TPG(US:TPG)2023-05-14 16:00Part I Part I: Financial Information This section presents TPG's unaudited financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the first quarter of 2023 Financial Statements (Unaudited) TPG's Q1 2023 financial statements reflect significantly lower revenues and net income compared to Q1 2022, primarily due to reduced capital allocation-based income, with total assets slightly increasing Condensed Consolidated Statements of Financial Condition Financial Condition Highlights (as of March 31, 2023 vs. December 31, 2022) | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $7.97 billion | $7.94 billion | | Cash and cash equivalents | $931.9 million | $1.11 billion | | Investments | $5.53 billion | $5.33 billion | | Total Liabilities | $4.31 billion | $4.20 billion | | Accrued performance allocation compensation | $3.23 billion | $3.27 billion | | Debt obligations | $444.7 million | $444.6 million | | Total Equity | $3.00 billion | $3.09 billion | Condensed Consolidated Statements of Operations Statement of Operations Highlights (Three Months Ended March 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenues | $643.1 million | $1.11 billion | | Fees and other | $311.5 million | $273.0 million | | Capital allocation-based income | $331.7 million | $837.7 million | | Total Expenses | $620.1 million | $942.5 million | | Performance allocation compensation | $221.3 million | $523.1 million | | Net Income | $35.7 million | $162.8 million | | Net Income Attributable to TPG Inc. | $25.1 million | $41.3 million | | Diluted EPS | $(0.01) | $0.11 | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Three Months Ended March 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $35.8 million | $713.6 million | | Net cash used in investing activities | $(0.9) million | $(0.6) million | | Net cash used in financing activities | $(210.3) million | $(231.1) million | | Net change in cash | $(175.4) million | $481.9 million | Notes to Condensed Consolidated Financial Statements The notes detail TPG's reorganization, accounting policies, investment breakdowns, and significant events including a contingent clawback obligation and the subsequent Angelo Gordon acquisition - As of March 31, 2023, TPG Inc.'s ownership of the TPG Operating Group was approximately 26%34 - If all investments held by TPG funds were liquidated at their current unrealized fair value as of March 31, 2023, there would be a potential clawback obligation of $58.3 million, net of tax, but if all remaining investments were deemed worthless, the potential clawback would be $1.86 billion196197 - On May 15, 2023, TPG announced the acquisition of Angelo, Gordon & Co., L.P., a credit and real estate investment firm, for approximately $970.0 million in cash and up to 62.5 million Common Units and RSUs, plus a potential earnout of up to $400.0 million243 Management's Discussion and Analysis (MD&A) Management attributes the Q1 2023 revenue and net income decline to lower performance allocations, while Fee-Related Earnings grew 8% and AUM increased to $137.1 billion, with the Angelo Gordon acquisition announced as a key subsequent event Business Overview and Trends TPG, a global alternative asset manager with $137.1 billion in AUM, navigated Q1 2023 market volatility with a 3% portfolio appreciation, anticipating continued favorable trends for alternative investments - TPG is a leading global alternative asset manager with approximately $137.1 billion in AUM as of March 31, 2023248 - The company's investment portfolio appreciated by 3% in the first quarter of 2023, reflecting strong operating performance and value creation initiatives258 Results of Operations (GAAP) Q1 2023 GAAP revenues decreased 42% to $643.1 million, primarily due to a 60% decline in capital allocation-based income, despite a 14% increase in fees and other revenues Revenue Breakdown (Three Months Ended March 31) | Revenue Component | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Management fees | $250.6M | $204.8M | +22% | | Transaction, monitoring and other fees, net | $4.7M | $24.9M | -81% | | Performance allocations | $315.7M | $800.0M | -61% | | Capital interests | $16.0M | $37.7M | -58% | | Total Revenues | $643.1M | $1,110.7M | -42% | - The decrease in performance allocations was driven by lower realized and unrealized appreciation in major funds like TPG VII, TPG VIII, and TREP III, partially offset by gains in Rise Climate and Growth III290 Non-GAAP Financial Measures Non-GAAP metrics show Q1 2023 Fee-Related Earnings increased 8% to $99.3 million, while Distributable Earnings sharply declined to $97.0 million due to a significant drop in realized performance allocations Key Non-GAAP Metrics (Three Months Ended March 31) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Fee-Related Earnings (FRE) | $99.3 million | $92.0 million | | Distributable Earnings (DE) | $97.0 million | $215.5 million | | After-Tax Distributable Earnings | $87.8 million | $199.0 million | - The increase in FRE was driven by a $45.3 million (22%) rise in management fees, primarily from the activation of funds like TPG IX, Asia VIII, and TREP IV318 - The sharp decline in DE was caused by a drop in realized performance allocations, which were only $5.0 million in Q1 2023 compared to $122.2 million in Q1 2022325 Operating Metrics As of March 31, 2023, AUM grew to $137.1 billion and FAUM to $78.8 billion, with $2.0 billion raised and $2.3 billion invested, and available capital at $42.7 billion Key Operating Metrics (as of March 31, 2023) | Metric | Value | Change from Q4 2022 | | :--- | :--- | :--- | | Assets Under Management (AUM) | $137.1 billion | +$2.1 billion | | Fee Earning AUM (FAUM) | $78.8 billion | +$0.9 billion | | Available Capital | $42.7 billion | -$0.3 billion | | Net Accrued Performance Allocations | $709 million | +$66 million | - In Q1 2023, TPG raised $2.0 billion, invested $2.3 billion, and had realizations of $2.3 billion360363364 - Performance Allocation Generating AUM (funds above their hurdle rate) increased to $93.6 billion from $85.3 billion at the end of 2022354 Liquidity and Capital Resources As of March 31, 2023, TPG maintained $1.66 billion in total liquidity, including cash and available credit, while managing debt obligations and a Tax Receivable Agreement liability, and declared a $0.20 per share dividend for Q1 2023 - Total liquidity as of March 31, 2023 was $1.66 billion, consisting of $931.9 million in cash and $730 million in available credit376 - The company has a Tax Receivable Agreement (TRA) obligating it to pay 85% of realized tax savings to beneficiaries, and an exchange of 1 million units in Q1 2023 increased the TRA liability by $8.1 million397398 - A dividend of $0.20 per Class A common share for Q1 2023 was declared on May 15, 2023406 Market Risk Disclosures The company's primary market risk relates to investment fair value movements, with no material changes observed during Q1 2023 - There was no material change in the company's market risks during the three months ended March 31, 2023409 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023412 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls413 Part II Part II: Other Information This section covers TPG's legal proceedings and unregistered sales of equity securities Legal Proceedings TPG is involved in ongoing litigation regarding a past investment and is cooperating with an SEC document request, but does not anticipate a material financial impact from current proceedings - The company is involved in ongoing lawsuits concerning a past investment in Hellas, but believes the claims are without merit and is defending them vigorously203206 - In October 2022, TPG received a document request from the SEC regarding the use and retention of business-related electronic communications, as part of a broader industry review, and is cooperating206 Unregistered Sales of Equity Securities In Q1 2023, 1 million Common Units were exchanged for Class A common shares by a pre-IPO investor, a transaction exempt from registration - In Q1 2023, 1 million Common Units were exchanged for 1 million shares of Class A common stock by a pre-IPO investor in a transaction exempt from registration418