Patria Investments Ltd Q1 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to Patria's First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Rob Lee, Head of Investor Relations. Please go ahead, sir. Thank you. Good morning everyone. And welcome to Patria's first quarter 2025 earnings call. Speaking today on the call are our Chief Executive Officer, Alex Saigh; our Chief Financial Officer, Ana Russo; and our Chief Economist, Luis Fernando Lopes for the Q&A session. This morning, we issued a press release and earnings presentation detailing our results for the quarter, which you can find posted on the Investor Relations section of our website or on Form 6-K filed with the Securities and Exchange Commission. This call is being webcast and a replay will be available. Before we begin, I'd like to remind everyone that today's call may include forward-looking statements which are uncertain, do not guarantee future performance, and undue reliance should not be placed on them. Patria assumes no obligation and does not intend to update any such forward-looking statements. Such statements are based on current management expectations and involve risks, including those discussed in the risk factors section of our latest Form 20-F annual report. Also note that no statements on this call constitute an offer to sell or a solicitation of an offer to purchase an interest in any Patria fund. As a foreign private issuer, Patria reports financial results using International Financial Reporting Standards or IFRS as opposed to U.S. GAAP. Additionally, we would like to remind everyone that we will refer to certain non-IFRS measures which we believe are relevant in assessing the financial performance of the business, but which should not be considered in isolation from or as a substitute for measures prepared in accordance with IFRS. Reconciliations of these measures to the most comparable IFRS measures are included in our earnings presentation. Now I will turn the call over to Alex.

Thank you, Rob, and good morning, everyone. 2025 is off to a very exciting start as fundraising totaled a record $3.2 billion, highlighting the expanded reach of our investment platforms and distribution capabilities, and putting us well on the way to achieving our $6 billion fundraising target for the year. This record fundraising benefited from the signing of several large customized investment accounts and SMAs (special managed accounts), emblematic of how we evolved from a product-centric asset manager to becoming a solutions provider for our investors. We also reported first quarter '25 fee-related earnings or FRE of $42.6 million, or $0.27 per share, representing 21% and 16% year-over-year growth, respectively, despite rising global uncertainty. Fee earning AUM grew 6% sequentially and 46% year-over-year. Most notably, we generated over $700 million of organic net inflows into fee earning AUM in first quarter '25, reflecting an annualized organic growth rate of over 8.6%. This is an important KPI to monitor over time as it highlights our ability to drive organic revenue and earnings growth independent of M&A and investment returns. As we highlighted at our recent Investor Day on December 9th, our increased diversification and the expansion of our investment and product capabilities is paying off in the form of robust fundraising and profitable net organic growth. In addition, fee earning AUM growth and management fee revenues benefit from the over 60% proportion of our assets, which earn fees based on net asset value and/or market value compared to below 10% at the time of our IPO, and which provides the opportunity for long-term compounding. All of the above reinforces our confidence in the three-year targets we introduced at the event. Now let me quickly summarize our first quarter results before we move on to some of the other highlights for the quarter. First, as we just noted, FRE per share of $0.27 in the first quarter '25 rose 16% year-over-year, driven by higher management fees due to higher fee earning AUM. The sequential decrease of 22% mainly reflects the expected seasonal decline in incentive fees, which totaled $12 million in the fourth quarter '24. Overall, we remain comfortable with our 2025 FRE per share guidance of $1.25 to $1.50, reflecting, at the midpoint of the range, approximately 20% year-over-year growth. We generated $37 million of distributable earnings in the first quarter '25 or $0.23 per share, up 12% year-over-year, driven by strong FRE growth. Performance related earnings were de minimis in the quarter. However, the net accrued performance fee balance of $368 million or $2.33 per share, rose 15% in the quarter, mainly due to the depreciation of the dollar, partially offset by declines in publicly-listed portfolio companies within private equity. For perspective, and notwithstanding changes in the value of the public holdings in our carry funds, underlying business trends at our private equity portfolio companies generally remain positive. In local currency terms, EBITDA at our non-public PE portfolio companies rose approximately 15% on average in 2024, as we focus on resilient sectors of the economy such as agribusiness, food and beverage, and health care. Furthermore, Infrastructure III, with $53 million of net accrued performance fees, remains in catch-up and we expect it to be the main source of realized performance related earnings over the year. Assets under management of $46 billion grew 43% year-over-year and over 9% sequentially, with sequential growth driven by the record quarterly fundraising of $3.2 billion, and positive impacts from investment returns and FX. Moving on, fee earning AUM of $35 billion rose a robust 46% year-over-year and 6% sequentially. There are several important things to keep in mind regarding our fee earning AUM results. There were no acquisitions in the quarter, and net organic inflows in the first quarter '25 were above $700 million, representing an 8.6% annualized organic growth rate. This was our second straight quarter of positive net organic fee earning AUM growth, and we believe it highlights how our expanded platform is primed to grow organically, supported by the capabilities we have acquired through our M&A activity, in addition to those we have developed internally. As a result, we have built a better and more resilient business. Fee earning AUM in the quarter also benefited from continued strong investment returns and a positive FX impact. Keep in mind that, as we highlighted at Investor Day, the FRE impact from soft currency FX volatility is modest, given that most of our expense base is denominated in local currency, providing a substantial natural hedge. We estimate that for every 10% change in soft currencies, our fee related earnings impact is approximately 2%. Finally, as we highlighted in the earnings presentation, investment performance remains strong, particularly within credits. It is worth keeping in mind that even though many of our strategies are U.S. dollar or hard currency denominated, local currency returns are increasingly important as, over time, we expect to source more assets from local investors to invest in local strategies. Moving on to fundraising. As I noted at the start of my remarks, we are very excited to report that we raised $3.2 billion in the first quarter of 2025 and $7.4 billion over the last 12 months, both a record for Patria. The quarter's outstanding results highlight the diversified product offering and distribution capabilities of the platform we have been building. Fundraising included a mix of customized investment accounts, SMA special managed accounts, and other fund structures, including drawdown funds, permanent capital listed vehicles, and interval funds, all spread across a variety of asset classes. As of the end of the first quarter 2025, approximately 20% of our fee earning AUM were in permanent capital vehicles, the growth of which remains a key long-term objective. Drilling down into some of the fundraising highlights for the quarter, we continue to see strong demand from Asian sovereign wealth fund investors and we closed on approximately $1 billion of commitments from these investors in customized investment accounts and SMAs that will be invested in or in conjunction with our current vintage private equity buyout and infrastructure development funds. The quarter amply demonstrated the expertise we have developed in crafting customized solutions for our investors and we continue to work on additional mandates for these strategies. We hope to have more news to share over the coming quarters. Within GPMS, we raised over $620 million in a new special managed account in addition to normal course fundraising in our commingled vehicles and other special managed accounts. We also continue to see significant momentum across our credit platform led by our flagship U.S. dollar high yield credit fund. Regarding real estate, while high interest rates in Brazil have impacted demand for many of our listed REITs, we see selected opportunity to raise capital on the floor of the exchange through M&A and consolidation as well as through credit oriented REIT strategies. It's important to keep in mind that a significant portion of the capital we raised in the quarter is customized accounts, SMAs and other products that will flow into fee earning AUM as capital is deployed, and our current pending fee earning AUM totals about $3.5 billion. Also, we will earn fees on most of the co-investment capital sourced through the customized accounts and SMAs once deployed. Of course, while we are excited about our robust fundraising this quarter, and believe we are comfortably on track to hit our $6 billion target for the year, it is important to note that the first quarter benefited from the closing of several large SMAs and customized accounts that we have been working on for some time. While we continue to work on other customized solutions across the platform, in addition to our normal fundraising, the timing of when large and complex customized investment contracts will close is very difficult to predict. With that, we caution against extrapolating the extraordinary fundraising success in the first quarter across the entire year as a new level of quarterly fundraising. Our efforts to diversify our platform and increase the resiliency of our business could not be timelier considering the highlighted global macro uncertainty and increased volatility that has gripped economies and markets around the world since the proposed imposition of widespread tariffs by the U.S. on its trading partners and uncertainty over future trade and economic policies. Against this backdrop, it's important for investors to understand and appreciate how the region in general and Patria specifically are positioned in these uncertain times. In a nutshell, while it's possible that increased economic uncertainty and volatility could have a dampening impact on investors' willingness to commit capital to new investments, in the short run, we believe Latin America is becoming a more attractive destination for capital, even as our locally focused and diversified business model enhances our resilience. While much uncertainty remains and the potential for a global recession creates challenges and headwinds, we believe the region and Patria are positioned to weather and indeed possibly thrive in these challenging conditions. Consider that, save for Mexico, where our current exposure is minimal at below 3% of AUM, the region is less exposed to potential tariffs and initially faced lower effective tariffs than other regions. Long term, however, we believe Mexico remains an attractive potential market for expansion. As the trade war between the U.S., China, and other countries escalates, we believe Latin America as a region is a beneficiary, given the region's low level of geopolitical risk and export markets that focus on in-demand agricultural products, in addition to both hard and soft commodities. With a population of over 650 million people and a combined GDP of over $6.5 trillion, the region also has large and growing internal markets that provide an attractive export destination for trading partners. As evidence of these attributes, China is already Brazil's largest trading partner, and the largest in the region when excluding Mexico. Also, the European Union and MERCOSUR, a regional consortium of countries including Brazil and Argentina, recently signed a trade agreement after nearly 20 years of negotiation, spurred on, we believe, by the pending imposition of tariffs and increased uncertainty out of the U.S. The region's relative attractiveness as a destination for investment can also be seen as it captures a growing market share of foreign direct investments, which the United Nations Trade and Development organization estimates reached 14.5% in 2023, more than three times the 4% in 1990, which represents the beginning of the data series, making Latin America one of the few regions to record a pickup in market share. From Patria's perspective, as investors in the region with over 36 years of significant boots on the ground resources, we have extensive experience in dealing with and investing through periods of high interest rates, FX volatility, and economic uncertainty. At the strategy or investment level, our private equity investments are mostly oriented toward domestic consumption markets, not export markets. Infrastructure, by its nature, is local, and our GPMS solutions business is focused on European, and to a lesser extent, U.S., middle market PE secondaries, primaries, and co-investments. Direct exposure to export-focused businesses and/or investments in the U.S. is minimal. Our position within Latin America as the go-to alternative manager for global investors looking to invest in the region is best evidenced by the customized investment accounts we completed in the first quarter with several Asian sovereign wealth funds. While this interest preceded the recent tariff-induced economic uncertainty, we believe recent trade actions by the U.S. have led to early signs of increased interest from Asian, Middle Eastern, and increasingly European investors in our infrastructure and other strategies, including our European solutions business, as investors seek alternative destinations outside the U.S. to deploy capital and earn returns. Also, the potential for the denominator effect to once again rear its head, as well as the prospect for lower DPIs in the global PE industry, should also benefit our solutions business, particularly our secondary strategies. Our business is also built to serve local investors and at the local level. We continue to see early signs of increased allocations to alternatives from local investors and institutions that are both under-allocated to alternative strategies and are often required to invest locally and understandably have a home country bias in times of economic stress and uncertainty. Local investors in LatAm accounted for approximately 17% of our fundraising in the first quarter '25 and over 40% in 2024, and we believe the current uncertainty is also supportive of demand for our European solutions business. Last but not least, economically, our fee earning AUM and management fees are very sticky and highly predictable, as approximately 20% of our fee earning AUM are in permanent capital vehicles and approximately 90% in vehicles with no or limited redemption features. At the same time, our FRE has little sensitivity to both currency FX volatility, as we mentioned earlier. Pooling this all together, our financial results and strong fundraising provide additional evidence that our strategy to diversify and grow our business both organically and inorganically while also increasing our resilience is paying off in the form of better organic growth and growing FRE. It's been only four years since our IPO, but as we highlighted at our Investor Day, which is available on our website, over that brief period, we have greatly expanded our regional and global investor base and distribution capabilities, and we have significantly diversified our investment strategies and product offerings. In addition to consistently achieving or beating virtually all of the objectives we set for ourselves since the time of our IPO, we believe we are off to a strong start to deliver on the new fundraising, fee related earnings, and other targets we unveiled at our recent Investor Day. Now, let me turn the call over to Ana to review our financial results in more detail. Thank you.

Thank you, Alex, and good morning, everyone. As Alex mentioned, 2025 is off to a very exciting start as the expanded reach of our investment platforms and products, and distribution capabilities helped us raise $3.2 billion in the first quarter, a quarterly record. Strong results in the quarter increase our confidence that we are on track to achieve our 2025 objective. Let's review our first quarter results. As Alex highlighted earlier, we are very pleased with our fundraising in the quarter and believe we are well on track to achieve our $6 billion target for the year against a backdrop of increased global uncertainty and volatility. Our FEAUM grew 46% year-over-year and 6% sequentially to approximately $35 billion, while acquisitions drove most of the year-over-year increase, the strong sequential growth reflects a combination of solid net organic inflows as well as positive contributions from investment performance and FX movements due to the depreciating U.S. dollar. As a result of the U.S. dollar depreciation in the quarter, fee earning AUM recouped approximately half of the negative FX impact in the fourth quarter 2024. More importantly, however, and as we highlighted in prior calls, FX fluctuation has limited impact on our FRE since our expense base provides a substantial hedge against currency movements that may impact our fee earning AUM and consequently our fee revenues. As reviewed at our Investor Day back on December 9th, based on our current asset class mix, a 10% variance in soft currencies against the dollar impacts FRE by only about 2%. It's particularly noteworthy that in the quarter, Patria generated approximately $700 million of net inflows into FEAUM for an 8.6% annualized organic growth rate. Since the end of the third quarter '24, Patria has generated about $1 billion of organic net inflows, highlighting the organic growth potential of our expanded platform. Of note, we reintroduced our pending fee earning AUM KPI, which highlights that we have almost $3.5 billion of already committed capital that should turn into fee earning AUM as the capital is deployed. For comparative purposes, this KPI was approximately $2 billion at year-end 2024. This pending fee earning AUM combined with our fundraising goals, the 20% of fee earning AUM that are in permanent capital vehicles, and the 35% of fee earning AUM in drawdown funds with an average life of 6.5 years, all point to our ability to generate net organic growth over time. Total fee revenue in the first quarter reached $77.3 million, up 28% over the prior year, about a $17 million increase, driven in large part by the full impact of our acquisitions completed in 2024, incremental inflows mainly into credit, partially offset by Private Equity IV, which ceased charging fees. It is worth mentioning that due to the timing of net asset flows into fee earning AUM, management fee revenues in the first quarter did not reflect the full impact of the quarter's asset growth. First quarter '25 fee revenue decreased 17% versus the prior quarter, primarily due to year-end seasonal incentive fees of about $12 million in addition to retroactive management fees of approximately $2.7 million that were recognized in the fourth quarter compared to just $0.3 million that were recognized in the first quarter. Excluding the impact of retro fees, management fee revenue was essentially flat sequentially. We currently expect retro fees to be at least $1 million in the second quarter 2025. Our management fee rate averaged about 96 basis points for the last 12 months. As we reviewed at our Investor Day, we are steadily diversifying our business and introducing new investment strategies and product structures, which are key drivers of our growth. Consequently, our management fee rate will continue to evolve, and we expect our fee rate over the coming years to trend towards approximately 90 basis points, but can vary substantially from quarter-to-quarter depending on mix. Moving on operating expenses, which include personal and G&A expenses totaling approximately $35 million in this quarter, were up 36% versus Q1 2024 or $9.3 million. About 75% of this increase reflects the impact of acquisitions, with the balance driven by continued investments in our business. The sequential decline reflects a combination of the seasonal effect of both our bonus of personal costs, as well as seasonality in G&A expenses. Looking ahead, we believe the first quarter personnel and G&A expenses combined are a good baseline run rate. Putting it all together, Patria delivered fee related earnings of $42.6 million in this quarter, up 21% versus prior year, with an FRE margin of 55%. We continue to expect the full year margin to fall within the range of our 58% to 60% guidance as we grow fee revenues and capture incremental expenses synergy from our acquisition. Overall, given the strong start to the year, we remain confident in our fundraising target of $6 billion and our ability to achieve our FRE target of $200 million to $225 million. Next, our net financial and other income and expense in Q1 '25, totaled a negative $2.8 million, reflecting mainly interest expense on our credit facilities, partially offset by income generated in our new energy trading platform, Tria, which contributed about $1.1 million in the quarter. As of the first quarter, net debt totaled approximately $143 million compared to $190 million at year-end. Our net debt to FRE ratio was well below one-time at the end of the quarter, in line with our long-term guidance. Our effective tax rate in the quarter was 9.2%, an increase of 5.5 percentage points versus the prior quarter, mainly reflecting the impact of performance fees of our Q4 '24 tax rate, and our mix of jurisdictions. We continue to expect our tax rate to trend towards 10% at the end of our three year target period in 2027, given our evolving business mix and new platforms located in higher tax jurisdictions. In Q1 2025, we generated $37 million of distributor earnings, up almost 17% year-over-year, reflecting higher FRE, partially offset by higher net financial interest expenses, while the sequential decline reflects the impact of both performance fees and incentive fees of fourth quarter '24 results. First quarter DE per share of $0.23 was up 12% versus the prior year on higher FRE, partially offset by a higher share count, and a slightly higher tax rate, and financial income statement. Regarding the share count, we finished the quarter at 158 million shares, and continued to expect the share count to average between 158 million and 160 million from 2025 through 2027, inclusive of share repurchase, which will be focused on offsetting stock-based compensation. Finally, as we announced during our PAX Day, the Board approved for 2025 a quarterly dividend per share of $0.15. With regards to our share repurchase program, we did not repurchase shares in the quarter, but it remains our intention to repurchase shares over the course of 2025. Overall, we are very pleased with our first quarter results and the momentum we have built as we continue to diversify and improve the resilience of our business. We believe we are on track to meet our FRE targets for 2025, and we are excited about the growth opportunity that lies ahead. Thank you, everyone, for dialing in, and we are now ready to answer your questions.

Our first question is from Craig Siegenthaler with Bank of America. Your line is open. Please go ahead.

Good morning, Alex. Hope everyone's doing well. My question is on the macro side: the trade conflicts should be a positive for LatAm and Brazil, encouraging more FDI. How are your portfolios positioned from higher tariffs from the U.S. and some of its largest trade partners, including China?

Thank you, Craig. It's great to speak with you. This is Alex, and I appreciate your participation in this call. To break it down, most of our investments are currently focused on Latin America. Our exposure to Mexico is minimal, at less than 3%. When I refer to Latin America, I primarily mean South America. Our investments there are largely in resilient, locally driven sectors such as healthcare, food and beverage, and infrastructure, which include local toll roads. Our credit portfolio also reflects this local focus, with minimal exposure to Mexico. Real estate investments follow suit, driven by local factors in countries like Brazil, Chile, and Colombia. Overall, our exposure to the ongoing tariff conflict is relatively low. The region falls within the 10% tariff bracket, which is on the lower end of the tariffs imposed by the U.S. I believe the region could benefit if this trade conflict persists, as it might encourage partners to look towards the region as a market for their products—especially since local consumption plays a major role in the GDP of these countries. China, being one of the largest trading partners here, reinforces this point. Furthermore, even if the current tariff situation returns to its previous state, I believe the ongoing credibility issues with the U.S. leadership will lead global investors to consider other regions for investment. Throughout 2023 and into 2024, there has been a significant inclination towards U.S. investments, but my discussions now suggest a shifting focus towards markets outside the U.S. In my opinion, regardless of the tariff debates, this credibility concern will drive investors to explore alternative opportunities. Latin America stands out as an appealing region due to its low geopolitical risks. To directly answer your question, I don't think our portfolio will be adversely impacted by the tariffs. Naturally, if a global recession occurs, that could change everything. However, based on our current assessment, we consider our portfolio low risk regarding tariff repercussions. Additionally, I believe our region will gain from being in the low-tariff category, attracting investors eager to tap into this large consumption market. Looking ahead, the Foreign Direct Investment figures for 2024 show that our region constitutes 14.3% of all FDI, up from 4% in 1990, indicating significant growth in market share. This trend is likely to continue in the near future. I hope that addresses your question, Craig.

Yes. That was great, Alex. Just for my follow-up and we can stick with the trade war topic, but move on to the fundraising front, there has been some news that Chinese institutions will be divesting from U.S. private markets. Could this open the door for Patria, if they divert their private markets allocations from U.S. to LatAm and Brazil specifically? We're just curious how your LP meetings and calls have gone since April 2nd.

The answer is yes. And I think this conversation was already happening last year. I think the Chinese investors specifically were already anticipating a potential Trump victory in the U.S. presidential election. So they were already taking steps in the direction of lowering their U.S. exposure. Having us sign $1 billion of SMAs, which is a very large amount for us in the first quarter of 2025, is a reflection of that. And these negotiations were going on during 2024 when Trump was not the U.S. President yet. So I think it's going to continue to drive in this direction. Our conversations after April 2nd intensified; we learned from our Asian, and not only Asian, but also Middle Eastern and some European investors a concern in continuing to allocate to U.S. alternative asset managers for geopolitical reasons, going all the way to no, we might have our accounts frozen and blah, blah, blah. So all of our fund structures do not flow through the U.S., they flow through other jurisdictions. We are not a U.S. company; we are a Cayman-based company which has no U.S. jurisdiction influence, etc. So I think, besides being in a part of the world that I think will benefit from this geopolitical confusion and uncertainty, specifically for Patria, we are structured and designed as a non-U.S. company. We were always like that. I think this will definitely benefit us in this very uncertain world. We already had these kinds of conversations with our investors after April 2nd. Hope I answered the question?

Thank you. And one moment as we move on to our next question. Our next question is going to come from the line of Tito Labarta with Goldman Sachs. Your line is open. Please go ahead.

Hi. Good morning, Alex, Ana, and Rob. Thank you for the call and for taking my question. I also want to ask about fundraising. You mentioned that so far there hasn't been much impact from the noise around tariffs, especially in the first quarter when fundraising was strong. Considering your outlook, you're already over halfway to your $6 billion target for the year. With the uncertainty around tariffs and potentially increased interest in Latin America, do you think there could be an upside to that $6 billion fundraising goal for the full year? Or was there something unusual in this quarter that might not happen again?

Thank you for your question, Tito. It's great to speak with you, and I appreciate your participation in this call. To answer your question directly, we are maintaining our $6 billion target. We had an excellent first quarter, but I advise against simply multiplying $3.2 billion by four, as that would be an overly ambitious estimate. We're currently a little over halfway towards our goal, which puts us in a strong position. Both I and the team are confident that we will reach our $6 billion target, a significant achievement for us. When we announced our $21 billion target for the next three years—$6 billion this year, $7 billion next year, and $8 billion in 2027—during our Investor Day on December 9, 2024, it was a substantial number given our scale. We already recorded over $3 billion in the first quarter, and of that, $700 million was in fee-paying assets under management from net new investments. This demonstrates that our strategy is effective, not even accounting for valuation increases in that $700 million. We started 2024 with a target of around $380 million in net new money for the whole year, but in the first quarter alone, we secured $700 million in the fee-paying AUM category. Overall, fundraising has been very strong. While I acknowledge that April 2 was after the first quarter, I believe that the Asian investors and sovereign funds wouldn’t have entered into these separate managed accounts in the first quarter of 2025, considering the uncertainty surrounding tariffs. They would have likely chosen to wait for the second quarter. However, the engagements have continued positively, with these investors actively seeking greater exposure to Latin America. A small investment from them can have a huge impact for us. For Asian sovereign funds, an investment of $1 billion or $2 billion is manageable, whereas for us, that amount constitutes a significant portion of our yearly fundraising goals. We are the largest alternative asset manager in the region and, in my opinion, fairly positioned to take on additional investments in infrastructure, credit, private equity, and more. These two managed accounts are set to channel funds into our infrastructure and private equity flagship funds, but the discussions with investors extend beyond that. As we move through the year, expect to hear reports from us regarding other types of managed accounts, such as managing assets they already have in Latin America or investing on the credit side. Many opportunities are emerging, and the dialogue has shifted positively, Tito. Having established our presence in Asia over the years, including opening an office in Hong Kong eight years ago and working with the Kuwait Investment Authority since our 1997 fund, we have strategically positioned ourselves to leverage these investments effectively. The results we're seeing in the first quarter reflect this strategy, and I anticipate we will have additional news throughout 2025 regarding new managed accounts and partnerships. I hope I have addressed your question.

Yes, that is very helpful, Alex. Thank you. Regarding the follow-up, if you analyze the fee-related earnings, even with some incentive fees in the fourth quarter, you are running slightly below the guidance of $200 million to $225 million. Should the increase in fee-earning AUM that we observed this quarter start benefiting in the second quarter? Will it be more impactful for the third and fourth quarters? Additionally, do you anticipate an increase in fee-related earnings that will bring it closer to the trend needed to meet the guidance for the full year? Thank you.

Yes, we acknowledge everything you just mentioned. If we do the basic calculations, it appears we are on track to achieve the midpoint of our guidance, and we believe we can exceed that. For the first quarter of 2025, our fee-related earnings were $42.6 million, as outlined in our presentation. Multiplied by four, that results in $170 million. We expect to surpass this due to the factors you've mentioned; the fee-earning AUM raised will translate into fee earnings as we invest that capital. So, using $42.6 million for the quarter multiplied by four gives us $170 million. If we add the same $12 million of incentive fees that we had in 2024, most of which came from our credit strategies, which benefit from market volatility, we're keeping that $12 million estimate. So, $170 million plus $12 million equals $182 million. For the year, if we raise $6 billion, starting with $3.2 billion in the first quarter, we are well positioned to reach that target. The $6 billion translates to an average of $3 billion per year, which at 96 basis points of management fees amounts to $28 million. Adding this to our previous total, $182 million plus $28 million gives us $210 million, right in the middle of our $200 million to $225 million guidance. By simply repeating the first quarter's FRE, maintaining the same incentive fees from last year, and assuming we achieve an average of $3 billion in raised funds for the year, we calculate $210 million. This is why we are affirming our guidance of $200 million to $225 million. I hope this clarifies things.

Yes, perfect. That's very clear. Thank you, Alex.

Thank you. One moment for our next question. Our next question comes from the line of Ricardo Buchpiguel with BTG Pactual. Your line is open. Please go ahead.

Good morning, everyone, and thank you for the opportunity of making questions. Could you please provide an update on the integration of all the M&As completed last year? Talking about also what parts of the process have been easier or more challenging than expected so far. Thank you very much.

Of course, Ricardo. It's great to speak with you, and thank you for your participation. Internally, we’re designating 2025 as our integration year. As you know, in our three-year guidance, we provided an inorganic guideline but indicated that acquisitions will primarily occur in 2026 and 2027, with no significant acquisitions planned for 2025 to allow us to focus on integrating the business. That has been our primary focus. We have initiated what we call the One Patria program, which encompasses everything from the frontline to the middle office, as well as support and back office areas. Currently, we are pleased to report that our integration is on track, with no major issues or concerns that raise red flags. We have already outlined our objectives for the process, governance, and systems, and we are in the implementation phase. For instance, all of our HR functions are now centralized under the same system, including payroll, compensation schemes, and evaluations. We recently completed year-end evaluations for over 800 employees using a common methodology and system. I could elaborate further, but the bottom line is that we operate as a people-centric business, making this integration crucial since it represents our largest expense. We must prioritize our employees accordingly. I can discuss other support and back office integrations, but focusing on HR as an example, we anticipate being fully integrated by the end of the year. As a result, we expect to achieve synergies that support our guidance of achieving FRE margins of 58% to 60% in 2025. This is a rebound from the lower margins we posted last year, as these integrations will allow us to enhance our margins back to the levels we observed in 2023. So far, there have been no concerns, as I mentioned, and we hope this continues through the rest of the year. I hope I have addressed your question, and if you have any specific inquiries regarding integration, I'm here to answer them.

Very clear. Thank you very much.

Thank you. One moment, as we move on to our next question. Our next question comes from the line of William Barranjard with Itau BBA. Your line is open. Please go ahead.

Thank you, everyone, and thank you, Alex and Ana, for the presentation. My question is about the pending FEAUM you mentioned during the call. Could you provide an overview of this $3.5 billion, including a breakdown of the strategies it will be allocated to and the expected management fee? Additionally, if you could share your expectations regarding the timing of these allocations, that would be appreciated.

Thank you for your question and for being on the call. We have about $3.4 billion to $3.5 billion in pending fee-paying assets under management. Most of this will be allocated to our infrastructure and GPMS verticals. This number can fluctuate significantly, so I'm providing you a snapshot rather than an exact figure. For future projections, I suggest using the average management fee we currently charge, which is 96 basis points, once we begin deploying that capital. The infrastructure and GPMS sectors generally have a higher management fee than 96 basis points, but using the average is advisable due to the variability of fundraising activities throughout the year. We typically deploy this capital over four to six quarters, and I believe we'll be able to start deploying this money within the infrastructure and GPMS verticals by 2025. As we distribute this capital in the second, third, and fourth quarters, you might find it useful to use an average fee for the year. Regarding our projection to raise $6 billion, we anticipate having about $3 billion in fee-paying assets under management on average, but given that we raised $3.2 billion in the first quarter, we're in a stronger position to invest sooner than we initially expected. If you have any further questions, I'd be happy to address them.

No. That is perfect. Thank you.

Well, thank you very much for your time here. I think again, out for a great start in 2025. Great fundraising, great results. I think, as I mentioned here when answering Tito's question, our FRE for the quarter, $42.6 million, if you multiply by four, and if you add the same incentive fees as last year and then an average $3 billion capital raise for this year, we get already to the $210 million. So very well positioned here to deliver the $225 million guidance that we gave you guys. Of course, also very well positioned to deliver on the $6 billion fundraising target. And as we move into the year, I think that the region and Patria are probably going to be very much benefited from the whole tariff uncertainties because of the low geopolitical risks of the region and how we are very well positioned to serve our Asian clients, Middle Eastern clients, and European clients. So thanks for your patience. I hope to see you in person soon. And again, have a good Friday. Thank you very much. Bye-bye.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone have a great day.