Ridgepost Capital, Inc (RPC) Earnings Call Transcript & Summary

Thank you. Good morning and welcome to Ridge Post Capital's second quarter 2026 earnings conference call. My name is Lateef and I will be coordinating your call today. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now pass the call to your host, Brian McKenna, Vice President, Investor Relations. Brian, please go ahead.

Thank you, operator, and thank you all for joining our call this morning. With us today, we have Luke Sarsfield, Chairman and Chief Executive Officer, and Amanda Cousins, EVP, Chief Financial Officer. After our prepared remarks, RJ Jensen, EVP, Head of M&A and Strategy, and Sarita Jareth, EVP, Global Head of Client Solutions, and Chief Financial Officer, we will now hear be available for the Q&A session. Before we begin, I'd like to remind everyone that this conference call, as well as the presentation slides, may include forward-looking statements within the meeting of the Federal Securities Laws, including 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 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, the forward looking statements included are made only as of the date hereof. We undertake. obligation to update or revise any forward-looking statements as a result of new information or future events, except as otherwise required by law. Please note that during this call, we'll reference certain non-GAAP measures that we believe can be useful in evaluating the company's performance. A reconciliation of these measures to the most directly comparable GAAP measures is available in the presentation slides posted on our website and in our filings with the SEC. In addition, we'll provide certain historical performance metrics for our funds and further details can be found in the presentation slides. Of course, past performance does not guarantee future results. Before I turn it over to Luke, I want to spend a minute sharing my perspective on why I'm so excited to be at Ridge Post Capital. I spent 12 plus years in Southside Equity Research covering financials, specifically the alternative asset managers and BDCs. So I've interacted with a number of different companies and management teams across the industry. So what stood out to me? First, the people, culture, and collaboration. Second, the durability of the model. Ridge Post Capital is one of the only pure play, capital-light, management fee-based alternative asset managers in the public markets. And third, which I think is most important, the firm continues to deliver impressive investment performance. I'm thrilled to be here. I look forward to working with the team as we continue to tell and educate the market on the Ridge Post Capital story. And I'm excited to interact with all of our stakeholders in the coming months and quarters. With that, I'll turn the call over to Luke.

Thank you, Brian. Good morning, everyone, and thank you for joining our call today. I'd like to start by welcoming Brian to Ridge Post Capital. Brian recently joined Ridge Post Capital to lead our investor relation efforts. Brian comes from Citizens, where he was a senior equity research analyst covering the alternative asset management and BDC sectors. His deep knowledge of our industry and strong relationships within the investment community make him an excellent addition to our team as we continue to prioritize transparency, accessibility, and proactive engagement with our shareholders. Many of you will have the opportunity to connect with Brian in the coming weeks and months, and we look forward to further strengthening our dialogue with the investment community. On an unrelated note, I did want to share some very sad news relating to the Rich Post Capital family. One of our long-serving board members, Robert Stewart Jr., unexpectedly passed away recently. On behalf of everyone at Reach Post Capital, we extend our deepest condolences to Rob's family and loved ones during this very difficult time. Rob was a dedicated supporter of Ridgepost Capital and a valued member of our board whose guidance, insight, and friendship had a meaningful impact on our company and the people who worked alongside him. Thank you. be greatly missed by all of us. Now turning to 2Q earnings, Ridge Post Capital delivered another strong quarter of results as our balanced and durable model continues to perform well amid a fluid operating environment. As a reminder, this was our first full quarter rebranded as Ridge Post Capital, formerly known as P10. we reached two new milestones in the second quarter as AUM surpassed $50 billion at period end, up more than $10 billion, or approximately 25% year-over-year, while fee-paying AUM totaled nearly $35 billion at quarter end, up 19% year-over. year. Importantly, we continue to experience very strong investment performance across our strategies. In the past, we've aggregated investment performance across our key funds to highlight the underlying strength and differentiated returns we are delivering for all of our stakeholders. We thought it would be helpful to update those numbers and share them with you today. Looking at the net IRRs for funds that are greater than five years old, private equity primary funds have averaged 14.1%, while secondary and co-invest funds have averaged 23.1%. Our GP stakes funds at Bon Accord have averaged 18.9%. The flagship funds of the FIBA have averaged 18.9%. at our venture strategy, TrueBridge, have averaged 18.7%, and our private credit strategies have averaged 10.9%. Now, moving on to fundraising and deployment activity. Second quarter trends remained healthy. We were in the market with about 20 funds, and we raised a meaningful amount of investor commitments across each of our investment verticals. We raised and deployed $1.1 billion of capital in the quarter, bringing the trailing four-quarter total to nearly $5 billion. And we are still in the market with multiple funds across most of our strategies, including our GP stake strategy, Bonacourt, our NAV lending strategy, Hart Capital, our venture capital strategy, Truebridge, our lower middle market private equity strategies, RCP and Qualitas, as well as our project finance strategy, and small business lending strategy, enhanced capital. I do want to spend a minute on TrueBridge. We continue to see strong demand for our venture capital offerings as investors are increasingly focused on the growing dispersion in venture returns. This is why manager selection remains so important in TrueBridge's track record of delivering different differentiated performance for investors for nearly two decades continues to resonate in the market. To that point, Truebridge has raised and deployed approximately $1.5 billion in the first half of this year. Bottom line, we believe the trajectory of our fundraising and capital deployment speaks directly to the strong demand we continue to see from LPs, the diversification of offerings across our strategies. well as our ability to deploy capital consistently and prudently in the In the first half of 2026, we organically raised and deployed over $3 billion of capital, consistent with our expectations heading into the year. which we had contemplated in our $10 billion fundraising and deployment target for 2026 and 2027. As previously highlighted, underlying growth in firm-wide fee-paying AUM remains strong, as year-over-year growth totaled 19% in the second quarter, giving us comfort and line of sight into achieving our 2029 year-end fee-paying AUM target of $50 billion. To that point, at the time of the investor day, in September 2024, when we disclosed this target, the implied fee paying AUM CAGR was approximately 15%. pleased to report that our fee-paying AUM CAGR through the second quarter of 2026 stands at 20%. I also want to highlight the growing contribution from direct, co-investment, and secondary funds, or assets that are not in fund-to-fund vehicles. Over the past four quarters, these funds have raised and deployed over $2.7 billion of capital, representing over 55% of firm-wide capital raising and deployment activity. Moving on, and we've talked about this at length in prior quarters, but I think it's important to re-highlight the underlying structure of our business. We believe we have one of the most durable business models in the industry, specifically as we operate a capital-light, third-party asset management business, and our composition of earnings is entirely driven by FRE with no direct exposure to realizations. Notably, within FRA, approximately 98% of fee-related revenue was generated from management and advisory fees in the second quarter, so there was very little contribution from fee-related performance fees and other non-fee-related revenue streams, which tend to be more cyclical in nature. We primarily earn these contractual management fees on committed or deployed AUM that sit within long-dated and capital committed investment strategies, meaning our fee-related revenue and fee-related earnings have little exposure to movements in NAV, while just less than 2% of our fee-paying AUM is subcontracted. subject to quarterly redemptions. On June 22nd, we completed the Stellis acquisition, and we are incredibly excited to have the Stellis team officially a part of Ridge Post Capital. We've spent a reasonable amount of time on our previous two calls reviewing the strategic merits and financial profile of the business and the transaction. I want to spend a moment today on our ongoing integration efforts and what we are doing to bring that strategic vision to life. You'll remember that we've talked about the opportunity to increase Stellas' origination funnel given the strong fit within our GP sponsor ecosystem focused on the middle and lower middle market. So, what are we doing to facilitate that? Well, Stellas' senior originators recently spent time in person with senior professionals at RCP as these teams begin collaborating and identifying ways to do exactly that. Regarding the longer-term origination opportunity with Stellis and RCP, if over time, Stellis can capture 10 to 20% of the demand from the equity capital deployed annually within RCP's network of private equity GPs, it could produce an additional $500 million to $1 billion. billion of incremental annual commitments across Stellis. I would also highlight that the Stellis leadership team recently presented to the entire Rich Post Capital platform, including all of our investment strategies, to Educate teams on their business and strategy and where there might be incremental opportunities to work together. In terms of the business, before considering any impact from the RCP origination opportunity, Stellis' origination pipeline is robust and has picked up meaningfully over the last 30 days. In fact, across all of our private credit businesses, origination pipelines are strong. A related point worth highlighting that also indicates we're beginning to see an increase in the velocity of capital returns in the middle and lower middle market. Contributions at RCP funds and therefore exit activity have shown a meaningful pickup year-to-date. Specifically, through July 24th, distributions from RCP funds have more than doubled year over year and are up more than 25% relative to the comparable period in 2024. This clearly has positive implications for distributions to fund investors, but it also has positive implications for future fundraising and deployment activity at both RCP and as well as our private credit businesses, most notably Stellis, which is consistent with the pipeline activity we previously highlighted. Before turning it over to Amanda, I want to highlight that RCP is celebrating its 25th anniversary this year. our industry, track record and incumbency are critical. Over the past two and a half decades, RCP has built a highly differentiated franchise supported by longstanding relationships, 25 years of investment data and insights, and a proven ability to deliver attractive returns across market cycles. It's been a terrific 25 years for RCP and we're excited about the opportunities ahead as we look toward the next 25 years.

With that, I'll turn it over to Amanda. Thanks, Luke. As highlighted earlier in the call, we delivered strong results again in the second quarter. We generated 24 cents per share of adjusted net income in the period, compared to 23 cents per share in the second quarter of 2025. Fee-related earnings totaled $39 million, up 10% year over year, while the FRE margin came in at 48%. Fee-related revenue totaled $81 million in the quarter, up 11% year over year. Management and advisory fees represented nearly all of fee-related revenue in 2Q, totaling $80 million. We believe this revenue mix results in a highly durable and stable earnings profile for Ridge Post Capital in terms In terms of the fee rate, the average core fee rate, excluding direct and secondary catch-up fees, totaled 100 basis points in the second quarter, up three basis points from the first quarter. As a reminder, the core fee rate is typically seasonally lower in the first half of the year, seasonally higher in the back half of the year, particularly in the fourth quarter, primarily due to our tax credit business. In terms of the core fee rate for full year 2026, we continue to expect this will total 103 basis points. And we also expect direct and secondary catch-up fees will total between six and eight million in 2026 unchanged from our prior expectations. With respect to the outlook for the margin, we continue to expect the FRE margin for full year 2026 will be in the mid-40s. As a reminder on cash interest, we fully utilized our credit revolver to fund the stillness acquisition at our borrowing rate of 260 plus SOFR. I would point out that in June, we expanded our revolving credit facility by 20 million to 195 million, enhancing our financial flexibility. And on cash taxes, we still expect to fully utilize our NOLs by the end of this year. As we've discussed in the past, we expect our cash tax rate to be in the high single-digit to low double-digit range for 2026 and in the mid-teens for 2027. In terms of changes to our share count, we issued 11.8M shares of partnership units and shares in connection with the Stellis acquisition. As a result of this, at the end of the second quarter, including partnership units exchangeable for shares, we had approximately 130M fully diluted shares outstanding. Regarding capital management, our capital allocation priorities remain balanced, including supporting our ongoing quarterly dividend of 4 cents per share, offsetting the dilution from annual employee stock issuance, managing our leverage, and returning excess capital through share repurchases when valuations are attractive. Given the recent acquisition of Stellis, some of the near-term focus will be around deleveraging, which coupled with natural growth and cash earnings in the back half of the year, should bring our leverage ratio back in line with our longer-term target in the mid-two times EBITDA by the end of this year versus approximately 2.8 times at the end of the second quarter pro forma for Stelis. And I would point out that we have already paid down $20 million of debt thus far in the third quarter. As is always the case, we will balance other capital uses with share repurchases, as we view this as an efficient and a creative way to return excess capital to shareholders, particularly if the stock continues to trade at what we view to be dislocated valuations. topic I want to discuss before turning it back to Luke for closing remarks. In close collaboration with our Chief Information Officer, Mike Goodwin, we're spending a meaningful amount of our time on AI and technology. We're exploring how Bridgepost Capital and all of our teams can leverage AI and technology in order to create operational efficiencies, as well as to drive more informed decision making, which we think will ultimately drive even better outcomes for all of our stakeholders. We see three key opportunities emerging as it relates to technology, AI, and rich post capital, while we balance internal and external costs, including token usage across the company. Operations and automation, enhanced investment capabilities, collaboration. I won't go into all the specifics for each of these buckets on the call today, but I do want to share a couple of tangible examples of the early progress we're seeing. The first area is reviewing NDAs. We've reduced the time it takes to review an NDA from roughly 60 minutes to about 5 to 10. For some perspective, we review at least a few thousand NDAs a year, implying that we'll save roughly several thousand hours per year on just NDAs alone. That's quite meaningful in thinking about the time and resources needed to review these documents previously. Second, at our private equity fund of funds business, RCP, the firm is leveraging AI and technology to significantly streamline the production of pair sheets and GP scout profiles. This process was previously done by human beings and would take about one to two days to complete. By leveraging technology and AI, this process now only roughly one hour and importantly this human capital has been redeployed across other areas of the business Third, collaboration across all of our strategies has never been higher, and we think our AI and technology initiatives have been a key driver of this. We recently started hosting firm-wide weekly AI drop-in open hours so our employees can ask questions, get help with AI prompts, and it's also a great way for all of our teams to collaborate and share ideas. These are only three examples of where we're experiencing real benefits and efficiencies across the business, but there's a long list of others currently underway. There's certainly been real-time cost savings associated with these early initiatives, and the incremental margin potential longer term is meaningful. So, we plan to invest some of this near-term savings back into other initiatives to make sure we're staying ahead of the curve longer term. Many of our strategies have decades' worth of data, which is valuable in and of itself, but we also have the view that the real value and longer-term benefits will come from prudently leveraging these datasets across the entire organization. online, we think we're only in the top of the second ending for AI in related adoption, and we look forward to sharing more with you on our progress in the coming quarters. With that, I'll turn it back to Luke for a few closing comments before we open it up for Q&A.

Thanks, Amanda. Before we open it up to questions, I want to share a few closing remarks. Our business is performing exceptionally well, and we have strong momentum heading into the back half of the year. We are pleased to have Stelis formally on board at Ridge Post Capital, and the integration process is well underway, with clear opportunities to collaborate to drive even better outcomes for our stakeholders. As we've talked about in the past, our top priority remains delivering differentiated returns for our LPs, as this is, by far, the most important driver of the flywheel longer term. on that, we remain laser focused on controlling what we can control across the business, including delivering profitable and accretive long-term growth. In terms of the stock, we believe the valuation today is incredibly dislocated relative to our view of fair value, specifically compared to the underlying fundamentals. Our business is historically compounded in the mid-teens annually, and we view Rich Post Capital as a pure play, capital light, third party alternative asset manager. Importantly, as previously mentioned, the vast majority of our revenue is driven by long-dated, contractually committed management fees, creating an incredibly stable and durable earning stream. So. we see strong downside protection with the potential for significant upside over time. Thank you for your time today. I'll now pass the call over to the operator to begin the Q&A session.

Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. stand by while we compile the Q&A roster. Our first question comes from the line of Michael Cypress.

Morgan Stanley. Your line is open, Michael. Hey, good morning. It's Joe Tamelo on from Mike Cypress. Thank you for taking my question. I think you guys mentioned, you know, 500 million to 1 billion of incremental commitments across Dulles by capturing roughly 10 to 20% of the equity capital from the GPs you already serve in the marketplace. I'm just wondering if you could talk about the steps you'll need to take to kind of really drive that strategy. What sort of timeframe do you think is really realistic to kind of achieve that? And I guess what's the baseline of where that is today, as I imagine Stelis already serves some of those GPs? Thank you.

hey Joe it's Luke thanks for the question and good morning I'd say a couple things so first thing I think it is important to note is that we closed the transaction about six weeks ago now and so while we think there's a big opportunity in front of us and we have spent a lot of time prior to closing the deal getting organized around that we are very very early days on this the second One thing I would note is we always highlighted that we thought one of the really compelling attributes of this transaction was the opportunity to really broaden that origination funnel at Stellis. And we thought we were in a unique and differentiated position to do that, given our network of relationships and, in particular, the strength of that GP. ecosystem in the middle and lower middle market at RCP. You know, RCP, as I talked about, celebrating 25 years, they have an incredible track record, incredible lineage, and just a deep set of both historical, ongoing, and frankly, perspective relationships that we think we can open up. The way we kind of came to that is we looked at, that number we used is we looked at some of the historical and recent historical deployment trends over time. And those sponsors within that RCP ecosystem deploy on average in a given year about $5 billion. So if you take 10% to 20% of that, that's how we're getting to the $500 to $1 billion of incremental origination capacity at Stellar. The other thing I would note is we think there's a lot of benefit to expanding the top of the funnel. And one of those key benefits is the opportunity to have, as I would call it, more shots on goal. The more shots on goal you have, the more opportunities you have, the more selective you can be in capital deployment. And trust me, the Stellis team is already world class at this and plenty selective, but the more opportunities you have, the better I think that investment profile is going to look over time. And so we are really, really focused on this. As I mentioned, we've already had the teams together. They're having, you know, weekly, if not daily calls. We're going to create a lot of opportunities for dialogue, for integration. We've really tried to build the bonds human-to-human. We've really tried to build the bonds human-to-human. human, person to person. We're spending a lot of time acting collectively and thinking about how we can do this. And look, realistically, though, to really get to those full numbers, it's probably going to take a period of years. But that doesn't mean we won't see incremental progress in that interval before that. I think we've already started. There's already been some dialogue around some obvious near-term transaction opportunities that we think we can collectively get after. And as kind of a takeaway, I would say we're super excited around what that can look like in the near, intermediate, and long term.

Great, thank you. I guess real quick as a follow-up, I completely hear you. The focus is on deleveraging and opportunistic share repurchases, but we kind of think about capital allocation a few years out here. I'm just kind of thinking in terms of the M&A environment. Where are some things that could be potentially interesting? or maybe worded differently is where do you see potential opportunities that are added to the RPC platform in terms of different kind of products or strategies? Thank you.

It's a great question. I'm going to let RJ, who's here, take that question. So RJ, over to you. RJ Williams yes, great. Thank you, Luke. Thank you for the question. Luke, I think it's similar to what you've heard from us in the past. to focus on geographic expansion where we have strategies. So thinking about Europe further, if you think about private credit in Europe, we think that could be kind of the analog of Stellis in the US. If you think about more regular way kind of US oriented strategies in private credit, I'd say we're very focused on asset tax platforms. And then we talk a lot about real assets as well, both infrastructure and real estate. So I think we're spending time in all areas. I would say, you know, while activity was a little bit slower in terms of new process launches the first half of the year, that feels like it's really increased. And I think you're going to see more activity, more announcements as we get into the second half of the year.

Thank you. Thank you. Our next question comes from the line of Benjamin Budish of Barclays. Please go ahead, Benjamin.