Silvercrest Asset Management Group Inc

Previous wording

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 three months ended June 30, 2024, our assets under management decreased by 3.2% from $34.5 billion to $33.4 billion. During the six months ended June 30, 2024, our assets under management increased by 0.3% from $33.3 billion to $33.4 billion.

Current wording

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 three months ended September 30, 2024, our assets under management increased by 5.1% from $33.4 billion to $35.1 billion. During the nine months ended September 30, 2024, our assets under management increased by 5.4% from $33.3 billion to $35.1 billion.

Previous wording

The business includes the management of funds of funds, and other investment funds, collectively referred to as the “Silvercrest Funds.” As of June 30, 2024, Silvercrest L.P. has issued Restricted Stock Units exercisable for 228,118 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).

Current wording

The business includes the management of funds of funds, and other investment funds, collectively referred to as the “Silvercrest Funds.” As of September 30, 2024, Silvercrest L.P. has issued Restricted Stock Units exercisable for 228,117 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).

Previous wording

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 results with ours. The interests of the limited partners’ collective 31.9% partnership interest in Silvercrest L.P. as of June 30, 2024 are reflected in non-controlling interests in our Condensed Consolidated Financial Statements.

Current wording

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 results with ours. The interests of the limited partners’ collective 31.7% partnership interest in Silvercrest L.P. as of September 30, 2024 are reflected in non-controlling interests in our Condensed Consolidated Financial Statements.

Previous wording

Average annual management fee is calculated by dividing our actual annualized 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 annual management fee was 0.37% and 0.38% for the three months ended June 30, 2024 and 2023, respectively. Our average annual management fee was 0.37% and 0.39% for the six months ended June 30, 2024 and 2023, respectively. Changes in our total average management fee rates are typically the result of changes in the mix of our assets under management and the concentration in our equities strategies whose fee rates are higher than those of other investment strategies. Management and 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 three and six months ended June 30, 2024 and 2023. Silvercrest L.P. has authority to take fees directly from external custodian accounts of its separately managed accounts.

Current wording

Average annual management fee is calculated by dividing our actual annualized 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 annual management fee was 0.36% and 0.38% for the three months ended September 30, 2024 and 2023, respectively. Our average annual management fee was 0.36% and 0.39% for the nine months ended September 30, 2024 and 2023, respectively. Changes in our total average management fee rates are typically the result of changes in the mix of our assets under management and the concentration in our equities strategies whose fee rates are higher than those of other investment strategies. Management and 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 three and nine months ended September 30, 2024 and 2023. Silvercrest L.P. has authority to take fees directly from external custodian accounts of its separately managed accounts.

Previous wording

The components of our compensation expense for the three and six months ended June 30, 2024 and 2023 are as follows:

Current wording

The components of our compensation expense for the three and nine months ended September 30, 2024 and 2023 are as follows:

Previous wording

For the three months ended June 30, 2024 and 2023, $7,514 and $6,962, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations. For the six months ended June 30, 2024 and 2023, $14,491 and $13,493, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations.

Current wording

For the three months ended September 30, 2024 and 2023, $7,222 and $6,983, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2024 and 2023, $21,713 and $20,476, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations.

Previous wording

Our revenues for the three and six months ended June 30, 2024 and 2023 are set forth below:

Current wording

Our revenues for the three and nine months ended September 30, 2024 and 2023 are set forth below:

Previous wording

The growth in our assets under management during the three and six months ended June 30, 2024 and 2023 is described below:

Current wording

The growth in our assets under management during the three and nine months ended September 30, 2024 and 2023 is described below:

Previous wording

Our total revenue increased by $1.3 million, or 4.2%, to $31.0 million for the three months ended June 30, 2024, from $29.7 million for the three months ended June 30, 2023. This increase was driven by market appreciation partially offset by net client outflows.

Current wording

Our total revenue increased by $0.7 million, or 2.4%, to $30.4 million for the three months ended September 30, 2024, from $29.7 million for the three months ended September 30, 2023. This increase was driven by market appreciation partially offset by net client outflows.

Previous wording

Total assets under management increased by $1.5 billion, or 4.7%, to $33.4 billion at June 30, 2024 from $31.9 billion at June 30, 2023. From June 30, 2023, there was market appreciation of $3.3 billion, client inflows of $3.3 billion, and client outflows of $5.1 billion. During the three months ended June 30, 2024, from March 31, 2024, there was a decrease of $1.1 billion in discretionary assets under management and no change in non-discretionary assets under management. The decrease in assets under management as of June 30, 2024 as compared to March 31, 2024 was primarily due to net client outflows and market depreciation during the quarter ended June 30, 2024. Sub-advised fund management revenue remained flat at $0.3 million for the three months ended June 30, 2024 and June 30, 2023. Proprietary fund management revenue remained flat at $0.7 million for the three months ended June 30, 2024 and June 30, 2023. With respect to our discretionary assets under management, equity assets decreased by 5.9% during the three months ended June 30, 2024 and fixed income assets increased by 0.9% during the same period. For the three months ended June 30, 2024, most of the decrease in equity assets came from our focused opportunity, smid growth and small cap growth strategies with composite returns of -3.8%, -3.1% and -3.0%, respectively. As of June 30, 2024, the composition of our assets under management was 65% in discretionary assets, which includes both separately managed accounts and proprietary and sub-advised funds, and 35% in non-discretionary assets which represent assets on which we provide portfolio reporting but do not have investment discretion.

Current wording

Total assets under management increased by $3.9 billion, or 12.5%, to $35.1 billion at September 30, 2024 from $31.2 billion at September 30, 2023. From September 30, 2023, there was market appreciation of $5.7 billion, client inflows of $3.9 billion, and client outflows of $5.7 billion. During the three months ended September 30, 2024, from June 30, 2024, there was an increase of $1.0 billion in discretionary assets under management and an increase of $0.7 billion in non-discretionary assets under management. The increase in assets under management as of September 30, 2024 as compared to June 30, 2024 was primarily due to market appreciation, partially offset by net client outflows during the quarter ended September 30, 2024. Sub-advised fund management revenue remained flat at $0.3 million for the three months ended September 30, 2024 and September 30, 2023. Proprietary fund management revenue remained flat at $0.7 million for the three months ended September 30, 2024 and September 30, 2023. With respect to our discretionary assets under management, equity assets increased by 5.7% during the three months ended September 30, 2024 and fixed income assets increased by 2.5% during the same period. For the three months ended September 30, 2024, most of the increase in equity assets came from our emerging markets ADR, REIT and focused opportunity strategies with composite returns of 12.8%, 12.4% and 10.7%, respectively. As of September 30, 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.

Previous wording

Our total revenue increased by $2.1 million, or 3.6%, to $61.3 million for the six months ended June 30, 2024, from $59.2 million for the six months ended June 30, 2023. This increase was driven by market appreciation partially offset by net client outflows.

Current wording

Our total revenue increased by $2.8 million, or 3.2%, to $91.7 million for the nine months ended September 30, 2024, from $88.9 million for the nine months ended September 30, 2023. This increase was driven by market appreciation partially offset by net client outflows.

Previous wording

Total assets under management increased by $1.5 billion, or 4.7%, to $33.4 billion at June 30, 2024 from $31.9 billion at June 30, 2023. From June 30, 2023, there was market appreciation of $3.3 billion, client inflows of $3.3 billion, and client outflows of $5.1 billion. During the six months ended June 30, 2024, from December 31, 2023, there was a decrease of $0.3 billion in discretionary assets under management and an increase of $0.4 billion in non-discretionary assets under management. The increase in assets under management as of June 30, 2024 as compared to December 31, 2023 was primarily due to market appreciation during the period and net client inflows during the period. Sub-advised fund management revenue remained flat at $0.6 million for the six months ended June 30, 2024 and 2023. Proprietary fund management revenue remained flat at $1.4 million for the six months ended June 30, 2024 and 2023. With respect to our discretionary assets under management, equity assets experienced a decrease of 2.1% during the six months ended June 30, 2024 and fixed income assets increased by 6.0% during the same period. For the six months ended June 30, 2024, most of the increase in equity assets came from our energy infrastructure, large cap growth and core international strategies with composite returns of 18.9%, 12.6% and 10.0%, respectively. As of June 30, 2024, the composition of our assets under management was 65% in discretionary assets, which includes both separately managed accounts and proprietary and sub-advised funds, and 35% in non-discretionary assets, which represent assets on which we provide portfolio reporting but do not have investment discretion.

Current wording

Total assets under management increased by $3.9 billion, or 12.5%, to $35.1 billion at September 30, 2024 from $31.2 billion at September 30, 2023. From September 30, 2023, there was market appreciation of $5.7 billion, client inflows of $3.9 billion, and client outflows of $5.7 billion. During the nine months ended September 30, 2024, from December 31, 2023, there was an increase of $0.7 billion in discretionary assets under management and an increase of $1.1 billion in non-discretionary assets under management. The increase in assets under management as of September 30, 2024 as compared to December 31, 2023 was primarily due to market appreciation during the period and net client inflows during the period. Sub-advised fund management revenue remained flat at $0.9 million for the nine months ended September 30, 2024 and 2023. Proprietary fund management revenue remained flat at $2.2 million for the nine months ended September 30, 2024 and 2023. With respect to our discretionary assets under management, equity assets experienced a decrease of 3.5% during the nine months ended September 30, 2024 and fixed income assets increased by 8.6% during the same period. For the nine months ended September 30, 2024, most of the increase in equity assets came from our energy infrastructure, large focused opportunity and large cap growth strategies with composite returns of 28.2%, 18.5% and 18.2%, respectively. As of September 30, 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.

Previous wording

The following table represents a further breakdown of our assets under management as of six months ended June 30, 2024 and 2023:

Current wording

The following table represents a further breakdown of our assets under management as of nine months ended September 30, 2024 and 2023:

Previous wording

Our expenses for the three and six months ended June 30, 2024 and 2023 are set forth below:

Current wording

Our expenses for the three and nine months ended September 30, 2024 and 2023 are set forth below:

Previous wording

For the three months ended June 30, 2024 and 2023, $7,514 and $6,962, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations. For the six months ended June 30, 2024 and 2023, $14,491 and $13,493, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations.

Current wording

For the three months ended September 30, 2024 and 2023, $7,222 and $6,983, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2024 and 2023, $21,713 and $20,476, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations.

Previous wording

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 and six months ended June 30, 2024 and 2023. 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 Condensed Consolidated Statements of Operations.

Current wording

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 and nine months ended September 30, 2024 and 2023. 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 Condensed Consolidated Statements of Operations.

Previous wording

Total expenses increased by $2.5 million, or 10.6%, to $25.7 million for the three months ended June 30, 2024 from $23.2 million for the three months ended June 30, 2023. This increase was attributable to an increase in compensation and benefits expense of $1.7 million and an increase in general, administrative and other expenses of $0.7 million.

Current wording

Total expenses increased by $2.8 million, or 12.0%, to $26.0 million for the three months ended September 30, 2024 from $23.2 million for the three months ended September 30, 2023. This increase was attributable to an increase in compensation and benefits expense of $1.9 million and an increase in general, administrative and other expenses of $0.9 million.

Previous wording

Compensation and benefits expense increased by $1.7 million, or 10.4% to $18.5 million for the three months ended June 30, 2024 from $16.8 million for the three months ended June 30, 2023. The increase was primarily attributable to an increase in the accrual for bonuses of $1.3 million and an increase in salaries and benefits of $0.4 million primarily as a result of merit-based increases.

Current wording

Compensation and benefits expense increased by $1.9 million, or 11.4% to $18.6 million for the three months ended September 30, 2024 from $16.7 million for the three months ended September 30, 2023. The increase was primarily attributable to increases in the accrual for bonuses of $0.7 million, severance expense of $0.2 million, equity-based compensation of $0.2 million and salaries and benefits of $0.8 million primarily as a result of merit-based increases.

Previous wording

General and administrative expenses increased by $0.7 million, or 11.3%, to $7.2 million for the three months ended June 30, 2024 from $6.5 million for the three months ended June 30, 2023. This was primarily attributable to increases in travel and entertainment expenses of $0.1 million, occupancy and related costs of $0.1 million, professional fees of $0.3 million, portfolio systems expense of $0.1 million and recruiting expenses of $0.3 million, partially offset by decreases in marketing expenses of $0.1 million and shareholder expenses of $0.1 million.

Current wording

General and administrative expenses increased by $0.9 million, or 13.4%, to $7.4 million for the three months ended September 30, 2024 from $6.5 million for the three months ended September 30, 2023. This was primarily attributable to increases in occupancy and related costs of $0.1 million, professional fees of $0.2 million, portfolio and systems expense of $0.3 million and trade errors of $0.3 million.

Previous wording

Total expenses increased by $4.2 million, or 9.1%, to $50.1 million for the six months ended June 30, 2024 from $45.9 million for the six months ended June 30, 2023. This increase was attributable to an increase in compensation and benefits expense of $2.9 million and an increase in general, administrative and other expenses of $1.3 million.

Current wording

Total expenses increased by $6.9 million, or 10.0%, to $76.0 million for the nine months ended September 30, 2024 from $69.1 million for the nine months ended September 30, 2023. This increase was attributable to an increase in compensation and benefits expense of $4.8 million and an increase in general, administrative and other expenses of $2.1 million.

Previous wording

Compensation and benefits expense increased by $2.9 million, or 8.7% to $36.2 million for the six months ended June 30, 2024 from $33.3 million for the six months ended June 30, 2023. The increase was primarily attributable to an increase in the accrual for bonuses of $2.2 million, an increase in salaries and benefits of $0.6 million primarily as a result of merit-based increases and severance of $0.1 million paid in the current quarter and an increase in equity-based compensation of $0.1 million.

Current wording

Compensation and benefits expense increased by $4.8 million, or 9.6% to $54.8 million for the nine months ended September 30, 2024 from $50.0 million for the nine months ended September 30, 2023. The increase was primarily attributable to increases in the accrual for bonuses of $3.0 million, severance expense of $0.2 million, equity-based compensation of $0.3 million and salaries and benefits of $1.3 million primarily as a result of merit-based increases.

Previous wording

General and administrative expenses increased by $1.3 million, or 9.9%, to $13.9 million for the six months ended June 30, 2024 from $12.6 million for the six months ended June 30, 2023. This was primarily attributable to increases in travel and entertainment expenses of $0.2 million, occupancy and related costs of $0.2 million, professional fees of $0.5 million, portfolio and systems expenses of $0.1 million, recruiting expenses of $0.3 million and depreciation and amortization expense of $0.1 million, partially offset by a decrease in marketing expenses of $0.1 million.

Current wording

General and administrative expenses increased by $2.1 million, or 11.1%, to $21.3 million for the nine months ended September 30, 2024 from $19.1 million for the nine months ended September 30, 2023. This was primarily attributable to increases in travel and entertainment expenses of $0.2 million, occupancy and related costs of $0.2 million, professional fees of $0.6 million, portfolio and systems expenses of $0.4 million, recruiting expenses of $0.3 million, trade errors of $0.3 million and depreciation and amortization expense of $0.1 million.

Previous wording

Total other income (expense) net increased by $0.7 million to other income of $0.6 million for the six months ended June 30, 2024 from other expense of $0.1 million for the six months ended June 30, 2023. Interest income increased due to higher rates earned on cash in interest-bearing accounts. Interest expense decreased because of lower outstanding balances on borrowings under our credit facility during the six months ended June 30, 2024 as compared with the same period in the prior year.

Current wording

Total other income (expense) net increased by $0.1 million to other income of $0.4 million for the three months ended September 30, 2024 from other income of $0.3 million for the three months ended September 30, 2023. Interest income increased due to higher rates earned on cash in interest-bearing accounts. Interest expense decreased because of the maturity and satisfaction of our term loan under our credit facility during the three months ended September 30, 2024 as compared with the same period in the prior year.

Previous wording

Total other income (expense) net increased by $0.3 million to other income of $0.3 million for the three months ended June 30, 2024 from other expense of $0.1 million for the three months ended June 30, 2023. Interest income increased due to higher rates earned on cash in interest-bearing accounts. Interest expense decreased because of lower outstanding balances on borrowings under our credit facility during the three months ended June 30, 2024 as compared with the same period in the prior year.

Current wording

Total other income (expense) net increased by $0.8 million to other income of $0.9 million for the nine months ended September 30, 2024 from other income of $0.1 million for the nine months ended September 30, 2023. Interest income increased due to higher rates earned on cash in interest-bearing accounts. Interest expense decreased because of lower outstanding balances on borrowings under our credit facility during the nine months ended September 30, 2024 as compared with the same period in the prior year.

Previous wording

The provision for income taxes was $1.2 million and $1.3 million for the three months ended June 30, 2024 and 2023, respectively. The change was primarily related to decreased profitability during the current period as compared to the prior year. Our provision for income taxes as a percentage of income before provision for income taxes for the three months ended June 30, 2024 and 2023 was 21.4% and 20.4%, respectively.

Current wording

The provision for income taxes was $1.1 million and $1.4 million for the three months ended September 30, 2024 and 2023, respectively. The change was primarily related to decreased profitability during the current period as compared to the prior year. Our provision for income taxes as a percentage of income before provision for income taxes for the three months ended September 30, 2024 and 2023 was 22.7% and 20.6%, respectively.

Previous wording

The provision for income taxes was $2.5 million and $2.7 million for the six months ended June 30, 2024 and 2023, respectively. The change was primarily related to decreased profitability during the current period as compared to the prior year. Our provision for income taxes as a percentage of income before provision for income taxes for the six months ended June 30, 2024 and 2023 was 21.1% and 20.6%, respectively.

Current wording

The provision for income taxes was $3.6 million and $4.1 million for the nine months ended September 30, 2024 and 2023, respectively. The change was primarily related to decreased profitability during the current period as compared to the prior year. Our provision for income taxes as a percentage of income before provision for income taxes for the nine months ended September 30, 2024 and 2023 was 21.6% and 20.6%, respectively.

Previous wording

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 Condensed 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.

Current wording

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 believe that it is important to management and investors to supplement our Condensed 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 stockholders.

Previous wording

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 Condensed 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.

Current wording

Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by total revenue. We believe that it is important to management and investors to supplement our Condensed 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 stockholders.

Previous wording

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 Condensed 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.

Current wording

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 believe that it is important to management and investors to supplement our Condensed 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 stockholders.

Previous wording

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 restricted stock units and non-qualified stock options 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 Condensed 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.

Current wording

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 restricted stock units and non-qualified stock options 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 believe that it is important to management and investors to supplement our Condensed 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.

Previous wording

For the six months ended June 30, 2023, represents professional fees of $5 related to the acquisition of Cortina.

Current wording

For the nine months ended September 30, 2023, represents professional fees of $5 related to the acquisition of Cortina.

Previous wording

For the three months ended June 30, 2024, represents a fair value adjustment to the Neosho contingent purchase price consideration of $12, an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives, sign on bonuses paid to certain employees of $188, professional fees of $26 related to a transfer pricing project, legal fees of $46 and software implementation costs of $3. For the six months ended June 30, 2024, represents a fair value adjustment to the Neosho contingent purchase price consideration of $12, an ASC 842 rent adjustment of $96 related to the amortization of property lease incentives, sign on bonuses paid to certain employees of $188, professional fees of $26 related to a transfer pricing project, legal fees of $46 and software implementation costs of $13. For the three months ended June 30, 2023, represents an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives, $12 related to moving costs, a fair value adjustment to the Cortina contingent purchase price consideration of ($2) and software implementation costs of $9. For the six months ended June 30, 2023, represents an ASC 842 rent adjustment of $96 related to the amortization of property lease incentives, $12 related to moving costs, a fair value adjustment to the Cortina contingent purchase price consideration of ($2) and software implementation costs of $20.

Current wording

For the three months ended September 30, 2024, represents an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives, data conversion costs of $14 and software implementation costs of $5. For the nine months ended September 30, 2024, represents a fair value adjustment to the Neosho contingent purchase price consideration of $12, an ASC 842 rent adjustment of $144 related to the amortization of property lease incentives, sign on bonuses paid to certain employees of $188, professional fees of $26 related to a transfer pricing project, legal fees of $46, data conversion costs of $14 and software implementation costs of $18. For the three months ended September 30, 2023, represents an adjustment to the tax receivable agreement of $40, an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives, $23 related to moving costs and software implementation costs of $8. For the nine months ended September 30, 2023, represents an adjustment to the tax receivable agreement of $40, an ASC 842 rent adjustment of $144 related to the amortization of property lease incentives, $35 related to moving costs, software implementation costs of $28 and a fair value adjustment to the Cortina contingent purchase price consideration of ($2).

Previous wording

GAAP net income per share is strictly attributable to Class A shareholders. Adjusted earnings per share takes into account earnings attributable to both Class A and Class B shareholders.

Current wording

GAAP net income per share is strictly attributable to Class A stockholders. Adjusted earnings per share takes into account earnings attributable to both Class A and Class B stockholders.

Previous wording

Includes 38,936 and 23,732 unvested restricted stock units at June 30, 2024 and 2023, respectively.

Current wording

Includes 37,109 and 23,732 unvested restricted stock units at September 30, 2024 and 2023, respectively.

Previous wording

Includes 228,118 and 264,037 unvested restricted stock units at June 30, 2024 and 2023, respectively, and 366,293 and 252,904 unvested non-qualified options at June 30, 2024 and 2023, respectively.

Current wording

Includes 228,117 and 264,037 unvested restricted stock units at September 30, 2024 and 2023, respectively, and 366,293 and 147,506 unvested non-qualified options at September 30, 2024 and 2023, respectively.

Previous wording

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. The challenges posed by the COVID-19 pandemic and the impact on our business and cash flows are evolving rapidly and cannot be predicted at this time. Consequently, we will continue to evaluate our liquidity and financial position on an ongoing basis.

Current wording

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.

Previous wording

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 $9.0 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.

Current wording

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 $9.1 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.

Previous wording

The following table sets forth our cash flows for the six months ended June 30, 2024 and 2023. 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, and cash paid as part of business acquisitions. Financing activities consist primarily of contributions from partners, distributions to partners, dividends paid on Class A common stock, the issuance and payments on partner notes, other financings, and earnout payments related to business acquisitions.

Current wording

The following table sets forth our cash flows for the nine months ended September 30, 2024 and 2023. 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, and cash paid as part of business acquisitions. Financing activities consist primarily of contributions from partners, distributions to partners, dividends paid on Class A common stock, the issuance and payments on partner notes, other financings, and earnout payments related to business acquisitions.

Previous wording

For the six months ended June 30, 2024 and 2023, operating activities used $8.1 million and $9.9 million, respectively. This difference is primarily the result of a decrease in net income of $1.2 million, decreased deferred tax expense of $0.4 million, decreased operating lease liabilities of $1.4 million and an increase in receivables and due from Silvercrest funds of $0.9 million, partially offset by an increase in accounts payable and accrued expenses of $0.4 million, an increase in accrued compensation of $4.1 million, increased non-cash lease expense of $0.4 million, an increase in prepaid and other expenses of $0.5 million, an increase in equity-based compensation of $0.1 million and an increase in depreciation and amortization of $0.1 million.

Current wording

For the nine months ended September 30, 2024 and 2023, operating activities provided $5.2 million and $6.2 million, respectively. This difference is primarily the result of a decrease in net income of $2.8 million, decreased deferred tax expense of $0.1 million, decreased operating lease liabilities of $1.5 million, a decrease in accounts payable and accrued expenses of $0.1 million and an increase in receivables and due from Silvercrest funds of $2.3 million, partially offset by an increase in accrued compensation of $4.8 million, increased non-cash lease expense of $0.4 million, an increase in prepaid and other expenses of $0.2 million, an increase in equity-based compensation of $0.3 million and an increase in depreciation and amortization of $0.1 million.

Previous wording

For the six months ended June 30, 2024 and 2023, investing activities used $1.0 million and $2.6 million, respectively. The primary use of cash during the six months ended June 30, 2024 and 2023 was for the acquisition of furniture and equipment and for leasehold improvements.

Current wording

For the nine months ended September 30, 2024 and 2023, investing activities used $1.3 million and $3.4 million, respectively. The primary use of cash during the nine months ended September 30, 2024 and 2023 was for the acquisition of furniture and equipment and for leasehold improvements.