- Management Fees: Over $70 million, up 14% year-over-year and 12% sequentially.
- Fee-Related Earnings (FRE): $39.5 million, up 17% year-over-year and 13% sequentially.
- FRE Margin: 56%, with expectations to trend towards 58%-60% in 2025.
- Distributable Earnings (DE): Close to $34 million or $0.22 per share, compared to $0.21 in the prior quarter.
- Assets Under Management (AUM): More than $40 billion, a 43% increase year-over-year and 26% sequentially.
- Organic Inflows: $1.3 billion in the quarter, approximately $5 billion over the last 12 months.
- Inorganic AUM Growth: Over $10.1 billion added in the second quarter from acquisitions.
- Pro Forma AUM: Around $43 billion, with over 20% in permanent capital vehicles.
- Dividend: $0.625 per share for 2024, with a quarterly dividend of $0.15 per share for the next 3 quarters.
- Share Repurchase Program: Up to 1.8 million shares over the next 12 months.
- Fundraising: $1.3 billion in the second quarter, $2.2 billion in the first half of 2024, and approximately $5 billion over the trailing 4 quarters.
- Credit Platform Fundraising: Over $350 million in the second quarter, $1.2 billion over the trailing 4 quarters.
- Real Estate Fundraising: About $380 million in the first half of 2024, $850 million over the trailing 4 quarters.
- Special Managed Account (SMA): Closed a $430 million SMA in the quarter.
- Infrastructure Fund Commitments: $1.1 billion, with a target to raise between $2 billion to $2.5 billion.
- Operating Expenses: $31 million, reflecting acquisitions and investments in marketing and technology.
- Effective Tax Rate: 7% for Q2 2024, expected to remain between 7%-9% for 2024 and trend towards 10% in 2025.
- Debt Outstanding: Approximately $176 million, expected to average $130 million over the next 6 months and potentially peak at $190 million by year-end.
- FRE Per Share Guidance: Increased to $1.10-$1.12 for 2024 and $1.26-$1.41 for 2025.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Management fees reached over $70 million, up 14% year-over-year and 12% sequentially.
- Fee-related earnings (FRE) reached $39.5 million, representing year-over-year and sequential growth of 17% and 13%, respectively.
- AUM finished the quarter with more than $40 billion, a robust 43% increase compared to the second quarter of 2023 and 26% versus the first quarter of 2024.
- Strong fundraising with $1.3 billion of organic inflows in the quarter and approximately $5 billion over the last 12 months.
- Announced a share repurchase program of up to 1.8 million shares over the next 12 months, reflecting a focus on creating long-term shareholder value.
Negative Points
- Expenses continue to be tightly managed, but the onboarding of the abrdn acquisition, which has a lower margin, impacted the FRE margin.
- Net accrued performance fee balance declined both year-over-year and sequentially, almost entirely due to foreign exchange movements.
- Effective tax rate in Q2 2024 came in at 7%, with expectations to trend towards 10% in 2025.
- Higher share count reflecting shares issued for incentive and deferred compensation and contingent payments.
- Debt levels are expected to average approximately $130 million over the next 6 months and potentially reach a peak of around $190 million at the year-end.
Q & A Highlights
Q: Can you give us some color on how the $200 million deployed in the quarter should impact fees going forward and which funds it is expected to go into? Also, why was the real estate management fee down a bit in the quarter?
A: Most of the investments were from our infrastructure and private equity funds, specifically Private Equity Fund V, VI, and VII, and Infrastructure Fund V. On the real estate side, we divested a couple of assets from our legacy real estate funds, including a self-storage business in Brazil, which impacted the fees.
Q: Can you provide more details on the fundraising timeline for Private Equity Fund VII and Infrastructure Fund V? Also, what caused the outflow in the GPMS vertical this quarter?
A: Private Equity Fund VII has raised around $1.5 billion and aims to reach $2 billion by year-end. Infrastructure Fund V is at $1.1 billion, targeting $2 billion to $2.5 billion. The outflow in GPMS is due to the healthy nature of our business, where we sell assets and return capital to investors, generating performance fees.
Q: With recent acquisitions and the share repurchase program, will Patria need new sources of funding in the coming quarters? Does it make sense to pursue more M&A given capital constraints?
A: We are comfortable with our cash flow and debt levels. We do not plan to pursue large acquisitions in the near term as our focus will be on integrating recent acquisitions. Our debt levels are manageable, and we expect to use performance fees to pay down debt.
Q: Can you explain the increase in personnel expenses and whether we will see synergies in the coming quarters? Also, will the expenses related to M&A transactions fade out in the next quarters?
A: Personnel expenses increased due to the integration of new acquisitions. We expect FRE margins to trend upwards as we realize synergies. M&A-related expenses should decrease in the coming quarters as we have completed major transactions.
Q: What is the outlook for fundraising in the second half of the year, particularly for Private Equity Fund VII and Infrastructure Fund V?
A: We expect strong fundraising momentum, with Private Equity Fund VII targeting an additional $500 million and Infrastructure Fund V aiming for $2 billion to $2.5 billion. We see robust interest from both Latin American and international investors.
Q: Can you provide more details on the Secondary Opportunities Fund V and its fundraising prospects?
A: The Secondary Opportunities Fund V is part of our GPMS platform and is a blind fund. We expect a significant first close in the second half of the year, with strong interest from investors.
Q: How do you plan to manage the integration of recent acquisitions and ensure smooth operations?
A: We are focusing on integrating people, systems, and processes. We have experience in consolidating businesses and expect to realize synergies that will improve our FRE margins.
Q: What are the main drivers for the increase in non-GAAP expenses this quarter?
A: The main drivers are transaction costs related to recent acquisitions and adjustments for deferred and contingent considerations. These expenses should normalize in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
