Alexander Bernstein

Alexander Bernstein of JPMorgan Chase & Co. questioned the higher-than-expected Q1 step-downs and expirations, the drivers of fee rate seasonality, potential tax benefits from the Qualitas acquisition, and the M&A outlook in Europe.

Answer

EVP and CFO Amanda Coussens confirmed that full-year guidance for step-downs remains unchanged and reiterated the 103 basis point core fee rate target for the year, attributing the Q1 dip to seasonality and slight drag from expirations. She also noted the Qualitas deal structure offers no new tax amortization benefits. Chairman and CEO Luke Sarsfield described the M&A pipeline as 'vibrant and robust,' with a particular focus on European opportunities and strategic adjacencies in private credit and real assets.

Alexander Bernstein inquired about the sustainability of P10's higher fee rates and the drivers behind the strong Q3 fundraising momentum, questioning if new strategic initiatives were already having an impact.

Answer

EVP & CFO Amanda Coussens attributed stable fee rates to oversubscribed funds in the attractive lower middle market, noting the future rate depends on the mix of commingled funds and SMAs. Chairman & CEO Luke A. Sarsfield added that while it's too early for new initiatives to be the primary driver, the strong fundraising reflects compelling strategies, alpha generation, and deep client relationships, highlighting $200 million in new SMA assets as a positive indicator of new client engagement models.

Alexander Bernstein, on for Ken Worthington of JPMorgan Chase & Co., asked for more detail on the gross-to-net deployment delta, the power of incumbency, and why the conversion was lower in Q4.

Answer

Co-Chief Executive Officer Marc S. Lipschultz reiterated that the dynamic is healthy, accelerates OID, and provides prepayment benefits. He characterized recent refinancings as companies with strong performance re-optimizing their capital structures in a healthier environment, rather than a surge of loans moving to the BSL market.

Alexander Bernstein, on for Ken Worthington, asked about any negative impacts on the P&C insurance business from Q3 hurricane activity and the outlook for Q4. He also inquired about potential changes to the energy transition opportunity following the U.S. election results.

Answer

President Nick Goodman reported a small, non-material impact from hurricanes in Q3 and does not expect anything significant in Q4, as the company has taken steps to derisk its exposure. On the energy transition business, he asserted that investment is driven by strong underlying fundamentals, such as renewables being the lowest-cost power source and high corporate demand, which are long-term trends that will support the business regardless of the political environment.

Alex Bernstein, on behalf of Kenneth Worthington, asked how the changing interest rate environment impacts the types of opportunities in the Financial Restructuring pipeline. He also inquired if the elevated level of broad-market refinancing activity affects Houlihan Lokey's Capital Markets business.

Answer

CEO Scott Adelson clarified that his earlier comments on elongated closing times applied to Corporate Finance, not Restructuring. He stated that the current elevated interest rate environment continues to fuel a strong pipeline of restructuring mandates. Regarding Capital Markets, Adelson noted the strength of their private capital solutions group. CFO J. Alley added that since their clients are primarily in the middle market, the opening of public debt markets for refinancing doesn't significantly impact their private capital business.