What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-27 compared with 2022-03-21 · 170 added, 187 removed, 416 unchanged (46% of the section changed)

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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 annual report on Form 10-K.

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 annual report on Form 10-K due to the effects of acquisitions which occurred during the year ended December 31, 2020 and 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.

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 annual report on Form 10-K due to the effects of acquisitions which occurred during the years ended December 31, 2022, 2021, and 2020, 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.

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

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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 twelve months ended December 31, 2021.

results are included in our Consolidated Statements of Operations beginning with the period from April 1, 2020 through December 31, 2020 and forward.

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 twelve months ended December 31, 2021.

TrueBridge’s results are included in our Consolidated Statements of Operations beginning with the period from October 2, 2020 through December 31, 2020 and forward.

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 twelve months ended December 31, 2021.

ECG’s results are included in our Consolidated Statements of Operations beginning with the period from December 14, 2020 through December 31, 2020 and forward.

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 December 31, 2021 and the Consolidated Statement of Operations from September 30, 2021 to December 31, 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 2022 and the Consolidated Statement of Operations beginning with the period from September 30, 2021 to December 31, 2021 and forward.

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

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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.

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

Of the proceeds, $86.8 million was used to paydown the outstanding term loan balance, $12.4 million was used to pay off the RCP Seller Notes, $1.1 million cash settled certain option awards, $1.0 million funded 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 shares of Class A common stock are entitled to one vote.

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 a term loan facility in an aggregate principal amount of $125 million (the "term loan") and revolving commitments in an aggregate principal amount of $125 million (the "revolver") with a four year term and an additional $125 million accordion feature.

The variable interest rate is 210 basis points over the Secured Overnight Financing Rate ("SOFR").

Proceeds were used to pay down 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.

As of December 31, 2021, the company paid off the previous facility, drawing down the entire $125 million term facility and drew down $91 million on the revolver.

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.

The facility includes the option to exercise a $125.0 million accordion feature.

The accordion feature was exercised in order to complete the acquisition of Western Technology Investment LLC ("WTI") on October 13, 2022.

The outstanding balance as of December 31, 2022 was $293.4 million.

On October 13, 2022, we completed the acquisition of WTI that again further expanded on solutions available to our investors by entering into the venture debt space.

The effect of this acquisition is reflected in our Consolidated Balance Sheet at December 31, 2022 and Consolidated Statement of Operations from October 13, 2022 to December 31, 2022.

The acquisition was accounted for as a business combination and WTI is reported as a consolidated subsidiary of P10.

During the 2022, the Board approved up to $40.0 million to repurchase stock.

These shares may be repurchased from time to time in the open market at prevailing market prices, in privately negotiated transactions, in block trades, in accordance with Rule 10b5-1 trading plans and/or through other legally permissible means.

The timing and amount of any repurchases pursuant to the program will depend on various factors including, the market price of its Class A Common Stock, trading volume, ongoing assessment of P10’s working capital needs, general market conditions, and other factors.

For the year ended December 31, 2022, $19.8 million has been spent to buy back shares under this program.

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

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

We have collectively deployed over $3.3 billion into 850+ projects and businesses across 39 states since 1999.

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.

Investments in solar assets have generated over 1.6 billion KWh of renewable energy over the lifetime of the portfolio.

As of December 31, 2022, IIS managed $1.9 billion of FPAUM .

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PCS also provides loans to mid-life, growth equity, venture and other funds backed by the unrealized investments at the fund level and provide financing for companies that would otherwise require equity.

The PCS investment team, which is comprised of 25 investment professionals with an average of 22+ years of experience, has deep and long-standing relationships in the private credit market which it has cultivated over the past 22 years, including 240+ investors across 5 active investment vehicles and 185+ portfolio

companies with over $1.9+ billion capital deployed.

The PCS investment team, which is comprised of 38 investment professionals with an average of 24+ years of experience, has deep and long-standing relationships in the private credit market which it has cultivated over the past 22 years, including 300+ investors across 12 active investment vehicles and 1,600+ portfolio companies with over $9.7+ billion capital deployed.

Our PCS is differentiated by our relationship-driven sourcing approach providing capital solutions for growth-oriented companies.

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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.

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

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 and attract capital.

Despite rising interest rates and the global economy outlook remaining uncertain, we continue to see investors turning towards alternative investments to achieve consistent and higher yields with our contractually guaranteed fee rate.

The continued growth of our business may be influenced by several factors, including the following market trends:

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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.

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

Favorable lower and lower-middle market dynamics, and data driven sourcing.

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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.

Our database stores and organizes a universe of managers and opportunities with powerful tracking metrics that we believe drive optimal portfolio construction, 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 several factors, including our continued access to a broad set of private market information on an on-going basis.

Expanding asset class solutions, broaden geographic reach and grow private markets network effect.

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We currently have a leading presence in North America, but believe that expanding our investor presence into international markets can be a significant growth driver for our business as investors continue to seek geographically diverse private market exposure.

Further, expanding into additional asset class solutions will enable us to further enhance our integrated network effect across private markets by, among other benefits, fostering deeper manager relationships.

Further, expanding into additional asset class solutions can enable us to further enhance our integrated network effect across private markets by, among other benefits, fostering deeper manager relationships.

We believe that the growing number of private markets focused fund managers increases the operational burden on investors and will lead to a greater reliance on highly trusted advisors to help investors navigate the complexity associated with multi- asset class manager selection.

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There is additional uncertainty around potential legal, regulatory, and tax changes, which may impact our profitability or impact our ability to operate and grow our business.

Our ability to raise capital in order to fund acquisitions and strategic growth initiatives.

In addition to organic growth of our existing solutions and services, our growth will continue to depend, in part, on our ability to identify, evaluate and acquire high performing and high-quality asset management businesses in order to expand our team of asset managers and advisors, as well as expand the industries and end markets which we serve.

Our ability to raise capital to fund acquisitions and strategic growth initiatives.

In addition to organic growth of our existing solutions and services, our growth will continue to depend, in part, on our ability to identify, evaluate and acquire high performing and high-quality asset management businesses to expand our team of asset managers and advisors, as well as expand the industries and end markets which we serve.

These acquisitions may require us to raise additional capital through debt financing or the issuance of equity securities.

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We intend to use these advantages afforded to us by our proprietary databases, analytical tools and deep industry knowledge to drive our performance, provide our clients with customized solutions across private markets asset classes and continue to differentiate our products and services from those of our competitors.

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.

Our ability to maintain our data advantage is dependent on several 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.

Consolidation of Manager relationships and flight to quality.

As global financial markets continue to remain uncertain and private markets investors evaluate their exposure and allocation to private markets, a trend of consolidating managers has emerged.

Our strategies, with long-track records of success, deep industry experience, well-established relationships, and high-quality investment opportunities, can benefit from a trend toward reducing the number of managers to which capital is allocated.

Furthermore, we believe that by offering investors access to access-constrained investment opportunities, investors may favor our strategies as they make decisions on market exposure and allocation levels.

Counter-cyclical strategies can thrive in a higher-rate environment.

Some strategies are counter-cyclical in nature and can take advantage of a higher rate environment.

Specifically, private credit products, including our NAV lending strategy, with floating rate terms, benefit from the current environment, with floating rates and longer duration.

The higher rate environment also benefits our venture debt strategy as rates float throughout the investment period.

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 to, in 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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These fees are typically staged to decrease over the life of the contract due to built-in declines in contractual rates and/or as a result of lower net invested capital balances as capital is returned to investors.

We also earn revenues through catch-up fees ("catch up fees") on the funds we manage.

We also earn revenues through catch-up fees ("catch

up fees") on the funds we manage.

Catch-up fees are earned from investors that make commitments to the fund after the first fund closing occurs during the fundraising period of funds originally launched in prior periods, and as such the investors are required to pay a catch-up fee as if they had committed to the fund at the first closing.

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Referral fee revenue is recognized upon closing of opportunities where we have referred credit opportunities that do not match our investment criteria.

The Company recognizes an accrued contingent liability and contingent payments to customers in our Consolidated Balance Sheets for an agreement between ECG and a third party.

The agreement requires ECG to share in certain revenues earned with the third party and also includes an option for the third party to sell back the revenue share to ECG at a set multiple.

Additionally, ECG holds the option to buy back 50% of the revenue share at a set multiple.

The options to repurchase the revenue share are not exercisable until July of 2025.

The Company believes it is probable that the third party will exercise its option to sell back the revenue share and has recognized a liability on the Consolidated Balance Sheets.

The Company has also recognized a contingent payments to customers asset associated with the agreement and will amortize the asset against revenue over the period the option is expected to be exercised.

The amortization is reported in management and advisory fees on the Consolidated Statements of Operations.

Operating Expenses

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This structure differs from that of most of our competitors, which we believe better aligns the objectives of our stockholders, investors and investment professionals.

The result is the substantial majority of our compensation and benefit expense is predictable.

Professional fees primarily consist of legal, advisory, accounting and tax fees which may include services related to our strategic development opportunities such as due diligence performed in connection with potential acquisitions.

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 Advisory Agreement ("SAA") that is the result of an existing agreement Bonaccord had 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.

This expense is driven by a Strategic Alliance Agreement ("SAA") that Bonaccord 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)

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

Income Tax Benefit

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

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

Income Tax Benefit/(Expense)

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

Current income tax benefit/(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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Total other (expense)

Net income/(loss) before income taxes

Income tax benefit

Net income before income taxes

Income tax (expense)/benefit

Year Ended December 31, 2022 and December 31, 2021

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 1.03% for the year ended December 31, 2022 and 1.00% for the year ended December 31, 2021.

For the year ended December 31, 2022 compared to the year ended December 31, 2021, revenues increased $47.8 million or 32% due to higher management fees primarily from the impact of organic growth in 2022.

Management and advisory fees increased $47.1 million, or 32%, to $196.5 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021 due primarily from additional fund closings and capital raised.

The full year of revenues from Hark and Bonaccord who were both acquired in the last day of the third quarter in 2021 and a partial quarter of revenue in 2022 from the acquisition of WTI attributed $14.9 million of the increase in management fee revenue.

Catch up fees for the twelve months ended December 31, 2021 were $6.1 million associated with the fund closings at TrueBridge and RCP.

Other revenues, which represent ancillary elements of our business, increased by $0.7 million or 63% to $1.8 million for the year ended December 31, 2022 as compared to the year ended December 31, 2021 driven primarily by an increase of

$0.6 million of interest income and $0.1 million of facility fee revenues, offset by a decrease of $0.2 million to referral fee revenues.

Year Ended December 31, 2021 and December 31, 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 year ended December 31, 2021 and December 31, 2020.

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The remaining increase of $22.1 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 and fourth quarters of 2021.

Catch up fees for th the twelve months ended December 31, 2021 were $6.1 million associated with the fund closings at TrueBridge and RCP.

Catch up fees for the twelve months ended December 31, 2021 were $6.1 million associated with the fund closings at TrueBridge and RCP.

Other revenues, which represent ancillary elements of our business, decreased by $0.1 million or 11% to $1.1 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020 driven primarily by a decrease of $0.1 million of interest income and $0.1 million of facility fee revenues, offset by a decrease of $0.1 million to referral fee revenues.

Year Ended December 31, 2020 and December 31, 2019

Total revenues increased $22.5 million, or 50%, to $67.4 million, for the twelve months ended December 31, 2020 compared to the twelve months ended December 31, 2019, due to higher management and advisory fees, partially offset by a decrease in other revenues.

Management and advisory fees increased by $23.9 million, or 57%, to $66.1 million, for fiscal 2020 compared to fiscal 2019 due primarily to the acquisitions of Five Points, TrueBridge, and ECG during fiscal 2020, which contributed management and advisory fee revenues of $21.1 million, in total.

The remaining increase of $2.8 million represents an increase in the Company’s legacy operations, which was primarily due from (i) having a full year of Fund XIV revenues representing a $2.7 million increase in revenues, including $0.8 million of catchup fees, (ii) the launch of Fund XV in July 2020 which contributed total revenues of $1.3 million, and (iii)a full year of Columbia FOF II representing an increase of $0.9 million for fiscal 2020.

These increases were partially offset by a decrease in SOF III catch up fees of $1.4 million year-over-year, and $1.4 million due to scheduled fee step downs for RCP Fund X and Direct II.

Other revenues, which represent ancillary elements of our business, decreased by $1.5 million, or 54%, year- over-year.

This decrease was primarily attributable to a decrease in referral fees from one of our customers, which decreased from $1.5 million in fiscal 2019 to $0.1 million in fiscal 2020.

For the Year Ended

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Total operating expenses increased by $44.7 million, or 41%, to $154.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

This increase was primarily due to increases in compensation and benefits as well as general, administrative, and other expenses primarily due to the acquisitions of Hark and Bonaccord on September 30, 2021 and WTI on October 13, 2022 as well as increased operating expenses related to organizational growth and public company expenses.

Compensation and benefits expense increased by $39.5 million, or 72%, to $94.3 million, for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Stock compensation accounts for $18.6 million of the increase.

This was driven by RSUs and stock options granted to employees during the fourth quarter of 2021 and the first, third and fourth quarters of 2022 as well as RSAs granted in late 2021 and the third quarter of 2022.

The Bonaccord and Hark Units that are discussed in Note 16 of the consolidated financial statements account for $8.3 million of the $18.6 million of increased stock compensation expense.

The acquisitions of Hark, Bonaccord, and WTI contributed $12.3 million to the increase in compensation expense.

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.

There was a $2.1 million increase associated with the build out of P10 back office to meet compliance needs of a public company.

Finally, an additional $4.8 million related to increases in headcount and performance incentives across all subsidiaries.

Professional fees increased by $1.3 million, or 12%, to $12.9 million primarily driven by both timing of acquisitions in 2021 and 2022 as well as public company filing and compliance costs.

General, administrative and other increased by $8.7 million, or 88% to $18.5 million, due primarily to the acquisitions of Hark, Bonaccord, and WTI as well as public company expenses.

The additions of Hark, Bonaccord, and WTI brought an additional $2.6 million of expense in 2022.

The Company also entered into a D&O insurance policy following the IPO in October 2021.

This brought an additional $1.9 million of expense during the year ended December 31, 2022.

The Company entered into two new leases since September 30, 2021 which added an additional $1.4 million of expense.

The remaining $2.8 million of additional general and administrative expense is derived from additional information technology expenses and increased travel since last year.

Contingent consideration expense decreased $1.8 million, to $1.7 million, for the twelve months ended December 31, 2022 as compared to the twelve months ended December 31, 2021.

This was driven by quarterly revaluations of the contingent consideration from the acquisitions of Hark and Bonaccord.

Amortization of intangibles decreased by $3.5 million, or 12%, to $26.9 million, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

The decrease is driven by an intangible asset that fully amortized in 2021 at RCP and less amortization at ECG in 2022 than in 2021 driven by unique syndication fee contracts.

This was offset by the addition of $65.2 million of gross finite lived intangible assets in the acquisitions of Hark, Bonaccord, and WTI.

Year Ended December 31, 2021 and December 31, 2020

Total operating expenses increased by $51.4 million, or 88%, to $110.2 million for the year ended December 31, 2021 compared to the year ended December 31, 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 year 2020 as well as the acquisitions of Hark and Bonaccord completed on September 30, 2021.

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The increase is due to the addition of $119.8 million of gross finite lived intangible assets in the acquisitions of Hark, Bonaccord, TrueBridge, Five Points and ECG.

Year Ended December 31, 2020 and December 31, 2019

Total operating expenses increased by $26.6 million, or 83%, to $58.7 million, for fiscal 2020 compared to fiscal 2019.

This increase was primarily due to increases in compensation and benefits, professional fees and amortization of intangibles.

These increases were primarily attributable to the acquisitions completed in fiscal 2020 of Five Points, TrueBridge and Enhanced.

Compensation and benefits expense increased by $12.2 million, or 99%, year-over-year.

There were several components that contributed to this increase.

The primary driver for the increase in compensation and benefits was the acquisitions completed in fiscal 2020 which resulted in a total of $8.5 million of additional compensation expense including Five Points, TrueBridge and ECG.

Additionally, salaries increased by $2.9 million in fiscal 2020 due to an increase in headcount and annual compensation increases.

Also reflected in the year-over-year increase was a $0.3 million increase in stock-based compensation expense.

Professional fees increased by $9.4 million, or 205% to $14.0 million in fiscal 2020 due primarily to pursuing business development opportunities and scaling the business.

Included in these costs were approximately $6.5 million of transaction costs related to our acquisitions of Five Points, TrueBridge, and ECG, primarily consisting of legal, tax and advisory costs.

Additionally, during fiscal 2020, the Company incurred $3.4 million in professional fees associated with the Company’s efforts to prepare for an initial public offering.

These increases were partially offset by a decrease of $0.6 million in other costs.

Amortization of intangibles increased by $4.9 million, or 47%, year-over-year.

The increase year-over-year is due to the addition of $104.4 million of gross finite lived intangible assets in the acquisitions of Five Points, TrueBridge, and ECG, partially offset by a $0.7 million decrease in amortization from acquisitions which were completed in prior years.

Other Income/(Expense)

Year Ended December 31, 2022 and December 31, 2021

Other expenses decreased by $28.7 million, or (78)%, to $8.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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

The Company incurred $15.3 million of expense associated with early extinguishment of the credit and guaranty facility and subsequent pay off of Notes payable to sellers from the RCP acquisition.

This consisted of $4.8 million of penalties paid for early principal paydowns, $2.1 million of non-cash write offs of debt issuance cost amortization associated with the credit and guaranty facility, and $8.4 million of remaining amortization on the Notes payable to sellers.

Those non-recurring expenses coupled with lower interest rates through the majority of 2022 as a product of the refinance are attributable to the decrease in other expenses.

Our interest rate on the credit and guaranty facility was 7%, where as the existing credit facility is 2.1% plus SOFR.

The average interest rate on our 2022 debt was 4.11%.

Year Ended December 31, 2021 and December 31, 2020

Other expenses increased by $24.9 million, or 213%, to $36.6 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

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The expected interest expense for 2022 with the new term loan and revolving credit facility is $7.3 million thus saving the Company $13.6 million annually in interest expense.

Income Tax Benefit/Expense

Year Ended December 31, 2022 and December 31, 2021

Interest expense, net on long-term debt increased by $0.4 million, or 3%, to $11.7 million for fiscal 2020 compared to fiscal 2019.

This increase was primarily due to a $1.3 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.

The effects of the increase in principal were partially offset by decreases in the associated LIBOR index rate, which was lower during fiscal 2020 than in fiscal 2019.

Additionally, the increase was further offset by a $1.0 million decrease on the imputed interest and discount amortization associated with our non-interest bearing notes.

Income Tax Benefit

Income taxes increased by $13.1 million to an expense of $6.1 million for the year ended December 31, 2022 compared to a benefit of $7.1 million for the year ended December 31, 2021.

The decrease was primarily due to the decrease of deferred tax assets during 2022.

Year Ended December 31, 2021 and December 31, 2020

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The decrease was primarily due to the increase of deferred tax assets during 2021, which is largely driven by the prior year's large release in valuation allowance.

Year Ended December 31, 2020 and December 31, 2019

Income tax benefit increased by $16.3 million, or 156%, to $26.8 million, for fiscal 2020 compared to fiscal 2019.

The increase was due primarily to a deferred tax benefit of $30.3 million in 2020 compared to a deferred tax benefit of $10.9 million in 2019, an increase of approximately $19.4 million.

The fiscal 2020 tax benefit was primarily comprised of a $35.4 million reduction in the deferred tax valuation allowance, partially offset by deferred tax expenses for changes in FIN 48 liabilities and the tax effects of expiration of NOL and other credits of $4.2 million and $3.8 million, respectively.

This increase in deferred tax benefit was partially offset by a $3.0 million increase in current tax expense year- over-year, which was primarily due to transaction related tax effects.

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, ECG, Hark and Bonaccord were acquired on January 1, 2020.

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

For the Year Ended

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FPAUM as of December 31, 2022

FPAUM increased $3.9 billion, or 29.3%, to $17.3 billion on a pro forma basis and $4.6 billion or 35.9% to $17.3 billion on an actual basis for the year ended December 31, 2021, due primarily to an increase in capital raised from our private equity and venture capital solutions.

FPAUM increased $2.2 billion, or 11.4%, to $21.2 billion on a pro forma basis and $3.9 billion or 22.8% to $21.2 billion on an actual basis for the year ended December 31, 2022, due primarily to an increase in capital raised from our private equity and venture capital solutions as well as the acquisition of WTI.

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.

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FPAUM as of December 31, 2021

FPAUM increased $1.5 billion, or 12.2%, to $13.4 billion on a pro forma basis for the twelve months ended December 31, 2020, due primarily to an increase in capital raised from our private equity, venture capital and impact investment solutions.

FPAUM increased $6.9 billion, or 120.2%, to $12.7 billion on an actual basis for the twelve months ended December 31, 2020, due primarily to an increase in FPAUM from acquisitions of $6.3 billion.

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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 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 differ significantly from the net income tax benefit, which is primarily comprised of deferred tax expense as described in the results of operations.

For the Twelve Months

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.

Similarly, the cash income taxes paid during the 2022 and 2021 periods differ significantly from the net income tax benefit, which is primarily comprised of deferred tax expense as described in the results of operations.

For the Year Ended

(in thousands)

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Interest expense, net

Loss on extinguishment of debt

Income tax (benefit)/expense

Income tax expense/(benefit)

Non-recurring expenses

Non-cash stock based compensation

Acquisition based compensation

Earn out related compensation

Adjusted EBITDA

Cash interest expense including loss on extinguishment, net

Cash interest expense

Cash income taxes, net of taxes related to

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(in thousands)

Cash and cash equivalents

Cash and cash equivalents (including restricted cash)

Goodwill and other intangibles

Debt obligations

Redeemable noncontrolling interest

Stockholders’

There was an increase in cash and cash equivalents from $11.8 million as of December 31, 2020 to $40.9 million as of December 31, 2021 due to operating cash flows and cash flows from financing activities related to the IPO.

This was offset by cash used for acquisitions, and financing activities related to the Credit and Guaranty Facility paydown.

There was an increase in goodwill and intangible assets of $33.8 million due to the acquisitions of Hark and Bonaccord of $63.0 million as

well as as $1.3 million adjustment to goodwill as a result of a purchase price adjustment at ECG offset by a $30.4 million reduction due to amortization of intangibles during the year ended December 31, 2021.

Remaining total assets also increased in the same period by $8.3 million for right-of-use asset for a new lease space in New York for Hark, Bonaccord, ECG, and P10 and an increase in receivables due to ECG's Advisory Agreement with Enhanced PC.

Additionally, deferred tax assets increased by $7.5 million driven primarily by tax effects related to the reorganization and restructure of the Company and its ability to apply more NOLs to the operations of its subsidiaries.

Additionally, lease liabilities increased related to the same aforementioned lease.

The Company also paid off the Credit and Guaranty Facility on December 22, 2021 and refinanced with a new term loan and revolving credit facility.

This decreased the debt outstanding balance from December 31, 2020 to December 31, 2021 by $77.6 million.

There was a decrease in cash and cash equivalents from $43.5 million as of December 31, 2021 to $29.5 million as of December 31, 2022 due to operating cash flows and cash flows from financing activities related to borrowings on the Credit Facility.

In addition, cash used for the acquisition of WTI.

There was an increase in goodwill and intangible assets of $110.9 million due to the acquisition of WTI of $137.6 million.

This was offset by amortization of intangible assets during the year ended December 31, 2022.

Remaining total assets also increased in the same period by $53.2 million primarily due to $24.2 million increase in due from related parties.

This is driven by the Advisory Agreement at Enhanced.

Additionally, deferred

tax assets decreased by $3.9 million driven primarily by the release of valuation allowances for state net operating loss carryforwards.

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 Notes payable to sellers were paid off in relation to the debt refinancing transaction that occurred December 22, 2021.

Refer to the debt footnote in the notes to the consolidated financial statements.

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 provided 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 provided 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, December 14, 2020, and in the third quarter of 2021 to provide additional term loan borrowings as further described below.

The Facility was paid down in full on December 22, 2021.

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.

The Company drew $125.0 million on the term loan and $90.9 million on the revolving credit facility.

The proceeds of the term loan and revolving credit facility were used to pay down the Credit and Guaranty Facility outstanding with HPS and the Notes payable to sellers.

During the year ended December 31, 2020, we raised $56.4 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 was paid off in December 2021.

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 December 31, 2021, we had $212.5 million outstanding under the Term Loan and Revolving Credit Facility.

The total debt outstanding decreased from December 31, 2020 due to the extinguishment of the HPS Credit and Guaranty Facility and the Notes payable to sellers, including the additional $35.0 million draw to fund the acquisitions of Bonaccord, offset by entering into the Term Loan and Revolving Credit Facility.

As of December 31, 2021 total available debt on the term loan and revolving credit facility was $34.1 million entirely at the revolving credit facility.

The outstanding balance at December 31, 2021 was $215.9 million of which $125.0 million relates to the term loan and $90.9 million relates to the revolving credit facility.

There is also a $125 million accordion feature available in the credit agreement, which we exercised in September 2022.

The accordion was not drawn until October 2022, at which point it was divided to $87.5 million of term loan and $37.5 million of revolver.

$6.0 million of the revolver was drawn at the time.

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.

As of December 31, 2022, the Term Loan with a balance of $125.0 million is incurring interest at a SOFR rate of 2.61%.

The Term Loan associated with the accordion exercise with a balance of $87.5 million is incurring interest at a SOFR rate of 4.45%.

As of December 31, 2022, the Revolver Facility is split into seven tranches.

The total principal outstanding is $80.9 million and the average SOFR rate amongst the tranches is 4.32%.

The tranches are all incurring interest at a set rate for three month periods and are subsequently reset at the current SOFR rate.

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 of less than or equal to 3.50.

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

As of December 31, 2022, the balance drawn on the revolving credit facility is $80.9 million and on the term loan, the balance is $212.5 million.

The Company has incurred $8.4 million in interest expense for the year ended December 31, 2022.

In September 2022, the Company exercised the accordion feature of the Credit Agreement.

There were no draws made until the fourth quarter of 2022.

The Company incurred $1.4 million of up front fees during the exercise which are reflected as debt obligations on the Consolidated Balance Sheets.

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 and December 31, 2020

The following table reflects our cash flows for the twelve months ended December 31, 2022, 2021 and 2020:

For the Year Ended

Ended December 31,

(in thousands)

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Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents and

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Cash from operating activities increased $12.6 million or 26%, to $61.7 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.

The components of this net increase primarily consist of a $18.6 million increase in net income as well as of the following changes in operating assets and liabilities:

An increase of $14.4 million in due from related parties primarily driven by the Advisory Agreement at Enhanced;

An increase in cash used for accounts payable for the year of $10.2 million, of which $8.6 million related to the distribution of a payable related to the acquisition of WTI;

A decrease in income tax benefit of $13.1 million primarily driven by a decrease of deferred tax assets.

Year Ended December 31, 2021 and December 31, 2020

Cash from operating activities increased $38.3 million or 359%, to $49.0 million for the year ended December 31, 2021 compared to the year ended December 31, 2020.

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

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An increase in deferred revenues driven by new fund closings in the third and fourth quarter of 2021.

Year Ended December 31, 2020 and December 31, 2019

Cash from operating activities decreased $6.1 million or -37%, to $10.7 million for fiscal 2020.

The components of this net decrease primarily consisted of a $2.9 million decrease in net income adjusted for non-cash expenses and income, including stock-based compensation, depreciation and amortization, and benefit for deferred tax, and the following changes in operating assets and liabilities:

A decrease related to deferred revenues, primarily due to $6.5 million of deferred revenues acquired in the acquisition of TrueBridge, which were fully recognized in the fourth quarter of 2020;

An increase related to accounts receivable, primarily attributable to collections of $1.3 million of accounts receivable acquired in the acquisition of ECG;

A net increase related to changes in other operating assets and liabilities totaling $2.0 million.

Investing activities

Year Ended December 31, 2022 and December 31, 2021

The cash used in investing activities increased by $51.2 million, or 108% to $98.6 million, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This increase in cash used in investing activities was due almost entirely to the 2022 acquisition of WTI as compared to the 2021 acquisitions of Hark and Bonaccord.

The acquistion of WTI resulted in net cash payments of $96.5 million whereas the acquisitions of Hark and Bonaccord resulted in net cash payments of $46.9 million during the third quarter of 2021.

Year Ended December 31, 2021 and December 31, 2020

The cash used in investing activities decreased by $166.8 million, or 78% to $47.4 million, for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

This decrease in cash used was due almost entirely to the 2021 acquisitions of Hark Capital and Bonaccord Capital as compared to the 2020 acquisitions of Five Points, Truebridge, and ECG.

The acquisitions of Hark and Bonaccord resulted in net cash payments of $46.9 million during the

third quarter of 2021 whereas the acquisitions of Five Points, Truebridge and ECG resulted in net cash payments of $213.9 million in 2020.

Year Ended December 31, 2020 and December 31, 2019

The cash used in investing activities increased by $213.5 million or 32,601%, for fiscal 2020.

This increase in the cash used was due almost entirely to the acquisitions of Five Points, TrueBridge and Enhanced which resulted in net cash payments of $46.6 million, $87.7 million and $79.6 million, respectively.

The acquisitions of Hark and Bonaccord resulted in net cash payments of $46.9 million during the third quarter of 2021 whereas the acquisitions of Five Points, Truebridge and ECG resulted in net cash payments of $213.9 million in 2020.

Financing Activities

Year Ended December 31, 2022 and December 31, 2021

We recorded a net $29.1 million for the year ended December 31, 2021 for financing activities, as compared to cash provided by financing activities of $196.8 million for the twelve months ended December 31, 2020 due to the following factors;

(1) the paydown of the Term Loan and Guaranty Facility of $300.2 million, (2) the draw on the new Term Loan and Revolving Credit Facility of $215.9 million and (3) proceeds from the IPO of $138.0 million.

The cash obtained for financing activities for the twelve months ended December 31, 2020 was primarily due to the proceeds from the issuance of redeemable noncontrolling interests of $46.4 million and debt drawn on the Credit and Guaranty Facility of $159.4 million to fund acquisition activity.

We recorded a net $22.9 million for the year ended December 31, 2022 of cash provided by financing activities, as compared to cash provided by financing activities of $29.1 million for the twelve months ended December 31, 2021 due to the following factors:

(1) borrowings on the Term Loan and Revolving Credit Facility of $75.6 million net of $41.0 million of repayments and associated debt issuance costs of $1.9 million, (2) repurchases of common stock of $21.9 million, (3) cash settlement of stock options of $12.5 million, (4) dividends paid of $10.5 million and (5) contingent consideration payments of $7.4 million.

The cash provided by financing activities for the twelve months ended December 31, 2021 was primarily due to

the proceeds from the IPO of $138.0 million, debt drawn on the Credit and Guaranty Facility of $252.9 million to fund acquisition activity and the debt refinance associated with the establishment of the Term Loan and Revolving Credit Facility, and $341.3 million related to the extinguishment of debt associated with establishment of the Term Loan and Revolving Credit Facility.

Year Ended December 31, 2021 and December 31, 2020

Financing activities provided $196.8 million of cash for fiscal 2020, as compared to cash used of $5.6 million in the comparable period for 2019.

The large favorable increase was due to the issuance of redeemable non-controlling interests of $46.4 million and borrowings, net of debt issuance costs, of $154.6 million to fund the acquisitions of Five Points, TrueBridge, and Enhanced.

These inflows were partially offset by repayments of debt totaling $4.8 million.

In the comparable period for 2019, we had net outflows associated with our debt facilities of $5.6 million.

We recorded a net $29.1 million for the year ended December 31, 2021 of cash provided by financing activities, as compared to cash provided by financing activities of $196.8 million for the twelve months ended December 31, 2020 due to the following factors;

The cash obtained for financing activities for the twelve months ended December 31, 2020 was primarily due to the proceeds from the issuance of redeemable noncontrolling interest of $46.4 million and debt drawn on the Credit and Guaranty Facility of $159.4 million to fund acquisition activity.

Future Sources and Uses of Liquidity

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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 the IPO transaction to pay down a portion of the indebtedness of the Company under these facilities.

Critical Accounting Policies and Estimates

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See Note 2, “Significant Accounting Policies”

for a summary of our significant accounting policies.

of our consolidated financial statements for a summary of our significant accounting policies.

Basis of Presentation

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When evaluating whether we are the primary beneficiary of a VIE, we perform a qualitative analysis that considers the design of the VIE, the nature of our involvement and the variable interests held by other parties.

See Note 7 for further information.

See Note 7 of our consolidated financial statements for further information.

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.

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

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

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.

See Note 7 of our consolidated financial statements for more information on both consolidated and unconsolidated VIEs.

Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities under the voting interest model.

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

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

Five Points, P10 Inc., 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.

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

Accordingly, the Company did not record a cumulative adjustment upon adoption.

Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services.

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The Company primarily earns fees for advisory services provided to clients where the Company does not have discretion over investment decisions.

Management and advisory fees received in advance reflects the amount of fees that have been received prior to the period the fees are earned.

Management and advisory fees received in advance reflects the

amount of fees that have been received prior to the period the fees are earned.

These fees are recorded as deferred revenue on the Consolidated Balance Sheets.

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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.

Business Acquisitions

In accordance with ASC 805, Business Combinations ("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 December 31, 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 December 31, 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 Company will determine the fair value of the reporting unit and record an impairment charge for the difference between fair value and carrying value (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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Our predominant exposure to market risk is related to our role as general partner or investment manager for our specialized investment vehicles and the sensitivities to movements in the fair value of their investments and overall returns for our investors.

Since our management fees are generally based on commitments or net invested capital, our management

fee and advisory fee revenue is not significantly impacted by changes in investment values, but unfavorable changes in the value of the assets we manage could adversely impact our ability to attract and retain our investors.

Since our management fees are generally based on commitments or net invested capital, our management fee and advisory fee revenue is not significantly impacted by changes in investment values, but unfavorable changes in the value of the assets we manage could adversely impact our ability to attract and retain our investors.

Fair value of the financial assets and liabilities of our specialized investment vehicles may fluctuate in response to changes in the value of underlying assets, and interest rates.

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In such agreements, we depend on the respective counterparty to make payment or otherwise perform.

We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions.

We generally endeavor to minimize our risk of exposure by

limiting the counterparties with which we enter into financial transactions to reputable financial institutions.

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.

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-K

Item 7. Management’s Discussion and Analysis