What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-13 compared with 2023-03-27 · 191 added, 237 removed, 349 unchanged (55% of the section changed)

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The following discussion and analysis relates to the activities and operations of P10.

As used in this section, “P10,”

the “Company”, “we”

or “our”

includes P10 and only its consolidated subsidiaries.

As used in this section, “P10,” the “Company”, “we” or “our” 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 annual report on Form 10-K.

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Our mission is to provide our investors differentiated access to a broad set of solutions and investment vehicles across highly attractive asset classes and geographies that generate superior risk-adjusted returns.

Our success and growth have been driven by our position in the private markets’

ecosystem, providing investors with specialized private market solutions across a comprehensive set of investment strategies, including primary investment funds, secondary investment, direct investment and co-investments and advisory solutions.

Our success and growth have been driven by our position in the private markets’ ecosystem, providing investors with specialized private market solutions across a comprehensive set of investment strategies, including primary investment funds, secondary investment, direct investment and co-investments and advisory solutions.

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.

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 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 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 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, 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.

On October 20, 2021, P10 Holdings, in connection with its Initial Public Offering ("IPO"), completed a reorganization and restructure.

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

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

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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 effect of this acquisition is reflected in our Consolidated Balance Sheets at December 31, 2022 and Consolidated Statements of Operations for the year ended December 31, 2022 beginning with the period from October 13, 2022 to December 31, 2022 and forward.

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.

During 2022, the Board approved a program to repurchase up to $40.0 million of outstanding shares of our Class A and Class B common 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.

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

As of December 31, 2023, $28.7 million has been spent to buy back shares under this program.

On October 20, 2023, the Company entered into an executive transition agreement with each of Mr.

Alpert and Mr.

Webb (each, a “Transition Agreement”).

Pursuant to the Transition Agreements, Mr.

Alpert and Mr.

Webb ceased to serve as Co-Chief Executive Officer, and Mr.

Alpert and Mr.

Webb were appointed as Executive Chairman and Executive Vice Chairman, respectively, for a one-year period.

Additionally, Mr.

Webb's Transition Agreement provides a one year transition period to continue serving the Company in a mergers and acquisitions capacity.

Effective October 23, 2023, the board of the Company appointed Luke A.

Sarsfield III as Chief Executive Officer (“CEO”) of the Company.

In connection with his appointment as CEO, the Company entered into an employment agreement with Mr.

Sarsfield (the “Employment Agreement”) setting forth the terms of his employment and compensation.

In connection with both the Transition Agreements and the Employment Agreement, provisions were made for severance and sign-on compensation, respectively.

The associated expenses were recorded in compensation and benefits on the Consolidated Statement of Operations.

As of December 31, 2023, 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 $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 have generated over 1.6 billion KWh of renewable energy over the lifetime of the portfolio.

From inception in 1999 through December 31, 2023, inclusive of proprietary assets and assets managed by affiliates, Enhanced Capital has raised a total of $6.1 billion.

Of the total AUM, impact assets represent $4.0 billion invested in over 1,000 projects and businesses across 40 states, Washington DC, and Puerto Rico and does not include investments made by non-impact affiliates.

Investments in clean energy have generated an estimate of over 2,229 GWh of renewable energy from inception to December 31, 2023.

As of December 31, 2023, IIS managed $2.0 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 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.

The PCS investment team, which is comprised of 39 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 11 active investment vehicles and 1,600+ portfolio companies with $9.8+ billion capital deployed.

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

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We currently maintain 55+ active sponsor relationships and have 80+ platform investments.

As of December 31, 2022, PCS managed $3.1 billion of FPAUM.

As of December 31, 2023, PCS managed approximately $2.9 billion of FPAUM.

Sources of Revenue

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Primary investment funds refer to investment vehicles which target investments in new private markets funds, which in turn invest directly in portfolio companies.

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

Primary investments are made during a fundraising period in the form of capital commitments, which are called upon by the fund manager and utilized to finance its investments in portfolio companies during a predefined investment period.

We receive a fee stream that is typically based on our investor’s committed, locked-in capital;

capital commitments that typically average ten to fifteen years, though they may vary by fund and strategy.

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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.

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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Our direct investing platform comprises approximately $8.3 billion of our FPAUM as of December 31, 2023.

• Secondaries.

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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Operating Segments

We operate our business as a single operating segment, which is how our chief operating decision makers (our Co-Chief Executive Officers) evaluate financial performance and make decisions regarding the allocation of resources.

We operate our business as a single operating segment, which is how our chief operating decision maker evaluates financial performance and makes decisions regarding the allocation of resources.

Trends Affecting Our Business

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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 (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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The complex regulatory and tax environment could restrict our operations and subject us to increased compliance costs and administrative burdens, as well as restrictions on our business activities.

The SEC recently adopted new rules and rule amendments to enhance the regulation of private fund advisers and update the existing compliance rule that applies to all investment advisers.

Compliance with these new rules is expected to increase our compliance costs and further restrict certain

business activities.

In addition, the SEC recently adopted significant new compliance requirements for investment advisers related to cybersecurity matters that are expected to increase compliance costs.

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 to fund acquisitions and strategic growth initiatives.

• 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 to expand our team of asset managers and advisors, as well as expand the industries and end markets which we serve.

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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’

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

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.

• Data advantage relative to competitors.

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See Significant Accounting Policies in Note 2 of our Consolidated Financial Statements for additional information regarding the way revenues are recognized.

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

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.

We earn management and advisory fees based on a percentage of investors’ capital commitments to, in funds or deployed capital.

Fee schedules are generally fixed and set for the expected life of the funds, which typically are between ten to fifteen years.

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Other revenue consists of subscription and consulting agreements and referral fees that we offer in certain cases.

Subscription and consulting agreements provide advisory and/or reporting services to our investors such as monitoring and reporting on an investor’s existing private markets investments.

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.

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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.

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

The agreements require 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 options to repurchase the revenue share are not exercisable until a certain period of time has lapsed per the agreements.

The Company believes it is probable that the third parties will exercise their options to sell back the revenue share and has recognized liabilities on the Consolidated Balance Sheets.

The Company has also recognized contingent payments to customers asset associated with the agreements and will amortize the assets against revenue over the length of the management contracts.

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

Operating Expenses

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

Compensation and benefits are our largest expense and consists of salaries, bonuses, severance, stock-based compensation, earnout and bonus payments related to the acquisition of WTI, 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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Carried interest is typically structured to stay with the investment professionals.

As such, while this does not impact the compensation we pay to our employees, it allows our investment professionals to receive additional benefit and provides economic incentive for them to outperform on behalf of our investors.

As such, while this does not impact the compensation we pay to our employees, it allows our investment professionals to receive additional benefit and provides an economic incentive for them to outperform on behalf of our investors.

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

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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.

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

General, administrative and other includes rent, 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 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.

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

Other (Expense)/Income

Interest expense includes interest paid and accrued on our outstanding debt, along with the amortization of deferred financing costs.

Other (expense)/income includes the accrued expenses related to litigation and regulatory activity as discussed in Note 14.

Income Tax Benefit/(Expense)

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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.

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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Results of Operations

For the year ended December 31, 2022, December 31, 2021, and December 31, 2020.

For the Year Ended

For the years ended December 31, 2023, December 31, 2022, and December 31, 2021.

ended December 31,

(in thousands)

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Loss on early extinguishment of debt

Other (expense)/income

Total other (expense)

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.

For the year ended December 31, 2021 compared to the year ended December 31, 2020, revenues increased $83.2 million or 123% due to higher management fees primarily from the impact of 2020 acquisitions.

Management and advisory fees increased $83.3 million, or 126%, to $149.4 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020 due primarily to the acquisitions of TrueBridge and ECG during the fourth quarter of 2020, which contributed management fee and advisory revenues of $53.8 million.

Acquisitions of Five Points in the second quarter of 2020 and Bonaccord and Hark on September 30, 2021, contributed management fee and advisory revenues of $7.4 million.

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 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.

For the Year Ended

Net (loss)/income before income taxes

Income tax (expense)

NET (LOSS)/INCOME

Years Ended December 31, 2023 and December 31, 2022

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 years ended December 31, 2023 and December 31, 2022.

For the year ended December 31, 2023 compared to the year ended December 31, 2022, revenues increased $43.4 million or 22% due to higher management fees from the impact of inorganic growth increasing revenue by $20.3 million driven by the acquisition of WTI and $24.4 million of organic growth across Bonaccord, Hark, RCP, and TrueBridge.

This was offset by a decline in revenues of $1.7 million at Five Points driven by fee expirations.

Management and advisory fees increased $42.2 million, or 21%, to $238.7 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 due to inorganic growth from the acquisition of WTI, which increased revenue by $20.2 million, and organic FPAUM growth at Bonaccord, Hark, RCP, and TrueBridge of $26.9 million.

This was offset by a decline in revenues of $1.7 million at Five Points driven by fee expirations and a decline of revenues of

$3.0 million at Truebridge due to a contract modification that is discussed below.

Catch up fees for the year ended December 31, 2023 were $14.4 million.

Catch up fees are associated with the fund closings at Bonaccord, TrueBridge and RCP.

Management fees are non-refundable, however, a certain fund was raised in 2022 with the objective of investing in all funds raised by an undisclosed manager across its global platform, most likely across two vintages – 2022 and 2024/2025.

The fund closed with $275.0 million of external LP capital.

Management fees were charged on $250 million, as the fund manager was unsure how much of the $275.0 million raised would be deployed.

The management rate is 1% based on LP commitment.

The fund deployed just under 40% of its total fund size in the 2022 vintages, with the remaining 60% reserved for future vintages.

In late 2023, the undisclosed manager announced that it would be separating its global platform into three separate geo-specific entities, spinning its India and China operations off into their own independent firms.

The fund mandate does not allow investments in these new independent firms.

As a result, the fund manager recommended that LPs vote to release all fund LPs from their uninvested capital which was approximately 60% of the original commitment.

The fund manager distributed a consent election to that effect.

The management fee from inception will be revised based on this new, smaller fund size which is approximately 40%.

In addition, to preserve goodwill with limited partners, the fund waived 50% of the recalculated management fee from inception at June 2022 to December 2023.

In accordance with ASC 606, this price concession was treated as a contract modification thus reducing revenue in the period in which it was identified which was the fourth quarter of 2023.

In the fourth quarter of 2023, revenue was reduced by $3.0 million.

Other revenues, which represent ancillary elements of our business, increased by $1.2 million or 66% to $3.0 million for the year ended December 31, 2023 as compared to the year ended December 31, 2022 driven primarily by an increase of $1.3 million of interest income offset by a decrease of $0.1 million of subscription fee revenues.

ended December 31,

OPERATING EXPENSES

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Operating Expenses

Year Ended December 31, 2022 and December 31, 2021

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

Years Ended December 31, 2023 and December 31, 2022

Total operating expenses increased by $65.9 million, or 43%, to $220.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

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.

This increase was primarily due to increases in compensation and benefits, as well as amortization expense, and general, administrative, and other expenses primarily due to the transition of the Chief Executive Officer role in October 2023 and a full year of operation with WTI, which was acquired on October 13, 2022 as well as increased operating expenses related to organizational growth.

Compensation and benefits expense increased by $60.0 million, or 64%, to $154.3 million, for the year ended December 31, 2023 compared to the year ended December 31, 2022.

The primary driver for the increase in compensation and benefits were the acquisitions completed after the first quarter of 2020 which resulted in a total of $17.1 million of additional compensation expense during 2021, reflecting a full year of compensation expense.

Hark and Bonaccord, which were acquired at the end of Q3 2021, contributed to $1.7 million of the increase in compensation expense.

There was also an increase in headcount and compensation cost related to building out the corporate function as the Company prepared for its initial public offering of $4.0 million.

A smaller driver of the increase was $1.8 million in compensation cost for acquisition related employee incentive bonuses.

There was an additional $1.4 million of stock-based compensation expense incurred related to the accelerating of vesting associated with the IPO.

Additionally, there was an increase in compensation cost for employees across all entities of $4.2 million due to an increase in headcount and annual salary increases.

Professional fees decreased by $2.4 million, or 18%, to $11.5 million primarily driven by the decline in acquisitions from 2020 to 2021 in size and complexity.

The 4.3 million decrease in professional fees due to less acquisition costs was offset by an increase at the newly acquired subsidiaries of $2.4 million due to the partial years activity in 2020.

The remaining decline in professional fees was a $0.5 million decline in legal expenses at RCP.

General, administrative and other increased by $5.2 million, or 110% to $9.9 million, due primarily to the acquisitions of TrueBridge, Five Points and ECG.

The acquisitions resulted in an increase in general and administrative costs of $4.1 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020.

due to a full year of costs in 2021.

General, administrative and other expenses increased by $0.9 million due to additional expenses and costs related to building out a corporate function in order to operate as a public company.

The additional $0.2 million was recognized at RCP, Hark and Bonaccord in line with the normal course of business.

Contingent consideration expense increased $3.5 million, to $3.5 million, for the twelve months ended December 31, 2021 as compared to the twelve months ended December 31, 2020.

This was driven by remeasurement of the contingent consideration from the acquisitions of Hark and Bonaccord post acquisition during the fourth quarter of 2021.

The increase is due to a number of factors.

The acquisition of WTI contributed $9.6 million to the increase in compensation expense.

Stock based compensation contributed to $18.3 million of the increase in compensation expense.

This was driven primarily by the Chief Executive Officer transition which resulted in $15.7 million of stock based compensation expense.

Stock based compensation unrelated to the transition increased by $2.4 million.

The earn out and bonus accruals associated with the acquisition of WTI as discussed in Note 14 in the footnotes to the Consolidated Financial Statements contributed an increase of $17.4 million.

Cash payments of severance contributed to $5.7 million primarily related to management changes.

Finally, $9.0 million of the increase in compensation expense was driven by an increase in headcount and associated benefits across all entities.

Professional fees decreased by $0.2 million, or 1%, to $12.7 million primarily driven by a decrease of $1.6 million in legal fees and professional services offset by an increase of $1.4 in audit, tax, and employee placement fees.

General, administrative and other increased by $4.1 million, or 22% to $22.6 million, due primarily to the acquisition of WTI as well as additional placement agent fees associated with increased revenues.

Contingent consideration expense decreased $1.2 million, to $0.6 million, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

This was driven by remeasurements of the fair value of contingent consideration from the acquisitions of Hark and Bonaccord.

More expense was recognized during 2022 due to increased probability of achieving performance hurdles.

Additionally, Hark's earnout was fully settled during the first half of 2023.

Amortization of intangibles increased by $2.4 million, or 9%, to $29.2 million, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

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.

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

This is recognition of a full year of amortization due to the acquisition of WTI, which was acquired in October 2022, offset by decreases at ECG and RCP.

The decrease at ECG is driven by unique syndicate contracts' amortization schedule, which is based on projected revenues at the time of acquisition.

The decrease at RCP is driven by asset management fee contracts' amortization schedule, which is based on projected revenues at the time of acquisition.

Other (Expense)/Income

Years Ended December 31, 2023 and December 31, 2022

Other expenses increased by $16.1 million, or 202%, to $24.1 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

This increase 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.

There was also a $10.6 million increase in interest expense related to the credit and guaranty facility as a result of the $194.4 million principal increases under the credit and guaranty facility to fund the acquisitions of TrueBridge, ECG, and Bonaccord.

This increase was offset by $0.8 million in other income driven by ECG’s income from unconsolidated subsidiaries during 2021.

On December 22, 2021, the Company refinanced its debt outstanding through entering into a new term loan and revolving credit facility, and using the proceeds to pay down and extinguish the remaining balance on the credit and guaranty facility and Notes payable to sellers.

In doing so, the Company obtained more favorable interest terms.

In 2021 the Company incurred $20.9 million in interest expense associated with the credit and guaranty facility as well as the Notes payable to sellers.

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.

This increase was driven by a rise in interest expense of $12.4 million.

The increase in interest expense correlates to a rise in interest rates throughout 2023, with the principal balance outstanding staying fairly consistent year over year with only a decrease of $0.8 million.

The increase was also driven by a legal settlement, primarily related to Oregon Department of Justice, for $2.4 million.

Income Tax Benefit/(Expense)

Year Ended December 31, 2022 and December 31, 2021

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

Income tax benefit decreased by $19.8 million to $7.1 million for the year ended December 31, 2021 compared to a benefit of $26.8 million for the year ended December 31, 2020.

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.

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

Years Ended December 31, 2023 and December 31, 2022

Income tax expense decreased by $1.4 million to an expense of $4.6 million for the year ended December 31, 2023 compared to an expense of $6.1 million for the year ended December 31, 2022.

The decrease in income tax expense from 2022 to 2023 was due to a reduction in overall taxable income in 2023.

The following table provides a period-to-period roll-forward of our fee paying assets under management on a pro forma basis as if WTI was acquired on January 1, 2022.

ended December 31,

(in millions)

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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.

For the Year Ended

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

ended December 31,

(in millions)

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FPAUM as of December 31, 2023

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.

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 December 31, 2021

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 by $2.1 billion, or 9.7%, to $23.3 billion on a pro forma basis and $2.1 billion or 9.7% to $23.3 billion on an actual basis for the year ended December 31, 2023, due primarily to an increase in capital raised and capital deployed from our private equity and venture capital solutions, which was offset by a decline of fees related to scheduled fee stepdowns and expiration of fees.

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

Results of Operations for Years Ended December 31, 2022 and 2021

For a comparison of our results of operations for fiscal years ended December 31, 2022 and 2021 see "Part II, Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations" of our annual report Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 27, 2023 and incorporated by reference herein.

Non-GAAP Financial Measures

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ANI is calculated as Adjusted EBITDA, less actual cash paid for interest and federal and state income taxes.

In order to compute Adjusted EBITDA, we adjust our GAAP net income for the following items:

In order to compute Adjusted EBITDA, we adjust our GAAP net (loss)/income for the following items:

• Expenses that typically do not require us to pay them in cash in the current period (such as depreciation, amortization and stock-based compensation);

• The cost of financing our business;

• One-time expenses related to restructuring of the management team including signing bonus, severance, and placement/search fees;

• 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, as well as bonuses paid to employees directly related to the acquisition;

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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

The 2021 cash paid for interest includes a loss on extinguishment of $4.8 million.

(in thousands)

Add back (subtract):

Net (loss)/income

Depreciation & amortization

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Non-cash stock based compensation

Acquisition based compensation

Non-cash stock based compensation - acquisitions

Non-cash stock based compensation - CEO transition

Earn out related compensation

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Adjusted Net Income

The 2021 cash paid for interest includes a loss on extinguishment of $4.8 million.

Financial Position, Liquidity and Capital Resources

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Goodwill and other intangibles

Accrued compensation and benefits

Debt obligations

Stockholders’

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

There was an increase in cash and cash equivalents from $29.5 million as of December 31, 2022 to $32.1 million as of December 31, 2023 due to operating cash flows largely offset by cash used in financing activities.

There was a decrease in

goodwill and intangible assets of $29.2 million driven by amortization of intangible assets during the year ended December 31, 2023.

Remaining total assets also increased in the same period by $34.4 million primarily due to $21.2 million increase in due from related parties and a $9.9 million increase in prepaid expenses and other assets.

These are driven by the Advisory Agreement at Enhanced and inventory assets for tax credit programs at Enhanced, respectively.

Additionally, deferred tax assets decreased by $3.8 million driven primarily by an increase in non-deductible expenses such as executive compensation and the Oregon DOJ settlement.

which resulted in usage of the NOLs leading to a reduction of deferred tax assets.

Liquidity and Capital Resources

We have continued to support our ongoing operations through the receipt of management and advisory fee revenues.

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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.

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

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.

As of December 31, 2023, the Term Loan with a balance of $201.9 million is incurring interest at a weighted average SOFR rate of 7.39%.

As of December 31, 2023, the Revolver Facility is split into thirteen tranches.

The total principal outstanding is $90.7 million and the weighted average SOFR rate amongst the tranches is 7.56%.

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

Refer to Note 12 for further details provided on the tranches and associated interest periods.

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, 2023, 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 $20.4 million in interest expense for the year ended December 31, 2023.

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:

Year Ended December 31, 2023 Compared to the Years Ended December 31, 2022 and December 31, 2021

The following table reflects our cash flows for the years ended December 31, 2023, 2022 and 2021:

Ended December 31,

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Net cash (used in) investing activities

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents and

Net cash (used in)/ provided by financing activities

Increase (decrease) in cash, cash equivalents and

restricted cash

Operating Activities

Year Ended December 31, 2022 and December 31, 2021

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:

An increase of $15.0 million in amortization of intangibles primarily due to the acquisitions of TrueBridge, Five Points, ECG, Hark and Bonaccord;

An increase in amortization expense driven by the write off of existing debt issuance costs associated with the Credit and Guaranty Facility that was paid down in full on December 22, 2021 as well as the write off of the remaining amortization associated with the Notes payable to sellers which was paid down following the refinance;

A decrease in income tax benefit of $19.8 million primarily driven by an increase of deferred tax assets;

An increase in due from related parties of $9.4 million, primarily attributable to ECG's advisory agreement with Enhanced PC;

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

Years Ended December 31, 2023 and December 31, 2022

Cash from operating activities decreased $14.0 million or 23%, to $47.7 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.

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

• An increase in revenues of $43.4 million associated with the acquisition of WTI as well as additional fund closings which is offset by an increase of $21.2 million in the current year of due from related parties that has not been received as of December 31, 2023 related to the Advisory Agreement at Enhanced compared to the year ended December 31, 2022;

• An increase of $9.7 million in prepaid expenses and other assets primarily driven by inventory assets related to Enhanced tax credit projects;

• An increase in cash used for certain deposits for investments held for customers from December 31, 2022 of $7.9 million;

• An increase in cash used for interest payments of $13.3 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

Years Ended December 31, 2023 and December 31, 2022

The cash used in investing activities decreased by $96.3 million, or 98% to $2.3 million, for the year ended December 31, 2023 as compared to the year ended December 31, 2022.

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.

This decrease in cash used in investing activities was due almost entirely to the 2022 acquisition of WTI.

The acquisition of WTI resulted in net cash payments of $96.5 million.

Financing Activities

Year Ended December 31, 2022 and December 31, 2021

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

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;

(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 interest of $46.4 million and debt drawn on the Credit and Guaranty Facility of $159.4 million to fund acquisition activity.

Years Ended December 31, 2023 and December 31, 2022

We used a net $42.9 million in cash for financing activities for the year ended December 31, 2023, as compared to cash provided by financing activities of $22.9 million for the year ended December 31, 2022 due to the following factors:

(1) net repayments of $0.8 million in 2023 as compared to net borrowings of $77.5 million in 2022 on the Term Loan and Revolver Facility, (2) repurchases of common stock of $18.6 million in 2023 as compared to $22.4 million in 2022, (3) cash settlement of stock options of $12.5 million in 2022, and (4) dividends paid of $14.8 million in 2023 as compared to $10.5 million in 2022.

Future Sources and Uses of Liquidity

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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.

GAAP”) and include the accounts of the Company and its consolidated subsidiaries.

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

GAAP”) and include the accounts of the Company and its consolidated subsidiaries.

The preparation of the Consolidated Financial Statements in conformity with U.S.

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Actual results could differ from those estimates.

We believe the following critical accounting policies could potentially produce materially different results if we were to change the underlying assumptions, estimates, or judgements.

See Note 2, “Significant Accounting Policies”

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

We believe the following critical accounting policies could potentially produce materially different results if we were to change the underlying assumptions, estimates, or judgments.

See Note 2 of our consolidated financial statements for a summary of our significant accounting policies.

Basis of Presentation

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Certain entities in which the Company holds an interest are investment companies that follow specialized accounting rules under GAAP and reflect their investments at estimated fair value.

Accordingly, the carrying value of the Company’s equity method investments in such entities retains the specialized accounting treatment.

Principles of Consolidation

The Company performs the variable interest analysis for all entities in which it has a potential variable interest.

If the Company has a variable interest in the entity and the entity is a variable interest entity (“VIE”), we will also analyze whether the Company is the primary beneficiary of this entity and if consolidation is required.

Generally, VIEs are entities that lack sufficient equity to finance their activities without additional financial support from other parties, or whose equity holders, as a group, lack one or more of the following characteristics:

(a) direct or indirect ability to make decisions, (b) obligation to absorb expected losses or (c) right to receive expected residual returns.

A VIE must be evaluated quantitatively and qualitatively to determine the primary beneficiary, which is the reporting entity that has (a) the power to direct activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The primary beneficiary is required to consolidate the VIE for financial reporting purposes.

To determine a VIE’s primary beneficiary, we perform a qualitative assessment to determine which party, if any, has the power to direct activities of the VIE and the obligation to absorb losses and/or receive its benefits.

This assessment involves identifying the activities that most significantly impact the VIE’s economic performance and determine whether we, or another party, has the power to direct those activities.

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.

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 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 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 of our consolidated financial statements 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, P10 Inc., P10 Holdings, and ECG are concluded to be consolidated subsidiaries of P10 under the voting interest model.

Five Points, 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

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.

While the determination of who is the customer in a contractual arrangement will be made on a contract-by-contract basis, the customer will generally be the investment fund for the Company’s significant management and advisory contracts.

Management and Advisory Fees

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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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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.

Additionally, the management fee may step down for certain funds depending on the contractual arrangement.

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

Stock-Based Compensation Expense

Stock-based compensation relates to grants for shares of P10 awarded to our employees through stock options as well as RSUs awarded to employees and RSAs issued to non-employee directors as compensation for service on the Company's board.

Stock compensation expense for awards that cliff-vest after a service period is recorded ratably over the vesting period at the fair market value on the grant date.

For awards with graded vesting, and vesting only requires a service condition, the Company elected, in accordance with ASC 718, to treat these awards as single awards for recognition purposes and recognize compensation on a straight-line basis over the requisite service period of the entire award.

For awards with graded vesting and require either a performance condition or market condition to vest, the Company treats each expected vesting tranche as an individual award and recognizes expense ratably over the vesting period at the fair market value of the grant date.

Certain acquisition-related RSUs vest after meeting certain performance metrics.

For these, the Company uses the tranche method and recognizes expense for each tranche of RSU's deemed probable of vesting on a straight-line basis over the expected vesting period.

The Company evaluates the probability of vesting at each reporting period.

Unvested units are remeasured quarterly against performance metrics as a liability on the Consolidated Balance Sheets.

Refer to Note 16 for further discussion.

Forfeitures are recognized as they occur.

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.

In accordance with 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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Interest Rate Risk

As of December 31, 2022, we had $293.4 million in outstanding principal under our Term Loan and Revolving Credit Facility.

As of December 31, 2023, we had $201.9 million in outstanding principal in Term debt 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%.

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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