P10, Inc. (NYSE: PX) is a leading multi-asset class private market solutions provider in the alternative asset management industry. The company's mission is to provide investors differentiated access to a broad set of solutions and investment vehicles across highly attractive asset classes and geographies that generate superior risk-adjusted returns.
Business Overview
P10's comprehensive portfolio of solutions spans private equity, venture capital, private credit, and impact investing, supporting its mission by offering a diverse set of investment vehicles to its investors. The company's existing strategies include primary fund of funds, secondary investments, direct investments and co-investments, alongside separate accounts.
Financials
In the fiscal year ended December 31, 2023, P10 generated annual revenue of $241,734,000 and annual net income of -$7,133,000. The company's annual operating cash flow was $47,685,000, while its annual free cash flow stood at $46,215,000. For the first quarter of 2024, P10 reported revenue of $66,115,000 and net income of $5,243,000.
Risks and Challenges
P10's business is affected by a variety of factors, including conditions in the financial markets, economic and political conditions in North America, as well as changes in global economic conditions and regulatory or other governmental policies or actions. Despite the uncertain macroeconomic environment, the company continues to see strong investor demand for its private markets solutions.
The company attributes its strong investment performance track record to several factors, including its broad private market relationships and access to fund managers and investments, its diligent and responsible investment process, its tenured investing experience, and its premier data, technology, and analytic capabilities. P10's proprietary database stores and organizes a vast universe of managers and opportunities, enabling robust and disciplined sourcing criteria that fuel its highly selective investment process.
P10's scalable business model is well-positioned to expand and grow its footprint as it develops its position within the private markets ecosystem. The company currently has a leading presence in North America and believes that expanding its investor presence into international markets can be a significant growth driver. Furthermore, expanding into additional asset class solutions can enable P10 to further enhance its integrated network effect across private markets.
The complex regulatory and tax environment could restrict the company's operations and subject it to increased compliance costs and administrative burdens, as well as restrictions on its business activities. Additionally, P10's ability to raise capital to fund acquisitions and strategic growth initiatives will be critical to its continued expansion.
P10 has also experienced increased competition to work with top private equity fund managers, as larger private markets investors consolidate the number of general partners in which they invest. The company's ability to invest and maintain its sphere of influence with these high-performing fund managers is crucial to its investors' success and its ability to maintain its competitive position and grow its revenue.
Recent Performance
Regarding the company's financial performance, P10 delivered record revenues of $66,115,000 in the first quarter of 2024, representing a 15% year-over-year increase. The company also enhanced its bottom-line performance, earning $5,243,000 in net income compared to $769,000 in the prior-year period.
P10 introduced new metrics to provide the investment community with greater transparency, including Fee-Related Revenue (FRR) of $65,007,000, a 16% increase compared to the prior-year period, and Fee-Related Earnings (FRE) of $30,741,000, a 9% increase from the first quarter of 2023. The company's FRE margin was 47% in the first quarter.
Outlook
Looking ahead, P10 expects to organically raise and deploy more than $2.5 billion of gross new assets in 2024. The company also anticipates double-digit revenue growth driven by its fundraising activity and positive fee rate dynamics, and it expects to announce a strategic transaction during the calendar year.
P10's strategies have demonstrated an exceptional track record of delivering returns across economic cycles, with the company's managers earning the trust of clients, investment managers, and intermediaries. The company's focus on the lower and core middle markets has insulated it from some of the macro dynamics affecting the upper middle market, such as a slower M&A environment, greater reliance on leverage, and a more competitive deal landscape.
Capital Allocation
In terms of capital allocation, P10 has been opportunistic in repurchasing its shares, having spent $59.5 million to buy back shares under its $80 million repurchase program as of March 31, 2024. The company also continues to pay quarterly cash dividends to shareholders, recently declaring a $0.035 distribution, representing an 8% increase.
Conclusion
Overall, P10 is well-positioned to capitalize on the growing demand for private markets solutions, leveraging its differentiated access, strong investment performance, and robust data and analytics capabilities to deliver consistent returns for its investors across market cycles.