PAX — Patria Investments Ltd

Summary of PAX Q2 2026 Earnings Call

1. Key Financial Results and Metrics:

• Fundraising: Total fundraising for Q2 2026 was $2.3 billion, with year-to-date totals reaching $4.5 billion, positioning the company to potentially exceed its full-year target of $7 billion.
• Fee-Earning AUM: Increased to $48.9 billion, up 7% sequentially and 32% year-over-year.
• Fee-Related Earnings (FRE): Reported at $57.1 million for the quarter, a 24% increase year-over-year and 13% sequentially. The FRE margin was 54%, slightly down from the previous quarter.
• Distributable Earnings per Share (EPS): Rose to $0.32, reflecting a 31% year-over-year and 19% sequential increase.
• Total Fee Revenues: Approximately $105.8 million, up 30% year-over-year and 14% sequentially.

2. Strategic Updates and Business Highlights:

• Investment Performance: Over 85% of fee-earning AUM are in funds performing at or above benchmarks. Notable performance in credit with an 11% annualized return since inception.
• Acquisitions: Successful integration of WP Global Partners and Solis, contributing to diversified offerings and increased AUM.
• New Mandate: Secured a $1 billion multi-asset separately managed account (SMA) from a sovereign wealth fund, enhancing strategic partnerships and long-duration capital profiles.
• Geographic Expansion: Strong fundraising momentum observed in Asia and Latin America, with a renewed focus on North America.

3. Forward Guidance and Outlook:

• FRE Guidance: Maintaining full-year FRE guidance of $225 million to $245 million, with confidence in achieving 2027 targets of $260 million to $290 million.
• Fundraising Outlook: Anticipating continued strong fundraising, with a clear pathway to potentially surpass last year’s record of $7.7 billion.
• FRE Margin: Expected to be slightly below the 58%-60% target for 2026 due to the integration of lower-margin acquisitions but confident in returning to this range in 2027.

4. Bad News, Challenges, or Points of Concern:

• Private Equity Performance: Two older private equity funds (IV and V) underperformed, leading to markdowns. These funds have not generated management fees for two years and have not accrued performance fees since Q4 2025.
• FRE Margin Pressure: The FRE margin has declined due to the integration of lower-margin businesses, which may impact short-term profitability.
• Transaction Costs: Increased transaction and restructuring costs were noted, totaling $11 million in Q2, with expectations for a decline in future quarters as M&A activity slows.

5. Notable Q&A Insights:

• Fee Structure: Management fees as a percentage of AUM have decreased slightly due to a changing mix of assets, but no pressure on fees is expected moving forward.
• Redemptions in Credit Funds: Some redemptions were attributed to clients reallocating investments within the firm's offerings, indicating no structural issues in credit performance.
• M&A Strategy: Future M&A will be selective, focusing on smaller acquisitions rather than large-scale transactions, with a greater emphasis on organic growth.
• SMA Fee Margins: Multi-asset SMAs typically have lower management fees (around 1%) compared to traditional funds, but they provide a stable revenue stream.

Overall, PAX reported strong financial results and maintained a positive outlook, despite some challenges in private equity performance and margin pressures from recent acquisitions. The company is well-positioned for continued growth through strategic fundraising and geographic expansion.