P10, Inc. Dividend Hike Sparks Sustainability Concerns Amid Earnings Slide

The investment thesis for P10, Inc. (NYSE:PX) has long hinged on its ability to generate consistent fee-based revenue from private markets investments. But with the company's recent 7% dividend hike, investors are now forced to ask: Can this payout be sustained as earnings stumble?

Let's start with the facts. In Q1 2025, P10 reported record fundraising of $1.4 billion in new AUM, pushing total fee-paying assets to $26.3 billion. That's a 10% year-over-year jump, and it's a sign of strong demand for the firm's private equity strategies. Yet beneath the surface, the financials are telling a more troubling story.

The Earnings Dilemma
While revenue rose 2% to $67.7 million, GAAP net income

plummeted 10% to $4.7 million. Even the non-GAAP Adjusted Net Income dropped 8% to $23.5 million. The culprit? Rising operational costs and a shift toward lower-margin business lines.

Meanwhile, the dividend increase to $0.0375 per share (an annualized $0.15) is now under scrutiny. With basic shares outstanding at 110.9 million (as of March 2025), the total annual dividend payout exceeds $16.6 million. Compare that to trailing twelve-month GAAP net income of just $18.2 million—a 91% payout ratio. That's a red flag.

Why This Matters
A payout ratio above 70% is typically seen as risky for most companies, but for a fee-based asset manager, it's even more precarious. These firms rely on steady cash flows from management fees, which can evaporate if AUM declines or investors pull out. P10's recent repurchase of 1.2 million shares (leaving $28.5M remaining in its buyback program) may have temporarily boosted per-share metrics, but it doesn't fix the core issue: Earnings are shrinking while dividends are rising.

Consider this: In Q1 2024, shares outstanding were 115.1 million, but they've now fallen to 110.9 million—a 4% drop. While that's good for EPS, it's not enough to offset the 10% GAAP net income decline. And the fully diluted shares (119.3 million) suggest even more dilution risks if the company issues equity to fund operations.

The Elephant in the Room
P10's leadership insists the dividend is “sustainable,” citing the Qualitas Funds acquisition and long-term AUM growth. But the math doesn't add up. If net income stays near $4.7 million annually (as Q1 suggests), the payout ratio would soar to 130%, meaning dividends would consume more cash than the company generates.

Investors should also note that P10's non-GAAP metrics rely on adjustments that exclude “one-time” expenses. Yet if those expenses are recurring—a possibility given the firm's operational struggles—the Adjusted Net Income may be misleading.

What's Next?
The dividend hike is a bold move, but it risks backfiring. If earnings continue to lag, P10 could face a liquidity crunch, forcing a dividend cut—a move that would crater investor confidence. Meanwhile, the stock trades at just 1.1x TTM revenue and 4.5x EV/EBITDA, suggesting the market already doubts the payout's sustainability.

The Bottom Line
P10's dividend boost is a gamble. While the company's AUM growth is impressive, its earnings instability and sky-high payout ratio create a ticking time bomb. Investors should proceed with caution—this isn't a “set it and forget it” income play. If you're considering PX, demand answers: Can earnings rebound? Or is this dividend merely a temporary illusion?

The market's patience won't last forever.

Data as of May 23, 2025. Always consult with a financial advisor before making investment decisions.