Patria Investments Ltd Q4 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Patria Fourth Quarter and Full Year 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Andre Medina from Patria Shareholder Relations. Please go ahead.

Thank you. Good morning, everyone, and welcome to Patria's Fourth Quarter and Full Year 2025 Earnings Call. Speaking today on the call are our Chief Executive Officer, Alex Saigh; and 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 in the Investor Relations section of our website on Form 6-K filed within 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. Reconciliation of these measures to the most comparable IFRS measures are included in our earnings presentation. Now I'll turn the call over to Alex.

Thank you, Andre. Good morning, everyone, and thank you for joining us today. We are very excited to report our fourth quarter results, a capstone to a very successful 2025, which highlights how as we enter 2026, Patria is in a strong position to achieve and hopefully exceed the 3-year fundraising and FRE fee-related earnings objectives in addition to other important KPIs we set for ourselves at our Investor Day in December 2024. Highlights of the quarter and 2025 include organic fundraising of $1.7 billion in the quarter and a record $7.7 billion for the full year, sharply surpassing our previously upwardly revised full year target of $6 billion by more than $1 billion. We generated $203 million of fee-related earnings in 2025, up 19% year-over-year, achieving our objective of over $200 million for the year. Distributable earnings per share reached $1.27 in 2025, driven by the strong fee-related earnings growth in addition to $19.6 million of performance-related earnings in the fourth quarter. We announced back on November 26, 2025, the acquisition of 51% of the Brazilian private credit manager, Solis, which closed on January 2. Solis, with approximately $3.5 billion of fee-earning AUM as of the third quarter 2025, substantially expands our capabilities and scale in the rapidly growing private credit market in Brazil. Pro forma for the acquisition, our credit vertical fee-earning AUM is approximately $12.1 billion. We also announced on December 11, 2025, the acquisition of several REITs real estate investment trusts from the Brazilian real estate manager, RBR, which closed yesterday and is expected to add approximately $1.3 billion of permanent capital real estate investment trust assets in Brazil. We are now the largest manager of listed REITs in Brazil with a pro forma fee-earning AUM of approximately $5.7 billion, a market in which we believe scale provides significant competitive advantages. Also just yesterday, we announced an agreement to acquire WP Global Partners, a U.S.-based lower middle market private equity solutions manager with $1.8 billion of fee-earning AUM as of the third quarter 2025, which will enhance our global capabilities in our global private markets solutions business. Pro forma for the acquisition, our GPMS Global Private Markets Solutions fee-earning AUM is approximately $13.6 billion. Our total fee-earning AUM of $41 billion as of the fourth quarter 2025 rose 5% sequentially and 24% year-over-year. Pro forma for the announced acquisitions, our fee-earning AUM at year-end is approximately $47.4 billion, putting us in a strong position to achieve our year-end 2027 target of $70 billion. We are also pleased to share that our energy trading platform, Tria, which has experienced strong growth since its launch in 2024 and contributed with $4 million to our 2025 distributable earnings, signed a definite agreement with Raizen to acquire its energy trading arm, Raizen Power. Upon completion of the transaction, Tria is expected to become one of the largest independent energy trading companies in Brazil. Finally, adding to our current approved share buyback program of 3 million shares, of which we have already acquired 1.5 million in the third quarter 2025, our Board just approved an additional 3 million share buyback program. On top of that, further illustrating Patria Partners' alignment with our business, of which we already own approximately 60%, and our belief in Patria's unique position to continue its growth path, we, Patria's Partners through our holding company, PHL, are happy to announce our intention to purchase up to 2.5 million PAX shares. Summing it all up, we can now purchase up to 7 million shares to return capital to our shareholders. Now let's take a closer look into the quarter and the year, starting with fundraising. The $1.7 billion of capital we raised in the fourth quarter 2025 and the $7.7 billion we raised for the full year do not include any acquisition and were driven by continued demand for our infrastructure, credit, real estate, and GPMS strategies. Our fundraising in 2025 exceeded the initial $6 billion target we set back at our Investor Day in December 2024, as well as the revised target of $6.6 billion we set in the third quarter of 2025. While we are leaving our 2026 and 2027 fundraising targets at $7 billion and $8 billion unchanged for now, our success in leveraging the investments we have been making in our platforms and distribution capabilities increases our confidence in our ability to meet and hopefully exceed our targets. Now turning to the fundraising performance of specific asset classes. As the leading infrastructure investor in Latin America, we continue to see increased global interest in this fast-growing asset class as we raised approximately $2.3 billion for our infrastructure strategies in 2025, led by the final closing of our Infrastructure Development Fund V and various fee-paying SMAs and co-investment vehicles. This was approximately 5x what we raised for infrastructure in 2024, and we see no letup in demand for these strategies from both global investors, as exemplified by the recently announced $2 billion data center projects led by one of our drawdown funds in partnership with ByteDance, and increasingly local investors. Next, GPMS raised almost $2 billion in 2025, continuing to highlight the strong support from our clients and our success in integrating this business into our platform. The recently announced agreement to acquire WP Global Partners, with approximately $1.8 billion of fee-earning AUM, we expect will further strengthen investor demand for our solutions strategies over time as it enhances our investment capabilities in the United States. Credit also had another strong year, fundraising a record $1.8 billion of capital, handily surpassing the $1.4 billion raised in 2024, which was itself a record. Continued strong investment performance, combined with the addition of Solis and its robust private credit capabilities, further enhances the capital raising prospects of our credit platform. On that note, let me give a little more color on how we see the private credit opportunity in Brazil. The total Brazilian credit market reached $1.7 trillion in 2024, with $800 billion estimated to represent the addressable market opportunity for asset-backed nonbank private credit, of which around $200 billion is already currently served through private credit vehicles, mainly CLOs. CLOs, which have exceeded $150 billion as of September 2025, have been the fastest-growing asset management strategy in the country, having grown at a 30% plus compound annual growth rate since 2019. This growth is supported by multiple structural drivers, including, but not limited to favorable regulation, banking disintermediation, tax incentives, and broader financial deepening, along with growing interest in the CLO structure amongst investors. With the acquisition of a majority stake in Solis, Patria significantly enhances its capabilities and scale in this very attractive market. Finally, even within a high-interest rate environment, we see building momentum in our real estate business. Our real estate strategies raised over $520 million in the fourth quarter of 2025, including over $260 million through a follow-on offering in our Brazilian logistics REITs and over $180 million in our funds in Colombia. As the largest manager of REITs assets in Brazil and one of the largest in Colombia with over $8 billion of pro forma permanent capital fee-earning AUM, we believe our substantial scale in this business is a significant competitive advantage when it comes to attracting investor capital, and we are excited with the opportunities this business has to offer heading into 2026. Of course, fundraising alone does not drive growth in fee-earning AUM and management fees. And we are proud to report that redemptions decreased by approximately 25% in 2025 versus 2024, a clear reflection of our strong investment performance across our verticals. Our ability to grow our fee-earning AUM is further enhanced by the stickiness of our asset base, given that approximately 90% is in vehicles with no or limited redemptions, including 22% or $9.1 billion of fee-earning AUM in permanent capital vehicles. Our strong fundraising, coupled with low redemption rates and a sticky asset base is translating into solid net organic growth as we generated approximately $2.4 billion of organic net inflows into fee-earning AUM in 2025, representing an organic growth rate of about 7%. We see additional room for our organic growth rates to increase further in the years ahead as we plan to grow our base of attractive products in sticky structures. In addition, with over 50% of our management fees charged on net asset value or market value, our strong investment performance continues to be an important growth driver, contributing approximately $3 billion to our fee-earning AUM. Combined organic net inflows and the positive impact of investment performance added over $5.3 billion to our fee-earning AUM in 2025. The impact of foreign exchange throughout the year was also positive, adding $2 billion to our fee-paying asset base. Finally, the acquisition of the Brazilian REITs discussed during our last earnings call and concluded in the second quarter of 2025 contributed $600 million. Summing it all together, our fee-earning AUM in the fourth quarter of 2025 reached $40.8 billion, up 24% or $7.9 billion year-over-year. Pro forma for recently announced acquisitions, our fee-earning AUM is now at $47.4 billion. It is also important to highlight that as we expand our business, a large portion of the capital we raise will only flow into fee-earning AUM as capital is deployed. Our fourth quarter 2025 pending fee-earning AUM totaled about $2.9 billion, further highlighting our future fee-earning AUM and management fee growth potential. Our fee-earning AUM growth is also reflected in the diversification of our business. Pro forma for recent acquisitions, our fee-earning AUM base is well diversified across our asset classes, with 29% in GPMS, 26% in credit, 19% in real estate, 12% in private equity, 9% in infrastructure, and 6% in public equities. Patria today has over 35 investment strategies with more than 100 products, with no single product representing more than 8% of our pro forma fee-earning AUM. Our largest fund, which is a corporate credit LatAm high-yield fund, has approximately $3.8 billion in AUM and has delivered an impressive 13.1% net compounded annualized return since inception in 2022 and as of the fourth quarter 2025. Our corporate credit LatAm high-yield strategy more broadly, which started back in 2000, currently has an aggregate AUM of over $5 billion and as of the fourth quarter 2025 has outperformed its benchmark for every single period: 1 year, 3 years, 5 years, and since inception, with a net compounded annualized return since inception of 11.1%, exceeding the benchmark by more than 360 basis points. In terms of geography, approximately one-third of our assets are invested in Brazil, one-third in other Latin American countries, and one-third in developed markets across Europe and the United States. With regards to our investor base, our sources of capital are also diversified across geographies with approximately 27% of our AUM coming from Europe and the Middle East, 31% from Latin America excluding Brazil, 16% from North America, 18% from Brazil, and 9% from the Asia Pacific region. Looking at our foreign exchange exposure, over 60% of our fee-earning AUM is denominated in a diversified basket of hard currencies, mainly the U.S. dollar and not exposed to soft currency fluctuations. Finally, as I mentioned before, approximately 90% of our pro forma fee earnings AUM is in vehicles with no or limited redemptions, including 22% or $9.1 billion of fee-earning AUM in permanent capital vehicles. These points further highlight the quality of our fee-paying asset base and the predictability and long duration of our management fees. Finally, we're also expanding the number of flagship drawdown funds into new strategies and asset classes, including infrastructure development, infrastructure credit, private equity buyouts, growth equity, venture capital, private credit, real estate development, secondaries, co-investment vehicles, among others. All of these products will be eligible to generate performance fees, highlighting the potential for even greater diversification of our performance fee earnings stream. Now our strong fee-earning AUM growth is translating into robust growth in fee-related earnings. In the fourth quarter of 2025, we reported fee-related earnings of $64.2 million, representing 30% sequential and 17% year-over-year growth, also supported by our margin expansion of 5% versus the third quarter 2025 and 5% versus 1 year ago, reflecting our success in integrating acquisitions and the growing scale of our business. For the full year, fee-related earnings reached $202.5 million, up 19% and in line with our guidance. On a per share basis, fee-related earnings of $0.41 in the fourth quarter 2025 rose 30% sequentially and 14% year-over-year. Full year fee-related earnings per share was $1.28, a 15% year-over-year increase. Given our strong fundraising momentum and fee-earning AUM growth outlook, we remain confident in meeting our 2026 fee-related earnings targets of $225 million to $245 million or $1.42 to $1.54 per share, in addition to our target of $260 million to $290 million or $1.60 to $1.80 per share. As a reminder, our fee-related earnings targets are inclusive of already announced and prospective M&A. We reported $78.5 million of distributable earnings in the fourth quarter and $200.9 million for the full year. On a per share basis, this was $0.50 and $1.27, respectively. In addition to the very strong fee-related earnings growth we highlighted earlier, distributable earnings also benefited from multiple monetization events in our Infrastructure Fund III, as we announced last quarter, our share count for the fourth quarter 2025 remained at 158 million shares. In connection with performance-related earnings, I think it is important to address the decrease in our net accrued performance fees primarily due to private equity buyout Fund V falling out of carry. As this particular fund's performance is close to its hurdle rate and given its European carry structure, foreign exchange and the price of public holdings can drive private equity buyout Fund V in and out of carry frequently. However, as we look more deeply into our business, we are optimistic in our ability to generate future performance fees as we believe we remain on track to deliver our performance-related earnings target range of $120 million to $140 million from the fourth quarter 2024 to the end of 2027. We have already realized $62 million of performance-related earnings against our target and Infrastructure Fund III, which is generating cash carry and had approximately $19 million of net accrued carry remaining as of year-end, is expected to generate performance fees in 2026. Private Equity Buyout Fund VI, which is a 2019 vintage and has over $210 million of net accrued carry is fully invested and entering its monetization phase. We have several newer strategies in growth and venture that have performed well and while still early days have already accrued about $7 million of net accrued carry, a balance that we would expect to grow over the coming years. For both private equity and infrastructure, an increasing proportion of our growing co-investment assets are carry eligible, which has the potential to generate performance fees on a deal-by-deal basis. In addition, as I mentioned, we have an expanding range of drawdown funds across our asset classes eligible to generate performance fees. To summarize, I want to reinforce that we believe that we are on track to deliver on our performance-related earnings target range of $120 million to $140 million from the fourth quarter 2024 to the end of 2027. With $62 million already realized, approximately $20 million expected in 2026, mainly from our Infrastructure Development Fund III and the remaining balance expected to be realized in 2027 from multiple funds. Before I conclude, a quick note on macro. From our perspective, the macro events, both globally and within the region, favor the drivers of our business. These long-term drivers, such as the financial deepening across Latin America, deregulation and pension reforms in large economies in the region, increased allocations to alternatives, robust demand for infrastructure investing, potentially lower interest rates on the back of declining inflation and better fiscal prospects—all of these factors are a consequence of more market-friendly governments being elected in the region and continue to drive demand from both local and global investors. If anything, the current geopolitical scenario, coupled with a weaker U.S. dollar and attractive on-the-ground trends is fueling increased interest in Latin America from a broadening range of investors. Incidentally, that is what capital markets showed in 2025 and also year-to-date, with the region outperforming in many asset classes. With that as a backdrop, we think it is important for investors to keep in mind that we have close to 40 years of investing experience navigating the various economic and political cycles in the region. This experience, combined with the greater diversification and resilience of our business, in our view, makes us uniquely positioned to capitalize on both the increased investor interest in the region and the wide range of investment opportunities we see. Again, we are excited about the fundraising and fee-related earnings momentum we have been building—momentum that is supported by our increasing scale and capabilities across an expanding range of strategies. We believe our long-term opportunity and outlook remain bright, and none of this would be possible without the dedication and capabilities of our team members, for which I am very proud and grateful. On a final note, I want to comment on organizational and structural changes we have announced in recent months. First, I'd like to thank our CFO, Chief Financial Officer, Ana Russo. Ana approached me about a year ago with her plan to step down from her current corporate role as Patria's CFO to focus the next stage of her career on advisory and non-executive roles and projects. We are sorry to see Ana leave and want to thank her for all her hard work and contributions in the past several years, but we are glad that we will continue our relationship on multiple fronts as, for example, through her current position as a Board member of Patria-Moneda Asset Management in Chile. I wish Ana the best of luck as she charts a new career path. Following an extensive review process, we announced that Raphael Denadai, currently Patria's partner and CFO of Portfolio Management with over 25 years of experience, will assume the role of Patria's CFO effective in April 2026. Ana, who will remain in her position until then, will provide more color on the transition in her prepared remarks. In addition, as we announced back in December 2025, to further strengthen our corporate structure in order to drive operational excellence and better support Patria's strategic execution at scale, Patria recently created the role of Global Chief Operating Officer and was pleased to introduce Nikitas Psyllakis as our new Global COO. Nikitas joins Patria from DWS Group, bringing over 20 years of extensive global experience in financial services, having led strategic planning, operational transformation, and regulatory initiatives. With that, I would like to once again welcome Nikitas and Raphael to their new roles. Now let me turn the call over to Ana to review our financial results in more detail. Thank you, Ana.

Thank you, Alex, for the kind words, and good morning, everyone. Indeed, it's quite rewarding to close out 2025 with $7.7 billion of organic fundraising, exceeding by a large margin our previously upwardly revised full year target of $6.6 billion by more than $1 billion. We expect the strong fundraising momentum and fee-earning AUM growth for 2025 to continue as we enter the second year of our current 3-year plan and are even more confident of our ability to achieve our objectives for 2026 and 2027. Before I review our financials in more detail, I would like to take a moment to speak about my transition from the CFO role. Stepping down as Patria's CFO is a deeply personal decision driven by my desire to dedicate the next stage of my career to advisory and non-executive positions, areas where I believe I can contribute to a different organization given my diverse background. I will continue serving as a Board member of Patria-Moneda Asset Management in Chile and remain fully committed to Patria as a CFO through the end of April. Over the next few months, my focus will be on delivering all 2025 annual reports and regulatory obligations, supporting our new auditor, KPMG, as they complete their first annual audit, and most importantly, ensuring a smooth and effective transition to Raphael Denadai. I'm extremely proud of how Patria has evolved during my 3.5-year tenure as CFO, and I'm confident that my colleague, Raphael, will do an excellent job and be supported by a strong and committed team. Let's review our fourth quarter and full year 2025 results in more detail. Our full year organic fundraising of $7.7 billion was an important step to deliver our cumulative 3-year plan of $21 billion of total fundraising that we communicated at our 2024 Investor Day. Our success this year demonstrates that the strategic investments we made across our investment platforms, products, and distribution capabilities are paying off. We entered 2026 with greater visibility and unwavering confidence in our ability and our path to achieve our objectives for this year and next. Our fee-earning AUM rose 24% year-over-year and 5% sequentially to $40.8 billion. The strong year-over-year growth reflects mainly the combination of solid organic net inflows of $2.4 billion and the positive contribution from our strong investment performance, in addition to a positive FX impact and the acquisition of several Brazilian REITs concluded in the second quarter of 2025. As Alex mentioned, our fee-earning AUM growth continues to highlight our expanding fundraising capabilities and deployment opportunities, coupled with the stickiness and resilience of our asset base. Pending fee-earning AUM of $2.9 billion, combined with our fundraising goals, the 22% of fee-earning AUM that are in permanent capital vehicles, the almost 35% of fee-earning AUM in drawdown funds with an average life of 6 years, and an overall stickiness of our asset base—all together highlight our ongoing ability to generate net organic fee-earning AUM growth over time. Total fee revenue in the fourth quarter reached $101 million, up 8% year-over-year and about 19% sequentially. For the full year, total fee revenue reached $344 million, an increase of 14% versus 1 year ago. Our management fee rate averaged 92 basis points over the trailing four quarters. As reviewed at our December 9, 2024 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 to trend towards approximately 90 basis points over the coming quarters, but with the potential to vary depending on the mix. Looking into our expense lines, operating expenses, which include personnel and G&A expenses, totaled approximately $36.1 million in the quarter, up 5% sequentially and down 4% year-over-year. We remain focused on controlling expenses and capturing operating efficiencies even as we continue to reinvest in the business. For the full year, operating expenses totaled $141.6 million, up 8% versus 2024, mainly driven by new acquisitions and salary increase inflation adjustments, partially offset by realized operating efficiencies. As we look ahead to 2026, excluding the impact of acquisitions, total expenses in the fourth quarter are a good starting point as we enter the new year. Putting it all together, Patria delivered fee-related earnings of $64.3 million in the quarter, up 17% versus prior year and 30% sequentially with an FRE margin that rose approximately 5 percentage points versus Q4 '24 and sequentially to 63.6%. We remind everyone that the fourth quarter is often our strongest quarter in terms of FRE margin, driven by the recognition of most of our high-margin incentive fees from our credit and public equity portfolio, which totaled $11.3 million in the quarter. For the full year 2025, we generated $202.5 million of fee-related earnings, up 19% year-over-year, in line with our guidance. As Alex mentioned, we continue to expect to generate $225 million to $245 million of FRE in 2026, and we remain confident that we are on path to deliver on our 2027 FRE target of $260 million to $290 million with an FRE margin objective of 58% to 60%. While our recent M&A may exert some short-term pressures of FRE margins, our expanding scale and ability to realize operating efficiencies keep us confident that we can meet our FRE margin objectives for 2026 and 2027 of 58% to 60%. As noted on our last call, in Q4 2025, we had multiple monetization events in our Infrastructure Fund III, which generated $19.6 million of performance-related earnings in the fourth quarter. We continue to expect Infrastructure III, which had approximately $19 million of net accrued performance fees at the quarter end, to continue its realization through 2026. Our total net accrued performance fee decreased from $402 million in the third quarter '25 to $249 million in the fourth quarter of 2025, mainly driven by private equity Fund V falling out of carry, driven by the price of public listed companies and FX. For reference purposes, if we consider the FX rate and the price of the public holdings by the end of January, net accrued performance fees for Fund V would have been around $40 million. As we look more deeply into our business and as detailed by Alex, we are optimistic about our ability to generate future performance fees from multiple funds. Next, our net financial and other income and expenses in the fourth quarter '25 totaled a positive $1.8 million versus Q4 '24, mainly due to lower average debt and a higher contribution from Tria, our energy trading platform. Sequentially, net financial income and other expenses were up $0.8 million versus the third quarter '25, mainly reflecting a lower contribution from Tria. While it can vary sharply quarter-to-quarter, it's worth noting that in 2025, Tria contributed approximately $4 million to Patria, and we are very excited regarding the long-term potential of this business and hope to share more updates on the development of this business over the course of 2026. At the end of the quarter, net debt totaled approximately $105 million, slightly below the $108 million for the third quarter '25 as we did not have any meaningful M&A payments in the quarter. Our net debt to FRE ratio of 0.5 was well below our long-term guidance of 1x. Deferred M&A-related cash payments through 2028 currently total approximately $110 million, excluding potential earn-outs. As highlighted in a previous earnings call, during the third quarter, we entered a total return swap or TRS with a financial institution through which 1.5 million shares were purchased on our behalf. We expect to settle the TRS by Q3 2026, at which point the shares will be transferred to Patria and subsequently retired. I would like to take the opportunity to recap our capital management strategy based on our strong cash generation and conversion of distributable earnings. First, we increased our dividend by $0.05 per share for 2026, resulting in an expected dividend payment of $100 million. Second, we will target around 3 million shares for repurchase to offset dilution from stock-based compensation and any M&A transaction settled in shares. For this purpose, we may again consider the use of total return swaps, which have proven to be a cost-effective capital management tool. With regard to current M&A, we expect funding to come primarily from cash. Also, as of December 31, our 2026 deferring contingent payment totals approximately $100 million, of which about 80% is expected to be paid in cash. To highlight our ample ability to fund our growth and maintain a healthy dividend, let's look at some simple math. Based on the midpoint of our 2026 FRE guidance and expected performance-related earnings, we estimate our cash generation in 2026 will be approximately $220 million. So detracting our dividend, payment of TRS, and the current deferred and contingent payments noted before, we still leave ourselves with the capacity to fund CapEx and additional M&A when considering our cash generation and our total unused debt capacity of over $100 million. Of note, our total current net debt capacity is about $235 million, which is one-time FRE compared to the $105 million at year-end, which is very conservative by industry standards. All the above underscores the strength of our financial position to support growth initiatives and maintain strategic optionality for our shareholders. Our effective tax rate in the fourth quarter '25 was 4.2%. Excluding performance fees, which are usually crystallized in a tax-favorable jurisdiction, the effective rate was 5.6%, which represents a 120 basis point improvement versus Q4 '24 on a comparable basis. The reduction was mainly driven by tax credits on our U.K. entities. On a full-year basis, excluding performance fees, the effective tax rate reached 6.3% with 180 basis points lower than 2024. Looking ahead, we continue to expect our annual tax rate to average around 10%. In the fourth quarter, we generated $78.5 million of distributable earnings or $0.50 per share. For the full year, distributable earnings were $200.9 million or $1.27 per share, representing a 6% year-over-year growth from $189.2 million in 2024, with a strong FRE growth more than offsetting lower performance-related earnings and the higher share count. While FRE and DE are important financial metrics, I'd like to give you some additional color on line items that impact our net income. In 2025, net income totaled $85.6 million, which is up 19% versus $71.9 million in 2024. The increase of $13.6 million is mainly driven by distributable earnings growth and lower deferred contingent consideration, partially offset by higher than originally anticipated equity-based compensation, reflecting better performance, lower employee turnover, and expansion of the program. We plan to give more color on the equity-based compensation and other line items during our first-quarter call. We finished the quarter with 158 million shares, unchanged from the prior quarter. We did not repurchase any shares during the quarter and continue to expect the share count to average between 158 million and 160 million from 2025 to 2027, inclusive of our additional share repurchase. In 2025, the Board approved a share repurchase program of up to 3 million shares, of which we have utilized 1.5 million through the TRS. At our recent Board meeting, we received the approval for an additional 3 million shares to be added to the program. Finally, we declared a dividend of $0.15 per share for the fourth quarter. We remind everyone that we have updated our fixed dividend policy from $0.60 in 2025 to $0.65 per share for 2026, an increase of 8%. Overall, we are truly encouraged by our fourth quarter results and with the momentum we are building as we continue to diversify and improve the resilience of our business. We believe we are firmly on track to achieve the various targets we have shared with you, and we are excited by the growth opportunity ahead. Thank you, everybody, for dialing in, and we are now ready to answer your questions.

And our first question comes from Craig Siegenthaler of Bank of America.

So first question is on private equity valuation process. We've had some recent inbound on the topic, so I thought we could kind of clean it up here. Private Equity Funds IV and V, they're both pre-2016 vintage funds. They both have a significant amount of unrealized value. So I was wondering if you could talk about your internal valuation process, how it works and also how those valuations are validated by third parties.

Okay. Thank you very much, Craig. Thanks for your question. On the valuation process, we—in summary, we use industry practice, an industry common valuation process for our private equity drawdown funds and our infrastructure funds. All of our drawdown funds have an independent appraiser to value the funds once a year. We normally use a recognized independent appraiser that does the valuation with year-end numbers, in this case, end of 2025. This independent appraiser works with the management teams of the respective portfolio company, going through a whole understanding of the business, understanding the next 3 to 5 years and future prospects of the business, utilizing a more technical discounted cash flow model as it is common in the industry for these valuations. And then this valuation, of course, is compared with multiples and compared with industry multiples, peers, if there are no comparable listed peers, or whatever. The main methodology is a discounted cash flow. The end result is then compared with peers' valuations, listed, non-listed M&A transactions, et cetera, et cetera. So, as I am saying, it's completely normal for these types of valuations in the industry. What we do is actually we then get a range and then we value within that range. During the year, we don't adjust much. We just actually have the valuation during the year, quarter by quarter, be adjusted by the cost of capital of that specific business and adjust the valuation if something major happens, like we sell part of the business or we merge, or if something really goes wrong, like COVID or whatever happens. But if there are no major changes, we don't really get into the habit of frequently changing the valuation of the business. If nothing major happens with that specific business during the year, we just adjust the valuation again by the cost of capital until we go through that process all over again at the end of the subsequent year. Again, we have been doing this since inception. Our first private equity fund was back in '97. Our first annual meeting with investors will be number 29 this year. We know this because it's going to be our 29th annual meeting, and we do one every year. We've been doing this kind of valuation for the businesses since then. We check with industry practices now and again, and continue with the methodology I just mention. However, it’s important to note sometimes there can be confusion when we discuss charging management fees and performance fees. We do not charge management fees on NAV for the drawdown funds. So the valuation is an indicative value and does not impact our revenues. It doesn’t affect our revenues because we charge on costs. So if we invested $100 in that business and that business is now valued at $150 or $50, we continue charging on $100 until we sell the business. Thus, the valuation does not affect our management fees. Secondly, we do not run performance fees or unrealized performance fees through our P&L. Consequently, if we have more or fewer performance fee accruals, all the numbers you heard me state about our 2025 financials and Ana Russo regarding our 2025 financials does not change because we do not run our performance fees through our P&L. Our team, our employees are not incentivized by unrealized performance fees, and they do not receive a bonus on unrealized performance fees. Thus, regardless of whether the valuation is 1, 2, 3, 4, or 10, their bonus stays the same. We recognize performance fees when they are paid: cash in the bank. And then we recognize them as revenues and calculate the bonuses of our employees based on them, which is paid a couple of quarters later. There’s a negative working capital here, the firm versus the employees on paying performance fees. We do actually provide unrealized performance fees as an off-balance sheet number, but it's important to note that these are unrealized. As you probably saw for the December 2025 numbers, we have around $250 million of unrealized performance fees. We guided that we expect to generate around $120 million to $140 million of performance fees from the last quarter of 2024 to the end of 2027. We already realized $60 million of performance-related earnings against our target, and we believe Infrastructure Fund III will generate cash carry and had approximately $19 million of net accrued carry remaining as of year-end, expected to generate performance fees in 2026. Lastly, Private Equity Buyout Fund VI, a 2019 vintage, has over $210 million of net accrued carry and is fully invested and entering its monetization phase. We have several newer strategies in growth and venture that have performed well, and while it's still early days, we already have accrued about $7 million of net accrued carry, a balance that we expect to grow over the coming years. We have an increasing proportion of our growing co-investment assets that are carry eligible, and this has the potential to generate performance fees on a deal-by-deal basis. As mentioned, we also have an expanding range of drawdown funds across our asset classes that are eligible to generate performance fees. To summarize, I want to reinforce that we believe we are on track to deliver on our performance-related earnings target range of $120 million to $140 million from the fourth quarter 2024 to the end of 2027. With $62 million already realized, approximately $20 million expected in 2026, mainly from our Infrastructure Development Fund III, and the remaining balance expected to be realized in 2027 from multiple funds. Thank you for your questions.

I do have a follow-up also on private equity. But if you look at the MSCI Brazil Index of listed public equities, Brazil has been very strong. As you know, it's returned 55% over the last 12 months, outperforming the S&P 500 in the U.S. by about 40%. Interest rates are expected to decline in Brazil. All this should benefit public equities, private equities, your realization pipeline. So can you talk about the prospects for both IPOs and strategic exits in private equity in 2026? And I assume exits to other private equity firms are still quite limited at this moment given the lack of competition in Brazil, too.

Yes. Thank you very much. Yes, I think normally, I'm generalizing again here, sorry to generalize—but listed traded securities do anticipate trends. In this case, I think the upward trend that you just mentioned, we did see reflected through the 2025 numbers of listed securities. The MSCI is one of them, as you mentioned, appreciating substantially in 2025 in local currency and in U.S. dollars. Of course, the U.S. dollar has weakened against some of the local currencies, so that's helped the U.S. dollar denominations return. That normally translates into private securities over time. It is not an immediate correlation, but the general enthusiasm for the region and investors start buying assets when they can, and the listed ones are the ones they have more access to because they're listed, of course. The private assets come in due time. And communication with investors has already begun regarding future exits from both our infrastructure and private equity funds. We’re nearing the realization phases for assets in Infrastructure Fund II and Fund III. In terms of private equity funds, we focus on selling the assets of Private Equity Fund IV and V—if you look at Private Equity Fund IV, for instance, we primarily invested in healthcare, which has been recovering after some COVID-induced hurdles. Fund V is also focused on healthcare, along with other sectors so we see good prospects for them too. In addition, Private Equity Fund VI and VII are fully invested and beginning monetization as well. Our growth equity funds, which include education and various investments, have already seen significant realizations and are expected to continue to do so in 2026, with the private equity venture fund performing well with realizations contributing to our revenue. Thus, we’re optimistic across all asset classes—including infrastructure and private equity growth funds—expecting returns to benefit from favorable market conditions in 2026.

And our next question comes from Lindsey Shema of Goldman Sachs.

Just wondering, you maintained your 2026 fundraising guidance. And because of that, it does imply slightly lower fundraising in 2026. So because of that, I just want to understand, do you see any risks to fundraising? Are you maybe a little bit less optimistic? And what are really those reasons for maintaining the fundraising guidance where they are? And then on the flip side, if there's kind of any upside risk to that guidance? And on that note, if you could just mention how much of your fundraising is coming from your own fund of funds and how that plays into your fundraising?

Lindsey, thanks for the question, and thanks for participating in the call. No, we're just being conservative, to be honest. I think it's—we're not—we had a guidance. We gave a 3-year plan. We want to hit the 3-year plan. The 3-year plan that we communicated in December of '24 was to raise organically $21 billion, which would involve $6 billion in 2025, which we did—$7.7 billion compared to our guidance of $6 billion. Then it would be $7 billion for 2026 and $8 billion for 2027. This gives a total of $21 billion in organic fundraising to increase our fee-earning AUM to $70 billion by the end of 2027, starting from around $35 billion at the end of 2024. So we aim to double our fee-earning AUM with an increase of 25% annually. We remain extremely positive about our fundraising momentum. However, we feel it prudent to maintain guidance at $7 billion and $8 billion for 2026 and 2027 respectively. We currently see good momentum in fundraising, but we'll wait for the first two quarters of 2026 to precisely evaluate if we might increase those expectations. While I cannot guarantee that we will adjust the numbers upward, we do prefer to play it conservatively rather than overcommit and underdeliver.

My only comment here and good afternoon, everyone. My only comment here is, as Alex said, we don't have fund of funds. We do manage a listed trust that has actually funded one of our secondary funds with an amount of $75 million. Again, a very small amount relative to the overall fundraising for last year. Just to remind, this is a vehicle that has an independent Board. It's a listed trust listed in the London Stock Exchange. Therefore, decisions are subject to an independent Board.

Okay. Any subsequent questions, Lindsey? Did we manage to answer your questions?

Yes. Thank you, Marco. It was the listed vehicle that I was asking about there. And then maybe just some further color on fundraising. Are you still seeing international interest in Latin America region? I know Brazil has been kind of a hot topic right now. What regions are you really seeing the most interest from? And where do you expect that incremental fundraising to come from?

Yes. No, thank you, Lindsey. No, yes, I think we have the—I have been saying that, I think, over several earnings calls that we have been geographically overperforming in LatAm, overperforming Asia, and Middle East. We’re around performing expectations in Europe, and we've underperformed in the U.S. That hasn’t changed throughout the whole year 2025. We have been overperforming LatAm generally, raising $7.7 billion compared to our guidance of $6 billion—30% more than our initial guidance of $6 billion. Where is it coming from? Overperforming in Asia Pacific, Middle East, and LatAm. We are performing in line with our expectations in Europe, but have underperformed in the U.S. Our geopolitical shifts in the world are benefiting LatAm. We are seeing interest from Asia Pacific, Middle East, and LatAm itself. I think some of that interest has to do with geopolitical shifts with some investors focusing more on LatAm and less on other parts of the world. LatAm is well-positioned to benefit from these trends due to solid democracies with strong institutional and regulatory frameworks. When comparing fiscal budgets, you can see that while small differences exist, they still shine favorably against countless countries worldwide. The region is also enhanced by high percentages of renewable energy and manufacturing capabilities. It’s a region rich in oil and gas and also in soft commodities. In my view, LatAm was underappreciated for many years, and now I think it’s gaining its deserved attention from investors.

Our next question comes from Ricardo Buchpiguel of BTG Pactual.

Can you please provide more color on the nature of the process related to the around $100 million in litigation liabilities Patria has and also comment about the chances of having to pay some of this value? And what are the key steps on the main litigations on this bulk of $100 million?

All right. Ana, do you want to help me with this answer? I think specifically the litigation liability, please?

Thank you, Ricardo, for the question. I was also making sure that this—the $100 million as is posted in our financial statement and also 20-F, is just so that it is not in our balance sheet, as you know, because we just consider an accrued if there is a possibility for considering that is losing. So you—as part of our information, you're going to see that more than 80% of this litigation, we already think is going to go away in our next reports, and basically, as we already mentioned in all prior reports, that it was not possible—it was not a remote, but it was probable. So we've actually won—and this means more than 85% of it is going to go away in our next reports.

That's clear. And a follow-up question. We saw that there was an increase in transaction costs related to M&A understand that Patria has been reaccelerating the M&A agenda and some announcements were made this year. So my question is if we should see—should expect this level of transaction costs of around $20 million, $25 million per quarter in the following quarters.

Yes. I think—well, I can take that from a macro view and then I can answer specific about the numbers. Just again, just to go through this litigation process again. So we won a specific litigation there, Ricardo, where around approximately 85% of the number of $100 million will come out of our numbers at the beginning of 2026, okay? So there’s 85% out of the $100 million there. On transaction costs, I think we did say to the market that we would have a hiatus in our acquisitions during 2025 in order to show our capability to integrate the businesses that we have acquired and fundraise for those acquired businesses, which I think we were spot on with the $7.7 billion that we raised does not include any acquisitions because we did not do any acquisitions during 2025. We raised money for businesses that we had acquired in the past like our credit business, our GPMS business, et cetera, and our real estate business as well. So I think that hiatus was positive for us. I think we're also happy to be re-entering acquisitions; I think the key moments are not to rush it. We also reminded the market that we would continue our acquisitions strategically, and we gave the guidance in December 2024 that we would fundraise $21 billion organically, as I mentioned here in Vinay's answer, but also look at $18 billion of fee-paying AUM acquisitions in order to reach our goal of $70 billion of fee-paying AUM by 2027. So we’ll be gradually re-entering the market with the acquisitions as we did with the acquisition of this private debt platform and some real estate investment trusts in Brazil, along with the recent signing of a global private market solutions business in the United States called WP. Yes, I think we will come back. We’ve outlined the guidance of $18 billion, which includes around $8 billion we’ve already acquired. So we’re targeting another $10 billion by the end of 2027. I hope I answered your question.

No, that's clear. So mainly when you are closing M&A, we should see smaller well. That's very clear.

And our next question comes from Nicolas Vaysselier of BNP Paribas.

I would like to bring the discussion back to the flagship PE and infrastructure funds. I acknowledge this is not the bulk of your fundraising targets for the next few years. Still, I would like to have a bit of color from your side. I mean you've managed to raise the success of funds in what was a difficult environment—macro environment for the LatAm region. And I was wondering if you could tell us more about the changes in the LP base you might have had from PE Fund IV to PE Fund V and same thing on the infra and particularly the sort of free-up rates you've managed to achieve from your LPs?

Nicolas, thanks for your question. Well, we have seen, in general, I think if we go back to our earlier funds and today, a shift from endowments and family offices to institutional investors. So if you look at the absolute value of the dollars that we raised for these funds that you mentioned—our drawdown funds, private equity funds, and infrastructure funds, in value, we see more and more institutional investors composing the absolute dollar amounts we’ve raised. You have a big number of family offices, but in absolute values, they are contributing less and because institutional investors tend to come in with sizable checks rather than family offices. That trend has been apparent in our drawdown funds, especially those you just mentioned. As for the re-up rates, they range from 40% to 60% for various funds. Our latest secondary opportunities Fund #5 has re-up rates above 50%. So that's the latest available data for you. For Private Equity Funds IV and V, it might be difficult at this moment to accurately review re-up rates since they are older funds. I can get back to you offline with estimates for you'd like.

And our next question comes from Carlos Gomez-Lopez of HSBC.

So first, I want to congratulate Ana I think for a very good presentation—very good job—and luck in your next endeavor. Specifically on Page 21, you give us a very good breakdown about shares outstanding and the increase in the first quarter of '25. We understand this is related to particular transactions M&A. What do we expect for the share count in the next, let's say, 2 or 3 years? Where should we expect to be dilution to shareholders—and second, when you look at the EPS evolution on Page 2—and I realize that the earnings is not everything, but you have had $1.26 in '23, $1.24 in '24, $1.27 in '25. What—again, what is the evolution that we should expect in the coming years?

Carlos, thank you for your question. I'll ask Ana to help me here and answer specifically on the numbers that you just mentioned. In general, we gave a guideline in our December 2024 three-year plan that we would have a share count of around 158 million to 160 million shares for the '25, '26, and '27 period. We finished 2025 with 158 million shares, and we project 2026 to '27 for the share count to stay within that range, around 160 million shares. This is the guideline we provided in December 2024 for the '25, '26, and '27 period. And we have also provided guidance for our FRE for 2026 for this year, which is $225 million to $245 million with a mid-range, of course, of $235 million. And for 2027, it is $260 million to $290 million with a mid-range of $275 million. We can use those numbers along with the share counts I provided to calculate the FRE per share. Ana, do you have the specific numbers available that you can assist me with for FRE per share for 2026 and 2027?

Sorry, I was on mute. Yes. I think just to understand what Carlos, what you're saying. So—when we look into our FRE per share—sorry, we have 108 on the FRE when we talk—I'm sorry—you were talking about FRE per share. I'm sorry that we couldn't hear you.

No, no. Actually, your answer has been on FRE per share, and I understand that it is the main metric that you use. But I was looking at distributable earnings, which ultimately is the measure for shareholders.

To be frank, it’s hard to listen exactly to your question. I think there was a noise in the background. So I understood FRE, but you’re saying DE. So I am sorry about that, Carlos.

No, no, my fault. I hope it’s better now.

No, no, I'm sorry. We were not listening very well to your question. So on the DE side, what we do is the following. We provide an FRE number, which is the one I just gave you: $225 million to $245 million for 2026, $260 million to $290 million for 2027. We also provide a share count number, which is 158 million to 160 million shares for '26 and '27. We don't provide a per year number for DE because it's very hard to pinpoint exactly which quarter and when performance fees will be generated. Thus, we gave a 3-year guidance. The 3-year guidance was $120 million to $140 million of performance fees. As of the end of 2025, we generated approximately $60 million of performance fees. So for 2026 and 2027, there's $60 million to $80 million left. It's very difficult again to predict exactly what quarter or even one year. Therefore, we provided this range as our guidance. We are one year into the guidance with two years to go. If we take the lower-end of this range—$60 million of performance fees—we believe Infrastructure Fund III is most likely to generate performance fees. Current unrealized performance fees in that fund are $20 million. Thus, that's $20 million of the $60 million. The remaining $40 million would come from various funds that we have that are maturing to generate performance fees.

Last one, do you expect the tax rate, which is down again about 5% or so to stay at those levels?

Our guidance on tax is around 10% tax rate. We've currently been able to maintain a lower tax rate for several reasons. One reason specifically for 2025 is due to a tax credit in the U.K. However, we don't foresee that recurring tax credit in 2026 or 2027. So we expect approximately a 10% tax rate as we move forward into those years.

Yes. Our tax rate has two impacts; when you look into our tax rate, the size of the performance also impacts our effective tax rate because some of the revenue sometimes comes from jurisdictions which have favorable tax rates. So you also have to take that into consideration when compared year-over-year. But as Alexandre mentioned, it was favorable impacts reflecting a credit in the U.K. We foresee for the next 3 years that at the end of the period, it would reach approximately 10%. So over time it will increase over time to reach that approximately 10% as we increase revenue and income.

Our next question comes from Fernanda Sayao of JPMorgan.

You've been growing very aggressively on the real estate business. Could you elaborate a little bit more on the strategy here? And how dependent do you think that lower rates is to grow this business?

Thank you, Fernanda. Thanks for your question. Well, we are extremely excited about our real estate business, in general, not only in Brazil, but in LatAm. We are currently the largest real estate investment trust manager in Brazil, and scale in this asset class does matter. I think we've been successful with our fundraising and have several strategies in place. It is an asset class in general that is interest rate dependent. When interest rates rise, we see a slower pace of fundraising. Conversely, as we begin to see rates show a decline, we could expect our fundraising to pick up, which is anticipated to happen in Brazil this year. The Brazilian Central Bank is most likely to reduce interest rates as indicated by the yield curve. We should see subsequent improvements in our fundraising pace, particularly for our Brazilian real estate investment trusts. Additionally, the size of our funds allows many investors to consider us for asset exchanges where they can swap real estate portfolios for shares of our funds. This provides a flexible exit strategy for families, which is particularly helpful in inheritance planning. Investors can sell shares of our funds progressively rather than having to sell entire real estate holdings. All of this, I believe, points to an improved fundraising landscape for our Brazilian real estate investment trusts as we enter 2026. I want to thank everyone for your patience and for staying with us for such a long call. I genuinely appreciate your engagement and support. I hope to see all of you in person during the year, and I believe there are several conferences we will get together for further discussions. Thank you very much for the invitation, and hopefully, we will continue delivering. I'm extremely confident in our numbers and start the year with a strong momentum. That momentum should translate into even better fundraising than projected, alongside fee earnings AUM and revenue. Thank you, everyone. Have a good day. Bye-bye.

This concludes today's conference call. Thank you for participating, and you may now disconnect.