Q4 2024 P10 Inc Earnings Call
Hello, and welcome to the P 10 fourth quarter 2024 conference call.
La Cheeks: My name is la cheeks, and I will be coordinating your call today.
La Cheeks: Currently all participants are in a listen only mode.
La Cheeks: After the speaker presentation, there will be a question and answer session.
La Cheeks: As a reminder, today's conference call is being recorded.
Speaker Change: I will now hand, the call over to your host Mark Hood, EVP and Chief administrative officer Mark. Please go ahead.
Speaker Change: Thank you operator, and thank you all for joining us on today's call, we'll be joined by Luc Sarsfield.
Amanda Cousins: Oregon, and Chief Executive Officer, and Amanda cousins, EVP and Chief Financial Officer.
Speaker Change: Additionally, in the room with US today are Jay Johnson, EVP head of strategy, and M&A, and Sweden Sheriff EVP global head of client solutions.
Speaker Change: Before we begin I'd like to remind everyone that this conference call as well as the presentation slides may constitute forward looking statements within the meaning of the federal Securities laws.
Speaker Change: The private Securities Litigation Reform Act of 1995 forward looking statements reflect management's current plans estimates and expectations and are inherently uncertain.
Speaker Change: Actual results for future periods may differ materially from those expressed or implied by these forward looking statements due to a number of risks and uncertainties that are described in greater detail in our earnings release and in our periodic reports filed from time to time with the SEC.
Speaker Change: The forward looking statements included are made only as of the date hereof, we undertake no obligation to update or otherwise revise any forward looking statements as a result of new information or future events.
Speaker Change: Except as otherwise required by law.
Speaker Change: During the call. We will also discuss certain non-GAAP measures, which we believe can be useful in evaluating the companys future performance.
Speaker Change: A reconciliation of these measures to the most directly comparable GAAP measure is available in our earnings release, and our filing with the SEC.
Luke: I will now turn the call over to Luke.
Luke: Thank you Mark good morning, everyone and thank you for joining our fourth quarter and full year 2024 earnings call. We are extremely encouraged by what our team accomplished in 2024, and we are very well positioned to advance our strategy further in the quarters ahead.
Luke: On today's call I will provide an overview of our financial highlights for the quarter and the year.
Luke: <unk> on our record performance review, our five year guidance share our 2025 outlook update you on the quality of those funds acquisition and discuss ongoing strategic imperatives that will support our growth plan.
Vanda: Vanda will also provide additional detail on our financial performance for the quarter and the year and key considerations for the year ahead.
Vanda: In the fourth quarter, <unk> made meaningful and demonstrable progress around our strategic initiatives, including adding key members to the leadership team to position <unk> to drive growth we.
Vanda: We ended the year in a position of strength.
Vanda: Feeding the financial and operating guidance, we provided in February of 2024, and which we committed to deliver over $2 5 billion in gross fundraising double digit revenue growth margins in the mid 40% range and a reinvigorated M&A process.
Vanda: To put some numbers around our outperformance for the full year 2024 P paying AUM increased by 10%.
Vanda: Revenues increased by 23%.
Vanda: Adjusted EBITDA rose by 17%.
Vanda: And we generated $3 8 billion in gross fundraising.
Vanda: Notably Monochord capital partners, our GP stake strategy closed fund II with a record $1 6 billion.
Vanda: It is our first fund to attract more than $1 billion in capital and we believe LP interest speaks to the attractiveness of our differentiated middle market focus.
Vanda: Additionally fee related revenue grew by 14%, excluding the effects of direct and secondary catch up fees, while full year FRE margins were 48, 8%.
Vanda: In early 2024, we committed to reinvigorate our M&A engine and in September we announced our acquisition of call. It cost funds, a leading European private equity fund of funds manager based in Madrid.
Vanda: Our firm provides fund of funds direct co investing in Nab financing opportunities in the European lower middle market, we remain on track to close the transaction in the first quarter.
Vanda: Additionally, at our September 2020 for Investor Day, we shared our longer term vision, which included our target of more than doubling fee paying AUM over the next five years through 2029.
Vanda: This equates to growth from $23 8 billion to.
Vanda: The $50 billion of fee paying AUM.
Vanda: While we expect the vast majority of growth to be organic we also expect to execute on value, creating M&A that meaningfully advances our strategy and delivers additional fee paying AUM.
Vanda: Turning to margins there are three key dynamics that are going to impact our FRE margin outlook.
Vanda: The key investments, we are making in the business, which are largely focused on human capital in areas like distribution we.
Vanda: We expect these investments to drive accelerated growth and provide a high ROI.
Vanda: Second the ongoing mix shift within our portfolio of strategies some of our newer and faster growing strategies have lower core FRE margins than some of the larger and more established parts of our business.
Vanda: And third a dynamic that we think is really attractive.
Vanda: The inherent operating leverage in our model, particularly as we scale assets and revenues over the longer term.
Vanda: The net aggregate effect of these three dynamics, excluding any impact from M&A is that we see FRE margins expanding from our current near and intermediate term target of the mid 40% to closer to 50% in the out years.
Vanda: Looking at our strong momentum in 2025, we remain on track to meet or exceed our five year goals.
Vanda: For 2025, we expect gross fund raising of at least $4 billion.
Vanda: This 2025 guidance reflects a 60% increase over our 2024 guidance $2 $5 billion.
Vanda: The guidance excludes the approximately $1 billion of incremental fee paying assets, we expect to receive following the close of the quality funds transaction.
Vanda: In addition, we plan to have 19 commingled funds in the market at various times in 2025. This includes four quality co mingled funds.
Vanda: We expect step downs and explorations to be in line with 2024 numbers between five and 7% of fee paying AUM.
Vanda: As it relates to our revenue outlook, we expect double digit growth, excluding direct and secondary catch up fees and including revenue contribution from quality funds once the transaction closes.
Vanda: And finally for 2025, we expect FRE margins to be in line with our Investor day guidance with core organic FRE margins, excluding M&A and the mid 40%.
Vanda: The quality of its funds business will put some modest downward pressure on 2025 margins, which is already baked into our mid forties percent guidance.
Vanda: Our confidence in our future performance and our ability to execute is rooted in a number of compelling factors are.
Vanda: Our platform is composed of elite high quality underlying strategies with long track records of delivering durable alpha.
Vanda: We continue to have a vast and growing global LP base with over 3800 relationships and with the addition of quality sponge to our platform. We anticipate that number will increase to approximately 5000 further expanding our European investor base and high net worth channel.
Vanda: We believe we are well positioned as a world class platform to serve clients, while expanding our product set and the ways in which we can engage lp's through our investment offerings.
Vanda: With over two decades in the middle and lower middle market <unk> tenants.
Vanda: <unk> is a trusted partner with a unique competitive advantage from our very robust proprietary data platform.
Vanda: We also have a firm conviction that we are an acquirer of choice and an excellent partner to strategies looking to join a larger platform.
Vanda: Finally, the plan, we put in place last year functions as the Northstar that guides our actions I would like to unpack each of these imperatives.
Vanda: What we achieved in 2024 and how we are thinking about 2025.
Vanda: First.
Vanda: We committed to optimizing our leadership team and corporate organizational structure.
We made tremendous progress in 2024 by hiring key top level corporate professionals, such as RJ Jetson head of strategy and M&A Cerita Jarrett global head of client solutions.
Vanda: Melodie craft General Counsel, and Chief compliance Officer, and Mike Goodwin Chief Information Officer.
Vanda: We also elevated our governance framework and appointed Tracy Bedford as our first lead independent director in June.
Vanda: As we think about 2025, we are working to strengthen the all important middle layers of our organization and institutionalize our platform by enhancing our capabilities and skills across the organization.
Vanda: Second we are committed to driving increased organic growth.
Vanda: We will find ways to accelerate our trajectory and increased the depth and breadth of our services by expanding our existing client franchise and delivering innovative products and solutions.
Vanda: Third.
Vanda: We committed to re accelerating M&A by implementing a robust disciplined and process driven approach to inorganic growth.
Vanda: The quality of those funds acquisition demonstrates our commitment to this strategic pillar and inorganic growth continues to be a key focus in 2025 and beyond we.
Vanda: We believe we have built the right team and processes and we will look to execute on strategic value, creating transactions with franchises that complement our platform.
Vanda: Fourth.
Vanda: We committed to generating operational efficiencies through incentivising collaboration and leveraging data insights.
Vanda: This work is underway in earnest and we are evaluating a host of attractive opportunities.
Vanda: Our mission remains to operate more as one cohesive enterprise and generate the requisite efficiencies and cost savings that will position our teams for success.
Vanda: Our data insights are a key competitive advantage and we plan on leveraging this in a thoughtful and appropriate way to the benefit of our clients.
Vanda: Fifth we committed to enhancing our shareholder communications with an eye to greater visibility and transparency.
Vanda: In 2024, we made tremendous progress.
Vanda: We established the five strategic pillars held an investor day offer clear financial guidance and.
Vanda: And disclosed additional kpis that make it easier for the investment community to draw a comparison to our peers.
In 2025, we will build upon our efforts to more broadly communicate <unk> capabilities to investors Lps and others and highlight our aspiration to be the category killer in the middle and lower middle market.
Amanda Cousins: Before I hand, the call off to Amanda.
Amanda Cousins: I want to touch on our capital allocation efforts.
Amanda Cousins: We believe our stock represents a compelling entry point for investors, who are looking for access to a diversified alternatives platform focused on the lower in core middle market.
Amanda Cousins: In the fourth quarter, we repurchased 815327 shares at an average price of $12 72.
Amanda Cousins: Leaving $3 $5 million available on the current buyback authorization.
Amanda Cousins: For the full year of 2024, we repurchased $6 million 641827 shares at an average price of $8 88.
Amanda Cousins: In total the 2020 for buyback amounted to $59 1 million.
Amanda Cousins: We continue to see share repurchases as an important tool for us to return capital to shareholders.
Amanda Cousins: With today's announcement the board has authorized an additional $40 million for share repurchases, bringing the total available for repurchases to approximately $43 $5 million.
Amanda Cousins: With that I'll hand, the call over to Amanda to provide a deeper look at our financials.
Amanda Cousins: Thank you Luke during the quarter fee paying assets, an advantage that for $25 7, billion% to 10% increase on a year over year basis.
Amanda Cousins: In the fourth quarter $905 million of fundraising and capital deployment was offset by a $152 million and step downs and exploration.
Amanda Cousins: It's worth reminding everyone. Our first quarter gross fundraising total excludes approximately $300 million of D. Peng commitment that closed earlier than expected and were included in our third quarter financials.
Andre: Andre Thank during the fourth quarter was driven by the successful close of Bancorp, Q, which added $506 million in the quarter RCP, multi strat, which raised 75 million and RTP 19, which added $51 million.
Andre: That Luke mentioned earlier in the call for 2025, we expect step downs in exploration to be in the range of 5% to 7% of fee paying assets under Dana Tibet.
Andre: With our historical numbers.
Andre: 25, we expect about two thirds of the step downs in exploration to occur in the first half of the year.
Andre: Revenue in the fourth quarter was $85 million 35.
Andre: 5% increase over the fourth quarter of 2023.
Andre: Year over year revenue increase from $241 $7 million to $296 4 million up 23%.
Andre: Average day rate in the fourth quarter with 133 basis points in total with an average fee rate of 105 basis points.
Andre: Excluding the impact of secondary interact to catch up to you.
Andre: For the full year average fee rate was 120 basis points with an average fee rate of 170 basis points, excluding the impact of secondary interact catch up date.
Andre: And 2025, we expect a core fee rate to average a 103 basis points.
Andre: Reflecting our expectation for Kira catch up fees in the year.
Andre: In the fourth quarter, we had 12 commingled funds in the market and broad participation across our investment platform.
Andre: Private equity strategies raised and deployed $712 million.
Andre: Venture capital solution raised and deployed $28 million and our private credit strategies added $165 million of fee paying assets under management.
Andre: The performance of <unk> strategy.
Andre: <unk> of our diverse global Investor base comprised of family offices and wealth managers.
Andre: Pensions and endowments and foundations.
Andre: Well as our Steven Gill team, who continue to execute on best in class investment and generate durable alpha.
Andre: And the fourth quarter catch up fees were $18 $9 million, bringing the total for the year to $38 9 million pets.
Andre: Catch up fees are driven by the timing of fund closing and then the fourth quarter. The fees were primarily attributable to the final closing of Bon Accord Q.
Speaker Change: Monochord too outsized catch up fees for an extraordinary events that we do not expect to be repeated in the future.
In the fourth quarter direct and secondary catch update incrementally increased NII per share by around seven cents per share.
Speaker Change: Operating expenses in the fourth quarter were $62 2 million an.
Speaker Change: An 8% increase over the same period a year ago.
Speaker Change: Full year 2024, operating expenses were $235 8 million a.
Speaker Change: A 7% increase over 2023.
Speaker Change: The increase was primarily driven by compensation expense associated with the successful closing of <unk> Q and placement fees associated with fundraising at other strategies.
Speaker Change: GAAP net income in the fourth quarter was $5 $7 million.
Speaker Change: The increase compared to a GAAP net loss of $1 9 million in the prior year quarter.
Speaker Change: For the full year 2024, GAAP net income was $19 7 million, an increase compared to a GAAP net loss of $7 8 million in 2023.
Speaker Change: Adjusted EBITDA in the fourth quarter was $42 9 million, an increase of 40% from the fourth quarter of 2023.
Speaker Change: For the year adjusted EBITDA grew from $123 6 million to one <unk>.
Speaker Change: <unk> $44 5, million% to 17% increase for.
Speaker Change: For the quarter, our adjusted EBITDA margin was 15, 5%.
Speaker Change: Our margin was higher in the quarter due to the strength of our direct strategy and product mix.
Speaker Change: For the full year adjusted EBITDA margin was 48, 7%.
Speaker Change: For the fourth quarter, adjusted net income or Eni with $35 3, million% to 39% increase over the fourth quarter of 2023 for the full year Eni increased from $102 million to $122 million, representing an 18%.
Speaker Change: Great.
Speaker Change: For the quarter fully diluted <unk> was 30 cents per share.
Speaker Change: Greece, a 44% for the full year fully diluted Eni with the dollar per share.
Speaker Change: Fr or in the quarter with $85 million, representing a 37% and Creed and F. R E with $42 7 million, representing a 39% increase.
Our FRE margin with 52% in the fourth quarter.
Full year <unk> with 291 3 million fr EE with $142 1 million and the FRE margin was 48, 8%.
Speaker Change: Cash and cash equivalents at the end of the fourth quarter were $67 5 million.
Speaker Change: At quarter end, we had an outstanding debt balance of $325 million and no balance on the revolver at the.
Speaker Change: $175 million available on the credit facilities.
As I reviewed at Investor Day, we plan to begin reporting fully taxed eni per share in 2025. We believe this metric will further enable the investment community to draw on apples to apples comparison with our peers.
Speaker Change: We will also continue to pay our quarterly dividend for class, a and class B common stock.
Speaker Change: We declared a quarterly cash dividend of $3.05 per share payable on March 22025 to stockholders of record as of the close of business on February 28 2025.
Speaker Change: Finally as of December 31, 2020 for our class a shares outstanding for $67 million 614875 and <unk>.
Speaker Change: Class B shares outstanding were $43 million 461442.
Speaker Change: Thank you for your time today I'll now pass the call over to the operator to begin the Q&A session.
Speaker Change: As a reminder to ask a question you will need to press star one one on your telephone.
Speaker Change: Yourself from the queue you May press Star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Okay.
Speaker Change: Our first question.
Speaker Change: Comes from the line of Ken Worthington of JP Morgan.
Speaker Change: Your line is open Ken.
Speaker Change: Hi, good morning, Thanks for taking my question.
Speaker Change: As we look ahead to the next couple of quarters, where is your sales team focusing so what are the bigger funds and market. So you mentioned 19 funds I think in market in 2025, which of those are sort of the biggest and most important for the sales and marketing team to get rate.
Speaker Change: To hit your $4 billion hit or exceed I'll say that.
Your $4 billion target.
Speaker Change: Hey, Ken It's Luke sorry, Phil Thanks for the question and as we mentioned Youre right. We think we will have 19 funds in total in the market at different times in 2025, not necessarily all at the same time, but at different times throughout the year and in particular for those will come from Koala toss and obviously those will be things we'll focus on.
Speaker Change: Once we close the acquisition and as we said we continue to expect to close the acquisition later here in the first quarter. We're really excited about the product offering that we have in market in 2025.
Speaker Change: Our RCP strategy, we have a number of funds in the market, including our co investment strategy, including our secondary strategy, including our primary fund of funds strategy small and emerging managers and we see real momentum across that and I think thats probably.
Speaker Change: Reflective of some of the momentum we're seeing generally in the private equity space or true bridge.
Speaker Change: Business has a number of strategies in the market that we're really excited about particularly the blockchain and the seed micro strategy five points is going to be out raising a new credit strategy.
Speaker Change: We're really excited about that will probably be back out in the market. Later this year with a number of other credit strategies more news to come on that and.
Speaker Change: And then finally as we mentioned on <unk>, we're excited about the momentum in that business and I think we will have some news to announce there as we get later in the year. So we think a lot of really interesting things in the market just to remind everybody. We think one of the really compelling things about our platform is the diversity of our business diversification of our fundraising.
Speaker Change: We're really really excited about the momentum and the outlook for 2025.
Speaker Change: Great. Thank you very much.
Speaker Change: Thank you our next question.
Speaker Change: It comes from the line of Ben Bowdish Barclays. Your question. Please.
Speaker Change: Hey, Good morning. This is Nick <unk> on the call for <unk>. This morning.
Speaker Change: I wanted to ask about the progress being made on your goals to broad across new vehicles in different channels and maybe just how we should think about the investments that are going to be made in 2025, and I know last quarter you provide some color on SMA fundraising. So maybe just an update on maybe west made fundraising was in the quarter and then any updates on progress being made on.
Speaker Change: That kind of vehicle.
Speaker Change: Thanks, Nick and its Luc again, that's a great question and as we mentioned at Investor Day.
Speaker Change: One of our key areas of focus is going to be really about meeting our clients, where they are and being a solution oriented provider to them as we have always frankly aspired debate and certainly a part of that is continuing to have the broadest diversification in terms of product offerings to meet them, where they want to go but also to happen in the REIT wrappers and so youre.
Speaker Change: Right, we think about a number of potential alternatives from SMA that are helping our clients achieve their goals.
Speaker Change: Different kinds of pooled vehicles, we can use.
Speaker Change: We've looked at in the past <unk> had some various different rated feeder funds and we think that that's an exciting place. We think about kind of co mingling some of our different strategies into kind of single point product offerings for our clients and Thats an opportunity and so under <unk> leadership, we are looking at a number of different ways to access that to axa.
Speaker Change: Different kinds of clients, whether it's in the RIAA channel, whether it's in the high net worth channel whether it's in the institutional channel and that work continues in earnest I would say youre right last quarter. We did talk about some of the momentum we had in the SMA parts of the business I think we're not going to get into necessarily just disclosing kind of by product type every <unk>.
Speaker Change: But one thing we do is when we do have notable progress and notable success, we're going to make it a point obviously the note that for you. So you can see our progress against those initiatives that we laid out in Investor day, and so my guess is as we get into 2025 Youll hear us talk about our progress very specifically around some of these initiatives not the least of which will be sma's.
Speaker Change: Great. Thank you if I could sneak in a follow up question.
Speaker Change: I also wanted to ask about the M&A pipeline. So obviously, we have to call. It does acquisition expected to close during the quarter, but looking later in the year and 25, just kind of like what looks attractive in the current pipeline. What are you seeing in terms of pricing and then how are some of these initiatives on your RJ in terms of more recurring M&A starting to come through.
Speaker Change: And come through this year. Thanks.
Speaker Change: Thanks, Nik so maybe what I'll do is I'll start and frame it and seeing as RJ sitting here right next to me I will turn it over to him to give a few thoughts, but I would say look one of the things we talked about at Investor Day, and I think we've been very successful at prosecuting is building what I would call it disciplined and programmatic approach to M&A and a key part of that is <unk>.
Speaker Change: <unk> out a pipeline.
Speaker Change: That is one that we are consistently monitoring one that we are consistently executing on one that we have.
Speaker Change: Potential opportunities in different stages of the funnel and so I think that that's really important I think we feel really good about.
Speaker Change: The state of the pipeline, but also the feedback we're hearing from potential partners around our attractiveness as a place where they want to be they want to work and they want to partner with and so with that RJ, maybe you want to add a few thoughts yeah. I would just say thank you look I would just say that look we're working very hard at.
Speaker Change: Working an active pipeline, we think we have interesting opportunities across the areas in asset classes that we laid out at Investor day.
Speaker Change: Including focusing on private credit direct lending asset backed I think those are really important areas for us I think interestingly, we talked about at Investor day. The one step two step we think would fall costs now opens up interest in Europe with respect to direct lending and asset back. So we're very.
Speaker Change: Focused on those things, we think are interesting things from looking at it we're optimistic about that.
Speaker Change: Sure.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Chris Kotowski Oppenheimer <unk> Company. Please go ahead Chris.
Chris Kotowski: Yes. Good morning, Thank you.
Speaker Change: I was just wondering I think I heard Amanda say expected at an average fee rate.
Speaker Change: 100 and.
Speaker Change: Three basis points for.
Speaker Change: X X catch up fees, but the last year was 107 I know, it's a little small difference, but just wondering why why it would go down by that magnitude.
Speaker Change: Thank you Chris for the question.
Speaker Change: So I'm going to frame my response on catch up fees first in general.
Speaker Change: As a reminder, we view our catch up fees in two distinct categories.
Speaker Change: Core fees from our primary funds, which occur on a more regular rate basis, they tend to be smaller in nature, given the shorter duration of the fundraise.
Speaker Change: There have direct and secondary fund catch up fees that are episodic in nature, because they raise bigger funds less frequently it can be difficult to predict and size and frequency.
Speaker Change: During 2024, our catch up fees were significantly elevated relative to historical levels. As a result of the funds that we had in the market, particularly our extraordinary results would then monochord fundraise. So we do not expect to be repeated in the future as we said.
Speaker Change: We do expect to catch up fees to be approximately $4 million to $5 million in 2025.
Speaker Change: Which.
Speaker Change: Including our core fee rate ex secondary catch up fees should remain stable at about 180 basis points for 2025.
Speaker Change: Hey, Chris I think it's just important to note if you look back over the history of our business.
Speaker Change: Ben at that pretty consistently at that core fee rate. If you look at the kind of a slideshow, we put out every quarter you see.
Speaker Change: 'twenty one we were at 100 basis points 2022, we were at 103 2023 were 103 2024 was a little bit of a higher rate at 107, and so when we look at kind of a guidance in the 2000.
Speaker Change: For 2025, and the 103 level, that's very much in line with the historical kind of trajectory of the fee rate in the business and we think kind of reflects the momentum.
Speaker Change: Okay alright, thank you.
Speaker Change: Thank you.
Speaker Change: Our next question.
Speaker Change: It comes from the line of Aden Hull of K B W. Please go ahead.
Aden Hull: Great. Good morning, everyone. Thanks for taking my question.
Speaker Change: I just wanted to.
Speaker Change: Follow up on the FRE margin commentary heard the thoughts around remaining in the mid Forty's 425, and also some of the incremental fundraising coming from less scaled managers and a little bit of a headwind, but at the same time you guys disclosed one of your largest funds.
Speaker Change: With Bon accord, two which usually.
Speaker Change: A tailwind to the margin. So just wanted to hear how you're thinking about maybe the trajectory from here in 'twenty five is it.
Speaker Change: The puts and takes there remained stable is it still striving for expansion in 'twenty, five or should we kind of be thinking about contracting near.
Speaker Change: Near term before.
Going towards your longer term goals that you laid out at Investor day.
Speaker Change: So good question and I would just start by saying the guidance. We gave at Investor Day is unchanged. We continue to believe in the near to intermediate term the core kind of FRE margin rate will be in the mid <unk> and given the dynamics, we see in our business, we think that will expand.
Speaker Change: Closer to 50% of the out years, so that guidance that thinking that trajectory that momentum of margin is absolutely unchanged from what we thought back in September and what we continue to believe here today.
Speaker Change: I'll make a few observations. The first is as you can imagine because Amanda talked about we have meaningful catch up fees in 2024, those will tend to come at a higher margin than some of just what I would call regular way.
Speaker Change: Fr or management fees and as a result, they will have some positive accretive impact on market.
Speaker Change: And when we get those it's great and they will have a transitory benefit of driving margin higher.
Speaker Change: But when you look at kind of the core of the business, we really think about being in that mid forty's as we said in the near and intermediate term and then seeing that accretion from there I'd say two things one and Youll see it we've talked about it we're still continuing to build out, particularly in our client solutions team focused on <unk>.
Speaker Change: <unk>, we think it will have an ROI, we think it's going to be a really positive growth driver and what momentum creator for our business, but the work is not done there yet right.
Speaker Change: Remember Cerita only started in September and so we're still very early days on this.
Speaker Change: Obviously, we're going to do that in a balanced and prudent way and so everything is factored into our margin guidance.
Speaker Change: The second thing I would note is and we've talked about this.
Speaker Change: It is the it is the impact of the mix shift in our business impacting margin and so again, we have some strategies that are growing faster that tend to be lower core margins because of the nature inherent nature of their businesses and that will have some impact on margin relative to some of our larger higher <unk>.
Speaker Change: <unk> businesses that tend to grow a little bit slower and then I would just point out as well.
Speaker Change: I think you heard this in my part of the script, we did mention that we factored into our margin guidance, but we think in 2025 again in that vein of different.
Speaker Change: Strategies, having different kind of core margin profiles quality to us, which we are acquiring will have a modest.
Speaker Change: Kind of downward pressure on margin factored into our core guidance still factored into that guidance of kind of mid <unk> right now, but again, that's part of this whole mix shift conversation that we're having.
Speaker Change: Okay.
Speaker Change: Thanks for the color I'll leave it there.
Speaker Change: Thank you.
Michael Cyprus: Our next question comes from Michael Cyprus Morgan Stanley. Your question. Please Michael.
Michael Cyprus: Hey, Good morning. This is Stephanie on for Mike just hoping to get an update on Cortez what are some of the lower hanging fruits in terms of integration synergies and then maybe longer term.
Speaker Change: Opportunities do you see around cross selling new product development or maybe potentially leveraging additional datasets.
Speaker Change: So thank you Stephanie Great question, and I think something we are really really excited about.
Speaker Change: We actually just spent the last few days at a management off site.
Speaker Change: And we actually had even though the transaction hasn't officially closed yet we had the opportunity to have the senior leadership team are managing partners, Eric and Sergio from Koala task join us.
Speaker Change: I will tell you the enthusiasm in the room was just absolutely palpable.
Speaker Change: As we mentioned they are already working closely and well mode to two of our strategies right they've been working with our RCP strategy for years. Therefore strategy is a European middle and lower Middle market fund of funds strategy, obviously RCP.
Speaker Change: Has effectively the identical strategy in the U S market.
So.
Speaker Change: When they get together one is there.
Speaker Change: There are compelling vision for what we can build on a global basis as a product offering focused on the middle and lower middle market second thing. We spent a lot of time on is they have a tremendous data set of data attributes that they bring around their kind of analysis of that European market. We have something you saw at Investor day through GP Scout, it's very similar.
Speaker Change: U S and I think the opportunity to combine that rich data set to be able to be a real solution provider for clients now on a global basis or at least North America, plus EMEA basis is really really compelling the other thing I think that they bring to us.
Speaker Change: We'll know how and how to design products and wrappers and Europe right. So they've been very successful getting licensed in different European jurisdictions. They obviously have big throw weight in the private bank channel in Europe. That's one of the things they've sold very successfully on a lot of large private bank platforms, and so that sort of distribution.
Speaker Change: Knowledge that product rapid knowledge that synergy is really really compelling. They also do a lot.
Speaker Change: We are building.
Speaker Change: Successfully raised our first fund in the NAV lending space working closely with our heart strategy. That's a place where we've been at that business for an incredibly long time, one of the pioneers in that business as you know.
Speaker Change: So just watching the dynamic that we're seeing there is that is a big big opportunity in Europe, It's still a big opportunity in the U S by the way, but it's much more advanced and mature in the U S than it is in Europe, and so the opportunity the combined.
Speaker Change: Sure.
Relationship network their distribution throw away.
Speaker Change: Their relationships with GPS with our core credit underwriting expertise, our knowledge of that NAV lending market.
Speaker Change: We think really differentiate it and we think we're just right now scratching the surface of that opportunity, but a lot more to come on that in the quarters and years ahead.
Speaker Change: Great. Thanks, so much for that and maybe just a follow up for me.
Speaker Change: I know you guys just had a successful close for Bon accord, two but I think the dips.
Speaker Change: <unk> investment pipelines, it's been pretty active so what can we expect in terms of timing and potential for the successor fund <unk> III to come back to market faster and scale. Thank you.
Speaker Change: Again, another great question and.
Speaker Change: And just stepping back I think it's really been amazing to watch the momentum that the <unk> team has.
Speaker Change: In this GP Stakes space, clearly I think from an LP perspective LP.
Speaker Change: Appetite there has been enormous focus.
Speaker Change: We play which is the middle and lower middle market the opportunity set there is incredibly robust.
Speaker Change: The team is seeing so many different opportunities I think the broad acceptance of the product both from a GP perspective, and then from an LP perspective looking to invest in the strategy given some of the attributes.
Speaker Change: Near term yield long term equity upside with the carrier participation is really compelling and so we're seeing a lot of enthusiasm and excitement around kind of that GP Stakes broadly read in particular, our GP stake strategy, which is middle and lower middle market focus where we think there's just a massive opportunity and we have a real head start relative to any of the competition obviously.
Speaker Change: We're really proud of what we accomplished with BCP too.
Speaker Change: A fund raising outcome that was.
Speaker Change: Very positively unexpected I would say and I think highlights the strength and momentum in that business and the investor appetite for that business, you're absolutely right.
Speaker Change: We have there are a lot of really attractive opportunities out there in the world I think the team has done an extraordinary job of putting capital to work in a very positive way.
Speaker Change: Had some really really positive developments of some of our some of the GPS within the portfolio that we're excited about but I think creates momentum for the business and to your point I think we're really excited about the prospects of BCP three.
Speaker Change: And I think as I mentioned, we should be in a position to talk about it more here as we roll into 2025.
Speaker Change: Yeah.
Speaker Change: Okay, great. Thanks for taking my questions.
Speaker Change: Okay.
Speaker Change: Thank you I would now like to turn the conference back to Luke Sarsfield closing remarks, Sir.
Speaker Change: Well, thank you operator, and thanks to everyone for joining our call today. Following a truly transformational 2024, we believe we have the infrastructure in place to accelerate growth and drive operational efficiencies for the benefit of our strategies and our shareholders. In 2025, we very much look forward to updating you on our <unk>.
Speaker Change: First quarter 2025 financial results.
Speaker Change: Matt.
Speaker Change: Have a good morning.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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