Praxair Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2024

There are 9 speakers on the call.

Operator

Good afternoon, and welcome to the P10's Q1 2024 Conference Call. Today, we will be joined by Luke Sarsfield, Chief Executive Officer and Amanda Cousins, EVP, Chief Financial Officer and Chief Compliance Officer. Additionally, in the room with us today is RJ Jensen, EVP, Head of Strategy and M and A. Before we begin, I'd like to remind everyone that this conference call as well as the presentation slides may constitute forward looking statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward looking statements reflect management's current plans, estimates and expectations and are inherently uncertain.

Operator

Actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to a number of risks and uncertainties that are described in greater detail in our earnings release and in our periodic reports filed from time to time with the SEC. The forward looking statements included are made only as of the date hereof. We undertake no obligation to update or revise any forward looking statements as a result of new information or future events, except as otherwise required by law. During the call, we will also discuss certain non GAAP measures, which we believe can be useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release and our filings with the SEC.

Operator

I will now turn the call over to Luke.

Speaker 1

Thank you, Mark. Good afternoon, everyone, and thank you for joining us today. During the Q1 of 2024, TPN generated strong financial results and importantly advanced the strategic initiatives we laid out on our last call in late February. Our strategies continue to perform well, generating strong and consistent returns for our LPs and we raised nearly $670,000,000 in gross new fee paying AUM in this quarter alone. With Q1 marking my 1st full quarter as CEO, I can say with conviction that we are building a world class platform that provides clients with unrivaled access to opportunities across the lower and core middle markets.

Speaker 1

On our call today, I'm going to provide an overview of our Q1 financial results, offer some perspectives on the market environment and discuss the operational progress we've made this year. I'll start by providing a brief financial overview. T:ten delivered record revenues of $66,000,000 in the 1st quarter, representing solid 15% top line growth year over year. Additionally, we enhanced our bottom line performance earning $5,000,000 in net income compared to $800,000 in the prior year period. As we mentioned on our last call, one of the key pillars of our new strategy is greater transparency.

Speaker 1

As such, we believe it is important to introduce new metrics that allow the investment community to more easily compare us to other alternative asset managers. To that end, we delivered fee related revenue or FRR of $65,000,000 a 16% increase compared to the prior year period. And we generated approximately $31,000,000 of fee related earnings or FRE, a 9% increase from Q1 2023. This represents an FRE margin of 47%. We continue to anticipate margin to remain in the mid-40s for the year ahead, which puts this performance slightly ahead of annual expectations.

Speaker 1

We are pleased with our ability to generate strong results as we implement transformative strategic initiatives that seek to accelerate growth in the near to medium term. Our Q1 performance gives us the confidence to reiterate guidance we laid out on our Q4 call. As a reminder, we expect to organically raise and deploy more than $2,500,000,000 of gross new assets. We expect double digit revenue growth that is driven both by this fundraising activity as well as positive fee rate dynamics and we expect to announce a strategic transaction in the calendar year. Zooming out slightly, Heat 10 continues to benefit from a focus on the lower and core middle markets.

Speaker 1

As we have said previously, these markets have been insulated from some of macro dynamics at the upper middle market levels, such as a meaningfully slower M and A environment, greater reliance on leverage and a more competitive backdrop for deals. In our view, the lower and core middle markets offer risk mitigation from these trends and have equally shown sustained resilience despite the current rate environment and inflationary pressures. Further, our strategies have an exceptional track record of delivering returns across economic cycles. Our GPs are strong fundraisers and even better portfolio managers, Whether it's through launching and optimizing industry leading products or forging strategic relationships with underlying portfolio companies, our strategies have established a differentiated reputation with clients, investment managers and intermediaries. T10's managers have earned trust at every level of the investment value chain and this trust underpins the strategic initiatives that we laid out on our last call.

Speaker 1

Today, I want to share some of the progress we've made in driving organic growth initiatives, establishing a robust M and A pipeline and institutionalizing our platform for the long term. 1st, we are making strides to drive organic growth. We see a clear and compelling opportunity to deepen and expand our already robust client franchise. In the Q1, we had 10 co mingled funds in the market, providing multiple avenues to meet the particular investment objectives of clients and achieve our organic growth goals. I want to take a moment to share some of the momentum we are producing on the fundraising front.

Speaker 1

In the Q1, our VC strategy through Bridge achieved its $750,000,000 target in fund 8. Today, the fund is on pace to hold a final close in the 2nd quarter at a total fund size in excess of $850,000,000 In private credit, Park IV has now achieved over $500,000,000 surpassing its target and putting it on track to hold the final close in the Q2. Staying in credit, WTI is positioned to turn on fees for its Fund 11 in the second half of the year and we are seeing strong interest around its portfolio. Moving to private equity, Bonacord will hold a final close of BCP Fund II later in this year and we will look to launch BCP Fund III in short succession. Finally, we expect to launch RCP Direct Fund V in the coming weeks.

Speaker 1

Further, RCP is on track to launch SOF V, a secondary fund in late 2024, which will set the stage for strong momentum in 2025. These funds have historically garnered a strong following from LPs, not only for their performance, but because of the demand for these solutions in the market today. We are pleased with the totality of our fundraising efforts, which have resulted in a gross raise of approximately $670,000,000 in the Q1. Our organic growth will always be enabled by our core strategies and these fundraising levels demonstrate the diversity of demand from our client base. Moving now to our inorganic growth strategy.

Speaker 1

On our last call, we announced the appointment of RJ Jensen to our leadership team as Head of Strategy and M and A. Since then, RJ has been hard at work developing our M and A infrastructure, leading the charge for us on situations that we are working to advance as well as doing the work on opportunities we are seeing in the market. I want to provide a few high level observations about the level of activity we are seeing. First, I would say the M and A market in the alternative asset management sector has picked up. You see that in the announcements in the marketplace generally and we see it in the number of opportunities we see directly.

Speaker 1

The pipeline we have developed to date is reasonably balanced between private equity, credit and distribution oriented opportunities. These are investments that we believe are actionable in the near term and represent a diverse mix from a geographic standpoint across both domestic and international deals. Throughout all our dialogue around prospective transactions, we have received positive feedback from potential partners who find the P-ten business model and our transaction framework to be differentiating and compelling. We anticipate announcing a deal this year and I also think it is most likely that near term successes will be more string of pearls in nature. We continue to think that geographic expansion where we have larger strategies as well as smaller natural adjacencies and potential tuck ins would make sense.

Speaker 1

Additionally, we are focused on situations that have an interesting distribution component to them. Please note that we will be disciplined around valuation, seeking accretive opportunities positioned to unlock long term value for our shareholders. Turning now to our focus on optimizing corporate level organizational structure. As you can see with the traction RJ has already achieved, our efforts to institutionalize the PTEN platform are taking hold. Since our last call, we have made several key appointments, enhanced our governance profile and set ourselves up to conclude our search for senior level talent in the first half of the year.

Speaker 1

In April, we appointed Tracy Benford to the Board as an independent director who will participate in all three of our governance committees. Tracy is a remarkable leader with deep alternative asset expertise and experience stewarding iconic institutions in the financial sector. She brings an independent diverse perspective to our Board.

Speaker 2

Robert Alpert informed the Board of Directors of his decision to step down as Executive Chairman effective June 14, the date of our annual meeting. His time as Executive Chairman was intended to help me and our senior team affect a successful leadership transition and he now feels that transition is complete. He will continue to serve on the Board as a Director. The Board voted to appoint me to the role of Chairman, also effective June 14 and intends to appoint a Lead Independent Director at our Annual Meeting. I want to thank Robert for his time as Executive Chairman and his leadership since founding TEN.

Speaker 2

I look forward to continuing to work with him on the Board. The Board also determined that the company's stockholder rights plan is no longer necessary for the preservation of federal income tax benefits and voted to terminate the rights plan effective today. The plan was set to expire in October of 2024.

Speaker 1

In parallel, we are augmenting our management team for future growth. To that end, I am pleased to report that we brought on Melody Craft as General Counsel to bolster our senior leadership team. Melody has an impressive long standing track record as a leader in the financial services sector with alternative asset management expertise and deep experience leading M and A transactions through requisite legal processes and post close integration activities. Her experience perfectly aligns with our operational goals and will be beneficial to P10 as we embark on our next chapter of growth. While we remain in the early innings of these strategic initiatives, we've been extremely pleased with the partnership we're seeing across strategies and managers.

Speaker 1

There is immense opportunity in our existing platform and we look forward to sharing specific examples in the coming quarters. I'll close with an update on our efforts to return value to shareholders through capital allocation. Last quarter, we shared that we had a total share repurchase authorization of over $50,000,000 In the Q1, we bought back about 3,700,000 shares at an average price of $8.15 per share. We currently have approximately $21,000,000 remaining on our authorization. Additionally, we continue to pay quarterly cash dividends to shareholders declaring a $0.035 distribution today, which represents an 8% increase.

Speaker 1

Our annual dividend now stands at $0.14 per share. As a reminder, E-ten employees make up the largest ownership position in our shareholder register, which is indicative of our collective conviction in the intrinsic value of our business. This ownership stake demonstrates our alignment with the broader shareholder base and should underscore our dissatisfaction with the current valuation pressure we face in the public market. We have been opportunistic in repurchasing shares of our stock and believe that the current trading levels present a compelling entry point for investors. As our strategy continues to gain momentum, the growth profile of P10 expands and accelerates.

Speaker 1

We believe the market will appreciate this potential in due time. Fundamentals of our business remain exceptionally strong. We have the right strategy in place to deliver long term value to shareholders. Before I turn the call over to Amanda, I want to take a moment to invite you all to mark your calendars for our inaugural Investor Day, which will be held on Thursday, September 19th in New York City. Today will serve as a deep dive on our various strategies and we will offer more details on our strategic progress to date.

Speaker 1

We look forward to sharing more details as the event approaches. With that, I'll hand the call over to Amanda.

Speaker 3

Thank you, Luke. PTEN continues to deliver strong results amidst implementing the transformative strategic initiatives the management team laid out on the Q4 earnings call. In the Q1, fee paying assets under management were $23,800,000,000 a 10% increase on a year over year basis. In the Q1, $667,000,000 of fundraising and capital deployment was offset by $81,000,000 in step downs and expirations. As we mentioned on the Q4 call, we expect step downs and expirations for 2024 to be approximately 1,500,000,000 dollars 200,000,000 less than 2023.

Speaker 3

Most of the step downs in expirations will occur in Q2, where we expect $1,000,000,000 leaving $400,000,000 generally evenly split across the 3rd and 4th quarters. Most of the 2nd quarter step downs and expirations are expected to be attributable to RCP Fund 9, a 2014 vintage and TruBridge Fund 2, a 2010 vintage. Record revenue in the first quarter was 66 $100,000 a 15% increase over the Q1 of 2023. Average fee rate in the Q1 was 110 basis points, driven by higher fee rate direct strategies becoming a larger part of our fee paying AUM mix as well as higher catch up fees. Turning now to our strategies.

Speaker 3

In the quarter, we had 10 funds in the market and saw broad participation across our investment platform. Our private equity strategies raised and deployed $213,000,000 our venture solution raised and deployed $339,000,000 dollars and our credit strategies added $99,000,000 to fee paying assets under management. Of note in the quarter, TruBridge 8 raised $233,000,000 P10 continues to benefit from strategies with long track records of generating durable alpha and offering best in class investment opportunities to our global clients. Catch up fees were $7,700,000 in the first quarter. Operating expenses in the Q1 were $54,000,000 a 3% increase over the same period a year ago.

Speaker 3

The increase was primarily driven by additional compensation benefits and non cash stock based compensation expense related to the acquisitions of Bonacord, Hark and WTI. GAAP net income in the Q1 was $5,200,000 an increase compared to $800,000 in the comparable period a year ago. Adjusted EBITDA in the Q1 was $30,800,000 an increase of 9% from the Q1 of 2023. For the quarter, our adjusted EBITDA margin was 47%. For the Q1, adjusted net income or ANI held flat at $25,400,000 when compared to the Q1 of 2023.

Speaker 3

Fully diluted ANI EPS remained at $0.21 per share on a year over year basis. As Luke noted, we have added transparency in the quarter and are introducing the following metrics: fee related revenue or FRR fee related earnings or FRE and complementary FRE margin. FRR in the quarter was $65,000,000 representing a 16% annual increase and FRE was $30,700,000 representing a 9% increase. Our FRE margin was 47% in the 1st quarter. Since this is the first time we have reported these metrics, I want to provide more information on how we define each term.

Speaker 3

Fee related revenue is calculated as total revenue less any incentive fees. Fee related earnings is a non GAAP performance measure used to monitor our baseline earnings, less any incentive fee revenue and excluding any incentive fee related expenses. We believe this additional disclosure will help the investment community draw better apples to apples comparison with a broader alternative asset management landscape. You can find additional details and definitions in our earnings presentation on our Investor Relations website. Cash and cash equivalents at the end of the Q1 were $29,000,000 At quarter end, we had an outstanding debt balance of $316,000,000 $45,000,000 available on the revolver.

Speaker 3

As of today, we have an outstanding debt balance of $298,000,000 $63,000,000 available on the revolver. We also continue to pay our quarterly dividend for Class A and Class B common stock. As Luke mentioned, we are increasing our dividend by 8%. Today, we declared a quarterly cash dividend of $0.035 per share payable on June 20, 2024, to stockholders of record as of the close of business on May 31, 2024. Finally, as of March 31, 2024, our Class A shares outstanding were 54,582,698 and Class B shares outstanding were 58,439,363.

Speaker 3

Before I close, I'd like to highlight that next week we expect to file a required registration statement that registers shares owned by founders and These shares were part of the shares issued during the IPO process. We want to be clear, the company is not selling shares to raise capital. With over 3,000,000 shares purchased last quarter, we think management's view on the stock's intrinsic value is clear. Thank you for your time today. We look forward to building strong momentum in 2024 as we seek to accelerate growth in 2025.

Speaker 3

I'll now pass the call over to the operator to begin the Q and A session.

Speaker 4

Thank you. Our first question comes from the line of Kenneth Worthington of JPMorgan.

Speaker 5

Hi. This is Alex Bernstein on for Ken. Thanks so much for taking my question and congratulations on the quarter. Just noticed that this quarter if you remove the impact of cash up fees, it looks like we're seeing a non handle on the fee rate for the first time in at least a while. Just wanted to double click on that and see if you have any explanations around what drove that and how we could think about the fee rate moving forward from an ex catch and fee perspective?

Speaker 5

And then also what the framework is more broadly? Appreciate it.

Speaker 3

Hi, Alex. Yes. We started seeing the impact to revenue of the step downs that we mentioned, the step downs and expirations that we mentioned that will occur in the Q2. This does not change our annual guidance of 105 basis points for the year though.

Speaker 5

Got it. Appreciate it. And maybe to ask a second question, this time speaking more broadly. You spoke about the robust M and A opportunities and you also pointed to distribution. Having had the benefit of seeing a number of your larger peers report now, There's definitely some specific areas from a distribution perspective that a lot of folks are after, namely insurance and retail come to mind.

Speaker 5

I noticed you did disclose some of your current AUM makeup and something like insurance is not really a large part of it. Is that more a factor of the size of the market and then type of markets you plan? And is that an area that you potentially look to target via M and A or otherwise? Appreciate

Speaker 1

it. Thanks, Alex. Great question. And I would say a few things. We do disclose, as you can see, kind of every quarter, our kind of LP distribution by channel think

Speaker 4

we do have to your question on retail,

Speaker 1

I do think retail think we do have to your question on retail, I do think retail broadly defined is a really big opportunity. And when you look at where we are in terms of family I I think you're exactly right. It is a question of product mix. And I think increasingly though, we do have products that are very relevant for the insurance channel. I would note Hark, for instance, as a product offering in the NAV lending space that's incredibly relevant for insurance.

Speaker 1

And we've actually seen some very, very nice momentum of late in terms of real traction with Hark in that channel. Remember, Hark is focused on deployed the way we recognize revenue is on deployed capital, not on committed capital. So it takes a little longer to come through the P and L, but I think insurance is a real opportunity for us with our broad range of credit offerings in particular with HARC and it's a place that we're incredibly focused on increasing our footprint.

Speaker 5

Appreciate the answer. Thanks again.

Speaker 4

Our next question comes from the line of Benjamin Butish of Barclays. Your line is open. Next question comes from Ben Budish of Barclays. Your line is open.

Speaker 6

Apologies there. I was had it on mute. Thanks for taking the question. I want to ask about the fundraising trajectory for the year. It looked like in Q1 you raised a little over 25 percent of the full year target.

Speaker 6

Now I know it's $2,500,000,000 plus or more than $2,500,000,000 So I'm wondering if you have any other color. Q1 tends to be seasonally slow. That's sort of what we've heard from some of the other publicly traded alts. You guys are a bit different in that you have many, many funds in the market that come back frequently rather than every several years. So just wondering, you talked about some of the upcoming closes, but how does the nearly $700,000,000 this quarter compare to what you expect in the next several quarters?

Speaker 6

Any help you can give us around like what the plus might mean would be helpful. Thank you.

Speaker 1

Thanks, Ben. I don't want I want to be a little careful here because I don't want to get into kind of giving quarterly guidance, but I'll say a few things. Number 1, we've talked about how we had 10 funds in the market in the Q1. And I think we referenced last time that we thought we would have 15 funds in the market over the course of the year. So obviously that we will have more funds in the market as we go into the mid of the year and the back half of the year.

Speaker 1

The second thing I would note is some of the great momentum we're seeing. I mentioned the momentum we're seeing in terms of TruBridge, in terms of Hark. We have some very big closes coming up with some of our strategies later this year, notably Bon Accord. And then as I mentioned, a number of funds that are going to be launched at RCP. I would say the following, I think like to your point, I do think we are seeing increasing momentum generally in terms of our dialogue with the broad swath of LPs.

Speaker 1

I think people even in light of some of the macro pressures are clearly starting to lean in a little bit more and that feels good. And so as I said, we're really pleased with the Q1 activity. We think we have really strong momentum. And again, we're reiterating the guidance that we think we will organically raise and deploy more than $2,500,000,000 of gross new assets this year. We feel very good about that.

Speaker 6

Appreciate that. Maybe one more question on capital allocation. So you bought back a lot of stock in the quarter based on that, the share price performance is not surprising why, especially based on what you've indicated is your conviction in the business. Just any color, what would it take to raise the repurchase authorization? Is that something that could happen quickly?

Speaker 6

What's your appetite to continue repurchasing shares? And then on the dividend side, can you just remind us, I can't remember if you communicated in the past, but any sort of higher level philosophy around being like a regular dividend raiser having a track to FRE or anything like that? Could you just remind us what you've communicated there in the past? Thank you.

Speaker 3

Sure. In terms of our just general capital allocation, we still have $20,500,000 available for the buyback. We did increase the dividend by about $0.01 per share, which is at the same pace that we increased the dividend last year. So that likely speaks to our dividend overall policy. And then in addition to the dividend, we really intend to allocate capital towards M and A.

Speaker 3

I would expect with $20,500,000 remaining on the buyback that, that is part of our capital allocation policy or will continue to be a priority. And then remainder will be a pay down on the revolver to free up capital for future M and A. So obviously, our capital allocation policy really has not changed or the priorities have not changed from last quarter.

Speaker 1

The only thing I would add is we continue to have a lot of conviction around where we think assuming we execute on the plan and we are laser focused on executing where we think the share price ought to be. You see that in our insider ownership where we have substantial skin in the game. You see that in the $30,000,000 roughly we deployed to share repurchase last quarter. And so we're obviously big fans of the shares right here and I think we'll take that into account as part of an overall capital allocation philosophy.

Speaker 6

All right. Thanks for the responses.

Speaker 4

Thank you. Our next question comes from the line of Adam Beatty of UBS.

Speaker 7

Thank you and good afternoon. Just wanted to get an update on the outlook for expense growth this year, maybe next year. I know, Luke, you have a pretty clear idea around reinvesting in the business and building for future growth. So just wanted to know if kind of the trajectory of expenses, again, for this year or next has changed at all and what you expect the cadence of that to be? Thank you.

Speaker 3

Adam, I'll take that question. So I would say in general, we're confident in our ability to manage expenses while still delivering strong performance. If you look at our operating expenses of $54,000,000 which was a 3% increase year over year compared to our record revenue of $64,000,000 which was a 15% increase year over year. We believe our right hires will enhance financial performance incrementally and demonstrate the value that we are creating. In terms of our overall margin, we do expect margins to average in the mid-40s excluding the effect of acquisitions.

Speaker 3

As we said in the prior quarter, this is an ongoing mix shift with our existing portfolio strategies. Some of our newer and faster growing businesses such as Bonaccord, Hark and WTI have lower core adjusted EBITDA margins than other parts of our business. And so the overall margin will continue to reflect this evolution. I would say the second influence on margins is our critical and foundational human capital investments that we're making in the business. We expect the investments to drive core growth and provide a high ROI for our investors.

Speaker 7

Okay, sounds good. No, I appreciate the ways of angling the margin, which is basically what I was after. And then turning to kind of the underlying investments and

Speaker 4

investment environment, and

Speaker 7

maybe some of the look through to the portfolio companies. Mid market obviously has great opportunities for alpha generation. You have that good chart in there about how much capital is chasing larger companies versus mid market. So clearly an opportunity there, but just wondering in uncertain times, sometimes folks are concerned about mid market companies kind of being more vulnerable as it were to the economic environment. So if there's any updates on maybe the kinds of revenue growth or other fundamentals you're seeing across the portfolio, that'd be great.

Speaker 1

Yes. Look, a great question and something we are focused on. And I know you're right, the conventional wisdom is that there's when the large market sneezes, the mid market catches a cold. Our lived experience is quite contrary to that actually. And I think it's due to a number of things.

Speaker 1

Number 1, as we noted on the dialogue, it's just a less competitive market environment and we are one of the clear differentiated market leaders and I think that really gives us opportunity. The second is, I would tell you, I think unlike in the large market opportunity, where there are a large number of competitors and large pools of capital going after the opportunity set, it's simply more limited in the middle market and that provides, I would say, a margin of safety. The third is the reality of things like leverage utilization. Leverage utilization is much, much higher in the upper part of the market and obviously in a rising rate environment that has real consequence. Leverage levels generally in our part of the market are much lower.

Speaker 1

And so even though rising rates will impact the overall interest expense on portfolio companies, they do so to a much smaller degree. And so when I think when we put that all together, the net effect is we continue to think the middle and lower middle market is an unbelievably attractive place to be. We continue to think it is insulated but not immune from some of the larger macro trends going on. And we think that emblematic of that has been our ability to generate differentiated investment alpha across the cycle.

Speaker 7

That's good context. Thanks very much. Appreciate it.

Speaker 4

Thank you. Our next question comes from the line of Stephanie Ma of Morgan Stanley.

Speaker 8

Great. Good afternoon. This is Stephanie on for Mike Cyprys. Our first question is for Luke. Now that you've spent the 1st few months in the COC and now with the expanded role, curious if you can just give us an update on the strategy and maybe reflect on some of the progress that you've made so far, what you focused on in your 1st few months at P and L versus where you may be turning your attention to now?

Speaker 1

Thanks, Stephanie. And that's a great question. I love talking about it. So as I mentioned, I came in with a real kind of strategic focus on doing a few things. The first was understanding the business.

Speaker 1

And as you recall on the Q4 call, I talked about how I really spent the tail end of 2023 out on a listening tour. Then you'll recall on the February call, we talked about kind of the 5 strategic pillars. And just to remind everybody, strategic pillar 1 was to institutionalize organizational structure. Pillar 2 was to drive increased organic growth through our client franchise and strategic partnerships. Pillar 3 was implementing a robust disciplined and process driven approach to M and A and inorganic growth.

Speaker 1

Pillar 4 was generating operational efficiencies through incentivizing collaboration and leveraging our data platform. And Pillar 5 was enhancing our shareholder communications with an eye to greater visibility and accelerating growth and profitability in 2025 and beyond. I will tell you and I think we started the call in this, I think in every instance, we've made real progress against those, right? And so if you take the organic growth pillar, we talked about the fundraising environment and the momentum we're seeing with our funds. If you take the inorganic growth pillar, you heard me talk about the pipeline, the conversations and the fact that our model and our structure is resonating to a broad swath of potential partners.

Speaker 1

I mentioned obviously and you've seen the press release is on the progress we made in terms of the leadership team, adding RJ Jensen to lead strategy in M and A, adding Melody Craft as our great new GC and then some of the board moves that we talked about. And obviously, we'll continue to advance that and we continue to be very aggressively out in the market looking for ahead of distribution and clients. We talked about some of the systems and processes and we're doing a lot of work around data and analytical initiatives, including AI in terms of how we can drive greater data utilization and greater data insight. And then we talked about enhanced transparency. And as you've seen on this call, we introduced fee related revenue, fee related earnings, FRE margins.

Speaker 1

We've given more detail in terms of fund level fundraising. And I think we're really, really focused on building that shareholder momentum through the Investor Day where we're going to continue to share even more. I would say my focus right now is a relentless focus on execution. We put the plan in place. We feel really good about the team we're building and now we've got to go execute and execute in a world class way.

Speaker 1

And so we're really focused on that execution. We're really focused on accountability. We're really focused on tracking KPIs related to that execution. But if I had to give you one watchword, it would be execution.

Speaker 8

That's great. Thanks for all that color, Luke. And then just maybe one more from us. Turning to VC, seems to be an area that's been out of favor and perhaps could be reinvigorated with the latest AI trends. So maybe you can just give us an update on your performance in the VC business.

Speaker 8

Does AI help support that portfolio in any way? And maybe how has investor appetite or demand evolved around that space lately? Thank you.

Speaker 1

Great question. I'd say a few things. Number 1, I think you recall I noted that we'd actually seen real momentum in our core fundraising around TruBridge and their core fund. Obviously, that's our marquee venture capital strategy. I think it's emblematic of a few things.

Speaker 1

Number 1 is their consistent track record of investment in alpha generation that's really profound across cycles, across markets. Number 2 is the fact that they really are an access constrained strategy with access to really top, top world class managers that I think many find very hard to access outside of TruBridge and we can provide that access. And I think Venture is a place where if you look at kind of dispersion of returns, there's it's not an eightytwenty rule, it's like a ninety five 5 rule in venture. And the good news is we're on the right side of that. And then I would say the last thing is we've always been great believers in data and analytics across our platform.

Speaker 1

Clearly, we're seeing the AI trend both accelerating the investing landscape for a lot of venture managers. But as I mentioned, we're trying to use data and ultimately artificial intelligence to gain greater insights into our business, into our investing capabilities, into our portfolio management capabilities, into our dealings with a lot of our LPs and clients. And so that's going to pervade our business in every way. But I would tell you personally, I'm incredibly excited about the opportunities in Venture. I think coming off what was the last cycle and now going into a new cycle of growth and opportunity, we're really excited about that franchise.

Speaker 8

Great. Thanks, Ken.

Speaker 4

Thank you. I would now like to turn the conference back to Luke Sarfield for closing remarks. Sir?

Speaker 1

Thank you. And thanks all of you for joining us today. As you've heard today, P10 is positioned to build upon the world class alternative asset Moreover, we're a business made up of PTEN shareholders, extraordinarily aligned with all of you that are listening today. I'm confident that the initiatives we're pursuing will deliver enhanced long term returns for our team and for all our fellow shareholders. We look forward to speaking with you all in August and to seeing you in New York City on Thursday, September 19th for our inaugural Investor Day.

Speaker 1

Thank you and good evening.

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Key Takeaways

  • Record Q1 financial results: Revenues reached $66 million (up 15% YoY), net income rose to $5 million from $0.8 million, fee-related revenue was $65 million (+16%), fee-related earnings hit $31 million (+9%) and FRE margin stood at 47%.
  • Robust organic growth: The firm raised nearly $670 million of gross new fee-paying AUM in Q1 and reiterated guidance to raise and deploy over $2.5 billion for the year across multiple funds including bridge VC, private credit and private equity vehicles.
  • Building inorganic pipeline: Under new Head of Strategy & M&A RJ Jensen, PTEN has a balanced deal pipeline in private equity, credit and distribution with plans for a strategic transaction in 2024 using a “string of pearls” approach and disciplined valuation.
  • Strengthened platform and governance: Appointments include Tracy Benford to the Board and Melody Craft as General Counsel, Luke Sarsfield was named Chairman, the stockholder rights plan was terminated, and an inaugural Investor Day is set for September 19.
  • Active capital allocation: Q1 buybacks repurchased 3.7 million shares at an average price of $8.15 (about $30 million), $21 million remains authorized, and the quarterly dividend was raised 8% to $0.035, reflecting management’s significant insider ownership.
AI Generated. May Contain Errors.
Earnings Conference Call
Praxair Q1 2024
00:00 / 00:00