What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-09 · 164 added, 120 removed, 377 unchanged (43% of the section changed)

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Additionally, Mr.

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

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

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

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

Effective June 14, 2024, Mr.

Alpert resigned as Executive Chairman and the board of the Company appointed CEO and President Mr.

Sarsfield to Chairman of the Board.

In connection with Mr.

Alpert's resignation as Executive Chairman, the Company and Mr.

Alpert agreed to the early termination of Mr.

Alpert's Transition Agreement.

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:

As of June 30, 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 March 31, 2024, PES managed $12.5 billion of Fee-Paying Assets Under Management ("FPAUM").

As of June 30, 2024, PES managed $12.4 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 1,900+ investors, 80+ fund managers, 50+ direct investments, 350+ private market funds and 13,000+ portfolio companies.

The VCS investment team, which is comprised of 12 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, 90+ fund managers, 90+ direct investments, 370+ private market

funds and 13,100+ 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 March 31, 2024, VCS managed $6.5 billion of FPAUM.

As of June 30, 2024, VCS managed $6.3 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 March 31, 2024, inclusive of proprietary assets and assets managed by affiliates, Enhanced Capital has raised a total of $5.9 billion.

From inception in 1999 through June 30, 2024, inclusive of proprietary assets and assets managed by affiliates, Enhanced Capital has raised a total of $6.0 billion.

Of the total AUM, impact assets represent $3.8 billion invested in over 950 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 March 31, 2024, IIS managed $1.9 billion of FPAUM .

As of June 30, 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 119+ platform investments.

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

As of June 30, 2024, PCS managed approximately $3.2 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.

On August 6, 2024, the Board of Directors authorized an additional $12.0 million for repurchases under the Stock Repurchase Program.

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

As of June 30, 2024, $71.9 million has been spent to buy back shares under this program.

Sources of Revenue

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

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

Our primary funds comprise approximately $13.4 billion of our FPAUM as of June 30, 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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Often, the fees are structured such that they step down, or decrease, over the life of the fund.

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

Our direct investing platform comprises approximately $8.8 billion of our FPAUM as of June 30, 2024.

• Secondaries.

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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 $1.6 billion of our FPAUM as of March 31, 2024.

Our secondary funds comprise approximately $1.6 billion of our FPAUM as of June 30, 2024.

Operating Segments

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This favorable lower and lower-middle market dynamic implies a larger pool of opportunities at compelling purchase price valuations with significant return potential.

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

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

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

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

Furthermore, we believe that by offering

investors access to access-constrained investment opportunities, investors may favor our strategies as they make decisions on market exposure and allocation levels.

Our strategies, with long-track records of success, deep industry

experience, well-established relationships, and high-quality investment opportunities, can benefit from a trend toward reducing the number of managers to which capital is allocated.

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

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

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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.

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

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

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

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

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

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

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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 a certain period of time has lapsed per the agreements.

Both options 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.

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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 an 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 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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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

Other (Expense)

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)

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

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

Other income (loss) includes any income from unconsolidated subsidiaries, interest income earned from bank accounts across management companies, and 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 (Expense)

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

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

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

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Results of Operations

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

For the three and six months ended June 30, 2024 and June 30, 2023.

For the three months

ended March 31,

ended June 30,

For the six months

ended June 30,

(in thousands)

Management and advisory fees

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Interest expense, net

Other income/ (loss)

Total other (expense)

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.

Net income before income taxes

Income tax (expense)

For the Three Months Ended June 30, 2024 and June 30, 2023

For the three months ended June 30, 2024 compared to the three months ended June 30, 2023, revenues increased by $8.6 million or 14% due to organic FPAUM growth across Bonaccord, Enhanced, and TrueBridge.

Management and advisory fees increased by $6.8 million, or 11%, to $68.5 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 due primarily to organic FPAUM growth generating revenues of $8.6 million at Bonaccord, Enhanced, and TrueBridge.

A decrease in catch-up fees at RCP for $2.0 million offset this increase in management fee revenue.

Catch-up fees for the three months ended June 30, 2024 were $6.0 million of the $68.5 million in management and advisory fees associated with the fund closings at Bonaccord, TrueBridge, and RCP.

Other revenues increased by $1.8 million or 219% to $2.6 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 driven by $1.8 million of recognized carried interest income in other revenue at RCP from an uncommon pre-acquisition legacy managed fund.

For the Six Months Ended June 30, 2024 and June 30, 2023

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 six months ended June 30, 2024 and June 30, 2023.

For the six months ended June 30, 2024 compared to the six months ended June 30, 2023, revenues increased by $17.5 million or 15% primarily due to organic FPAUM growth across Bonaccord, Enhanced, and TrueBridge.

Management and advisory fees increased by $15.4 million, or 13%, to $133.6 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 due to organic FPAUM growth at Bonaccord, Enhanced, and TrueBridge of $17.7 million offset slightly by a decrease of $2.3 million in management fees at RCP primarily due to a decrease in catch-up fees.

Catch-up fees for the six months ended June 30, 2024 were $13.8 million associated with the fund closings at Bonaccord, TrueBridge and RCP.

Other revenues increased by $2.1 million or 143% to $3.6 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 primarily driven by $1.8 million of recognized carried interest income from an uncommon pre-acquisition legacy managed fund in other revenue and an increase of $0.4 million of interest income in other revenue at RCP.

For the three months

ended March 31,

ended June 30,

For the six months

ended June 30,

OPERATING EXPENSES

(in thousands)

Compensation and benefits

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Operating Expenses

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.

For the Three Months Ended June 30, 2024 and June 30, 2023

Total operating expenses increased by $2.1 million, or 4%, to $54.2 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

This increase was primarily due to an increase in general, administrative, and other expenses.

Compensation and benefits expense was unchanged for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 due to a change of estimate for timing of achieving the earnout payment related to the acquisition of WTI, which prospectively adjusted recognition of the expense and resulted in $2.8 million decrease for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Additionally, there was a decrease in severance expense of $0.9 million and a decrease in stock compensation of $1.4 million 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 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.

Moreover, the Bonaccord Units, which are recognized using the tranche method, had a decrease in expense for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

These decreases were offset by a $5.1 million increase related 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.

Professional fees increased by $0.5 million, or 18%, to $3.5 million.

The primary increase in professional fees for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is driven by an increase of $0.8 million in legal fees associated with the Company's transitions related to turnover at the management level, office locations, policies, as well as normal course of business such as filings and due diligence for acquisitions, which was slightly offset by the drop off of $0.3 legal fees associated with Enhanced's Oregon DOJ matter in the second quarter of 2023.

General, administrative, and other increased by $2.0 million, or 39%, to $7.0 million, due primarily to $0.6 million increase of placement agent fees at Hark, $0.1 million increase in rent at TrueBridge, $0.1 million increase in premises and utilities expense, $0.3 million increase in marketing efforts, $0.3 million increase in conferences, travel, and entertainment expenses, as well as $0.4 million ongoing enhancements to infrastructure, technology, and security across the Company.

Amortization of intangibles decreased by $0.9 million, or 12%, to $6.4 million, for the three months ended June 30, 2024 as compared to the three months ended June 30, 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 decrease at ECG is driven by unique syndication 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 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.

For the Six Months Ended June 30, 2024 and June 30, 2023

Total operating expenses increased by $3.7 million, or 4%, to $108.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

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

general, administrative and other expense, and strategic alliance expense offset slightly by a decrease in amortization of intangibles.

Compensation and benefits expense increased by $1.4 million, or 2%, to $73.4 million, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

The increase was driven by $8.3 million of increases in headcount and associated benefits across the Company as well as merit-based salary raises to retain and motivate talent across the Company.

This increase was offset by change of estimate for timing of achieving the earnout payment related to the acquisition of WTI, which prospectively adjusted recognition of the expense and resulted in $5.7 million decrease for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Additionally, there was a decrease in severance expense of $0.9 million and a decrease in stock compensation of $1.8 million, of which $5.3 million decrease relates to remeasurement for the fair value of the Bonaccord Units and Hark Units related to the acquisition of Bonaccord and Hark offset by $3.8 million increase related to management separation agreements.

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 six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Professional fees increased by $0.5 million, or 7%, to $7.3 million.

The primary driver for the increase in professional fees for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 is an increase of $1.0 million legal expenses associated with the Company's transitions related to turnover at the management level, office locations, policies, as well as normal course of business such as filings and due diligence for acquisitions, which was slightly offset by a decrease in audit and tax services incurred in the six months ended June 30, 2024.

General, administrative and other increased by $3.2 million, or 32%, to $13.1 million, due to $0.8 million increase of placement agent fees, $0.2 million increase of rent, $0.2 million increase of consulting expense, $0.5 million increase in marketing efforts, $0.4 million increase in conferences, travel, and entertainment expenses, and $0.6 million increase for ongoing enhancements to infrastructure, technology, and security across the Company.

Contingent consideration expense decreased by $0.3 million, to $0.1 million, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

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

The Hark contingent consideration was fully earned and paid in 2023 and the Bonaccord contingent consideration remaining fair value is $5.6 million as of June 30, 2024.

Amortization of intangibles decreased by $1.7 million, or 12%, to $12.9 million, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

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

The decrease at ECG is driven by unique syndication 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)

For the Three Months Ended June 30, 2024 and June 30, 2023

Other expenses decreased by $0.5 million, or 8%, to $5.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

This was offset by an increase in interest expense of $0.7 million on the credit facility due to higher SOFR rates and a larger outstanding balance on the Revolving Credit Facility in the three months ended June 30, 2024.

For the Six Months Ended June 30, 2024 and June 30, 2023

Other expenses decreased by $0.5 million, or 4%, to $10.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

This decrease was driven by $1.3 million in other income/(losses) related to legal settlements incurred in the three months ended June 30, 2023 compared to no legal settlements incurred in the three months ended June 30, 2024 and $0.5 million increase in other income primarily as a result of interest earned for money market accounts.

This was offset by an increase in interest expense of $1.3 million due to higher SOFR rates and a larger outstanding balance on the Revolving Credit Facility for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Income Tax Expense

For the Three Months Ended June 30, 2024 and June 30, 2023

Income tax expense increased by $1.8 million to $3.7 million for the three months ended June 30, 2024 compared to the expense of $2.0 million for the three months ended June 30, 2023.

The increase was primarily due to additional income during the period.

For the Six Months Ended June 30, 2024 and June 30, 2023

Income tax expense increased by $4.5 million to $5.5 million for the six months ended June 30, 2024 compared to an expense of $1.0 million for the six months ended June 30, 2023.

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

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 March 31,

For the three months

ended March 31,

ended June 30,

For the six months

ended June 30,

(in millions)

Balance, Beginning of Period

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

FPAUM as of 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.

FPAUM as of June 30, 2024

FPAUM remained flat by staying at $23.8 billion for the three months ended June 30, 2024, due primarily to an increase in capital raised and deployed from our private equity and venture capital solutions being offset by expirations and scheduled fee stepdowns.

FPAUM increased by $0.6 billion, or 2.5%, to $23.8 billion for the six months ended June 30, 2024, due primarily to an increase in capital raised and deployed from our private equity and venture capital solutions and offset by stepdowns and expirations.

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 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 Fee-Related Revenue ("FRR"), Fee-Related Earnings ("FRE"), Adjusted Net Income ("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.

FRR is calculated as Total Revenues less any incentive fees.

FRE 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 effects of income taxes.

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.

The cash income taxes paid during the three months ended June 30, 2024 and June 30, 2023 as well as during the six months ended June 30, 2024 and June 30, 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

(in thousands)

Depreciation & amortization

Interest expense, net

Income tax expense/(benefit)

Income tax expense

Non-recurring expenses

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Adjusted Net Income

Total GAAP Revenue

Total Revenues

Non-Fee Related Revenue

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Debt obligations

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.

Cash and cash equivalents remained flat from $32.1 million as of December 31, 2023 to $32.2 million as of June 30, 2024 primarily due to strategic open market repurchases in the open market and the debt draws and repayments associated with the share repurchases.

There was a decrease in goodwill and intangible assets of $12.9 million due to amortization of intangibles during the six months ended June 30, 2024.

Remaining total assets increased in the same period by $1.9 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.

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

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

The increase in remaining total assets was offset by a decrease in deferred tax assets, net due to a change in estimates and a decrease in prepaid expenses and other assets, which is primarily due to Enhanced's sale of state tax credits during the six months ended June 30, 2024.

Debt obligations increased by $10.8 million which is driven by revolver activity due to common stock repurchases during the six months ended June 30, 2024.

Liquidity and Capital Resources

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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 deferred issuance costs in 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.

Both facilities are Term SOFR Loans meaning loans bearing interest based upon the "Adjusted Term SOFR Rate".

The Adjusted Term SOFR Rate is the Secured Overnight Financing Rate ("SOFR") at the date of election, plus 2.10%.

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

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 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%.

As of June 30, 2024, the Term Loan with a balance of $196.6 million is incurring interest at a weighted average Adjusted Term SOFR Rate of 7.43%.

As of June 30, 2024, the Revolver Facility is split into fourteen tranches.

The total principal outstanding is $106.1 million and the average Adjusted Term 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 11 of our Consolidated Financial Statements for further details provided on the tranches and associated interest periods.

Refer to Note 11 of the 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 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,

As of June 30, 2024, P10 was in compliance with its financial and other covenants required under the facility.

The Company has incurred $11.2 million in interest expense for the six months ended June 30, 2024.

On August 1, 2024, the Company entered into a restatement agreement, which amends and restates the Company's Credit Agreement.

Refer to Note 17 of the Consolidated Financial Statements for further details.

Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

The following table reflects our cash flows for the six months ended June 30, 2024 and 2023:

For the Six Months

Ended June 30,

(in thousands)

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Net cash (used in) financing activities

(Decrease) Increase in cash, cash equivalents and

Increase (Decrease) in cash, cash equivalents and

restricted cash

Operating Activities

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.

Six Months Ended June 30, 2024 and June 30, 2023

The Company’s operating activities generally reflect the Company’s earnings in the respective periods after adjusting for significant non-cash activity, including income of unconsolidated subsidiaries, stock-based compensation, depreciation, amortization, and deferred tax expense, all of which are included in net income.

Cash from operating activities increased by $16.6 million, or 57%, to $45.8 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

For the six months ended June 30, 2024 and 2023, our net cash provided by operating activities was driven primarily by receipts of management fees and advisory fees, partially offset by payment of operating expenses, which includes professional fees, compensation and benefits, as well as general, administrative and other expenses.

Additionally, the six months ended June 30, 2024 was impacted by cash received for the sale of tax credits while the six months ended June 30, 2023 was impacted by repaying deposit liabilities to third parties related to pending tax credit projects.

Investing activities

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.

Six Months Ended June 30, 2024 and June 30, 2023

The cash used in investing activities increased by $0.5 million, or 81%, to $1.1 million, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

This increase in cash used was primarily due to purchases of leasehold improvements, included in property and equipment during the six months ended June 30, 2024.

Financing Activities

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.

Six Months Ended June 30, 2024 and June 30, 2023

We recorded a net $44.5 million for the six months ended June 30, 2024 for cash used in financing activities, as compared to cash used in financing activities of $33.2 million for the six months ended June 30, 2023.

The change is driven by the repurchase of common stock funded by cash available from operating activities and additional draws on debt during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Future Sources and Uses of Liquidity

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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.

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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.

For these, the Company uses the tranche method and recognizes expense for each tranche of RSUs 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.

Refer to Note 15 to the Consolidated Financial Statements for further discussion.

Forfeitures are recognized as they occur.

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Interest Rate Risk

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.

As of June 30, 2024, we had $196.6 million in outstanding principal in Term Loans under our Term Loan and $106.1 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 March 31, 2024, the interest rate on these borrowings was 2.1% + SOFR.

On June 30, 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.

12 unchanged sentences

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent quarter ended March 31, 2024 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 June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

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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, 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