TPG Inc. (NASDAQ:TPG) Q1 2023 Earnings Call Transcript

TPG Inc. (NASDAQ:TPG) Q1 2023 Earnings Call Transcript May 15, 2023

TPG Inc. beats earnings expectations. Reported EPS is $0.52, expectations were $0.33.

Operator: Good Morning, and welcome to the TPG Conference Call. Currently all callers have been placed in a listen-only mode and following management’s prepared remarks, the call will be opened for your questions. [Operator Instructions] Please be advised that today’s call is being recorded. Please go to TPG’s IR website to obtain earning materials. I will now turn the call over to Gary Stein, Head of Investor Relations at TPG. Thank you, you may begin.

Gary Stein: Great. Thanks, Ashley. Thank you all for joining us on our first quarter conference call. We’re also excited to announce that we have entered into a definitive agreement to acquire Angelo Gordon and we will be discussing the transaction today in detail. Earlier this morning, in addition to posting our standard quarterly earnings materials to our Investor Relations website, we issued a press release announcing the acquisition and posted an investor presentation that we will be referring to during this call. With me this morning are Chief Executive Officer, Jon Winkelried and our Chief Financial Officer, Jack Weingart. Our Executive Chairman and Co-Founder, Jim Coulter and our President, Todd Sisitsky will also be available for the Q&A portion of this call.

Additionally, we are pleased to be joined this morning by Josh Baumgarten and Adam Schwartz, the Co-Chief Executive Officers of Angelo Gordon. I’d like to remind you, this call may include forward-looking statements that do not guarantee future events or performance. Please refer to TPG’s SEC filings for factors that could cause actual results to differ materially from these statements. TPG undertakes no obligation to revise or update any forward-looking statements except as required by law. Within our discussion and earnings release, we’re presenting GAAP measures, non-GAAP measures and pro-forma non-GAAP measures reflecting the reorganization that was completed during 2021 and immediately prior to TPG’s IPO. We believe it’s helpful for investors and analysts to understand the historic results through the lens of our go-forward structure and please refer to TPG’s earnings release for details on the pro-forma financial information.

We’ll also be discussing certain non-GAAP measures on this call that we believe are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to the nearest GAAP figures in TPG’s earnings release which is available on our website. Please note that nothing on this call constitutes an offer to sell or a solicitation of an offer to purchase an interest in any TPG Funds. Looking briefly at our results for the first quarter, we reported GAAP net income attributable to TPG Inc. of $25 million and after tax distributable earnings of $88 million or $0.24 per share of Class A common stock. We also declared a dividend of $0.20 per share of Class A common stock, which will be paid on June 5th to holders of record as of May 25th.

With that I will turn the call over to Jon.

Jon Winkelried: Thanks, Gary. Good morning, everyone. Earlier today, we made a very important announcement. TPG has agreed to acquire Angelo Gordon, a fully-integrated and scaled multi-strategy alternatives platform in credit and real estate with approximately $73 billion in AUM and $50 billion in fee earning AUM at the end of 2022. This transaction is highly compelling and advances our position as a diversified global alternative asset manager. We’ve been focused on strategic diversification since our IPO and we believe Angelo Gordon, puts us in a strong position to continue delivering growth and scale. We have a lot to cover this morning. So Jack and I will briefly review our quarterly results before discussing the Angelo Gordon transaction in detail.

During the quarter, the timing of fundraising and deal activity continue to be impacted by market volatility and increased macro uncertainty. However, we’ve navigated through similar dynamics in prior cycles and continue to feel very good about our long-term growth trajectory particularly with the addition of Angelo Gordon. We raised $27 billion of capital over the last 12 months and $2 billion in the quarter in a challenging fundraising environment. The $27 billion represents a 9% increase over the last 12 months ending first quarter 2022, while fundraising in the industry was down 11% during the same period. We continue to engage in robust, high-quality conversations with clients around the world. Interest remains strong. The timelines for capital commitments across the industry have been elongated.

Similar to what you’ve already heard from other alternative asset managers, we believe near-term fundraising will remain difficult for the industry and Jack will discuss what this means for our funds. We really don’t know how long the remainder of our current flagship campaigns will last, but we’ll make thoughtful decisions around the timing of our final closes. As discussed broadly across the industry, deal activity in the first quarter was slow. We deployed $2 billion in the first quarter and $14 billion over the last 12 months. However, we’ve recently seen a significant pickup in our deal pipelines and our investment committees are very active. TPG’s long-term, patient and sector driven approach to investing is well-suited for this environment.

We believe the intellectual capital and ecosystems we built around our core themes, along with $43 billion of dry powder, leave us well positioned to capitalize on unique deployment opportunities. This includes an increasing proportion of corporate carve-outs, big privates, our proprietary partnerships, and we recently signed a number of differentiated deals. At TPG Capital, we agreed to carve-out Elite, a provider of financial and practice management solutions for leading law firms from Thomson Reuters Corporations. We also announced the acquisition of OneOncology in partnership with AmerisourceBergen. This is an example of a creative proprietary corporate partnership from our leading healthcare franchise and the transaction includes a unique structure with significant downside protection.

In Capital Asia, we announced an investment in Manipal hospitals, the second-largest pan-Indian healthcare services platform out of our current fund after originally investing from TPG Capital Asia VI in 2015. This investment was done alongside the Company’s Founder and Temasek, both of whom were eager to bring in TPG for the next leg of value-creation, given our track-record of driving significant growth over the last eight years. Our impact platform continues to deploy capital at a healthy pace. Rise Climate and the Rise Fund recently invested in Palmetto Clean Technology, a fast-growing rooftop solar platform in the US. Rise was also the lead investor in the latest round of funding for Ohmium, a leader in the development and the implementation of hydrogen electrolyzer technology.

Across our current funds, we feel very good about our solid portfolio construction in sectors where we have strong thematic conviction and deep expertise. Our portfolios continue to perform well and in aggregate, they appreciated 3% in the first-quarter and 4% over the last 12 months. On an LTM basis, aggregate portfolio company revenue growth across all our platforms was 25%. A low inflationary pressures persist. Aggregate EBITDA margins have remained stable and our companies have been able to effectively manage pricing and costs. Realizations across our platforms were more than $2 billion in the first quarter and $13 billion over the last 12 months. Given the long-dated nature of our capital, we will be very targeted and deliberate around monetizing investments during this part of the cycle.

We’re prepared for this type of environment in our underwriting and believe now is an opportune time to continue building value and driving growth in our portfolio coverage. Now Jack will spend a few minutes on our financial results.

Jack Weingart: Thanks, Jon. Good morning, everyone. At the end of the first quarter, we had assets under management of $137 billion, which is up 14% year-over-year. This was driven by $27 billion of capital raised and value creation of $3 billion, partially offset by $13 billion of realizations during the last 12 months. Fee earning AUM increased 23% year-over-year to $79 billion at the end of Q1. AUM subject to fee earning growth totaled $13 billion. Before I walk through our financials, I want to call out a few quarter-specific factors that impacted our first quarter results. First, the step-down of our predecessor Asia Funds, which resulted in a one-time step-down in management fees of approximately $9 million during the quarter.

Second, an unusually light quarter in our Capital Markets business resulting from the timing of our investment activity. As a reminder, in Q4 of last year, we highlighted that our transaction fees of $45 million were unusually high. We believe that the average of these two quarters or approximately $20 million to $25 million represents a normalized quarter for our transaction fees. Non-core expenses totaled approximately $11 million, primarily related to diligence, legal and accounting work in connection with our acquisition of Angelo Gordon. This resulted in a one-time reduction in our distributable earnings for the quarter, which is reflected through our realized investment income in other line item. The unusually low capital markets fees plus the one-time M&A expenses caused our distributable earnings to be approximately $30 million lower than they would have otherwise been during the quarter.

That being said first quarter management fees of $248 million increased 22% compared to the year-ago quarter and were relatively unchanged from Q4 ’22. This is due to the one-time step-down of the prior Capital Asia Fund that I just described. Total fee related revenue was $265 million in Q1, a 10% increase year-over-year. While transaction and monitoring fees were late in the quarter, based on the robust transaction pipeline that Jon referenced, we expect capital markets revenue to pick back up to more normalized levels over the balance of the year as our pace of deployment increases. Fee related earnings totaled $99 million in the first quarter up 8% year-over-year. LTM FRE of $461 million, notably, grew 31% compared to the pro-forma last 12 months ended Q1 ’22.

Our first quarter FRE margin of 37% was impacted by lower capital markets revenue as well as the Asia step-down. Given the inherent fluctuations in capital markets activity quarter-to-quarter and the one-time nature of the step-down, we believe that our run-rate FRE margin is better represented by our margin over the last 12 months, which was 42%. This is in line with our full-year 2022 results and a 335 basis point improvement from the pro-forma last 12 months ended Q1 ’22. We continue to be very disciplined around cost management and are working toward our 45% FRE margin target, which we believe we remain on-track to hit by year end for TPG on a standalone basis. I’ll touch more on the impact of the integration of Angelo Gordon to our FRE margin in a few minutes.

We ended the first quarter with $709 million in net accrued performance allocations, which is a 10% increase from the fourth quarter of ’22. After tax distributable earnings for the first-quarter were $88 million or $0.24 per share of Class A common stock and $589 million over the last 12 months. We announced a quarterly cash dividend of $0.20 per share of Class A common stock, representing 85% of our after tax distributable earnings. Moving onto an update on fundraising. We raised $2 billion in the first quarter, as Jon mentioned and $27 billion over the last 12 months. Notably, in the first quarter, we completed the final close of our highly successful campaign for TTAD II, our technology adjacency fund. We raised an aggregate of $3.4 billion from TTAD II, more than doubling the size of the Inaugural fund.

We believe the strength of TPG’s brand, client relationships, investment style and returns continue to stand-out among alternative asset managers. As Jon mentioned, we have strong ongoing engagement with both new and existing LPs. However, we set our original flagship fundraising targets under different market conditions. We still expect each fund to grow compared to its predecessor. But in aggregate, they may not grow as much as we previously expected. We’ve already been managing the business with this in mind as you can see from our cost discipline in the first quarter. To dimensionalize this for you, I would note the following. Across our flagship funds currently in market, TPG 9, Healthcare Partners 2, Asia 8 and Rise 3, our original targets totaled $27.5 billion.

While it’s too — still too early to tell what the outcome of each fundraise will be, we’re currently managing the business, assuming we’ll raise an aggregate of approximately $23 billion to $24 billion, which would represent greater than 10% growth over the aggregate predecessor funds. This implies we would need to raise approximately an incremental $7 billion across these four funds. Based on our strong pipeline of LP engagement, we have confidence in our ability to achieve this outcome. Finally, we continue to make good progress capitalizing our new strategies including TPG Next, Life Sciences and TRECO, our real estate credit funding, as well as preparing to launch our first climate infrastructure fund. We expect to have a further update on these organic initiatives in the coming quarters.

Given the significant fundraising headwinds, I want to acknowledge the strong progress we’ve made in our campaigns and the considerable growth in our fee earning AUM. We have a near-record level of dry powder available to invest in growing pipelines and increasingly interesting opportunities across our platforms. So there’s a lot to look forward to. Now I’ll turn the call back over to Jon to talk about the Angelo Gordon transaction in greater detail.

Jon Winkelried: Thanks, Jack. Since our IPO early last year, we’ve consistently signaled our desire to drive continued growth and diversification through both organic initiatives and strategic transactions. We always seek to build long-term shareholder value and there have been focused on scaling our existing platforms and providing a broader array of high-quality investment solutions to our clients. We believe the Angelo Gordon transaction delivers on these objectives. We’ve been seeking a platform that we believe will generate strong returns for our limited partners. Angelo Gordon has done that historically, as evidenced by their proven investment track record and their significant recent AUM growth. And we believe they are well-positioned to continue delivering attractive risk-adjusted returns going forward.

Assuming TPG and Angelo Gordon have been combined at the end of 2022. We would have had approximately $208 billion of total AUM and $128 billion of fee-earning AUM with approximately 1,800 employees located in 18 cities around the world. We expect this transaction to be mid to high single-digit accretive on an FRE and after tax DE per share basis in 2024 before any revenue or cost synergies. The acquisition of Angelo Gordon with its scale of credit and real estate businesses is directly on-target with our strategic objectives to further diversify and unlock new avenues for growth and innovation in attractive and complementary asset classes. First, Angelo Gordon’s $55 billion credit platform brings significant momentum to TPG in what is widely recognized as a multi-trillion dollar market opportunity in credit investing.

This business has grown AUM at a 15% CAGR from 2017 to 2022. Importantly, this growth is diversified across four major scale strategies along the credit spectrum, including corporate credit and special situations, direct lending through their Twin Brook business and structured credit. Angelo Gordon’s credit platform is not concentrated within a single product, but rather offers multiple compelling paths for growth as we look ahead. Second, Angelo Gordon’s $18 billion real estate platform has also demonstrated strong momentum with AUM growing at a 14% CAGR over the last five years and is very complementary to our existing fast-growing platform. The combination with Angelo Gordon will expand our current real estate presence in Europe, open new geographies with their business in Asia, broaden our product set to include strategies such as net lease and enhance our global sourcing capabilities.

Combined, we will have meaningful scale with $38 billion collected real estate AUM as of the end of 2022. We believe this transaction offers multiple ways to accelerate growth. There are clear synergies with our core investment processes and deep combined sector knowledge. We also see numerous opportunities to expand our product set by offering joint new strategies to a much larger client base that has minimal overlap. In addition to attractive growth opportunities, this transaction significantly diversifies TPG. With Angelo Gordon, our strategies outside of private-equity increased as a percentage of our total AUM by 30 percentage points from approximately 20% to half our total AUM. Our institutional client relationships will increase more than 60% from 550 to approximately 900 and we’ll have the ability to offer them broad range of products across 27 total strategies.

From a cultural standpoint, we’ve been very focused and deliberate about identifying a firm with a culture and approach to doing business similar to ours. We first met the Angelo Gordon team over a year ago, and since then, has spent considerable amount of time building relationships and getting to know one another. What stood out from the beginning was the close and unique alignment of our two firms. Since our first meetings in early 2022, Angelo Gordon’s sustained culture came through and was consistently reinforced in our regular interactions over the last year. The culture at Angelo Gordon is entrepreneurial, collaborative, nimble and respectful. They approach business with high ethical standards and a strong commitment to ownership and accountability.

We really enjoyed getting to know them and it’s clear that Angelo Gordon’s culture is strong and highly complementary to everything we do at TPG. We also share similar histories. TPG and Angelo Gordon were both founded more than 30 years ago and have evolved in similar ways, transitioning from founder-led businesses into leading next-generation firms. Both firms place a strong emphasis on business building and innovation, which is evidenced by the significant growth each of us has experienced in recent years. Between our two firms, we launched 13 new products over the last five years and we’ve already had extensive conversations about the many types of businesses and strategies we can create together. The Angelo Gordon partners joining us had been at the firm for an average of 13 years and we admire the outstanding business they’ve build.

Importantly, this transaction is structured to create long-term alignment between TPG and Angelo Gordon. Non-founding partners at Angelo Gordon will receive approximately 85% of their consideration in equity with multi-year vesting and lockup provisions. This ensures alignment between our respective teams that are coming together as one firm as well as with our LPs and public shareholders over the long-term. Finally, we both have a deep bench with extremely talented and dedicated employees that we believe the combination will create exciting new opportunities for our combined team going-forward. On slide seven of the investor presentation, you’ll see an overview of their favorable long-term dynamics driving growth in credit investing. The markets have been experiencing multi-decade trend of non-bank lenders stepping into fill the void created by the retrenchment of traditional lending sources.

At the same time, the continued scaling of private-equity has increased demand for flexible and alternative financing solutions and following a prolonged period of low-interest rates, which drove institutional investors to search for yield, alternative credit has become a core component of institutional portfolio allocations. As a result, credit has been growing at a steady pace, and this is projected to continue well into the future. Slide eight provides a high-level overview of Angelo Gordon. The firm was founded nearly 35 years ago, currently has more than 650 employees including 245 investment professionals located in 12 offices around the world. Angelo Gordon has built a scaled alternatives business with a broad-spectrum of investment strategies across both credit and real-estate.

Based on their strong investment track record and focus on innovation over the last five years, they have generated significant growth doubling AUM and fee AUM, $73 billion and $50 billion, respectively. Slide nine highlights the broad spectrum of alternative solutions we’ll be able to provide to our clients following the combination of TPG and Angelo Gordon. As you can see in the chart on the left, the combined entity will have a much broader suite of investment strategies across a number of asset classes. In addition, the right slide shows transaction will substantially expand our offerings to target a wider range of risk and return profiles. On slide ten, we highlight the strategic rationale and benefits of this transaction. With a broader spectrum of investment strategies, we’ll be even more compelling partner and solution provider for clients globally.

Additionally, we will be able to offer customized multi-asset class solutions that include credit, real estate and private-equity. Looking at the client bases of TPG and Angelo Gordon, they are highly complementary. This provides us with a substantial opportunity to expand our respective relationships across a broader range of platforms and strategies. On the closing of this transaction, we expect to have more than 900 combined institutional LP relationships that will be well-diversified by both geography and channel and there’s minimal overlap between the two client bases. Only around 10% of our relationships are currently shared. The combined company will benefit from shared intellectual capital including sector and investing expertise, broader deal sourcing and the support of robust infrastructure.

We expect this will drive enhanced opportunities for growth, business expansion and product development. Through the broader-based clients and investment strategies, we believe the combined company will be well-positioned to expand our distribution capabilities in high-growth channels such as insurance, high-net worth and retail. We’re incredibly excited to bring our businesses together. I want to thank Josh and Adam and the broader teams at both TPG and Angelo Gordon who have put in countless hours over the last year to make this happen. Of course, there is still a tremendous amount of work in front of us to execute on what we’ve outlined here today. This has been an extraordinary team effort. I know I speak for the entire leadership team of both organizations and taking all of you for your partnership, execution and continued focus.

I’ll turn the call over to Josh and Adam to make a few comments.

Josh Baumgarten: It’s Jon. I’m very excited to finally get the opportunity to discuss the transaction with you all today. It’s been a long year. Today marks a major milestone for Angelo Gordon. It’s truly a testament to the team and the business we have built of our nearly 35 year history. I’m very excited to be speaking with you all this morning. I’m going to briefly discuss why this is the opportune time for a combination with TPG and why TPG is the ideal partner for us. As many people know, we’re seeing a steady shift in the dynamics across our industry. Assets LP capital is more competitive today than ever before and many LPs want to build larger, strategic relationships with more established best-in-class managers who offer diverse set of process.

There is no doubt today that there is a clear competitive advantage in scale and diversification. As a firm, we’ve reached an inflection point, where we’re now routinely competing with some of the largest alt managers in the world on a daily basis. We have big ambitions as the firm’s talented professionals who are focused on delivering for our LP, smart and strategic growth is an absolute imperative. We have the brand, the people, and the solution set to continue to grow and drive performance for our clients. But at the same time, we’ve always had an eye towards strategic opportunities that would expand our capabilities and product offerings. Importantly, our firm is not for sale. However, given what we want to accomplish and after our meetings with our new partners at TPG, we recognize the opportunity and unique power of this combination.

And we’ve had many decisions we made, we’d remain uncompromising on our deep commitment to a firm culture of collaboration and investment philosophy built on fundamental research and downside protection, and an unwavering focus on our clients. We believe the combination with TPG reflects all of these commitments and also deliver significant opportunities for all of our employees. I’m now going to turn the call to my partner, Adam Schwartz.

Adam Schwartz: Thanks, Josh. Good morning, everyone. So, we believe that this is a transaction that will strongly deliver benefits of scale, diversification and opportunity for both firms. TPG will bring expanded investment capabilities, significant industry and domain expertise and a broad and deep base of LPs, all of which we believe will help accelerate and expand the trajectory of Angelo Gordon. Consistent with Jon’s comments, I want to reiterate that we are confident that the combination represents a strong strategic and cultural fit. When the transaction closes, TPG and Angelo Gordon will join to from a leading investment platform with a shared philosophy of firm culture, investment excellence and delivering for clients.

And importantly, our firms are entirely aligned on achieving growth through performance. Our investment teams will have the opportunity to leverage TPG’s deep industry and sector expertise in areas such as healthcare, technology, Internet and digital media, consumer and business services. And the scale of the combined platform will enhance our access to capital, unlocking new opportunities to expand our deal pipelines and driving performance for our LPs. With the power of our combined platform, we will be able to pursue new solutions for our clients across the risk and return spectrum by leveraging our individual and collective investment capabilities and approaches. Ultimately, this transaction is about growth and capitalizing on our collective momentum in order to do more together.

Our priority is focusing on execution to realize the opportunities that we are confident exist, which ultimately will be a positive, as Josh said, for our people and our clients. Josh and I’ve spent a lot of time with Jon, Jack, Jim, Todd, Anilu and many others at TPG over the last year. It’s been a great team effort getting to this result today. We are very excited about this partnership and how our businesses fit together. We couldn’t be more enthusiastic about joining together with them to drive growth and create significant long-term value. Jack will now walk through the transaction details and the financial benefits.

Jack Weingart: Thanks, Adam. As you can tell, we’re all looking-forward to working together as partners. I’ll close out our prepared remarks by reviewing the financial impact of this transaction. We’re acquiring Angelo Gordon in a cash and equity transaction valued at approximately $2.7 billion, based on TPG share price as of Friday. This includes approximately $970 million in cash and up to $62.5 million common units and RSUs of TPG, which represents approximately 16% of the equity of the combined company. We believe the transaction has been well structured to ensure a clear alignment of interests. Angelo Gordon’s active partners will generally receive 85% of their consideration in equity while the founders of Angelo Gordon will receive 90% of their consideration in cash and 10% in equity.

The unvested common units and RSUs that the Angelo Gordon non-Founder partners are receiving will generally vest ratably over a five-year period, with a full lock-up during the first year post-closing. Importantly, a portion of Angelo Gordon’s equity consideration will be distributed to its employees, creating broad-based employee ownership. This is similar to the IPO award given to TPG employees when we went public, ensuring everyone who is a shareholder and directly benefits from the growth of the business. This transaction also includes post-closing contingent consideration, which is valued at up to $400 million. This earn-out is based on Angelo Gordon achieving certain fee-related revenue milestones in 2026, and if earned, will pay it out in 2027.

In order to receive 100% of the earn-out, Angelo Gordon will need to grow its annual FRR by 16% per annum through 2026 and TPG will have flexibility to determine the cash and equity mix used to fund any earn-out payment due. Consistent with our business model, the transaction then structures the 20% of performance allocations generated by Angelo Gordon funds will flow-through to TPG operating group with public shareholders receiving their customary proportion. Upon closing, Angelo Gordon will become a new significant investing platform within TPG. In terms of management, Angelo Gordon’s Co-CEOs, Josh and Adam will become co-managing partners of the platform, reporting directly to Jon. It’s expected that Angelo Gordon’s other executives and senior management will continue in their current roles upon the closing of the transaction.

Finally, a senior Angelo Gordon partner will also join TPG’s Board of Directors. Looking briefly at the pro-forma financial impact, as Jon mentioned, we expect this transaction to be mid-to-high single-digit accretive to TPG’s FRE and after-tax DE per share in 2024 and that’s before any revenue or couple of cost synergies that we may realize. We’ll provide more specific financial disclosure around the time of close. But in the meantime, I wanted to provide the following framework. At the end of 2022, Angelo Gordon’s fee earning AUM was $50 billion. This FAUM has more than doubled over the past five years growing at a 17% CAGR. The average fee rate for 2022 was approximately 85 basis points to 90 basis points across all real estate and credit funds.

Additionally, I would note that several of their core credit products pay fees on drawn capital only. Due to their strong recent fundraising momentum, Angelo Gordon had AUM not yet earning fees of approximately $11 billion at the end of 2022. As they invest this capital, it will flow into FAUM and begin paying management fees. Next, Angelo Gordon has been pursuing an expansion of their FRE margin much like TPG. Given the firm’s recent growth and investment in their business, they’re earlier in their execution in the process of realizing operating leverage and margin expansion. We expect Angelo Gordon’s FRE margin on a standalone basis in 2023 to be in the mid to-high 20s. Post-closing, we expect our combined FRE margins to blend down to the high 30s, creating an opportunity for us to resume our margin expansion, benefiting from operating leverage across a much larger base of fee-related revenue as we integrate and scale the businesses.

Finally on PRE, as I mentioned, we’re acquiring 20% of historical and go forward carried interest across Angelo Gordon funds and expect to flow this through to TPG shareholders. At the end of 2022 Angelo Gordon had accrued unrealized carried interest of approximately $760 million. So the 20% allocable to TPG shareholders was approximately $150 million. This will be additive to the current TPG balance of $709 million. In terms of funding the cash portion of the acquisition to close, we expect to use our current cash balance and undrawn revolver. Upon completion of the transaction, our leverage will remain conservative and we’ll have ample liquidity and significant financial flexibility. Lastly, the transaction is subject to customary closing conditions including Hart-Scott-Rodino, international regulatory approvals and other clients and third-party consents.

The transaction was unanimously approved by TPG’s Board of Directors and is expected to close in the fourth quarter of this year. Before I turn the call back over to the operator so we can take your questions, I’d like to echo Jon, Josh and Adam’s enthusiasm for this transaction, and thank everyone at TPG and Angelo Gordon for helping us reach this milestone. We look forward to building a great combined business together in the coming years. Ashely, we’re ready to take questions.

Q&A Session

Operator: Thank you. [Operator Instructions] We will take our first question from Glenn Schorr with Evercore ISI. Please go ahead.

Operator: And we will take our next question from Kenneth Worthington with JPMorgan. Please go ahead.

Operator: And we will take our next question from Craig Siegenthaler with Bank of America. Please go ahead.

Operator: And we will take our next question from Brian Bedell with Deutsche Bank. Please go ahead.

Operator: And we will take our next question from Michael Cyprys with Morgan Stanley. Please go ahead.

Operator: And we will take our next question from Finian O’Shea with Wells Fargo Securities. Please go ahead.

Operator: And we will take our next question from Bill Katz with Credit Suisse. Please go ahead.

Operator: And we will take our next question from Adam Beatty with UBS. Please go ahead.

Operator: And we will take our next question from Brian McKenna from JMP Securities. Please go ahead.

Operator: And we will go next to Luke Mason with BNP Paribas. Please go ahead.

Operator: And this concludes the Q&A portion of today’s call. I would now like to turn the call back over to Gary Stein for additional or closing remarks.

Gary Stein: Great. Thanks, operator. Thanks, everyone, for joining us this morning. Please feel free to follow-up with me or Abenie if you have any questions.

Operator: Thank you. And this concludes today’s TPG conference call and webcast. You may now disconnect your line at this time and have a wonderful day.