Good afternoon, and welcome to the TPG's Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. Please go to TPG's IR website to obtain the earnings materials. I will now turn the call over to Gary Stein, Head of Investor Relations at TPG. Thank you. You may begin.

Great. Thanks, operator, and welcome, everyone. Joining me today are Jon Winkelried, Chief Executive Officer; and Jack Weingart, Chief Financial Officer. In addition, our Executive Chairman and Co-Founder, Jim Coulter and our President, Todd Sisitsky, are here with us for the Q&A portion of this call. Nehal Raj is also joining us today for the Q&A session, given his role leading the Software Sector at TPG and as Co-Managing Partner of TPG Capital. 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 earnings release and 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 and non-GAAP measures, and we believe certain non-GAAP measures that we discuss on this call 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 fund. Looking briefly at our results for the fourth quarter, we reported GAAP net income attributable to TPG Inc. of $77 million and after-tax distributable earnings of $304 million or $0.71 per share of Class A common stock. We declared a dividend of $0.61 per share of Class A common stock, which will be paid on March 5, 2026, to holders of record as of February 19, 2026. With that, I'll turn the call over to Jon.

Good morning, everyone. Thank you for joining us. We look forward to discussing our strong results for the fourth quarter and full year. 2025 was a breakout year for TPG, and we entered 2026 with strong momentum. Before we turn to our results, I did want to briefly touch on a topic that has been top of mind for investors around the intersection of software and AI. This is an important question, but not a new one for us at TPG. As a firm who's been investing in AI solutions for over a decade, the question of where AI is an opportunity in technology and where it poses a risk is deeply embedded in our investment approach. Let me put our software investing activities in context and talk about our approach across our asset classes. Today, software represents 11% of our total AUM with the majority in private equity and minimal exposure in credit. Starting with credit, within our direct lending business, we focus on sponsor-backed companies with strong cash flow profiles, and lend at the top of the capital structure with strong financial covenants that give us a seat at the table. Given our approach, we have not invested heavily in the software sector and have not offered ARR-based loans. Today, software represents approximately 2% of our credit AUM. In private equity, you've consistently heard from us on how important our sector-focused and theme-based approach is to our investment activities and we've invested in software for more than 20 years. Today, software companies represent 18% of our private equity AUM. Our long-standing presence in the software space has enabled us to develop deep expertise and nuanced perspectives on the sector to the companies into which we ultimately invest. As a result, we're highly selective in our investment approach, recognizing…

Thank you, Jon, and thank you all for joining us today. As Jon noted, 2025 was an outstanding year for the firm. We've been executing on our growth strategy and translating our fundraising momentum and investment performance into strong financial results. We reported full year fee-related revenue of $2.1 billion, including $628 million for the fourth quarter, which grew 36% year-over-year. Our management fees reached $475 million for the quarter up 18% from the prior year, as we continue to successfully drive both fund over fund growth across our private equity strategies and fee earning deployment in our credit platform. Additionally, fourth quarter transaction and monitoring fees more than tripled from the prior year to $122 million. This resulted in full year 2025 transaction and monitoring fees of $249 million which grew nearly 70% year-over-year. This step function increase was driven by our accelerated deployment pace, as well as the further integration of our strong capital markets capabilities across our platforms and geographies. We also generated $29 million of fee-related performance revenues in the fourth quarter as a result of strong fund performance by both T-POP and TCAP. We reported fee-related earnings of $326 million for the quarter and $953 million for the year, which increased 25% from 2024. As a result of our significant capital markets revenue at the end of the year, our fourth quarter FRE margin reached a record 52% and our full year FRE margin was 45%, a 340 basis point expansion from 2024. I would note that even if we normalize our fourth quarter results to reflect the lower level of capital markets revenue, we would still have exceeded the year above the mid-40s margin target we had guided to previously. Turning to PRE. In the fourth quarter, we generated $48 million of realized performance…

[Operator Instructions] We'll take our first question from Glenn Schorr with Evercore ISI.

Well, you're fourth on the list, so I apologize if I'm going to try something different. I think I don't know, why not, right? So I feel like you and others have put up good performance. You have a lot of diversification. You're raising capital, the institutional channels unbothered and your stocks fall like rocks because people think it's looking in the rear view, particularly direct lending. So I'm trying to think of -- it must be that they don't believe the performance will sustain and that the stats that you've given can't hold up. So do you think there are either any actions to be taken by you and the industry to solidify belief and confidence on the direct lending side and/or maybe you could talk about what the process is of valuing the portfolio and coming up for performance because I'm finding hard to believe you just pick numbers out of the hat, like maybe bring that side to life if there aren't actions to take because I appreciate that you're doing everything else that you can?

Well, good question, Glenn. I think just to start with maybe the back half of your question and then maybe kind of coming back around to the front part of your question with respect to sort of the performance and then how it plays out with respect to how it affects growth or how it affects our performance. But from our perspective, I think the market is well familiar with our franchise as being directed and focused to the lower middle market. And the lower middle market is fundamentally different than the upper middle market. So -- and we can talk about the upper middle market, if you want to, but the lower middle market is fundamentally different in that our business is a -- it is also a sponsor-based business in terms of the companies that we're financing. But we're doing that as generally the only lender and in that process also have a different dynamic with respect to the terms with which we lend. And I think that we're not competing again -- importantly, we're not competing against the BSL market. We're not competing. It's not -- unlike the upper middle market where direct lenders are actively competing against the banks and it's a race to the bottom with respect to terms, spreads, covenants, et cetera. That's not the case in the space that we're lending in. And so I think as the data suggests, our coverage ratios are generally higher. Our loans are not picking. Our spreads are generally higher, and we have a discipline of always applying at least 2 financial covenants to our loans within the Twin Brook franchise. We also control the revolver. So one of the things that gives us going to your question of how do we monitor performance and how do…

Glenn. Jim Coulter here. To your first question on what we can do, it's been my experience, and I'm sure you said that over time that when the market gets happy or worried, it tends to move things together. And the second step is usually differentiation, understanding where there are differences. So I think at this moment, it's not really so much software or no software, it's which software, and so trying to help that understanding. The second point I would look at is LP flows. You can assume that issues around valuation and momentum are well understood in the LP market as they're doing work on new funds. And as Jack said, you see a very substantial gap in our fundraising versus the market. And I think you can assume that these issues have been thought about in the LT community for a while and watch the LP flows as a way of kind of getting some comfort on that.

We'll take our next question from Ben Budish with Barclays.

I was wondering if you could unpack a little bit more the pickup in transaction fees in the quarter. I think, Jack, during your prepared remarks, you talked about on the fundraising side, you expect to see things sort of structurally step up. It looks like that's kind of the direction of travel there as well. You've got growing dry powder. It feels like the deployment activity is really picking up. It also looked like in the quarter, your transaction fees relative to deployment were a little bit higher than average. I know things like monetization and transaction fees are hard to forecast even just a couple of quarters out, but just given this step-up and maybe kind of your line of sight, how should we be thinking about revenues there for 2026?

Thanks for the question. Good question. Look, we've been talking for several years now about the efforts we've been undertaking to broaden and grow our capital markets business. and our view that, that would be an outsized grower for us. It's obviously, as you point out, going to be a bit lumpy. But as I pointed out in my remarks, the growth that we're seeing is really driven by the growth of deployment but also the broadening out of this business across the entire firm. If you could look back 3, 4 years ago, it was very TPG capital-centric and now it's much more diversified. To give you a little more color behind Q4, the transaction fees that we recorded in Q4 were across 26 different transactions. Of course, there were a little concentrated toward the biggest but 26 different transactions broadly spread across the Impact platform, the capital platform, the growth platform, the credit platform. And I would say that growth across the firm and the growth of capital markets fees in new businesses, we're only in the beginning innings of that. So while it will be lumpy and while the fourth quarter was above trend, we continue to view capital markets as a long-term growth opportunity for us.

Our next question comes from Ken Worthington with JPMorgan.

Maybe just following up on that, how is the baseline of your capital markets capabilities changed over the last year. So again, it's going to be volatile. We get that. But is there a way to sort of help us figure out how what you've invested in has actually grown and should translate into revenue, all else being equal? And then if we look out another year, how should we expect that baseline to have changed a year from now? Does this question make sense?

Yes, I'll start on that. If you look at what we've done to grow the business, I would start with our team because in order to be delivering capital market services across our portfolio, in a way where management teams want to hire us to drive their capital structure evolution. We need to have smart people engaging with our portfolio of companies, engaging with our deal teams in greater numbers across businesses, and we've done that. I think over the past 2 or 3 years, we've more than doubled our capital markets team. So we're actively engaging across all of these portfolios, and looking for opportunities to help our management teams drive capital structure optimization, drive efficient exits, that kind of thing. There's no good way to model this other than in the private equity businesses there should be a correlation between capital deployment and capital markets fees. There's also a second prong, which is kind of regular way balance sheet optimization of existing deals. So the sources of income in capital markets in private equity oriented businesses will be both funding new deals and financing and refinancing existing portfolio company balance sheets to optimize them. And I guess the third piece would be add-on acquisitions for existing companies, which would usually have equity capital deployment associated with them. On the credit side, it will be different across different credit businesses, but kind of flows of deployment should also be probably the most important metric to measure capital markets opportunity. Hopefully, that helps.

We'll take our next question from Alex Blostein with Goldman Sachs.

When we think about the credit business at TPG, you guys have done a really sizable build out there over the last year, 1.5 years, lots of fundraising. So maybe talk a little bit about the outlook for net deployment across various verticals within credit as a source of management fee growth for TPG into 2026?

Yes. Thanks, Alex. Look, I think that obviously, there's been an important relationship between capital formation and putting ourselves in a position where we can do more. As you know, I mean, the credit business can be quite scalable as it relates to identifying and sourcing transactions and then and the size of those transactions? And how much of it we can deploy into it ourselves versus how much of it we're syndicating away to other participants in the market. And so our underlying base has gone up and grown a lot as a result of the pools of capital that we're now investing. I think if you look at -- I think the other related opportunity for us in terms of deployment across our business is as a result of the coming together of TPG and Angelo Gordon, and the collaboration and the synergies that we're seeing between our equity franchise and our credit franchise, I think our ability to -- the breadth of our sourcing capability our relationships with companies, our relationships with sponsors, the ability to do really interesting things at scale, particularly in our Credit Solutions franchise as an example, I think it's going to provide us with a continued upward trend and perhaps even a step function in terms of sort of opportunities for us. And so on the back of raising a meaningfully larger fund there, we're going to have an opportunity to deploy a lot more capital. On the structured credit side, which I think obviously has a lot of tailwinds with respect to private capital financing that part of the market, whether it's IGA [indiscernible] or the residential mortgage market, consumer finance, et cetera, we're seeing a big step function in terms of deployment there. I mean, obviously, just to give you…

We'll go next to Craig Siegenthaler with Bank of America.

I had a follow-up to Glenn's question, which I thought was a good one, but I wanted to ask it on the software equity book, not the debt book. And I think you pointed out, not all software companies are created equal. But I was hoping you could walk us through some of the qualities of your software buyout and growth books that make you feel more comfortable when you think about future returns. And also, what type of companies have you generally avoided? And what type of companies do you own that you think are not impacted at all from AI disruptions?

Craig, this is Nehal Raj. Great questions. Let me start by saying we've got a very informed perspective on this topic, having invested in the software space for over 20 years to AI space for over a decade. And this experience has really served us well over lots of tech transitions; the on-premise to cloud transition, [GFC], COVID, we navigated all those transitions with strong returns and low loss ratios, so we'd expect the same with respect to AI. As Jon mentioned in his remarks, we've identified a number of characteristics that we believe will largely determine AI winners from AI losers, where there's opportunity and where there's threat. And to your question, let me double-click a bit on where we're seeing opportunities first, both in the market and our portfolio. The first area is vertical market software. Vertical market companies tend to reside on a lot of proprietary data that's generated over decades. This data is typically managed in a closed system. So third-party AI can access this data. And it can really only be monetized by internally developed AI, which works to the benefit of these companies. I'll give you an example maybe to bring it to light. In our TPG Capital portfolio, we own a company called Lyric. Lyric processes the majority of medical claims in the U.S. and over a period of decades has built up a very, very unique data set. This data is not available to third-party AI firms and that makes Lyric really uniquely positioned to apply AI to this data set to create new value for its customers. We're the control owners of Lyric. So we've been really driving new AI products under our ownership, and this has actually resulted in a significant acceleration in the revenue and revenue growth of this…

Our next question comes from Mike Brown with UBS.

Maybe just kind of build on the last question. So another question for Nehal here. So great color on the different types of exposure and kind of breaking that down for us. Could you maybe also break down a little bit more about the funds? And what is kind of the vintage mix here of the software investments? And specifically, how much of the exposure would be from that 2021 cohort? And then I'd love your thoughts on how to think about the broader software industry here? Like what's -- how does this potentially play out in terms of disruption? When would that ultimately come through in terms of maybe timing here, just given some of these contracts have a bit of a long life to them. Like when do we start to really see some of this come through?

Yes. Let me start by maybe framing a little bit our last 5 or 6 years of software investment and realization activity. In that 2020 to 2022 period, we were bigtime net sellers in our software portfolio. Part of that was due to the valuation environment at that time. Part of it was due to the value that we've already created in our portfolio of companies. And so I remember very distinctly during that time period, we exited every one of our software companies in TPG VII and before, if you're looking at our fund vintages. So those funds have been ex software for the better part of 5 years as a result of that activity. So that means most of our software investment activity really has resided in funds 8, 9 and now 10. And the benefit of that is we've had pretty good visibility into what's happening in AI over that time period. So I think where you will see more risk is in companies that were underwritten 2018, 2019, 2020 prior to the advent of generative AI. And those vintages are more susceptible to risk and disruption. The great part about our setup is having exited those companies, we were able to underwrite with the knowledge of what's happening in generative AI, and I think have generally adhered to this framework that I mentioned earlier. I'd also maybe answer the second part of your question in terms of when does the disruption play out? I understand your point about long contracts, but we're starting -- where there is disruption. I think it's starting to become evident in results. If you think about a CIO's budget in an enterprise, it's being inundated with requests for AI-oriented purchases and expenditures. As a result, some tough choices are having to be made. If you're spending more on AI, what are you spending less of to stay within your budget and that's really creating already winners and losers. Now some of that is maybe more in bookings than revenue. But because we are control investors, we have the opportunity to really look under the hood of the companies that we're investing in, and we can look at leading indicators. We can look at retention rates. We can look at detail that you may not get if you're just a lender, and that's giving us really good insight as to where winners and losers are residing in this market. But I would answer your question, the disruption when it is happening is happening now.

Our next question comes from Brennan Hawken with BMO Capital Markets.

Like we snuck in right under the wire here. So was curious, it looked like the fee rate adjusting for catch-up fees ticked down quarter-over-quarter. Can you speak to maybe what drove that? And how we should be thinking about the fee rate going forward, whether there are any funds coming off the holidays and whatnot?

Yes. It's Jack. Obviously, fee rates are blended across lots of different funds and different fee structures are kind of have lots of things impacting them. I would tell you that the biggest thing impacting at the highest level, our firm-wide average fee rate is the mix of where we're investing. Because if you think about some of the businesses we've been growing most actively credit, some new areas of credit, those generally have lower fee rates than our traditional private equity business. So you'll see that mix drive fee rate just blended across the businesses. If you look at each fund, one at a time, each business line, we're not seeing material fee rate degradation in any one business. So it's more a question of the mix. The other thing that was going on in the fourth quarter is we saw a step down in TPG IX. So if you simply calculate, for example, the average fee rate in the TPG Capital or private equity business, we had our FAUM step down in the fourth quarter while we activated Fund X in the third quarter. So the average fee rate in our capital business was a little elevated in the third quarter because we're charging fees on both of those funds and that one TPG X, which is big, it was a $3 billion step-down occurred in Q4. So that may be what you're seeing.

We'll go next to Arnaud Giblat with BNP.

I've got a question on real estate, please. Since that's a big part of your fundraising for 2026, I was just wondering if you could talk a bit more about the confidence around that, in particular in the context of maybe performance in the broader real estate market and maybe the outlook still being softer. How confident are you run from resin real estate?

Yes, sure. But we feel great about the outlook for our real estate franchise and for this fundraising cycle. And I think we have a fair amount of confidence based on the strong performance that we have had. Obviously, you can see our value creation numbers which have been very, very strong and, frankly, industry-leading. And we have some distinct elements of our franchise that I think that our investors are I think, quite interested in, particularly when you look at what's going on in various markets and the return opportunities that people are looking at. Real estate obviously has gone through a pretty tough run over the last number of years, and I think we've been consistently talking about this on our calls and in our communication that we've seen a distinct change in terms of the opportunity set on the real estate side. And for us, I think, in terms of our deployment and taking advantage of those opportunities. I think for us, it started, frankly, more than a year ago where we started to see, as a result of stress in the real estate community, opportunities felt were very defensible and had a lot of upside. And so if you look at the deployment opportunity and where we've taken advantage of those opportunities, it's obviously ticked up over the course of 2025 in a meaningful way. So we feel like what we're coming to market with in 2026 is a good, diverse set of opportunities for our LP and about the fundraising cycle and about the real estate opportunity more broadly. And I think that there is more interest from the LP community today in real estate than I think we've seen in several years. So I think we go into this with a lot of enthusiasm about this fundraising cycle, our ability to raise capital. And I think relative to what we expect fund over fund, we do expect growth on a fund over fund basis in all of these strategies. And so we're pretty excited about it.

Arnaud, I would just add, it's Jack, that the biggest tentpole in real estate for us this year is going to be the TREP business. And as Jon indicated, with our institutional LPs, we're already in different stages of dialogue and seeing very strong demand. The other thing I would say is that's a business where we've never offered that product to the high net worth market, and we have one of our most strategic channel partners there despite the fact that demand is moving more toward the evergreen market, who believes that our performance in that TREP business is so strong, they want to offer that closed-end fund to their system, and we expect material take-up there.

Our next question comes from Brian Bedell with Deutsche Bank.

Maybe just to go back to the connection between the deployment and transaction fees. And obviously, you've been pretty clear that the deployment opportunities broadly across the platform are continue to improve as we move into 2026, and that structurally augurs well for the transaction fees. But just it's been improving throughout 2025, sequentially every quarter. And obviously, we have a step -- major step up here in 4Q. So I appreciate that it was a broad-based good mix in 4Q and lumpy. But was there a vast improvement from 3Q to 4Q in the structure of what you did in terms of the teams in place? And then maybe another way to look at this would be if we were to quarterize or annualize that number in 4Q, which I know is unbelievably lumpy what kind of upside would there be to the FRE margin for '26 in that type of scenario?

I'll just start and then Jack will add in. But I think that I don't think there was anything that was structurally different about what we're doing other than what Jack described earlier. Just I think it's important that you understand sort of the way we execute on this, which is that we feel it's very important to have capital markets capability that essentially is embedded in each of these different businesses because being early in the transaction cycle being involved in the financing discussions and structuring deals early in the transaction cycle is very important because you're gaining the confidence of your management teams, et cetera. And in terms of the value add that we bring to bear as a result of being inside of these companies and really understanding them and being able to position the company the best we can with respect to structuring financing around it and bringing capital to bear and attracting capital to it. So this is something that Jack mentioned before that we've consistently built out over the course of time across our businesses. We're continuing to do that. And so of course, I think transaction and financing revenue is going to be correlated to deployment and transactional activity. There's no question about that. And I think there will be other overlaying factors depending upon sort of where other capital is coming from. But I think that it will continue to be correlated to that. However, structurally, it is -- if you think about sort of what is the baseline embedded structural opportunity the structural opportunity continues to go up for us as we think about how we're doing this. And of course, as I mentioned before, on the credit side, as we continue to build our credit platform and embed capital markets capability and our broker-dealer capabilities in that business, I think that's a structural upside for us in terms of something that I think we'll realize over the next couple of years. So I think of it that way. I think that if you looked at the capital markets revenue flow and you went back from 2024 through where we are today, you can almost look at sort of like progression. If you try to smooth the line, you can almost look at a progression on a quarter-by-quarter basis of the expansion of the opportunity set for us and kind of develop a little bit of a baseline that way because you're right, there will be sort of lumpy, chunky opportunities like we saw in the fourth quarter.

The only thing I'd add to that, Brian, is one factor that determines the revenue opportunity in any given deal is how the capital structure is put in place. What I mean by that is, simplistically, if you think either broadly syndicated loan that's underwritten and distributed to the marketplace or a private lending, a direct lending solution in a broadly syndicated loan, our participation will be a percentage of the total fee opportunity. In a directly placed capital structure we are usually doing all of the work and placing the entire capital structure. And it did so happen that in the fourth quarter, there were a number -- it wasn't just one deal, there were a number of larger transactions that closed in the quarter. where the deal was funded with a private capital structure, and our team did exceptional work to design those capital structures. So that will also determine a little bit of lumpiness. Now on your margin question, capital markets revenue is very high, think about like 85% to 90% contribution margin on incremental revenue. So if we have very strong capital markets quarters like we had in Q4, that's what drove the FRE margin up in Q4.

Our last question comes from Michael Cyprys with Morgan Stanley.

Just a question on the wealth channel. It seems T-POP is off to a good strong start. I was hoping you could elaborate on some of the initiatives and steps you're going to be taking across the wealth channel here in '26 to accelerate growth across the existing vehicles? And more broadly, how are you thinking about scope for new product development vehicles, potential partnerships to bring more of what you do to the private wealth channel and to ease point of access for retail?

Yes. Good question, Mike. We're spending a lot of time on that. Job 1 for us as we started down this path several years ago was we got to get T-POP right. This has got to work well. It's got to be viewed as a high-quality product. It has to help us build our brand much more broadly in the channel than we had in the past, just placing one closed end fund at a time. And I would say we're off to a fantastic start there. T-POP on the platforms that we are on, we are one of the top and in some cases, the top performing and top capital raising, private equity evergreen product on the shelf. So step 1 is continue that expansion and continue to use this premier product to broaden our brand awareness and our active engagement with financial advisers across more platforms. And that will lead to accelerated growth in T-POP this year. I think we talked about the growth rate we had this past year. I would expect T-POP to more than double this year and that will be the result of continuing to penetrate the existing channel partners. And as I mentioned in my prepared remarks, we have several additional channel partners who have already selected T-POP in some cases -- in many cases, in competition with every other private equity evergreen product out there as one to add to their shelf this year. So expanding on existing platforms, growing across new platforms. On both T-POP and TCAP, by the way, we talked about flows in TCAP, we expect TCAP to continue to grow as a very sizable direct lending option in the private wealth market. that's step 1. Step 2 is expanding our product set as you talked about. And we are actively working on both a multi-strategy for us, effectively investing across all of our different credit businesses in Angelo Gordon. And then the third -- the next product is an nontraded REIT. And as Jon indicated, we are seeing a resumption of real interest in real estate, not just in institutional LP land, but also on the high net worth channel partners. We have a couple of our biggest channel partners who are eager to partner with us on a nontraded REIT that reflects everything we do in real estate without an older portfolio with a newly seeded portfolio. So working on both of those. And then the final piece, I would say, is the market is really moving in part toward what I would call bundled solutions that require partnerships with partners more on the liquid side, the public side of the market. Obviously, a couple of our peers have announced those. And we have very active discussions going on with interesting partners who I think will open up more market opportunity, more mass affluent opportunity and eventually the 401(k) market.

Thank you. This concludes the Q&A portion of today's call. I would now like to turn the call back over to Gary Stein for closing remarks.

Great. Thank you all for joining us today. We know it's an extremely busy earnings day. So we appreciate you choosing to spend time with us. If you have any questions, as always, feel free to follow up with the Investor Relations team. Otherwise, we'll look forward to speaking with you again next quarter.

This concludes today's TPG's Fourth Quarter and Full Year 2025 Earnings Call and Webcast. You may now disconnect your line at this time, and have a wonderful day.