What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-09 · 161 added, 142 removed, 399 unchanged (43% of the section changed)

35 unchanged sentences

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

As of June 30, 2024, our private market solutions were comprised of the following:

Webb's Transition Agreement terminated in accordance with its terms on October 23, 2024.

As of September 30, 2024, our private market solutions were comprised of the following:

• Private Equity Solutions (PES) .

5 unchanged sentences

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 5,880 investment firms, 10,700 funds, 48,000 individual transactions, 32,000 private companies and 334,000 financial metrics.

As of June 30, 2024, PES managed $12.4 billion of Fee-Paying Assets Under Management ("FPAUM").

As of September 30, 2024, PES managed $13.4 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 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.

The VCS investment team, which is comprised of 15 investment professionals with an average of 24+ 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, 95+ direct investments, 385+ private market funds and 13,100+ portfolio companies.

We have 20 active investment vehicles.

1 unchanged sentence

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 June 30, 2024, VCS managed $6.3 billion of FPAUM.

• Impact Investing Solutions (IIS).

Under IIS, we make equity, tax equity, and debt investments in impact initiatives across North America.

IIS primarily targets investments in renewable energy development and historic building renovation projects, as well as providing capital to small businesses that are women or minority owned or operating in underserved communities.

The IIS investment team, which is comprised of 17 investment professionals with an average of 23+ years of experience, has deep and long-standing relationships in the impact market which it has cultivated over the past 20 years, including deploying capital on behalf of over 119 investors.

We currently have 36 active investment vehicles.

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 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 June 30, 2024, IIS managed $1.9 billion of FPAUM .

As of September 30, 2024, VCS managed $6.4 billion of FPAUM.

• Private Credit Solutions (PCS).

5 unchanged sentences

We currently maintain 80+ active sponsor relationships and have 120+ platform investments.

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

Within PCS, the Company has investments that target renewable energy development and historic building renovation projects, as well as providing capital to small businesses that are women or minority owned or operating in underserved communities.

These investments are differentiated in both the breadth of impact areas served, the type of capital deployed and the duration of the impact investing track record.

From the impact investing inception in 1999 through September 30, 2024, inclusive of proprietary assets and assets managed by affiliates, Enhanced Capital has raised a total of $6.3 billion.

Of the total AUM, impact assets represent $4.2 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 September 30, 2024, PCS managed approximately $5.1 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.

3 unchanged sentences

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

As of September 30, 2024, $78.1 million has been spent to buy back shares under this program.

Sources of Revenue

9 unchanged sentences

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

Our primary funds comprise approximately $13.4 billion of our FPAUM as of June 30, 2024.

Our primary funds comprise approximately $13.7 billion of our FPAUM as of September 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.

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.

4 unchanged sentences

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

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

Our direct investing platform comprises approximately $9.6 billion of our FPAUM as of September 30, 2024.

• Secondaries.

5 unchanged sentences

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 June 30, 2024.

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

Operating Segments

2 unchanged sentences

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

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

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

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

11 unchanged sentences

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

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.

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.

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.

30 unchanged sentences

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.

29 unchanged sentences

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.

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

18 unchanged sentences

Results of Operations

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

For the three and nine months ended September 30, 2024 and September 30, 2023.

For the three months

ended June 30,

For the six months

ended June 30,

ended September 30,

For the nine months

ended September 30,

(in thousands)

16 unchanged sentences

Total other (expense)

Net income before income taxes

Net income/(losses) before income taxes

Income tax (expense)

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

NET INCOME/(LOSS)

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

For the three months ended September 30, 2024 compared to the three months ended September 30, 2023, revenues increased by $15.3 million or 26% due to organic FPAUM growth across Bonaccord, Enhanced, RCP, and WTI.

Management and advisory fees increased by $14.5 million, or 25%, to $72.6 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 due primarily to organic FPAUM growth generating revenues of $14.7 million at Bonaccord, Enhanced, RCP and WTI.

Catch-up fees for the three months ended September 30, 2024 were $6.2 million of the $72.6 million in management and advisory fees associated with the fund closings at Bonaccord and RCP.

Other revenues increased by $0.8 million or 91% to $1.6 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 driven by $0.6 million increase in ancillary elements of our business.

Additionally, an increase of $0.2 million of interest income in other revenue at RCP.

For the Nine Months Ended September 30, 2024 and September 30, 2023

For the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, revenues increased by $32.8 million or 18% primarily due to organic FPAUM growth across Bonaccord, Enhanced, RCP, WTI, and TrueBridge.

Management and advisory fees increased by $29.9 million, or 17%, to $206.2 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 due to organic FPAUM growth at Bonaccord, Enhanced, WTI, and TrueBridge of $30.2 million offset slightly by a decrease of $0.7 million in management fees at Five Points.

Catch-up fees for the nine months ended September 30, 2024 were $20.0 million associated with the fund closings at Bonaccord, TrueBridge and RCP.

Other revenues increased by $2.9 million or 124% to $5.2 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 primarily driven by $2.0 million of recognized carried interest income from an uncommon pre-acquisition legacy managed fund in other revenue and an increase of $0.6 million of interest income in other revenue at RCP.

For the three months

ended June 30,

For the six months

ended June 30,

ended September 30,

For the nine months

ended September 30,

OPERATING EXPENSES

9 unchanged sentences

Operating Expenses

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 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.

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

Total operating expenses increased by $6.9 million, or 12%, to $65.4 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

This increase was primarily due to an increase in professional fees as well as general, administrative, and other expenses.

Compensation and benefits expense was relatively unchanged for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

There was a decrease in severance expense of $2.3 million and a decrease in stock compensation of $1.3 million primarily driven by a decrease in management stock compensation expense acceleration related to the executive transition that occurred in October 2023 offset by an increase in the remeasurement for the fair value of the Bonaccord Units related to the acquisition of Bonaccord.

The Bonaccord Units, which are recognized using the tranche method, had an increase in expense for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

These decreases were offset by a $1.8 million increase in profit and revenue share expense at Bonaccord and $1.3 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 $5.8 million, or 173%, to $9.2 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.

The primary increase in professional fees for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 is primarily driven by an increase in professional and legal fees associated with the Company's debt refinancing as well as 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.

General, administrative, and other increased by $1.3 million, or 24%, to $6.6 million, due primarily to $0.5 million increase of placement agent fees at Hark, $0.4 million increase in marketing efforts, 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 September 30, 2024 as compared to the three months ended September 30, 2023.

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

1 unchanged sentence

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.

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.

For the Nine Months Ended September 30, 2024 and September 30, 2023

Total operating expenses increased by $10.6 million, or 6%, to $173.7 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This increase was primarily due to increases in compensation and benefits, general, administrative and other expense, professional fees, and strategic alliance expense offset slightly by a decrease in amortization of intangibles.

Compensation and benefits expense increased by $1.8 million, or 2%, to $115.9 million, for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

The increase was driven by $15.9 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.

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 $8.6 million decrease for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Additionally, there was a decrease in severance expense of $3.3 million and a decrease in stock compensation of $3.1 million, of which $2.1 million decrease relates to remeasurement for the fair value of the Bonaccord Units and Hark Units related to the acquisition of Bonaccord and Hark and a decrease of $1.0 million related to management stock award accelerations in 2023 related to the Executive Transition in October 2023.

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.

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

Professional fees increased by $6.3 million, or 62%, to $16.5 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.

The primary driver for the increase in professional fees for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 is an increase of $5.0 million in professional and legal expenses associated with the Company's debt refinancing and 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.

Additionally, a $1.1 million increase related to audit, tax, and compliance services provided to the Company.

General, administrative and other increased by $4.5 million, or 29%, to $19.7 million, due to $1.1 million increase of placement agent fees, $0.3 million increase of rent, $0.9 million increase in marketing efforts, $0.6 million increase in conferences, travel, and entertainment expenses, and $1.1 million increase for ongoing enhancements to infrastructure, technology, and security across the Company.

Contingent consideration expense decreased by $0.4 million, to $0.2 million, for the nine months ended September 30, 2024 as compared to the nine months ended September 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.

The Hark contingent consideration was fully earned and paid in 2023 and the Bonaccord contingent consideration is fully earned as of September 30, 2024 and has a remaining fair value is $4.3 million as of September 30, 2024.

Amortization of intangibles decreased by $2.6 million, or 12%, to $19.3 million, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

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

2 unchanged sentences

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.

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

Other expenses decreased by $1.1 million, or (15)%, to $6.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.

This decrease was driven by $3.1 million in other income/(losses) related to legal settlements incurred in the three months ended September 30, 2023 compared to no legal settlements incurred in the three months ended September 30, 2024.

This was offset by an increase in interest expense of $2.0 million on the credit facility due to higher SOFR rates and a larger outstanding debt balance in the three months ended September 30, 2024.

For the Nine Months Ended September 30, 2024 and September 30, 2023

Other expenses decreased by $1.6 million, or 8%, to $17.1 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

This decrease was driven by $2.3 million in other income/(losses) related to legal settlements incurred in the nine months ended September 30, 2023 compared to no legal settlements incurred in the nine months ended September 30, 2024 and $1.7 million increase in other income driven by interest earned for money market accounts and income from unconsolidated subsidiaries.

This was offset by an increase in interest expense of $2.5 million due to higher SOFR rates and a larger average outstanding debt balance for the nine months ended September 30, 2024 compared to the nine months ended September 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.

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

Income tax expense decreased by $0.5 million to $1.3 million for the three months ended September 30, 2024 compared to the expense of $1.8 million for the three months ended September 30, 2023.

The decrease was primarily due to discrete period recognition of windfall tax adjustments related to options exercised and RSU vesting during the period.

For the Nine Months Ended September 30, 2024 and September 30, 2023

Income tax expense increased by $3.9 million to $6.7 million for the nine months ended September 30, 2024 compared to an expense of $2.8 million for the nine months ended September 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 June 30,

For the six months

ended June 30,

ended September 30,

For the nine months

ended September 30,

(in millions)

12 unchanged sentences

(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 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.

FPAUM as of September 30, 2024

FPAUM increased by $1.1 million to $24.9 million for the three months ended September 30, 2024, due primarily to an increase in capital raised from our private equity and venture capital solutions being offset by scheduled fee stepdowns.

FPAUM increased by $1.7 billion, or 7.2%, to $24.9 billion for the nine months ended September 30, 2024, due primarily to an increase in capital raised from our private equity and venture capital solutions.

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.

5 unchanged sentences

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 ("ANI"), as well as Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to provide additional measures of profitability.

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.

7 unchanged sentences

• One-time expenses related to restructuring of the management team including placement/search fees;

• Expenses related to the debt refinancing completed in August 2024;

• 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 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.

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

September 30,

(in thousands)

Net Income/(Loss)

Depreciation & amortization

4 unchanged sentences

Non-cash stock based compensation - acquisitions

Non-cash stock based compensation - CEO transition

Earn out related compensation

1 unchanged sentence

Cash interest expense, net

Net cash paid on income taxes

Cash income taxes, net of taxes related to acquisitions

Adjusted Net Income

7 unchanged sentences

Selected Statements of Financial Position

September 30,

(in thousands)

3 unchanged sentences

Debt obligations

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.

Cash and cash equivalents increased from $32.1 million as of December 31, 2023 to $63.3 million as of September 30, 2024 primarily due to the Company's debt refinancing.

There was a decrease in goodwill and intangible assets of $19.3 million due to amortization of intangibles during the nine months ended September 30, 2024.

Remaining total assets increased in the same period by $11.7 million.

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.

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

Debt obligations increased by $30.4 million which is driven by the Company's debt refinancing during the nine months ended September 30, 2024.

Liquidity and Capital Resources

1 unchanged sentence

However, to fund our continued growth, we have utilized capital obtained through debt and equity raises.

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

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

On December 22, 2021, P10, Inc.

4 unchanged sentences

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.

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

On August 1, 2024, the Company entered into the Amended and Restated Credit Agreement, which provides for a new senior secured revolving credit facility in the amount of $175 million, with a $10 million sublimit for the issuance of letters of credit, and a new senior secured loan facility in the amount of $325 million.

The New Credit Facilities are to be used to refinance and replace the credit facilities under the Credit Agreement and for general corporate purposes, including acquisitions.

The New Credit 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 2.60%.

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 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 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 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,

Principal is contractually repaid at a rate of 1.25% on the term loan quarterly effective December 31, 2025.

The New Revolving Facility has no contractual principal repayments until maturity, which is August 1, 2028 for both facilities.

As of September 30, 2024, the Term Loan with a balance of $325.0 million is incurring interest at a weighted average Adjusted Term SOFR Rate of 7.68%.

As of September 30, 2024, there is no outstanding balance for the Revolver Facility.

Refer to Note 11 of the Consolidated Financial Statements for further details provided on the debt and associated interest periods.

The Amended and Restated 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, 2024, P10 was in compliance with its financial and other covenants required under the facility.

The Company has incurred $17.5 million in interest expense for the nine months ended September 30, 2024.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

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

For the Nine Months

Ended September 30,

(in thousands)

5 unchanged sentences

Operating Activities

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

Nine Months Ended September 30, 2024 and September 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.

Cash from operating activities increased by $27.5 million, or 60%, to $73.3 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

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

Investing activities

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.

Nine Months Ended September 30, 2024 and September 30, 2023

The cash used in investing activities increased by $2.6 million, or 362%, to $3.4 million, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

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

Financing Activities

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.

Nine Months Ended September 30, 2024 and September 30, 2023

We recorded a net $38.7 million for the nine months ended September 30, 2024 for cash used in financing activities, as compared to cash used in financing activities of $52.4 million for the nine months ended September 30, 2023.

The change is driven by the cash provided by debt refinancing during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Future Sources and Uses of Liquidity

29 unchanged sentences

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.

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 such VIEs' 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.

The liabilities of our consolidated VIEs' 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.

2 unchanged sentences

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

Accounts Receivable and Due from Related Parties

Accounts receivable is equal to contractual amounts reduced for allowances, if applicable.

Management fees are collected on a quarterly basis.

Certain subsidiaries management fee contracts are collected at the beginning of the quarter, while others are collected in arrears.

The management fees reflected in accounts receivable at period end are those that are collected in arrears.

Due from related parties represents receivables from the Funds for reimbursable expenses, and management fees collected by a related party of RCP 2 that are owed to RCP 2.

Additionally, fees owed to the Company for the advisory agreement entered into upon the closing of the acquisitions of ECG and ECP and any supplemental agreements entered into after acquisition, ("Advisory Agreements") where ECG provides advisory services to Enhanced Permanent Capital, LLC ("Enhanced PC") are reflected in due from related parties on the Consolidated Balance Sheets.

Revenue Recognition of Management Fees and Management Fees Received in Advance

5 unchanged sentences

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

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

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

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

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.

Advisory services are generally based upon fixed amounts and billed quarterly.

These fees are recorded as deferred revenues on the Consolidated Balance Sheets due to the performance obligation not being satisfied at the time of collection.

For asset management and advisory services, the Company typically satisfies its performance obligations over time as the services are provided as a distinct series of daily performance obligations that the customer simultaneously benefits from as they are performed.

Asset management fees are based on the contractual terms of each contract which differ, such as fees calculated based on committed capital or deployed capital, fees initially calculated based on committed capital during the investment period and on net invested capital through the remainder of the fund’s term, fees that step down during specified periods of the fund's term, or in limited instances, fees based on assets under management.

At contract inception, no revenue is estimated as the fees are dependent variable amounts which are susceptible to factors outside of our control.

Fees are recognized for services provided during the period, which are distinct from services provided in other periods.

In certain asset management and advisory agreements progress is measured using the practical expedient under the output method resulting in the recognition of revenue in the amount for which the Company has a right to invoice.

Advisory service fees are determined using fixed-rate fees and are recognized over time as the related services are completed.

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

The Company allocates a portion of consideration received under an arrangement to a financing component when it determines that a significant financing component exists.

The Company does not adjust the promised amount of consideration for the effects of a significant financing component if, at each contract inception the Company expects that the period between services being provided and cash collection would be less than one year.

To the extent the Company determines that there is a significant financing component in a contract with a customer, it determines the impact of the time value of money in adjusting the transaction price to account for the income associated with the financing component by estimating the discount rate that would be reflected in a separate financing transaction between the customer and the Company at contract inception, based upon the credit characteristics of the customer receiving financing in the contract.

The Company is applying the optional disclosure exemption for variable consideration for unsatisfied performance obligations, as the variable consideration relates to these unsatisfied performance obligations being fulfilled as a series.

The performance obligations related to these contracts are expected to be satisfied over the next 1-10 years as services are provided to the customer.

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.

Catch-up fees are recorded as revenue when such commitments are made as variable consideration.

Stock-Based Compensation Expense

2 unchanged sentences

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.

For awards with graded vesting and require a 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.

18 unchanged sentences

Interest Rate Risk

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 June 30, 2024, the interest rate on these borrowings was 2.1% + SOFR.

As of September 30, 2024, we had $325.0 million in outstanding principal in Term Loans under our Term Loan and $0 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 2.50%.

On September 30, 2024, the interest rate on these borrowings was 2.6% + SOFR.

Despite the current interest rate environment displaying an interest rate cut by 50-basis points, the Company is still exposed to interest rate risk if there is a shift in the environment.

We estimate that a 100-basis point increase in the interest rate would result in an approximately $3.2 million increase in interest expense related to the loan over the next 12 months.

5 unchanged sentences

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.

We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (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.

4 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 June 30, 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 September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

2 unchanged sentences

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