Patria(PAX) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Patria generated $21.5 million in IFRS net income in Q3 2021, with fee-related earnings of $21.8 million and performance-related earnings of $1.5 million, resulting in distributable earnings of $22.5 million or $0.165 per share [6][32] - Fee-related earnings increased by 24% from $17.6 million in Q2 2021, and fee revenue rose 16% to $37.4 million [33] - The FRE margin for Q3 was 58%, up from 55% in Q2, indicating strong revenue growth [34] Business Line Data and Key Metrics Changes - Fee earnings AUM reached $9.2 billion, up 11% from $8.3 billion in the previous quarter and up 22% from $7.5 billion a year ago [35] - The company expects to see fee-related earnings growth of over 50% in 2022 compared to 2021, driven by the addition of Moneda's fee-related earnings [13][44] Market Data and Key Metrics Changes - The company is analyzing a pipeline of around $50 billion in potential equity checks for transactions and CapEx in the infrastructure sector across various countries in the region [19] - The telecom sector saw significant developments, including a winning bid for 5G spectrum, which will lead to the construction of over 5,000 telecom towers [20] Company Strategy and Development Direction - Patria is focused on organic growth and has accelerated its flagship strategy timelines, with a new private equity fund in the market ahead of schedule [14] - The strategic combination with Moneda Asset Management is expected to enhance earnings and create a leading alternative credit platform in the region [15][26] - The company aims to expand its product offerings and geographic footprint through acquisitions, particularly in the credit and real estate sectors [60] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving targets for 2021 and anticipates strong growth in 2022, with a focus on maintaining high margins and expanding fee-related earnings [11][44] - The management noted that the current macroeconomic environment, including rising inflation and interest rates, could impact local investor behavior, but emphasized that their products are designed to be inflation-protected [61][63] Other Important Information - The company is raising a renewable energy fund to complement its flagship infrastructure fund, targeting to raise this fund before returning to market with the infrastructure fund next year [22] - The company has established anchor investors for its upcoming credit products, indicating strong demand for capital in the infrastructure and credit sectors [25] Q&A Session Summary Question: M&A outlook after Moneda - Management confirmed an appetite for further acquisitions post-Moneda, with $200 million in cash available for additional transactions [53][59] Question: Impact of rising interest rates on business - Management indicated that their products are designed to be inflation-linked, which should mitigate the impact of rising interest rates on their business [61][63] Question: Changes in the LP base and fundraising - The majority of capital raised is expected to come from existing LPs, with a goal of expanding the LP base to include more high-net-worth individuals [70][72] Question: Capital deployment and realizations in 2022 - Management expects to maintain or increase capital deployment levels in 2022, while being cautious about divestments due to current market conditions [86][92]