Hello, and welcome to the P10 fourth quarter and year-end 2021 conference call. My name is Charlie, and I will be coordinating your call today. If you would like to ask a question during the presentation, you may register to do so by pressing star followed by one on your telephone keypad. I will now hand you over to your host, Mark Hood, Director of Investor Relations. Mark, please go ahead.
Good morning, and welcome to the P10 fourth quarter and year-end 2021 conference call. This is Mark Hood, Director of Investor Relations. Today, we'll be joined by Robert Alpert, Chairman and Co-CEO, Clark Webb, Co-CEO, Fritz Souder, Chief Operating Officer, and Amanda Cousins, Chief Financial Officer. 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 Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements reflect management's current plans, estimates, and expectations and are inherently uncertain.
Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are described in greater detail under Risk Factors of the company's prospectus dated October 20, 2021, filed with the U.S. Securities and Exchange Commission on October 22, 2021, in our quarterly report on Form 10-Q, filed with the SEC, and our annual report on Form 10-K to be filed with the SEC, and in our subsequent reports filed from time to time with the SEC. The forward-looking statements included are made only as of the date hereof. We undertake no obligation to update or revise any forward-looking statement as a result of new information or future events, except as otherwise required by law. I will now turn the call over to Robert.
Good morning. I'm Robert Alpert, Chairman and Co-CEO. Today, we will reflect on 2021, the positive trends continuing in our business, discuss expansion opportunities, and review fourth quarter and year-end financial results. I'm pleased to report that we concluded 2021 with $17.3 billion in Fee-Paying AUM. That's a 36% increase from where we started the year. Of the $4.6 billion increase, only $952 million is attributable to acquisitions. That is a 29% annual organic growth rate. Other key operational metrics also highlight this transformational year. Revenue increased from $67.4 million in 2020 to $150.5 million in 2021 for a 123% increase. Adjusted EBITDA increased year over year from $34.8 million to $83.1 million.
Adjusted net income, or ANI, increased year-over-year from $23.9 million to $62.8 million. ANI is an important operational metric, and we believe it is the best profit measure for our business and comparable to after-tax fee-related earnings for our peers. Besides record financial performance, 2021 is notable because we raised $240 million as part of our October initial public offering on the New York Stock Exchange. Being an NYSE company elevates our marketplace profile and provides us with the opportunity to attract a premier set of institutional investors who value our long-term vision for middle and lower middle market leadership. In December, we closed on a $250 million credit facility which allowed us to retire our old credit facility. Amanda will speak more about this in a few minutes.
At its core, 2021 was all about strengthening our position as the premier specialized private market solution provider. We deepened our market presence by expanding product offerings and adding two leading investment strategies to our lineup, NAV lending with Hark Capital and GP stakes with Bonaccord Capital Partners. In a moment, Clark Webb will provide an update on these acquisitions. We believe we have best-in-class solutions with sustainable competitive advantage driven by long-term track records of superior fund performance, trusted relationships, and a proven investment process. We are excited about the year ahead and well-positioned for continued growth. Fritz Souder , Chief Operating Officer, will now discuss some of the factors continuing to support the strength of our business.
Thank you, Robert. The momentum that drove last year's growth continues to support our go-to-market strategy. Three factors are noteworthy. Our concentrated focus on middle and lower middle market, outstanding investment fund returns, and cross-selling opportunities. First, we focus on the middle and lower middle market, where there are nearly ten times as many opportunities when compared to our large cap investment opportunities. Our targeted approach means we have the opportunity to find better deals, drive favorable pricing, and leverage our deal flow. We believe that no one has a better understanding of our marketplace than we do, and specialization contributes to outsized fund performance. Our market space can also be an attractive environment for larger fund sponsors looking for platform expansions or acquisitions. As they sit on considerable undeployed capital. Secondly, our historically strong fund performance continued in the latest reporting period.
Review our recent returns and consider how this feeds a virtuous cycle for P10. As we deliver superior investment performance, our LPs trust us with more capital, which drives follow-on funds and new strategies. Great performance also attracts new global capital searching for exposure to private markets, especially in our market. As capital inflows continue, we broaden our relationship with the GPs with whom we invest. They recognize us as a financially strong preferred partner who can scale up to co-invest, transact secondary interest, make loans to their portfolio companies, structure NAV loans, and even take a stake in the GP. We know that past performance is no guarantee of future results, but we have confidence in our investment teams and their data-driven, time-tested process. Finally, in 2021, cross-selling helped us deliver meaningful incremental fee-paying AUM across P10 affiliates.
In Q4, we assigned three veteran RCP marketing professionals to focus on offering P10 products from a top-down approach. With an expanding portfolio of distinct products, we have an excellent opportunity to present large clients a holistic set of middle and lower middle market-centric investment choices. With structural macro tailwinds, excellent track records, and ample cross-selling opportunities, we remain focused on expanding our marketplace leadership. Clark will now provide some thoughts on growth opportunities in 2022.
Thank you, Fritz. I'd like to provide a framework of how we think about capital raising in 2022 and 2023. Because P10 is a true solutions provider, providing diversified solutions across multiple asset classes, we consistently have many funds in the market. We are not overly reliant on any one fund. In 2021, for example, we raised capital across 19 different funds. We expect a similar number of funds to be in the market in 2022, with all of our verticals pursuing new capital. Because of the large number of funds, it is impossible to predict specific closings on specific funds. That being said, we expect to raise approximately $5 billion over the course of 2022 and 2023. The cadence of capital raising will likely be more back-end loaded in 2022, with momentum extending into 2023 as well.
Part of our upcoming slate of offerings includes follow-on funds from our newest members of the P10 family, Hark and Bonaccord. Since joining P10, both strategies have accelerated capital deployment, and as a result, are coming to market with follow-on funds sooner than anticipated. We believe both NAV lending and GP stakes fit perfectly within the P10 ecosystem of providing middle and lower market GPs with value-added products and services. Both Hark and Bonaccord can attest that the virtuous cycle of raising and deploying capital has been accelerated since joining the P10 family. As our shareholders know, we believe we are a premier home for investment strategies with a great track record, defensive moat, and a team that wants to accelerate growth.
At the same time, with nearly two dozen funds continually in the market raising capital across private equity, venture capital, private credit, and impact, we do not need M&A to achieve our long-term goals of sustainable double-digit growth alongside extraordinary returns on capital. As a result, while we are always engaged in dialogue with potential partners, we can afford to be patient, waiting for the perfect win-win transaction for all parties involved. With that, let me turn it over to Amanda to walk through Q4 results.
Thank you, Clark. I will walk us through some of the key financial results for the fourth quarter and the full year of 2021. Fee-paying assets under management were $17.3 billion at year-end, a 36% increase on a year-over-year basis. Revenue in the fourth quarter was $45.6 million, an 85% increase over the fourth quarter of 2020. Year over year, revenue increased from $67.4 million to $150.5 million, for a 123% increase. Average fee rates for the fourth quarter were 108 basis points, which is 8 points higher than our historical average, driven primarily by $3.2 million in catch-up fees earned during the quarter.
As a reminder, catch-up fees are earned from investors that committed near the end of the fundraising period for 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. That being said, when you look out across a cycle of four quarters, you should see our Fee-Paying AUM deliver approximately 100 basis points of revenue. For 2021, revenue did in fact average 100 basis points of Fee-Paying AUM compared to 99 basis points in 2020. As Clark mentioned earlier, we expect to have a similar number in 2022.
Operating expenses in the fourth quarter were $33.3 million, a 34% increase over the same period a year ago, primarily driven by an increase in compensation and benefits expense as a result of our acquisitions of Enhanced at the end of the fourth quarter of 2020 and a full quarter of expenses for Hark and Bonaccord in 2021. The remainder of the increase is largely due to additional amortization of intangibles also associated with our acquisitions. On a year-over-year basis, operating expenses were $110 million, an 88% increase. GAAP net income in the fourth quarter was $1.5 million, a decrease when compared to $20.6 million in the same period a year ago.
The difference is primarily attributable to non-cash expenses we incurred during the fourth quarter for our debt refinance, contingent consideration costs associated with our acquisitions of Hark and Bonaccord, and additional intangible asset amortization expense from acquisitions. During the fourth quarter, we incurred $15.3 million of expenses associated with the early retirement of our debt, which included the payoff of debt of our prior debt facility and notes payable to sellers associated with our acquisitions. GAAP net income was lower on a year-over-year basis by $13 million due to additional costs during 2021 associated with the IPO, debt refinance, and acquisitions, offset by a full year of operating income from our 2020 acquisitions. Adjusted EBITDA in the fourth quarter was $26.4 million, a significant increase over the $12.3 million we reported in the fourth quarter of 2020.
For the year, our adjusted EBITDA margin was 55%, in line with our target. We expect margins to vary during 2022, depending on the timing of fund closings and revenue associated with capital deployment on some of our impact products, which are typically back-end loaded. We generally expect to maintain a 55% adjusted EBITDA margin for the full year. For the fourth quarter, adjusted net income, ANI, was $21.9 million, a significant increase over the $8.5 million reported in the fourth quarter of 2020. For the year, ANI was $62.8 million, a 162% increase over the prior year. ANI is calculated by reducing adjusted EBITDA for cash interest expense and cash income tax.
Our efficient conversion of adjusted EBITDA to ANI was substantially increased by the refinancing of our debt, lowering interest rates from 7% to 210 basis points above SOFR, or approximately 2.25% at the end of 2021, with an expected range of 2.25%-2.5% in 2022, depending on the SOFR rate that is variable. We expect to use our substantial operating cash flow generated by our high fee-related earnings to invest in the business, pay down debt, and fund acquisitions. As our leverage profile has materially improved in the last year, we may consider instituting a quarterly dividend or a stock buyback over time, given the strong returns of capital we achieve in our business. I also want to revisit our two tax assets.
The first is a net operating loss that at year-end was $220 million. The second is $321 million in tax amortization. Tax amortization is created when we acquire a company, usually an LLC, that has no basis and then has a full step-up in value. We amortize our tax goodwill over a 15-year period, and the remaining federal taxable income is reduced by the remaining NOL balance. While we expect to utilize and exhaust the NOL over future years, we do expect tax amortization to increase when we make additional acquisitions. As tax amortization increases from acquisitions and is utilized first to reduce taxable income, the NOL balance is then available to continue offsetting future period taxable income, effectively extending the period by which the NOL can be utilized. Turning to our balance sheet.
As previously mentioned, we refinanced our debt at the end of the fourth quarter. On December 23, we closed and announced a $250 million credit facility with a syndicate of banks led by J.P. Morgan, Texas Capital Bank, and twelve other financial institutions, including a minority depository institution and a community development financial institution. The new credit facility has two parts, a $125 million term loan and a $125 million revolving commitment, each with a four-year term. The interest rate is variable and based on what is known as SOFR, or the Secured Overnight Financing Rate, plus 210 basis points, which was approximately 2.25% at the end of 2021.
Proceeds of the refinancing were used to pay off the prior credit facility, pay transaction-related expenses, and pay off sellers' notes related to the RCP acquisition. As of December 31, 2021, we drew down all of the $125 million term facility and $91 million of the revolver. At the end of the quarter, we had $213 million of net debt and $41 million in cash and cash equivalents. On February 24, we made an additional $25 million debt payment, further reducing our debt balance and subsequently our interest expense. With our strong balance sheet, new credit facility, and anticipated operating cash flows, we are well positioned for continued growth in 2022.
Thank you, Amanda. P10 has terrific opportunity to expand our market leadership as we expand our product offerings with a wide range of funds in 2022. We're proud of what we've achieved in 2021 and appreciate the contributions of our talented team. Now let's turn the call over for a few questions.
If you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, it is star followed by two.
When preparing to ask your question, please limit yourself to one question and one follow-up only. Please also ensure you are unmuted locally. Our first question comes from Kenneth Worthington of J.P. Morgan. Your line is open. Please go ahead.
Hi. Good morning. Thanks for taking the question. So I understand the nearly 24 funds that were in market this year, but could you help us better understand in fourth quarter, what were the bigger funds or the bigger contributors to the $900 million of Fee-Paying AUM raised this quarter? And then how much of that AUM or Fee-Paying AUM were in funds versus, say, separate accounts? And then I'll throw the follow-up question in here as well. How do we think about step downs and catch-up fees as we look at calendar 2022?
Yeah. Hey, Kenneth . Thanks for the question. If you look at Q4 in particular, it really was in three buckets. It was in our private equity vertical, our venture capital vertical, and our private credit vertical. I'd say it was all in funds, very little in SMA. Private credit, we really saw a nice benefit from Hark, which was an acquisition we made in the third quarter. That's based on deployed capital, and they had a very nice quarter in deployed capital.
What was the follow-up, Kenneth ?
The follow-up was, how should we think about catch-up fees? I know you guys guided to, you know, a 100 basis point fee rate, but how do we think about catch-up fees and the step downs, the assets that sort of have fees that step down in calendar 2022?
Yeah. Kenneth , when you think about step downs, there is a small amount of step downs. The nice thing about having a growing business when you raise capital with funds that have a 10-year life is the funds that are rolling off are funds that were raised in the 2011, 2012 timeframe. Those were smaller funds, and there were fewer of them. I do not expect a big impact from step downs. In terms of catch-up fees, we talked about while we don't give guidance properly, we do talk about kind of gross AUM we think we can raise over a period of time. Depending on when that AUM comes in, that will dictate whether or not we have catch-up fees in the quarter.
We do think that we can raise $5 billion-plus in terms of capital over the next two years. While we think it should be relatively ratable starting really in the second half of 2022, to the extent it extends further than that, you would expect more catch-up fees if you raise it later in the fund period.
Okay. That sounds like less catch-up fees this year because the back-end loading of fundraising than what we would expect in 2023. Is that sort of fair or is that okay.
Absolutely.
Great. Thank you.
That's correct.
Great. Thank you.
The next question comes from Chuma Nwankwo of Morgan Stanley. Your line is open. Please go ahead.
Hey. Morning. Thanks for taking the question. Congrats on the quarter. Just wondering if I could turn to M&A very quickly. You've seen us execute on a few deals successfully as you built the company. I'm just wondering, how are you thinking about the opportunity from here, and what do you think you'd like to have? What do you think is out there, and you know, how do you think about getting it, as it were?
Thanks for the question. M&A is episodic and opportunistic for us. One of the key things about our M&A strategy is, you know, given that we're not buying carry and, you know, all our transactions have a large component of ownership in P10 for alignment, you know, it really takes not only the right management team and investment team in terms of they've gotta have a long-term view, they wanna stay in their business, they wanna accelerate the growth of their business, they want the carry 'cause we don't buy the carry.
If somebody's just interested in getting the highest price and being left alone, they will go to a Bonaccord, Dyal, Petershill, or if they wanna sell out and go to the beach and just have a, you know, whatever their, you know, commensurate lockup is, they will do the, you know, they'll sell to, you know, some large financial institution. It takes a unique opportunity, not only for the right. We wanna buy the best-in-class in terms of performance, managers, but also they have to have the right, attitude. There's lots of folks out there. It is not a programmatic, M&A, you know, operation where we're just out buying just to buy.
Got it. That makes a lot of sense. As you look at the business today, what do you think would be most beneficial to the business in terms of expanding the opportunity set for you? You've obviously now got NAV lending and the GP stakes in addition in your quiver. As you look at the business, what do you think is missing?
Yeah, I mean, we're very fortunate in that when we look across the different strategies we offer, we don't have a hole in that offering. So it really does feel like we can go to market with these funds and grow organically for a long time to come. So this is not something we feel like we must do. If you think about how we approach M&A, it's really in three buckets. The first bucket is infill strategies that fit within our existing platform, but we don't offer currently. That's if you think about Hark and Bonaccord, those were strategies that fit perfectly within our private equity and private credit verticals, but they're in North America. It's more of a bolt-on, if you will. We see plenty of opportunity there.
The next real bucket of M&A is taking what we do and then taking it internationally, finding the RCP of Europe or the TrueBridge of Asia and moving internationally within our existing verticals. The last one is adding a new vertical. Obviously, there aren't that many that we're not in. You look at something like real estate or infrastructure. We are always looking to try to find the right partner, but I wouldn't hold your breath. I feel like we wanna find the right partner. We don't need to. We always have conversations, but there is nothing imminent.
Thank you very much for taking the questions.
The next question comes from Adam Beatty of UBS. Your line is open. Please go ahead.
Thank you, and good morning. Just wanted to get some thoughts around operating leverage. Appreciate, you know, Amanda's commentary and outlook around the margin for this year and, you know, obviously a couple acquisitions toward the end of last year. You know, there's some a little bit of noise in that. Longer term, just wanted to get your thoughts around potential for margin expansion, you know, not that there's anything wrong with a 55% margin, but you know, just how you're thinking about it beyond 2022. Thank you.
Thank you for the question. I think, you know, we are still planning to navigate to a 55% adjusted EBITDA margin for the year. We do expect expenses in a range to deliver the target over the twelve-month period. Margins may fluctuate during the year, but in aggregate, we're still expecting about 55%, as we continue to invest in the business.
Okay. Thank you.
I would just say long term. Yeah. Long term, I just when you're converting $1 of revenue into $0.55 of free cash flow, which is what we're doing given our low interest expense and tax asset, we are very focused on accelerating the revenue growth. We think it adds more value to add 7, 8, 9 years of additional revenue at that $0.55 of flow-through margin as opposed to trying to maximize margin in the short term. We think over long term, higher revenue is gonna be helpful.
That's great context. Appreciate that. Just turning to kind of the acquisitions and the broader platform where, as you say, you know, some of the gaps are filled, and it's really a very nice diverse offering at this point. What's been the reaction so far? Some of them may not be in the market quite yet, but anecdotally from your LPs in terms of the broader offering and maybe the outlook on how that might help gain some wallet share among them. Thank you.
Yeah, it's been terrific. You know, as we've come together, we brought on, as we mentioned in the opening statements, moved a number of P10—sorry, RCP reps up to P10 to go out to the marketplace as a P10 offering, whether it's going to, you know, large pension, sovereign wealth, or endowments that heretofore, you know, they needed to allocate $100-$200 million allocations, and any one of the strategies was too small to accept that. We now can offer a P10 offering to go down and to offer them down into the middle market and lower middle market and give them higher returns. So we've begun those conversations.
You know, as you know, it's never easy to raise money, and there's a long sales cycle around it, but it has been quite receptive. We're excited about the opportunity.
Excellent. Thank you. Appreciate your taking my questions this morning.
The next question comes from Robert Lee of KBW. Your line is open. Please go ahead.
Great. Good morning. Thanks for taking my questions this morning. Maybe the first question beyond just capital. Going back to capital usage, you know, maybe, Amanda, if you could just update us on the tax shield. What is the current tax amortization benefit each quarter if we're trying to kinda think about the pattern of using, you know, the NOL the next couple of years? Maybe also understanding that in the absence of transactions, you know, maybe the first priority is to pay down debt, you know, reinvest in the business.
Since most of the fund commitments are funded by employees, you know, can you—I don't know if there's other kind of internal pieces of cash we're not being, you know, we're not thinking about, or maybe there will be some capital commitments from the holding company. Just trying to get a sense of kind of incremental use of cash next year or two.
Sure. The tax amortization that we expect is going to be about $15 million a year. I think that answers your question on the tax amortization. For the second part of the question, in terms of uses of cash, we'll have some cash. We'll have continued debt paydown as well as any M&A activity that comes up. You know, we mentioned a potential dividend or stock buyback as well. In terms of
Yes. In terms of balance sheet, you know, we haven't, you know, as you noted, Robert, all the team members fund the GP commitments. For the most part, that will continue. If we have the opportunity to launch a new fund or a new strategy within P10, we would consider using capital off the balance sheet, but it isn't a priority, if you will. You could see it, but it's not a high priority because we all want to invest in funding the opportunities that we're generating these great returns.
Robert, I think you bring up a great point, which is our business model to date, the free cash flow is truly free cash flow. Not only is it relatively infinite returns on capital, but that free cash is not being reinvested in the business to help it grow organically. We have a lot of investment professionals that analyze investments for a living. They love backstopping the GP commitment. We think that's great alignment with our teams. As Robert said, to the extent we come across a new type of fund that may require more of a GP commitment, that's certainly an option. To date, what you've seen is 100% of our free cash flow has gone into deleveraging and doing M&A.
We're now at the point with our debt where we are potentially underlevered. We do have more uses of free cash flow going forward than perhaps we had historically.
If I could maybe do a quick follow-up on the dividend. I mean, is there, you know, a certain run rate of EBITDA you kinda have in mind that you'd wanna be at where you can kinda do all those other things and still, you know, fund a dividend? Just kinda what is the, you know, the flag, you know?
Robert, are you looking for guidance on this? I think, you know, we're gonna
Of course.
We're gonna do what's best for the business. As large insider owners, we are of course focused on driving value to all shareholders. I wouldn't wanna put us in a box in terms of giving guidance on when we'd pay a dividend and at what level. You know, it really will depend on what the market opportunities are presented in front of us. For instance, if we had a large acquisition come along, we would probably lever up, take on some more leverage and use the free cash to pay down debt and not have it allocated to a dividend. I understand where you're going.
We do not have, you know, obviously with a $25 million pay down in February, we did not have a, you know, an acquisition, you know, sort of at hand, no. It was part of the revolver, and we could, you know, we can expand that accordion that back up, so we haven't reduced any flexibility at all.
I know I keep saying just one more question, but just a real quick one. Was your Fee-Paying AUM included, you know, some capital deployment. Could you maybe update us on kind of the dry powder you may have that's not yet been, you know, drawn down earning fees and if there was some incremental capital raising that may have supported that in the quarter as well that's not in the Fee-Paying AUM number?
Yeah, Robert, it's a great question. As you know, we don't specifically break that number out because we think it may be misleading. It is a very small piece of our business, the funds that are actually paid on deployed capital as opposed to committed capital. One of those businesses is Hark, and they just happen to have a very busy Q4. We'd like to think that's synergies with P10, but time will tell. It's not something we're gonna break out only because it's such a small number, we think it's misleading. That being said, episodically, we may have quarters where one or two of our funds that are paid on deployed capital have a good quarter. We're thrilled when a recent acquisition comes in, and they come in sprinting.
Great. Thanks for taking my questions.
The next question comes from Chris Kotowski of Oppenheimer. Your line is open. Please go ahead.
Yeah, good morning, and thanks for taking my question. I wanted to come back to my very favorite charts on pages 8 and 9, the what I always think of the money table. It seems to me like this is kind of the key to understanding your fee-paying AUM. I just kinda wanna get a sense of the cadence going or how we should look at it. I'm comparing this table to last quarter's, and I see, for example, RCP XVI going from $52 million to $187 million, and I see SOF IV going from 0 to $281 million. Is that what you know if I have a big spreadsheet going, that's how I can kind of judge where you know where your increase in AUM is coming from.
Going from your prior comments, it sounds like that's all going straight into fee-paying AUM as opposed to just, you know, non-fee-paying AUM. Is that all right?
Yes. That is all correct. There are some when we do raise the separate accounts, that is not going to show up on the money table, as you say. That will go into Fee-Paying AUM. There are some additional dollars that we raise where we're not showing up in that table. This table is our core fund series. Then you'll also show that I think on some of our tables, it's a question of when the fund actually gets put on the table. This is the best way to track our core funds, which encompass the vast majority of our Fee-Paying AUM. I think what you're doing is the right way to do it.
Okay. You mentioned in your comments that venture and TrueBridge was one of the sources of the growth in this quarter. When I look at the fund tables, I didn't see a you know, a jump in the AUM. Does that mean that was all in the separately managed accounts, or is that a fund we don't yet see or?
Yeah. That's what I was trying to correct. You were leading the witness. No, that's what I was referencing is there's a question of when the fund goes on the table, in venture because these are 15-year live funds. Fund 7, which we had a final close in December, that fund will go on the table. It's gonna be with standard practice, what they've done for years. We can check with the team and get back to you when that becomes posted. Again, that is a 15-year fund. While it did contribute to Fee-Paying AUM, it's gonna be a few years before that performance becomes meaningful.
Okay. When you said in December, you mean December 22?
Yeah, December 2022. So they're absolutely. They had closed on fund 7. They raised fund 7. It was at the hard cap, and that will show up on the table going forward. The question is what quarter it drops in because the table is meant to show performance. On a 15-year fund, in a venture especially, the early years are not very meaningful with respect to performance.
Yeah. Okay. If I can just say, though, it would be helpful then, though, to even have the fund size without even if the performance isn't there.
No, that's great. Listen, that makes sense. We will, with our second earnings call, we're taking good notes, and we'll get back to you on that.
Okay, great. Lastly, on page 18 on the P&L, the roughly $5 million of non-recurring expense, I just wonder, that was all related to Hark and Bonaccord and the IPO or what were those non-recurring items?
Yes, that's correct. The about $3.5 million of the $5 million is related to the contingent consideration adjustment for Hark and Bonaccord as well as IPO and additional acquisition costs.
Okay, great. Thank you. That's it for me.
The final question comes from John Campbell of Stephens Inc. Your line is open. Please go ahead.
Good morning and congrats on the quarter. This is James Holly stepping in for John Campbell. First question here. On the cross-sell opportunities, you know, you have more than 2,400 clients working with P10. Can you kinda walk through the boots on the ground strategy there that you're deploying to meet those existing clients and any additional products there? And then if you can also size up that opportunity, what you think it could be over time, that would be really helpful.
Yeah. When you think about cross-selling, I would think about it in two different buckets. Obviously in the investment management business, it's raising capital and deploying capital. Those are the two drivers of the business. On the raising capital side, you're right, we've got 2,500 LPs from around the world. As one of the questioners asked earlier about our performance, the great news is the vast majority of our LPs are allocators to alternatives more than just the strategy they're allocating to today. We believe that when we bring these new strategies to market, we're introducing not only great performance over 20 years, but also asset classes that are in vogue. There are not many pension funds not talking about impact, for example. Same thing in venture capital.
On the front end, in terms of sales reps, it really is introducing new funds, new strategies to our existing LP base and asking them what problems we can solve for them. If they wanna be in venture capital, we believe we have all of the best solutions. If they wanna be in impact, we think we have the right solutions, et cetera. Robert mentioned that we did move some people from RCP over to P10 in the fourth quarter to really spearhead the cross-sell. I think we referenced in the script. It has been material so far in terms of bringing in cross-selling on the LP front. We expect with this new slate of fund offerings, that's only going to accelerate.
I would say so far so good, and we think there's a long runway there. On the capital deployment side, what our business, especially in private equity and venture capital, we are surrounding the GP with every product and service that they may need. If you're a private equity GP in the lower middle market, you have long looked to RCP for your primary capital, your secondary transactions, your co-invest capital, and your data. When we then introduce something like NAV lending from Hark, that is an additional tool that we can offer to the GP to help solve their problems. It really is not a pushed cross-sell. The GP is welcoming this additional tool because just like LPs out there, GPs are trying to consolidate the number of relationships that they have.
We think in both cases, we are adding value on the cross-sell side.
Yeah. Thanks, Clark. That's really helpful. Maybe one more just kinda quick one here. You know, P10 kinda has a unique advantage of being in the lower middle markets with less eyeballs in the space. Is there any notable call-outs around its performance as a whole and through a rising rate environment versus the higher ends of the market? Anything to call out there?
Well, actually, not James, not actually sure what you're asking there. I mean, our managers have 20-year track records that have been performing through, you know, great markets and very tough markets and continue to deliver, you know, excellent results throughout. You know, we don't get to invest in the markets we want. We get to invest in the markets that are in front of us. In a rising rate environment or an inflationary environment, they've continued to do well. I don't know that I'd call out any one in particular to say, "Oh, this is gonna shine or this is gonna fall apart." They all have done, you know, exceptional over the years.
Okay. No, that's helpful. I appreciate the time, guys. Thank you.
Hey, John, this is Mark. I've got one more thing for you. I wanna share with you as of 2/28, we had 35,391,739 Class A shares. The B shares as of 2/28, it was 81,801,008. Just to give you an update on where we're at.
There are no further questions at this time. This therefore concludes today's call. Thank you for joining. You may now disconnect your lines.
Thank you.