UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________________ to ____________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 7, 2023, there were
Table of Contents
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FINANCIAL INFORMATION |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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6 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
29 |
Item 3. |
43 |
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Item 4. |
44 |
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OTHER INFORMATION |
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Item 1. |
45 |
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Item 1A. |
45 |
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Item 2. |
45 |
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Item 3. |
45 |
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Item 4. |
45 |
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Item 5. |
45 |
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Item 6. |
46 |
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48 |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
P10, Inc.
Consolidated Balance Sheets
(in thousands, except share amounts)
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As of |
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As of June 30, |
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December 31, |
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2023 |
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2022 |
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(unaudited) |
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ASSETS |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Accounts receivable |
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Note receivable |
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Due from related parties |
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Investment in unconsolidated subsidiaries |
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Prepaid expenses and other assets |
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Property and equipment, net |
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Right-of-use assets |
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Contingent payments to customers |
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Deferred tax assets, net |
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Intangibles, net |
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Goodwill |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS' EQUITY |
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LIABILITIES: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Accrued compensation and benefits |
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Due to related parties |
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Other liabilities |
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Contingent consideration |
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Accrued contingent liabilities |
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Deferred revenues |
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Lease liabilities |
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Debt obligations |
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Total liabilities |
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STOCKHOLDERS' EQUITY: |
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Class A common stock, $ |
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Class B common stock, $ |
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Treasury stock |
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Additional paid-in-capital |
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Accumulated deficit |
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( |
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Noncontrolling interest |
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Total stockholders' equity |
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
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$ |
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$ |
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The Notes to Consolidated Financial Statements are an integral part of these statements.
1
P10, Inc.
Consolidated Statements of Operations
(Unaudited, in thousands except per share amounts)
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For the Three Months |
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For the Six Months |
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2023 |
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2022 |
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2023 |
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2022 |
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REVENUES |
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Management and advisory fees |
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$ |
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$ |
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$ |
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$ |
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Other revenue |
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Total revenues |
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OPERATING EXPENSES |
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Compensation and benefits |
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Professional fees |
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General, administrative and other |
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Contingent consideration expense |
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( |
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Amortization of intangibles |
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Strategic alliance expense |
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Total operating expenses |
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INCOME FROM OPERATIONS |
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OTHER (EXPENSE)/INCOME |
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Interest expense, net |
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( |
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( |
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( |
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Other (expense)/income |
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( |
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( |
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Total other (expense) |
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( |
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( |
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( |
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Net income before income taxes |
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Income tax expense |
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( |
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( |
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( |
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( |
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NET INCOME |
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$ |
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$ |
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$ |
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Less: net income attributable to noncontrolling interest in P10 Intermediate |
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$ |
( |
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$ |
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NET INCOME ATTRIBUTABLE TO P10 |
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$ |
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$ |
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$ |
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$ |
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Earnings per share |
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Basic earnings per share |
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$ |
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$ |
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$ |
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$ |
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Diluted earnings per share |
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$ |
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$ |
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$ |
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$ |
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Dividends paid per share |
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$ |
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$ |
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$ |
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$ |
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Weighted average shares outstanding, basic |
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Weighted average shares outstanding, diluted |
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The Notes to Consolidated Financial Statements are an integral part of these statements.
2
P10, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited, in thousands)
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Common Stock - Class A |
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Common Stock - Class B |
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Treasury stock |
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Additional |
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Accumulated |
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Non Controlling |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in-capital |
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Deficit |
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Interest |
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Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Deferred offering costs |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Net income attributable to P10 |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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( |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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Settlement of stock options |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
— |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income attributable to P10 |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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( |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends declared |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Dividends paid |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
— |
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$ |
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Common Stock - Class A |
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Common Stock - Class B |
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Treasury stock |
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Additional |
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Accumulated |
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Non Controlling |
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Stockholders' |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Paid-in-capital |
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Deficit |
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Interest |
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Equity |
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Balance at December 31, 2022 |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income attributable to P10 and net income attributable to non controlling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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— |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exercise of stock options (net of tax) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Distributions to non-controlling interests |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Issuance of restricted stock units |
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— |
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— |
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— |
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— |
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— |
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— |
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Repurchase of common stock for employee tax witholding |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Stock repurchase |
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— |
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— |
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( |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Accrual for excise tax associated with stock repurchases |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Dividends declared |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Dividends paid |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Balance at March 31, 2023 |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Net income attributable to P10 and net income attributable to non controlling interest |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Exchange of Class B common stock for Class A common stock |
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( |
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( |
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— |
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— |
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— |
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— |
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Exercise of stock options (net of tax) |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Distributions to non-controlling interests |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Issuance of restricted stock units |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
|
|||
Repurchase of common stock for employee tax witholding |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Dividends declared |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
( |
) |
|
— |
|
|
— |
|
|
( |
) |
Dividends paid |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||||||
Balance at June 30, 2023 |
|
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|
|
|
|
|
( |
) |
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|
( |
) |
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|
||||||||
The Notes to Consolidated Financial Statements are an integral part of these statements.
3
P10, Inc.
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
|
|
For the Six Months |
|
|||||
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|||||
|
|
2023 |
|
|
2022 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net income |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net income to net cash provided by operating |
|
|
|
|
|
|
||
Stock-based compensation |
|
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|
|
||
Depreciation expense |
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||
Amortization of intangibles |
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|
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|
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||
Amortization of debt issuance costs and debt discount |
|
|
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|
|
|
||
Income from unconsolidated subsidiaries |
|
|
( |
) |
|
|
( |
) |
Deferred tax expense |
|
|
|
|
|
|
||
Amortization of contingent payment to customers |
|
|
|
|
|
|
||
Remeasurement of contingent consideration |
|
|
|
|
|
( |
) |
|
Post close purchase price adjustment |
|
|
|
|
|
|
||
Change in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Due from related parties |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
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|
|
|
|
||
Right-of-use assets |
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|
|
|
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|
||
Accounts payable |
|
|
|
|
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|
||
Accrued expenses |
|
|
|
|
|
( |
) |
|
Accrued compensation and benefits |
|
|
|
|
|
( |
) |
|
Due to related parties |
|
|
( |
) |
|
|
( |
) |
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Deferred revenues |
|
|
( |
) |
|
|
( |
) |
Lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
CASH FLOWS (USED IN) INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Purchase of intangible assets |
|
|
( |
) |
|
|
|
|
Draw on note receivable |
|
|
( |
) |
|
|
( |
) |
Proceeds from note receivable |
|
|
|
|
|
|
||
Proceeds from investments in unconsolidated subsidiaries |
|
|
|
|
|
|
||
Software capitalization |
|
|
( |
) |
|
|
( |
) |
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) investing activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS (USED IN) FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Borrowings on debt obligations |
|
|
|
|
|
|
||
Repayments on debt obligations |
|
|
( |
) |
|
|
( |
) |
Repurchase of Class A common stock for employee tax withholding |
|
|
( |
) |
|
|
|
|
Repurchase of Class B common stock |
|
|
( |
) |
|
|
|
|
Payment of contingent consideration |
|
|
( |
) |
|
|
|
|
Cash settlement of stock options |
|
|
|
|
|
( |
) |
|
Dividends paid |
|
|
( |
) |
|
|
( |
) |
Distributions to partners |
|
|
( |
) |
|
|
|
|
Debt issuance costs |
|
|
|
|
|
( |
) |
|
Net cash (used in) financing activities |
|
|
( |
) |
|
|
( |
) |
Net change in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning |
|
|
|
|
|
|
||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of |
|
$ |
|
|
$ |
|
||
The Notes to Consolidated Financial Statements are an integral part of these statements.
4
P10, Inc.
Consolidated Statements of Cash Flows
(Unaudited, in thousands)
|
|
For the Six Months |
|
|||||
|
|
|
|
|||||
|
|
2023 |
|
|
2022 |
|
||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Net cash paid for income taxes |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
NON-CASH OPERATING, INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Additions to right-of-use assets |
|
$ |
|
|
$ |
|
||
Additions to lease liabilities |
|
|
|
|
|
|
||
Additions to property and equipment |
|
|
|
|
|
|
||
Additions to accrued compensation and benefits |
|
|
|
|
|
|
||
Additions to contingent consideration |
|
|
|
|
|
|
||
Dividends declared |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
RECONCILIATION OF CASH, CASH EQUIVALENTS AND |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
The Notes to Consolidated Financial Statements are an integral part of these statements.
5
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Note 1. Description of Business
Description of Business
On October 20, 2021, P10 Holdings, Inc. ("P10 Holdings"), in connection with its Initial Public Offering ("IPO"), completed a reorganization and restructure. In connection with the reorganization, P10, Inc. ("P10") became the parent company and all of the existing equity of P10 Holdings, and its consolidated subsidiaries were converted into common stock of P10. The offering and reorganization included a reverse stock split of P10 Holdings common stock on a
Following the reorganization and IPO, P10 has two classes of common stock, Class A common stock and Class B common stock. Each share of Class B common stock is entitled to ten votes while each share of Class A common stock is entitled to one vote.
P10, Inc. and its consolidated subsidiaries (the “Company”) operate as a multi-asset class private market solutions provider in the alternative asset management industry. Our mission is to provide our investors differentiated access to a broad set of solutions and investment vehicles across a multitude of asset classes and geographies. Our existing portfolio of solutions across private equity, venture capital, private credit and impact investing support our mission by offering a comprehensive set of investment vehicles to our investors, including primary fund of funds, secondary investment, direct investment and co-investments, alongside separate accounts (collectively, the “Funds”).
The direct and indirect subsidiaries of the Company include P10 Holdings, P10 Intermediate Holdings, LLC (“P10 Intermediate”), which owns the subsidiaries P10 RCP Holdco, LLC (“Holdco”), Five Points Capital, Inc. (“Five Points”), TrueBridge Capital Partners, LLC (“TrueBridge”), Enhanced Capital Group, LLC (“ECG”), Bonaccord Capital Advisors, LLC ("Bonaccord"), Hark Capital Advisors, LLC ("Hark"), P10 Advisors, LLC ("P10 Advisors"), and Western Technology Investment Advisors LLC ("WTI").
Prior to November 19, 2016, P10, formerly Active Power, Inc., designed, manufactured, sold, and serviced flywheel-based uninterruptible power supply products and serviced modular infrastructure solutions. On November 19, 2016, we completed the sale of substantially all our assets and liabilities and operations to Langley Holdings plc, a United Kingdom public limited company. Following the sale, we changed our name from Active Power, Inc. to P10 Industries, Inc. and became a non-operating company focused on monetizing our retained intellectual property and acquiring profitable businesses. For the period from December 2016 through September 2017, our business primarily consisted of cash, certain retained intellectual property assets and our net operating losses (“NOLs”) and other tax benefits. On March 22, 2017, we filed for reorganization under Chapter 11 of the Federal Bankruptcy Code, using a prepackaged plan of reorganization. The Company emerged from bankruptcy on May 3, 2017. On December 1, 2017, the Company changed its name from P10 Industries, Inc. to P10 Holdings, Inc. We were founded as a Texas corporation in
On October 5, 2017, we closed on the acquisition of RCP Advisors 2, LLC ("RCP 2") and entered into a purchase agreement to acquire RCP Advisors 3, LLC ("RCP 3") in January 2018. On January 3, 2018, we closed on the acquisition of RCP 3. RCP 2 and RCP 3 are registered investment advisors with the United States Securities and Exchange Commission.
On April 1, 2020, the Company completed the acquisition of Five Points. Five Points is a leading lower middle market alternative investment manager focused on providing both equity and debt capital to private, growth-oriented companies and limited partner capital to other private equity funds, with all strategies focused exclusively in the U.S. lower middle market. Five Points is a registered investment advisor with the United States Securities and Exchange Commission.
On October 2, 2020, the Company completed the acquisition of TrueBridge. TrueBridge is an investment firm focused on investing in venture capital through fund-of-funds, co-investments, and separate accounts. TrueBridge is a registered investment advisor with the United States Securities and Exchange Commission.
On December 14, 2020, the Company completed the acquisition of
6
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
On September 30, 2021, the Company completed acquisitions of Bonaccord and Hark. Bonaccord is an alternative asset manager focusing on acquiring minority equity interests in alternative asset management companies focused on private market strategies which may include private equity, private credit, real estate, and real asset strategies. Hark is engaged in the business of making loans to portfolio companies that are owned or controlled by financial sponsors, such as private equity funds or venture capital funds, and which do not meet traditional direct lending underwriting criteria but where the repayment of the loan by the portfolio company is guaranteed by its financial sponsor.
In June 2022, the Company formed P10 Advisors, a fully consolidated subsidiary, to manage investment opportunities that are sourced across the P10 platform but do not fit within an existing investment mandate.
On October 13, 2022, the Company completed the acquisition of all of the issued and outstanding membership interests of WTI. WTI provides senior secured financing to early-stage and emerging stage life sciences and technology companies. WTI is a registered investment advisor with the United States Securities and Exchange Commission.
Simultaneously with the acquisition of WTI, the Company completed a restructuring of P10 Intermediate and subsidiaries to LLC entities that are considered disregarded entities for federal income tax purposes. This allowed the WTI sellers to obtain a partnership interest in P10 Intermediate and all of its subsidiaries. As a result of the acquisition, the WTI sellers obtained
The results of WTI’s operations have been included in the consolidated financial statements effective October 13, 2022. The Company reports noncontrolling interest related to the partnership interests which are owned by the WTI sellers. This is recorded as noncontrolling interest on the Consolidated Balance Sheets. Noncontrolling interest is allocated a share of income or loss in the respective consolidated subsidiaries in proportion to their relative ownership interest. Additionally, the Company makes periodic distributions to the WTI sellers for tax related and other agreed upon expenses in accordance with the terms of the P10 Intermediate operating agreement.
Note 2. Significant Accounting Policies
Basis of Presentation
The accompanying Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management believes it has made all necessary adjustments so that the Consolidated Financial Statements are presented fairly and that estimates made in preparing the Consolidated Financial Statements are reasonable and prudent. The Consolidated Financial Statements include the accounts of the Company, its wholly owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. All intercompany transactions and balances have been eliminated upon consolidation. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year ended December 31, 2023.
Certain entities in which the Company holds an interest are investment companies that follow FASB Accounting Standards Codification Topic 946, Financial Services - Investment Companies and reflect their investments at estimated fair value. Accordingly, the carrying value of the Company’s equity method investments in such entities retains that accounting treatment.
Principles of Consolidation
The Company performs the variable interest analysis for all entities in which it has a potential variable interest. If the Company has a variable interest in the entity and the entity is a variable interest entity (“VIE”), we will also analyze whether the Company is the primary beneficiary of this entity and if consolidation is required.
Generally, VIEs are entities that lack sufficient equity to finance their activities without additional financial support from other parties, or whose equity holders, as a group, lack one or more of the following characteristics: (a) direct or indirect ability to make decisions, (b) obligation to absorb expected losses or (c) right to receive expected residual returns. A VIE must be evaluated quantitatively and qualitatively to determine the primary beneficiary, which is the reporting entity that has (a) the power to direct activities of a VIE that most significantly impact the VIE's economic performance and (b) the
7
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
To determine a VIE's primary beneficiary, we perform a qualitative assessment to determine which party, if any, has the power to direct activities of the VIE and the obligation to absorb losses and/or receive its benefits. This assessment involves identifying the activities that most significantly impact the VIE's economic performance and determining whether we, or another party, has the power to direct those activities. When evaluating whether we are the primary beneficiary of a VIE, we perform a qualitative analysis that considers the design of the VIE, the nature of our involvement and the variable interests held by other parties. See Note 7 for further information.
The Company has determined that certain of its subsidiaries are VIEs, and that the Company is the primary beneficiary of the entities, because it has the power to direct activities of the entities that most significantly impact the VIE’s economic performance and has a controlling financial interest in each entity. Accordingly, the Company consolidates these entities, which includes P10 Intermediate, Holdco, RCP 2, RCP 3, TrueBridge, Bonaccord, Hark, and WTI. The assets and liabilities of the consolidated VIEs are presented on a gross basis in the Consolidated Balance Sheets. See Note 7 for more information on both consolidated and unconsolidated VIEs.
Entities that do not qualify as VIEs are assessed for consolidation under the voting interest model. Under the voting interest model, the Company consolidates those entities it controls through a majority voting interest or other means. P10 Holdings, Five Points, P10 Advisors, and ECG are concluded to be consolidated subsidiaries of P10 under the voting interest model.
Reclassifications
Certain reclassifications have been made within the Consolidated Financial Statements to conform prior periods with current period presentation.
Use of Estimates
The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with original maturities of three months or less to be cash equivalents. As of June 30, 2023, and December 31, 2022, cash equivalents include money market funds of $
Restricted Cash
Restricted cash as of June 30, 2023 and December 31, 2022 was primarily cash that is restricted due to certain deposits being held for customers.
Accounts Receivable and Due from Related Parties
Accounts receivable is equal to contractual amounts reduced for allowances, if applicable. The Company considers accounts receivable to be fully collectible; accordingly,
8
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
the period that determination is made. Management fees are collected on a quarterly basis. Certain subsidiaries management fee contracts are collected at the beginning of the quarter, while others are collected in arrears. The management fees reflected in accounts receivable at period end are those that are collected in arrears.
Due from related parties represents receivables from the Funds for reimbursable expenses. Additionally, fees owed to the Company for the advisory agreement entered into upon the closing of the acquisitions of ECG and ECP ("Advisory Agreement") where ECG provides advisory services to Enhanced Permanent Capital, LLC ("Enhanced PC") are reflected in due from related parties on the Consolidated Balance Sheets. These amounts are expected to be fully collectible.
Note Receivable
Note receivable is mostly related to contractual amounts owed from a signed, secured promissory note with BCP Partners Holdings, LP ("BCP"). In addition to contractual amounts, borrowers are obligated to pay interest on outstanding amounts. The Company considers the note receivable to be fully collectible;
Investment in Unconsolidated Subsidiaries
For equity investments in entities that we do not control, but over which we exercise significant influence, we use the equity method of accounting. The equity method investments are initially recorded at cost, and their carrying amount is adjusted for the Company’s share in the earnings or losses of each investee, and for distributions received. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.
For certain entities in which the Company does not have significant influence and fair value is not readily determinable, we value these investments under the measurement alternative. Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825, Financial Instruments, requires equity securities to be recorded at cost and adjusted to fair value at each reporting period. However, the guidance allows for a measurement alternative, which is to record the investments at cost, less impairment, if any, and subsequently adjust for observable price changes of identical or similar investments of the same issuer.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the terms of the respective leases or service lives of the improvements, whichever is shorter, using the straight-line method. Expenditures for major renewals and betterments that extend the useful lives of the property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Computers and purchased software |
|
|
|
|
Furniture and fixtures |
|
|
|
Long-lived Assets
9
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Leases
The Company recognizes a lease liability and right-of-use asset in our Consolidated Balance Sheets for contracts that it determines are leases or contain a lease. The Company’s leases primarily consist of operating leases for various office spaces. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. The Company’s right-of-use assets and lease liabilities are recognized at lease commencement based on the present value of lease payments over the lease term. Lease right-of-use assets include initial direct costs incurred by the Company and are presented net of deferred rent, lease incentives and certain other existing lease liabilities. Absent an implicit interest rate in the lease, the Company uses its incremental borrowing rate, adjusted for the effects of collateralization, based on the information available at commencement in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease, and the Company would account for this when it is reasonably certain that the Company will exercise those options. Lease expense is recognized on a straight-line basis over the lease term. Additionally, upon amendments or other events, the Company may be required to remeasure our lease liability and right-of-use asset.
The Company does not recognize a lease liability or right-of-use asset on our Consolidated Balance Sheets for short-term leases. Instead, the Company recognizes short-term lease payments as an expense on a straight-line basis over the lease term. A short-term lease is defined as a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise. When determining whether a lease qualifies as a short-term lease, the Company evaluates the lease term and the purchase option in the same manner as all other leases.
Revenue Share and Repurchase Arrangement
The Company recognizes an accrued contingent liability and contingent payments to customers asset in our Consolidated Balance Sheets for an agreement between ECG and a third party. The agreement requires ECG to share in certain revenues earned with the third party and also includes an option for the third party to sell back the revenue share to ECG at a set multiple. Additionally, ECG holds the option to buy back 50% of the revenue share at a set multiple. The options to repurchase the revenue share are not exercisable until July of 2025. The Company believes it is probable that the third party will exercise its option to sell back the revenue share and has recognized a liability on the Consolidated Balance Sheets. The Company has also recognized a contingent payment to customers associated with the agreement and will amortize the asset against revenue over the contractual term of the management contract. The amortization is reported in management and advisory fees on the Consolidated Statements of Operations. The Company will reassess at each reporting period. Refer to Note 14 for further information.
Goodwill and Intangible Assets
Goodwill is initially measured as the excess of the cost of the acquired business over the sum of the amounts assigned to identifiable assets acquired, less the liabilities assumed. As of June 30, 2023, goodwill recorded on our Consolidated Balance Sheets relates to the acquisitions of RCP 2, RCP 3, Five Points, TrueBridge, Enhanced, Bonaccord, Hark, and WTI. As of June 30, 2023, the intangible assets are comprised of indefinite-lived intangible assets and finite-lived intangible assets related to the acquisitions of RCP 2, RCP 3, Five Points, TrueBridge, Enhanced, Bonaccord, Hark, and WTI.
Indefinite-lived intangible assets and goodwill are not amortized. Finite-lived technology is amortized using the straight-line method over its estimated useful life of
Goodwill is reviewed for impairment at least annually as of September 30 utilizing a qualitative or quantitative approach and more frequently if circumstances indicate impairment may have occurred. The impairment testing for goodwill under the qualitative approach is based first on a qualitative assessment to determine if it is more likely than not that the fair value of the Company’s reporting unit is less than the respective carrying value. The reporting unit is the reporting level for testing the impairment of goodwill. If it is determined that it is more likely than not that a reporting unit’s fair value is less
10
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Contingent Consideration
Contingent consideration is initially measured at fair value on the date of the acquisition. The liabilities are remeasured at fair value on each reporting date, with changes in the fair value reflected in operating expenses on our Consolidated Statements of Operations. As of June 30, 2023, contingent consideration recorded relates to the acquisitions of Hark and Bonaccord on the Consolidated Balance Sheets.
Accrued Compensation and Benefits
Accrued compensation and benefits consists of employee salaries, bonuses, benefits, and acquisition-related earnouts contingent on employment that has not yet been paid. The acquisition-related earnout contingent on employment is a product of the acquisition of WTI. The sellers and eligible employees of WTI are eligible to earn up to $
Debt Issuance Costs
Costs incurred which are directly related to the issuance of debt are deferred and amortized using the effective interest method and are presented as a reduction to the carrying value of the associated debt on our Consolidated Balance Sheets. As these costs are amortized, they are included in interest expense, net within our Consolidated Statements of Operations.
Noncontrolling Interest
Noncontrolling interest ("NCI") reflect the portion of income or loss and the corresponding equity attributable to third-party equity holders and employees in certain consolidated subsidiaries that are not 100% owned by the Company. Noncontrolling interest is presented as a separate component in our Consolidated Statements of Income to clearly distinguish between our interests and the economic interest of third parties in those entities. Net income attributable to P10, as reported in the Consolidated Statements of Income, is presented net of the portion of net income attributable to holders of non-controlling interest. NCI is allocated a share of income or loss in the respective consolidated subsidiaries in proportion to their relative ownership interest.
Treasury Stock
The Company records common stock purchased for treasury at cost. At the date of subsequent reissuance, the treasury stock account is reduced by the cost of such stock using the average cost method.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date. We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy set forth by the FASB.
As of June 30, 2023 and December 31, 2022, we used the following valuation techniques to measure fair value for assets and there were no changes to these methodologies during the periods presented:
Level 1—Assets were valued using the closing price reported in the active market in which the individual security was traded.
11
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Level 2—Assets were valued using quoted prices in markets that are not active, broker dealer quotations, and other methods by which all significant inputs were observable at the measurement date.
Level 3—Assets were valued using unobservable inputs in which little or no market data exists as reported by the respective institutions at the measurement date.
The carrying values of financial instruments comprising cash and cash equivalents, prepaid assets, accounts payable, accounts receivable and due from related parties approximate fair values due to the short-term maturities of these instruments. The fair value of the credit facilities approximate carrying value based on the interest rates which approximate current market rates. The Company has a contingent consideration liability related to the acquisitions of Hark and Bonaccord that is measured at fair value and is remeasured on a recurring basis. See Note 11 for additional information.
Revenue Recognition
Revenue is recognized when, or as, the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. While the determination of who the customer is in a contractual arrangement will be made on a contract-by-contract basis, the customer will generally be the investment fund for the Company’s significant management and advisory contracts.
Management and Advisory Fees
The Company earns management fees for asset management services provided to the Funds where the Company has discretion over investment decisions. The Company primarily earns fees for advisory services provided to clients where the Company does not have discretion over investment decisions. Management and advisory fees received in advance reflects the amount of fees that have been received prior to the period the fees are earned. These fees are recorded as deferred revenues on the Consolidated Balance Sheets.
For asset management and advisory services, the Company typically satisfies its performance obligations over time as the services are rendered, since the customers simultaneously receive and consume the benefits provided as the Company performs the service. The transaction price is the amount of consideration to which the Company expects to be entitled based on the terms of the arrangement. For certain funds, management fees are initially calculated based on committed capital during the investment period and on net invested capital through the remainder of the fund’s term. Additionally, the management fee may step down for certain funds depending on the contractual arrangement. Certain management fees are also calculated on capital deployed. Advisory services are generally based upon fixed amounts and billed quarterly. Other advisory services include transaction and management fees associated with managing the origination and ongoing compliance of certain investments.
Other Revenue
Income Taxes
Current income tax expense represents our estimated taxes to be paid or refunded for the current period. In accordance with ASC 740, Income Taxes, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount we believe is more likely than not to be realized.
12
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Uncertain tax positions are recognized only when we believe it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. We recognize interest and penalties, if any, related to uncertain tax positions in income tax expense.
Earnings Per Share
Basic earnings per share (“EPS”) is calculated by dividing net income attributable to common stockholders by the weighted-average number of common shares. Diluted EPS includes the determinants of basic EPS and common stock equivalents outstanding during the period adjusted to give effect to potentially dilutive securities. See Note 17 for additional information.
The denominator in the computation of diluted EPS is impacted by additional common shares that would have been outstanding if dilutive potential shares of common stock had been issued. Potential shares of common stock that may be issued by the Company include shares of common stock that may be issued upon exercise of outstanding stock options as well as the vesting of restricted stock units. Also included in the diluted EPS denominator are the units of P10 Intermediate owned by the sellers of WTI, assuming the option to exchange the units for shares of Class A common stock of the Company is exercised in full. Under the treasury stock method, the unexercised options are assumed to be exercised at the beginning of the period or at issuance, if later. The assumed proceeds are then used to purchase shares of common stock at the average market price during the period.
Stock-Based Compensation Expense
Segment Reporting
According to ASC 280, Disclosures about Segments of an Enterprise and Related Information, operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker(s) in deciding how to allocate resources and in assessing performance. The Company operates our business as a single operating segment, which is how our chief operating decision makers (our Co-Chief Executive Officers) evaluate financial performance and make decisions regarding the allocation of resources.
13
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Business Acquisitions
In accordance with ASC 805, Business Combinations (“ASC 805”), the Company identifies a business to have three key elements; inputs, processes, and outputs. While an integrated set of assets and activities that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set of assets and activities are not required if market participants can acquire the set of assets and activities and continue to produce outputs. In addition, the Company also performs a screen test to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets is not a business. If the set of assets and activities is not considered a business, it is accounted for as an asset acquisition using a cost accumulation model. In the cost accumulation model, the cost of the acquisition, including certain transaction costs, is allocated to the assets acquired on the basis of relative fair values.
The Company includes the results of operations of acquired businesses beginning on the respective acquisition dates. In accordance with ASC 805, the Company allocates the purchase price of an acquired business to its identifiable assets and liabilities based on the estimated fair values using the acquisition method. The excess of the purchase price over the amount allocated to the assets and liabilities, if any, is recorded as goodwill. The excess value of the net identifiable assets and liabilities acquired over the purchase price of an acquired business is recorded as a bargain purchase gain. The Company uses all available information to estimate fair values of identifiable intangible assets and property acquired. In making these determinations, the Company may engage an independent third-party valuation specialist to assist with the valuation of certain intangible assets, notes payable, and tax amortization benefits.
The consideration for certain of our acquisitions may include liability classified contingent consideration, which is determined based on formulas stated in the applicable purchase agreements. The amount to be paid under these arrangements is based on certain financial performance measures subsequent to the acquisitions. The contingent consideration included in the purchase price is measured at fair value on the date of the acquisition. The liabilities are remeasured at fair value on each reporting date, with changes in the fair value reflected in operating expenses on our Consolidated Statements of Operations.
For business acquisitions, the Company recognizes the fair value of goodwill and other acquired intangible assets, and estimated contingent consideration at the acquisition date as part of purchase price. This fair value measurement is based on unobservable (Level 3) inputs.
Dividends
Dividends are reflected in the consolidated financial statements when declared.
Recent Accounting Pronouncements
Pronouncements Recently Adopted
Effective January 1, 2023, the Company adopted ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 provides amendments to ASC 326, Financial Instruments - Credit Losses, which replaces the incurred loss impairment model with a current expected credit loss (“CECL”) model. CECL requires a company to estimate lifetime expected credit losses based on relevant information about historical events, current conditions and reasonable and supportable forecasts. The guidance must be applied using the modified retrospective adoption method on January 1, 2023, with early adoption permitted. The adoption of ASU 2016-13 did not have a material impact on the Company's Consolidated Financial Statements.
On October 28, 2021, the FASB issued ASU 2021-08, which amends ASC 805 to “require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.” Under current GAAP, an acquirer generally recognizes such items at fair value on the acquisition date. The guidance is effective for fiscal years beginning after December 15, 2022. The Company adopted this guidance on January 1, 2023. The guidance had no effect on the Consolidated Financial Statements but will be considered for future acquisitions.
14
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Pronouncements Not Yet Adopted
On June 30, 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"). The amendments in this update affect all entities that have investments in equity securities measured at fair value that are subject to a contractual sale restriction. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The guidance is effective for fiscal years beginning after December 15, 2023. We are evaluating the effects of these amendments on our financial reporting.
Note 3. Acquisitions
Acquisition of WTI
On
The following is a summary of consideration paid:
|
|
Fair Value |
|
|
Cash |
|
$ |
|
|
Fair value of equity consideration |
|
|
|
|
Total purchase consideration |
|
$ |
|
|
In connection with the acquisition, the Company incurred a total of $
The acquisition date fair value of certain assets and liabilities, including intangible assets acquired and related weighted average expected lives are provisional and subject to revision within one year of the acquisition date. As such, our estimates of fair values are pending finalization, which may result in adjustments to goodwill.
The following table presents the provisional fair value of the net assets acquired as of the acquisition date:
|
|
Fair Value |
|
|
ASSETS |
|
|
|
|
Cash and cash equivalents |
|
$ |
|
|
Accounts receivable |
|
|
|
|
Right-of-use assets |
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
Property and equipment |
|
|
|
|
Intangible assets, net |
|
|
|
|
Total assets acquired |
|
$ |
|
|
LIABILITIES |
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
|
|
Lease liabilities |
|
|
|
|
Total liabilities assumed |
|
$ |
|
|
|
|
|
|
|
Net identifiable assets acquired |
|
$ |
|
|
Goodwill |
|
|
|
|
Net assets acquired |
|
$ |
|
|
The following table presents the provisional fair value of the identifiable intangible assets acquired:
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Amortization |
|
|
|
Fair Value |
|
|
Period |
|
Value of management and advisory contracts |
|
$ |
|
|
||
Value of trade name |
|
|
|
|
||
Total identifiable intangible assets |
|
$ |
|
|
|
|
15
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Goodwill
The goodwill recorded as part of the acquisition includes the expected benefits that management believes will result from the acquisition, including the Company’s build out of its investment product offering. Approximately $
Identifiable Intangible Assets
The fair value of management and advisory contracts acquired were estimated using the excess earnings method. Significant inputs to the valuation model include existing revenue, estimates of expenses and contributory asset charges, the economic life of the contracts and a discount rate based on a weighted average cost of capital.
The fair value of trade names acquired were estimated using the relief from royalty method. Significant inputs to the valuation model include estimates of existing and future revenue, estimated royalty rate, economic life and a discount rate based on a weighted average cost of capital.
The management and advisory contracts and trade names have a finite useful life. The carrying value of the management fund and advisory contracts and trade names will be amortized in line with the pattern in which the economic benefits arise and are reviewed at least annually for indicators of impairment in value that is other than temporary.
Pro-forma Financial Information
Prior Year Acquisition:
The following unaudited pro forma condensed consolidated results of operations of the Company assumes the acquisition of WTI was completed on January 1, 2022:
|
|
For the Six Months |
|
|||||
|
|
|
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Revenue |
|
$ |
|
|
$ |
|
||
Net income attributable to P10 |
|
|
|
|
|
|
||
Pro-forma adjustments include revenue and net income of the acquired business for each period. Other pro forma adjustments include intangible amortization expense, interest expense based on debt issued in connection with the acquisition, and compensation expense contingent on EBITDA (as noted in Note 14) as if the acquisition were completed on January 1, 2022.
Note 4. Revenue
The following presents revenues disaggregated by product offering:
|
|
For the Three Months |
|
|
For the Six Months |
|
||||||||||
|
|
|
|
|
|
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Management and advisory fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Subscriptions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 5. Strategic Alliance Expense
In connection with the Bonaccord acquisition, Bonaccord entered into a Strategic Alliance Agreement ("SAA") with a third-party investor. This SAA provides the third-party the right to receive
16
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
includes the management fees minus applicable expenses, for Fund I and subsequent funds, paid quarterly, in exchange for funding certain amounts of capital commitments to the fund. Net management fee earnings the third-party has the right to receive is based on the total capital committed.
Within 60 days following the final closing of the next fund, Bonaccord Fund II ("Fund II"), the third-party has the opportunity to acquire, at the price at the time of the original acquisition, equity interests in Bonaccord based on the amount of commitment made. For each $
Similar terms apply for Fund III with the exception that the third-party can acquire 9.8 basis points for every $
Note 6. Note Receivable
The Company's note receivable consists of an Advance Agreement and Secured Promissory Note that was executed on September 30, 2021 between the Company and BCP to lend funds to certain employees to be used to pay general partner commitments to certain funds managed by Bonaccord. This agreement provides for a note to BCP for $
Note 7. Variable Interest Entities
Consolidated VIEs
The Company consolidates certain VIEs for which it is the primary beneficiary. VIEs consist of certain operating entities not wholly owned by the Company and include P10 Intermediate, Holdco, RCP 2, RCP 3, TrueBridge, Hark, Bonaccord, and WTI. See Note 2 for more information on the Company’s accounting policies related to the consolidation of VIEs. The assets of the consolidated VIEs totaled $
17
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Unconsolidated VIEs
Through its subsidiary, ECG, the Company holds variable interests in the form of direct equity interests in certain VIEs that are not consolidated because the Company is not the primary beneficiary. The Company's maximum exposure to loss is limited to the potential loss of assets recognized by the Company relating to these unconsolidated entities.
Note 8. Investment in Unconsolidated Subsidiaries
The Company’s investment in unconsolidated subsidiaries consist of equity method investments primarily related to ECG’s tax credit finance and asset management activities.
As of June 30, 2023, investment in unconsolidated subsidiaries totaled $
Asset Management
ECG manages some of its alternative asset management funds through various unconsolidated subsidiaries and records these investments under the equity method of accounting. ECG recorded its share of income in the amount of $
Tax Credit Finance
ECG provides a wide range of tax credit transactions and consulting services through various entities which are wholly owned subsidiaries of Enhanced Tax Credit Finance, LLC (“ETCF”), which is a wholly owned subsidiary of ECG. Some of these subsidiaries own nominal interests, typically under 1.0%, in various VIEs and record these investments under the measurement alternative described in Note 2 above. For the three and six months ended June 30, 2023 and June 30, 2022, ECG made $
Note 9. Property and Equipment
Property and equipment consist of the following:
|
|
As of June 30, |
|
|
As of December 31, |
|
||
|
|
|
|
|
|
|
||
|
|
2023 |
|
|
2022 |
|
||
Computers and purchased software |
|
$ |
|
|
$ |
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Note 10. Goodwill and Intangibles
Changes in goodwill for the six months ended June 30, 2023 are as follows:
Balance at December 31, 2022 |
|
$ |
|
|
Purchase price adjustment |
|
|
( |
) |
Increase from acquisitions |
|
|
|
|
Balance at June 30, 2023 |
|
$ |
|
18
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
During the period, there was a revision to the provisional fair value of the WTI tradename as a result of obtaining new information that was available at acquisition. This revision resulted in a purchase price adjustment. This resulted in a $
Intangibles consists of the following:
|
|
As of June 30, 2023 |
|
|||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|||
Trade names |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Technology |
|
|
|
|
|
— |
|
|
|
|
||
Total indefinite-lived intangible assets |
|
|
|
|
|
— |
|
|
|
|
||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|||
Trade names |
|
|
|
|
|
( |
) |
|
|
|
||
Management and advisory contracts |
|
|
|
|
|
( |
) |
|
|
|
||
Technology |
|
|
|
|
|
( |
) |
|
|
|
||
Total finite-lived intangible assets |
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
As of December 31, 2022 |
|
|||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|||
Indefinite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|||
Trade names |
|
$ |
|
|
$ |
— |
|
|
$ |
|
||
Technology |
|
|
|
|
|
— |
|
|
|
|
||
Total indefinite-lived intangible assets |
|
|
|
|
|
— |
|
|
|
|
||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|||
Trade names |
|
|
|
|
|
( |
) |
|
|
|
||
Management and advisory contracts |
|
|
|
|
|
( |
) |
|
|
|
||
Technology |
|
|
|
|
|
( |
) |
|
|
|
||
Total finite-lived intangible assets |
|
|
|
|
|
( |
) |
|
|
|
||
Total intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Management and advisory contracts and finite lived trade names are amortized over
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total amortization |
|
$ |
|
Note 11. Fair Value Measurements
The Company measures certain liabilities at fair value on a recurring basis.
Earnouts associated with the acquisitions of Bonaccord and Hark
Included in total consideration of the acquisition of Bonaccord is an earnout payment not to exceed $
19
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
contingent consideration associated with the earnout. Total expense recognized for the three and six months ended June 30, 2023 was $
Included in the total consideration of the acquisition of Hark is an earnout not to exceed $
The following tables provide details regarding the classification of these liabilities within the fair value hierarchy as of the dates presented:
|
As of June 30, 2023 |
|
|||||||||||||
|
Level I |
|
|
Level II |
|
|
Level III |
|
|
Total |
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration obligation |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total liabilities |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
As of December 31, 2022 |
|
|||||||||||||
|
Level I |
|
|
Level II |
|
|
Level III |
|
|
Total |
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Contingent consideration obligation |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total liabilities |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
For the liabilities presented in the tables above, there were no changes in fair value hierarchy levels during the periods ended June 30, 2023 and December 31, 2022.
The changes in the fair value of Level III financial instruments are set forth below:
Contingent Consideration Liability |
|
|
|
|
For the Six Months Ended June 30, |
|
|||||
|
|
|
|
|
2023 |
|
|
2022 |
|
||
Balance, beginning of year: |
|
|
|
|
$ |
|
|
$ |
|
||
Additions |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
( |
) |
|
Settlements |
|
|
|
|
|
( |
) |
|
|
|
|
Balance, end of period: |
|
|
|
|
$ |
|
|
$ |
|
||
The fair value of the contingent consideration liability represents the fair value of future payments upon satisfaction of performance targets. The assumptions used in the analysis are inherently subjective; therefore, the ultimate amount of the contingent consideration liability primarily relate to the expected future payments of obligations with a discount rate applied. The contingent consideration liability is included in contingent consideration on the Consolidated Balance Sheets. Changes in the fair value of the liability are included in contingent consideration expense on the Consolidated Statements of Operations.
20
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Note 12. Debt Obligations
Debt obligations consists of the following:
|
|
As of |
|
|
As of |
|
||
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Revolver facility |
|
$ |
|
|
$ |
|
||
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Revolver facility, net |
|
$ |
|
|
$ |
|
||
Term Loan |
|
$ |
|
|
$ |
|
||
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Term loan, net |
|
$ |
|
|
$ |
|
||
Total debt obligations |
|
$ |
|
|
$ |
|
||
|
|
June 30, 2023 |
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
Principal Amount |
|
|
Base Rate |
|
|
SOFR Rate |
|
|
Rate Expiration Date |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Term Loan |
|
$ |
|
|
|
% |
|
|
% |
|
||||
Term Loan |
|
|
|
|
|
% |
|
|
% |
|
||||
Revolver Facility |
|
|
|
|
|
% |
|
|
% |
|
||||
Revolver Facility |
|
|
|
|
|
% |
|
|
% |
|
||||
Revolver Facility |
|
|
|
|
|
% |
|
|
% |
|
||||
Revolver Facility |
|
|
|
|
|
% |
|
|
% |
|
||||
Revolver Facility |
|
|
|
|
|
% |
|
|
% |
|
||||
Revolver Facility |
|
|
|
|
|
% |
|
|
% |
|
||||
Total |
|
$ |
|
|
|
|
|
|
|
|
|
|||
Revolving Credit Facility and Term Loan
On December 22, 2021, the Company entered into a new credit agreement (the "Credit Agreement") with JPMorgan, in its capacity as administrative agent and collateral agent, and Texas Capital Bank, as joint lead arrangers and joint bookrunners, and the other loan parties party thereto. The Credit Agreement consists of two facilities. The first is a revolving credit facility with an available balance of $
Both facilities are "Term SOFR Loans" meaning loans bearing interest based upon the "Adjusted Term SOFR Rate". The Adjusted Term SOFR Rate is the Secured Overnight Financing Rate ("SOFR") at the date of election, plus
The Credit Agreement contains affirmative and negative covenants typical of such financing transactions, and specific financial covenants which require P10 to maintain a minimum leverage ratio. As of June 30, 2023, P10 was in compliance with its financial covenants required under the facility. As of June 30, 2023, the balance drawn on the revolving credit facility is $
Debt Payable
Future principal maturities of debt as of June 30, 2023 are as follows:
21
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
|
|
$ |
|
Debt Issuance Costs
Debt issuance costs are offset against the Revolver Facility and Term Loan. Unamortized debt issuance costs for the Revolver Facility and Term Loan as of June 30, 2023 and December 31, 2022 were $
Amortization expense related to debt issuance costs totaled $
Note 13. Related Party Transactions
Effective January 1, 2021, the Company entered into a sublease with 210 Capital, LLC, a related party, for office space serving as our corporate headquarters. The monthly rent expense is $
As described in Note 1, through its subsidiaries, the Company serves as the investment manager to the Funds. Certain expenses incurred by the Funds are paid upfront and are reimbursed from the Funds as permissible per fund agreements. As of June 30, 2023, the total accounts receivable from the Funds totaled $
Upon the closing of the Company’s acquisition of ECG and ECP, the Advisory Agreement between ECG and Enhanced PC immediately became effective. Under this agreement, ECG provides advisory services to Enhanced PC related to the assets and operations of the permanent capital subsidiaries owned by Enhanced PC, as contributed by both ECG and ECP, and new projects undertaken by Enhanced PC. In exchange for those services, which commenced on January 1, 2021, ECG receives advisory fees from Enhanced PC based on a declining fixed fee schedule, initially totaling $
Upon the closing of the Company’s acquisition of ECG and ECP, the Administrative Services Agreement between ECG and Enhanced Capital Holdings, Inc. (“ECH”), the entity which holds a controlling equity interest in ECP, immediately became effective. Under this agreement, ECG pays ECH for the use of their employees to provide services to Enhanced PC at the direction of ECG. The Company recognized $
22
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
On September 10, 2021, Enhanced entered into a strategic partnership with Crossroads Impact Corp ("Crossroads"), the parent company of Capital Plus Financial ("CPF"), a leading certified development financial institution. Under the terms of the agreement, Enhanced will originate and manage loans across its diverse lines of business including small business loans to women and minority owned businesses, and loans to renewable energy and community development projects. The loans will be held by CPF and CPF will pay an advisory fee to Enhanced.
On July 6, 2022, Crossroads entered into the Advisory Agreement (the "Crossroads Advisory Agreement") with ECG. The Crossroads Advisory Agreement provides for ECG to receive a services fee of
On July 6, 2022, certain funds managed by the Company purchased
Upon the closing of the Bonaccord acquisition on September 30, 2021, an Advance Agreement and Secured Promissory Note was signed with BCP, an entity that was formed by employees of the Company. For details, see Note 6.
Note 14. Commitments and Contingencies
Operating Leases
The Company leases office space and various equipment under non-cancelable operating leases, with the longest lease expiring in 2032. These lease agreements provide for various renewal options. Rent expense for the various leased office space and equipment was approximately $
The following table presents information regarding the Company’s operating leases as of June 30, 2023:
Operating lease right-of-use assets |
|
$ |
|
|
Operating lease liabilities |
|
$ |
|
|
Cash paid for lease liabilities |
|
$ |
|
|
Weighted-average remaining lease term (in years) |
|
|
|
|
Weighted-average discount rate |
|
|
% |
The future contractual lease payments as of June 30, 2023 are as follows:
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total undiscounted lease payments |
|
|
|
|
Less imputed interest |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
23
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Earnout Payment
With the acquisition of WTI, an earnout payment of up to $
Bonus Payment
In connection with the acquisition of WTI, certain employees entered into employment agreements. As part of these employment agreements, certain employees may receive a one-time bonus payment if the employee is employed by the Company as of the fifth anniversary of the effective date and the trailing-twelve month EBITDA of WTI at that time is equal to or greater than $
Revenue Share Arrangement
The Company recognizes accrued contingent liabilities and contingent payments to customers asset in our Consolidated Balance Sheets for an agreement that exists between ECG and third parties. The agreements require ECG to share in certain revenues earned with the third parties and also includes an option for the third parties to sell back the revenue share to ECG at a set multiple. The Company’s contingent liabilities and corresponding contingent payments to customers are recognized once determined to be probable and estimable. The contingent payments to customers are amortized and recorded within management and advisory fees on the Consolidated Statements of Operations over the revenue share agreement. As of June 30, 2023, the Company has determined that the put options are probable and have accrued estimated contingent liabilities and contingent payments to customers. As of June 30, 2023 and December 31, 2022, the balance was $
Contingencies
We may be involved, either as plaintiff or defendant, in a variety of ongoing claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of our business. We evaluated all potentially significant litigation, government investigations, claims or assessments in which we are involved and disclosed anything more likely than not to be recognized below. We do not believe that any of these matters, individually or in the aggregate, will result in losses that are materially in excess of amounts already recognized, if any.
In 2021, the Civil Enforcement Division of the Oregon Department of Justice (Oregon DOJ) initiated an investigation of certain transactions involving the Oregon Low Income Community Jobs Initiative, also known as the Oregon New
24
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Markets Tax Credit (NMTC) program, to which a subsidiary of Enhanced Capital, among others, was a party. The Oregon DOJ contends that the subsidiary of Enhanced Capital omitted from the NMTC application information regarding the application of leveraged financing in the transaction and the sources and uses of funds in the proposed transactions. No formal claims have been filed by the Oregon DOJ. The Company continues to assert that it followed all program requirements and met all disclosure obligations. The subsidiary of Enhanced Capital completed non-binding mediation in July 2023 and settlement discussions continue. Based on our assessment of the current stage of this investigation and settlement, our financial results as of June 30, 2023, includes an immaterial accrual related thereto in accrued expenses on the Consolidated Balance Sheets and other (expense)/income on the Consolidated Statements of Operation. At this time, we do not believe any outcome in this investigation will have a material adverse effect on our business, operating results, or financial position.
Note 15. Income Taxes
The Company calculates its tax provision using the estimated annual effective tax rate methodology. The tax expense or benefit caused by an unusual or infrequent item is recorded in the quarter in which it occurs. To the extent that information is not available for the Company to fully determine the full year estimated impact of an item of income or tax adjustment, the Company calculates the tax impact of such item discretely.
Based on these methodologies, the Company’s effective income tax rate was
The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that, in management's view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future. As of June 30, 2023, the Company has recorded a $
The Company monitors federal and state legislative activity and other developments that may impact our tax positions and their relation to the income tax provision. Any impacts will be recorded in the period in which the legislation is enacted or new regulations are issued. The Company is subject to examination by the United States Internal Revenue Service as well as state and local tax authorities. The Company is not currently under audit.
Note 16. Stockholders' Equity
Equity-Based Compensation
On July 20, 2021, the Board of Directors approved the P10 Holdings, Inc. 2021 Stock Incentive Plan (the "Plan"), which replaced the 2018 Incentive Plan ("2018 Plan"), our previously existing equity compensation plan. The Compensation Committee of the Board of Directors may issue equity-based awards including stock options, stock appreciation rights, restricted stock units and restricted stock awards. Options previously granted under the 2018 Plan cliff vest over a period of or
The 2018 Plan provided for an initial
25
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
On March 15, 2022, the Board of Directors approved the settlement of
On June 17, 2022, at the Annual Meeting of Stockholders, the shareholders authorized an increase of
A summary of stock option activity for the period ended June 30, 2023 is as follows:
|
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Weighted Average |
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Contractual Life |
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Aggregate |
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||||
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Number of |
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Weighted Average |
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Remaining |
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Intrinsic Value |
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||||
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Shares |
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Exercise Price |
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(in years) |
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(whole dollars) |
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||||
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|
||||
Outstanding as of December 31, 2022 |
|
|
|
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$ |
|
|
|
|
|
$ |
|
||||
Granted |
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|
||||
Exercised |
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( |
) |
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|||
Settled |
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|
||||
Expired/Forfeited |
|
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( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding as of June 30, 2023 |
|
|
|
|
$ |
|
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|
|
|
$ |
|
||||
Exercisable as of June 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Compensation expense equal to the grant date fair value is recognized for these awards over the vesting period and is included in compensation and benefits on our Consolidated Statements of Operations. The stock-based compensation expense was $
The weighted average assumptions used in calculating the fair value of stock options granted during the six months ended June 30, 2023 and June 30, 2022 were as follows:
|
|
For the Six Months Ended June 30, |
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|||||
|
|
2023 |
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2022 |
|
||
Expected life |
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||||
Expected volatility |
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% |
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% |
||
Risk-free interest rate |
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% |
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% |
||
Expected dividend yield |
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|
% |
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% |
||
The Company has granted restricted stock awards ("RSAs") to certain employees. Holders of RSAs have no voting rights and accrue dividends until vesting with payment being made once they vest. All of the shares currently vest one year from the grant date.
|
|
Number of |
|
|
Weighted-Average Grant |
|
||
|
|
RSAs |
|
|
Date Fair Value Per RSA |
|
||
Outstanding as of December 31, 2022 |
|
|
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|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
|
|
|
|
||
Forfeited |
|
|
|
|
|
|
||
Outstanding as of June 30, 2023 |
|
|
|
|
$ |
|
||
26
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
The Company has granted restricted stock units ("RSUs") to certain employees. Holders of RSUs have no voting rights and are not eligible to receive dividends or other distributions paid with respect to any RSUs that have not vested. All of the shares currently vest one year from the grant date excluding the restricted stock units at Hark and Bonaccord which are discussed in more detail below.
At the time of the Bonaccord acquisition, the Company entered into a Notice of Restricted Stock Units with certain employees of Bonaccord for grants of Restricted Stock Units ("Bonaccord Units") to be allocated to employees at a later date for meeting certain performance metrics. The Bonaccord Units may not be transferred, sold, pledged, exchanged, assigned or otherwise encumbered or disposed of by any grantee until it has become vested. On August 16, 2022, allocations were finalized pursuant to which an aggregate a value of $
At the time of the Hark acquisition, the Company entered into a Notice of Restricted Stock Units with an employee, which grants Restricted Stock Units ("Hark Units") for meeting a certain performance metric. The Hark Units may not be transferred, sold, pledged, exchanged, assigned or otherwise encumbered or disposed of by any grantee until they have become vested. As of June 30, 2023, all Hark Units have vested and been issued. An expense of $
The below table does not include Bonaccord or Hark Units that were issued outside of the Plan, that have not vested and are recorded as a liability.
|
|
Number of |
|
|
Weighted-Average Grant |
|
||
|
|
RSUs |
|
|
Date Fair Value Per RSU |
|
||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
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( |
) |
|
|
|
|
Forfeited |
|
|
|
|
|
|
||
Outstanding as of June 30, 2023 |
|
|
|
|
$ |
|
||
27
P10, Inc.
Notes to Consolidated Financial Statements
(Unaudited, dollar amounts stated in thousands, except share and per share amounts)
Note 17. Earnings Per Share
The Company presents basic EPS and diluted EPS for our common stock. Basic EPS excludes potential dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if shares of common stock were issued pursuant to our stock-based compensation awards. For the three and six months ended June 30, 2023, diluted EPS reflects the potential dilution that could occur assuming that all units in P10 Intermediate that were granted as a result of the WTI acquisition are converted to shares of Class A common stock.
The following table presents a reconciliation of the numerators and denominators used in the computation of basic and diluted EPS:
|
|
For the Three Months |
|
|
For the Six Months |
|
||||||||||
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||||||||||
|
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2023 |
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2022 |
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2023 |
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2022 |
|
||||
Numerator: |
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|
||||
Numerator for basic calculation—Net income |
|
|
|
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|
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|
|
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|
||||
Numerator for basic calculation—Net income |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Adjustment for: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to noncontrolling interest in P10 Intermediate |
|
|
|
|
|
- |
|
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|
|
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|
|||
Numerator for earnings per share |
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|
||||
Numerator for earnings per share assuming |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Denominator: |
|
|
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|
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|
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|
||||
Denominator for basic calculation—Weighted- |
|
|
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|
||||
Weighted shares assumed upon exercise of partnership units |
|
|
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- |
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|
- |
|
||
Weighted shares assumed upon exercise of stock |
|
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|
||||
Denominator for earnings per share assuming dilution |
|
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|
||||
Earnings per share—basic |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Earnings per share—diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The computations of diluted earnings per share on a weighted average basis excluded
Note 18. Subsequent Events
The Board of Directors of the Company has declared a quarterly cash dividend of $
In accordance with ASC 855, Subsequent Events, the Company evaluated all material events or transactions that occurred after June 30, 2023, the Consolidated Balance Sheet date, through the date the Consolidated Financial Statements were issued, and determined there have been no additional events or transactions that would materially impact the Consolidated Financial Statements.
28
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis relates to the activities and operations of P10. As used in this section, “P10,” the “Company”, “we” or “our” includes P10 and only its consolidated subsidiaries. The following information should be read in conjunction with our selected financial and operating data and the accompanying consolidated financial statements and related notes contained elsewhere in this quarterly report on Form 10-Q. Our historical results discussed below, and the way we evaluate our results, may differ significantly from the descriptions of our business and key metrics used elsewhere in this quarterly report on Form 10-Q due to the effects of acquisitions which occurred during the year ended December 31, 2022, but may not have had a material impact on our statements of operations due to the limited period of time which they were included in our consolidated results. The following discussion may contain forward-looking statements that reflects our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Form 10-Q, and in our annual report on Form 10-K for the year ended December 31, 2022, particularly in "Risk Factors" and the "Forward-Looking Information." Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to fiscal 2023 and 2022 are to our fiscal years ended December 31, 2023 and 2022, respectively.
Business Overview
We are a leading multi-asset class private market solutions provider in the alternative asset management industry. Our mission is to provide our 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. Our success and growth have been driven by our position in the private markets’ ecosystem, providing investors with specialized private market solutions across a comprehensive set of investment strategies, including primary investment funds, secondary investment, direct investment and co-investments and advisory solutions. As investors entrust us with additional capital, our relationships with our fund managers are strengthened, which drives additional investment opportunities, sources more data, enables portfolio optimization and enhances returns, and in turn attracts new investors.
On October 13, 2022, we completed the acquisition of WTI that again further expanded on solutions available to our investors by entering into the venture debt space. The effect of this acquisition is reflected in our Consolidated Balance Sheet at December 31, 2022 and Consolidated Statement of Operations beginning with the period from October 13, 2022 to December 31, 2022 and forward. The acquisition was accounted for as a business combination and WTI is reported as a consolidated subsidiary of P10.
During 2022, the Board approved a program to repurchase up to $40.0 million of outstanding shares of our Class A and Class B common stock. These shares may be repurchased from time to time in the open market at prevailing market prices, in privately negotiated transactions, in block trades, in accordance with Rule 10b5-1 trading plans and/or through other legally permissible means. The timing and amount of any repurchases pursuant to the program will depend on various factors including, the market price of our Class A Common Stock, trading volume, ongoing assessment of our working capital needs, general market conditions, and other factors. As of June 30, 2023, $21.1 million has been used to buy back shares under this program.
As of June 30, 2023, our private market solutions were comprised of the following:
29
Sources of Revenue
Our sources of revenue currently include fund management fee contracts, advisory service fee contracts, consulting agreements, referral fees, subscriptions and other services. The majority of our revenues are generated through long-term, fixed fee management and advisory contracts with our investors for providing investment solutions in the following vehicles for our investors:
30
Operating Segments
We operate our business as a single operating segment, which is how our chief operating decision makers (our Co-Chief Executive Officers) evaluate financial performance and make decisions regarding the allocation of resources.
Trends Affecting Our Business
Our business is affected by a variety of factors, including conditions in the financial markets and economic and political conditions in the North American markets in which we operate, as well as changes in global economic conditions, and regulatory or other governmental policies or actions, which can materially affect the values of the funds our platforms manage, as well as our ability to effectively manage investments and attract capital. Despite rising interest rates and the global economy outlook remaining uncertain, we continue to see investors turning towards alternative investments to achieve consistent and higher yields with our contractually guaranteed fee rate.
The continued growth of our business may be influenced by several factors, including the following market trends:
31
32
Key Financial & Operating Metrics
Revenues
We generate revenues primarily from management fees and advisory contracts, and to a lesser extent, other consulting arrangements and services. See Significant Accounting Policies in Note 2 of our Consolidated Financial Statements for additional information regarding the way revenues are recognized.
We earn management and advisory fees based on a percentage of investors’ capital commitments to, in funds or deployed capital. Management and advisory fees during the commitment period are charged on capital commitments and after the commitment period (or a defined anniversary of the fund’s initial closing) is reduced by a percentage of the management and advisory fees for the preceding years or charged on net invested capital or NAV, in selected cases. Fee schedules are generally fixed and set for the expected life of the funds, which typically are between ten to fifteen years. These fees are typically staged to decrease over the life of the contract due to built-in declines in contractual rates and/or as a result of lower net invested capital balances as capital is returned to investors. We also earn revenues through catch-up fees ("catch up fees") on the funds we manage. Catch-up fees are earned from investors that make commitments to the fund after the first fund closing occurs during the fundraising period of funds originally launched in prior periods, and as such the investors are required to pay a catch-up fee as if they had committed to the fund at the first closing. While catch-up fees are not a significant component of our overall revenue stream, they may result in a temporary increase in our revenues in the period in which they are recognized.
Other revenue consists of subscription and consulting agreements and referral fees that we offer in certain cases. Subscription and consulting agreements provide advisory and/or reporting services to our investors such as monitoring and reporting on an investor’s existing private markets investments. The subscription and consulting agreements typically have renewable one-year lives, and revenue is recognized ratably over the current term of the subscription or the agreement. If subscriptions or fees have been paid in advance, these fees are recorded as deferred revenue on our Consolidated Balance Sheets. Referral fee revenue is recognized upon closing of opportunities where we have referred credit opportunities that do not match our investment criteria.
The Company recognizes an accrued contingent liability and contingent payments to customers in our Consolidated Balance Sheets for agreements between ECG and third parties. The agreements require ECG to share in certain revenues earned with the third party and also includes an option for the third party to sell back the revenue share to ECG at a set multiple. Additionally, ECG holds the option to buy back 50% of the revenue share at a set multiple. The options to repurchase the revenue share are not exercisable until a certain period of time has lapsed per the agreements. The Company believes it is probable that the third parties will exercise their options to sell back the revenue share and has recognized a liability on the Consolidated Balance Sheets. The Company has also recognized a contingent payments to customers asset associated with the agreement and will amortize the asset against revenue over the length of the management contracts. The amortization is reported in management and advisory fees on the Consolidated Statements of Operations.
Operating Expenses
Compensation and benefits are our largest expense and consists of salaries, bonuses, stock-based compensation, earnout and bonus payments related to the acquisition of WTI, employee benefits and employer-related payroll taxes. Despite our general operating leverage that exists, we expect to continue to experience an incremental rise in compensation and benefits expense commensurate with expected growth in headcount and with the need to maintain competitive compensation levels as we expand into new markets to create new products and services. In substantially all instances, the Company does not hold carried interests in the funds that we manage. Carried interest is typically structured to stay with the investment professionals. As such, while this does not impact the compensation we pay to our employees, it allows our investment professionals to receive additional benefit and provides economic incentive for them to outperform on behalf of our investors. This structure differs from that of most of our competitors, which we believe better aligns the objectives of our stockholders, investors and investment professionals.
Professional fees primarily consist of legal, advisory, accounting and tax fees which may include services related to our strategic development opportunities such as due diligence performed in connection with potential acquisitions. Our professional fees will fluctuate commensurate with our strategic objectives and potential acquisitions, and certain recurring accounting advisory, audit and tax expenses are expected to increase as our Company has become an SEC registrant and we must comply with additional regulatory requirements.
33
General, administrative and other includes occupancy, travel and entertainment, technology, insurance and other general costs associated with operating our business.
Strategic alliance expense is included in operating expenses. This expense is driven by the SAA that Bonaccord entered into with an investor at the time Bonaccord was acquired in exchange for a portion of net management fee earnings and net distributable carried interest at the time of acquisition.
Other Income (Expense)
Interest expense includes interest paid and accrued on our outstanding debt, along with the amortization of deferred financing costs.
Income Tax Benefit (Expense)
Income tax benefit (expense) is comprised of current and deferred tax benefit (expense). Current income tax benefit (expense) represents our estimated taxes to be paid or refunded for the current period. In accordance with ASC 740, Income Taxes (“ASC 740”), we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount we believe is more likely than not to be realized.
Fee-Paying Assets Under Management, or FPAUM
FPAUM reflects the assets from which we earn management and advisory fees. Our vehicles typically earn management and advisory fees based on committed capital, and in certain cases, net invested capital, depending on the fee terms. Management and advisory fees based on committed capital are not affected by market appreciation or depreciation.
Results of Operations
For the three and six months ended June 30, 2023 and June 30, 2022.
|
|
For the three months |
|
For the six months |
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|
|
|
|
|
||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
||||||
REVENUES |
|
(in thousands) |
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|||||||||||||||
Management and advisory fees |
|
$ |
61,657 |
|
|
$ |
46,451 |
|
|
$ |
15,206 |
|
|
33% |
|
$ |
118,244 |
|
|
$ |
89,478 |
|
|
$ |
28,766 |
|
|
32% |
Other revenue |
|
|
815 |
|
|
|
287 |
|
|
|
528 |
|
|
184% |
|
|
1,481 |
|
|
|
541 |
|
|
|
940 |
|
|
174% |
Total revenues |
|
|
62,472 |
|
|
|
46,738 |
|
|
|
15,734 |
|
|
34% |
|
|
119,725 |
|
|
|
90,019 |
|
|
|
29,706 |
|
|
33% |
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Compensation and benefits |
|
|
36,311 |
|
|
|
17,815 |
|
|
|
18,496 |
|
|
104% |
|
|
71,953 |
|
|
|
36,309 |
|
|
|
35,644 |
|
|
98% |
Professional fees |
|
|
2,992 |
|
|
|
2,740 |
|
|
|
252 |
|
|
9% |
|
|
6,834 |
|
|
|
5,352 |
|
|
|
1,482 |
|
|
28% |
General, administrative and other |
|
|
5,037 |
|
|
|
4,250 |
|
|
|
787 |
|
|
19% |
|
|
9,894 |
|
|
|
8,362 |
|
|
|
1,532 |
|
|
18% |
Contingent consideration expense |
|
|
80 |
|
|
|
(140 |
) |
|
|
220 |
|
|
(157)% |
|
|
470 |
|
|
|
(13 |
) |
|
|
483 |
|
|
(3,715)% |
Amortization of intangibles |
|
|
7,326 |
|
|
|
6,153 |
|
|
|
1,173 |
|
|
19% |
|
|
14,574 |
|
|
|
12,334 |
|
|
|
2,240 |
|
|
18% |
Strategic alliance expense |
|
|
402 |
|
|
|
153 |
|
|
|
249 |
|
|
163% |
|
|
805 |
|
|
|
305 |
|
|
|
500 |
|
|
164% |
Total operating expenses |
|
|
52,148 |
|
|
|
30,971 |
|
|
|
21,177 |
|
|
68% |
|
|
104,530 |
|
|
|
62,649 |
|
|
|
41,881 |
|
|
67% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
INCOME FROM OPERATIONS |
|
|
10,324 |
|
|
|
15,767 |
|
|
|
(5,443 |
) |
|
(35)% |
|
|
15,195 |
|
|
|
27,370 |
|
|
|
(12,175 |
) |
|
(44)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
OTHER (EXPENSE)/INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest expense, net |
|
|
(5,426 |
) |
|
|
(1,525 |
) |
|
|
(3,901 |
) |
|
256% |
|
|
(10,598 |
) |
|
|
(2,910 |
) |
|
|
(7,688 |
) |
|
264% |
Other (expense)/income |
|
|
(832 |
) |
|
|
791 |
|
|
|
(1,623 |
) |
|
(205)% |
|
|
(719 |
) |
|
|
1,120 |
|
|
|
(1,839 |
) |
|
(164)% |
Total other (expense) |
|
|
(6,258 |
) |
|
|
(734 |
) |
|
|
(5,524 |
) |
|
753% |
|
|
(11,317 |
) |
|
|
(1,790 |
) |
|
|
(9,527 |
) |
|
532% |
Net income before income taxes |
|
|
4,066 |
|
|
|
15,033 |
|
|
|
(10,967 |
) |
|
(73)% |
|
|
3,878 |
|
|
|
25,580 |
|
|
|
(21,702 |
) |
|
(85)% |
Income tax (expense) |
|
|
(1,964 |
) |
|
|
(3,879 |
) |
|
|
1,915 |
|
|
(49)% |
|
|
(1,007 |
) |
|
|
(6,634 |
) |
|
|
5,627 |
|
|
(85)% |
NET INCOME |
|
$ |
2,102 |
|
|
$ |
11,154 |
|
|
$ |
(9,052 |
) |
|
(81)% |
|
$ |
2,871 |
|
|
$ |
18,946 |
|
|
$ |
(16,075 |
) |
|
(85)% |
Revenues
Three Months Ended June 30, 2023 and June 30, 2022
Our revenue is composed almost entirely of recurring management and advisory fees, with the vast majority of fees earned on committed capital that is typically subject to ten to fifteen year lock up agreements, therefore our average fee rates have remained stable at approximately 1% for the three months ended June 30, 2023 and June 30, 2022. For the three months
34
ended June 30, 2023 compared to the three months ended June 30, 2022, revenues increased by $15.7 million or 34% due to higher management fees from the impact of inorganic growth of $6.9 million driven by the acquisition of WTI and $8.8 million of organic growth across Bonaccord, Hark, ECG, RCP, and Truebridge.
Management and advisory fees increased by $15.2 million, or 33%, to $61.7 million for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 due to inorganic growth due to the acquisition of WTI which brought $6.9 million of revenue in the first quarter of 2023 and organic FPAUM growth at Bonaccord, Hark, RCP, TrueBridge, and ECG were the primary drivers of the increase in management and advisory fees of $8.3 million. Catch-up fees for the three months ended June 30, 2023 were $4.7 million associated with the fund closings at Bonaccord, TrueBridge and RCP.
Other revenues, which represent ancillary elements of our business, increased by $0.5 million or 184% to $0.8 million for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022 driven primarily by an increase of $0.6 million of interest income in other revenue.
Six Months Ended June 30, 2023 and June 30, 2022
Our revenue is composed almost entirely of recurring management and advisory fees, with the vast majority of fees earned on committed capital that is typically subject to ten to fifteen year lock up agreements, therefore our average fee rates have remained stable at approximately 1% for the six months ended June 30, 2023 and June 30, 2022. For the six months ended June 30, 2023 compared to the six months ended June 30, 2022, revenues increased by $29.7 million or 33% due to higher management fees from the impact of inorganic growth of $14.0 million driven by the acquisition of WTI and $15.7 million of organic growth across Bonaccord, Hark, ECG, RCP, and Truebridge.
Management and advisory fees increased by $28.8 million, or 32%, to $118.2 million for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 due to inorganic growth due to the acquisition of WTI which brought $14.0 million of revenue in the first quarter of 2023 and organic FPAUM growth at Bonaccord, Hark, RCP, TrueBridge, and ECG were the primary drivers of the increase in management and advisory fees of $14.8 million. Catch-up fees for the six months ended June 30, 2023 were $7.8 million associated with the fund closings at Bonaccord, TrueBridge and RCP.
Other revenues, which represent ancillary elements of our business, increased by $0.9 million or 174% to $1.5 million for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 driven primarily by an increase of $0.7 million of interest income in other revenue.
|
|
For the three months |
|
|
For the six months |
|
||||||||||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|
||||||||
OPERATING EXPENSES |
|
(in thousands) |
|
|
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
||||||||||||||
Compensation and benefits |
|
$ |
36,311 |
|
|
$ |
17,815 |
|
|
$ |
18,496 |
|
|
|
104 |
% |
|
$ |
71,953 |
|
|
$ |
36,309 |
|
|
$ |
35,644 |
|
|
|
98 |
% |
Professional fees |
|
|
2,992 |
|
|
|
2,740 |
|
|
$ |
252 |
|
|
|
9 |
% |
|
|
6,834 |
|
|
|
5,352 |
|
|
|
1,482 |
|
|
|
28 |
% |
General, administrative, and other |
|
|
5,037 |
|
|
|
4,250 |
|
|
$ |
787 |
|
|
|
19 |
% |
|
|
9,894 |
|
|
|
8,362 |
|
|
|
1,532 |
|
|
|
18 |
% |
Contingent consideration expense |
|
|
80 |
|
|
|
(140 |
) |
|
$ |
220 |
|
|
|
(157 |
)% |
|
|
470 |
|
|
|
(13 |
) |
|
|
483 |
|
|
|
(3,715 |
)% |
Amortization of intangibles |
|
|
7,326 |
|
|
|
6,153 |
|
|
$ |
1,173 |
|
|
|
19 |
% |
|
|
14,574 |
|
|
|
12,334 |
|
|
|
2,240 |
|
|
|
18 |
% |
Strategic alliance expense |
|
|
402 |
|
|
|
153 |
|
|
$ |
249 |
|
|
|
163 |
% |
|
|
805 |
|
|
|
305 |
|
|
|
500 |
|
|
|
164 |
% |
Total operating expenses |
|
$ |
52,148 |
|
|
$ |
30,971 |
|
|
$ |
21,177 |
|
|
|
68 |
% |
|
$ |
104,530 |
|
|
$ |
62,649 |
|
|
$ |
41,881 |
|
|
|
67 |
% |
Operating Expenses
For the Three Months Ended June 30, 2023 and June 30, 2022
Total operating expenses increased by $21.2 million, or 68%, to $52.1 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This increase was primarily due to increases in compensation and benefits as well as amortization expense.
Compensation and benefits expense increased by $18.5 million, or 104%, to $36.3 million, for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The acquisition of WTI added $2.7 million of
35
compensation expense in the first half of 2023. Stock compensation contributed to $5.3 million of the increase, of which $2.2 million relates to acquisition activity. An additional $2.1 million of the increase in stock compensation expense is attributable to management compensation as a result of amended employment agreements executed during the second quarter of 2023. The earn out and bonus accruals associated with the acquisition of WTI as discussed in Note 14 in the Notes to the Consolidated Financial Statements contributed $6.4 million. Additionally, there was a $4.2 million increase associated with an increase in headcount and associated benefits across all subsidiaries.
Professional fees increased by $0.3 million, or 9%, to $3.0 million. The primary cost in professional fees for the three months ended June 30, 2023 and 2022 are tax fees associated with year end reporting and strategic planning.
General, administrative and other increased by $0.8 million, or 19%, to $5.0 million, due primarily to the acquisition of WTI.
Contingent consideration expense increased by $0.2 million, to $0.1 million, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. This was driven by remeasurement during the periods of contingent consideration payable in connection with the acquisitions of Hark and Bonaccord.
Amortization of intangibles increased by $1.2 million, or 19%, to $7.3 million, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. This is due to the acquisition of WTI.
For the Six Months Ended June 30, 2023 and June 30, 2022
Total operating expenses increased by $41.9 million, or 67%, to $104.5 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This increase was primarily due to increases in compensation and benefits as well as amortization expense.
Compensation and benefits expense increased by $35.6 million, or 98%, to $72.0 million, for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The increase was driven by a number of factors. The acquisition of WTI added $5.9 million of compensation expense in the first half of 2023. Stock compensation contributed to $10.9 million of the increase, of which $6.7 million relates to acquisition activity. Management compensation contributed to the increase in stock compensation by $2.1 million as a result of amended employment agreements executed during the second quarter of 2023. The earn out and bonus accruals associated with the acquisition of WTI as discussed in Note 14 in the footnotes to the consolidated financial statements contributed $12.8 million. The final driver is a $6.1 million increase associated with an increase in headcount and associated benefits across all subsidiaries.
Professional fees increased by $1.5 million, or 28%, to $6.8 million. The primary cost in professional fees for the six months ended June 30, 2023 and 2022 are tax fees associated with year end reporting and strategic planning and audit expenses.
General, administrative and other increased by $1.5 million, or 18%, to $9.9 million, due primarily to the acquisition of WTI.
Contingent consideration expense increased by $0.5 million, to $0.5 million, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. This was driven by remeasurement during the periods of contingent consideration payable in connection with the acquisitions of Hark and Bonaccord.
Amortization of intangibles increased by $2.2 million, or 18%, to $14.6 million, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. This is due to the acquisition of WTI.
Other Income (Expense)
For the Three Months Ended June 30, 2023 and June 30, 2022
Other expenses increased by $5.5 million, or 753%, to $6.3 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. This increase was driven by a rise in interest expense of $3.9 million. The increase in interest expense correlates to the increase in the principal balance outstanding of our Revolving Credit Facility and Term Loan of $84.3 million from the second quarter of 2022 to the second quarter of 2023 as well as rising interest rates. The increase in principal balances primarily relates to the acquisition of WTI.
36
For the Six Months Ended June 30, 2023 and June 30, 2022
Other expenses increased by $9.5 million, or 532%, to $11.3 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. This increase was driven by a rise in interest expense of $7.7 million. The increase in interest expense correlates to the increase in the principal balance outstanding of our Revolving Credit Facility and Term Loan of $84.3 million from the first six months of 2022 to the first six months of 2023 as well as rising interest rates. The increase in principal balances primarily relates to the acquisition of WTI.
Income Tax Expense/Benefit
For the Three Months Ended June 30, 2023 and June 30, 2022
Income tax expense decreased by $1.9 million to $2.0 million for the three months ended June 30, 2023 compared to an expense of $3.9 million for the three months ended June 30, 2022. The decrease was due to lower pre-tax income during the period.
For the Six Months Ended June 30, 2023 and June 30, 2022
Income tax expense decreased by $5.6 million to $1.0 million for the six months ended June 30, 2023 compared to an expense of $6.6 million for the six months ended June 30, 2022. The decrease was due to lower pre-tax income during the period.
FPAUM
The following table provides a period-to-period roll-forward of our fee paying assets under management on a pro forma basis as if WTI was acquired on January 1, 2022.
|
|
For the three months |
|
|
For the three months |
|
|
For the six months |
|
|
For the six months |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
||||
Balance, Beginning of Period |
|
$ |
21,601 |
|
|
$ |
19,277 |
|
|
$ |
21,206 |
|
|
$ |
19,032 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisitions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Capital raised (1) |
|
|
1,056 |
|
|
|
944 |
|
|
|
1,721 |
|
|
|
1,440 |
|
Capital deployed (2) |
|
|
216 |
|
|
|
328 |
|
|
|
461 |
|
|
|
552 |
|
Net Asset Value Change (3) |
|
|
(29 |
) |
|
|
(70 |
) |
|
|
(47 |
) |
|
|
(130 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Scheduled fee base stepdowns |
|
|
(214 |
) |
|
|
(32 |
) |
|
|
(284 |
) |
|
|
(132 |
) |
Expiration of fee period |
|
|
(465 |
) |
|
|
(269 |
) |
|
|
(892 |
) |
|
|
(585 |
) |
Balance, End of period |
|
$ |
22,165 |
|
|
$ |
20,178 |
|
|
$ |
22,165 |
|
|
$ |
20,177 |
|
37
The following table provides a period-to-period roll-forward of our fee paying assets under management on an actual basis.
|
|
For the three months |
|
|
For the three months |
|
|
For the six months |
|
|
For the six months |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
|
(in millions) |
|
||||
Balance, Beginning of Period |
|
$ |
21,601 |
|
|
$ |
17,593 |
|
|
$ |
21,206 |
|
|
$ |
17,263 |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisitions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Capital raised (1) |
|
|
1,056 |
|
|
|
944 |
|
|
|
1,721 |
|
|
|
1,440 |
|
Capital deployed (2) |
|
|
216 |
|
|
|
212 |
|
|
|
461 |
|
|
|
435 |
|
Net Asset Value Change (3) |
|
|
(29 |
) |
|
|
4 |
|
|
|
(47 |
) |
|
|
8 |
|
Less: |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Scheduled fee base stepdowns |
|
|
(214 |
) |
|
|
(30 |
) |
|
|
(284 |
) |
|
|
(109 |
) |
Expiration of fee period |
|
|
(465 |
) |
|
|
(269 |
) |
|
|
(892 |
) |
|
|
(585 |
) |
Balance, End of period |
|
$ |
22,165 |
|
|
$ |
18,454 |
|
|
$ |
22,165 |
|
|
$ |
18,452 |
|
FPAUM as of June 30, 2023
FPAUM increased by $0.6 billion or 2.6% to $22.2 billion on a pro forma basis and actual basis for the three months ended June 30, 2023, due primarily to an increase in capital raise and deployed from our private equity and venture capital solutions and offset by stepdowns and expirations. FPAUM increased by $1.0 billion, or 4.5%, to $22.2 billion on a pro forma basis and actual basis for the six months ended June 30, 2023, due primarily to an increase in capital raised and deployed from our private equity and venture capital solutions and offset by stepdowns and expirations. Our FPAUM growth and concentration across solutions and vehicles has been relatively consistent over time but can vary in particular periods due to the systematic fundraising cycles of new funds, which typically lasts 12-24 months. We expect to continue to expand our fundraising efforts and grow FPAUM with the launch of new specialized investment vehicles and asset class solutions.
Non-GAAP Financial Measures
Below is a description of our unaudited non-GAAP financial measures. These are not measures of financial performance under GAAP and should not be construed as a substitute for the most directly comparable GAAP measures, which are reconciled below. These measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these measures in isolation or as a substitute for GAAP measures. Other companies may calculate these measures differently than we do, limiting their usefulness as a comparative measure.
We use Adjusted Net Income, or ANI, as well as Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) to provide additional measures of profitability. We use the measures to assess our performance relative to our intended strategies, expected patterns of profitability, and budgets, and use the results of that assessment to adjust our future activities to the extent we deem necessary. ANI reflects our actual cash flows generated by our core operations. ANI is calculated as Adjusted EBITDA, less actual cash paid for interest and federal and state income taxes.
38
In order to compute Adjusted EBITDA, we adjust our GAAP net income for the following items:
The cash income taxes paid during the periods differ significantly from the net income tax expense, which is primarily comprised of deferred tax expense as described in the results of operations.
|
|
For the Three |
|
|
For the Six |
|
||||||||||
|
|
Months Ended |
|
|
Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
(in thousands) |
|
|
(in thousands) |
|
||||||||||
Net income |
|
$ |
2,102 |
|
|
$ |
11,154 |
|
|
$ |
2,871 |
|
|
$ |
18,946 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation & amortization |
|
|
7,856 |
|
|
|
6,264 |
|
|
|
15,626 |
|
|
|
12,540 |
|
Interest expense, net |
|
|
5,426 |
|
|
|
1,525 |
|
|
|
10,598 |
|
|
|
2,910 |
|
Income tax expense |
|
|
1,964 |
|
|
|
3,878 |
|
|
|
1,007 |
|
|
|
6,633 |
|
Non-recurring expenses |
|
|
3,017 |
|
|
|
208 |
|
|
|
5,176 |
|
|
|
2,938 |
|
Non-cash stock based compensation |
|
|
5,799 |
|
|
|
2,717 |
|
|
|
8,398 |
|
|
|
4,232 |
|
Non-cash stock based compensation - acquisitions |
|
|
2,272 |
|
|
|
— |
|
|
|
6,773 |
|
|
|
— |
|
Earn out related compensation |
|
|
6,394 |
|
|
|
— |
|
|
|
12,787 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Adjusted EBITDA |
|
|
34,830 |
|
|
|
25,746 |
|
|
|
63,236 |
|
|
|
48,199 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash interest expense |
|
|
(7,141 |
) |
|
|
(1,892 |
) |
|
|
(10,003 |
) |
|
|
(2,290 |
) |
Cash income taxes, net of taxes related to |
|
|
(1,030 |
) |
|
|
(664 |
) |
|
|
(1,088 |
) |
|
|
(428 |
) |
Adjusted Net Income |
|
$ |
26,659 |
|
|
$ |
23,190 |
|
|
$ |
52,145 |
|
|
$ |
45,481 |
|
Financial Position, Liquidity and Capital Resources
Selected Statements of Financial Position
|
|
As of |
|
|
As of |
|
|
|
|
|
|
|||
|
|
As of June 30, |
|
|
December 31, |
|
|
|
|
|
|
|||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|||
|
|
(in thousands) |
|
|
|
|
|
|
||||||
Cash and cash equivalents (including restricted cash) |
|
$ |
24,861 |
|
|
$ |
29,492 |
|
|
$ |
(4,631 |
) |
|
(16)% |
Goodwill and other intangibles |
|
|
643,890 |
|
|
|
658,433 |
|
|
|
(14,543 |
) |
|
(2)% |
Total assets |
|
|
819,741 |
|
|
|
826,360 |
|
|
|
(6,619 |
) |
|
(1)% |
Debt obligations |
|
|
271,735 |
|
|
|
289,224 |
|
|
|
(17,489 |
) |
|
(6)% |
Stockholders’ equity |
|
$ |
435,076 |
|
|
$ |
433,883 |
|
|
$ |
1,193 |
|
|
0% |
There was a decrease in cash and cash equivalents of $4.6 million from December 31, 2022 to $24.9 million as of June 30, 2023 primarily due to timing of debt facility maturities and associated repayments. There was a decrease in goodwill and intangible assets of $14.5 million due to amortization of intangibles during the six months ended June 30, 2023. Remaining total assets increased in the same period by $9.9 million. The increase is driven by an increase in accounts receivable from related parties which is primarily due to ECG's Advisory Agreement with Enhanced PC and Crossroads.
39
Debt obligations declined by $17.5 million which is driven by payments towards the revolver and term loan balances during the period.
Historical Liquidity and Capital Resources
We have continued to support our ongoing operations through the receipt of management and advisory fee revenues. However, to fund our continued growth, we have utilized capital obtained through debt and equity raises. Our ability to continue to raise funds will be critical as we pursue additional business development opportunities and new acquisitions.
On December 22, 2021, P10, Inc. entered into a Term Loan and Revolving Credit Facility with JP Morgan Chase Bank, N.A.. The term loan and revolving credit facility provides financing for acquisition activity. The term loan provides for a $125.0 million facility and the revolving credit facility provides for an additional $125.0 million. There is also a $125 million accordion feature available in the credit agreement, which we exercised in September 2022. The accordion was not drawn until October 2022, at which point it was divided to $87.5 million of term loan and $37.5 million of revolver.
Both facilities are Term SOFR Loans. The Company can elect one or three months for the Revolver Facility and three or six months for the Term Loan. Principal is contractually repaid at a rate of 1.25% on the term loan quarterly effective March 31, 2023. The Revolving Credit Facility has no contractual principal repayments until maturity, which is December 22, 2025 for both facilities.
In September 2022, the Company exercised the accordion feature of the Credit Agreement. There were no draws made until the fourth quarter of 2022. The Company incurred $1.4 million of up front fees during the exercise which are reflected as debt obligations on the Consolidated Balance Sheets.
As of June 30, 2023, the Term Loan with a balance of $207.2 million is incurring interest at a weighted average SOFR rate of 7.28%. As of June 30, 2023, the Revolver Facility is split into six tranches. The total principal outstanding is $68.0 million and the average SOFR rate amongst the tranches is 7.31%. The tranches are all incurring interest at a set rate for one, three, or six month periods and are subsequently reset at the current SOFR rate. Refer to Note 12 for further details provided on the tranches and associated interest periods.
The Credit Agreement contains affirmative and negative covenants typical of such financing transactions, and specific financial covenants which require P10 to maintain a minimum leverage ratio of less than or equal to 3.50. As of June 30, 2023, P10 was in compliance with its financial covenants required under the facility. The Company has incurred $10.6 million in interest expense for the six months ended June 30, 2023.
Cash Flows
Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022
The following table reflects our cash flows for the six months ended June 30, 2023 and 2022:
|
|
For the Six Months |
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
|
2023 |
|
|
2022 |
|
|
$ Change |
|
|
% Change |
|||
|
|
(in thousands) |
|
|
|
|
|
|
||||||
Net cash provided by operating activities |
|
$ |
29,207 |
|
|
$ |
23,171 |
|
|
$ |
6,036 |
|
|
26% |
Net cash (used in) investing activities |
|
|
(627 |
) |
|
|
(320 |
) |
|
|
(307 |
) |
|
96% |
Net cash (used in) financing activities |
|
|
(33,211 |
) |
|
|
(40,989 |
) |
|
|
7,778 |
|
|
(19)% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Increase (decrease) in cash and cash equivalents and |
|
$ |
(4,631 |
) |
|
$ |
(18,138 |
) |
|
$ |
13,508 |
|
|
(74)% |
40
Operating Activities
Six Months Ended June 30, 2023 and June 30, 2022
Cash from operating activities increased by $6.0 million, or 26%, to $29.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The components of this net increase primarily consisted of the following changes in operating assets and liabilities:
Investing activities
Six Months Ended June 30, 2023 and June 30, 2022
The cash used in investing activities increased by $0.3 million, or 96%, to ($0.6) million, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. This increase in cash used was due to additional property and equipment purchased in the first half of 2023.
Financing Activities
Six Months Ended June 30, 2023 and June 30, 2022
We recorded a net $33.2 million for the six months ended June 30, 2023 for cash used in financing activities, as compared to cash used in financing activities of $40.9 million for the six months ended June 30, 2022. The change is attributed to timing differences of revolver tranches subject to repayment and payments of contingent consideration.
Future Sources and Uses of Liquidity
We generate significant cash flows from operating activities. We believe that we will be able to continue to meet our current and long-term liquidity and capital requirements through our cash flows from operating activities, existing cash and cash equivalents, and our external financing activities which may include refinancing of existing indebtedness or the pay down of debt using proceeds of equity offerings.
Off Balance Sheet Arrangements
We do not invest in any off-balance sheet vehicles that provide liquidity, capital resources, market or credit risk support, or engage in any activities that expose us to any liability that is not reflected in our consolidated financial statements.
Contractual Obligations, Commitments and Contingencies
In the ordinary course of business, we enter contractual arrangements that require future cash payments. The following table sets forth information regarding our anticipated future cash payments under our contractual obligations as of June 30, 2023:
|
|
Total |
|
|
2023 |
|
|
2024 |
|
|
2025 |
|
|
2026 |
|
|
2027 |
|
|
Thereafter |
|
|||||||
|
|
(in thousands) |
|
|||||||||||||||||||||||||
Operating lease obligations (1) |
|
$ |
25,005 |
|
|
$ |
1,755 |
|
|
$ |
3,959 |
|
|
$ |
3,211 |
|
|
$ |
2,917 |
|
|
$ |
2,870 |
|
|
$ |
10,293 |
|
Debt obligations (2) |
|
|
275,188 |
|
|
|
5,313 |
|
|
|
10,625 |
|
|
|
259,250 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
300,193 |
|
|
$ |
7,068 |
|
|
$ |
14,584 |
|
|
$ |
262,461 |
|
|
$ |
2,917 |
|
|
$ |
2,870 |
|
|
$ |
10,293 |
|
41
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its consolidated subsidiaries. The preparation of the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We believe the following critical accounting policies could potentially produce materially different results if we were to change the underlying assumptions, estimates, or judgements. See Note 2 of our consolidated financial statements for a summary of our significant accounting policies.
Basis of Presentation
The accompanying Consolidated Financial Statements are prepared in accordance with GAAP. Management believes it has made all necessary adjustments so that the Consolidated Financial Statements are presented fairly and that estimates made in preparing the Consolidated Financial Statements are reasonable and prudent. The Consolidated Financial Statements include the accounts of the Company, its wholly owned or majority-owned subsidiaries and entities in which the Company is deemed to have a direct or indirect controlling financial interest based on either a variable interest model or voting interest model. All intercompany transactions and balances have been eliminated upon consolidation. Certain entities in which the Company holds an interest are investment companies that follow specialized accounting rules under GAAP and reflect their investments at estimated fair value. Accordingly, the carrying value of the Company’s equity method investments in such entities retains the specialized accounting treatment.
Principles of Consolidation
The Company performs the variable interest analysis for all entities in which it has a potential variable interest. If the Company has a variable interest in the entity and the entity is a variable interest entity (“VIE”), we will also analyze whether the Company is the primary beneficiary of this entity and if consolidation is required.
Generally, VIEs are entities that lack sufficient equity to finance their activities without additional financial support from other parties, or whose equity holders, as a group, lack one or more of the following characteristics: (a) direct or indirect ability to make decisions, (b) obligation to absorb expected losses or (c) right to receive expected residual returns. A VIE must be evaluated quantitatively and qualitatively to determine the primary beneficiary, which is the reporting entity that has (a) the power to direct activities of a VIE that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.
To determine a VIE’s primary beneficiary, we perform a qualitative assessment to determine which party, if any, has the power to direct activities of the VIE and the obligation to absorb losses and/or receive its benefits. This assessment involves identifying the activities that most significantly impact the VIE’s economic performance and determine whether we, or another party, has the power to direct those activities. When evaluating whether we are the primary beneficiary of a VIE, we perform a qualitative analysis that considers the design of the VIE, the nature of our involvement and the variable interests held by other parties. See Note 7 of our consolidated financial statements for further information.
The Company has determined that certain of its subsidiaries are VIEs, and that the Company is the primary beneficiary of the entities, because it has the power to direct activities of the entities that most significantly impact the VIE’s economic performance and has a controlling financial interest in each entity. Accordingly, the Company consolidates these entities, which include P10 Intermediate, Holdco, RCP 2, RCP 3, TrueBridge, Hark, Bonaccord, and WTI. The assets and liabilities of the consolidated VIEs are presented gross in the Consolidated Balance Sheets. The liabilities of our consolidated VIE’s are obligations of those entities and their creditors do not generally have recourse to the assets of P10. See Note 7 of our consolidated financial statements for more information on both consolidated and unconsolidated VIEs.
Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities under the voting interest model. Under the voting interest model, the Company consolidates those entities it controls through a majority voting interest
42
or other means. Five Points, P10 Holdings, and ECG are concluded to be consolidated subsidiaries of P10 under the voting interest model.
Revenue Recognition of Management Fees and Management Fees Received in Advance
Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services.
While the determination of who is the customer in a contractual arrangement will be made on a contract-by-contract basis, the customer will generally be the investment fund for the Company’s significant management and advisory contracts.
Management and Advisory Fees
The Company earns management fees for asset management services provided to the Funds where the Company has discretion over investment decisions. The Company primarily earns fees for advisory services provided to clients where the Company does not have discretion over investment decisions. Management and advisory fees received in advance reflects the amount of fees that have been received prior to the period the fees are earned. These fees are recorded as deferred revenue on the Consolidated Balance Sheets.
For asset management and advisory services, the Company typically satisfies its performance obligations over time as the services are rendered, since the customers simultaneously receive and consume the benefits provided as the Company performs the service. The transaction price is the amount of consideration to which the Company expects to be entitled based on the terms of the arrangement. For certain funds, management fees are initially calculated based on committed capital during the investment period and on net invested capital through the remainder of the fund’s term. Additionally, the management fee may step down for certain funds depending on the contractual arrangement. Advisory services are generally based upon fixed amounts and billed quarterly. Other advisory services include transaction and management fees associated with managing the origination and ongoing compliance of certain investments.
Income Taxes
Current income tax expense represents our estimated taxes to be paid or refunded for the current period. In accordance with ASC 740, we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount we believe is more likely than not to be realized.
Uncertain tax positions are recognized only when we believe it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. We recognize interest and penalties, if any, related to uncertain tax positions in income tax expense.
We file various federal and state and local tax returns based on federal and state local consolidation and stand- alone tax rules as applicable.
Item 3. Qualitative and Quantitative Disclosures about Market Risk.
In the normal course of business, we are exposed to a broad range of risks inherent in the financial markets in which we participate, including price risk, interest-rate risk, access to and cost of financing risk, liquidity risk, and counterparty risk. Potentially negative effects of these risks may be mitigated to a certain extent by those aspects of our investment approach, investment strategies or other business activities that are designed to benefit, either in relative or absolute terms, from periods of economic weakness, tighter credit or financial market dislocations.
Our predominant exposure to market risk is related to our role as general partner or investment manager for our specialized investment vehicles and the sensitivities to movements in the fair value of their investments and overall returns for our investors. Since our management fees are generally based on commitments or net invested capital, our management fee and advisory fee revenue is not significantly impacted by changes in investment values, but unfavorable changes in the value of the assets we manage could adversely impact our ability to attract and retain our investors.
43
Fair value of the financial assets and liabilities of our specialized investment vehicles may fluctuate in response to changes in the value of underlying assets, and interest rates.
Interest Rate Risk
As of June 30, 2023, we had $207.2 million in outstanding principal in Term Loan under our Term Loan and Revolving Credit Facility. The annual interest rate on the Term Loan is based on SOFR, subject to a floor of 0.10%, plus 2.00%. On June 30, 2023, the interest rate on these borrowings was 2.1% + SOFR. We estimate that a 100-basis point increase in the interest rate would result in an approximately $2.1 million increase in interest expense related to the loan over the next 12 months.
Credit Risk
We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In such agreements, we depend on the respective counterparty to make payment or otherwise perform. We generally endeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In other circumstances, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgement in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.
Our management, under the supervision and with the participation of our Co-Chief Executive Officers and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this report. Based on that evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are effective to provide reasonable assurance that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
44
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The information required with respect to this item can be found under “Contingencies” in Note 14, Commitments and Contingencies, to our consolidated financial statements included elsewhere in this annual report, and such information is incorporated by reference into this Item 1.
Item 1A. Risk Factors.
There have been no material changes from the risk factors previously disclosed in “Risk Factors” included in our annual report on Form 10-K for the year ended December 31, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information about our repurchase activity with respect to shares of our common stock for the quarter ended June 30, 2023:
|
|
|
|
|
|
|
|
|
||||
Period |
Total Number of Shares Purchased |
|
Average Price Paid per Share |
|
Total Number of Shares Purchased as Part of Publicly Announced Plan or Program (1) |
|
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) |
|
||||
April 1 - 30, 2023 |
|
— |
|
|
— |
|
|
— |
|
$ |
18,936,024 |
|
May 1 - 31, 2023 |
|
— |
|
|
— |
|
|
— |
|
$ |
18,936,024 |
|
June 1 - 30, 2023 |
|
— |
|
|
— |
|
|
— |
|
$ |
18,936,024 |
|
Total |
|
— |
|
|
— |
|
|
— |
|
|
|
|
(1) On May 12, 2022, we announced that our Board of Directors authorized a program to repurchase outstanding shares of our Class A and Class B common stock as of the date of authorization, not to exceed $20 million (the "Stock Repurchase Program"). On December 27, 2022, we announced that our Board of Directors authorized an additional $20 million for repurchases under the Stock Repurchase Program. The authorization provides us the flexibility to repurchase shares in the open market, in block trades, in accordance with Rule 10b5-1 trading plans, and/or through other legally permissible means, in privately negotiated transactions, from time to time, based on market conditions and other factors. The Stock Repurchase Program does not obligate P10 to acquire any particular amount of common stock and it may be terminated or amended by the Board of Directors at any time.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information
Neither the Company nor any of our officers or directors
45
Item 6. Exhibits.
Exhibit Number |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1 |
|
|
|
|
|
10.2 |
|
|
|
|
|
10.3 |
|
|
|
|
|
10.4 |
|
|
|
|
|
10.5* |
|
Amendment No. 1 to Controlled Company Agreement, dated as of May 16, 2023 |
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
31.3* |
|
|
|
|
|
32.1* |
|
|
|
|
|
32.2* |
|
|
|
|
|
32.3* |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
46
* Filed herewith.
47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
P10, Inc. |
|
|
|
|
|
Date: August 14, 2023 |
|
By: |
/s/ Robert Alpert |
|
|
|
Robert Alpert |
|
|
|
Co-Chief Executive Officer and Chairman of the Board of Directors (Co-Principal Executive Officer) |
|
|
|
|
Date: August 14, 2023 |
|
By: |
/s/ C. Clark Webb |
|
|
|
C. Clark Webb |
|
|
|
Co-Chief Executive Officer and Director (Co-Principal Executive Officer) |
|
|
|
|
Date: August 14, 2023 |
|
By: |
/s/ Amanda Coussens |
|
|
|
Amanda Coussens |
|
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
48
AMENDMENT NO. 1 TO
CONTROLLED COMPANY AGREEMENT
This AMENDMENT NO. 1 TO CONTROLLED COMPANY AGREEMENT (the “Amendment”) is entered into as of May 16, 2023 to amend that Controlled Company Agreement dated as of October 20, 2021 (the “Controlled Company Agreement”), by and among the parties listed on the signature pages thereto, and shall be effective as of the Effective Date (as defined below). Capitalized terms not otherwise defined herein shall have the meanings ascribed in the Controlled Company Agreement.
WHEREAS, in connection with the consummation by Issuer of a Restructuring, the Issuer and Stockholders agreed to enter into the Controlled Company Agreement to govern certain of their rights, duties and obligations with respect to their ownership of Shares after consummation of the Restructuring.
WHEREAS, Jeff P. Gehl, the Trustee of the Jeff P. Gehl Living Trust dated January 25, 2011, a Restricted Stockholder, has elected to terminate his employment, service and association with RCP Advisors 2, LLC and RCP Advisors 3, LLC effective as of May 15, 2023 (the “Effective Date”), and in connection therewith, desires to be released from the rights, duties and obligations under the Controlled Company Agreement as a Restricted Stockholder.
WHEREAS, pursuant to Section 4.1 of the Controlled Company Agreement, each of the parties to the Controlled Company Agreement are entering into this Amendment to amend the Controlled Company Agreement to remove the Jeff P. Gehl Living Trust dated January 25, 2011 as a Restricted Stockholder on and after the Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged the parties mutually agree as follows:
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be executed on its behalf as of the date first written above.
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ISSUER: |
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P10, INC. |
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By: |
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/s/ Amanda Coussens |
Name: Amanda Coussens |
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Title: CFO |
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[Signature Page to Amendment No. 1 to Controlled Company Agreement]
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Jeff P. Gehl Living Trust dated January 25, 2011 |
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By: |
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/s/ Jeff P. Gehl |
Name: Jeff P. Gehl |
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Its: Trustee |
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[Signature Page to Amendment No. 1 to Controlled Company Agreement]
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210 Stockholders: |
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210/P10 ACQUISITION PARTNERS, LLC |
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By: Its:
By: Its: |
210 Capital, LLC Sole Member
Covenant RHA Partners, L.P. Member |
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By: |
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/s/ Robert Alpert |
Name: Robert Alpert |
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Its: Authorized Signatory |
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By: Its: |
CCW/LAW Holdings, LLC Member |
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By: |
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/s/ C. Clark Webb |
Name: C. Clark Webb |
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Its: Authorized Signatory
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[Signature Page to Amendment No. 1 to Controlled Company Agreement]
4882-6473-8657.3
RCP Stockholders: |
/s/ David McCoy
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David McCoy |
/s/ Alexander Abell |
Alexander Abell
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/s/ Michael Feinglass |
Michael Feinglass |
/s/ Andrew Nelson |
Andrew Nelson |
/s/ Nell Blatherwick |
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Nell Blatherwick |
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Thomas P. Danis, Jr. Revocable Living Trust dated March 10, 2003, as amended |
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By: |
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/s/ Thomas P. Danis, Jr. |
Name: Thomas P. Danis, Jr. |
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Its: Trustee |
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[Signature Page to Amendment No. 1 to Controlled Company Agreement]
4882-6473-8657.3
RCP Stockholders (continued):
Charles K. Huebner Trust dated January 16, 2001 |
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By: |
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/s/ Charles K. Huebner |
Name: Charles K. Huebner |
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Its: Trustee |
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Jon I. Madorsky Revocable Trust dated December 1, 2008 |
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By: |
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/s/ Jon I/ Madorsky |
Name: Jon I. Madorsky |
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Its: Trustee |
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Souder Family LLC |
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By: |
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/s/ William F. Souder |
Name: William F. Souder |
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Its: General Partner
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[Signature Page to Amendment No. 1 to Controlled Company Agreement]
4882-6473-8657.3
TrueBridge Stockholders:
TrueBridge Colonial Fund, u/a dated 11/15/2015 |
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By: |
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/s/ Edwin Poston |
Name: Edwin Poston |
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Its: |
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Mel Williams Irrevocable Trust u/a/d August 12, 2015 By: Alliance Trust Company, its Trustee |
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By: |
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/s/ Mel Williams |
Name: Mel Williams |
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Its: |
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TrueBridge Ascent LLC |
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By: |
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/s/ Edwin Poston |
Name: Edwin Poston |
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Its: GP |
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MAW Management Co. |
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By: |
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/s/ Mel A. Williams |
Name: Mel A. Williams |
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Its: Manager |
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[Signature Page to Amendment No. 1 to Controlled Company Agreement]
4882-6473-8657.3
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert Alpert, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 14, 2023 |
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By: |
/s/ Robert Alpert |
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Robert Alpert |
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Co-Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, C. Clark Webb, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 14, 2023 |
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By: |
/s/ C. Clark Webb |
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C. Clark Webb |
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Co-Chief Executive Officer |
Exhibit 31.3
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Amanda Coussens, certify that:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 14, 2023 |
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By: |
/s/ Amanda Coussens |
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Amanda Coussens |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of P10, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: August 14, 2023 |
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By: |
/s/ Robert Alpert |
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Robert Alpert |
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Co-Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of P10, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: August 14, 2023 |
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By: |
/s/ C. Clark Webb |
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C. Clark Webb |
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Co-Chief Executive Officer |
Exhibit 32.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of P10, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: August 14, 2023 |
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By: |
/s/ Amanda Coussens |
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Amanda Coussens |
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Chief Financial Officer |