Patria Investments : PAX USQ Transcript 2026 02 03

About this update from Patria Investments Limited

LSEG STREETEVENTS EDITED TRANSCRIPT PAX.OQ - Q4 2025 Patria Investments Ltd Earnings Call EVENT DATE/TIME: FEBRUARY 03, 2026 / 2:00PM GMT CORPORATE PARTICIPANTS Andre Medina Patria Investments Ltd - Investor Relations Alexandre Teixeira Saigh Patria Investments Ltd - Chief Executive Officer, Director Ana Russo Patria Investments Ltd - Chief Financial Officer Marco D'Ippolito Patria Investments Ltd - Managing Partner CONFERENCE CALL PARTICIPANTS Craig Siegenthaler BofA Global Research (US) - Analyst Lindsey Shema Goldman Sachs Group Inc - Analyst Ricardo Buchpiguel BTG Pactual - Analyst Nicolas Vaysselier BNP Paribas Exane (UK) - Analyst Carlos Gomez-Lopez HSBC Securities (USA) Inc. - Analyst Fernanda Sayão Banco J.P. Morgan S.A. (Research) - Analyst PRESENTATION Operator Good day, and thank you for standing by. Welcome to the Patria Fourth Quarter and Full Year 2025 Earnings Conference Call. (Operator Instructions) 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. Andre Medina - Patria Investments Ltd - Investor Relations 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 US 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. ‌Alexandre Teixeira Saigh - Patria Investments Ltd - Chief Executive Officer, Director 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 three-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 surpassed 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 $200 million plus 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 US-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, 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 AUM in Brazil exceeded $150 billion as of September 2025, have been the fastest-growing asset management strategy in the country, having grown at a 30% plus CAGR compounded 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 and 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 NAV 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 FX 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 with $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, one year, three years, five years and since inception with since inception, net compounded annualized return of 11.1%, exceeding the benchmark by more than 360 basis points. In terms of geography, approximately 1/3 of our assets are invested in Brazil, 1/3 in other Latin American countries and 1/3 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 US 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 one 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, already have 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, a consequence of more market-friendly governments being elected in the region continue to drive demand from both local and global investors. If anything, the current geopolitical scenario, coupled with a weaker US dollar and attractive on-the-ground trends are 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, make 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 which 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 nonexecutive roles and projects. We are sorry to see Ana leave and want to thank her for all her hard work and contribution in the past several years but we are glad that we will continue our relationship in several fronts as, for example, with her current position as 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. Ana Russo - Patria Investments Ltd - Chief Financial Officer 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 three-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 nonexecutive 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 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 three-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 FEAUM 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 six years and an overall stickiness of our asset base, altogether highlight our ongoing ability to generate net organic FEAUM 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 one 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 adjustment, 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 purpose, if we consider the FX rate and the price of the public holdings by 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 fourth quarter '25 totaled a positive $1.8 million versus Q4 '24, mainly due to lower average debt and higher contribution from Tria, our energy trading platform. Sequentially, net financial income and other expenses were up of $0.8 million versus 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 previous earnings call, during 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 share 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 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 a simple math. Based on the midpoint of our 2026 FRE guidance and expected PRE, 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 us 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 or onetime FRE compared to the $105 million at year-end, which is very conservative as 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 is usually crystallized in the tax favorable jurisdiction, the effective rate was 5.6%, which represents 120 basis point improvement versus Q4 '24 on a comparable basis. The reduction was mainly driven by tax credits on our UK 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 would 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 comp 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 share in 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. QUESTIONS AND ANSWERS Operator (Operator Instructions) Craig Siegenthaler, Bank of America. ‌Craig Siegenthaler - BofA Global Research (US) - Analyst 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. Alexandre Teixeira Saigh - Patria Investments Ltd - Chief Executive Officer, Director Okay. Thank you very much, Craig. Thanks for your question. On the valuation process, we -- in summary, we use industry practice, industry common valuation process for our private equity drawdown funds and our infrastructure fund funds, all of our drawdown funds, we -- once a year, we have an independent appraiser to value the funds. 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 of the next three to five years and future prospects of the business and more of a technical discounted cash flow model as it is common in the industry for these kinds of valuations. And then this valuation, of course, is compared with multiples and compared with industry multiples, peers, if there are no comparable listed peers, whatever. So it's, of course, the main methodology is a discounted cash flow. And of course, the end result is compared with peers, valuations, listed, nonlisted M&A transactions, et cetera, et cetera. As it is what I'm saying, it's completely normal for these kind of valuations in the industry. And what we do is actually we then -- they give us a range and then we value within the range, we actually mark the companies one by one. That's what we do. And during the year, we don't really do 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 whatever or something really went -- goes wrong, like COVID or something like that or whatever. But if there was no major changes, I don't -- we really don't like and we are advised not really to keep changing the valuation of the business. If nothing major happens with that specific business during the year, we just then adjust the valuation by, again, the cost of capital until we go through that process, all that process again at the end of the subsequent year. So again, we have been doing this for -- since inception, right? Our first private equity fund was back in '97. It's going to be 30 years, not 29 years as of now. We know that because it's going to be -- this year is going to be our annual meeting with investors number 29, and we do one a year. So it's now 29 years ago, we did our first one. And we've been doing this kind of valuation for the businesses since then.

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