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PI

P10, Inc. (PX)·Q3 2024 Earnings Summary

Executive Summary

  • Record quarter: Revenue $74.2M (+26% YoY), FRR $72.9M (+26%), FRE $35.1M (+19%), Adjusted EBITDA $35.3M (+19%), Fully diluted ANI EPS $0.26 (+32% YoY); FPAUM reached $24.9B (+10% YoY) .
  • Mix and catch-up fees drove margin upside: FRE margin 48% in Q3; management reiterated full-year margin in mid-40s and long-term path toward ~50% as operating leverage accrues .
  • Strategic catalysts: $1.4B gross new fee-paying AUM (incl. $300M pulled forward), agreement to acquire Qualitas Funds ($1B FPAUM) to establish European presence (closing expected Q1 2025), and expanded credit capacity to $500M (accordion +$125M) to fund growth .
  • Capital return: Repurchased ~609K shares at $10.15; dividend declared $0.035 per share; ~$13.9M remains under authorization; cash $61M; term loan $325M outstanding; revolver undrawn ($175M available) .
  • 2024 fundraising tracking ahead: $2.9B raised/deployed YTD vs “≥$2.5B” guidance, aided by strong closes in PE and credit; step-downs/expirations ~$1.5B for FY with ~$200M remaining in Q4 .

What Went Well and What Went Wrong

What Went Well

  • Record financials across KPIs: “record quarterly results across fundraising, revenue and fee-related earnings” (Luke Sarsfield) . Revenue $74.2M (+26% YoY), FRR $72.9M (+26%), FRE $35.1M (+19%), ANI $30.8M (+26%) .
  • Fundraising momentum and strategy breadth: $1.4B gross new fee-paying AUM in Q3, with PE $1.1B, Private Credit $220M, VC $105M, and >$200M SMAs, demonstrating traction beyond commingled vehicles .
  • Strategic platform execution: Announced Qualitas Funds acquisition to expand Europe, and upsized/extended credit facility to $500M (maturity 2028) supporting inorganic growth; “we believe we can become the acquirer of choice” (Investor Day themes echoed on call) .

What Went Wrong

  • GAAP profitability still thin and volatile: GAAP net income of $1.3M (vs. $(8.8)M prior year); margin uplift partly from lumpy catch-up fees ($6M in Q3; ~$20M YTD) which are episodic, particularly in direct/secondaries .
  • Operating expense growth: OpEx rose to $65.4M (+12% YoY) on compensation, placement fees, Qualitas transaction costs, and debt refinancing; management reiterated mid-40s margin for the year despite Q3’s 48% .
  • Step-downs/expirations continue to offset fundraising: $285M in Q3 (mostly private credit repayments); ~$1.5B expected for FY 2024, tempering net FPAUM growth cadence despite strong gross asset raising .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Revenue ($USD Millions)$58.9 $71.1 $74.2
Fee-Related Revenue (FRR) ($USD Millions)$57.7 $68.3 $72.9
Fee-Related Earnings (FRE) ($USD Millions)$29.5 $33.6 $35.1
FRE Margin (%)51% 49% 48%
Adjusted EBITDA ($USD Millions)$29.6 $35.4 $35.3
GAAP Net Income ($USD Millions)$(8.8) $7.4 $1.3
GAAP EPS (Fully Diluted, $)$(0.07) $0.06 $0.01
ANI ($USD Millions)$24.3 $28.8 $30.8
ANI per share ($)$0.21 $0.26 $0.28
Fully diluted ANI per share ($)$0.20 $0.24 $0.26
FPAUM ($USD Billions)—$23.8 $24.9

Segment fundraising and flows:

Fundraising/FlowsQ2 2024Q3 2024
Gross new fee-paying AUM ($USD Millions)$844 $1,400
Private Equity Solutions ($USD Millions)$302 $1,100
Private Credit Solutions ($USD Millions)$368 $220
Venture Capital Solutions ($USD Millions)$159 $105
Impact (Credit) ($USD Millions)$15 —
SMAs (approx.) ($USD Millions)—>$200
Step-downs & expirations ($USD Millions)$855 $285

KPIs and balance sheet:

KPIQ2 2024Q3 2024
Average fee rate (bps)115 119
Catch-up fees ($USD Millions)$6 (YTD $13.7) $6 (YTD ~$20)
Cash & cash equivalents ($USD Millions)$31 $61
Term loan outstanding ($USD Millions)$303 at 6/30; $325 post-Q2 $325
Revolver balance ($USD Millions)$0 $0
Revolver availability ($USD Millions)$175 (post-Q2) $175
Share repurchases (shares; avg price)~1,533,800; $8.12 ~609,300; $10.15
Authorization remaining ($USD Millions)~$20 ~$13.9
Dividend per share ($)$0.035 declared 9/20/24 $0.035 declared 12/20/24

Guidance Changes

MetricPeriodPrevious GuidanceCurrent UpdateChange
Gross new fee-paying AUM raised/deployedFY 2024“≥$2.5B” ~$2.9B YTD through Q3 Ahead of pace (likely exceed)
Step-downs & expirationsFY 2024~$1.5B ~$1.5B total; ~$200M remaining in Q4 Maintained
Catch-up feesFY 2024~$16M ~$20M YTD; exceeded due to Bonaccord II timing Exceeded
Core fee rate ex catch-upFY 2024~105 bps Average fee rate 119 bps in Q3; mix and catch-ups lifted reported rate Maintained baseline; higher reported due to mix/catch-ups
FRE margin (near/intermediate, ex M&A)Multi-yearMid-40s% near/intermediate; trending to ~50% longer-term Q3 at 48%; reiterated mid-40s for FY Maintained
DividendQuarterly$0.035/share $0.035/share Maintained
Credit facility capacityOngoing$359M facilities $500M facilities; +$125M accordion; maturity to 8/1/2028 Increased/extended
M&A (Qualitas Funds)Transaction—Expected close Q1 2025; ~$1B FPAUM addition New addition pending close

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2024)Current Period (Q3 2024)Trend
Inorganic growth (M&A)Building disciplined M&A engine; pipeline balanced; aimed to announce a 2024 deal Announced Qualitas Funds (Madrid, ~$1B FPAUM); closing expected Q1 2025; strategic fit with RCP and Hark Execution progressing (from pipeline to announced)
Data/AI and analyticsEmphasized proprietary data; planned demo at Investor Day; data informs sourcing/diligence “Leveraging data insights” and rolling out shared tools; operational efficiencies via collaboration Institutionalization and tooling scaling
Fee rates/mix and marginsGuided ~105 bps core fee rate; margin mid-40s ex M&A; Q2 avg 115 bps on mix/catch-ups Q3 avg 119 bps; catch-up fees $6M; FRE margin 48%; reiterated mid-40s FY margin Mix/catch-ups elevating reported rates; margin holding within guided band
Capital allocation (buybacks/dividend)Elevated buybacks in Q1/Q2; priority framework: dividend, buybacks/M&A, then debt repay Q3 buybacks lower due to blackout ahead of Qualitas; dividend maintained; reiteration of hierarchy Consistent; timing influenced by deal execution
SMAs / product breadthSMAs ~15% of assets; opportunity to expand bespoke/customized mandates >$200M SMAs raised in Q3; management sees high-margin leverage of existing capabilities Building momentum beyond commingled funds
Macro/portfolio positioning“All-weather” diversified platform; middle/lower middle market more insulated vs upper market Expect to benefit if DPI improves industry-wide; diversified strategies across PE/VC/credit Constructive macro stance; diversification highlighted

Management Commentary

  • “In the third quarter, we raised and deployed $1.4 billion in gross new fee-paying AUM… We delivered revenue of $74 million… and approximately $35 million of fee-related earnings” (CEO Luke Sarsfield) .
  • “Our margin came in a bit higher than expected due to catch-up fees and product mix… we still expect margins for the year to be in the mid-40s” (CFO Amanda Coussens) .
  • “We expect to more than double fee-paying assets under management by 2029… and… core organic FRE margins… to near 50% in the out years” (CEO on long-term plan) .
  • “We think the stock is unbelievably compelling at these levels” (CEO on buybacks; capital allocation hierarchy remains dividend, buybacks/M&A, then debt) .
  • On Qualitas Funds: “This acquisition will establish a European presence and meaningfully grow P10’s investor base” with expected Q1 2025 close .

Q&A Highlights

  • Fee rates pathway: Analysts probed sustainability above ~105 bps; CFO cited stability in primary strategies and mix effects from direct/secondaries and SMAs; more 2025 guidance to come .
  • Fundraising drivers: Management attributed strength primarily to strategy performance and client relationships, noting ~$200M of SMAs as an early sign of broader engagement beyond commingled funds .
  • FRE margin mix/investments: Margin near-term mid-40s reaffirmed; catch-up fees temporarily lift margins; longer-term expansion toward ~50% driven by operating leverage and mix .
  • Buybacks cadence: Lower Q3 repurchase due to blackout ahead of Qualitas; reiterated dividend-first, then buybacks/M&A framework based on opportunity set .
  • SMAs economics: Lower fee rates vs commingled, but high incremental margins leveraging existing capabilities; viewed as a durable, sticky growth vector .
  • Integration/cross-sell: Qualitas complements RCP and Hark; mutual opportunities expected across Europe and U.S. post-close .

Estimates Context

  • Wall Street consensus (S&P Global) for quarterly EPS/revenue/EBITDA was unavailable at time of request due to SPGI daily limit constraints, so estimate comparisons could not be retrieved. We anchored analysis on company-reported results and call commentary [GetEstimates error].
  • Where estimate comparisons are critical for portfolio decisions, re-poll S&P Global after limit reset to quantify any beat/miss relative to “Primary EPS Consensus Mean” and “Revenue Consensus Mean” (S&P Global).

Key Takeaways for Investors

  • Mix tailwinds and catch-up fees supported a strong quarter; underlying FRE margin remains within mid-40s guidance, suggesting durable operating leverage ahead as newer strategies scale .
  • Fundraising momentum and broadened product set (SMAs) point to continued organic growth, while the Qualitas deal opens a European foothold and cross-sell synergies in PE and NAV lending .
  • Balance sheet flexibility improved with $500M credit capacity and undrawn revolver ($175M availability), supporting both buybacks and disciplined M&A execution .
  • Near-term watch items: Q4 step-downs (~$200M), timing of catch-up fees, and updated 2025 guidance (including fee rate mix and margin expansion trajectory) .
  • Trading lens: Shares repurchased at $10.15 and management’s reiterated view of “compelling” valuation suggest internal conviction; monitor post-close integration of Qualitas and any incremental capital allocation actions .
  • Medium-term thesis: FRE-centric model with sticky fee base, diversified all-weather strategies in mid/lower middle market, and proprietary data capabilities supports scalable growth to 2029 targets .