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Item 2. Management’s Discussion and Analysis

2024-05-09 compared with 2023-11-13 · 188 added, 255 removed, 309 unchanged (59% 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 quarterly report on Form 10-Q.

Our historical results discussed below, and the way we evaluate our results, may differ significantly from the descriptions of our business and key metrics used elsewhere in this quarterly report on Form 10-Q due to the effects of acquisitions which occurred during the year ended December 31, 2022, but may not have had a material impact on our statements of operations due to the limited period of time which they were included in our consolidated results.

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

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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.

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 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 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 our Class A Common Stock, trading volume, ongoing assessment of our working capital needs, general market conditions, and other factors.

As of September 30, 2023, $21.1 million has been used to buy back shares under this program.

As of September 30, 2023, our private market solutions were comprised of the following:

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 Statements of Operations.

As of March 31, 2024, our private market solutions were comprised of the following:

• Private Equity Solutions (PES) .

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We are further differentiated by the scale, depth, diversity and accuracy of our constantly expanding proprietary private markets database that contains comprehensive information on more than 5,600 investment firms, 10,200 funds, 47,000 individual transactions, 31,000 private companies and 317,000 financial metrics.

As of September 30, 2023, PES managed $12.0 billion of FPAUM.

As of March 31, 2024, PES managed $12.5 billion of Fee-Paying Assets Under Management ("FPAUM").

• Venture Capital Solutions (VCS).

Under VCS, we make investments in venture capital funds across North America and specialize in targeting high-performing, access-constrained opportunities.

The VCS investment team, which is comprised of 13 investment professionals with an average of 23+ years of experience, has deep

and long-standing investor and fund manager relationships in the venture market which it has cultivated over the past 14+ years, including over 1,800+ investors, 80+ fund managers, 81 direct investments, 340+ private market funds and 12,000+ portfolio companies.

The VCS investment team, which is comprised of 13 investment professionals with an average of 23+ years of experience, has deep and long-standing investor and fund manager relationships in the venture market which it has cultivated over the past 14+ years, including over 1,900+ investors, 80+ fund managers, 50+ direct investments, 350+ private market funds and 13,000+ portfolio companies.

We have 20 active investment vehicles.

Our VCS solution is differentiated by our innovative strategic partnerships and our vantage point within the venture capital and technology ecosystems, maximizing advantages for our investors.

Our VCS solution is differentiated by our innovative strategic partnerships and our vantage point within the venture capital and

technology ecosystems, maximizing advantages for our investors.

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

As of September 30, 2023, VCS managed $6.0 billion of FPAUM.

As of March 31, 2024, VCS managed $6.5 billion of FPAUM.

• Impact Investing Solutions (IIS).

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

From inception in 1999 through September 30, 2023, inclusive of proprietary assets and assets managed by affiliates, Enhanced Capital has raised a total of $5.8 billion.

From inception in 1999 through March 31, 2024, inclusive of proprietary assets and assets managed by affiliates, Enhanced Capital has raised a total of $5.9 billion.

Of the total AUM, impact assets represent $3.8 billion invested in over 1,400 projects and businesses across 40 states, Washington DC, and Puerto Rico and does not include investments made by non-impact affiliates.

Investments in solar assets have generated over 1.6 billion KWh of renewable energy from inception to December 31, 2022.

As of September 30, 2023, IIS managed $2.0 billion of FPAUM .

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

As of March 31, 2024, IIS managed $1.9 billion of FPAUM .

• Private Credit Solutions (PCS).

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We currently maintain 75+ active sponsor relationships and have 100+ platform investments.

As of September 30, 2023, PCS managed approximately $2.7 billion of FPAUM.

As of March 31, 2024, PCS managed approximately $2.9 billion of FPAUM.

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.

Upon completion of purchases under the prior authorizations, on February 27, 2024, the Board of Directors authorized an additional $40.0 million for repurchases under the Stock Repurchase Program.

As of March 31, 2024, $59.5 million has been spent to buy back shares under this program.

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

Our primary funds comprise approximately $13.2 billion of our FPAUM as of September 30, 2023.

Our primary funds comprise approximately $13.8 billion of our FPAUM as of March 31, 2024.

• Direct and Co-Investment Funds.

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

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

P10’s direct and co-

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

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

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

offer direct and co-investment funds across our private equity, venture capital, impact investing and private credit solutions.

We offer direct and co-investment funds across our private equity, venture capital, impact investing and private credit solutions.

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

Our direct investing platform comprises approximately $8.0 billion of our FPAUM as of September 30, 2023.

Our direct investing platform comprises approximately $8.4 billion of our FPAUM as of March 31, 2024.

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

Our secondary funds comprise approximately $1.5 billion of our FPAUM as of September 30, 2023.

Our secondary funds comprise approximately $1.6 billion of our FPAUM as of March 31, 2024.

Operating Segments

We operate our business as a single operating segment, which is how our chief operating decision makers 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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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.

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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The purview of private markets has meaningfully broadened over the last decade.

As investors increase their allocations to

private markets investments, we believe the demand for asset class diversification will rise.

As investors increase their allocations to private markets investments, we believe the demand for asset class diversification will rise.

Furthermore, as part of this evolution we believe investors will seek out private market solutions providers with scale and an ability to deliver multiple asset classes and vehicle solutions to streamline relationships and pursue cost efficiency.

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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 are expected to increase our compliance costs and further restrict certain business activities.

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.

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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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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.

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.

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.

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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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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 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 length of the management contracts.

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 assets 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, earnout and bonus payments related to the acquisition of WTI, 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.

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.

As our Company is an SEC registrant, our professional fees will fluctuate commensurate with our strategic objectives and potential acquisitions, and certain recurring accounting advisory, audit and tax expenses will increase to comply with additional regulatory requirements.

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 the SAA 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 Income (Expense)

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

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

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.

Other (Expense)/ Income

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

Other (expense)/income includes any accrued expenses related to litigation and regulatory activity as necessary, which would be discussed in Note 13 of our Consolidated Financial Statements.

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 three and nine months ended September 30, 2023 and September 30, 2022.

For the three months ended March 31, 2024 and March 31, 2023.

For the three months

ended September 30,

For the nine months

ended September 30,

(in thousands)

ended March 31,

(in thousands)

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Interest expense, net

Other (expense)/income

Total other (expense)

Net (loss)/income before income taxes

Income tax (expense)

NET (LOSS)/INCOME

Three Months Ended September 30, 2023 and September 30, 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 three months ended September 30, 2023 and September 30, 2022.

For the three months ended September 30, 2023 compared to the three months ended September 30, 2022, revenues increased by $8.9 million or 18% due to higher management fees from the impact of inorganic growth of $6.6 million driven by the acquisition of WTI and $2.5 million of organic growth across Bonaccord and Truebridge.

Management and advisory fees increased by $8.6 million, or 17%, to $58.1 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 due to inorganic growth from the acquisition of WTI which brought $6.6 million of revenue in the third quarter of 2023 and organic FPAUM growth at Bonaccord and TrueBridge of $2.5 million.

Catch-up fees for the three months ended September 30, 2023 were $2.0 million associated with the fund closings at Bonaccord and TrueBridge.

Other revenues, which represent ancillary elements of our business, increased by $0.3 million or 67% to $0.9 million for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022 driven by an increase of $0.3 million of interest income in other revenue.

Nine Months Ended September 30, 2023 and September 30, 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 nine months ended September 30, 2023 and September 30, 2022.

For the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, revenues increased by $38.7 million or 28% due to higher management fees from the impact of inorganic growth of $20.7 million driven by the acquisition of WTI and $18.0 million of organic growth across Bonaccord, RCP, and Truebridge.

Management and advisory fees increased by $37.4 million, or 27%, to $176.3 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 due to inorganic growth from the acquisition of WTI which brought $20.6 million of revenue in 2023 and organic FPAUM growth at Bonaccord, RCP, and TrueBridge of $16.7 million.

Catch-up fees for the nine months ended September 30, 2023 were $9.9 million associated with the fund closings at Bonaccord, TrueBridge and RCP.

Other revenues, which represent ancillary elements of our business, increased by $1.3 million or 122% to $2.3 million for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 driven by an increase of $1.3 million of interest income in other revenue.

Net income/(loss) before income taxes

Income tax (expense)/benefit

Three Months Ended March 31, 2024 and March 31, 2023

Our total revenue is composed almost entirely of recurring management and advisory fees, with the vast majority of fees earned on committed capital that is typically subject to ten to fifteen year lock up agreements, therefore our average fee rates have remained stable at approximately 1% for the three months ended March 31, 2024 and March 31, 2023.

For the three months ended March 31, 2024 compared to the three months ended March 31, 2023, total revenues increased by $8.9 million or 15% due to organic FPAUM growth across Bonaccord and TrueBridge.

Management and advisory fees increased by $8.5 million, or 15%, to $65.1 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 due primarily to organic FPAUM growth of $8.9 million at Bonaccord and TrueBridge, slightly offset by fee step-downs at Five Points Capital for $0.3 million.

Catch-up fees for the three months ended March 31, 2024 were $7.7 million of the $65.1 million in management and advisory fees associated with the fund closings at Bonaccord, TrueBridge, and RCP compared to the $3.0 million associated with fund closings at Bonaccord, TrueBridge, and RCP for the three months ended March 31, 2023.

Other revenues, which represent ancillary elements of our business, increased by $0.3 million or 49% to $1.0 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 driven primarily by an increase of $0.3 million of interest income in other revenue.

For the three months

ended September 30,

For the nine months

ended September 30,

ended March 31,

OPERATING EXPENSES

(in thousands)

Compensation and benefits

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Operating Expenses

For the Three Months Ended September 30, 2023 and September 30, 2022

Total operating expenses increased by $18.8 million, or 47%, to $58.6 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

This increase was primarily due to increases in compensation and benefits.

Compensation and benefits expense increased by $18.2 million, or 76%, to $42.2 million, for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

The acquisition of WTI added $2.9 million of compensation expense in 2023.

The earn out and bonus accruals associated with the acquisition of WTI as discussed in Note 14 in the Notes to the Consolidated Financial Statements contributed $6.5 million.

An additional $4.4 million of the increase in compensation and benefits expense is attributable to management compensation as a result of amended employment agreements executed during the second quarter of 2023.

The compensation expense associated with the CEO transition attributed to $4.9 million of the increase in compensation and benefits expense.

The $4.9 million of Co-CEO succession compensation consists of $2.8 million of severance compensation and $2.1 million of accelerated expense associated with bonus payments.

These expenses are further discussed in Note 14.

Finally, there was a reduction in expense of $0.5 million related to forfeitures of stock options associated with employees who have left the Company prior to vesting.

For the Three Months Ended March 31, 2024 and March 31, 2023

Total operating expenses increased by $1.6 million, or 3%, to $54.0 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

This increase was primarily due to increases in general, administrative and other expenses as well as compensation and benefits expense offset slightly by decreases in amortization expense of intangibles and contingent consideration expense.

Compensation and benefits expense increased by $1.5 million, or 4%, to $37.1 million, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

The increase was primarily driven by a $1.8 million increase due to increases in headcount and associated benefits across the Company as well as merit-based salary raises to retain and motivate talent across the Company offset by a decrease in stock compensation expense recognized in the first quarter of 2024 as compared to the first quarter of 2023, respectively.

Stock compensation expense decreased by $0.3 million, which was primarily driven by remeasurement for the fair value of the Bonaccord Units and Hark Units related to the acquisition of Bonaccord and Hark.

In 2023, the Hark Units were fully earned and recognized, therefore, there was no correlating expense in 2024 associated with the Hark Units.

Moreover, The Bonaccord Units, which are recognized using the tranche method, had a decrease in expense for the first quarter of 2024 compared to the first quarter of 2023.

Professional fees decreased by $0.1 million, or 2%, to $3.8 million.

The primary source of the decline in professional fees from the three months ended September 30, 2022 to the three months ended September 30, 2023 is the non-recurring cost of the acquisition of WTI in 2022.

General, administrative and other increased by $1.3 million, or 32%, to $5.3 million, due primarily to the acquisition of WTI during the fourth quarter of 2022.

Contingent consideration expense decreased by $1.3 million, to $0.1 million, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

This was driven by remeasurement of contingent consideration payable in connection with the acquisition of Hark and Bonaccord The decrease was driven primarily by Hark, which has been fully accrued and paid out as of September 30, 2023.

During the three months ended September 30, 2022, the Company recognized a higher expense as a result of changing conditions in the market, as informed by management at Hark at the time of remeasurement, which made it more probable that the contingent consideration would be paid.

Amortization of intangibles increased by $1.2 million, or 19%, to $7.3 million, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

This is due to the acquisition of WTI.

For the Nine Months Ended September 30, 2023 and September 30, 2022

Total operating expenses increased by $60.7 million, or 59%, to $163.1 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

This increase was primarily due to increases in compensation and benefits as well as amortization expense, general, administrative and other expense, and professional fees.

Compensation and benefits expense increased by $53.8 million, or 89%, to $114.1 million, for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The increase was driven by a number of factors.

The acquisition of WTI added $8.9 million of compensation expense in 2023.

There was an increase in stock compensation of $6.0 million of the increase, of which $2.0 million relates to acquisition activity.

Management compensation contributed to the increase in stock compensation by $6.7 million as a result of amended employment agreements executed during the second quarter of 2023.

The compensation expense associated with the CEO transition attributed to $4.9 million of the increase in compensation and benefits expense.

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 $19.4 million.

There was $1.3 million of compensation expense incurred associated with a performance-related bonus.

Finally, $6.6 million of the increase was driven by an increase in headcount and associated benefits across all subsidiaries.

Professional fees increased by $0.8 million, or 8%, to $10.2 million.

The primary driver for the increase in professional fees for the nine months ended September 30, 2023 from 2022 is the acquisition of WTI and legal expenses related to the Oregon matter discussed in Note 14 to the Consolidated Financial Statements.

General, administrative and other increased by $2.8 million, or 23%, to $15.2 million, due primarily to the acquisition of WTI as well as additional placement agent fees associated with increased revenues.

Contingent consideration expense decreased by $0.8 million, to $0.6 million, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

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

Amortization of intangibles increased by $3.4 million, or 18%, to $21.9 million, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

This is due to the acquisition of WTI and offset by declines at ECG and RCP.

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

The decline at RCP is driven by asset management fee contracts' amortization base, which is based on projected revenue at the time of acquisition and the projected revenues started slowing down in 2022.

Other Income (Expense)

For the Three Months Ended September 30, 2023 and September 30, 2022

Other expenses increased by $5.2 million, or 237%, to $7.3 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

This increase was driven by a rise in interest expense of $3.1 million.

The increase in interest expense correlates to the increase in the principal balance outstanding of our Revolving Credit Facility and Term Loan of $90.3 million from the third quarter of 2022 to the third quarter of 2023 as well as rising interest rates.

The increase in principal balances primarily relates to the acquisition of WTI.

The remainder of the increase in other expenses is driven by the contingent loss accrual discussed in Note 14 to the Consolidated Financial Statements.

For the Nine Months Ended September 30, 2023 and September 30, 2022

Other expenses increased by $14.7 million, or 370%, to $18.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

This increase was driven by a rise in interest expense of $10.8 million.

The increase in interest expense correlates to the increase in the principal balance outstanding of our Revolving Credit Facility and Term Loan of $90.3 million from the first nine months of 2022 to the first nine months of 2023 as well as rising interest rates.

The increase in principal balances primarily relates to the acquisition of WTI.

The remainder of the increase in other expenses is driven by the contingent loss accrual discussed in Note 14 to the Consolidated Financial Statements.

The primary cost in professional fees for the three months ended March 31, 2024 and 2023 are audit, tax, and legal fees associated with year end reporting and strategic planning.

General, administrative and other increased by $1.2 million, or 25%, to $6.1 million, due primarily to ongoing enhancements to infrastructure, technology, and security as well as marketing efforts.

Contingent consideration expense decreased by $0.4 million, to $0, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

This was driven by remeasurement for the fair value of the contingent

consideration related to the acquisition of Bonaccord.

The Hark contingent consideration was fully earned and paid in 2023 and the Bonaccord contingent consideration remaining fair value is $6.5 million as of March 31, 2024.

Amortization of intangibles decreased by $0.8 million, or (11)%, to $6.4 million, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

This is due to decreases at ECG, RCP, and TrueBridge.

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

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

Other (Expense)/Income

For the Three Months Ended March 31, 2024 and March 31, 2023

Other expenses increased by $39 thousand, or 1%, to $5.1 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

This increase was driven by an increase in interest expense of $600 thousand on the credit facility due to rising SOFR rates and a larger draw on debt in the first three months ended March 31, 2024.

This was offset by $565 thousand of income primarily as a result of interest earned for money market accounts.

Income Tax (Expense)/Benefit

For the Three Months Ended September 30, 2023 and September 30, 2022

Income tax expense decreased by $0.7 million to $1.8 million for the three months ended September 30, 2023 compared to an expense of $2.5 million for the three months ended September 30, 2022.

The decrease was due to lower taxable income during the period.

For the Nine Months Ended September 30, 2023 and September 30, 2022

Income tax expense decreased by $6.3 million to $2.8 million for the nine months ended September 30, 2023 compared to an expense of $9.1 million for the nine months ended September 30, 2022.

The decrease was due to lower taxable income during the period.

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.

For the three months

ended September 30,

For the three months

ended September 30,

For the nine months

ended September 30,

For the nine months

ended September 30,

(in millions)

Balance, Beginning of Period

Capital raised (1)

Capital deployed (2)

Net Asset Value Change (3)

Scheduled fee base stepdowns

Expiration of fee period

Balance, End of period

(1) Represents new commitments from funds that earn fees on a committed capital fee base.

(2) In certain vehicles, fees are based on capital deployed, as such increasing FPAUM.

(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.

For the Three Months Ended March 31, 2024 and March 31, 2023

Income tax expense increased by $2.7 million to $1.8 million for the three months ended March 31, 2024 compared to a benefit of $1.0 million for the three months ended March 31, 2023.

The increase was primarily due to additional income, and a decrease in the stock-based compensation-related tax benefit.

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

For the three months

ended September 30,

ended March 31,

For the three months

ended September 30,

For the nine months

ended September 30,

For the nine months

ended September 30,

(in millions)

ended March 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.

FPAUM as of September 30, 2023

FPAUM increased by $0.5 billion or 2.4% to $22.7 billion on a pro forma basis and actual basis for the three months ended September 30, 2023, due primarily to an increase in capital raised and deployed from our private equity and venture capital solutions and offset by net asset value change, stepdowns, and expirations.

FPAUM increased by $1.5 billion, or 7.0%, to $22.7 billion on a pro forma basis and actual basis for the nine months ended September 30, 2023, due primarily to an increase in capital raised and deployed from our private equity and venture capital solutions and offset by stepdowns and expirations.

FPAUM as of March 31, 2024

FPAUM increased by $0.6 billion, or 2.5%, to $23.8 billion for the three months ended March 31, 2024, due primarily to an increase in capital raised and deployed from our private equity and venture capital solutions and offset by expirations and scheduled fee stepdowns.

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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Other companies may calculate these measures differently than we do, limiting their usefulness as a comparative measure.

We use Adjusted Net Income, or ANI, as well as Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to provide additional measures of profitability.

We use Fee-Related Revenue ("FRR"), Fee-Related Earnings ("FRE"), Adjusted Net Income, or ANI, as well as Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to provide additional measures of profitability.

We use the measures to assess our performance relative to our intended strategies, expected patterns of profitability, and budgets, and use the results of that assessment to adjust our future activities to the extent we deem necessary.

Fee-Related Revenues is calculated as Total Revenues less any incentive fees.

Fee-Related Earnings is a non-GAAP performance measure used to monitor our baseline earnings less any incentive fee revenue and excluding any incentive fee-related expenses.

ANI reflects our actual cash flows generated by our core operations.

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• 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;and

• One-time expenses related to restructuring of the management team including 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;

• The effects of income taxes.

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

The cash income taxes paid during the three months ended March 31, 2024 and March 31, 2023 differ significantly from the net income tax expense, which is primarily comprised of deferred tax expense as described in the results of operations.

For the Three

September 30,

(in thousands)

Net (loss)/income

Depreciation & amortization

Interest expense, net

Income tax expense

Income tax expense/(benefit)

Non-recurring expenses

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Non-cash stock based compensation - acquisitions

Non-cash stock based compensation - CEO transition

Earn out related compensation

Adjusted EBITDA

Cash interest expense

Cash income taxes, net of taxes related to

Cash interest expense, net

Net cash paid on income taxes

Adjusted Net Income

Total GAAP Revenue

Non-Fee Related Revenue

Fee-Related Revenue

Adjusted EBITDA

Non-Fee Related Income

Fee-Related Earnings

Financial Position, Liquidity and Capital Resources

Selected Statements of Financial Position

September 30,

(in thousands)

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Debt obligations

Stockholders’

There was a decrease in cash and cash equivalents of $7.3 million from December 31, 2022 to $22.2 million as of September 30, 2023 primarily due to timing of debt facility interest periods and associated repayments.

There was a decrease in goodwill and intangible assets of $21.8 million due to amortization of intangibles during the nine months ended

September 30, 2023.

There was a decrease in cash and cash equivalents of $2.0 million from December 31, 2023 to $30.0 million as of March 31, 2024 primarily due to timing of debt facility maturities and associated repayments.

There was a decrease in goodwill and intangible assets of $6.4 million due to amortization of intangibles during the three months ended March 31, 2024.

Remaining total assets increased in the same period by $7.2 million.

The increase is driven by an increase in accounts receivable from related parties which is primarily due to ECG's Advisory Agreement with Enhanced PC and Crossroads.

Accrued compensation and benefits increased $33.2 million to $52.1 million during the nine months ended September 30, 2023, $25.3 million of this increase was driven by the WTI earnout and bonus payment discussed in Note 14 and the Hark and Bonaccord RSUs discussed in Note 16.

Debt obligations declined by $27.3 million as a result of payments on the revolver and term loan balances during the period.

Historical Liquidity and Capital Resources

Debt obligations increased by $24.2 million which is driven by revolver activity due to common stock repurchases during the period.

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.

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

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

Both facilities are Term SOFR Loans.

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

As of September 30, 2023, the Term Loan with a balance of $204.5 million is incurring interest at a weighted average SOFR rate of 7.28%.

As of September 30, 2023, the Revolver Facility is split into six tranches.

The total principal outstanding is $60.5 million and the average SOFR rate amongst the tranches is 7.49%.

As of March 31, 2024, the Term Loan with a balance of $199.2 million is incurring interest at a weighted average SOFR rate of 7.39%.

As of March 31, 2024, the Revolver Facility is split into thirteen tranches.

The total principal outstanding is $117.2 million and the weighted average SOFR rate amongst the tranches is 7.43%.

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.

Refer to Note 11 of our Consolidated Financial Statements 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 September 30, 2023, P10 was in compliance with its financial covenants required under the facility.

The Company has incurred $16.1 million in interest expense for the nine months ended September 30, 2023.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

The following table reflects our cash flows for the nine months ended September 30, 2023 and 2022:

For the Nine Months

Ended September 30,

As of March 31, 2024, P10 was in compliance with its financial covenants required under the facility.

As of March 31, 2024, the balance drawn on the revolving credit facility is $117.2 million.

The Company has incurred $5.4 million in interest expense for the three months ended March 31, 2024.

Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2023

The following table reflects our cash flows for the three months ended March 31, 2024 and 2023:

For the Three Months

Ended March 31,

(in thousands)

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Net cash (used in) financing activities

Increase (decrease) in cash and cash equivalents and

(Decrease) Increase in cash, cash equivalents and

restricted cash

Operating Activities

Nine Months Ended September 30, 2023 and September 30, 2022

Cash from operating activities increased by $1.9 million, or 4%, to $45.8 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

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

An increase in revenues of $38.7 million associated with the acquisition of WTI as well as additional fund closings which is offset by an increase of $16.1 million in the current year of accounts receivable that has not been received as of September 30, 2023 related to the Advisory Agreement at Enhanced compared to the first three quarters of 2022;

An increase in cash used for interest payments of $10.5 million;

An increase of restricted cash used of $7.3 million related to operations of Enhanced projects;

An increase of cash used for bonus payments of $1 million.

Three Months Ended March 31, 2024 and March 31, 2023

Cash from operating activities decreased by $9.8 million, or (47)%, to $11.0 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

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

• Despite an increase in revenues of $8.9 million associated with additional fund closings as well as organic growth, net income only increased by $4.4 million due to offsetting increases in income tax expense, compensation and benefits expenses as well as general, administrative and other expenses primarily driven by organic growth;

• An increase in deferred tax expense for $2.4 million due to additional income, and a decrease in the stock-based compensation-related tax benefit;

• A decrease of change in accounts payable and accrued expenses for $4.2 million primarily driven by a $3.0 million payment of a TrueBridge management fee refund paid to investors for a change in management at one of their funds in the first quarter of 2024, a decrease in accruals for revenue and profit share agreements of about $1.2 million;

• A decrease of change in accrued compensation and benefits for $4.3 million driven by a change in estimate for timing of achieving the earnout payment related to the acquisition, which prospectively adjusted recognition of the expense and resulted in lower expense for the three months ended March 31, 2024 compared to the three months ended March 31, 2023;

• A decrease of change in deferred revenues for $3.2 million due to a larger amount of prepayments for management fees not earned by the company in the first quarter of 2023 compared to the first quarter of 2024.

Investing activities

Nine Months Ended September 30, 2023 and September 30, 2022

The cash used in investing activities decreased by $0.8 million, or 53%, to $0.7 million, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

This decrease in cash used was primarily driven by fewer draws on the notes receivable in 2023 than in 2022.

Three Months Ended March 31, 2024 and March 31, 2023

The cash used in investing activities decreased by $0.4 million, or (63)%, to ($0.3) million, for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

This decrease in cash used was due to purchases of additional property and equipment in the first quarter of 2023.

Financing Activities

Nine Months Ended September 30, 2023 and September 30, 2022

We recorded a net $52.4 million for the nine months ended September 30, 2023 for cash used in financing activities, as compared to cash used in financing activities of $65.1 million for the nine months ended September 30, 2022.

The change is attributed to timing differences of revolver tranche interest periods subject to repayment aligned with cash availability and payments of contingent consideration as well as tax witholdings on employee stock options that are settled on a net of tax basis.

Three Months Ended March 31, 2024 and March 31, 2023

We recorded a net $12.7 million for the three months ended March 31, 2024 for cash used in financing activities, as compared to cash used in financing activities of $13.7 million for the three months ended March 31, 2023.

The change is driven by the repurchase of common stock in the first quarter of 2024 offset by an increase in draws on debt during the period.

Future Sources and Uses of Liquidity

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We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any activities that expose us to any liability that is not reflected in our consolidated financial statements.

Contractual Obligations, Commitments and Contingencies

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

The following table sets forth information regarding our anticipated future cash payments under our contractual obligations as of September 30, 2023:

(in thousands)

Operating lease obligations (1)

Debt obligations (2)

1) We lease office space under agreements that expire periodically through 2032.

The table only includes guaranteed minimum lease payments under these agreements and does not project other related payments.

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

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.

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.

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

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

The Consolidated Financial Statements

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

All intercompany transactions and balances have been eliminated upon consolidation.

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 6 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 6 of our consolidated financial statements for more information on both consolidated and unconsolidated VIEs.

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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 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 15 to our Consolidated Financial Statements 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.

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Interest Rate Risk

As of September 30, 2023, we had $204.5 million of outstanding principal in Term Loan under our Term Loan and Revolving Credit Facility.

As of March 31, 2024, we had $199.2 million in outstanding principal in Term Loans under our Term Loan and $117.2 million under our Revolving Credit Facility.

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

On September 30, 2023, the interest rate on these borrowings was 2.1% + SOFR.

On March 31, 2024, the interest rate on these borrowings was 2.1% + SOFR.

We estimate that a 100-basis point increase in the interest rate would result in an approximately $2.0 million increase in interest expense related to the loan over the next 12 months.

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Disclosure Controls and Procedures

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

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

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

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

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

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

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

Based on that evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective to provide reasonable assurance that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed,

summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

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

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

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Legal Proceedings.

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

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

The information required with respect to this item can be found under “Contingencies” in Note 13, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this annual report, and such information is incorporated by reference into this Item 1.

Risk Factors.

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

included in our annual report on Form 10-K for the year ended December 31, 2022.

There have been no material changes from the risk factors previously disclosed in “Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2023.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis