million for the year ended December 31, 2023.

Year Ended December 31, 2023 versus Year Ended December 31, 2022

Our total revenue decreased by $5.8 million, or 4.7%, to $117.4 million for year ended December 31, 2023, from $123.2 million for year ended December 31, 2022. Despite higher assets under management ("AUM") as of December 31, 2023 when compared with AUM as of December 31, 2022, AUM levels were lower in previous periods. This was driven by market downturns, which had the effect of lower revenue during 2023 when compared with 2022.

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Assets under management increased by $4.4 billion, or 15.2%, to $33.3 billion at December 31, 2023 from $28.9 billion at December 31, 2022. Our increase in assets under management for the year ended December 31, 2023 was attributable to an increase in discretionary assets under management of $1.0 billion and an increase in non-discretionary assets under management of $3.4 billion. The increase in our discretionary assets under management was driven by market appreciation and net client inflows. With respect to our discretionary assets under management, equity assets increased by 5.3% during the year ended December 31, 2023 and fixed income assets increased by 4.4% during the same period. With respect to our discretionary assets under management, most of our decrease came from our large cap growth, multi cap growth, international small cap value and core international strategies with composite returns of 36.0%, 29.1%, 28.8%, and 26.8%, respectively, for the year ended December 31, 2023. Compared to the year ended December 31, 2022, there was a decrease of $1.0 billion of client inflows, a decrease of $1.5 billion in client outflows and an increase of $7.3 billion in market appreciation. Our market appreciation during the year ended December 31, 2023 constituted a 11.4% rate of increase in our total assets under management compared to December 31, 2022, as compared to our market depreciation during the year ended December 31, 2022 which constituted a 12.1% rate of decrease in our total assets under management compared to December 31, 2021. Sub-advised fund management revenue decreased by $0.1 million for the year ended December 31, 2023 as compared to the prior year. Proprietary fund management revenue decreased by $0.3 million for the year ended December 31, 2023 as compared to the prior year as a result of market depreciation. As of December 31, 2023, the composition of our assets under management was 66% in discretionary assets, which includes both separately managed accounts and proprietary and sub-advised funds, and 34% in non-discretionary assets which represent assets on which we provide portfolio reporting but do not have investment discretion.

Family office services revenue remained flat at approximately $4.6 million for the years ended December 31, 2023 and 2022.

There was no performance fee revenue for the years ended December 31, 2023 and 2022. These performance fees are primarily related to external investment strategies in which we have a revenue sharing arrangement.

The following table represents a further breakdown of our assets under management for the years ended December 31, 2024, 2023 and 2022:

(1)
Represents new account flows from both new and existing client relationships

(2)
Represents closed accounts of existing client relationships and those that terminated

(3)
Represents periodic cash flows related to existing accounts

(4)
Represents client assets that converted to Discretionary AUM from Non-Discretionary AUM

(5)
Represents the net change to Non-Discretionary AUM

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Expenses

Our expenses for the years ended December 31, 2024, 2023 and 2022, are set forth below:

(1)
For the years ended December 31, 2024 and 2023, $31,140 and $31,289, respectively, of partner incentive payments was included in compensation and benefits expense.

Our expenses are driven primarily by our compensation costs. The table included in “—Expenses—Compensation and Benefits Expense” describes the components of our compensation expense for the three years ended December 31, 2024. Other expenses, such as rent, professional service fees, data-related costs, and sub-advisory fees incurred are included in our general and administrative expenses in the Consolidated Statement of Operations.

Year Ended December 31, 2024 versus Year Ended December 31, 2023

Total expenses increased by $7.4 million, or 7.5%, to $106.0 million for the year ended December 31, 2024 from $98.6 million for the year ended December 31, 2023. This increase was attributable to an increase in general and administrative expenses of $3.4 million and an increase in compensation and benefits expense of $4.0 million.

Compensation and benefits expense increased by $4.0 million, or 5.6%, to $76.7 million for the year ended December 31, 2024 from $72.6 million for the year ended December 31, 2023. The increase was primarily attributable to an increase in equity based compensation expense of $0.3 million due to an increase in the number of unvested restricted stock units and unvested non-qualified stock options outstanding, an increase in salaries and benefits expense of $2.5 million primarily as a result of merit-based increases and newly-hired staff and an increase in the accrual for bonuses of $1.2 million.

General and administrative expenses increased by $3.4 million, or 13.1%, to $29.4 million for the year ended December 31, 2024 from $26.0 million for the year ended December 31, 2023. The increase was primarily attributable to increases in professional fees of $1.1 million, portfolio and systems expenses of $0.8 million, occupancy and related costs of $0.3 million, trading errors of $0.3 million, recruiting expenses of $0.3 million, travel and entertainment expenses of $0.2 million, depreciation and amortization of $0.1 million, office expense of $0.1 million, publications and subscriptions costs of $0.1 million and sub-advisory and referral fees of $0.1 million.

Year Ended December 31, 2023 versus Year Ended December 31, 2022

Total expenses increased by $13.9 million, or 16.5%, to $98.6 million for the year ended December 31, 2023 from $84.7 million for the year ended December 31, 2022. This increase was attributable to an increase in general and administrative expenses of $12.9 million and an increase in compensation and benefits expense of $1.0 million.

Compensation and benefits expense increased by $1.0 million, or 1.4%, to $72.6 million for the year ended December 31, 2023 from $71.6 million for the year ended December 31, 2022. The increase was primarily attributable to an increase in equity based compensation expense of $0.5 million due to an increase in the number of unvested restricted stock units and unvested non-qualified stock options outstanding and an increase in salaries and benefits expense of $1.3 million primarily as a result of merit-based increases and newly-hired staff, partially offset by a decrease in the accrual for bonuses of $0.8 million.

General and administrative expenses increased by $12.9 million, or 99.1%, to $26.0 million for the year ended December 31, 2023 from $13.0 million for the year ended December 31, 2022. The increase was primarily attributable to increases in the fair value of contingent consideration related to the Cortina Acquisition of $11.8 million and the Neosho Acquisition of $0.3 million, portfolio

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and systems expenses of $0.5 million, occupancy and related costs of $0.2 million, marketing costs of $0.2 million, depreciation and amortization of $0.1 million and office expense of $0.1 million. These increases were partially offset by decreases in professional fees of $0.1 million, sub-advisory and referral fees of $0.1 million and telephone and internet costs of $0.1 million. Information regarding acquisitions can be found in Note 3. “Acquisitions” in the “Notes to Consolidated Financial Statements” in the accompanying consolidated financial statements.

Other Income (Expense), Net

Year Ended December 31, 2024 versus Year Ended December 31, 2023

Other income (expense), net increased by $1.9 million to $2.6 million for the year ended December 31, 2024 from $0.7 million for the year ended December 31, 2023. There was a $0.1 million adjustment to the fair value of our tax receivable agreement liability as of December 31, 2024. The adjustment in fair value was a result of a reduction in the future effective corporate tax rates at the federal level and in New York City as a result of law changes. Equity income from investments increased by $1.1 million in 2024 as compared with the same period in the prior year as a result of increased performance fee allocations. Interest expense for the year ended December 31, 2024 decreased by $0.3 million as compared to the prior year due to the repayment of outstanding debt. Interest income increased by $0.5 million as a result of higher balances in interest-bearing accounts during the year.

Year Ended December 31, 2023 versus Year Ended December 31, 2022

Other income (expense), net increased by $0.8 million to $0.7 million for the year ended December 31, 2023 from ($0.2) million for the year ended December 31, 2022. There was a $0.4 million adjustment to the fair value of our tax receivable agreement liability as of December 31, 2023. The adjustment in fair value was a result of a reduction in the future effective corporate tax rates at the federal level and in New York City as a result of law changes. Equity income from investments increased by $0.1 million in 2023 as compared with the same period in the prior year as a result of increased performance fee allocations. Interest expense for the year ended December 31, 2023 was flat as compared to the prior year. Interest income increased as a result of higher balances in interest-bearing accounts during the year.

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Provision for Income Taxes

Year Ended December 31, 2024 versus Year Ended December 31, 2023

The provision for income taxes was $4.6 million and $4.3 million for the years ended December 31, 2024 and 2023, respectively. Our provision for income taxes as a percentage of income before provision for income taxes for the year ended December 31, 2024 and 2023 was 22.5% and 22.1%, respectively.

Year Ended December 31, 2023 versus Year Ended December 31, 2022

The provision for income taxes was $4.3 million and $7.6 million for the years ended December 31, 2023 and 2022, respectively. Our provision for income taxes as a percentage of income before provision for income taxes for the year ended December 31, 2023 and 2022 was 22.1% and 19.8%, respectively.

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Supplemental Non-GAAP Financial Information

To provide investors with additional insight, promote transparency and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making, we supplement our consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles, or GAAP, with Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Earnings Per Share, which are non-GAAP financial measures of earnings.

•
EBITDA represents net income before provision for income taxes, interest income, interest expense, depreciation and amortization.

•
We define Adjusted EBITDA as EBITDA without giving effect to the Delaware franchise tax, professional fees associated with acquisitions or financing transactions, gains on extinguishment of debt or other obligations related to acquisitions, impairment charges and losses on disposals or abandonment of assets and leaseholds, client reimbursements and fund redemption costs, severance and other similar expenses, but including partner incentive allocations, prior to our initial public offering, as an expense. We feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted EBITDA, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring earnings of the Company, taking into account earnings attributable to both Class A and Class B shareholders.

•
Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by total revenue. We feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted EBITDA Margin, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring profitability of the Company, taking into account profitability attributable to both Class A and Class B shareholders.

•
Adjusted Net Income represents recurring net income without giving effect to professional fees associated with acquisitions or financing transactions, losses on forgiveness of notes receivable from our principals, gains on extinguishment of debt or other obligations related to acquisitions, impairment charges and losses on disposals or abandonment of assets and leaseholds, client reimbursements and fund redemption costs, severance and other similar expenses, but including partner incentive allocations, prior to our initial public offering, as an expense. Furthermore, Adjusted Net Income includes income tax expense assuming a blended corporate rate of 26%. We feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted Net Income, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring income of the Company, taking into account income attributable to both Class A and Class B shareholders.

•
Adjusted Earnings Per Share represents Adjusted Net Income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic Adjusted Earnings Per Share, and to the extent dilutive, we add unvested deferred equity units and performance units to the total shares outstanding to compute diluted Adjusted Earnings Per Share. As a result of our structure, which includes a non-controlling interest, we feel that it is important to management and investors to supplement our consolidated financial statements presented on a GAAP basis with Adjusted Earnings Per Share, a non-GAAP financial measure of earnings, as this measure provides a perspective of recurring earnings per share of the Company as a whole as opposed to being limited to our Class A common stock.

These adjustments, and the non-GAAP financial measures that are derived from them, provide supplemental information to analyze our operations between periods and over time. Investors should consider our non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

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The following tables contain reconciliations of net income to Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share (amounts in thousands except per share amounts).

Adjusted EBITDA

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(a)
In 2023, represents professional fees of $5 related to the acquisition of Cortina. In 2022, represents insurance costs of $22 and professional fees of $15 related to the acquisition of Cortina.

(b)
In 2024, represents a fair value adjustment to the Neosho contingent purchase price consideration of $12, an ASC 842 (see Note 2. “Summary of Significant Accounting Policies”) rent adjustment of $192 related to the amortization of property lease incentives, Tax Receivable Agreement adjustment of ($78), sign on bonuses paid to certain employees of $188, professional fees of $53 related to a transfer pricing project, legal fees of $46, data conversion costs of $27 and software implementation costs of $22. In 2023, represents a variable compensation payment of $1,667 related to the difference between the number of non-qualified stock options granted to an existing Class B unit holder as determined using the Black-Scholes method inclusive and exclusive of the expected annual dividend yield input, Tax Receivable Agreement adjustment of $2, an ASC 842 rent adjustment of $192 related to the amortization of property lease incentives, moving costs of $35, software implementation costs of $35, professional fees related to a transfer pricing project of $37, legal fees related to the startup of a fund of $2, a fair value adjustment to the Neosho contingent purchase price consideration of $24 and a fair value adjustment to the Cortina contingent purchase price consideration of ($2). In 2022, represents a fair value adjustment to the Cortina contingent purchase price consideration of ($11,781), a fair value adjustment to the Neosho contingent purchase price consideration of ($299), Tax Receivable Agreement adjustment of ($202), an ASC 842 rent adjustment of $192 related to the amortization of property lease incentives, expenses related to obtaining a business license of $26, system implementation costs of $6 and expenses related to the Coronavirus pandemic of $6.

Liquidity and Capital Resources

Historically, the working capital needs of our business have primarily been met through cash generated by our operations. We expect that our cash and liquidity requirements in the next twelve months will be met primarily through cash generated by our operations. We will continue to evaluate our liquidity and financial position on an ongoing basis.

On June 24, 2013, the subsidiaries of Silvercrest L.P. entered into a $15.0 million credit facility with City National Bank. The subsidiaries of Silvercrest L.P. are the borrowers under such facility and Silvercrest L.P. guarantees the obligations of its subsidiaries under the credit facility. The credit facility is secured by certain assets of Silvercrest L.P. and its subsidiaries. The credit facility consisted of a $7.5 million delayed draw term loan that was scheduled to mature on June 24, 2025, and a $7.5 million revolving credit facility that was scheduled to mature on June 21, 2019. Effective July 1, 2019, the credit facility was increased and consisted of a $25.5 million delayed draw term loan that was to mature on July 1, 2026, and a $10.0 million revolving credit facility with a stated maturity date of June 18, 2024 and a stated term loan draw date of July 1, 2024. On June 17, 2022, the revolving credit facility was amended to replace LIBOR terms with its successor, Secured Overnight Financing Rate (“SOFR”). The loan bears interest at either (a) the higher of the prime rate plus a margin of 0.25 percentage points and 2.5% or (b) the SOFR rate plus 2.80 percentage points, at the borrowers’ option. On February 15, 2022, the credit facility was amended and restated to reflect changes to various definitions and related clauses with respect to the Company’s subsidiaries. On February 15, 2022, the credit facility was amended to reflect changes to various definitions and related clauses with respect to the Company’s subsidiaries. The credit facility contains restrictions on, among other things, (i) incurrence of additional debt, (ii) creating liens on certain assets, (iii) making certain investments, (iv) consolidating, merging or otherwise disposing of substantially all of our assets, (v) the sale of certain assets, and (vi) entering into transactions with affiliates. In addition, the credit facility contains certain financial covenants including a test on discretionary assets under management, maximum debt to EBITDA and a fixed charge coverage ratio. The credit facility contains customary events of default, including the occurrence of a change in control which includes a person or group of persons acting together acquiring more than 30% of the total voting securities of Silvercrest. On June 18, 2024, the subsidiaries of Silvercrest L.P. and City National Bank entered into an Amendment and Restatement Agreement, which amends and restates the credit facility (as so amended and restated, the “A&R Credit Agreement”) whereby, among other items, (i) the term loan maturity date was extended until June 18, 2027, (ii) the term loan draw date was extended to June 18, 2025, (iii) the term loan commitment was decreased from $25.5 million to $10.0 million as a result of the repayment in full of the existing term loans previously borrowed under the Credit Agreement, and (iv) the $10.0 million revolving credit facility maturity date was extended until June 18, 2025. Additionally, the quarterly installments due upon termination of the term loan commitment were revised to equal 5% of the aggregate principal amount of term loans outstanding as of June 18, 2025 (after giving effect to any term loan made on such date). The fee structure was amended so as to provide for an upfront fee of $15,000 and additional commitment fee of up to $100,000 payable in three installments of $33,333.33 each, subject to the terms of the A&R Credit Agreement, and the unused line fee with respect to the term loan commitment was increased to 0.75% per annum times the actual daily amount of unused term loan commitment for the immediately preceding fiscal quarter. The credit agreement and all other loan documents between the Credit Parties and City National Bank continued in full force and effect. As of December 31, 2024 and 2023, we had $0 and $2.7 million outstanding under the term loan. We were in compliance with the covenants under the credit facility as of December 31, 2024 and 2023.

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Our ongoing sources of cash will primarily consist of management fees and family office services fees, which are principally collected quarterly. We will primarily use cash flow from operations to pay compensation and related expenses, general and administrative expenses, income taxes, debt service, capital expenditures, distributions to Class B unit holders and dividends on shares of our Class A common stock.

Seasonality typically affects cash flow since the first quarter of each year, includes as a source of cash, the prior year’s annual performance fee payments, if any, from our various funds and external investment strategies and, as a use of cash, the prior fiscal year’s incentive compensation. We believe that we have sufficient cash from our operations to fund our operations and commitments for the next twelve months.

The following table sets forth certain key financial data relating to our liquidity and capital resources as of December 31, 2024, 2023 and 2022.

We anticipate that distributions to the principals of Silvercrest L.P. will continue to be a material use of our cash resources and will vary in amount and timing based on our operating results and dividend policy. We pay and intend to continue paying quarterly cash dividends to holders of our Class A common stock. We are a holding company and have no material assets other than our ownership of interests in Silvercrest L.P. As a result, we will depend upon distributions from Silvercrest L.P. to pay any dividends to our Class A stockholders. We expect to cause Silvercrest L.P. to make distributions to us in an amount sufficient to cover dividends, if any, declared by us. Our dividend policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay our intended dividends or our subsidiaries are prevented from making a distribution to us under the terms of our current credit facility or any future financing. To the extent we do not have cash on hand sufficient to pay dividends, we may decide not to pay dividends. By paying cash dividends rather than investing that cash in our future growth, we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations or unanticipated capital expenditures, should the need arise.

Our purchase of Class B units in Silvercrest L.P. that occurred concurrently with the consummation of our initial public offering, and the future exchanges of Class B units of Silvercrest L.P., are expected to result in increases in our share of the tax basis of the tangible and intangible assets of Silvercrest L.P. at the time of our acquisition and these future exchanges, which will increase the tax depreciation and amortization deductions that otherwise would not have been available to us. These increases in tax basis and tax depreciation and amortization deductions are expected to reduce the amount of tax that we would otherwise be required to pay in the future. We entered into a tax receivable agreement with the current principals of Silvercrest L.P. and any future employee-holders of Class B units pursuant to which we agreed to pay them 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that we actually realize as a result of these increases in tax basis and certain other tax benefits related to entering into the tax receivable agreement, including tax benefits attributable to payments thereunder. The timing of these payments is currently unknown. The payments to be made pursuant to the tax receivable agreement will be a liability of Silvercrest and not Silvercrest L.P., and thus this liability has been recorded as an “other liability” on our Consolidated Statement of Financial Condition. For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing our actual income tax liability to the amount of such taxes that we would have been required to pay had there been no increase in our share of the tax basis of the tangible and intangible assets of Silvercrest L.P.

The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of shares of our Class A common stock at the time of the exchange, the extent to which such exchanges are taxable, the amount and timing of our income and the tax rates then applicable. Nevertheless, we expect that as a result of the size of the increases in the tax basis of our tangible and intangible assets, the payments that we may make under the tax receivable agreement likely will be substantial. Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize the full tax benefit of the increased depreciation and amortization of our assets, we expect that future payments to the selling principals of Silvercrest L.P. in respect of our purchase of Class B units from them will aggregate approximately $10.1 million. Future payments to current principals of Silvercrest L.P. and future holders of Class B units in respect of subsequent exchanges would be in addition to these amounts and are expected to be substantial. We intend to fund required payments pursuant to the tax receivable agreement from the distributions received from Silvercrest L.P.

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Cash Flows

The following table sets forth our cash flows for the years ended December 31, 2024, 2023 and 2022. Operating activities consist of net income subject to adjustments for changes in operating assets and liabilities, depreciation, and equity-based compensation expense. Investing activities consist primarily of acquiring and selling property and equipment, distributions received from investments in investment funds, and cash paid as part of business acquisitions. Financing activities consist primarily of contributions from partners, distributions to partners, the issuance and payments on partner notes, other financings, and earnout payments related to business acquisitions.

Operating Activities

Year Ended December 31, 2024 versus Year Ended December 31, 2023

Operating activities provided $21.6 million and $21.0 million for the years ended December 31, 2024 and 2023, respectively. This difference is primarily the result of increases in net income of $0.5 million, equity-based compensation expense of $0.3 million, depreciation and amortization of $0.1 million, a change in prepaid and other assets of $0.1 million and accrued compensation of $4.9 million. These increases were partially offset by a changes in deferred tax expense of $0.2 million, accounts receivable of $2.7 million, the TRA liability of $0.1 million, non-cash lease expense of $0.5 million, accounts payable and accrued expenses of $0.1 million, operating lease liabilities of $0.7 million and an increase in equity income from investments of $1.1 million

Year Ended December 31, 2023 versus Year Ended December 31, 2022

Operating activities provided $21.0 million and $23.4 million for the years ended December 31, 2023 and 2022, respectively. This difference is primarily the result of decreases in net income of $15.6 million, deferred tax expense of $1.8 million, operating lease liabilities of $0.5 million, a decrease in equity income from investments of $0.1 million, distributions received from investment funds of $1.4 million and accrued compensation of $0.4 million. These decreases were partially offset by a change in the TRA liability of $0.2 million, a change in prepaid and other assets of $2.6 million, and increases in non-cash lease expense of $1.6 million, equity-based compensation expense of $0.5 million, accounts payable and accrued expenses of $12.4 million, primarily due to a change in the fair value of contingent consideration related to the Cortina and Neosho Acquisitions and depreciation and amortization of $0.1 million.

Investing Activities

Year Ended December 31, 2024 versus Year Ended December 31, 2023

For the years ended December 31, 2024 and 2023, investing activities used $1.7 million and $3.9 million, respectively. The primary use of cash during 2024 and 2023 was for the acquisition of furniture, equipment and leasehold improvements.

Year Ended December 31, 2023 versus Year Ended December 31, 2022

For the years ended December 31, 2023 and 2022, investing activities used $3.9 million and $1.0 million, respectively. The primary use of cash during 2023 and 2022 was for the acquisition of furniture, equipment and leasehold improvements.

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Financing Activities

Year Ended December 31, 2024 versus Year Ended December 31, 2023

For the years ended December 31, 2024 and 2023, financing activities used $21.5 million and $24.2 million, respectively. Dividends of $7.4 million and $7.0 million were paid during 2024 and 2023, respectively, to Class A shareholders. Payments received from partners on notes receivable was $0.1 million and $0.1 million during 2024 and 2023, respectively. Distributions to partners of Silvercrest L.P. of $6.7 million and $7.8 million were paid during 2024 and 2023, respectively. Repayment of borrowings under the credit facility was $2.7 million and $3.6 million in 2024 and 2023, respectively. Payments of contingent purchase price consideration totaled $0.1 million and $0.1 million in 2024 and 2023, respectively. During 2024 and 2023, approximately 266 thousand and 300 thousand shares of Class A common stock of Silvercrest Asset Management Group Inc. were purchased at a cost of $4.6 million and $5.7 million, respectively.

Year Ended December 31, 2023 versus Year Ended December 31, 2022

For the years ended December 31, 2023 and 2022, financing activities used $24.2 million and $30.7 million, respectively. Dividends of $7.0 million and $6.8 million were paid during 2023 and 2022, respectively, to Class A shareholders. Payments received from partners on notes receivable was $0.1 million and $0.2 million during 2023 and 2022, respectively. Distributions to partners of Silvercrest L.P. of $7.8 million and $7.9 million were paid during 2023 and 2022, respectively. Repayment of borrowings under the credit facility was $3.6 million and $2.7 million in 2023 and 2022, respectively. Payments of contingent purchase price consideration totaled $0.1 million and $4.6 million in 2023 and 2022, respectively. During 2023 and 2022, approximately 300 thousand and 476 thousand shares of Class A common stock of Silvercrest Asset Management Group Inc. were purchased at a cost of $5.8 million and $8.8 million, respectively.

We anticipate that distributions to principals of Silvercrest L.P. will continue to be a material use of our cash resources, and will vary in amount and timing based on our operating results and dividend policy.

As of December 31, 2024 and 2023, $0 and $2.7 was outstanding under our term loan with City National Bank.

As of December 31, 2024 and 2023, there were no borrowings outstanding on our revolving credit facility with City National Bank.

Off-Balance Sheet Arrangements

We did not have any significant off-balance sheet arrangements as of December 31, 2024 or December 31, 2023.

Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues, expenses and other income reported in the consolidated financial statements and the accompanying notes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under current circumstances, our results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results could differ from those estimates. Significant estimates and assumptions made by management include the fair value of acquired assets and liabilities, impairment of goodwill and intangible assets, revenue recognition, equity based compensation, accounting for income taxes, and other matters that affect the consolidated financial statements and related disclosures. Accounting policies are an integral part of our consolidated financial statements. An understanding of these accounting policies is essential when reviewing our reported results of operations and our financial condition. Management believes that the critical accounting policies and estimates discussed below involve additional management judgment due to the sensitivity of the methods and assumptions used.

Business Combinations

We account for business combinations using the acquisition method of accounting. The acquisition method of accounting requires that purchase price, including the fair value of contingent consideration, of the acquisition be allocated to the assets acquired and liabilities assumed using the estimated fair values determined by management as of the acquisition date.

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We measure the fair value of contingent consideration at each reporting period using a probability-adjusted discounted cash flow method based on significant inputs not observable in the market and any change in the fair value from either the passage of time or events occurring after the acquisition date, is recorded in earnings. In relation to our acquisitions of Milbank and Jamison, the fair value of the contingent consideration was based on discounted cash flow models using projected EBITDA for each earnout period. The discount rate applied to the projected EBITDA was determined based on our weighted average cost of capital and considered that the overall risk associated with the payments was similar to the overall risks of our business as there is no target, floor or cap associated with the contingent payments. In relation to the Neosho acquisition, the fair value of the contingent consideration was based on discounted cash flow models using projected revenue from each earnout period. The discount rate applied to the projected revenue was determined based on the weighted average cost of capital of the Company and took into account that the overall risk associated with the payments was similar to the overall risks of the Company as there is no target, floor of cap associated with the contingent payments. In relation to the Cortina Acquisition, the income approach was used to determine the fair value of the contingent consideration by estimating a range of likely outcomes and payouts given these outcomes. The potential payouts were estimated using a Monte Carlo simulation and discounted back to their present values using a risk-free discount rate adjusted to account for the Company’s credit or counterparty risk to arrive at the present value of the contingent consideration payments. The discount rate for the contingent consideration payment was based on the revenue cost of capital for Cortina’s revenue.

The excess of the purchase price over the fair value of the identifiable assets acquired, including intangibles, and liabilities assumed is recorded as goodwill. The Company generally uses valuation specialists to perform appraisals and assist in the determination of the fair values of the assets acquired and liabilities assumed. These valuations require management to make estimates and assumptions that are critical in determining the fair values of the assets and liabilities. During the measurement period, the Company may record adjustments to the assets acquired and liabilities assumed. Any adjustments to provisional amounts that are identified during the measurement period are recorded in the reporting period in which the adjustment amounts are determined. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

Goodwill is not amortized but is evaluated for impairment at least annually, on October 1st of every year, or whenever events or circumstances indicate that impairment may have occurred.

We account for Goodwill under Accounting Standard Codification (“ASC”) No. 350, “Intangibles - Goodwill and Other,” which provides an entity the option to first perform a qualitative assessment of whether a reporting unit’s fair value is more likely than not less than its carrying value, including goodwill. In performing its qualitative assessment, an entity considers the extent to which adverse events or circumstances identified, such as changes in economic conditions, industry and market conditions or entity specific events, could affect the comparison of the reporting unit’s fair value with its carrying amount. If an entity concludes that the fair value of a reporting unit is more likely than not less than its carrying amount, the entity is required to perform the currently prescribed two-step goodwill impairment test to identify potential goodwill impairment and, accordingly, measure the amount, if any, of goodwill impairment loss to be recognized for that reporting unit. We utilized this option when performing our annual impairment assessment in 2024 and 2023, and concluded that our single reporting unit’s fair value was more likely than not greater than its carrying value, including goodwill.

Revenue Recognition

Investment advisory fees are typically billed quarterly in advance at the beginning of the quarter or in arrears after the end of the quarter, based on a contractual percentage of the assets managed. Family office services fees are also typically billed quarterly in advance at the beginning of the quarter or in arrears after the end of the quarter based on a contractual percentage of the assets managed or upon a contractually agreed-upon flat fee arrangement. Revenue is recognized on a ratable basis over the period in which services are performed.

We account for performance-based revenue in accordance with ASC 606-10-32, Accounting for Management Fees Based on a Formula, by recognizing performance fees and allocations as revenue only when it is certain that the fee income is earned and payable pursuant to the relevant agreements. In certain arrangements, we are only entitled to receive performance fees and allocations when the return on assets under management exceeds certain benchmark returns or other performance targets. We record performance fees and allocations as a component of revenue once the performance fee has crystallized. As a result, there is no estimate or variability in the consideration when revenue is recorded.

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Because the majority of our revenues are earned based on assets under management that have been determined using fair value methods and since market appreciation/depreciation has a significant impact on our revenue, we have presented our assets under management using the GAAP framework for measuring fair value. That framework provides a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs based on company assumptions (Level 3). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows:

•
Level 1—includes quoted prices (unadjusted) in active markets for identical instruments at the measurement date. The types of financial instruments included in Level 1 include unrestricted securities, including equities listed in active markets.

•
Level 2—includes inputs other than quoted prices that are observable for the instruments, including quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, or inputs other than quoted prices that are observable for the instruments. The type of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities, and managed funds whose net asset value is based on observable inputs.

•
Level 3—includes one or more significant unobservable inputs. Financial instruments that are included in this category include assets under management primarily comprised of investments in privately held entities, limited partnerships, and other instruments where the fair value is based on unobservable inputs.

The table below summarizes the approximate amount of assets under management for the periods indicated for which fair value is measured based on Level 1, Level 2 and Level 3 inputs.

As substantially all our assets under management are valued by independent pricing services based upon observable market prices or inputs, we believe market risk is the most significant risk underlying valuation of our assets under management, as discussed under the heading “Risk Factors” in this annual report.

The average value of our assets under management for the year ended December 31, 2024 was approximately $34.9 billion. Assuming a 10% increase or decrease in our average assets under management and the change being proportionately distributed over all our products, the value would increase or decrease by approximately $3.5 billion for the year ended December 31, 2024, which would cause an annualized increase or decrease in revenues of approximately $12.4 million for the year ended December 31, 2024, at a weighted average fee rate for the year ended December 31, 2024 of 0.35%.

The average value of our assets under management for the year ended December 31, 2023 was approximately $31.1 billion. Assuming a 10% increase or decrease in our average assets under management and the change being proportionately distributed over all our products, the value would increase or decrease by approximately $3.1 billion for the year ended December 31, 2023, which would cause an annualized increase or decrease in revenues of approximately $11.7 million for the year ended December 31, 2023, at a weighted average fee rate for the year ended December 31, 2023 of 0.38%.

Equity-Based Compensation

Restricted Stock Units and Stock Options

On November 2, 2012, our board of directors adopted the 2012 Equity Incentive Plan.

Information regarding restricted stock units and stock options can be found in Note 16. “Equity-Based Compensation” in the accompanying consolidated financial statements.

Tax Receivable Agreement

In connection with our initial public offering and reorganization of Silvercrest L.P. that was completed on June 23, 2013, we entered into a tax receivable agreement with the partners of Silvercrest L.P. that requires the Company to pay them 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in the case of an early termination payment by it, or a change in control) as a result of the increases in tax basis and certain other tax benefits

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related to entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement or attributable to exchanges of shares of Class B common stock for shares of Class A common stock. The payments to be made pursuant to the tax receivable agreement are a liability of Silvercrest and not Silvercrest L.P.

The actual amount and timing of any payments under these agreements will vary depending upon a number of factors, including the timing of sales or exchanges by the holders of limited partnership units, the price of the Class A common stock at the time of such sales or exchanges, whether such sales or exchanges are taxable, the amount and timing of the taxable income Silvercrest generates in the future and the tax rate then applicable and the portion of Silvercrest’s payments under the tax receivable agreement constituting imputed interest or depreciable basis or amortizable basis.

Income Taxes

Silvercrest L.P., our operating company, is not subject to federal and state income taxes, since all income, gains and losses are passed through to its partners. Our operating company is subject to New York City Unincorporated Business Tax. We, including our affiliated incorporated entities, are subject to federal and state corporate income tax, which requires an asset and liability approach to the financial accounting and reporting of income taxes. With respect to our incorporated entities, the annual tax rate is based on the income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Judgment is required in determining the tax expense and in evaluating tax positions. The tax effects of an uncertain tax position (“UTP”) taken or expected to be taken in income tax returns are recognized only if it is “more likely-than-not” to be sustained on examination by the taxing authorities, based on its technical merits as of the reporting date. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. We recognize estimated interest and penalties related to UTPs in income tax expense.

We recognize the benefit of a UTP in the period when it is effectively settled. Previously recognized tax positions are derecognized in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination.

Recently Issued Accounting Pronouncements

Information regarding recent accounting developments and their impact on Silvercrest can be found in Note 2. “Summary of Significant Accounting Policies” in the accompanying consolidated financial statements.