P10(PX) - 2022 Q4 - Annual Report

PART I Item 1. Business P10 is a multi-asset private market solutions provider, generating recurring fees from specialized investment vehicles - P10 is a multi-asset class private market solutions provider in alternative asset management, offering specialized funds and customized separate accounts across Private Equity, Venture Capital, Impact Investing, and Private Credit[24][26] - Revenue is almost entirely composed of recurring management and advisory fees, primarily earned on committed capital with typical 10-15 year lock-up agreements, providing high revenue visibility and investor retention[25] Fee-Paying Assets Under Management (FPAUM) as of December 31, 2022 | Metric | Amount ($B) | | :----- | :---------- | | FPAUM | 21.2 | - The company's growth is driven by strong investment performance, scale in the middle and lower-middle market, deep relationships with fund managers, and expanding data capabilities[27] - P10 has a global investor base of over 3,100 investors across 50 states, 59 countries, and 6 continents, including large institutional investors, family offices, and high net worth individuals, with a significant presence in North America[30][47] - As of December 31, 2022, P10 had 234 employees, including 107 investment professionals, with over 100 employees holding an equity interest (approximately 63% on a fully-diluted basis)[31][119] Our Company P10 is a multi-asset class private market solutions provider with a recurring fee-based business model and strong free cash flow - P10 is a multi-asset class private market solutions provider, structuring, managing, and monitoring portfolios across Private Equity, Venture Capital, Impact Investing, and Private Credit[24] - The business model is characterized by highly recurring, diversified management and advisory fee revenues, and strong free cash flow, with fees primarily earned on committed capital[25] FPAUM Growth (2018-2022) | Metric | Value | | :----- | :---- | | FPAUM as of Dec 31, 2022 | $21.2 billion | | CAGR (2018-2022) | 17% | - P10 operates under established brands like RCP Advisors, Bonaccord Capital, P10 Advisors (Private Equity), TrueBridge (Venture Capital), Enhanced (Impact Investing), and Five Points, Hark Capital, WTI (Private Credit)[13][26] Our Solutions P10 offers specialized solutions across private equity, venture capital, impact investing, and private credit, each with distinct focus areas FPAUM by Solution (as of December 31, 2022) | Solution | FPAUM ($B) | Investment Professionals | Average Experience (Years) | | :------- | :--------- | :----------------------- | :------------------------- | | Private Equity Solutions (PES) | 10.8 | 39 | 25+ | | Venture Capital Solutions (VCS) | 5.4 | 15 | 22+ | | Impact Investing Solutions (IIS) | 1.9 | 15 | 22+ | | Private Credit Solutions (PCS) | 3.1 | 38 | 24+ | - PES focuses on middle and lower-middle market private equity, leveraging a proprietary database of over 5,000 firms and 38,000 transactions[36][37] - VCS invests in North American venture capital funds, targeting high-performing, access-constrained opportunities and partners with Forbes for the Midas List[38] - IIS makes equity, tax equity, and debt investments in impact initiatives, deploying over $3.3 billion into 850+ projects across 39 states since 1999[39] - PCS primarily makes debt investments in lower middle market companies, providing capital solutions for growth-oriented companies and leveraging the PES network for sourcing[40] Our Vehicles P10 provides flexible private market solutions through various investment vehicles, including primary funds, direct/co-investment funds, and secondaries - P10 offers flexible specialized private market solutions through various investment vehicles, with an average annual fee rate of approximately 1%[41] FPAUM by Investment Vehicle (as of December 31, 2022) | Vehicle | FPAUM ($B) | Description | | :---------------------- | :--------- | :---------- | | Primary Investment Funds | 11.7 | Invests in new private markets funds, fees based on committed capital (10-15 year terms). | | Direct and Co-Investment Funds | 8.0 | Acquires equity/debt in operating companies, often co-investing, fees based on committed/invested capital (10-15 year terms). | | Secondaries | 1.5 | Investments in existing private markets funds through acquisition of existing interests, fees on committed capital (typical 10-year fund life). | Our Investors P10 serves a diverse global investor base, including institutional clients, family offices, and high net worth individuals - P10 serves a global investor base of over 3,100 investors across 50 states, 59 countries, and 6 continents, including pension funds, endowments, foundations, corporate pensions, financial institutions, family offices, and high net worth individuals[47] Our Distribution and Marketing A dedicated team manages investor relationships, monitors preferences, and tailors product offerings to meet client needs - A dedicated team of business development and investor relations professionals maintains active dialogue with existing and prospective investors, monitoring preferences and tailoring product offerings[49] - The team leads in-depth due diligence processes for prospective investors and designs specific strategic plans for customized separate accounts[49] Our Investment Performance Strong investment performance is a key differentiator, driven by broad relationships, diligent processes, and premier data capabilities - Strong investment performance is a key differentiator and retention mechanism, attributed to broad private market relationships, diligent investment processes, tenured experience, and premier data capabilities[51][113] Selected Fund Performance (as of September 30, 2022) | Fund Type | Vintage | Fund Size ($M) | Called Capital | Net IRR | Net ROIC | | :---------- | :------ | :------------- | :------------- | :------ | :------- | | Fund-of-Funds (Fund VIII) | 2012 | $268 | 113% | 20.8% | 2.3x | | Secondary Funds (SOF III) | 2018 | $400 | 95% | 44.4% | 1.7x | | Co-Investment Funds (Direct I) | 2010 | $6015 | 82% | 42.8% | 3x | | Impact Funds (Impact Equity) | N/A | $566 | N/A | 20%+ | 1.2x | | GP Stakes Funds (Fund I) | 2019 | $724 | 72% | 19.2% | 1.3x | | Credit Funds (VLL I) | 1994 | $47 | 100% | 63.3% | 5.9x | | Equity Funds (Fund III) | 2013 | $230 | 94% | 25.4% | 2.6x | | NAV Lending Funds (Fund III) | 2021 | $400 | 71% | 13.2% | 1.1x | - Historical results are not indicative of future performance, and factors like market conditions, fund maturity, tax/regulatory changes, and competition can affect returns[55][57] Our History P10 has a history of strategic acquisitions and corporate reorganization, expanding its multi-asset class offerings and market presence - P10 Holdings was founded in 1992, reincorporated in Delaware in 2000, and after a period as a non-operating company and Chapter 11 reorganization in 2017, re-entered the alternative asset management industry[59] - Key acquisitions include RCP Advisors (2017-2018), Five Points Capital (2020), TrueBridge (2020), Enhanced Capital Group (2020), Hark Capital and Bonaccord Capital Partners (2021), and WTI (2022), expanding its multi-asset class offerings[60][61][62][63][64][67] - P10, Inc. completed its IPO and corporate reorganization on October 18, 2021, with Class A common stock trading on the NYSE under 'PX'[65] - In June 2022, P10 Advisors was formed to manage investment opportunities outside existing mandates[66] Organizational Structure P10, Inc. operates with a dual-class common stock structure, where Class B holders retain significant voting control - P10, Inc. became the parent company after the IPO and reorganization in October 2021, issuing Class A common stock and converting existing equity into P10 common stock[65][72] - The company has a dual-class common stock structure: Class A (one vote per share) and Class B (ten votes per share), with Class B holders controlling approximately 95% of combined voting power as of December 31, 2022[76][79][89] - A 'Sunset' provision triggers the conversion of Class B to Class A common stock upon certain conditions, including a decrease in beneficial ownership by Sunset Holders or the tenth anniversary of the amended certificate of incorporation[76][88] - P10, Inc. is a 'controlled company' under NYSE listing standards, allowing exemptions from certain corporate governance requirements[21][336] Our Market Opportunity The private markets industry is experiencing significant growth, driven by increasing demand and investor allocations - The private markets industry is large and growing, driven by accelerating demand as more companies remain private and investors seek higher risk-adjusted returns away from public markets[91][92] - Private markets AUM grew 3.1x from $2.4 trillion in 2010 to $9.8 trillion in 2022, with a projected 10% CAGR through 2027[93][94] - Favorable dynamics in the middle and lower-middle markets offer a larger pool of opportunities at compelling valuations due to less capital in pursuit compared to larger companies[95] - Long-term investor allocations to private equity and private credit are expected to grow, with increasing interest in impact investing and ESG principles[97][103] - The 'democratization of private markets' and proliferation of fund managers drive demand for scaled private market solutions providers with strong data, analytics, and technology capabilities[98][101][102][105] Our Competitive Strengths P10 leverages specialized multi-asset solutions, deep market expertise, proprietary data, and a predictable financial profile - P10 offers specialized multi-asset class solutions and comprehensive vehicle offerings (primaries, secondaries, direct/co-investments) with distinct market access and wide-ranging relationships[107] - The company possesses distinct middle and lower-middle market expertise, with 107 investment professionals averaging over 22 years of experience[108] - Differentiated access to middle and lower-middle market private equity and venture capital firms is maintained through long-standing relationships with over 265 general partners[109] - A premier proprietary database, containing information on over 4,900 investment firms, 9,800 funds, and 276,000 financial metrics, supports robust sourcing and investment decisions[111][112] - P10's financial profile is characterized by a highly predictable, recurring fee-based revenue model (6.1 years weighted average duration of remaining capital under management as of Dec 31, 2022), well-diversified revenue and investor base, and attractive profitability[114][115][116] - The ownership structure aligns with investors, with over 100 employees holding equity (63% fully diluted) and investment professionals receiving carried interest directly to incentivize outperformance[118][119] Our Growth Strategy P10 aims to expand investor relationships, asset class solutions, and geographic reach through organic growth and strategic acquisitions - P10 aims to maximize investor relationships by enhancing existing mandates through cross-selling and capturing new investors by leveraging its differentiated sourcing and multi-asset class solutions[121][122] - The company plans to expand distribution channels, particularly to high-net-worth individuals who are currently under-allocated to private markets[123][124] - Growth will involve expanding asset class solutions (e.g., new vehicles in Venture Capital and Impact Investing), broadening geographic reach (Europe and Asia), and growing the private markets network effect[125][126][127] - P10 will leverage its proprietary database and analytical tools to drive performance and innovate solutions for investors[128] - The company will selectively pursue strategic acquisitions that expand its footprint, broaden its investor base, and strengthen its solution offerings, targeting differentiated platforms with strong margins and management teams[129] - Recent acquisitions like Hark and Bonaccord (2021) and WTI (2022) added approximately $900 million in FPAUM and strengthened its market position, particularly in venture debt[129][130][131] Our Investment Process P10 maintains rigorous investment, monitoring, and risk management processes, unified by a common philosophy and comprehensive analysis - P10 maintains rigorous investment, monitoring, and risk management processes across all solutions, unified by a common philosophy and comprehensive analysis of fund managers and portfolio companies[133] - The process includes tracking thousands of opportunities, initial screening using an extensive database, annual due diligence (operational and legal), and investment committee review for final approval[137][138][139][140] Our Risk Management Process Risk management covers identification, measurement, mitigation, monitoring, and reporting, tailored by solution, vehicle, and client - Risk management covers identification, measurement, mitigation, monitoring, and reporting, tailored by solution, vehicle, and client, applied across general partners, investment funds, and portfolio companies[142] - Ongoing monitoring includes reviewing historical strategy, track record, team composition, decision-making, deal flow, fund terms for general partners, and performance metrics for investment funds and portfolio companies[143][145][146] Our Responsible Investment Philosophy P10 integrates an ESG framework into its investment process and internal operations, believing it improves long-term, risk-adjusted returns - P10 integrates an ESG framework into its investment process and internal operations, believing it improves long-term, risk-adjusted returns for clients[149] - Two subsidiaries are signatories to the United Nations Principles for Responsible Investment (UNPRI), with an annual policy review[149] Our Fee-Paying AUM Fee-Paying AUM (FPAUM) represents assets generating management and advisory fees, typically based on committed capital - Fee-Paying AUM (FPAUM) represents assets from which management and advisory fees are earned, typically based on committed capital, making it unaffected by market appreciation or depreciation[152] FPAUM Growth (2018-2022) | Year | FPAUM ($B) | | :--- | :--------- | | 2018 | 9.9 | | 2022 | 21.2 | - FPAUM grew from $9.9 billion in 2018 to $21.2 billion in 2022 on a pro forma basis, reflecting a 17% CAGR[31][153] Our Fees and Other Key Contractual Terms Fees for investment vehicles are typically based on committed capital over long terms, with separate accounts offering flexible fee structures - For commingled investment vehicles, investors make capital commitments (typically 10-15 years) and fees are based on committed capital, often stepping down after the investment period[156][158][159] - Separate accounts involve contractual arrangements with investment management agreements, where fees are based on committed capital, net invested capital, or NAV, and can decrease over time[161][163] - Separate account contracts are typically terminable by investors with 5 to 90 days' notice[164] Our Competition P10 competes with a wide range of financial institutions and private markets solutions providers based on various factors - P10 competes with a wide range of asset management firms, commercial banks, broker-dealers, insurance companies, and other financial institutions, primarily other private markets solutions providers in North America[166] - Competition factors include access to investment opportunities, brand recognition, investment performance, service quality, data analytics, and ability to customize offerings[167] Regulatory and Compliance Matters P10's business is subject to extensive regulation in the US and internationally, requiring robust compliance programs - P10's business is subject to extensive regulation in the United States (federal and state) and internationally, including SEC, ERISA, SBA, and foreign regulatory agencies[168][171][173][175][178] - Compliance requirements cover fiduciary duties, transactions with investors, compliance programs, political contributions, personal trading, incentive fees, custody, advertising, recordkeeping, reporting, and disclosure[171] - The company is subject to stringent privacy and cybersecurity regulations (e.g., GLBA, GDPR, CCPA), requiring robust information security policies and procedures[179] - P10 maintains Chief Compliance Officers, in-house legal staff, and an outsourced Internal Audit group to ensure compliance with applicable laws and regulations[182][185] Legal Proceedings There are no material legal, judicial, or administrative proceedings currently pending or threatened against P10 - Currently, there are no material legal, judicial, or administrative proceedings pending or threatened against P10[186] Employees As of December 31, 2022, P10 had 234 employees, including 107 investment professionals, and maintains good employee relations - As of December 31, 2022, P10 had 234 total employees, including 107 investment professionals, and considers its relationship with employees to be good[187] Facilities P10 leases its corporate headquarters in Dallas, TX, and additional office spaces across nine states - P10 leases its corporate headquarters in Dallas, TX, and additional office spaces in 9 states, believing current facilities are adequate and suitable additional space will be available[188] Human Capital P10 prioritizes human capital, focusing on attracting, developing, and retaining diverse talent with competitive compensation and benefits - P10 prioritizes human capital, focusing on attracting, recruiting, developing, and retaining diverse talent, with oversight from its Board of Directors[190][191] - The company offers competitive compensation, benefits (medical, dental, vision, life, disability, parental leave, 401(k)-match), and education reimbursement[193] - P10 is committed to Diversity and Inclusion (D&I), with approximately 39% female and 17% minority representation in its total workforce as of December 31, 2022[195] AVAILABLE INFORMATION P10 makes its annual, quarterly, and current reports available free of charge on its investor relations website - P10 makes its annual, quarterly, and current reports available free of charge on its investor relations website (https://ir.p10alts.com/)[197](index=197&type=chunk) Item 1A. Risk Factors This section outlines risks including investor dependence, poor investment performance, intense competition, and regulatory and organizational structure challenges - Revenue is dependent on fee-paying investors, and early withdrawals or termination of advisory agreements could adversely affect fees[200] - Poor performance of specialized investment vehicles can hinder future capital raising, and historical performance is not indicative of future results[201][202] - The business relies on identifying suitable investment opportunities, and intense competition for access to top-performing fund managers is a significant challenge[203][206] - Conflicts of interest, inability to retain senior leadership, and risks associated with expanding into new lines of business or geographic markets (including acquisitions) pose threats to reputation and resources[209][211][212][215] - Valuation methodologies for illiquid assets are subjective, and actual realizations may differ, potentially leading to losses and reputational harm[233][234] - Operational risks, data security breaches, and reliance on third-party service providers could disrupt business, compromise sensitive information, and result in financial or reputational damage[248][250][253] - The investment management industry is intensely competitive, with factors like greater resources of competitors, low barriers to entry, and potential lower cost of capital for rivals[278][279] - Difficult market conditions, including rising interest rates and economic downturns, can reduce asset values, investor allocations, and profitability due to fixed costs[281][282][284] - Increased government regulation, compliance failures, and changes in tax laws (e.g., TCJA, CARES Act, Inflation Reduction Act) could adversely affect operations, increase costs, and impact financial performance[285][287][306][308] - A change of control, including a 'Sunset' event, could trigger an assignment of investment advisory agreements, requiring investor consent which may not be obtained[320] - The dual-class stock structure (Class A: one vote, Class B: ten votes) gives Class B holders significant control, potentially depressing the trading price of Class A common stock and limiting stockholder influence[339][340] Summary Risk Factors This section summarizes key risks including revenue dependence, investment performance, competition, human capital, and regulatory challenges - Revenue depends on fee-paying investors; poor investment vehicle performance can hinder future capital raising[20] - Success relies on suitable investment opportunities, facing intense competition for access[20] - Failure to manage conflicts of interest or retain human capital could damage reputation and business[20] - Business expansion and acquisitions pose risks, and due diligence may not reveal all relevant facts[20] - Indebtedness terms, dependence on leverage, and investor defaults can adversely affect operations and returns[20] - Subjective asset valuation, illiquid investments, and undiversified portfolios can lead to significant losses[20] - Inability to maintain desired fee structure, data restrictions, and operational/cybersecurity risks can disrupt business[21] - Intense competition, difficult market conditions, and regulatory changes pose significant industry risks[21] - Organizational risks include assignment of advisory agreements upon change of control and the impact of dual-class stock structure[21] Risks Related to Our Business P10 faces risks related to revenue dependence, investment performance, competition, human capital, acquisitions, and operational vulnerabilities - P10's revenue is highly dependent on fee-paying investors, and early termination rights or non-renewal of contracts could lead to revenue decline[200] - Poor investment performance of specialized vehicles can negatively impact future capital raising and management/advisory fee revenue[201] - The success of the business relies on identifying suitable investment opportunities, which are subject to market conditions and intense competition[203][206] - Conflicts of interest, the ability to retain key personnel, and risks associated with expanding into new business lines or geographic markets (including acquisitions) are critical for P10's success[209][211][212][215] - Valuation methodologies for illiquid assets are subjective, and actual realized values may differ, potentially causing significant losses and reputational damage[233][234] - Operational risks, data security breaches, and reliance on third-party service providers can disrupt business, compromise sensitive information, and lead to financial or reputational harm[248][250][253] - The company may not fully utilize its net operating loss (NOL) and other tax carryforwards due to ownership changes or insufficient future taxable income, devaluing significant deferred tax assets[270][272] Risks Related to Our Industry The investment management industry is intensely competitive, subject to difficult market conditions, and increasing regulatory scrutiny - The investment management and advisory business is intensely competitive, with numerous firms vying for investment performance, service quality, and brand recognition[278] - Difficult market conditions, including rising interest rates, inflation, and global economic instability, can reduce asset values, investor commitments, and overall profitability[281][282][283] - Increased government regulation, compliance failures, and changes in laws (e.g., Dodd-Frank Act, SEC proposed rules on private funds, climate-related disclosure) could increase costs and restrict operations[285][287][288] - P10 is subject to stringent and evolving data privacy and protection obligations (e.g., GLBA, CCPA, GDPR), with non-compliance potentially leading to investigations, fines, and reputational harm[292][294][296] - Federal, state, and foreign anti-corruption and sanctions laws (e.g., FCPA, OFAC, UK Bribery Act) create potential for significant liabilities and reputational damage if violated[309][311] - Increasing scrutiny from institutional investors regarding ESG implications of investments may constrain opportunities and affect P10's ability to raise capital[314][315] Risks Related to Our Organizational Structure P10's organizational structure presents risks related to change of control, investment company status, anti-takeover provisions, and dual-class stock - A change of control, including the occurrence of a 'Sunset' event, could be deemed an assignment of investment advisory agreements, requiring investor consent which may not be obtained[320] - If P10 were deemed an 'investment company' under the Investment Company Act of 1940, applicable restrictions could make it impractical to continue business as contemplated[321][322] - Protective provisions in the Certificate of Incorporation and a shareholder rights plan, designed to preserve NOLs, may have unintended anti-takeover effects and impact stock liquidity[323][324][326] - The dual-class stock structure, with Class B holders having superior voting rights, may depress the trading price of Class A common stock and limit stockholder influence[339][340] - As an emerging growth company, reduced reporting and disclosure requirements may make Class A common stock less attractive to some investors[341] General Risk Factors General risks include the impact of the COVID-19 pandemic, public company compliance costs, internal control deficiencies, and anti-takeover provisions - The COVID-19 pandemic severely disrupted global financial markets and business climate, and its future adverse impact on P10's business, financial condition, and results of operations remains uncertain[329][330] - Fulfilling public company financial reporting and regulatory obligations is expensive and time-consuming, increasing legal and financial compliance costs[331][332] - P10's internal controls over financial reporting do not yet meet all Sarbanes-Oxley Act Section 404 standards, and any material weakness could harm its reputation and stock price[337][338] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult and limit stockholders' ability to replace management[343][345] Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report Item 2. Properties No information is reported as the company does not own real property and facilities data is covered elsewhere Item 3. Legal Proceedings The company is not currently involved in any material legal, regulatory, or administrative proceedings - P10 is not currently subject to any material legal, regulatory, or administrative proceedings[349] Item 4. Mine Safety Disclosures No mine safety disclosures are applicable to the company PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities P10's Class A common stock trades on NYSE, with dividends declared and stock repurchases executed in fiscal 2022 - P10's Class A common stock is traded on the NYSE under the symbol 'PX'; there is no established public trading market for Class B common stock[353] Common Stock Holders of Record (as of December 31, 2022) | Class | Holders of Record | | :---- | :---------------- | | Class A | 3,104 | | Class B | 2,930 | - P10 declared a quarterly dividend of $0.30 per share of common stock in each fiscal quarter of 2022, with the board intending to continue comparable cash dividends[355][356] Issuer Purchases of Equity Securities (Q4 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Total Shares Purchased (Publicly Announced Plan) | Dollar Value Remaining (Publicly Announced Plan) | | :----- | :--------------------- | :--------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Oct 2022 | 192,654 | $10.30 | 192,654 | | | Nov 2022 | 994,950 | $9.45 | 994,950 | | | Dec 2022 | 759,161 | $9.68 | 759,161 | $19,787,024 | | Total | 1,946,765 | $9.62 | 1,946,765 | | - The Board authorized a $20 million stock repurchase program on May 12, 2022, with an additional $20 million authorized on December 27, 2022[357] Item 6. [Reserved] This item is reserved and contains no information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes P10's financial condition, results of operations, and liquidity, covering revenue, expenses, FPAUM, and non-GAAP measures - P10 is a leading multi-asset class private market solutions provider, growing through strategic acquisitions like Five Points, TrueBridge, ECG, Hark, Bonaccord, and WTI[365][366][367][371] - The company's revenue is primarily generated from long-term, fixed-fee management and advisory contracts, typically 10-15 years, based on committed or deployed capital[376] - Key market trends affecting the business include accelerating demand for private markets, favorable lower-middle market dynamics, data-driven sourcing, and increasing investor allocations to private markets[381] Consolidated Statements of Operations Summary (in thousands) | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :-------------------------- | :------- | :------- | :------- | | Total Revenues | 198,360 | 150,534 | 67,368 | | Total Operating Expenses | 154,937 | 110,188 | 58,679 | | Income From Operations | 43,423 | 40,346 | 8,689 | | Total Other (Expense)/Income | (7,960) | (36,649) | (11,720) | | Net Income | 29,399 | 10,767 | 23,806 | Fee-Paying Assets Under Management (FPAUM) Roll-Forward (in millions) | Metric | 2022 ($) | 2021 ($) | | :------------------------ | :------- | :------- | | Balance, Beginning of period | 19,031 | 14,567 | | Add: Capital raised | 2,454 | 4,294 | | Add: Capital deployed | 1,056 | 735 | | Add: Net Asset Value Change | (151) | (4) | | Less: Scheduled fee base stepdowns | (578) | (499) | | Less: Expiration of fee period | (607) | (62) | | Balance, End of period | 21,205 | 19,031 | Adjusted EBITDA and Adjusted Net Income (in thousands) | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :-------------------- | :------- | :------- | :------- | | Adjusted EBITDA | 106,811 | 83,120 | 34,806 | | Less: Cash interest expense | (6,784) | (17,997) | (9,699) | | Less: Cash income taxes, net | (2,114) | (2,308) | (1,169) | | Adjusted Net Income | 97,913 | 62,815 | 23,938 | Business Overview P10 is a multi-asset class private market solutions provider, expanding through strategic acquisitions and corporate reorganization - P10 is a multi-asset class private market solutions provider, expanding through acquisitions of Five Points (Private Credit), TrueBridge (Venture Capital), ECG (Impact Investing), Hark, Bonaccord (expanded solutions), and WTI (venture debt)[365][366][367][371] - The company completed an IPO and reorganization on October 20, 2021, becoming the parent company with Class A and Class B common stock[368][369] - P10 entered a $250 million credit agreement in December 2021, expanding to $375 million in 2022 to fund the WTI acquisition[370] - The Board approved up to $40 million for stock repurchases in 2022, spending $19.8 million[372] Private Market Solutions Overview (as of December 31, 2022) | Solution | FPAUM ($B) | Key Activities | | :------- | :--------- | :------------- | | Private Equity Solutions (PES) | 10.8 | Direct/indirect investments in middle/lower-middle market PE, minority equity in mid-sized managers. | | Venture Capital Solutions (VCS) | 5.4 | Investments in North American venture capital funds, targeting high-performing opportunities. | | Impact Investing Solutions (IIS) | 1.9 | Equity, tax equity, and debt investments in impact initiatives (renewable energy, historic renovation, small businesses). | | Private Credit Solutions (PCS) | 3.1 | Debt investments in lower middle market companies, loans to mid-life funds, financing for growth-oriented companies. | Sources of Revenue P10's primary revenue sources are recurring management and advisory fees, typically based on committed or deployed capital - Primary revenue sources include fund management fee contracts, advisory service fee contracts, consulting agreements, referral fees, and subscriptions[376] - Management and advisory fees are typically based on a percentage of committed capital or deployed capital, with fee schedules generally fixed for 10-15 years and often stepping down over time[376] - Catch-up fees are earned from investors joining funds after the first closing, requiring payment as if they committed earlier[385] - Other revenue includes subscription and consulting agreements (recognized ratably) and referral fees (recognized upon closing of opportunities)[386] Operating Segments P10 operates as a single operating segment, with Co-Chief Executive Officers evaluating financial performance and allocating resources - P10 operates as a single operating segment, with Co-Chief Executive Officers evaluating financial performance and allocating resources[378] Trends Affecting Our Business Business growth is influenced by accelerating demand for private markets, favorable lower-middle market dynamics, and strategic expansion - Business growth is influenced by accelerating demand for private markets solutions, favorable lower-middle market dynamics, and the ability to expand asset class solutions and geographic reach[381] - Factors like increasing regulatory requirements, political uncertainty, competition for top fund managers, and the ability to raise capital for acquisitions also impact the business[381] - P10 benefits from its data advantage and the trend of consolidating manager relationships, with counter-cyclical strategies like private credit thriving in higher-rate environments[381] Key Financial & Operating Metrics P10's key metrics include stable average fee rates, compensation as the largest expense, and FPAUM reflecting fee-generating assets - Revenues are primarily management and advisory fees, with average fee rates stable at approximately 1%[383][397] - Compensation and benefits are the largest expense, expected to rise with headcount and market competitiveness, with carried interest typically staying with investment professionals[388] - Professional fees fluctuate with strategic objectives and acquisitions, while general, administrative, and other expenses include occupancy, travel, and technology costs[389][390] - Fee-Paying Assets Under Management (FPAUM) reflects assets generating management and advisory fees, typically based on committed capital and not affected by market fluctuations[394] Results of Operations Total revenues increased significantly in 2022 due to organic growth and acquisitions, despite a rise in operating expenses Total Revenues (in thousands) | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :----- | :------- | :------- | :------- | | Management and advisory fees | 196,546 | 149,424 | 66,125 | | Other revenue | 1,814 | 1,110 | 1,243 | | Total revenues | 198,360 | 150,534 | 67,368 | - Total revenues increased by $47.8 million (32%) in 2022 compared to 2021, primarily due to organic growth and the full-year impact of Hark and Bonaccord acquisitions, and partial-year impact of WTI[397][398] Total Operating Expenses (in thousands) | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :-------------------------- | :------- | :------- | :------- | | Compensation and benefits | 94,297 | 54,755 | 24,529 | | Professional fees | 12,856 | 11,508 | 13,953 | | General, administrative and other | 18,522 | 9,870 | 4,710 | | Contingent consideration expense | 1,717 | 3,472 | 21 | | Amortization of intangibles | 26,867 | 30,431 | 15,466 | | Strategic alliance expense | 678 | 152 | — | | Total operating expenses | 154,937 | 110,188 | 58,679 | - Total operating expenses increased by $44.7 million (41%) in 2022, driven by higher compensation and benefits (including $18.6 million in stock compensation) and increased general, administrative, and other expenses due to acquisitions and public company costs[405][406][408] - Other expenses decreased by $28.7 million (78%) in 2022, primarily due to the non-recurring loss on early extinguishment of debt in 2021 and lower interest rates from debt refinancing[417] - Income tax expense increased by $13.1 million in 2022 to $6.1 million, compared to a benefit of $7.1 million in 2021, mainly due to a decrease in deferred tax assets[420] FPAUM FPAUM increased by $2.2 billion in 2022, driven by capital raised from private equity and venture capital solutions and the WTI acquisition FPAUM Roll-Forward (Pro Forma, in millions) | Metric | 2022 ($) | 2021 ($) | | :------------------------ | :------- | :------- | | Balance, Beginning of period | 19,031 | 14,567 | | Add: Capital raised | 2,454 | 4,294 | | Add: Capital deployed | 1,056 | 735 | | Add: Net Asset Value Change | (151) | (4) | | Less: Scheduled fee base stepdowns | (578) | (499) | | Less: Expiration of fee period | (607) | (62) | | Balance, End of period | 21,205 | 19,031 | - FPAUM increased by $2.2 billion (11.4%) to $21.2 billion on a pro forma basis in 2022, driven by capital raised from private equity and venture capital solutions, and the WTI acquisition[428] - FPAUM growth is influenced by systematic fundraising cycles of new funds, typically lasting 12-24 months[428] Non-GAAP Financial Measures P10 uses Adjusted Net Income (ANI) and Adjusted EBITDA as non-GAAP measures to assess profitability and performance - P10 uses Adjusted Net Income (ANI) and Adjusted EBITDA as non-GAAP measures to assess profitability and performance, reflecting cash flows from core operations[432] - Adjusted EBITDA is calculated by adjusting GAAP net income for non-cash expenses (depreciation, amortization, stock-based compensation) and non-recurring acquisition-related expenses[433] Adjusted EBITDA and Adjusted Net Income Reconciliation (in thousands) | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :-------------------------- | :------- | :------- | :------- | | Net income | 29,399 | 10,767 | 23,806 | | Add back (subtract): | | | | | Depreciation & amortization | 28,028 | 30,703 | 15,571 | | Interest expense, net | 9,505 | 37,497 | 11,720 | | Income tax expense/(benefit) | 6,064 | (7,070) | (26,837) | | Non-recurring expenses | 9,587 | 8,807 | 9,832 | | Non-cash stock based compensation | 9,587 | 2,416 | 714 | | Acquisition based compensation | 9,029 | — | — | | Earn out related compensation | 5,612 | — | — | | Adjusted EBITDA | 106,811| 83,120 | 34,806 | | Less: Cash interest expense | (6,784) | (17,997) | (9,699) | | Less: Cash income taxes, net | (2,114) | (2,308) | (1,169) | | Adjusted Net Income | 97,913 | 62,815 | 23,938 | Financial Position, Liquidity and Capital Resources P10's financial position reflects growth in assets and debt, with operating cash flows supporting strategic acquisitions and shareholder returns Selected Statements of Financial Position (in thousands) | Metric | Dec 31, 2022 ($) | Dec 31, 2021 ($) | $ Change | % Change | | :------------------------------------ | :--------------- | :--------------- | :------- | :------- | | Cash and cash equivalents (incl. restricted cash) | 29,492 | 43,482 | (13,990) | (32)% | | Goodwill and other intangibles | 658,433 | 547,489 | 110,944 | 20% | | Total assets | 826,360 | 676,217 | 150,143 | 22% | | Debt obligations | 289,224 | 212,496 | 76,728 | 36% | | Stockholders' equity | 433,883 | 395,164 | 38,719 | 10% | - Cash and cash equivalents decreased by $13.99 million in 2022 due to operating cash flows, financing activities, and the WTI acquisition[437] - Goodwill and intangible assets increased by $110.9 million, primarily from the WTI acquisition[437] - P10 utilizes debt and equity raises to fund growth, with a $250 million Term Loan and Revolving Credit Facility (expanded to $375 million) in place as of December 31, 2022[439][440] Cash Flows Summary (in thousands) | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :------------------------------------ | :------- | :------- | :------- | | Net cash provided by operating activities | 61,675 | 49,019 | 10,669 | | Net cash used in investing activities | (98,590) | (47,400) | (214,193) | | Net cash provided by (used in) financing activities | 22,925 | 29,080 | 196,841 | | Increase (decrease) in cash and cash equivalents and restricted cash | (13,990) | 30,699 | (6,683) | - Operating cash flows increased by $12.6 million (26%) in 2022, while investing activities used $98.6 million, primarily for the WTI acquisition[447][448] - Financing activities provided $22.9 million in 2022, including debt borrowings, stock repurchases, and dividend payments[450] Contractual Obligations (as of December 31, 2022, in thousands) | Obligation | Total ($) | 2023 ($) | 2024 ($) | 2025 ($) | 2026 ($) | 2027 ($) | Thereafter ($) | | :---------------------- | :-------- | :------- | :------- | :------- | :------- | :------- | :------------- | | Operating lease obligations | 21,581 | 3,003 | 3,881 | 2,741 | 2,417 | 2,338 | 7,201 | | Debt obligations | 293,400 | 10,625 | 10,625 | 272,150 | — | — | — | | Total | 314,981 | 13,628 | 14,506 | 274,891 | 2,417 | 2,338 | 7,201 | Critical Accounting Policies and Estimates P10's financial statements adhere to U.S. GAAP, with key policies for consolidation, revenue recognition, and income taxes - Consolidated Financial Statements are prepared in accordance with U.S. GAAP, including accounts of wholly-owned/majority-owned subsidiaries and entities with controlling financial interest (VIEs or voting interest model)[460][461][465] - Revenue recognition for management and advisory fees is based on transferring promised goods/services over time, typically calculated on committed or invested capital[466][468][470] - Income taxes are recognized using ASC 740, accounting for current and deferred tax benefit/expense, with valuation allowances recorded against deferred tax assets if realization is not probable[471] Item 7A. Quantitative and Qualitative Disclosures About Market Risk P10 faces market risks including price, interest rate, financing, liquidity, and counterparty risks, with interest rate sensitivity on its debt obligations - P10 is exposed to market risks including price, interest-rate, access to and cost of financing, liquidity, and counterparty risk[473] - Management fees are generally based on commitments or net invested capital, so they are not significantly impacted by changes in investment values, but unfavorable changes could affect investor attraction and retention[474] - As of December 31, 2022, P10 had $293.4 million in outstanding principal under its Term Loan and Revolving Credit Facility, with an interest rate based on SOFR plus 2.00%[476] - A 100-basis point increase in the interest rate is estimated to result in an approximately $2.1 million increase in interest expense over the next 12 months[476] - Credit risk is minimized by engaging reputable financial institutions as counterparties[477][478] Item 8. Financial Statements and Supplementary Data This section provides audited consolidated financial statements, including balance sheets, statements of operations, equity changes, cash flows, and detailed notes Report of Independent Registered Public Accounting Firm KPMG LLP issued an unqualified opinion on P10's consolidated financial statements for the three-year period ended December 31, 2022 - KPMG LLP provided an unqualified opinion on the consolidated financial statements for the three-year period ended December 31, 2022[482] - The financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with U.S. GAAP[482] - The audit was conducted in accordance with PCAOB standards, but an audit of internal control over financial reporting was not performed due to the company's emerging growth company status[484] Consolidated Balance Sheets The Consolidated Balance Sheets show P10's financial position, with increased assets and debt, and a decrease in cash and cash equivalents in 2022 Consolidated Balance Sheets (in thousands) | ASSETS | Dec 31, 2022 ($) | Dec 31, 2021 ($) | | :------------------------------------ | :--------------- | :--------------- | | Cash and cash equivalents | 20,021 | 40,916 | | Restricted cash | 9,471 | 2,566 | | Accounts receivable | 16,551 | 2,854 | | Note receivable | 4,231 | 2,552 | | Due from related parties | 36,538 | 12,357 | | Investment in unconsolidated subsidiaries | 2,321 | 1,803 | | Prepaid expenses and other assets | 5,089 | 4,759 | | Property and equipment, net | 2,878 | 981 | | Right-of-use assets | 15,923 | 14,789 | | Contingent payments to customers | 13,629 | — | | Deferred tax assets, net | 41,275 | 45,151 | | Intangibles, net | 151,795 | 128,788 | | Goodwill | 506,638 | 418,701 | | Total assets | 826,360 | 676,217 | | LIABILITIES: | | | | Accounts payable | 2,578 | 401 | | Accrued expenses | 8,052 | 6,009 | | Accrued compensation and benefits | 18,900 | 6,465 | | Due to related parties | 2,157 | 2,258 | | Other liabilities | 8,715 | 1,808 | | Contingent consideration | 17,337 | 22,963 | | Accrued contingent liability | 14,305 | — | | Deferred revenues | 12,651 | 12,953 | | Lease liabilities | 18,558 | 15,700 | | Debt obligations | 289,224 | 212,496 | | Total liabilities | 392,477 | 281,053 | | STOCKHOLDERS' EQUITY: | | | | Class A common stock | 42 | 34 | | Class B common stock | 73 | 83 | | Treasury stock | (9,926) | (273) | | Additional paid-in-capital | 628,828 | 650,405 | | Accumulated deficit | (225,879) | (255,085) | | Noncontrolling interest | 40,745 | — | | Total stockholders' equity | 433,883 | 395,164 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | 826,360 | 676,217 | - Cash and cash equivalents (including restricted cash) decreased by $13.99 million (32%) from $43.48 million in 2021 to $29.49 million in 2022[437][488] - Goodwill and other intangibles increased by $110.94 million (20%) to $658.43 million in 2022, primarily due to the WTI acquisition[437][488] - Debt obligations increased by $76.73 million (36%) to $289.22 million in 2022[437][488] Consolidated VIE Balance Sheets The Consolidated VIE Balance Sheets show a significant increase in both assets and liabilities for P10's consolidated Variable Interest Entities in 2022 Consolidated VIE Balance Sheets (in thousands) | ASSETS | Dec 31, 2022 ($) | Dec 31, 2021 ($) | | :------------------------------------ | :--------------- | :--------------- | | Cash and cash equivalents | 12,654 | 18,536 | | Restricted cash | 756 | 756 | | Accounts receivable | 3,264 | 1,060 | | Note receivable | 808 | 2,552 | | Due from related parties | 16,029 | 3,243 | | Prepaid expenses and other assets | 3,823 | 1,330 | | Property and equipment, net | 1,409 | 866 | | Right-of-use assets | 15,081 | 4,976 | | Contingent payments to customers | 13,629 | - | | Intangibles, net | 117,142 | 84,339 | | Goodwill | 383,444 | 295,507 | | Total assets | 568,039 | 413,165 | | LIABILITIES | | | | Accounts payable | 2,418 | 121 | | Accrued expenses | 16,690 | 4,818 | | Accrued compensation and benefits | 14,191 | 4,326 | | Contingent consideration | 17,337 | 22,963 | | Accrued contingent liability | 14,305 | - | | Deferred revenues | 11,265 | 10,676 | | Lease liabilities | 16,798 | 5,944 | | Deferred tax liabilities, net | 3,316 | 4,769 | | Total liabilities | 96,320 | 53,617 | - Total assets of consolidated VIEs increased by $154.87 million (37%) to $568.04 million in 2022[490] - Total liabilities of consolidated VIEs increased by $42.70 million (79%) to $96.32 million in 2022[490] Consolidated Statements of Operations P10's Consolidated Statements of Operations show significant revenue growth and increased net income attributable to P10 in 2022 Consolidated Statements of Operations (in thousands) | Metric | 2022 ($) | 2021 ($) | 2020 ($) | | :------------------------------------ | :------- | :------- | :------- | | Management and advisory fees | 196,546 | 149,424 | 66,125 | | Other revenue | 1,814 | 1,110 | 1,243 | | Total revenues | 198,360| 150,534| 67,368 | | OPERATING EXPENSES | | | | | Compensation and benefits | 94,297 | 54,755 | 24,529 | | Professional fees | 12,856 | 11,508 | 13,953 | | General, administrative and other | 18,522 | 9,870 | 4,710 | | Contingent consideration expense | 1,717 | 3,472 | 21 | | Amortization of intangibles | 26,867 | 30,431 | 15,466 | | Strategic alliance expense | 678 | 152 | — | | Total operating expenses | 154,937| 110,188| 58,679 | | INCOME FROM OPERATIONS | 43,423 | 40,346 | 8,689 | | OTHER (EXPENSE)/INCOME | | | | | Interest expense implied on notes payable to sellers | — | (825) | (988) | | Interest expense, net | (9,505) | (21,360) | (10,732) | | Loss on extinguishment of debt | — | (15,312) | — | | Other income | 1,545 | 848 | — | | Total other (expense) | (7,960)| (36,649)| (11,720)| | Net income before income taxes | 35,463 | 3,697 | (3,031)| | Income tax benefit/(expense) | (6,064) | 7,070 | 26,837 | | NET INCOME | 29,399 | 10,767 | 23,806 | | Less: preferred dividends attributable to redeemable noncontrolling interest | - | (1,593) | (720) | | Less: net income attributable to noncontrolling interest in P10 Intermediate | (193) | - | - | | NET INCOME ATTRIBUTABLE TO P10 | 29,206 | 9,174 | 23,086 | | Earnings per share | | | | | Basic earnings per share | 0.25 | 0.13 | 0.37 | | Diluted earnings per share | 0.24 | 0.08 | 0.36 | | Dividends paid per share | 0.09 | — | — | | Weighted average shares outstanding, basic | 116,751 | 72,660 | 62,465 | | Weighted average shares outstanding, diluted | 121,655 | 112,332 | 64,905 | - Total revenues increased by $47.8 million (32%) in 2022, primarily from higher management and advisory fees due to organic growth and acquisitions[397][398] - Net income attributable to P10 increased from $9.17 million in 2021 to $29.21 million in 2022[493] - Basic EPS increased to $0.25 in 2022 from $0.13 in 2021, and diluted EPS increased to $0.24 from $0.08[493]