Patria(PAX) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Patria achieved full year 2024 fee related earnings (FRE) of $170 million, up 15% from 2023, with FRE per share reaching$ 1.12, up 13% [10][41] - For Q4 2024, FRE was $55 million, up 35% from the prior quarter and 18% year-over-year, with FRE per share of$ 0.36, also up 35% from Q3 and 13% year-over-year [10][41] - Total fee revenue for Q4 reached $93.2 million, up 41% year-over-year, while full year revenue was$ 300.8 million, up 25% [37][41] Business Line Data and Key Metrics Changes - Performance related earnings (PRE) for the year exceeded expectations, driven by the sale of the Aguas Pacifico project, contributing approximately $60 million in performance fees [11][60] - The net accrued performance fee balance declined 30% to$ 319 million, primarily due to significant realizations in Infrastructure III and lower marks on publicly traded holdings [13][41] - The earning assets under management (AUM) rose 38% year-over-year to $33 billion, although it declined 3% sequentially due to dollar appreciation [15][33] Market Data and Key Metrics Changes - Fundraising for 2024 totaled$ 5.5 billion, exceeding the target of $5 billion, with significant contributions from credit and GPMS platforms [20][21] - Approximately 70% of fundraising in 2024 came from local investors, indicating a shift in investment behavior towards local products [22][24] - The company noted that Brazil represents less than a third of its investment exposure, down from over 90% at the time of its IPO [23] Company Strategy and Development Direction - Patria is focused on diversifying its product offerings and enhancing distribution capabilities, with a target of$ 6 billion in fundraising for 2025 [21][32] - The company aims to develop local investment strategies tailored to regional markets, particularly in Chile, Colombia, and Brazil [96][100] - The strategy includes creating local currency-denominated funds to cater to local pension funds and investors [102][106] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2025 FRE target of $200 million to$ 225 million, with a margin between 58% to 60% [42][51] - The company is well-positioned to navigate macroeconomic challenges, with a focus on resilient sectors such as agribusiness and infrastructure [14][24] - Management highlighted the potential growth in pension fund contributions across Latin America, which could significantly increase the capital available for investment [94][95] Other Important Information - The effective tax rate for 2024 was 6.5%, with expectations to trend towards 10% by 2027 [44] - The company announced a fourth quarter dividend of $0.15 per share and plans to repurchase shares in 2025 [47][49] - Stock-based compensation for 2024 totaled$ 20 million, with expectations for it to rise to $28 million to$ 30 million in 2025 [50] Q&A Session Summary Question: Clarification on PRE and future exit strategies for Infra Fund III - Management confirmed that the sale of Aguas Pacifico was completed, generating approximately $60 million in performance fees, with additional exits from Infrastructure Fund III being pursued [60][62] Question: Trends in redemptions for public equities and credit strategies - Management noted that redemptions were minimal and expected to remain low, with positive net new money flows anticipated for credit strategies [66][68] Question: Breakdown of the$ 6 billion fundraising target for 2025 - Management indicated that while they have a well-organized plan, they prefer to maintain flexibility regarding the specific breakdown of the fundraising target [76][78] Question: Impact of Chile's pension reform on investment strategies - Management highlighted that pension reforms across Latin America are expected to increase contributions significantly, benefiting private equity and infrastructure investments [94][96] Question: Expectations for real estate inflows in 2025 - Management acknowledged that high interest rates in Brazil may negatively impact brick-and-mortar strategies, while security strategies are expected to perform well [110][112]