Ridgepost Capital, Inc. Q4 FY2023 earnings call

Key Points

• P10 delivered strong fourth quarter and full year 2023 results with double-digit top line growth and strong profitability. Fee-paying AUM increased 10%, revenues 22%, and adjusted EBITDA 16% in 2023.
• Luke Sarsfield highlighted strategic priorities: institutionalize platform and optimize corporate structure, drive organic growth via cross-selling and partnerships, implement disciplined inorganic growth, drive operational efficiencies, and enhance shareholder communications.
• Hired key executives: EVP of Operations and Chief Administrative Officer Mark Hood, EVP Head of Strategy and M&A Arjay Jensen; seeking head of distribution.
• Addressed related party transaction with Crossroads, stating governance controls were followed and an independent investigation found proper procedures.

In the fourth quarter, fee-paying assets under management were $23.3 billion, a 10% year-over-year increase. Revenue in the fourth quarter was $63.1 million, an 8% increase over Q4 2022, and year-over-year revenue grew 22% from $198.4 million to $241.7 million. Private equity strategies raised and deployed $324 million, venture equity strategy raised $299 million, credit fleet raised and deployed $209 million, and team contributed $28 million. For the full year 2023, fee-paying AUM increased by 10%, revenues increased by 22%, and adjusted EBITDA rose by 16%. The venture equity strategy TrueBridge had a one-time event impact; excluding this, it would have had additional revenue and adjusted EBITDA.

Forward-Looking

• Anticipate organically raise over $2.5 billion of gross new assets across the platform in 2024.
• Expect double-digit revenue growth driven by fundraising and fee rate dynamics.
• Expect adjusted EBITDA margins to average in the mid 40s excluding acquisitions, influenced by mix shift in strategies and human capital investments.
• Plan to use 'FRE' (fee-related earnings) in financial reporting going forward.

Risks

• P10 trades at a meaningful discount to alternatives peer group, presenting a valuation risk.
• Market uncertainties and related party transaction with Crossroads could impact investor perception and valuation.

Q: Michael Cyprys asked about key takeaways from the listening tour and growth levers.

A: Luke Sarsfield said the strong investing franchises and talent were prominent, LPs' trust in the LP base, and alignment across the organization. Growth levers include organic growth with a head of distribution and inorganic growth with M&A expertise.

Q: Kenneth Worthington asked about fee rate and step-downs.

A: Amanda Coussens said fee rate expected to be about 105 basis points, step-downs pace expected to be 5.3% going forward.

Q: Kenneth Worthington asked about Crossroads in customer conversations.

A: Luke Sarsfield said it hasn't come up much in dialogue with LPs of various strategies as LPs trust the business and managers.

Q: Mike Brown asked about capital allocation and M&A.

A: Luke Sarsfield said current valuation impacts M&A in some instances but not all, with access to capital and untapped credit capacity; Amanda Coussens discussed capital allocation waterfall including dividends, M&A, buyback, and debt paydown.

Q: Benjamin Budish asked about revenue guidance and cash tax rate.

A: Amanda Coussens explained revenue growth from catch-up fees and expected cash tax rate similar to 2023 with interest expense outlook depending on buyback activity.

Q: John Campbell asked about catch-up fees and AUM duration.

A: Amanda Coussens confirmed catch-up fees expected to be up about 60 million, and weighted average duration of remaining AUM exiting 2023 was about seven years.