Here’s a new P10 slide deck for a talk I gave last week.
P10’s cash earnings are consistent, contractually guaranteed, and high quality. They do not change with interest rate changes or oil prices, and they are still growing in a tough market. Currently, P10’s stock is being priced more on market flows than the company’s fundamentals and eventually this will correct.
The free cash flow yield is now over 9%. Total assets under management at year end were 21.2 billion up 23% from the year prior. Management is on track to use all its NOLs which when combined with amortization tax assets, the company will have not have a federal income tax bill for the next several years (state taxes still apply).
Organic growth is starting to slow in the face of rising interest rates this year and will “only” be in the low teens for 2023. If this is what a slow year for fund raising looks like, we’re still in good shape. P10’s largest manager, RCP Advisors, closed a new fund subscription on March 31 this year with 328mm of new funds to manage. Yes, fundraising may be more competitive this year but we are still seeing meaningful organic growth.
In the fall of 2022, P10 closed on WTI, a venture credit solutions provider. With venture capital firms facing a less friendly market for equity deals, WTI is likely to find more firms turning to debt to avoid heavy stock dilution, another plus for P10’s multi-asset class model.
Buyback authorization was first announced in January 2022, but the first shares weren’t bought back until fall. Management bought a touch under 2 million shares or 1.7% of the company @ $9.62 in 2022. All the shares were purchased through negotiated block trades at ~8% discounts to market prices. In March 2023, the company bought another 100,000 shares at $8.51. It should come as no surprise to anyone who follows P10’s management to see that they waited patiently until the price was right to buy and then bought in size.
It might take a while, but eventually the quality of p10’s earnings will carry the day, until then enjoy the buybacks.