Ridgepost Capital Third Quarter 2026 Earnings Conference Call - RIDGEPOST CAPITAL INC

Financial Performance:

• Adjusted net income per share was $0.25 in Q3 2026.
• Fee-related revenue reached $89 million, a 17% year-over-year increase, with management and advisory fees comprising $87 million.
• Fee-related earnings (FRE) totaled $43 million, up 19% year-over-year, resulting in a 48% FRE margin for the quarter.
• Fee-paying AUM entered the quarter at $35.2 billion, growing 2.4% sequentially and 21% year-over-year (11% ex-Stellis).
• Year-to-date (first nine months) gross fundraising and deployment hit $4.5 billion, a record period, with $2 billion in venture capital, $1.7 billion in private equity, and $700 million in private credit.
• Adjusted net income for the first nine months was $86 million, generating $75 million in GAAP operating cash flow.
• Net leverage stood at 2.7x at quarter-end, with a target to reach the mid-2x range by year-end.
• Full-year 2026 core fee rate is guided at approximately 103 basis points; direct and secondary catch-up fees are expected to be $6–$8 million in 2027.

Guidance and Future Outlook:

• Targeting $50 billion in fee-paying AUM by year-end 2029.
• On track to meet the aggregate $10 billion gross fundraising and deployment target for 2026–2027.
• Q4 2026 is expected to show strong fundraising momentum across 15+ funds in market, with seasonality expected to drive higher fee rates in the fourth quarter.
• No significant fee expiration or step-downs expected in Q4; full-year step-downs projected at 5–7%.
• Cash tax rate expected to be high single-digit to low double-digits for 2026 and mid-teens for 2027.
• Next vintage launch for Stellis expected early 2027.

Business Segments and Product Lines:

• TrueBridge (Venture Capital): Fee-paying AUM grew 32% year-over-year to $8.7 billion; Secondaries 2 closed in September with over $500 million, more than double the size of the predecessor; flagship funds have seen >20% size growth per vintage on average.
• Stellis (Lower Middle Market Direct Lending): Expanding lower middle market direct lending efforts; preparing to re-enter the market for a new vintage in 2027.
• Private Credit & Equity: $450 million raised in private equity and $385 million in credit during Q3; strategies Bon Accord (GP stake), Hart Capital (NAV lending), and Qualitas/RCP (middle market PE) remain in fundraising.
• Cross-Selling: Firm-wide cross-sell activity totaled $1.7 billion since June 2024, representing ~15% of fundraising (up from <5% at the 2024 Investor Day).

Market and Competitive Landscape:

• Capital raising is broad-based across 15 funds, with strong LP demand for secondaries and primary venture funds.
• Venture ecosystem capital velocity remains robust, with TrueBridge positioned at the center of the market.
• Competitors face redemption risks; Ridge Post Capital benefits from a structural advantage with ~98% of AUM in drawdown funds (committed capital basis) and a weighted average duration of seven years.
• Macro environment described as fluid and dynamic, impacting credit deployment timing but not long-term demand.

Risks and Challenges:

• Macroeconomic volatility, including interest rate fluctuations, software/SaaS sector concerns, and geopolitical instability, has caused muted activity in credit deployment.
• Seasonality impacts tax credit business and fundraising closings, particularly shifting from Q3 to Q4.
• No exposure to investment realizations; earnings are entirely fee-related, limiting upside from market performance but increasing stability.

Management Commentary and Tone:

• Tone is confident and optimistic, emphasizing the stability of the business model, "complementary platform," and "differentiated investment performance."
• Management highlighted the fifth anniversary of the IPO and the successful execution of the Stellis acquisition without disrupting deployment or fundraising pipelines.
• Reiterated commitment to profitable growth, balancing platform investments (technology, distribution) with margin protection.
• CEO Luke Sarsfield noted that the business is "well on our way" to long-term targets with significant momentum heading into 2027.

Analyst Questions and Answers:

• Fundraising & Q4 Outlook: Confirmed strong pipeline for Q4 with 15 funds active; no delays related to Stellis acquisition; expected seasonality to support Q4 closures.
• Fee Rate Volatility: Attribute Q3 core fee rate dip to timing of fundraising and tax credit seasonality; Q4 expected to step up to maintain full-year 103 bps guidance.
• Cross-Selling Strategy: Clarified that cross-sells now represent 15% of fundraising (up from <5%); focus remains on expanding existing client base via improved data integration and product breadth.
• Margins: Confirmed FRE margins are expected to remain flat year-over-year for full-year 2026 despite ongoing investments; "troughed" and expected to be stable.
• Fund Sizing: TrueBridge primary funds showing >20% vintage-to-vintage growth; WTI (venture debt) currently focused on deployment rather than immediate fundraising; successor fund timing to be announced when appropriate.

Other Key Points:

• Capital allocation includes maintaining a $0.04 quarterly dividend and utilizing share repurchases ($15M spent in Q3 on 1.8M shares) to offset dilution.
• Board approved an additional $30 million in share repurchase authorization.
• Fully diluted shares outstanding approx. 129.2 million in Q3.
• Borrowing rate on credit facilities is SOFR + 260 bps.
• 98% of fee-related revenue is derived from management and advisory fees, creating a "capital-like" business model.