Silvercrest Asset Management Group(SAMG) - 2025 Q2 - Quarterly Report

Part I Financial Information Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including the statements of financial condition, operations, changes in equity, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and specific financial line items Condensed Consolidated Statements of Financial Condition Total assets decreased from $194,432 thousand at December 31, 2024, to $152,711 thousand at June 30, 2025, primarily driven by a significant reduction in cash and cash equivalents, while total liabilities and equity also declined Assets (in thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | Cash and cash equivalents | $30,041 | $68,611 | | Investments | $164 | $1,354 | | Receivables, net | $13,129 | $12,225 | | Total assets | $152,711 | $194,432 | Liabilities and Equity (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Accounts payable and accrued expenses | $3,190 | $1,953 | | Accrued compensation | $17,811 | $39,865 | | Total liabilities | $52,757 | $74,739 | | Total equity | $99,954 | $119,693 | Condensed Consolidated Statements of Operations The company experienced a decrease in net income for both the three and six months ended June 30, 2025, compared to the same periods in 2024, due to increased expenses despite a modest revenue increase for the six-month period Three Months Ended June 30 (in thousands, except per share data) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Total revenue | $30,673 | $30,993 | $(320) | (1.0)% | | Total expenses | $26,632 | $25,684 | $948 | 3.7% | | Net income | $3,149 | $4,380 | $(1,231) | (28.1)% | | Net income attributable to Silvercrest | $1,918 | $2,665 | $(747) | (28.0)% | | Basic EPS | $0.21 | $0.28 | $(0.07) | (25.0)% | | Diluted EPS | $0.21 | $0.28 | $(0.07) | (25.0)% | Six Months Ended June 30 (in thousands, except per share data) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Total revenue | $62,065 | $61,265 | $800 | 1.3% | | Total expenses | $53,187 | $50,052 | $3,135 | 6.3% | | Net income | $7,077 | $9,295 | $(2,218) | (23.9)% | | Net income attributable to Silvercrest | $4,387 | $5,665 | $(1,278) | (22.6)% | | Basic EPS | $0.47 | $0.60 | $(0.13) | (21.7)% | | Diluted EPS | $0.47 | $0.60 | $(0.13) | (21.7)% | Condensed Consolidated Statements of Changes in Equity The company's total equity significantly decreased from $119,693 thousand at January 1, 2025, to $99,954 thousand at June 30, 2025, primarily due to substantial purchases of Class A common stock for treasury, distributions to partners, and dividends paid Key Equity Changes (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :------------------------------------------------ | :----- | | Total Equity, January 1, 2025 | $119,693 | | Distributions to partners | $(4,230) | | Net Income attributable to Silvercrest | $4,387 | | Purchase of shares of Class A common stock | $(19,138) | | Dividends paid on Class A common stock | $(3,680) | | Total Equity, June 30, 2025 | $99,954 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the company experienced a significant net decrease in cash and cash equivalents, primarily driven by substantial cash used in financing activities, including share repurchases and dividends, and continued cash usage in operating activities Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change (in thousands) | | :----------------- | :--- | :--- | :-------------------- | | Net cash used in operating activities | $(10,865) | $(8,107) | $(2,758) | | Net cash used in investing activities | $(872) | $(957) | $85 | | Net cash used in financing activities | $(26,835) | $(11,274) | $(15,561) | | Net Decrease in Cash and Cash Equivalents | $(38,570) | $(20,354) | $(18,216) | | Cash and cash equivalents, end of period | $30,041 | $49,947 | $(19,906) | - Significant financing activities in H1 2025 included $18,948 thousand for Class A common stock repurchases and $3,668 thousand for Class A common stock dividends[17][226] Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the figures presented in the condensed consolidated financial statements, covering the company's structure, significant accounting policies, specific asset and liability breakdowns, debt, commitments, equity, and related party transactions 1. Organization and Business Silvercrest Asset Management Group Inc. operates as a holding company controlling Silvercrest L.P., which provides investment management and family office services, and has a Tax Receivable Agreement with an estimated $10,150 thousand liability - Silvercrest is a holding company, with its only material asset being a 68.7% general partner interest in Silvercrest L.P., which provides investment management and family office services[18][19][35] - The company has expanded through multiple acquisitions of asset management firms since 2004, including JCE, LGI, HFM, MCG, Milbank, Commodity Advisors, Ten-Sixty, Jamison, Cappiccille, Neosho, and Cortina[20] - A Tax Receivable Agreement (TRA) requires Silvercrest to pay SLP Partners 85% of cash savings from U.S. federal, state, and local income tax due to increases in tax basis and other tax benefits, with an estimated liability under the TRA of $10,150 thousand as of June 30, 2025[21][24] 2. Summary of Significant Accounting Policies This section outlines the company's accounting policies, including the basis of presentation, principles of consolidation, non-controlling interest treatment, segment reporting, key accounting estimates, revenue recognition, equity-based compensation, leases, and income taxes - The company's Condensed Consolidated Financial Statements are unaudited and prepared in accordance with Form 10-Q, with all intercompany transactions eliminated[27][29] - Silvercrest does not consolidate any of the Silvercrest Funds, as each fund is deemed a Voting Interest Entity (VoIE) where unaffiliated limited partners have substantive 'kick-out' rights to remove the general partner[31][32][34] - Silvercrest consolidates Silvercrest L.P. and its subsidiaries, recording a non-controlling interest for the remaining 31.3% economic interests in SLP held by limited partners[35][155] - The company operates as a single operating and reportable segment within the investment management industry, with the CEO monitoring consolidated net income[37] - Revenue is primarily from management and advisory fees, performance fees, and family office services, with management and advisory fees driven by Assets Under Management (AUM) and performance fees recognized when crystallized[67][75] - Recent accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-03, ASU 2025-04) are not expected to have a material effect on the company's financial statements[82][83][84][85] 3. Investments and Fair Value Measurements The company's investments primarily consist of interests in Silvercrest Funds, accounted for using the equity method due to significant influence, with no financial assets or liabilities recorded at fair value on a recurring basis or impairment charges recorded Investments (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Investments | $164 | $1,354 | - Investments represent the Company's interests in Silvercrest Funds, accounted for using the equity method due to significant influence, despite financial interests up to 2% of net assets[86] - No financial assets or liabilities were recorded at fair value on a recurring basis as of June 30, 2025, and December 31, 2024[89] 4. Receivables, Net Receivables, net, increased to $13,129 thousand at June 30, 2025, from $12,225 thousand at December 31, 2024, primarily due to a rise in unbilled receivables, partially offset by a decrease in management and advisory fees receivable Receivables, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (in thousands) | | :------- | :------------ | :---------------- | :-------------------- | | Management and advisory fees receivable | $4,064 | $5,401 | $(1,337) | | Unbilled receivables | $9,168 | $6,856 | $2,312 | | Other receivables | $177 | $248 | $(71) | | Receivables, net | $13,129 | $12,225 | $904 | - The allowance for doubtful receivables remained constant at $280 thousand for both periods[93] 5. Furniture, Equipment and Leasehold Improvements, Net The net book value of furniture, equipment, and leasehold improvements slightly decreased to $7,302 thousand at June 30, 2025, from $7,387 thousand at December 31, 2024, due to ongoing depreciation, despite additions Furniture, Equipment and Leasehold Improvements, Net (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (in thousands) | | :------- | :------------ | :---------------- | :-------------------- | | Total cost | $23,789 | $22,917 | $872 | | Accumulated depreciation and amortization | $(16,487) | $(15,530) | $(957) | | Net book value | $7,302 | $7,387 | $(85) | - Depreciation expense for the six months ended June 30, 2025, was $957 thousand, up from $867 thousand in the prior year[94] 6. Goodwill Goodwill remained stable at $63,675 thousand for both June 30, 2025, and December 31, 2024, with no impairment charges recorded after the annual qualitative assessment Goodwill (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Gross balance | $81,090 | $81,090 | | Accumulated impairment losses | $(17,415) | $(17,415) | | Net balance | $63,675 | $63,675 | - No goodwill impairment charges were recorded during the three and six months ended June 30, 2025, and 2024[52][96] 7. Intangible Assets, Net Net intangible assets decreased to $15,547 thousand at June 30, 2025, from $17,788 thousand at June 30, 2024, primarily due to ongoing amortization, with customer relationships constituting the majority Intangible Assets, Net (in thousands) | Category | June 30, 2025 | June 30, 2024 | Change (in thousands) | | :------- | :------------ | :------------ | :-------------------- | | Total Cost | $46,521 | $46,521 | $0 | | Accumulated amortization | $(30,974) | $(28,733) | $(2,241) | | Net Book Value | $15,547 | $17,788 | $(2,241) | - Amortization expense for intangible assets was $1,097 thousand for the six months ended June 30, 2025, a decrease from $1,145 thousand in the prior year[97] Future Amortization Schedule (in thousands) | Period | Amount | | :----- | :----- | | Remainder of 2025 | $1,095 | | 2026 | $1,832 | | 2027 | $1,828 | | 2028 | $1,824 | | 2029 | $1,820 | | Thereafter | $7,148 | | Total | $15,547 | 8. Debt The company's credit facility with City National Bank was amended in June 2025, extending the term loan maturity to June 2028 and the revolving credit facility to June 2026, with no outstanding borrowings as of June 30, 2025 - The credit facility was amended on June 18, 2025, extending the term loan maturity to June 18, 2028 (with two one-year extensions possible) and the revolving credit facility to June 18, 2026[100] - As of June 30, 2025, and December 31, 2024, the company had no outstanding borrowings under its revolving credit facility or term loan[101][228] - Interest expense on the credit facility decreased significantly for both the three and six months ended June 30, 2025, compared to 2024, due to the maturity and satisfaction of the term loan in 2024[102][200][201] 9. Commitments and Contingencies The company has operating lease commitments for office space, including a new lease in Singapore, with future minimum payments totaling $25,830 thousand, and finance lease liabilities with a principal balance of $197 thousand - Net rent expense for the six months ended June 30, 2025, was $3,417 thousand, a slight increase from $3,326 thousand in 2024[104] - The company entered into a new office lease in Singapore in February 2025, commencing May 16, 2025, and expiring May 15, 2031[107] Future Minimum Operating Lease Payments (in thousands) | Period | Operating Leases | | :----- | :--------------- | | Remainder of 2025 | $3,462 | | 2026 | $7,059 | | 2027 | $7,026 | | 2028 | $5,429 | | 2029 | $819 | | Thereafter | $2,035 | | Total | $25,830 | - The aggregate principal balance of finance leases was $197 thousand as of June 30, 2025, down from $262 thousand at December 31, 2024[108] 10. Equity Silvercrest's equity structure includes Class A common stock (voting and economic rights) and Class B common stock (voting rights only), with total Class A shares outstanding decreasing due to repurchases and Class B shares due to conversions Shares Outstanding (June 30, 2025) | Share Class | Authorized Shares | Outstanding Shares | Voting Rights | Economic Rights | | :---------- | :---------------- | :----------------- | :------------ | :-------------- | | Class A Common Stock | 50,000,000 | 8,501,241 | 1 vote per share | All | | Class B Common Stock | 25,000,000 | 4,126,476 | 1 vote per share | None | - Partner incentive allocations of $13,353 thousand for the six months ended June 30, 2025, are treated as compensation expense, while partnership distributions totaled $4,230 thousand for the same period[111][112] - During the six months ended June 30, 2025, Class A common stock outstanding decreased by 875,039 shares (from 9,376,280 to 8,501,241), primarily due to repurchases, while Class B common stock decreased by 246,839 shares (from 4,373,315 to 4,126,476) mainly due to conversions[116][117] 11. Notes Receivable from Partners Notes receivable from SLP's partners increased to $594 thousand at June 30, 2025, from $251 thousand at December 31, 2024, primarily due to the issuance of new notes, partially offset by repayments Notes Receivable from Partners (in thousands) | Item | June 30, 2025 | December 31, 2024 | Change (in thousands) | | :--- | :------------ | :---------------- | :-------------------- | | Beginning balance | $251 | $344 | $(93) | | New notes issued to partners | $410 | $0 | $410 | | Repayment of notes | $(76) | $(94) | $18 | | Interest accrued and capitalized | $9 | $1 | $8 | | Ending balance | $594 | $251 | $343 | - All notes receivable from partners are full recourse, and no allowance for credit losses was recorded[119] 12. Related Party Transactions The company provides investment advisory services to various Silvercrest Funds, earning management fees ranging from 0% to 1.75% of AUM, and also earns management fees from employee-managed assets - Management fee income from Silvercrest Funds was $1,837 thousand for the six months ended June 30, 2025, down from $2,012 thousand in 2024[121] - The company was owed $875 thousand from its various funds as of June 30, 2025[121] - Management and advisory fees from employee-managed assets were $943 thousand for the six months ended June 30, 2025, up from $917 thousand in 2024[122] 13. Income Taxes The company reported net deferred tax assets of $2,413 thousand at June 30, 2025, a decrease from $3,924 thousand at December 31, 2024, with the total income tax provision decreasing due to reduced profitability Net Deferred Tax Assets (in thousands) | Category | June 30, 2025 | December 31, 2024 | Change (in thousands) | | :------- | :------------ | :---------------- | :-------------------- | | Net deferred tax assets | $2,413 | $3,924 | $(1,511) | Income Tax Provision (Six Months Ended June 30, in thousands) | Tax Expense Type | 2025 | 2024 | Change (in thousands) | | :--------------- | :--- | :--- | :-------------------- | | Current tax expense | $1,344 | $1,736 | $(392) | | Deferred tax expense | $890 | $753 | $137 | | Total income tax provision | $2,234 | $2,489 | $(255) | - A full valuation allowance of $457 thousand was recorded against the deferred tax asset of the foreign subsidiary at June 30, 2025, due to uncertainty of future taxable income[126] - The current tax expense decreased mainly due to a reduction in profitability[129] 14. Redeemable Partnership Units SLP retains the right to redeem vested Class B units from a principal terminated for cause, at a purchase price equal to the lesser of their capital account balance or original purchase price - SLP has the right to redeem vested Class B units from a principal terminated for cause, at the lesser of the aggregate capital account balance or the original purchase price[134] 15. Equity-Based Compensation The 2012 Equity Incentive Plan was amended in June 2025, increasing available shares to 4,237,500, with 2,322,416 shares remaining for grant, and compensation expense for awards totaling $855 thousand for the six months ended June 30, 2025 - The 2012 Equity Incentive Plan was amended on June 4, 2025, increasing the total shares issuable to 4,237,500, with 2,322,416 shares available for grant as of June 30, 2025[136] Equity-Based Compensation Expense (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | Change (in thousands) | | :--- | :--- | :--- | :-------------------- | | Compensation expense (RSUs & NQOs) | $855 | $839 | $16 | - As of June 30, 2025, $2,542 thousand of unrecognized compensation expense related to unvested awards is expected to be recognized over approximately 1.16 years[150] 16. Defined Contribution and Deferred Compensation Plans The company offers a 401(k) savings plan, matching employee contributions up to 4% of compensation, with matching contributions for the six months ended June 30, 2025, increasing to $59 thousand 401(k) Matching Contributions (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | Change (in thousands) | | :--- | :--- | :--- | :-------------------- | | Matching contributions | $59 | $43 | $16 | 17. Soft Dollar Arrangements The company utilizes 'soft dollar' arrangements to obtain research and other services, receiving credits from broker-dealers, with $180 thousand in soft dollar credits utilized for the six months ended June 30, 2025 Soft Dollar Credits Utilized (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | Change (in thousands) | | :--- | :--- | :--- | :-------------------- | | Soft dollar credits utilized | $180 | $425 | $(245) | - The company relies on Section 28(e) of the Securities Exchange Act of 1934 for a 'safe harbor' regarding soft dollar arrangements, requiring a good-faith determination of commission reasonableness relative to services received[152] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year, covering key performance indicators, revenue drivers, expense trends, and liquidity Overview Silvercrest is a full-service wealth management firm providing financial advisory and family office services to ultra-high net worth individuals and institutional investors, with Assets Under Management (AUM) increasing to $36.7 billion during the three months ended June 30, 2025 - Silvercrest is a full-service wealth management firm offering financial advisory and family office services to ultra-high net worth individuals and institutional investors[153] Assets Under Management (AUM, in billions) | Period | AUM | Change (%) | | :----- | :-- | :--------- | | June 30, 2025 | $36.7 | +4.0% (vs. March 31, 2025) | | December 31, 2024 | $36.5 | +0.5% (vs. Dec 31, 2024) | Key Performance Indicators Key performance indicators show a decline in profitability for both the three and six months ended June 30, 2025, compared to 2024, with decreased net income and Adjusted EBITDA leading to lower margins despite AUM growth Key Performance Indicators (Three Months Ended June 30, in thousands, except AUM) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Revenue | $30,673 | $30,993 | $(320) | (1.0)% | | Net income | $3,149 | $4,380 | $(1,231) | (28.1)% | | Net income margin | 10.3% | 14.1% | (3.8)pp | (27.0)% | | Adjusted EBITDA | $5,735 | $7,232 | $(1,497) | (20.7)% | | Adjusted EBITDA margin | 18.7% | 23.3% | (4.6)pp | (19.7)% | | AUM at period end (billions) | $36.7 | $33.4 | $3.3 | 9.9% | Key Performance Indicators (Six Months Ended June 30, in thousands, except AUM) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :----- | :--- | :--- | :--------- | :--------- | | Revenue | $62,065 | $61,265 | $800 | 1.3% | | Net income | $7,077 | $9,295 | $(2,218) | (23.9)% | | Net income margin | 11.4% | 15.2% | (3.8)pp | (25.0)% | | Adjusted EBITDA | $12,232 | $14,685 | $(2,453) | (16.7)% | | Adjusted EBITDA margin | 19.7% | 24.0% | (4.3)pp | (17.9)% | | AUM at period end (billions) | $36.7 | $33.4 | $3.3 | 9.9% | Revenue Total revenue decreased by 1.0% for the three months ended June 30, 2025, to $30.7 million, but increased by 1.3% for the six months ended June 30, 2025, to $62.1 million, primarily influenced by market appreciation, partially offset by net client outflows and a decrease in the average annual management fee rate Total Revenue (Three and Six Months Ended June 30, in thousands) | Revenue Category | 3 Months 2025 | 3 Months 2024 | Change ($) | Change (%) | 6 Months 2025 | 6 Months 2024 | Change ($) | Change (%) | | :--------------- | :------------ | :------------ | :--------- | :--------- | :------------ | :------------ | :--------- | :--------- | | Management and advisory fees | $29,515 | $29,900 | $(385) | (1.3)% | $59,783 | $59,065 | $718 | 1.2% | | Family office services | $1,158 | $1,093 | $65 | 5.9% | $2,282 | $2,200 | $82 | 3.7% | | Total revenue | $30,673 | $30,993 | $(320) | (1.0)% | $62,065 | $61,265 | $800 | 1.3% | - Total AUM increased by $3.3 billion (9.9%) to $36.7 billion at June 30, 2025, driven by $2.8 billion in market appreciation, $5.7 billion in client inflows, and $5.2 billion in client outflows[183][188] - The average annual management fee decreased from 0.37% in 2024 to 0.34% in 2025 for both the three and six-month periods, primarily due to changes in the mix of AUM and concentration in equity strategies[165] Discretionary Managed Accounts Discretionary AUM increased to $23.3 billion for the three months ended June 30, 2025, from $21.2 billion in 2024, contributing 97% of management and advisory fees revenue, with revenue slightly decreasing for the three-month period but increasing for the six-month period Discretionary Managed Accounts Performance (in billions, except revenue in millions) | Metric | 3 Months 2025 | 3 Months 2024 | 6 Months 2025 | 6 Months 2024 | | :----- | :------------ | :------------ | :------------ | :------------ | | AUM | $23.3 | $21.2 | $23.3 | $21.2 | | Average AUM | $23.3 | $21.7 | $23.1 | $21.4 | | Revenue (in millions) | $28.6 | $28.9 | $57.9 | $57.1 | | % of management and advisory fees revenue | 97% | 97% | 97% | 96% | - Equity assets within discretionary AUM increased by 7.3% during the three months ended June 30, 2025, while fixed income assets decreased by 1.8%[184] Private Funds AUM concentrated in private funds remained stable at $0.4 billion for both periods, contributing 3% of management and advisory fees revenue, with revenue decreasing for both the three and six months ended June 30, 2025 Private Funds Performance (in billions, except revenue in millions) | Metric | 3 Months 2025 | 3 Months 2024 | 6 Months 2025 | 6 Months 2024 | | :----- | :------------ | :------------ | :------------ | :------------ | | AUM | $0.4 | $0.4 | $0.4 | $0.4 | | Average AUM | $0.4 | $0.5 | $0.5 | $0.4 | | Revenue (in millions) | $0.8 | $1.0 | $1.8 | $2.0 | | % of management and advisory fees revenue | 3% | 3% | 3% | 3% | Average Annual Management Fee The average annual management fee decreased to 0.34% for both the three and six months ended June 30, 2025, from 0.37% in the prior year, primarily attributed to shifts in the mix of assets under management and the concentration in equity strategies Average Annual Management Fee | Period | 2025 | 2024 | Change (pp) | | :----- | :--- | :--- | :---------- | | Three Months Ended June 30 | 0.34% | 0.37% | (0.03)pp | | Six Months Ended June 30 | 0.34% | 0.37% | (0.03)pp | - Changes in fee rates are typically due to the mix of AUM and concentration in equity strategies, which have higher fee rates[165] Expenses Total expenses increased by 3.7% to $26.6 million for the three months and by 6.3% to $53.2 million for the six months ended June 30, 2025, driven by increases in both compensation and benefits and general and administrative costs Total Expenses (Three and Six Months Ended June 30, in thousands) | Expense Category | 3 Months 2025 | 3 Months 2024 | Change ($) | Change (%) | 6 Months 2025 | 6 Months 2024 | Change ($) | Change (%) | | :--------------- | :------------ | :------------ | :--------- | :--------- | :------------ | :------------ | :--------- | :--------- | | Compensation and benefits | $18,805 | $18,493 | $312 | 1.7% | $37,686 | $36,162 | $1,524 | 4.2% | | General, administrative and other | $7,827 | $7,191 | $636 | 8.8% | $15,501 | $13,890 | $1,611 | 11.6% | | Total expenses | $26,632 | $25,684 | $948 | 3.7% | $53,187 | $50,052 | $3,135 | 6.3% | Compensation and Benefits Expense Compensation and benefits expense increased by 1.7% to $18.8 million for the three months and by 4.2% to $37.7 million for the six months ended June 30, 2025, primarily due to merit-based increases and new hires, partially offset by lower bonus accruals and equity-based compensation Compensation and Benefits Expense (Three and Six Months Ended June 30, in thousands) | Compensation Type | 3 Months 2025 | 3 Months 2024 | Change ($) | Change (%) | 6 Months 2025 | 6 Months 2024 | Change ($) | Change (%) | | :---------------- | :------------ | :------------ | :--------- | :--------- | :------------ | :------------ | :--------- | :--------- | | Cash compensation and benefits | $18,404 | $18,008 | $396 | 2.2% | $36,831 | $35,323 | $1,508 | 4.3% | | Non-cash equity-based compensation | $401 | $485 | $(84) | (17.3)% | $855 | $839 | $16 | 1.9% | | Total compensation expense | $18,805 | $18,493 | $312 | 1.7% | $37,686 | $36,162 | $1,524 | 4.2% | - The increase in cash compensation and benefits was primarily due to merit-based increases and newly-hired staff, partially offset by decreases in bonus accruals[194][197] General and Administrative Expenses General and administrative expenses increased by 8.8% to $7.8 million for the three months and by 11.6% to $15.5 million for the six months ended June 30, 2025, driven by higher professional fees, occupancy costs, portfolio and systems expense, and travel and entertainment - For the three months ended June 30, 2025, increases were seen in professional fees ($0.2 million), occupancy and related costs ($0.1 million, partly due to new Singapore office), marketing and advertising ($0.1 million), shareholder expenses ($0.1 million), and travel and entertainment ($0.1 million)[195] - For the six months ended June 30, 2025, increases included professional fees ($0.6 million), occupancy and related costs ($0.1 million), portfolio and systems expense ($0.3 million), shareholder expenses ($0.1 million), marketing and advertising costs ($0.1 million), office expenses ($0.1 million), sub-advisory and referral fees ($0.1 million), and travel and entertainment expenses ($0.2 million)[198] Other Income (Expense), Net Total other income (expense), net, decreased for both the three and six months ended June 30, 2025, compared to 2024, primarily due to lower interest income resulting from reduced interest rates and balances, partially offset by a decrease in interest expense Other Income (Expense), Net (Three and Six Months Ended June 30, in thousands) | Category | 3 Months 2025 | 3 Months 2024 | Change ($) | Change (%) | 6 Months 2025 | 6 Months 2024 | Change ($) | Change (%) | | :------- | :------------ | :------------ | :--------- | :--------- | :------------ | :------------ | :--------- | :--------- | | Other income (expense), net | $20 | $7 | $13 | 185.7% | $27 | $15 | $12 | 80.0% | | Interest income | $163 | $289 | $(126) | (43.6)% | $436 | $636 | $(200) | (31.4)% | | Interest expense | $(15) | $(29) | $14 | (48.3)% | $(30) | $(80) | $50 | (62.5)% | | Total other income (expense), net | $168 | $267 | $(99) | (37.1)% | $433 | $571 | $(138) | (24.2)% | - Interest income decreased due to lower interest rates and lower balances in interest-bearing accounts[200][201] - Interest expense decreased due to the maturity and satisfaction of the term loan under the credit facility during 2024[200][201] Provision for Income Taxes The provision for income taxes decreased for both the three and six months ended June 30, 2025, primarily due to decreased profitability, while the effective tax rate increased to 25.2% for the three-month period and 24.0% for the six-month period in 2025 Provision for Income Taxes (Three and Six Months Ended June 30, in thousands) | Metric | 3 Months 2025 | 3 Months 2024 | Change ($) | Change (%) | 6 Months 2025 | 6 Months 2024 | Change ($) | Change (%) | | :----- | :------------ | :------------ | :--------- | :--------- | :------------ | :------------ | :--------- | :--------- | | Provision for income taxes | $1,060 | $1,196 | $(136) | (11.4)% | $2,234 | $2,489 | $(255) | (10.2)% | | Tax rate (as % of income before taxes) | 25.2% | 21.4% | 3.8pp | 17.8% | 24.0% | 21.1% | 2.9pp | 13.7% | - The change in tax provision was primarily related to decreased profitability during the current period compared to the prior year[202][203] Supplemental Non-GAAP Financial Information The company provides non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Earnings Per Share, to offer additional insight into recurring earnings and profitability, considering earnings attributable to both Class A and Class B stockholders, which show a decline for the current periods - Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income, and Adjusted Earnings Per Share are non-GAAP measures used to assess recurring earnings and profitability, considering both Class A and Class B stockholders[205][207] Adjusted EBITDA and Margin (Three and Six Months Ended June 30, in thousands) | Metric | 3 Months 2025 | 3 Months 2024 | Change ($) | Change (%) | 6 Months 2025 | 6 Months 2024 | Change ($) | Change (%) | | :----- | :------------ | :------------ | :--------- | :--------- | :------------ | :------------ | :--------- | :--------- | | Adjusted EBITDA | $5,735 | $7,232 | $(1,497) | (20.7)% | $12,232 | $14,685 | $(2,453) | (16.7)% | | Adjusted EBITDA Margin | 18.7% | 23.3% | (4.6)pp | (19.7)% | 19.7% | 24.0% | (4.3)pp | (17.9)% | Adjusted Net Income and EPS (Three and Six Months Ended June 30, in thousands, except per share) | Metric | 3 Months 2025 | 3 Months 2024 | Change ($) | Change (%) | 6 Months 2025 | 6 Months 2024 | Change ($) | Change (%) | | :----- | :------------ | :------------ | :--------- | :--------- | :------------ | :------------ | :--------- | :--------- | | Adjusted net income | $3,258 | $4,402 | $(1,144) | (26.0)% | $7,152 | $9,121 | $(1,969) | (21.6)% | | Adjusted basic EPS | $0.26 | $0.31 | $(0.05) | (16.1)% | $0.57 | $0.65 | $(0.08) | (12.3)% | | Adjusted diluted EPS | $0.25 | $0.30 | $(0.05) | (16.7)% | $0.54 | $0.63 | $(0.09) | (14.3)% | Liquidity and Capital Resources The company expects to meet its working capital needs and commitments primarily through cash generated by operations, with distributions to Class B unit holders and dividends to Class A stockholders being material uses of cash, and substantial future payments anticipated under the Tax Receivable Agreement - Ongoing sources of cash primarily consist of management fees and family office services fees, collected quarterly[215] - Cash flow from operations will be used for compensation, general and administrative expenses, income taxes, debt service, capital expenditures, distributions to Class B unit holders, and dividends on Class A common stock[215] - The company anticipates distributions to SLP limited partners to be a material use of cash, varying with operating results and dividend policy[218][227] - Future payments under the Tax Receivable Agreement (TRA) are expected to be substantial, with an estimated $10.2 million for past Class B unit purchases and additional substantial amounts for future exchanges[219][220][221] Key Liquidity Data (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----- | :------------ | :---------------- | | Cash and cash equivalents | $30,041 | $68,611 | | Accounts receivable | $13,129 | $12,225 | | Due from Silvercrest Funds | $875 | $945 | Cash Flows For the six months ended June 30, 2025, the company experienced a net decrease in cash of $38.6 million, significantly higher than the $20.4 million decrease in 2024, primarily driven by increased cash usage in financing activities, particularly share repurchases, and higher cash used in operating activities Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | Change (in thousands) | | :----------------- | :--- | :--- | :-------------------- | | Net cash used in operating activities | $(10,865) | $(8,107) | $(2,758) | | Net cash used in investing activities | $(872) | $(957) | $85 | | Net cash used in financing activities | $(26,835) | $(11,274) | $(15,561) | | Net change in cash | $(38,570) | $(20,354) | $(18,216) | Operating Activities Net cash used in operating activities increased to $10.9 million for the six months ended June 30, 2025, from $8.1 million in 2024, mainly due to decreased net income and higher accrued compensation, partially offset by increased distributions from investment funds and changes in receivables - The increase in cash used in operating activities was primarily due to a $2.2 million decrease in net income and a $2.9 million decrease in accrued compensation, partially offset by a $1.2 million increase in distributions received from investment funds and a $1.4 million increase in receivables and due from Silvercrest Funds[224] Investing Activities Net cash used in investing activities slightly decreased to $0.9 million for the six months ended June 30, 2025, from $1.0 million in 2024, with the primary use of cash being for the acquisition of furniture, equipment, and leasehold improvements - The primary use of cash in investing activities for both periods was for the acquisition of furniture, equipment, and leasehold improvements[225] Financing Activities Net cash used in financing activities significantly increased to $26.8 million for the six months ended June 30, 2025, from $11.3 million in 2024, largely driven by substantial purchases of Class A common stock and continued distributions to partners and dividends to Class A shareholders Key Financing Activities (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change (in thousands) | | :------- | :--- | :--- | :-------------------- | | Repayments of notes payable | $0 | $(2,700) | $2,700 | | Distributions to partners | $(4,230) | $(4,916) | $686 | | Dividends paid on Class A common stock | $(3,668) | $(3,614) | $(54) | | Purchase of Class A common stock | $(18,948) | $0 | $(18,948) | | Net cash used in financing activities | $(26,835) | $(11,274) | $(15,561) | - The company purchased approximately 1,226,000 shares of Class A common stock for $19.1 million in H1 2025, compared to 262,000 shares for $5.0 million in H1 2024[226] Critical Accounting Policies and Estimates There have been no changes to the company's critical accounting policies during the six months ended June 30, 2025, with revenue recognition, particularly for investment advisory and performance fees, remaining a key policy significantly impacted by AUM valuation - No changes to critical accounting policies occurred during the six months ended June 30, 2025[229] - Revenue recognition for investment advisory fees (based on AUM) and performance fees (recognized when crystallized) is a critical policy, with market appreciation/depreciation significantly impacting revenue[230][231][232] AUM by Fair Value Hierarchy (in billions) | Period | Level 1 | Level 2 | Level 3 | Total | | :----- | :------ | :------ | :------ | :---- | | June 30, 2025 AUM | $25.1 | $5.6 | $6.0 | $36.7 | | December 31, 2024 AUM | $24.7 | $6.1 | $5.7 | $36.5 | Recently Issued Accounting Pronouncements Information regarding recent accounting developments and their impact on the Company can be found in Note 2, 'Summary of Significant Accounting Policies,' in the 'Notes to Condensed Consolidated Financial Statements' in this filing - Refer to Note 2 for details on recently issued accounting pronouncements and their expected immaterial impact[238] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is directly tied to its role as an investment adviser, with most revenue derived from advisory fees based on the market value of assets under management, meaning a decline in security prices or client withdrawals would negatively impact revenue and income, though the company does not face material inflation risk - Market risk is directly related to the company's role as an investment adviser, with revenue largely dependent on the market value of AUM[239] - A 10% increase or decrease in average AUM for the six months ended June 30, 2025, would cause an annualized increase or decrease in revenues of approximately $12.4 million[236] - The company believes it does not face any material risk from inflation[239] Controls and Procedures This section details the company's disclosure controls and procedures and internal control over financial reporting, confirming their effectiveness as of June 30, 2025, with no material changes during the quarter Disclosure Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and concluded they were effective - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[240] Internal Control over Financial Reporting Management, including the CEO and CFO, assessed the effectiveness of internal control over financial reporting as of June 30, 2025, based on the COSO 2013 framework, and concluded it was effective, with no material changes during the quarter - No changes in the company's internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[241] - Management concluded that internal control over financial reporting was effective as of June 30, 2025, based on the 2013 COSO Internal Control - Integrated Framework[243] Part II Other Information Legal Proceedings The company is not a party to any material legal proceedings - The company is not involved in any material legal proceedings[244] Risk Factors There have been no material changes to the company's risk factors during the second quarter of 2025, as previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors occurred during Q2 2025, consistent with disclosures in the 2024 Form 10-K[245] Unregistered Sale of Equity Securities and Use of Proceeds The company repurchased 1,008,770 shares of Class A common stock during the quarter ended June 30, 2025, at an average price of $15.19 per share, under its 2024 and 2025 Repurchase Programs Class A Common Stock Repurchases (Quarter Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased under the Plan or Program | | :----- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------- | | April 1 - April 30, 2025 | 226,800 | $15.69 | 226,800 | $1,273 | | May 1 - May 31, 2025 | 375,249 | $14.55 | 375,249 | $19,545,212 | | June 1 - June 30, 2025 | 406,721 | $15.03 | 406,721 | $13,425,549 | | Total | 1,008,770 | $15.19 | 1,008,770 | | - The 2024 Repurchase Program ended in April 2025, with 709,687 shares purchased for approximately $12,119 thousand, and a new $25,000 thousand 2025 Repurchase Program was approved on May 23, 2025, under which 781,970 shares were purchased for approximately $11,690 thousand as of June 30, 2025[247][248][249] Defaults of Senior Securities There were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[250] Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[250] Other Information No directors or executive officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025 - No changes to securities trading plans by directors or executive officers were reported during Q2 2025[251] Exhibits This section lists the exhibits filed with the Form 10-Q, including amendments to the equity incentive plan, the amended credit agreement, and certifications from the CEO and CFO - Key exhibits include the Amendment to the 2012 Equity Incentive Plan, the First Amendment to the Amended and Restated Credit Agreement, and certifications from the CEO and CFO (31.1, 31.2, 32.1, 32.2)[252]