• Revenue: $74.2 million, a 26% increase over the third quarter of 2023.
• Fee-Related Revenue (FRR): $72.9 million, representing a 26% annual increase.
• Fee-Related Earnings (FRE): $35.1 million, a 19% increase from Q3 of 2023.
• FRE Margin: 48% in the third quarter.
• Adjusted EBITDA: $35.3 million, a 19% increase from the third quarter of 2023.
• Adjusted EBITDA Margin: 48% for the quarter.
• GAAP Net Income: $1.3 million, compared to a GAAP net loss of $8.8 million in the prior year third quarter.
• Adjusted Net Income (ANI): $30.8 million, a 26% increase over the third quarter of 2023.
• Fully Diluted ANI EPS: $0.26 per share, a 32% increase year-over-year.
• Fee-Paying Assets Under Management: $24.9 billion, a 10% increase year-over-year.
• Cash and Cash Equivalents: $61 million at the end of the third quarter.
• Term Loan Balance: $325 million outstanding with no balance on the revolver.
• Share Repurchase: 609,300 shares repurchased at an average price of $10.15 per share in the third quarter.
• Quarterly Dividend: $0.035 per share declared, payable on December 20, 2024.

• Warning! GuruFocus has detected 5 Warning Sign with STRL.

Release Date: November 07, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• P10 Inc (NYSE:PX) reported record third-quarter financial results with a 26% year-over-year revenue growth, reaching $74 million.
• The company successfully raised and deployed $1.4 billion in gross new fee-paying AUM, surpassing their full-year guidance of $2.5 billion.
• P10 Inc (NYSE:PX) achieved a fee-related earnings (FRE) margin of 48%, indicating strong profitability.
• The acquisition of Qualitas Funds is expected to establish a European presence and expand P10's investor base, enhancing their global multi-strategy private markets firm status.
• The company has made significant progress on its strategic growth plan, including enhancing shareholder engagement and communication, as evidenced by their first Investor Day.

Negative Points

• Operating expenses increased by 12% year-over-year, driven by higher compensation, placement fees, and professional fees related to the Qualitas Funds transaction and debt refinancing.
• Despite strong financial performance, the company anticipates step-downs and expirations totaling approximately $1.5 billion for the full year.
• The average fee rate, while higher than previous guidance, may face pressure due to the mix of traditional commingled funds and SMA relationships.
• The company's stock repurchase activity was limited in the third quarter due to blackout periods related to the Qualitas Funds transaction.
• P10 Inc (NYSE:PX) faces challenges in maintaining FRE margins in the mid-40% range due to ongoing investments and mix shifts within their portfolio.

Q & A Highlights

Q: How high do you think fee rates can get in the future, and how does the asset raising mix expected to change over time? A: Amanda Coussens, CFO, explained that the majority of fee-paying AUM comes from traditional commingled funds, with stable fee rates due to oversubscription and strong returns. Future guidance will provide more details on fee rate growth, influenced by the mix of traditional funds and SMA relationships.

Q: To what extent can you attribute the strong fundraising quarter to initiatives from Investor Day, like cross-selling? A: CEO Luke Sarsfield noted that while strategic initiatives are important, the success is largely due to compelling investment strategies and strong client relationships. The $200 million in SMA assets raised indicates potential for engaging clients beyond traditional funds.

Q: How should we think about the FRE margin guidance and the balance between expense discipline and ongoing investments? A: Amanda Coussens reiterated mid-40% FRE margin guidance for the year, with expectations to expand to near 50% long-term. This is driven by mix shifts and foundational human capital investments, which are expected to yield high ROI.

Q: What is the outlook for share buybacks given the stock's attractiveness? A: Luke Sarsfield emphasized the stock's compelling value and explained that buyback activity was paused due to the Qualitas transaction. The capital use hierarchy prioritizes dividends, followed by share repurchases and value-enhancing M&A.

Q: How do you see the new asset from the Qualitas Funds acquisition functioning as part of P10 next year? A: Luke Sarsfield expressed excitement about the strategic alignment with Qualitas Funds, highlighting opportunities for collaboration with existing strategies like RCP and Hark. The acquisition is expected to open opportunities in Europe and the U.S. once closed in Q1 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.