What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-07-29 compared with 2021-05-06 · 180 added, 98 removed, 427 unchanged (39% of the section changed)

22 unchanged sentences

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 March 31, 2021, our assets under management increased by 4.3% from $27.8 billion to $29.0 billion.

The business includes the management of funds of funds, and other investment funds, collectively referred to as the “Silvercrest Funds.” As of March 31, 2021, Silvercrest L.P.

During the three months ended June 30, 2021, our assets under management increased by 6.9% from $29.0 billion to $31.0 billion.

During the six months ended June 30, 2021, our assets under management increased by 11.5% from $27.8 billion to $31.0 billion.

The business includes the management of funds of funds, and other investment funds, collectively referred to as the “Silvercrest Funds.” As of June 30, 2021, Silvercrest L.P.

has issued Restricted Stock Units exercisable for 170,854 Class B units which entitle the holders thereof to receive distributions from Silvercrest L.P.

7 unchanged sentences

The interests of the limited partners’ collective 33.1% partnership interest in Silvercrest L.P.

as of March 31, 2021 are reflected in non-controlling interests in our Condensed Consolidated Financial Statements.

as of June 30, 2021 are reflected in non-controlling interests in our Condensed Consolidated Financial Statements.

COVID-19 Pandemic

3 unchanged sentences

Such current demand may not continue and/or demand may decrease from historical levels depending on the duration and severity of the COVID-19 pandemic, the length of time it takes for normal economic and operating conditions to resume, additional governmental actions that may be taken and/or extensions of time for restrictions that have been imposed to date, and numerous other uncertainties.

The COVID-19 pandemic affected our operations in the each of the four quarters during the period April 1, 2020 through March 31, 2021 and may continue to do so indefinitely thereafter.

The COVID-19 pandemic affected our operations in the each of the five quarters during the period April 1, 2020 through June 30, 2021 and may continue to do so indefinitely thereafter.

All of these factors may have far reaching impacts on our business, operations, and financial results and conditions, directly and indirectly, including without limitation impacts on the health of our management and employees, client behavior, and on the overall economy.

9 unchanged sentences

For the Three Months

Ended March 31,

Ended June 30,

For the Six Months

Ended June 30,

(in thousands except as indicated)

28 unchanged sentences

As of and for the Three

Months Ended March 31,

Months Ended June 30,

As of and for the Six Months

Ended June 30,

(in billions)

5 unchanged sentences

As of and for the Three

Months Ended March 31,

Months Ended June 30,

As of and for the Six Months

Ended June 30,

(in billions)

24 unchanged sentences

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 0.44% and 0.50% for the three months ended March 31, 2021 and 2020, respectively.

Our average annual management fee was 0.44% and 0.43% for the three and six months ended June 30, 2021 and 2020, 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 months ended March 31, 2021 and 2020.

These cash flow-related adjustments were insignificant for the three and six months ended June 30, 2021 and 2020.

Silvercrest L.P.

20 unchanged sentences

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 expense for the three months ended March 31, 2021 and 2020 are as follows:

The components of our compensation expense for the three and six months ended June 30, 2021 and 2020 are as follows:

For the Three Months

Ended March 31,

Ended June 30,

For the Six Months

Ended June 30,

(in thousands)

2 unchanged sentences

Total compensation expense

For the three months ended March 31, 2021 and 2020, $8,004 and $7,377, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations.

For the three months ended June 30, 2021 and 2020, $9,010 and $5,557, 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, 2021 and 2020, $17,014 and $12,934, respectively, of partner incentive payments were included in cash compensation and benefits expense in the Condensed Consolidated Statements of Operations.

During 2021 and 2020, Silvercrest L.P.

43 unchanged sentences

Operating Results

Our revenues for the three months ended March 31, 2021 and 2020 are set forth below:

Our revenues for the three and six months ended June 30, 2021 and 2020 are set forth below:

For the Three Months

Ended March 31,

Ended June 30,

(in thousands)

2 unchanged sentences

Total revenue

The growth in our assets under management during the three months ended March 31, 2021 and 2020 is described below:

For the Six Months

Ended June 30,

(in thousands)

Management and advisory fees

Family office services

Total revenue

The growth in our assets under management during the three and six months ended June 30, 2021 and 2020 is described below:

Assets Under Management

2 unchanged sentences

Discretionary

As of January 1, 2020

As of March 31, 2020

Gross client inflows

1 unchanged sentence

Net client flows

Market depreciation

Market appreciation

As of June 30, 2020

As of March 31, 2021

Gross client inflows

Gross client outflows

Net client flows

Market appreciation

As of June 30, 2021

As of January 1, 2020

2 unchanged sentences

Net client flows

Market appreciation/(depreciation)

As of March 31 , 2021

Market (depreciation)/appreciation

As of June 30, 2020

As of January 1, 2021

Gross client inflows

Gross client outflows

Net client flows

Market appreciation

As of June 30 , 2021

Less than 5% of assets under management generate performance fees or allocations.

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PROPRIETARY EQUITY PERFORMANCE

as of March 31, 2021

as of June 30, 2021

ANNUALIZED PERFORMANCE

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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.

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

Our total revenue increased by $2.9 million, or 10.1%, to $31.2 million for the three months ended March 31, 2021, from $28.4 million for the three months ended March 31, 2020.

Three Months Ended June 30, 2021 versus Three Months Ended June 30, 2020

Our total revenue increased by $9.1 million, or 37.8%, to $33.1 million for the three months ended June 30, 2021, from $24.0 million for the three months ended June 30, 2020.

This increase was driven by market appreciation in discretionary assets under management, partially offset by net client outflows.

Total assets under management increased by $8.4 billion, or 40.8%, to $29.0 billion at March 31, 2021 from $20.6 billion at March 31, 2020.

Compared to the three months ended March 31, 2020, there was an increase in market depreciation of $6.0 billion and an increase of $0.5 billion in client inflows, partially offset by an increase of $0.8 billion in client outflows.

During the three months ended March 31, 2021, from December 31, 2020, there was an increase of $1.3 billion in discretionary assets under management while non-discretionary assets under management decreased by $0.1 billion.

The increase in assets under management as of March 31, 2021 as compared to December 31, 2020 was primarily due to market appreciation during the quarter ended March 31, 2021.

Sub-advised fund management revenue remained flat at $0.3 million for the three months ended March 31, 2021 as compared to the same period in the prior year.

Proprietary fund management revenue remained flat at $0.9 million for the three months ended March 31, 2021 as compared to the same period in the prior year.

With respect to our discretionary assets under management, equity assets experienced an increase of 9.1% during the three months ended March 31, 2021 and fixed income assets increased by 1.5% during the same period.

For the three months ended March 31, 2021, most of the increase in equity assets came from our master limited partnership, small cap value and smid cap value strategies with composite returns of 18.8%, 15.6% and 14.7%, respectively.

As of March 31, 2021, the composition of our assets under management was 76% in discretionary assets, which includes both separately managed accounts and proprietary and sub-advised funds, and 24% in non-discretionary assets which represent assets on which we provide portfolio reporting but do not have investment discretion.

The following table represents a further breakdown of our assets under management as of the three months ended March 31, 2021 and 2020:

Total assets under management increased by $7.2 billion, or 30.3%, to $31.0 billion at June 30, 2021 from $23.8 billion at June 30, 2020.

Compared to the three months ended June 30, 2020, there was an increase of $0.3 billion in client inflows, partially offset by a decrease in market appreciation of $0.7 billion and an increase of $0.8 billion in client outflows.

During the three months ended June 30, 2021, from March 31, 2021, there was an increase of $1.0 billion in discretionary assets under management and an increase of $1.0 billion in non-discretionary assets under management.

The increase in assets under management as of June 30, 2021 as compared to March 31, 2021 was primarily due to market appreciation during the quarter ended June 30, 2021.

Sub-advised fund management revenue remained flat at $0.3 million for the three months ended June 30, 2021 as compared to the same period in the prior year.

Proprietary fund management revenue increased by $0.1 million for the three months ended June 30, 2021 as compared to the same period in the prior year.

With respect to our discretionary assets under management, equity assets experienced an increase of 3.6% during the three months ended June 30, 2021 and fixed income assets increased by 6.5% during the same period.

For the three months ended June 30, 2021, most of the increase in equity assets came from our master limited partnership, focused opportunity and REIT strategies with composite returns of 14.8%, 10.7% and 10.3%, respectively.

As of June 30, 2021, the composition of our assets under management was 74% in discretionary assets, which includes both separately managed accounts and proprietary and sub-advised funds, and 26% in non-discretionary assets which represent assets on which we provide portfolio reporting but do not have investment discretion.

The following table represents a further breakdown of our assets under management as of the three months ended June 30, 2021 and 2020:

Three Months Ended

Total AUM as of March 31,

Discretionary AUM:

Total Discretionary AUM as of March 31,

New client accounts/assets (1)

Closed accounts (2)

Net cash inflow/(outflow) (3)

Non-discretionary to Discretionary AUM (4)

Market appreciation

Change to Discretionary AUM

Total Discretionary AUM at June 30,

Change to Non-Discretionary AUM (5)

Total AUM as of June 30,

Represents new account flows from both new and existing client relationships.

Represents closed accounts of existing client relationships and those that terminated.

Represents periodic cash flows related to existing accounts.

Represents client assets that converted to Discretionary AUM from Non-Discretionary AUM.

Represents the net change to Non-Discretionary AUM.

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

Our total revenue increased by $12.0 million, or 22.8%, to $64.3 million for the six months ended June 30, 2021, from $52.4 million for the six months ended June 30, 2020.

This increase was driven by market appreciation in assets under management, partially offset by net client outflows.

Total assets under management increased by $7.2 billion, or 30.3%, to $31.0 billion at June 30, 2021 from $23.8 billion at June 30, 2020.

Compared to the six months ended June 30, 2020, there was an increase in market appreciation of $5.4 billion and an increase of $0.8 billion in client inflows, partially offset by an increase of $1.7 billion in client outflows.

During the six months ended June 30, 2021, from December 31, 2020, there was an increase of $2.3 billion in discretionary assets under management and an increase of $0.9 billion in non-discretionary assets under management.

The increase in assets under management as of June 30, 2021 as compared to December 31, 2020 was primarily due to market appreciation during the period.

Sub-advised fund management

revenue increase d by $ 0.1 million for the six months ended June 30, 2021 as compared to the same period in the prior year.

Proprietary fund management revenue increased by $ 0.1 million for the six months ended June 30, 2021 as compared to the same period in the prior year.

With respect to our discretionary assets under management, equity assets experienced an increase of 13.0 % during the six months ended June 30, 2021 and fixed income assets increased by 8.2 % during the same period.

For the six months ended June 30, 2021, most of the increase in equity assets came from our master limited partnership, small cap growth and smid cap value strategies with composite returns of 36.5 %, 22.8 % and 20.8 %, respectively.

As of June 30, 2021, the composition of our assets under management was 74 % in discretionary assets, which includes both separately managed accounts and proprietary and sub-advised funds, and 26 % in non-discretionary assets which represent assets on which we provide portfolio reporting but do not have investment discretion.

The following table represents a further breakdown of our assets under management as of the six months ended June 30, 2021 and 2020:

Six Months Ended

Total AUM as of January 1,

5 unchanged sentences

Non-discretionary to Discretionary AUM (4)

Market appreciation

Market appreciation/(depreciation)

Change to Discretionary AUM

Total Discretionary AUM at March 31,

Total Discretionary AUM at June 30,

Change to Non-Discretionary AUM (5)

Total AUM as of March 31,

Total AUM as of June 30,

Represents new account flows from both new and existing client relationships.

3 unchanged sentences

Represents the net change to Non-Discretionary AUM.

Our expenses for the three months ended March 31, 2021 and 2020 are set forth below:

For the Three Months Ended March 31,

Our expenses for the three and six months ended June 30, 2021 and 2020 are set forth below:

For the Three Months Ended June 30,

(in thousands)

2 unchanged sentences

Total expenses

NM = Not Meaningful

For the Six Months Ended June 30,

(in thousands)

Compensation and benefits (1)

General, administrative and other

Total expenses

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 months ended March 31, 2021 and 2020.

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.

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

Total expenses increased by $9.8 million, or 62.2%, to $25.6 million for the three months ended March 31, 2021 from $15.8 million for the three months ended March 31, 2020.

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, 2021 and 2020.

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.

Three Months Ended June 30, 2021 versus Three Months Ended June 30, 2020

Total expenses increased by $3.1 million, or 13.7%, to $25.8 million for the three months ended June 30, 2021 from $22.7 million for the three months ended June 30, 2020.

This increase was attributable to an increase in compensation and benefits expense of $5.1 million, partially offset by a decrease in general, administrative and other expenses of $2.0 million.

Compensation and benefits expense increased by $5.1 million, or 38.2%, to $18.5 million for the three months ended June 30, 2021 from $13.4 million for the three months ended June 30, 2020.

The increase was primarily attributable to an increase in the accrual for bonuses of $4.6 million, an increase in salaries and benefits of $0.4 million primarily as a result of merit-based increases, newly hired staff, and an increase in equity-based compensation expense of $0.1 million due to an increase in the number of vested and unvested restricted stock units and unvested non-qualified stock options outstanding.

General and administrative expenses decreased by $2.0 million, or 21.7%, to $7.3 million for the three months ended June 30, 2021 from $9.3 million for the three months ended June 30, 2020.

This was primarily attributable to a decrease in the adjustment to the fair value of contingent consideration related to the Cortina Acquisition of $2.2 million, a decrease in portfolio and systems expense of $0.1 million, partially offset by an increase in sub-advisory and referral fees of $0.1 million, an increase in occupancy and related costs of $0.1 primarily due to the increased cost of cleaning related to the coronavirus pandemic and an increase in travel and entertainment expenses of $0.1 million.

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

Total expenses increased by $12.9 million, or 33.6%, to $51.3 million for the six months ended June 30, 2021 from $38.4 million for the six months ended June 30, 2020.

This increase was attributable to increases in compensation and benefits expense and general, administrative and other expenses of $7.1 million and $5.8 million, respectively.

Compensation and benefits expense increased by $1.9 million, or 12.4%, to $17.7 million for the three months ended March 31, 2021 from $15.7 million for the three months ended March 31, 2020.

The increase was primarily attributable to an increase in the accrual for bonuses of $1.3 million, an increase in salaries and benefits of $0.3 million primarily as a result of merit-based increases and newly hired staff, an increase in equity-based compensation expense of $0.4 million due to an increase in the number of vested and unvested restricted stock units and unvested non-qualified stock options outstanding.

General and administrative expenses increased by $7.9 million, to $7.9 million for the three months ended March 31, 2021 from $43 thousand for the three months ended March 31, 2020.

This was primarily attributable to an increase in the fair value of contingent consideration related to the Cortina Acquisition of $8.3 million, an increase in occupancy and related costs of $0.1 million due to increased cleaning costs relate to the coronavirus pandemic, and an increase in professional fees of $0.1 million partially offset by a decrease in portfolio and systems expense of $0.3 million and a decrease in travel and entertainment expenses of $0.3 million as a result of the coronavirus pandemic.

Compensation and benefits expense increased by $7.1 million, or 24.2%, to $36.1 million for the six months ended June 30, 2021 from $29.1 million for the six months ended June 30, 2020.

The increase was primarily attributable to an increase in the accrual for bonuses of $5.9 million, an increase in salaries and benefits of $0.7 million primarily as a result of merit-based increases and newly hired staff and an increase in equity-based compensation expense of $0.5 million due to an increase in the number of vested and unvested restricted stock units and unvested non-qualified stock options outstanding.

General and administrative expenses increased by $5.8 million, or 62.6%, to $15.2 million for the six months ended June 30, 2021 from $9.3 million for the six months ended June 30, 2020.

This was primarily attributable to an increase in the adjustment to the fair value of contingent consideration related to the Cortina Acquisition of $6.1 million, an increase in occupancy and related costs of $0.2 million due to increased cleaning costs relate to the coronavirus pandemic, an increase in professional fees of $0.1 million and an increase in insurance expense of $0.1 million partially offset by a decrease in travel and entertainment expenses of $0.2 million as a result of the coronavirus pandemic, a decrease in portfolio and systems expense of $0.3 million, a decrease in depreciation and amortization of $0.1 million and a decrease in office expense of $0.1 million.

Other Income (Expense), Net

For the Three Months Ended March 31,

For the Three Months Ended June 30,

(in thousands)

3 unchanged sentences

Total other income (expense), net

NM – Not Meaningful

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

Total other income (expense) net decreased by $82 thousand to other expense of $96 thousand for the three months ended March 31, 2021 from other expense of $178 thousand for the three months ended March 31, 2020 due to a decrease in interest expense as a result of the level of borrowings under our credit facility and a decrease in interest income due to lower balances on notes receivable as a result of scheduled repayments.

For the Six Months Ended June 30,

(in thousands)

Other income (expense), net

Interest income

Interest expense

Total other income (expense), net

Three Months Ended June 30, 2021 versus Three Months Ended June 30, 2020

Total other income (expense) net increased by $35 thousand to other expense of $87 thousand for the three months ended June 30, 2021 from other expense of $122 thousand for the three months ended June 30, 2020 due to a decrease in interest expense as a result of the level of borrowings under our credit facility and a decrease in interest income due to lower balances on notes receivable as a result of scheduled repayments.

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

Total other income (expense) net increased by $117 thousand to other expense of $183 thousand for the six months ended June 30, 2021 from other expense of $300 thousand for the six months ended June 30, 2020 due to a decrease in interest expense as a result of the level of borrowings under our credit facility and a decrease in interest income due to lower balances on notes receivable as a result of scheduled repayments.

Provision for Income Taxes

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

The provision for income taxes was $1.3 million and $2.7 million for the three months ended March 31, 2021 and 2020, respectively.

Three Months Ended June 30, 2021 versus Three Months Ended June 30, 2020

The provision for income taxes was $1.6 million and $0.5 million for the three months ended June 30, 2021 and 2020, respectively.

The change was primarily related to a reduction in the tax effect of the change in the fair value of the contingent consideration related to the Cortina Acquisition and by 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 March 31, 2021 and 2020 was 22.5% and 22.1%, respectively.

Our provision for income taxes as a percentage of income before provision for income taxes for the three months ended June 30, 2021 and 2020 was 22.0% and 36.7%, respectively.

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

The provision for income taxes was $2.9 million and $3.2 million for the six months ended June 30, 2021 and 2020, respectively.

Our provision for income taxes as a percentage of income before provision for income taxes for the six months ended June 30, 2021 and 2020 was 22.2% and 23.4%, respectively.

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 Condensed 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.

5 unchanged sentences

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%.

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.

5 unchanged sentences

Three Months Ended

Six Months Ended

Reconciliation of non-GAAP financial measure:

29 unchanged sentences

Three Months Ended

Six Months Ended

Acquisition costs (a)

Total other adjustments

For the three months ended March 31, 2021, represents equity-based compensation expense of $300 related to restricted stock unit grants issued to two associates hired as part of the Cortina Acquisition in conjunction with their admission to Silvercrest L.P., and insurance costs of $11 related to the acquisition of Cortina.

For the three months ended March 31, 2020, represents legal and other professional fees of $73, insurance costs of $11 related to the acquisition of Cortina, and costs related to the integration of Cortina’s operations of $173.

For the three months ended March 31, 2021, represents a fair value adjustment to the Cortina contingent purchase price consideration of $2,300, an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives and expenses related to the Coronavirus pandemic of $115.

For the three months

ended March 31, 2020 , represents expenses of $ 18 related to office renovations, an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives, professional fees related to a new audit requirement of $13, a fair value adjustment to the Cappiccille contingent purchase price consideration of $83, a fair value adjustment to the Cortina contingent purchase price consideration of $(6,000) and expenses related to the Coronavirus pandemic of $21.

For the three months ended June 30, 2021, represents insurance costs of $11 and professional fees of $9 related to the acquisition of Cortina.

For the six months ended June 30, 2021, represents equity-based compensation expense of $300 related to restricted stock unit grants issued to two associates hired as part of the Cortina Acquisition in conjunction with their admission to Silvercrest L.P., insurance costs of $22 and professional fees of $9 related to the acquisition of Cortina.

For the three months ended June 30, 2020, represents legal and other professional fees of $12 and insurance costs of $11 related to the acquisition of Cortina.

For the six months ended June 30, 2020, represents legal and other professional fees of $84, insurance costs of $23 related to the acquisition of Cortina, and costs related to the integration of Cortina’s operations of $173.

For the three months ended June 30, 2021, represents a fair value adjustment to the Cortina contingent purchase price consideration of $1,600, an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives and expenses related to the Coronavirus pandemic of $75.

For the six months ended June 30, 2021, represents a fair value adjustment to the Cortina contingent purchase price consideration of $3,900, an ASC 842 rent adjustment of $96 related to the amortization of property lease incentives and expenses related to the Coronavirus pandemic of $190.

For the three months ended June 30, 2020, represents an ASC 842 rent adjustment of $48 related to the amortization of property lease incentives, a fair value adjustment to the Jamison contingent purchase price consideration of $70, a fair value adjustment to the Cortina contingent purchase price consideration of $3,800 and expenses related to the Coronavirus pandemic of $123.

For the six months ended June 30, 2020, represents expenses of $18 related to office renovations, an ASC 842 rent adjustment of $96 related to the amortization of property lease incentives, professional fees related to a new audit requirement of $13, a fair value adjustment to the Cappiccille contingent purchase price consideration of $83, a fair value adjustment to the Cortina contingent purchase price consideration of $(2,200), a fair value adjustment to the Jamison contingent purchase price consideration of $70, and expenses related to the Coronavirus pandemic of $144.

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.

Includes 8,242 and 10,139 unvested restricted stock units at March 31, 2021 and 2020, respectively.

Includes 74,907 and 35,336 unvested restricted stock units and 192,162 and 0 unvested non-qualified options at March 31, 2021 and 2020, respectively.

Includes 19,877 and 8,242 unvested restricted stock units at June 30, 2021 and 2020, respectively.

Includes 170,854 and 74,907 unvested restricted stock units and 252,904 and 86,764 unvested non-qualified options at June 30, 2021 and 2020, respectively.

Liquidity and Capital Resources

21 unchanged sentences

As of March 31, 2021, we had $11.7 million outstanding under the term loan.

As of March 31, 2021, there were no borrowings outstanding on the revolving credit facility.

We were in compliance with the covenants under the credit facility as of March 31, 2021.

As of June 30, 2021, there were no borrowings outstanding on the revolving credit facility.

We were in compliance with the covenants under the credit facility as of June 30, 2021.

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, payment of the prior year’s annual performance fees and allocations, if any, from our various funds and external investment strategies and, as a use of cash, the prior fiscal year’s incentive compensation.

Seasonality typically affects cash flow since the first quarter of each year includes, as a source of cash, payment of the prior year’s annual performance fee s and allocations , 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 March 31, 2021 and December 31, 2020.

The following table sets forth certain key financial data relating to our liquidity and capital resources as of June 30, 2021 and December 31, 2020.

(in thousands)

31 unchanged sentences

We intend to fund required payments pursuant to the tax receivable agreement from the distributions received from Silvercrest L.P.

The following table sets forth our cash flows for the three months ended March 31, 2021 and 2020.

The following table sets forth our cash flows for the six months ended June 30, 2021 and 2020.

Operating activities consist of net income subject to adjustments for changes in operating assets and liabilities, depreciation, and equity-based compensation expense.

1 unchanged sentence

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.

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Net used in operating activities

Net provided (used in) operating activities

Net cash used in investing activities

2 unchanged sentences

Operating Activities

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

For the three months ended March 31, 2021 and 2020, operating activities used $15.6 million and used $15.1 million, respectively.

This difference is primarily the result of a decrease in net income of $5.4 million, decreased deferred income taxes of $2.3 million, increased payouts of accrued compensation of $0.2 million, increased operating lease liabilities of $0.5 million, a

de crease in distributions received from investment funds of $ 0.1 million and a n in crease in accounts receivable of $ 2.

3 million due to timing of payments received from clients .

This was partially offset by a n in crease in equity-based compensation expense of $ 0.4 million , an increase in prepaid expenses and other assets of $0.

1 million, an increase in non-cash lease expense of $0.5 million and a n in crease in accounts payable and accrued expenses of $ 9.4 million , primarily due to a change in the fair value of contingent consideration related to the Cortina Acquisition .

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

For the six months ended June 30, 2021 and 2020, operating activities provided $2.0 million and used $4.4 million, respectively.

This difference is primarily the result of a decrease in depreciation and amortization of $0.1 million, decreased deferred income taxes of $1.9 million, increased non-cash lease expense of $0.5 million, an increase in accounts payable and accrued expense of $7.1 million, primarily due to a change in the fair value of contingent consideration related to the Cortina Acquisition, an increase in equity-based compensation expense of $0.5 million, increased operating lease liabilities of $0.6 million and an increase in accrued compensation of $4.2 million.

This was partially offset by a decrease in net income of $0.5 million, a decrease in distributions received from investment funds of $0.1 million, an increase in accounts receivable of $2.5 million due to timing of payments received from clients and an increase in prepaid expenses and other assets of $0.3 million.

Investing Activities

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

For the three months ended March 31, 2021 and 2020, investing activities used $0.1 million and $0.2 million, respectively.

The primary use of cash during the three months ended March 31, 2021 was for the acquisition of furniture, equipment and leasehold improvements.

The primary use of cash during the three months ended March 31, 2020 was for the acquisition of furniture, equipment and leasehold improvements mostly related to the renovation of our office space in New York City.

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

For the six months ended June 30, 2021 and 2020, investing activities used $0.4 million and $0.4 million, respectively.

The primary use of cash during the six months ended June 30, 2021 was for the acquisition of furniture, equipment and leasehold improvements.

The primary use of cash during the six months ended June 30, 2020 was for the acquisition of furniture, equipment and leasehold improvements mostly related to the renovation of our office space in New York City.

Financing Activities

Three Months Ended March 31, 2021 versus Three Months Ended March 31, 2020

For the three months ended March 31, 2021 and 2020, financing activities used $4.1 million and used $4.8 million, respectively.

During the three months ended March 31, 2021 and 2020, the Company repaid $0.9 million and $0.9 million, respectively, of principal on the term loan with City National Bank.

Distributions to partners during the three months ended March 31, 2021 and 2020 were $1.8 million and $2.2 million, respectively.

During the three months ended March 31, 2021 and 2020, the Company paid dividends of $1.5 million and $1.5 million, respectively, to Class A shareholders.

During the three months ended March 31, 2021 and 2020, we made earnout payments of $0.1 million and $0.4 million, respectively.

During the three months ended March 31, 2021 and 2020, we received payments from partners on notes receivable of $0.2 million and $0.3 million, respectively.

Six Months Ended June 30, 2021 versus Six Months Ended June 30, 2020

For the six months ended June 30, 2021 and 2020, financing activities used $10.4 million and used $10.4 million, respectively.

During the six months ended June 30, 2021 and 2020, the Company repaid $1.8 million and $1.8 million, respectively, of principal on the term loan with City National Bank.

Distributions to partners during the six months ended June 30, 2021 and 2020 were $5.4 million and $5.0 million, respectively.

During the six months ended June 30, 2021 and 2020, the Company paid dividends of $3.1 million and $3.0 million, respectively, to Class A shareholders.

During the six months ended June 30, 2021 and 2020, we made earnout payments of $0.3 million and $0.7 million, respectively.

During the six months ended June 30, 2021 and 2020, we received payments from partners on notes receivable of $0.2 million and $0.3 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 March 31, 2021 and December 31, 2020, $11.7 million and $12.6, respectively, was outstanding under the term loan with City National Bank.

As of March 31, 2021 and December 31, 2020, accrued but unpaid interest on the term loan with City National Bank was $32 thousand and $0, respectively.

As of March 31, 2021 and December 31, 2020, nothing was 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 March 31, 2021 and December 31, 2020.

As of June 30, 2021 and December 31, 2020, $10.8 million and $12.6, respectively, was outstanding under the term loan with City National Bank.

As of June 30, 2021 and December 31, 2020, accrued but unpaid interest on the term loan with City National Bank was $28 thousand and $0, respectively.

As of June 30, 2021 and December 31, 2020, nothing was outstanding on our revolving credit facility with City National Bank.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies during the three months ended March 31, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 4, 2021.

There have been no changes to our critical accounting policies during the six months ended June 30, 2021 from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 4, 2021.

Revenue Recognition

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(in billions)

March 31, 2021 AUM

June 30, 2021 AUM

December 31, 2020 AUM

1 unchanged sentence

“– Qualitative and Quantitative Disclosures Regarding Market Risk.”

The average value of our assets under management for the three months ended March 31, 2021 was approximately $28.4 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 $2.8 billion for the three months ended March 31, 2021, which would cause an annualized increase or decrease in revenues of approximately $12.5 million for the three months ended March 31, 2021, at a weighted average fee rate for the three months ended March 31, 2021 of 0.44%.

The average value of our assets under management for the three and six months ended June 30 , 2021 was approximately $ 30.0 billion and $ 29.4 billion , respectively .

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 $ 3.0 billion and $ 2.9 billion for the three and six months ended June 30 , 2021 , respectively, which would cause an annualized increase or decrease in revenues of approximately $ 13.2 million and $ 12.9 million for the three and six months ended June 30 , 2021 , respectively, at a weighted average fee rate for the three and six months ended June 30 , 2021 of 0.44 % and 0.44 %, respectively .

The average value of our assets under management for the year ended December 31, 2020 was approximately $26.5 billion.

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis