P10, Inc. — Form 10-Q Summary
Period: Quarter and nine months ended September 30, 2022. The supplied filing is for P10, Inc.; it does not identify Ridgepost Capital, Inc. as the registrant. Unless otherwise noted, financial amounts below are in millions of dollars.
Business context and reporting period
P10 is a single-segment alternative asset manager providing private-market investment and advisory solutions across private equity, venture capital, impact investing and private credit. Its revenue is primarily recurring management and advisory fees, generally earned on committed or invested capital. Results include acquisitions completed in 2021; comparisons with 2021 are therefore not fully like-for-like.
Fee-paying assets under management (FPAUM) were $19.0 billion at September 30, 2022, up 9.8% year to date. The filing is unaudited.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $50.0 | $38.1 | $140.0 | $104.9 |
| Operating income | $10.3 | $11.1 | $37.6 | $28.0 |
| Net income | $5.6 | $4.1 | $24.6 | $9.3 |
| Diluted EPS | $0.05 | $0.04 | $0.20 | $0.08 |
| Operating margin | 20.5% | 29.0% | 26.9% | 26.7% |
Management and advisory fees were $49.5 million in Q3, up 30%, and $139.0 million for the nine months, up 34%. Management attributed growth primarily to organic FPAUM increases, with the 2021 Hark and Bonaccord acquisitions also contributing to the year-to-date comparison. Q3 catch-up fees were $0.8 million, versus $1.7 million a year earlier.
Operating expenses rose 47% in Q3 and 33% year to date. Compensation and benefits increased 71% and 57%, respectively, including higher stock-based compensation, acquisition-related costs, headcount and public-company costs. Q3 operating income declined despite revenue growth; year-to-date operating income increased.
Net interest expense was $2.4 million in Q3 and $5.3 million year to date, down from $5.3 million and $15.8 million, respectively, in the comparable periods. The filing attributes the reduction mainly to refinancing and lower debt balances. The nine-month effective tax rate was 25.9%; net income includes $7.8 million of deferred tax expense.
Operating cash flow was $43.9 million for the first nine months, versus $40.7 million in 2021. Investing activities used $1.6 million, compared with $46.9 million, largely reflecting the prior-year acquisitions. Financing activities used $65.1 million, including $41.0 million of debt repayments, $12.5 million to settle stock options and $7.0 million of dividends. Cash, cash equivalents and restricted cash totaled $20.8 million at quarter-end, down from $43.5 million at year-end 2021; unrestricted cash was $19.4 million.
Total assets were $648.3 million and stockholders’ equity was $407.2 million. Debt principal was $174.9 million ($125.0 million term loan and $49.9 million revolver); reported debt obligations, net of issuance costs, were $170.8 million. The company reported $75.1 million of unused revolver capacity before the later accordion borrowing. Both facilities mature December 22, 2025; the company was in compliance with its financial covenants at September 30. Lease liabilities were $15.4 million.
Material changes versus the prior comparable period
- Nine-month revenue increased 33%, while net income increased 165%; revenue growth reflected organic FPAUM growth and inclusion of Hark and Bonaccord.
- Q3 operating income fell 7% as expense growth outpaced revenue growth, particularly compensation and benefits.
- Year-to-date cash from operations increased 8%, but financing cash outflow drove the decline in cash balances.
- Debt obligations declined $41.7 million from December 31, 2021, primarily following revolver repayments.
- FPAUM grew by $1.7 billion year to date, principally from capital raised; scheduled fee-base stepdowns and fee-period expirations partly offset growth.
Outlook, management commentary, risks and unusual items
- Management expects continued fundraising and FPAUM growth through new and specialized vehicles, and believes operating cash flow, cash and external financing can meet liquidity needs. No quantitative earnings or revenue guidance is provided.
- Management cited rising interest rates and economic uncertainty, but said investors continued to turn toward alternative investments. The company estimates a 100-basis-point rate increase would add about $1.8 million to interest expense over the next 12 months.
- Key business risks include the ability to raise capital and complete acquisitions, competition for access to fund managers, fundraising cycles, market and financing conditions, regulatory and tax changes, and maintaining access to proprietary market data. Unfavorable investment performance could impair fundraising even though most fees are not directly tied to market values.
- In September 2022, P10 exercised its $125 million credit-agreement accordion but had not drawn it by quarter-end; it incurred $1.4 million of associated issuance costs. In October, after quarter-end, it acquired Westech Investment Advisors for $97 million cash, with earnouts of up to $70 million and 3,916,666 exchangeable P10 Intermediate units. It drew $87.5 million of accordion term debt and $6.0 million of revolver borrowings to fund the acquisition. Purchase accounting was still in process.
- Contingent consideration was $24.3 million at quarter-end, a Level 3 fair-value estimate; $1.4 million of nine-month expense reflected remeasurement. The filing notes estimation uncertainty.
- Related-party amounts due from the Enhanced PC advisory agreement were $23.0 million at quarter-end, included in total due from related parties of $30.4 million. These receivables rose materially year to date and are expected by management to be collectible.
- The company paid dividends of $0.03 per share in Q3 and declared another $0.03 per-share quarterly dividend payable in December 2022. It also repurchased 141,292 shares for $1.5 million year to date under a $20 million authorization.
- Management reported effective disclosure controls and no material quarterly change in internal control over financial reporting. It reported no material change in previously disclosed risk factors and did not expect ordinary-course legal matters to result in material losses beyond amounts, if any, already recognized.
Important facts for investors to verify
- Confirm the registrant identity: the supplied filing names P10, Inc., not Ridgepost Capital, Inc.
- Review the Westech acquisition’s final purchase accounting, earnout terms, unit dilution and post-acquisition debt and liquidity.
- Assess collectability and timing of the $23.0 million Enhanced PC related-party receivable and the broader $30.4 million due-from-related-parties balance.
- Evaluate variable-rate debt exposure, covenant headroom and the effect of accordion borrowing on leverage and interest expense.
- Monitor compensation and stock-based award costs, including performance-based Bonaccord and Hark units, and potential dilution.
- Reconcile reported cash figures carefully: quarter-end unrestricted cash was $19.4 million, while cash plus restricted cash was $20.8 million.