Patria Investments Ltd. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Fundraising: Robust organic fundraising of over $2 billion in Q3 2024, year-to-date over $4.2 billion, on track for $5 billion full-year target. Fee-earning AUM reached nearly $34 billion, up 9% QoQ and 58% YoY.
• Financial Results: Management fees ~$78 million (+26% YoY), fee-related earnings ~$41 million (+13% YoY), distributable earnings ~$35 million. Net accrued performance fee balance $455 million.
• Acquisitions and Integrations: Acquisitions of Credit Suisse real estate assets, Nexus transaction in Colombia, and GPMS business from abrdn impacted short-term margins but expected to improve with integration.
• Diversification: Increased regional and global investor base; local investors now account for 40% of YTD fundraising, up from 0% at IPO.

Segment Performance

• Real Estate: Real Estate Fee Earning AUM grew from $1.3 billion in Q2 2022 to over $6 billion by end of Q2 2024, with approximately 90% being permanent capital.
• Credit: Credit fee earning AUM reached $6.5 billion, up 43% since end 2022, driven by strong organic inflows and investment performance.
• GPMS Solutions: Fee earning AUM exceeded $10.3 billion, with over $1.8 billion raised in Q2-Q3 2024, including a Private Equity SMA of over $900 million.
• Infrastructure: Returned nearly $2 billion to investors since 2023, with Infrastructure Fund III in its catch-up phase.
• Private Equity: Realization activity constrained, but portfolio companies saw 20% organic EBITDA growth over past year.

Guidance

• 2024: Target $170 million in fee-related earnings, $5 billion organic fundraising.
• 2025: Expect FRE margin to trend towards 58%-60%, with fee-related earnings target $200-$225 million.
• Dividends: Declared $0.15 per share dividend for Q4 2024.
• Outlook: Confident in organic growth into Q4 2024 and 2025, driven by new platforms and product launches.

Risks

• Integration Risks: Acquisitions may impact short-term margins until operational efficiencies are realized.
• Market Volatility: Macroeconomic conditions, interest rate changes, and geopolitical factors could affect investment performance and fundraising.
• Redemption Rates: While moderating, redemption rates and capital recycling could impact AUM growth.

Question and Answer

Q: On fundraising, how has GPMS altered organic growth trajectory?

A: GPMS is driving strong fundraising momentum, with $4.3 billion organic fundraising YTD, expected to continue, including SMAs and new product launches.

Q: What are the expectations for FRE margin in 2025?

A: Expect FRE margin to trend towards 58%-60% in 2025, improving from current levels as integrations and efficiencies take effect.

Q: How is the infrastructure fund impacted by market conditions?

A: Infrastructure in Brazil is experiencing strong activity with auctions, foreign interest, and local demand, well-positioned despite macroeconomic challenges.

Q: What are the product expansion plans?

A: Expanding organically in Colombia, looking to expand GPMS in US and infrastructure globally, focusing on integration of recent acquisitions first.