What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-13 compared with 2021-11-22 · 189 added, 267 removed, 319 unchanged (59% of the section changed)

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includes P10 and only its consolidated subsidiaries.

The following information should be read in conjunction with our selected financial and operating data and the accompanying consolidated financial statements and related notes contained elsewhere in this quarterly report on Form 10-Q, and our audited financial statements, the related notes, and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our prospectus dated October 20, 2021 , filed with the U.S.

Securities and Exchange Commission ("SEC") on October 22, 2021.

Our historical results discussed below, and the way we evaluate our results, may differ significantly from the descriptions of our business and key metrics used elsewhere in this quarterly report on Form 10-Q due to the effects of acquisitions which occurred during the year ended December 31, 2021, but may not have had a material impact on our statements of operations due to the limited period of time which they were included in our consolidated results.

The below historical results also do not include any activities or positions of P10, Inc., or give effect to any of the reorganization activities which have occurred in connection with the Initial Public Offering discussed in the subsequent events.

This quarterly report reflects the historical results of operations and financial position of P10 Holdings, our predecessor for accounting purposes, prior to the Reorganization and IPO.

The following discussion may contain forward-looking statements that reflects our plans, estimates and beliefs.

Our actual results could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-Q, and in our annual report on Form 10-K for the year ended December 31, 2021, particularly in "Risk Factors" and the "Forward-Looking Information." Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to fiscal 2022 and 2021 are to our fiscal years ended December 31, 2022 and 2021, respectively.

Business Overview

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As investors entrust us with additional capital, our relationships with our fund managers are strengthened, which drives additional investment opportunities, sources more data, enables portfolio optimization and enhances returns, and in turn attracts new investors.

During the year ended December 31, 2020, we completed several acquisitions to expand the private market solutions available to our investors.

During 2020, we completed several acquisitions to expand the private market solutions available to our investors.

On April 1, 2020, we completed our acquisition of Five Points to serve as our Private Credit solution (which also offers certain private equity solutions).

Five Points’

results are included in our Consolidated Statements of Operations for the period from April 1, 2020 through December 31, 2020 and for the nine months ended September 30, 2021.

On October 2, 2020, we completed our acquisition of TrueBridge Capital Partners, LLC (TrueBridge) to serve as our Venture Capital solution.

TrueBridge’s results are included in our Consolidated Statements of Operations for the period from October 2, 2020 through December 31, 2020 and for the nine months ended September 30, 2021.

On December 14, 2020, we completed our acquisition of 100% of the equity interest in ECG to serve as our Impact Investing solution.

ECG’s results are included in our Consolidated Statements of Operations for the period from December 14, 2020 through December 31, 2020 and for the nine months ended September 30, 2021.

On December 14, 2020, we completed our acquisition of 100% of the equity interest in Enhanced Capital Group, LLC (ECG) to serve as our Impact Investing solution.

These acquisitions were accounted for as business combinations, and these entities are reported as consolidated subsidiaries of P10.

Additionally, on December 14, 2020, we completed our acquisition of approximately 49% of the voting interests and 50% of the economic interests in ECP, which is a related party of ECG.

As we only acquired a non-controlling interest in ECP, it is reported as an equity method investment in accordance with ASC 323.

On September 30, 2021, we completed the acquisitions of Hark and Bonaccord to further expand on solutions available to our investors.

The effect of these acquisitions is reflected in our Consolidated Balance Sheet at September 30, 2021.

As we only acquired a non-controlling interest in ECP, it is reported as an equity method investment in accordance with ASC 323, Equity Method and Joint Ventures (“ASC 323").

On September 30, 2021, we completed the acquisitions of Hark Capital Advisors, LLC (Hark) and Bonaccord Capital Advisors, LLC (Bonaccord) to further expand on solutions available to our investors.

The effect of these acquisitions is reflected in our Consolidated Balance Sheet at December 31, 2021 and the Consolidated Statement of Operations from September 30, 2021 to December 31, 2021.

These acquisitions were accounted for as business combinations and are reported as consolidated subsidiaries of P10.

As of September 30, 2021, our private market solutions were comprised of the following:

On October 20, 2021, P10 Holdings, in connection with its IPO, completed a reorganization and restructure.

In connection with the reorganization, P10 became the parent company and all of the existing equity of P10 Holdings, which is a wholly owned subsidiary of P10, and its consolidated subsidiaries, including the convertible preferred units of P10 Intermediate were converted into common stock of P10.

The offering and reorganization included a reverse stock split of P10 Holdings common stock on a 0.7-for-1 basis pursuant to which every outstanding share of common stock decreased to 0.7 shares.

Net proceeds from the sale of our Class A common stock, after deducting underwriting discounts and commissions but before expenses was approximately $129.4 million.

Of the proceeds, $86.8 million was used to pay down outstanding term loan debt, $12.4 million was used to pay off RCP Seller's Notes, $1.1 million was used to cash settle certain option awards, $1.0 million was used to fund the dividend on P10 Intermediate's preferred stock and $4.5 million was used to pay expenses incurred in connection with the offering.

Following the reorganization and IPO, P10 has two classes of common stock, Class A common stock and Class B common stock.

Each share of Class B common stock is entitled to ten votes while each share of Class A common stock is entitled to one vote.

On December 22, 2021, P10 entered into a $250 million credit agreement with a syndicate of banks, including JP Morgan Chase Bank and Texas Capital Bank as joint lead arrangers and bookrunners, which provided for the Term Loan in an aggregate principal amount of $125 million and Revolver Facility in an aggregate principal amount of $125 million with a four year term and an additional $125 million accordion feature.

The variable interest rate is 210 basis points over the SOFR.

Borrowings were used to pay down the outstanding balance under the previous credit facility with HPS and related transaction expenses, pay off Seller's Notes related to the RCP acquisition and to finance working capital needs and for general corporate purposes.

During the first quarter of 2022, the Company paid down $25 million of the outstanding balance under the Revolver Facility and as of March 31, 2022, the outstanding balance was $65.9 million.

As of March 31, 2022, our private market solutions were comprised of the following:

Private Equity Solutions (PES) .

Under PES, we make direct and indirect investments in middle and lower- middle market private equity across North America.

PES also makes minority equity investments in a diversified portfolio of mid-sized managers across private equity, private credit and real assets.

PES also makes minority equity investments in a diversified portfolio of mid-sized managers across private equity, private credit, real estate and real assets.

The PES investment team, which is comprised of 41 investment professionals with an average of 24+ years of experience, has deep and long-standing investor and fund manager relationships in the middle and lower-middle market which it has cultivated over the past 20 years, including over 1,800+ investors, 200+ fund managers, 375+ private market funds and 1,900+ portfolio companies.

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PES occupies a differentiated position within the private markets ecosystem helping our investors access, perform due diligence, analyze and invest in what we believe are attractive middle and lower-middle market private equity opportunities.

We are further differentiated by the scale, depth, diversity and accuracy of our constantly expanding proprietary private markets database that contains comprehensive information on more than 2,500 investment firms, 4,000 funds, 25,000 individual

transactions, 30,000 private companies and 175,000 financial metrics.

As of September 30, 2021, PES managed $9.3 billion of FPAUM.

We are further differentiated by the scale, depth, diversity and accuracy of our constantly expanding proprietary private markets database that contains comprehensive information on more than 4,900 investment firms, 9,000 funds, 42,000 individual transactions, 28,000 private companies and 250,000 financial metrics.

As of March 31, 2022, PES managed $10.0 billion of FPAUM.

Venture Capital Solutions (VCS).

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In addition, since 2011, we have partnered with Forbes to publish the Midas List, a ranking of the top value-creating venture capitalists.

As of September 30, 2021, VCS managed $4.2 billion of FPAUM.

As of March 31, 2022, VCS managed $4.6 billion of FPAUM.

Impact Investing Solutions (IIS).

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We are differentiated in both the breadth of impact areas served, the type of capital deployed and the duration of our track record.

We have collectively deployed over $3.0 billion into 600+ projects, supporting 380+ businesses across 36 states since 2000, including $550 million capital deployed in impact credit and 535 million KWh of renewable energy produced through 2019.

As of September 30, 2021, IIS managed $1.7 billion of FPAUM .

We have collectively deployed over $4.8 billion into 700+ projects, supporting 390+ businesses across 38 states, Washington DC and Puerto Rico since 2000.

We have invested $2.6 billion in Impact Assets across our Small Business Lending, Impact Real Estate and Climate Finance Strategies.

Investments in solar assets will generate 16 billion KWh of renewable energy over the lifetime of the portfolio.

As of March 31, 2022, IIS managed $1.7 billion of FPAUM .

Private Credit Solutions (PCS).

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We currently maintain 45+ active sponsor relationships and have 60+ platform investments.

As of September 30, 2021, PCS managed $1.0 billion of FPAUM.

As of March 31, 2022, PCS managed $1.3 billion of FPAUM.

Sources of Revenue

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Often, the fees are structured such that they step down, or decrease, over the life of the fund.

Our primary funds comprise approximately $10.1 billion of our FPAUM as of September 30, 2021.

Our primary funds comprise approximately $10.9 billion of our FPAUM as of March 31, 2022.

Direct and Co-Investment Funds.

Direct and co-investments involve acquiring an equity interest in or making a loan to an operating company, project, property, alternative asset manager, or asset, typically by co-investing alongside an investment by a fund manager or by investing directly in the underlying asset.

P10’s direct and co-

investment funds include both commingled investment vehicles with multiple investors as well as customizable separate accounts, which typically include one investor.

P10’s direct and co- investment funds include both commingled investment vehicles with multiple investors as well as customizable separate accounts, which typically include one investor.

Capital committed to direct investments and co-investments is typically invested immediately, thereby advancing the timing of expected returns on investment.

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Often, the fees are structured such that they step down, or decrease, over the life of the fund.

Our direct investing platform comprises approximately $5.0 billion of our FPAUM as of September 30, 2021.

Our direct investing platform comprises approximately $5.4 billion of our FPAUM as of March 31, 2022.

Secondaries refer to investments in existing private markets funds through the acquisition of an existing interest in a private markets fund by one investor from another in a negotiated transaction.

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Often, the fees are structured such that they step down, or decrease, over the life of the fund.

Our secondary funds comprise approximately $1.2 billion of our FPAUM as of September 30, 2021.

Our secondary funds comprise approximately $1.3 billion of our FPAUM as of March 31, 2022.

Operating Segments

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Trends Affecting Our Business

Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions in the North American markets which we operate, as well as changes in global economic conditions, including the effects of COVID-19 as described below, and regulatory or other governmental policies or actions can materially affect the values of the funds our platforms manage, as well as our ability to effectively manage investments.

Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions in the North American markets in which we operate, as well as changes in global economic conditions and regulatory or other governmental policies or actions, which can materially affect the values of the funds our platforms manage, as well as our ability to effectively manage investments.

With interest rates remaining historically low, we continue to see investors turning towards alternative investments to achieve higher yields.

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Furthermore, investors continue to increase their exposure to passive strategies in search for lower fee alternatives as relative returns in active public market strategies have compressed.

We believe the continued move away from active public market strategies into passive strategies will support growth in private market solutions as investors seek higher risk-adjusted returns.

We believe the continued move away from active public market

strategies into passive strategies will support growth in private market solutions as investors seek higher risk-adjusted returns.

Additional trends driving investor demand are 1) increasing long-term investor allocations towards private market asset classes, 2) legislation that allows retirement plans to add private equity vehicles as an investment option, and 3) the adoption of Environmental, Social, and Corporate Governance (“ESG”) and impact investing by the institutional and high net worth investor community.

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In addition, our premier data and analytic capabilities, driven by our proprietary database, support our robust and disciplined sourcing criteria, which fuels our highly selective investment process.

Our database stores and organizes a universe of managers and opportunities with powerful tracking metrics that we believe drive optimal portfolio management and monitoring and enable a portfolio grading system, as well as repository of

investment evaluation scorecards.

Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information on an on-going basis.

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This has resulted in some investors, primarily smaller investors or less strategically important investors, not being able to gain access to certain funds.

Our ability to invest and maintain our sphere of influence with these high-performing fund managers is critical to our investors’

Our ability to invest and maintain our sphere of influence with these high-performing fund

managers is critical to our investors’

success and our ability to maintain our competitive position and grow our revenue.

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Our ability to maintain our data advantage is dependent on a number of factors, including our continued access to a broad set of private market information on an on-going basis, as well as our ability to maintain our investment scale, considering the evolving competitive landscape and potential industry consolidation.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) a global pandemic, which has resulted in significant disruption and uncertainty in the global economic markets.

The full extent of the operational and financial impact the COVID-19 pandemic may have on the Company has yet to be determined and is dependent on its duration and spread, the effectiveness of treatments and measures of prevention, and any related operational restrictions and the overall economy.

Currently, we have activated our Business Continuity Plan, which assures the ability for all aspects of our business to continue operating without interruption.

We are unable to accurately predict how COVID-19 will affect the results of our operations because the virus’s severity, the effectiveness, availability and public acceptance of vaccines, as well as the duration of the pandemic are uncertain.

However, we do not expect a significant impact to our near-term results given

the structure of our contracts.

While it is premature to accurately predict its full impact, the pandemic may affect our ability to raise capital for future funds.

Key Financial & Operating Metrics

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We earn management and advisory fees based on a percentage of investors’

capital commitments to or, in selected cases, net invested capital in, or NAV, of our investment funds.

capital commitments in our funds or deployed capital.

Management and advisory fees during the commitment period are charged on capital commitments and after the commitment period (or a defined anniversary of the fund’s initial closing) is reduced by a percentage of the management and advisory fees for the preceding years or charged on net invested capital or NAV, in selected cases.

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Operating Expenses

Compensation and benefits are our largest expense and consists of salaries, bonuses, employee benefits and employer-related payroll taxes.

Compensation and benefits are our largest expense and consists of salaries, bonuses, stock-based compensation, employee benefits and employer-related payroll taxes.

Despite our general operating leverage that exists, we expect to continue to experience an incremental rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels as we expand into new markets to create new products and services.

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Our professional fees will fluctuate commensurate with our strategic objectives and potential acquisitions, and certain recurring accounting advisory, audit and tax expenses are expected to increase as our Company has become an SEC registrant and we must comply with additional regulatory requirements.

However, much of this investment was made during the first half of 2021.

General, administrative and other includes occupancy, travel and entertainment, technology, insurance and other general costs associated with operating our business.

Strategic alliance expense is included in operating expenses.

This expense is driven by a Strategic Alliance Agreement (SAA) that Bonaccord had entered into with an investor at the time Bonaccord was acquired in exchange for a portion of net management fee earnings and net distributable carried interest at the time of acquisition.

Other Income/(Expense)

Interest expense includes interest paid and accrued on our outstanding debt, along with the amortization of deferred financing costs, amortization of original issue discount and the write-off of deferred financing costs due to the repayment of

previously outstanding debt.

Interest expense also includes the effects of the imputed interest on certain non-interest-bearing notes payable.

Income Tax Expense/Benefit

Income tax expense/benefit is comprised of current and deferred tax expense/benefit.

Current income tax expense/benefit represents our estimated taxes to be paid or refunded for the current period.

Income Tax Expense

Income tax expense is comprised of current and deferred tax expense.

Current income tax expense represents our estimated taxes to be paid or refunded for the current period.

In accordance with ASC 740, Income Taxes (“ASC 740”), we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards.

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FPAUM reflects the assets from which we earn management and advisory fees.

Our private credit vehicles earn management fees on deployed capital.

Our vehicles typically earn management and advisory fees based on committed capital, and in certain cases, net invested capital, depending on the fee terms.

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Results of Operations

For the three and nine months ended September 30, 2021 and September 30, 2020.

For the three months ended March 31, 2022 and March 31, 2021.

For the Three Months Ended

For the Nine Months Ended

September 30,

(in thousands)

Management and advisory fees

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General, administrative and other

Contingent consideration expense

Amortization of intangibles

Strategic alliance expense

Total operating expenses

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Total other (expense)

Net income/(loss) before income taxes

Income tax (expense)/benefit

NET INCOME/(LOSS)

Three Months Ended September 30, 2021 and September 30, 2020

Our revenue is composed almost entirely of recurring management and advisory fees, with the vast majority of fees earned on committed capital that is typically subject to ten to fifteen year lock up agreements, therefore our average fee rates have remained stable at approximately 1% for the three months ended September 30, 2021 and September 30, 2020.

For the three months ended September 30, 2021 compared to the three months ended September 30, 2020, revenues increased $22.8 million or 148% due to both higher management fees primarily from the impact of 2020 acquisitions, as well as an increase in other revenues.

Management fees increased $22.7 million, or 149%, to $37.9 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 due primarily to the acquisitions of TrueBridge and ECG during the fourth quarter of 2020, which contributed management fee and advisory revenues of $18.2 million.

The remaining increase of $4.5 million represents an increase in the Company’s management fees due to increases in FPAUM, primarily from capital

raised and additional fund closings during the third quarter of 2021.

Catch up fees during the third quarter of 2021 were $1.7 million associated with the fund closings at TrueBridge and RCP.

Other revenues, which represent ancillary elements of our business, increased by $47 thousand or 30% to $0.2 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 driven primarily by administrative fees.

Nine Months Ended September 30, 2021 and September 30, 2020

Total revenues increased $62.2 million, or 146%, to $104.9 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, due to higher management and advisory fees, largely attributable to our acquisitions, partially offset by a small decrease in other revenues.

Management fees increased by $62.2 million, or 149%, to $104.0 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020 due primarily to the acquisitions of Five Points, TrueBridge, and ECG during fiscal 2020, which contributed $54.8 million to management fee and advisory revenues, in total.

Revenue also increased by $5.9 million due to an increase in primary fund closings and $1.4 million related to a private credit fund closing.

Catch up fees during Q3 2021 were $2.9 million associated with the fund closings at TrueBridge and RCP.

Other revenues increased by $11 thousand, or 1% to $0.9 million, from the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

This increase was primarily attributable to a increase in referral fees during the first half of 2021.

Net income before income taxes

Income tax expense

Three Months Ended March 31, 2022 and March 31, 2021

For the three months ended March 31, 2022 compared to the three months ended March 31, 2021, revenues increased $10.5 million or 32% due to higher management fees primarily from the impact of organic growth of $6.7 million across RCP, TrueBridge, and Five Points as well as $3.8 million driven by the acquisition of Hark and Bonaccord in 2021.

Management and advisory fees increased $10.5 million, or 32%, to $43.0 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 due primarily to organic growth at RCP, TrueBridge, and Five Points of $6.7 million driven by increases in FPAUM, primarily from capital raised and additional fund closings.

The acquisitions of Bonaccord and Hark on September 30, 2021, contributed management fee and advisory revenues of $3.8 million.

Catch up fees for the three months ended March 31, 2022 were $0.7 million associated with the fund closings at TrueBridge and RCP.

Other revenues, which represent ancillary elements of our business, increased by $0.1 million or 30% to $0.3 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 driven primarily by an increase of $0.1 million of interest income in other revenue.

For the Three Months Ended

For the Nine Months Ended

September 30,

OPERATING EXPENSES

(in thousands)

Compensation and benefits

Professional fees

General, administrative

General, administrative, and other

Contingent consideration expense

Amortization of intangibles

Strategic alliance expense

Total operating expenses

Operating Expenses

Three Months Ended September 30, 2021 and September 30, 2020

Total operating expenses increased by $13.9 million, or 106%, to $27.1 million, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020 primarily driven by increases in compensation and benefits, general and administrative expenses, and amortization of intangibles also attributable to the acquisitions completed in fiscal 2020 and the compensation and benefits attributable to the acquisitions of Hark and Bonaccord during the third quarter of 2021.

Compensation and benefits expense increased by $8.1 million, or 137%, to $14.0 million for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

The primary drivers for the increase in compensation and benefits are the acquisitions of TrueBridge and ECG which resulted in a total of $4.3 million additional compensation expense as well as an increase in headcount and compensation related to building out the corporate function as the Company prepared for an initial public offering of $1.6 million.

Additionally, there was an increase in compensation cost for acquisition related employee incentive bonuses of $1.6 million from the third quarter of 2020 to the third quarter of 2021.

The remaining increase in compensation cost of $0.5 million is driven by increases in salaries at subsidiaries not associated with acquisitions.

Professional fees decreased by $32 thousand, to $2.6 million.

ECG and TrueBridge contributed $0.4 million of additional professional fees for the three months ended September 30, 2021 that did not exist in the three months ended September 30, 2020 as they were acquired later in 2020.

This was offset by reductions in professional fees related to the acquisition of ECG and TrueBridge in the three months ended September 30, 2020 that were not recurring in the three months ended September 30, 2021 of $0.3 million as well as non-recurring audit fees at Five Points of $0.2 million in 2020.

General, administrative and other increased by $2.0 million, or 183% to $3.0 million due to the full quarter of expenses incurred at TrueBridge and ECG that were not yet acquired at September 30, 2020.

This drove $1.7 million of the $2.0 million increase.

Amortization of intangibles increased by $3.9 million, or 110% to $7.5 million, for the three months ended September 30, 2021 as compared to the three months ended September 30, 2020.

The increase is due to the addition of $80.4 million of gross finite lived intangible assets in the acquisitions of TrueBridge and ECG.

Nine Months Ended September 30, 2021 and September 30, 2020

Total operating expenses increased by $43.0 million, or 127%, to $76.7 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

This increase was primarily due to increases in compensation and benefits as well as amortization of intangibles associated with the acquisitions of TrueBridge, Five Points, and ECG completed in fiscal 2020.

Compensation and benefits expense increased by $22.3 million, or 141%, to $38.1 million, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The primary driver for the increase in compensation and benefits were the acquisitions completed after the second quarter of 2020 which resulted in a total of $13.0 million of additional compensation expense including TrueBridge and ECG.

Five Points, which was acquired in Q2 2020, contributed to a full six months of compensation expense which drove $2.3 million of the six months ended change.

There was also an increase in headcount and compensation cost related to building out the corporate function as the Company prepared for an initial public offering of $4.5 million.

A smaller driver of the increase was $1.6 million in compensation cost for acquisition related employee incentive bonuses.

Additionally, there was an increase in compensation cost for employees not associated with TrueBridge, Five Points and ECG acquisitions of $0.8 million.

Professional fees increased by $2.7 million, or 52%, to $7.9 million and general, administrative and other increased by $5.2 million, or 163% to $8.3 million, due primarily to the acquisitions of TrueBridge, Five Points and ECG.

The acquisitions resulted in an increase in professional fees of $1.7 million and an increase in general and administrative costs of $4.7 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

Professional fees increased by an additional $1.7 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 due to additional legal, advisory and tax fees associated with the acquisition transactions of Hark and Bonaccord and the initial public offering.

This was offset by a $0.6 million decrease in legal expenses related to borrowings for acquisitions related to ECG and TrueBridge.

Amortization of intangibles increased by $12.8 million, or 134%, to $22.5 million, for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

The increase is due to the addition of $80.4 million of gross finite lived intangible assets in the acquisitions of TrueBridge, Five Points and ECG.

For the Three Months Ended March 31, 2022 and March 31, 2021

Total operating expenses increased by $7.5 million, or 31%, to $31.7 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

This increase was primarily due to increases in compensation and benefits as well as general, administrative, and other offset by fully amortized intangible assets at RCP and declining amortization expense of intangibles at ECG.

Compensation and benefits expense increased by $6.6 million, or 55%, to $18.5 million, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The increase was driven by a number of factors.

The acquisitions of Hark and Bonaccord on September 30, 2021 added $2.2 million of compensation expense in the first quarter of 2022.

Five Points made a $1.7 million one time payment to buyout the employment contracts for the prior partners during the first quarter of 2022.

Stock compensation expense increased by $1.1 million, due to RSUs and stock options issued to employees during the first quarter of 2022 as well as RSAs issued in late 2021.

There was a $0.7 million increase associated with the build out of P10 back office to meet the compliance needs of a public company.

The final driver is a $1.0 million increase associated with an increase in headcount across all subsidiaries.

Professional fees decreased by $0.1 million, or 4%, to $2.6 million.

The similar expense for the three months ended March 31, 2022 compared to 2021 due to the slower acquisition activity in both first quarters.

The primary cost in professional fees for the three months ended March 31, 2022 and 2021 are audit fees incurred associated with year end reporting.

General, administrative and other increased by $2.1 million, or 102% to $4.1 million, due primarily to the increase of $0.7 million in D&O insurance driven by the IPO transaction at the end of 2021, $0.3 million due to the acquisitions of Hark and Bonaccord, and $0.3 million of additional rent expense for the three months ended March 31, 2022 as compared to the

three months ended March 31, 2021.

The remaining $0.5 million increase was individually insignificant increases in cost at each subsidiary driven by an additional leased office space, insurance costs, and general operations.

Contingent consideration expense increased $0.1 million, to $0.1 million, for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

This was driven by remeasurement during the first quarter of 2022 of the contingent consideration payable in connection with the acquisitions of Hark and Bonaccord.

Amortization of intangibles decreased by $1.3 million, or (17)%, to $6.2 million, for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

The decrease is due to $1.8 million less in expense in the first quarter of 2022 as compared to 2021 at RCP due to fully amortized intangible assets and at ECG due to declining amortization expense.

This was offset by an addition of $0.5 million in amortization expense driven by the acquisitions of Hark and Bonaccord on September 30, 2021.

Other Income/(Expense)

Three Months Ended September 30, 2021 and September 30, 2020

Other expenses increased $2.9 million, or 126%, to $5.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

This increase was primarily due to a $3.2 million increase in interest expense related to the credit and guaranty facility as a result of the $159.4 million principal increases under the credit and guaranty facility to fund the acquisitions of TrueBridge and ECG.

Nine Months Ended September 30, 2021 and September 30, 2020

Other expenses increased by $8.5 million, or 117%, to $15.8 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

This increase was primarily due to a $9.3 million increase in interest expense related to the credit and guaranty facility as a result of the $159.4 million principal increases under the credit and guaranty facility to fund the acquisitions of TrueBridge and ECG.

This increase was offset by $0.6 million in other income driven by ECG’s pick up of income from unconsolidated subsidiaries in the first nine months of 2021.

Income Tax/Benefit Expense

Three Months Ended September 30, 2021 and September 30, 2020

Income tax expense increased by $1.9 million to $1.8 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 due to the reduction of deferred tax assets during 2021.

Nine Months Ended September 30, 2021 and September 30, 2020

Income tax expense increased by $4.7 million to $3.2 million for the nine months ended September 30, 2021 compared to a benefit of $1.5 million for the nine months ended September 30, 2020.

The increase was primarily due to the reduction of deferred tax assets during 2021.

The following table provides a period-to-period roll-forward of our fee earning AUM on a pro forma basis as if Five Points, True Bridge and ECG were acquired on January 1, 2020.

For the Three Months Ended December 31, 2021 and December 31, 2020

Other expenses decreased by $4.1 million, or (80)%, to $1.1 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

This decrease was primarily driven by the early extinguishment of the credit and guaranty facility on December 22, 2021.

The credit and guaranty facility incurred interest at a rate of 7%.

This was replaced with the revolving credit facility and term loan which incurs interest at a base rate of 2.1% plus SOFR.

The decline in interest expense for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 is a function both of lower interest rates as well as $65.1 million less in outstanding interest-bearing principal as of March 31, 2022.

The lower principal balance was a result of the paydown of debt with IPO proceeds and operating cash flow during the last year.

Income Tax Expense

For the Three Months Ended March 31, 2022 and March 31, 2021

Income tax expense increased by $2.1 million to $2.8 million for the three months ended March 31, 2022 compared to an expense of $0.7 million for the three months ended March 31, 2021.

The increase was primarily due to the increase of pre-tax income during 2022.

The following table provides a period-to-period roll-forward of our fee paying assets under management on a pro forma basis as if Hark and Bonaccord were acquired on January 1, 2021.

For the Three Months Ended

For the Nine Months Ended

September 30,

(in millions)

Balance, Beginning of Period

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(3) Net asset value change consists primarily of the impact of market value appreciation (depreciation) from funds that earn fees on a net asset value basis.

The following table provides a period-to-period roll-forward of our fee-earning AUM on an actual basis.

The following table provides a period-to-period roll-forward of our fee paying assets under management on an actual basis.

For the Three Months Ended

For the Nine Months Ended

September 30,

(in millions)

Balance, Beginning of Period

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(3) Net asset value change consists primarily of the impact of market value appreciation (depreciation) from funds that earn fees on a net asset value basis.

FPAUM as of September 30, 2021

FPAUM increased $1.2 billion, or 7.8%, to $16.3 billion on a pro forma basis and $2.1 billion, or 14.7%, to $16.3 billion on an actual basis for the three months ended September 30, 2021.

On a pro forma basis, this increase is due primarily to an increase in capital raised from our private equity and venture capital solutions.

On an actual basis, $1.1 billion of the increase is due to the previously mentioned organic growth and $1.0 billion is due to the acquisitions of Hark and Bonaccord.

FPAUM increased $2.9 billion, or 21.8%, to $16.3 billion on a pro forma basis and $3.6 billion or 28.0% to $16.3 billion on an actual

basis for the nine months ended September 30, 2021, due primarily to an increase in capital raised from our private equity and venture capital solutions.

FPAUM as of March 31, 2022

FPAUM increased $0.3 billion, or 1.9%, to $17.6 billion on a pro forma basis and $0.3 billion or 1.9% to $17.6 billion on an actual basis for the three months ended March 31, 2022, due primarily to an increase in capital raised and deployed from our private equity and venture capital solutions of $720 million offset by $395 million of step downs and expirations at RCP and TrueBridge.

Our FPAUM growth and concentration across solutions and vehicles has been relatively consistent over time but can vary in particular periods due to the systematic fundraising cycles of new funds, which typically lasts 12-24 months.

We expect to continue to expand our fundraising efforts and grow FPAUM with the launch of new specialized investment vehicles and asset class solutions.

FPAUM as of March 31, 2021

FPAUM increased $0.5 billion, or 3.9%, to $13.9 billion on a pro forma basis for the three months ended March 31, 2021, due primarily to an increase in capital raised from our private equity, venture capital and impact investment solutions.

FPAUM increased $0.4 billion, or 3.0%, to $13.1 billion on an actual basis for the three months ended March 31, 2021, due primarily to an increase in capital raised and deployed from our private equity and venture capital investment solutions of $424 million offset by $44 million in step downs and expirations.

We expect to continue to expand our fundraising efforts and grow FPAUM with the launch of new specialized investment vehicles and asset class solutions.

Non-GAAP Financial Measures

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The cost of financing our business,

Losses associated with extinguishing debt outstanding,

Acquisition-related expenses which reflects the actual costs incurred during the period for the acquisition of new businesses, which primarily consists of fees for professional services including legal, accounting, and advisory,

Registration-related expenses includes professional services associated with our prospectus process incurred during the period, and does not reflect expected regulatory, compliance, and other costs associated with which may be incurred subsequent to our Initial Public Offering, and

Registration-related expenses includes professional services associated with our prospectus process incurred during the period, and does not reflect expected regulatory, compliance, and other costs associated with those that were incurred subsequent to our Initial Public Offering, and

The effects of income taxes.

Adjusted Net Income reflects the cash payments made for interest, which differs significantly from total interest expense that includes non-cash interest on the non-interest-bearing Seller Notes related to our acquisitions of RCP 2 and RCP 3.

Similarly, the cash income taxes paid during the periods is significantly lower than the net income tax benefit, which is primarily comprised of deferred tax expense as described in the results of operations.

Adjusted Net Income in 2021 reflects the cash payments made for interest, which differs significantly from total interest expense that includes non-cash interest on the non-interest-bearing Seller Notes related to our acquisitions of RCP 2 and RCP 3 that existed.

Similarly, the cash income taxes paid during the periods differ significantly from the net income tax expense, which is primarily comprised of deferred tax expense as described in the results of operations.

For the Three

For the Nine Months

September 30,

(in thousands)

Add back (subtract):

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Interest expense, net

Income tax (benefit)/expense

Income tax expense

Non-recurring expenses

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Adjusted EBITDA

Cash interest expense, net

Cash interest expense

Cash income taxes, net of taxes related to

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Selected Statements of Financial Position

September 30,

(in thousands)

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Debt obligations

Redeemable noncontrolling interest

Stockholders’

There was an increase in cash from $11.8 million as of December 31, 2020 to $21.7 million as of September 30, 2021 due to excess operating cash flows.

There was an increase in goodwill and intangible assets of $22.4 million due to the acquisitions of Hark and Bonaccord offset by a $7.4 million reduction from December 31, 2020 to September 30, 2021 due to amortization of intangibles during the nine months ended September 30, 2021.

Remaining total assets also increased in the same period by $5.4 million of restricted cash due to cash held by ECG in escrow for deals not yet closed and an increase in receivables due to ECG's Advisory Agreement with Enhanced PC.

Additionally, amounts due to related parties increased by $2.3 million due to the related party note agreement balance between BCP and Bonaccord Partners Holdings as of September 30, 2021.

The Company also paid down debt obligations of $12.3 million in the nine months ended September 30, 2021 which was offset by an increase in principal by $35.0 million related to the acquisitions of Hark Capital and Bonaccord Capital.

There was a decrease in cash and cash equivalents of $17.3 million from December 31, 2021 to $23.7 million as of March 31, 2022 primarily due to the paydown of $25 million on the revolving credit facility principal balance in February 2022.

There was a decrease in goodwill and intangible assets of $6.2 million due to amortization of intangibles during the three months ended March 31, 2022.

Remaining total assets increased in the same period by $2.7 million.

The increase of $2.7 million is driven by an increase in accounts receivable from related parties which is entirely due to ECG's Advisory

Agreement with Enhanced PC and Crossroads.

Debt obligations declined by $24.8 million which is driven by a $25.0 million principal pay down in February 2022 on the revolving credit facility which is offset by additional debt issuance costs.

Historical Liquidity and Capital Resources

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Our ability to continue to raise funds will be critical as we pursue additional business development opportunities and new acquisitions.

In order to fund the acquisitions of RCP 2, in October 2017, the Company issued non-interest bearing Secured Promissory Notes Payable (“2017 Seller Notes”) in the amount of $81.3 million to the sellers of RCP 2.

On January 3, 2018, the Company issued non-interest bearing Secured Promissory Notes Payable (“2018 Seller Notes”) in the amount of $22.1 million to the sellers of RCP 3.

Additionally, in connection with the acquisition, the Company issued non-interest-bearing tax amortization benefits in the amount of $48.4 million (“TAB Payments”) to the owners of RCP 3.

The 2017 Seller Notes, the 2018 Seller Notes, and the TAB Payments are collectively referred to as “Notes payable to sellers.”

The Company’s indirect wholly owned subsidiary, P10 RCP Holdco, LLC (“HoldCo”), entered into a Credit and Guaranty Facility with HPS Investment Partners, LLC (HPS), an unrelated party, as administrative agent and collateral agent on October 7, 2017 (the Facility).

The Facility provides for a $130.0 million senior secured credit facility in order to refinance the existing debt obligations of RCP Advisors and provide for the financing to repay the seller notes (the “Seller Notes”) due resulting from the acquisition of RCP Advisors.

The Facility provides for a $125 million five-year term loan and a $5 million one-year line of credit.

The line of credit was repaid and subsequently expired during 2018.

This Facility was amended in the past year, on October 2, 2020 and December 14, 2020 to provide additional term loan borrowings as further described below.

During the year ended December 31, 2020, we raised $46.4 million of cash through the issuance of redeemable preferred equity interests through the issuance of shares in our subsidiary, P10 Intermediate.

Additionally, we incurred $159.4 million under the Facility, which matures in October 2022.

As of December 31, 2020, we had $261.7 million outstanding under the Facility.

We utilized these funds and cash on hand, as well as the issuance of $141.4 million of P10 Intermediate shares to the sellers to fund the acquisitions of Five Points, TrueBridge, ECG and ECP.

As of September 30, 2021, we had $286.8 million outstanding under the Facility.

This increased from December 31, 2020 due to a $35.0 million draw to fund the acquisitions of Hark and Bonaccord and was offset by quarterly principal paydowns of $9.8 million.

Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

The following table reflects our cash flows for the nine months ended September 30, 2021 and 2020:

For the Nine Months Ended

September 30,

On December 22, 2021, P10, Inc.

entered into a Term Loan and Revolving Credit Facility with JP Morgan Chase Bank, N.A..

The term loan and revolving credit facility provides financing for acquisition activity.

The term loan provides for a $125.0 million facility and the revolving credit facility provides for an additional $125.0 million.

There is also a $125 million accordion feature available in the credit agreement.

Both facilities are Term SOFR Loans.

The Company can elect one or three months for the Revolver Facility and three or six months for the Term Loan.

The Company elected a six month SOFR rate at the time of draw for the term loan and a one month SOFR rate for the Revolver Facility at the time of draw.

Principal is contractually repaid at a rate of 1.25% on the term loan quarterly effective March 31, 2023.

The Revolving Credit Facility has no contractual principal repayments until maturity, which is December 22, 2025 for both facilities.

The Credit Agreement contains affirmative and negative covenants typical of such financing transactions, and specific financial covenants which require P10 to maintain a minimum leverage ratio.

As of March 31, 2022, P10 was in compliance with its financial covenants required under the facility.

In February 2022, the Company repaid $25 million of the principal balance outstanding on the revolving credit facility.

As of March 31, 2022, the balance drawn on the revolving credit facility is $65.9 million and on the term loan, the balance is $125.0 million.

For the three months ended March 31, 2022 and March 31, 2021, $0.9 million and $0 interest expense was incurred, respectively.

Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

The following table reflects our cash flows for the three months ended March 31, 2022 and 2021:

For the Three Months

Ended March 31,

(in thousands)

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Net cash used in investing activities

Net cash provided by financing activities

Net cash used in financing activities

Increase (decrease) in cash and cash equivalents and

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Operating Activities

Cash from operating activities increased $24.4 million or 150%, to $40.7 million for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The components of this net increase primarily consisted of a $6.1 million increase in net income and the following changes in operating assets and liabilities:

An increase of $12.8 million in amortization of intangibles primarily due to the acquisitions of TrueBridge, Five Points and ECG;

An increase in expense for deferred taxes of $3.4 million primarily driven by reduction of deferred tax assets;

An increase in accounts receivable of $5.7 million, primarily attributable to ECG's advisory agreement with Enhanced PC;

A decrease of $3.5 million in accounts payable driven by Keystone's exercise of options settled in the fourth quarter of 2020;

An increase in other liabilities of $6.3 million related to the state tax deposits at ECG.

Three Months Ended March 31, 2022 and March 31, 2021

Cash from operating activities decreased $1.9 million or (20)%, to $7.6 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021.

The components of this net decrease primarily consisted of the following changes in operating assets and liabilities:

An increase of $5.0 million in net income driven primarily by organic growth;

An increase in stock based compensation expense of $1.1 million;

An increase in due from related parties of $5.7 million, primarily attributable to ECG's advisory agreement with Enhanced PC;

A decrease in due to related parties of $1.8 million;

Investing activities

The cash used in investing activities increased by $0.6 million, or 1% to ($47.4) million, for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020.

This increase in the cash used was due almost entirely to the acquisitions of Hark Capital and Bonaccord Capital on September 30, 2021, which resulted in net cash payments of $46.9 million during the third quarter of 2021.

Three Months Ended March 31, 2022 and March 31, 2021

The cash used in investing activities decreased by $0.8 million, or (64)% to ($0.4) million, for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

This decrease in cash used was due almost entirely to the 2021 post-closing adjustment to the ECG working capital.

There was no acquisition activity at the end of 2021 to carry over into 2022.

Financing Activities

We obtained a net $22.0 million of cash for the nine months ended September 30, 2021 for financing activities, as compared to cash provided by financing activities of $27.9 million for the nine months ended September 30, 2021 due primarily to the borrowing of $35.0 million related to the Hark Capital and Bonaccord Capital acquisitions in the third quarter of 2021.

The cash obtained for financing activities for the first nine months of 2020 was primarily due to the proceeds from the issuance of redeemable noncontrolling interests.

The was offset by $9.7 million of repayments of debt obligations for the nine months ended September 31, 2021.

Three Months Ended March 31, 2022 and March 31, 2021

We recorded a net $25.0 million for the three months ended March 31, 2022 for cash used in financing activities, as compared to cash used in financing activities of $7.7 million for the three months ended March 31, 2021.

The $25.0 million of cash used in 2022 was entirely driven by the pay down in principal on the revolving credit facility in February 2022.

Future Sources and Uses of Liquidity

We generate significant cash flows from operating activities.

We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents, and our external financing activities which may include refinancing of existing indebtedness or the pay down of debt using proceeds of equity offerings.

We intend to use a portion of the proceeds raised in the Initial Public Offering completed on October 25, 2021 to pay down the debt obligations of the Company which existed as of September 30, 2021.

We believe we will also continue to

evaluate opportunities, based on market conditions, to access the capital markets and use proceeds from the issuance of equity securities or debt instruments, to continue funding acquisitions and expanding our operations.

Subsequent Events

On October 25, 2021, we completed our Initial Public Offering to the New York Stock Exchange.

We issued 20,000,000 of our Class A common stock at a price to the public of $12.00 per share.

We then used the proceeds from the offering mostly to pay down the term loan.

On October 29, 2021, the Company paid down $86.8 million of our total principal outstanding on the term loan.

Off Balance Sheet Arrangements

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In the ordinary course of business, we enter contractual arrangements that require future cash payments.

The following table sets forth information regarding our anticipated future cash payments under our contractual obligations as of September 30, 2021:

The following table sets forth information regarding our anticipated future cash payments under our contractual obligations as of March 31, 2022:

(in thousands)

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2) Debt obligations presented in the table reflect scheduled principal payments related to the various debt instruments of the Company.

As described above, we used a portion of the proceeds from this Merger transaction to pay down a portion of the indebtedness of the Company under these facilities.

Critical Accounting Policies

Critical Accounting Policies and Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S.

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The accompanying Consolidated Financial Statements are prepared in accordance with GAAP.

Management believes it has made all necessary adjustments so that the Consolidated Financial Statements are presented fairly and that estimates made in preparing the Consolidated Financial Statements are reasonable and prudent.

Management believes it has made all necessary adjustments so that the Consolidated Financial Statements are presented fairly and that estimates

made in preparing the Consolidated Financial Statements are reasonable and prudent.

The Consolidated Financial Statements include the accounts of the Company, its wholly owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model.

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See Note 7 for further information.

The Company has determined that certain of its subsidiaries are VIEs, and that the Company is the primary beneficiary of the entity, because it has the power to direct activities of the entities that most significantly impact the VIE’s economic performance and has a controlling financial interest in each entity.

Accordingly, the Company consolidates these entities, which includes P10 Intermediate, Holdco, RCP 2, RCP 3, TrueBridge, Hark and Bonaccord.

The Company has determined that certain of its subsidiaries are VIEs, and that the Company is the primary beneficiary of the entities, because it has the power to direct activities of the entities that most significantly impact the VIE’s economic performance and has a controlling financial interest in each entity.

Accordingly, the Company consolidates these entities, which include Holdco, RCP 2, RCP 3, TrueBridge, Hark and Bonaccord.

The assets and liabilities of the consolidated VIEs are presented gross in the Consolidated Balance Sheets.

The assets of our consolidated VIE’s are owned by those entities and not generally available to satisfy P10 Holding’s obligations, and the liabilities of our consolidated VIE’s are obligations of those entities and their creditors do not generally have recourse to the assets of P10.

The liabilities of our consolidated VIE’s are obligations of those entities and their creditors do not generally have recourse to the assets of P10.

See Note 7 for more information on both consolidated and unconsolidated VIEs.

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Under the voting interest model, the Company consolidates those entities it controls through a majority voting interest or other means.

Five Points and ECG are concluded to be consolidated subsidiaries of P10 Intermediate under the voting interest model.

Five Points, P10 Intermediate, P10 Holdings, and ECG are concluded to be consolidated subsidiaries of P10 under the voting interest model.

Revenue Recognition of Management Fees and Management Fees Received in Advance

On January 1, 2019, the Company adopted ASC 606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method.

As a result, prior period amounts continue to be reported under legacy GAAP.

The adoption did not change the historical pattern of recognizing revenue for management fees.

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For asset management and advisory services, the Company typically satisfies its performance obligations over time as the services are rendered, since the customers simultaneously receive and consume the benefits provided as the Company performs the service.

The transaction price is the amount of consideration to which the Company expects to be entitled based

on the terms of the arrangement.

The transaction price is the amount of consideration to which the Company expects to be entitled based on the terms of the arrangement.

For certain funds, management fees are initially calculated based on committed capital during the investment period and on net invested capital through the remainder of the fund’s term.

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Other advisory services include transaction and management fees associated with managing the origination and ongoing compliance of certain investments.

Other Revenue

Other revenue on our Consolidated Statements of Operations primarily consists of subscriptions, consulting agreements and referral fees.

The subscription and consulting agreements typically have renewable one-year lives, and revenue is recognized ratably over the current term of the subscription or the agreement.

If subscriptions or fees have been paid in advance, these fees are recorded as deferred revenue on our Consolidated Balance Sheets.

Referral fee revenue is recognized upon closing of certain opportunities.

Current income tax expense represents our estimated taxes to be paid or refunded for the current period.

In accordance with Accounting Standards Codification (ASC) 740, Income Taxes (“ASC 740”), we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse.

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We file various federal and state and local tax returns based on federal and state local consolidation and stand- alone tax rules as applicable.

Stock-Based Compensation Expense

Stock-based compensation relates to option grants for shares of P10 awarded to our employees.

Stock- based compensation cost is estimated at the grant date based on the fair-value of the award, which is determined using the Black Scholes option valuation model and is recognized as expense ratably over the requisite service period of the award, generally five years.

The share price used in the Black Scholes model is based on the trading price of our shares on the OTC Market.

Expected life is based on the vesting period and expiration date of the option.

Stock price volatility is estimated based on a group of similar publicly traded companies determined to be most reflective of the expected volatility of the Company due to the nature of operations of these entities.

The risk-free rates are based on the U.S.

Treasury yield in effect at the time of grant.

Forfeitures are recognized as they occur.

Business Acquisitions

In accordance with ASC 805, the Company identifies a business to have three key elements:

inputs, processes, and outputs.

While an integrated set of assets and activities that is a business usually has outputs, outputs are not required to be present.

In addition, all the inputs and processes that a seller uses in operating a set of assets and activities are not required if market participants can acquire the set of assets and activities and continue to produce outputs.

In addition, the Company also performs a screen test to determine when a set of assets and activities is not a business.

The screen requires that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business.

If the set of assets and activities is not considered a business, it is accounted for as an asset acquisition using a cost accumulation model.

In the cost accumulation model, the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values.

The Company includes the results of operations of acquired businesses beginning on the respective acquisition dates.

In accordance with ASC 805, the Company allocates the purchase price of an acquired business to its identifiable assets and liabilities based on the estimated fair values using the acquisition method.

The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill.

The excess value of the net identifiable assets and liabilities acquired over the purchase price of an acquired business is recorded as a bargain purchase gain.

The Company uses all available

information to estimate fair values of identifiable intangible assets and property acquired.

In making these determinations, the Company may engage an independent third-party valuation specialist to assist with the valuation of certain intangible assets, notes payable, and tax amortization benefits.

The consideration for certain of our acquisitions may include liability classified contingent consideration, which is determined based on formulas stated in the applicable purchase agreements.

The amount to be paid under these arrangements is based on certain financial performance measures subsequent to the acquisitions.

The contingent consideration included in the purchase price is measured at fair value on the date of the acquisition.

The liabilities are remeasured at fair value on each reporting date, with changes in the fair value reflected in general, administrative and other on our Consolidated Statements of Operations.

For business acquisitions, the Company recognizes the fair value of goodwill and other acquired intangible assets, and estimated contingent consideration at the acquisition date as part of purchase price.

This fair value measurement is based on unobservable (Level 3) inputs.

Goodwill and Intangible Assets

Goodwill is initially measured as the excess of the cost of the acquired business over the sum of the amounts assigned to identifiable assets acquired less the liabilities assumed.

As of September 30, 2021, goodwill recorded on our Consolidated Balance Sheets relates to the acquisitions of RCP 2, RCP 3, Five Points, TrueBridge, Enhanced, Hark, and Bonaccord.

As of September 30, 2021, the intangible assets are comprised of indefinite-lived intangible assets and finite-lived intangible assets related to the acquisitions of RCP 2, RCP 3, Five Points, TrueBridge, Enhanced, Hark, and Bonaccord.

Indefinite-lived intangible assets and goodwill are not amortized.

Finite-lived technology is amortized using the straight-line method over its estimated useful life of 4 years.

Finite-lived management and advisory contracts, which relate to acquired separate accounts and funds and investor/customer relationships with a specified termination date, are amortized in line with contractual revenue to be received, which range between 7 and 16 years.

Certain of our trade names are considered to have finite-lives.

Finite-lived trade names are amortized over 10 years in line with the pattern in which the economic benefits are expected to occur.

Goodwill is reviewed for impairment at least annually utilizing a qualitative or quantitative approach and more frequently if circumstances indicate impairment may have occurred.

The impairment testing for goodwill under the qualitative approach is based first on a qualitative assessment to determine if it is more likely than not that the fair value of the Company’s reporting unit is less than the respective carrying value.

The reporting unit is the reporting level for testing the impairment of goodwill.

If it is determined that it is more likely than not that a reporting unit’s fair value is less than its carrying value, then the difference is recorded as an impairment (not to exceed the carrying amount of goodwill).

The Company performed the annual goodwill impairment assessment as of September 30, 2021 and 2020 and concluded that goodwill was not impaired.

The Company has not recognized any impairment charges in any of the periods presented.

Qualitative and Quantitative Disclosures about Market Risk.

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Interest Rate Risk

As of September 30, 2021, we had $253.9 million in outstanding principal under our Credit and Guaranty Facility.

The annual interest rate on the Term Loan is based on LIBOR, subject to a floor of 1.00%, plus 6.00%.

On September 30, 2021, the interest rate on these borrowings was 7.00%.

As of March 31, 2022, we had $190.9 million in outstanding principal under our Term Loan and Revolving Credit Facility.

The annual interest rate on the Term Loan is based on SOFR, subject to a floor of 0.10%, plus 2.00%.

On March 31, 2022, the interest rate on these borrowings was 2.1% + SOFR.

We estimate that a 100-basis point increase in the interest rate would result in an approximately $1.4 million increase in interest expense related to the loan over the next 12 months.

In July 2017, the UK’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR as a benchmark by the end of 2021.

At the present time, our Facility has a term that extends beyond 2021.

The Facility provides for a mechanism to amend the underlying agreements to reflect the establishment of an alternate rate of interest.

However, we have not yet pursued any amendment or other contractual alternative to our Facility to address this matter.

We are currently evaluating the potential impact of the eventual replacement of the LIBOR interest rate.

We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements.

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In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.

Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing disclosure controls and procedures, our management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible disclosure controls and procedures.

The design of any disclosure controls and procedures also is based in part upon certain assumptions about likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

Our management, under the supervision and with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report.

Based on that evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective to provide reasonable assurance that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Legal Proceedings.

The information required with respect to this item can be found under “Contingencies”

in Note 14, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this annual report, and such information is incorporated by reference into this Item 1.

Risk Factors.

There have been no material changes from the risk factors previously disclosed in “Risk Factors”

included in our annual report on Form 10-K for the year ended December 31, 2021.

Unregistered Sales of Equity Securities and Use of Proceeds .

Not applicable.

Defaults Upon Senior Securities.

Not applicable.

Mine Safety Disclosures.

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis