GCM Grosvenor Inc.
08/07/2025 | Press release | Distributed by Public on 08/07/2025 14:16
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the Annual Report on Form 10-K for the fiscal year ended December 31, 2024. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a result of many factors, such as those set forth under the "Risk Factors" section of Part I, Item IA in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and under the "Forward-Looking Statements" section elsewhere in this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
We are a leading alternative asset management solutions provider that invests across all major alternative investment strategies. We invest on a primary basis and through direct-oriented strategies, which we define as secondaries, co-investments, direct investments and seed investments. We operate customized separate accounts and commingled funds. We collaborate with our clients to invest on their behalf across the private and public markets, either through portfolios customized to meet a client's specific objectives or through specialized commingled funds that are developed to meet broad market demands for strategies and risk-return objectives.
We operate at scale across the full range of private markets and absolute return strategies. Private markets and absolute return strategies are primarily defined by the liquidity of the underlying securities purchased, the length of the client commitment, and the form and timing of incentive fees. For private markets strategies, clients generally commit to invest over a three-year time period and have an expected duration of seven years or more. In private markets strategies, carried interest is typically based on realized gains on liquidation of the investment. For absolute return strategies, the securities tend to be more liquid, clients have the ability to redeem assets more regularly, and performance fees can be earned on an annual basis. We offer the following investment strategies:
•Private Equity
•Infrastructure
•Real Estate
•Absolute Return Strategies
•Alternative Credit
•Sustainable and Impact Investing
Our clients include large, sophisticated, global institutional investors who rely on our investment expertise and differentiated investment access to navigate the alternatives market, but also include a growing individual investor client base. As one of the pioneers of the customized separate account solutions, we are equipped to provide investment services to clients with a wide variety of needs, internal resources and investment objectives, and our client relationships are deep and frequently span decades.
Trends Affecting Our Business
As a global alternative asset manager, our results of operations are impacted by a variety of factors, including conditions in the global financial markets and economic and political environments, particularly in the United States, Europe, Asia-Pacific, Latin America and the Middle East. While economic factors, such as interest rates, can make alternative investments more or less attractive relative to other asset classes, investors have increasingly gravitated towards the returns generated by alternative investments in order to meet their return objectives. In addition, increased equity market volatility can also contribute to increased investor demand for alternative strategies. We have observed such volatility in the first half of 2025 in the United States, driven by elevated inflation, economic slowdown and potential implications of U.S. trade tariffs. Finally, the opportunities in private markets continue to expand as firms raise new funds and launch new vehicles and products to access private markets across the globe.
In addition to the trends discussed above, we believe the following factors, among others, will influence our future performance and results of operations:
Our ability to retain existing investors and attract new investors in our funds.
Our ability to retain existing assets under management and attract new investors in our funds is partially dependent on the extent to which investors continue to favorably see the alternative asset management industry relative to traditional publicly listed equity and debt securities. A decline in the pace or the size of our fundraising efforts or investments as a result of increased competition in the private markets investing environment or a shift toward public markets may impact our revenues, which are generated from management fees and incentive fees.
Our ability to expand our business through new lines of business and geographic markets.
Our ability to grow our revenue base is partially dependent upon our ability to offer additional products and services by entering into new lines of business and by entering into, or expanding our presence in, new geographic markets. Entry into certain lines of business or geographic markets or the introduction of new types of products or services may subject us to the evolving macroeconomic and regulatory environment of the various countries where we operate or in which we invest.
Our ability to realize investments.
Challenging market and economic conditions may adversely affect our ability to exit and realize value from our investments and we may not be able to find suitable investments in which to effectively deploy capital. During periods of adverse economic conditions, such as current geopolitical turmoil abroad and elevated inflation and interest rates, our funds may have difficulty accessing financial markets, which could make it more difficult to obtain funding for additional investments and impact our ability to successfully exit positions in a timely manner. A general market downturn, a recession or a specific market dislocation may result in lower investment returns for our funds, which would adversely affect our revenues.
Our ability to identify suitable investment opportunities for our clients.
Our success largely depends on the identification and availability of suitable investment opportunities for our clients, including the success of the investment vehicles managed by third-party investment managers in which GCM Funds invest. The availability of investment opportunities is subject to certain factors outside of our control, including the market environment at a given point in time. Although there can be no assurance that we will be able to secure the opportunity to invest on behalf of our clients in all or a substantial portion of the investments we select, or that the size of the investment opportunities available to us will be as large as we would desire, we seek to maintain excellent relationships with investment managers that we have invested with previously or who we may invest with in the future. These investment managers include investment managers of investment funds as well as sponsors of investments that might provide co-investment opportunities in portfolio companies alongside the fund manager. Our ability to identify attractive investments and execute those investments is dependent on a number of factors, including the general macroeconomic environment, valuation, transaction size, and expected duration of such investment opportunity.
Our ability to generate competitive returns.
The ability to attract and retain clients is partially dependent on returns we are able to deliver versus client objectives, our peers and industry benchmarks. The capital we are able to attract drives the growth of our assets under management and the management and incentive fees we earn. Similarly, in order to maintain our desired fee structure in a competitive environment, we must be able to continue to provide clients with investment returns and service that incentivize our investors to pay our desired fee rates.
Our ability to comply with increasing and evolving regulatory requirements.
The complex and evolving regulatory and tax environment may have an adverse effect on our business and subject us to additional expenses or capital requirements, as well as restrictions on our business operations.
For example, on July 4, 2025, H.R. 1, the "One Big Beautiful Bill Act" (the "OBBBA") was signed into law in the United States. Among other changes, the OBBBA modifies key business tax provisions, including the restoration of 100% bonus depreciation under Section 168(k) of the United States Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), the restoration of the immediate deduction of U.S. domestic research and experimental expenditures under Section 174A of the Internal Revenue Code, the restoration of the EBITDA-based business interest expense limitation under
Section 163(j) of the Internal Revenue Code, and changes to the computation of taxes related to international operations. As the OBBBA was passed after June 30, 2025, there is no impact on our financial statements for the three and six months ended June 30, 2025, but we are currently evaluating the impact that OBBBA may have on our future financial condition and results of operations. Regulations and other United States Internal Revenue Service guidance implementing the OBBBA may give rise to new issues that we did not foresee, and further changes to tax laws may be implemented.
Operating Segments
We have determined that we operate in a single operating and reportable segment. This is consistent with how our chief operating decision maker, who is our Chief Executive Officer, allocates resources and assesses performance.
Organizational Structure
The diagram below depicts our current organizational structure:
Note: The diagram depicts a simplified version of our structure and does not include all legal entities in our structure. Approximate ownership percentages are as of August 4, 2025.
(1)Mr. Sacks, the chairman of our board of directors and our Chief Executive Officer, ultimately owns and controls GCM V. The address for Mr. Sacks is c/o GCM Grosvenor, 900 North Michigan Avenue, Suite 1100, Chicago, Illinois 60611.
(2)Percentage of combined voting power represents voting power with respect to all shares of Class A common stock and Class C common stock, voting together as a single class. Each holder of Class A common stock is entitled to one vote per share, and each holder of Class C common stock is entitled to the lesser of (i) 10 votes per share and (ii) the Class C Share Voting Amount on all matters submitted to stockholders for their vote or approval.
From and after the Sunset Date, holders of Class C Common Stock will be entitled to one vote per share. Class C common stock does not have any of the economic rights (including rights to dividends and distributions upon liquidation) associated with Class A common stock.
(3)Each warrant entitles the registered holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
(4)Mr. Sacks is the ultimate managing member of each of (i) Holdings, (ii) Management LLC, (iii) Holdings II, and (iv) GCM Progress Subsidiary LLC, a Delaware limited liability company (collectively, the "GCMH Equityholders"). Any distribution of proceeds derived from the securities held by the GCMH Equityholders is shared among the respective members of such entities in accordance with the applicable operating agreements of such entities.
(5)As of August 4, 2025, there were 53,220,319 shares of Class A common stock outstanding and 141,665,831 common units of GCMH ("Common Units") outstanding held by the GCMH Equityholders, which may be exchanged for shares of Class A common stock on a one-to-one basis, or, at the Company's election, for cash, pursuant to and subject to the restrictions set forth in the Fifth Amended and Restated Limited Liability Limited Partnership Agreement of GCMH. As of August 4, 2025, GCM V held 141,665,831 shares of Class C common stock, which corresponds to the number of Common Units held by the GCMH Equityholders.
Components of Results of Operations
Revenues
We generate revenues from management fees and incentive fees, which includes carried interest and performance fees.
Management Fees
Management Fees
We earn management fees from providing investment management services to specialized funds and customized separate account clients. Specialized funds are generally structured as partnerships or companies having multiple investors. Customized separate account clients may be structured using an affiliate-managed entity or may involve an investment management agreement between us and a single client. Certain separate account clients may have us manage assets both with full discretion over investments decisions as well as without discretion over investment decisions and may also receive access to various other advisory services the firm may provide.
Certain of our management fees, typically associated with our private markets strategies, are based on client commitments to those funds during an initial commitment or investment period. During this period, fees may be charged on total commitments, on invested capital (capital committed to underlying investments) or on a ratable ramp-in of total commitments, which is meant to mirror typical invested capital pacing. Following the expiration or termination of such period, certain fees continue to be based on client commitments while others are based on invested assets or based on invested capital and unfunded deal commitments less returned capital or based on a fixed ramp down schedule.
Certain of our management fees, typically associated with absolute return strategies, are based on the NAV of those funds. Such GCM Funds either have a set fee for the entire fund or a fee scale through which clients with larger commitments pay a lower fee.
Management fees are determined quarterly and are more commonly billed in advance based on the management fee rate applied to the management fee base at the end of the preceding quarterly period as defined in the respective contractual agreements.
We provided investment management / advisory services on assets of $85.9 billion and $80.1 billion as of June 30, 2025 and December 31, 2024, respectively.
Fund expense reimbursement revenue
We incur certain costs, primarily related to accounting, client reporting, investment-decision making and treasury-related expenditures, for which we receive reimbursement from the GCM Funds in connection with our performance obligations to provide investment management services. We concluded that we control the services provided and resources used before they are transferred to the customer, and therefore we act as a principal. Accordingly, the reimbursement for these costs incurred by us are presented on a gross basis within management fees. Expense reimbursements are recognized at a point in time, in the periods during which the related expenses are incurred and the reimbursements are contractually earned.
Incentive Fees
Incentive fees are based on the results of our funds, in the form of performance fees and carried interest income, which together comprise incentive fees.
Carried Interest
Carried interest is a performance-based capital allocation from a fund's limited partners earned by us in certain GCM Funds, more commonly in private markets strategies. Carried interest is typically a percentage of the profits calculated in accordance with the terms of fund agreements, certain fees and a preferred return to the fund's limited partners. Carried interest is ultimately realized when underlying investments distribute proceeds or are sold and therefore carried interest is highly susceptible to market factors, judgments, and actions of third parties that are outside of our control.
Agreements generally include a clawback provision that, if triggered, would require us to return up to the cumulative amount of carried interest distributed, typically net of tax, upon liquidation of those funds, if the aggregate amount paid as carried interest exceeds the amount actually due based upon the aggregate performance of each fund. We have defined the portion to be deferred as the amount of carried interest, typically net of tax, that we would be required to return if all remaining investments had no value as of the end of each reporting period. As of June 30, 2025, deferred revenue relating to constrained realized carried interest was approximately $6.1 million.
Assets under management that are subject to carried interest, excluding investments of the firm and our professionals from which we generally do not earn incentive fees, were approximately $47.4 billion as of June 30, 2025.
Performance Fees
We may receive performance fees from certain GCM Funds, more commonly in funds associated with absolute return strategies. Performance fees are typically a fixed percentage of investment gains, subject to loss carryforward provisions that require the recapture of any previous losses before any performance fees can be earned in the current period. Performance fees may or may not be subject to a hurdle or a preferred return, which requires that clients earn a specified minimum return before a performance fee can be assessed. These performance fees are determined based upon investment performance at the end of a specified measurement period, generally the end of the calendar year.
Investment returns are highly susceptible to market factors, judgments, and actions of third parties that are outside of our control. Accordingly, performance fees are variable consideration and are therefore constrained and not recognized until it is probable that a significant reversal will not occur. In the event that a client redeems from one of the GCM Funds prior to the end of a measurement period, any accrued performance fee is ordinarily due and payable by such redeeming client as of the date of the redemption.
Assets under management that are subject to performance fees, excluding investments of the firm and our professionals from which we generally do not earn incentive fees, were approximately $14.3 billionas of June 30, 2025.
Other Operating Income
Other operating income primarily consists of administrative fees from certain private investment vehicles where we perform a full suite of administrative functions but do not manage or advise and have no discretion over the capital.
Expenses
Employee Compensation and Benefits
Employee compensation and benefits primarily consists of (1) cash-based employee compensation and benefits, (2) equity-based compensation, (3) partnership interest-based compensation, (4) carried interest compensation, (5) cash-based incentive fee related compensation and (6) other non-cash compensation. Bonus and incentive fee related compensation is generally determined by our management and is discretionary taking into consideration, among other things, our financial results and the employee's performance. In addition, various individuals, including certain senior professionals have been awarded partnership interests and/or restricted stock units ("RSUs"). These partnership interests grant the recipient the right to certain cash distributions from GCMH Equityholders' profits (to the extent such distributions are authorized) and/or to certain net sale proceeds after threshold distributions, resulting in non-cash profits interest compensation expense. The company recognizes compensation expense attributable to the RSUs on a straight-line basis over the requisite service period, which is generally the vesting period. Certain employees and former employees are also entitled to a portion of the carried interest and performance fees realized from certain GCM Funds, which is payable upon a realization of the carried interest or performance fees.
General, Administrative and Other
General, administrative and other consists primarily of professional fees, travel and related expenses, IT operations, communications and information services, occupancy, fund expenses, depreciation and amortization, and other costs associated with our operations.
Net Other Income (Expense)
Investment Income (Loss)
Investment income (loss) primarily consists of gains and losses arising from our equity method investments.
Interest Expense
Interest expense includes interest paid and accrued on our outstanding debt, along with the amortization of deferred debt issuance costs incurred from debt issued by us, including the Term Loan Facility and the Revolving Credit Facility (each of which defined below) entered into by us. Interest expense also includes (1) the impact of qualifying effective cash flow hedges and (2) the amortization of realized gains or losses on interest rate swaps that initially qualified for hedge accounting and were subsequently terminated. The unrealized gains or losses are reclassified from accumulated other comprehensive income into interest expense over the original life of the swap for terminated derivative instruments.
Other Income (Expense)
Other income (expense) consists primarily of other non-operating items, including interest income.
Change in Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities are non-cash and consist of fair value adjustments related to the outstanding public and private warrants issued in connection with the Transaction. The warrant liabilities are classified as marked-to-market liabilities pursuant to ASC 815-40, Derivatives and Hedging-Contracts in Entity's Own Equity, and the corresponding increase or decrease in value impacts our net income (loss).
Provision for Income Taxes
We are a corporation for U.S. federal income tax purposes and therefore are subject to U.S. federal and state income taxes on our share of taxable income generated by us and our subsidiaries. GCMH is treated as a pass-through entity for U.S. federal and state income tax purposes. As such, income generated by GCMH flows through to its partners, and is generally not subject to U.S. federal or state income tax at the partnership level. Our non-U.S. subsidiaries generally operate as corporate entities in non-U.S. jurisdictions, with certain of these entities subject to local or non-U.S. income taxes. The tax liability with respect to income attributable to noncontrolling interests in GCMH is borne by the holders of such noncontrolling interests.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests in subsidiaries represents the economic interests of third parties in certain consolidated subsidiaries.
Net income (loss) attributable to noncontrolling interests in GCMH represents the economic interests of GCMH Equityholders in GCMH. Profits and losses, other than partnership interest-based compensation, are allocated to the noncontrolling interests in GCMH in proportion to their relative ownership interests regardless of their basis.
Results of Operations
The following is a discussion of our consolidated results of operations for the three and sixmonths ended June 30, 2025and 2024. This information is derived from our accompanying Condensed Consolidated Financial Statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
| Management fees | $ | 101,924 | $ | 99,843 | $ | 211,239 | $ | 195,728 | |||||||||||||||
| Incentive fees | 16,258 | 16,037 | 31,326 | 26,155 | |||||||||||||||||||
| Other operating income | 1,475 | 1,074 | 2,938 | 3,937 | |||||||||||||||||||
| Total operating revenues | 119,657 | 116,954 | 245,503 | 225,820 | |||||||||||||||||||
| Expenses | |||||||||||||||||||||||
| Employee compensation and benefits | 74,863 | 67,955 | 157,103 | 167,602 | |||||||||||||||||||
| General, administrative and other | 25,549 | 28,164 | 53,825 | 53,343 | |||||||||||||||||||
| Total operating expenses | 100,412 | 96,119 | 210,928 | 220,945 | |||||||||||||||||||
| Operating income | 19,245 | 20,835 | 34,575 | 4,875 | |||||||||||||||||||
| Investment income | 5,782 | 1,290 | 6,546 | 6,967 | |||||||||||||||||||
| Interest expense | (5,908) | (6,134) | (11,571) | (12,057) | |||||||||||||||||||
| Other income | 1,182 | 394 | 2,028 | 947 | |||||||||||||||||||
| Change in fair value of warrant liabilities | 19,388 | (180) | 10,612 | (2,324) | |||||||||||||||||||
| Net other income (expense) | 20,444 | (4,630) | 7,615 | (6,467) | |||||||||||||||||||
| Income (loss) before income taxes | 39,689 | 16,205 | 42,190 | (1,592) | |||||||||||||||||||
| Provision (benefit) for income taxes | (202) | 3,244 | 3,389 | 4,354 | |||||||||||||||||||
| Net income (loss) | 39,891 | 12,961 | 38,801 | (5,946) | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests in subsidiaries | 980 | (901) | 1,155 | 401 | |||||||||||||||||||
| Less: Net income (loss) attributable to noncontrolling interests in GCMH | 23,474 | 9,062 | 21,746 | (13,271) | |||||||||||||||||||
| Net income attributable to GCM Grosvenor Inc. | $ | 15,437 | $ | 4,800 | $ | 15,900 | $ | 6,924 | |||||||||||||||
Revenues
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Private markets strategies | $ | 59,600 | $ | 58,807 | $ | 126,458 | $ | 114,384 | |||||||||||||||
| Absolute return strategies | 38,334 | 37,690 | 76,109 | 74,065 | |||||||||||||||||||
| Fund expense reimbursement revenue | 3,990 | 3,346 | 8,672 | 7,279 | |||||||||||||||||||
| Total management fees | 101,924 | 99,843 | 211,239 | 195,728 | |||||||||||||||||||
| Incentive fees | 16,258 | 16,037 | 31,326 | 26,155 | |||||||||||||||||||
| Administrative fees | 1,295 | 954 | 2,577 | 1,896 | |||||||||||||||||||
| Other | 180 | 120 | 361 | 2,041 | |||||||||||||||||||
| Total other operating income | 1,475 | 1,074 | 2,938 | 3,937 | |||||||||||||||||||
| Total operating revenues | $ | 119,657 | $ | 116,954 | $ | 245,503 | $ | 225,820 | |||||||||||||||
Three Months Ended June 30, 2025 and June 30, 2024
Management fees increased $2.1 million, or 2%, to $101.9 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. Private markets strategies fees increased $0.8 million, or 1%, primarily due to a $0.3 million increase in private market strategies specialized funds fees and a $0.5 millionincrease in private markets strategies customized separate accounts fees, both as a result of capital raising and deployment. Absolute return strategies fees increased $0.6 million, or 2%, primarily as a result of capital raising and higher returns for certain absolute return strategies funds. Fund expense reimbursement revenue increased $0.6 million, or 19% to $4.0 million.
Incentive fees consisted of carried interest and performance fees. Carried interest increased $3.1 million, or 27%, to $14.8 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. This increase is primarily due to higher distributions from investments and tax carry realizations during three months ended June 30, 2025, as compared to the three months ended June 30, 2024.Performance fees decreased $2.9 million, or 67%, to $1.4 million, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to lower returns from absolute return strategies funds with a different fiscal year than us. Performance fees are generally determined at the end of the calendar year and are generally minimal in interim periods.
Six Months Ended June 30, 2025 and June 30, 2024
Management fees increased $15.5 million, or 8%, to $211.2 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Private market strategies fees increased $12.1 million, or 11%, primarily due to a $11.4 million increasein private market strategies specialized funds fees and a $0.8 million increasein private market strategies customized separate accounts fees, both as a result of capital raising and deployment. Absolute return strategies fees increased $2.0 million, or 3%,primarily as a result of capital raising and higher returns for certain absolute return strategies funds. Fund expense reimbursement revenue increased $1.4 million, or 19% to $8.7 million.
Incentive fees consisted of carried interest and performance fees. Carried interest increased $10.3 million, or 65%, to $26.1 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to higher distributions from investments and carry realizations and higher tax carry realizations related to2024 taxable income during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024. Performance fees decreased $5.1 million, or 49%, to $5.3 million for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, primarily due to lower fees earned from funds with a different fiscal year than us. Performance fees are generally determined at the end of the calendar year and are generally minimal in interim periods.
Expenses
Employee Compensation and Benefits
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Cash-based employee compensation and benefits | $ | 38,658 | $ | 38,733 | $ | 77,705 | $ | 76,006 | |||||||||||||||
| Equity-based compensation | 6,776 | 5,335 | 27,077 | 30,805 | |||||||||||||||||||
| Partnership interest-based compensation | 16,323 | 11,588 | 28,548 | 41,590 | |||||||||||||||||||
| Carried interest compensation | 9,281 | 6,860 | 14,606 | 9,402 | |||||||||||||||||||
| Cash-based incentive fee related compensation | 3,832 | 5,260 | 8,990 | 9,449 | |||||||||||||||||||
| Other non-cash compensation | (7) | 179 | 177 | 350 | |||||||||||||||||||
| Total employee compensation and benefits | $ | 74,863 | $ | 67,955 | $ | 157,103 | $ | 167,602 | |||||||||||||||
Three Months Ended June 30, 2025 and June 30, 2024
Employee compensation and benefits increased $6.9 million, or 10%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The overall increase was primarily driven by an increase in partnership interest-based compensation and carried interest compensation. Partnership interest-based compensation increased $4.7 million, or 41%,primarily due to award modifications during the second quarter of 2025. This was partially offset by lower expense of the Holdings Awards that were granted in 2023 and were fully expensed during the year ended December 31, 2024, and the GCMH Equityholders Awards that were granted in 2022 and were fully expensed during the six months ended June 30, 2025.
Holdings Awards and GCMH Equityholders Awards are further described in Note 9 in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of the Quarterly Report on Form 10-Q). These awards do not dilute Class A common stockholders or impact our net cash flows. Carried interest compensation increased $2.4 million, or 35%, primarily due to higher realized carried interest during the three months ended June 30, 2025 compared to the three months ended June 30, 2024.
Six Months Ended June 30, 2025 and June 30, 2024
Employee compensation and benefits decreased $10.5 million, or 6%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The overall decrease was primarily driven by decreases in partnership interest-based compensation partially offset by an increase in carried interest compensation. Partnership interest-based compensation decreased $13.0 million, or 31%, primarily due to award modifications that occurred in the first quarter of 2024 and expenses recorded for the Holdings Awards and GCMH Equityholders Awards for the six months ended June 30, 2024. Holdings Awards did not have any expense recorded for the six months ended June 30, 2025 as they were fully expensed during the year ended December 31, 2024. GCMH Equityholders Awards were fully expensed during the six months ended June 30, 2025. Holdings Awards and GCMH Equityholders Awards are further described in Note 9 in the Notes to Condensed Consolidated Financial Statements included in Part I, Item 2 of the Quarterly Report on Form 10-Q. These awards do not dilute Class A common stockholders or impact our net cash flows. Carried interest compensation increased $5.2 million, or 55%, primarily due to higher realized carried interest during the six months ended June 30, 2025.
General, Administrative and Other
Three and Six Months Ended June 30, 2025 and June 30, 2024
General, administrative and other decreased $2.6 million, or 9%, to $25.5 million for the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily driven by a decrease in professional fees of $2.5 million and rent expense of $1.2 million, partially offset by an increase travel related costs of $0.9 million.
General, administrative and other increased $0.5 million, or 1%, to $53.8 million for the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to increases in travel related costs of $1.3 millionand depreciation expense of $0.9 million, partially offset by a decrease in occupancy expenses of $2.1 million.
Net Other Income (Expense)
Three Months Ended June 30, 2025 and June 30, 2024
Investment income was $5.8 million for the three months ended June 30, 2025 compared to $1.3 millionfor the three months ended June 30, 2024, the change was primarily due to the change in value of private and public market investments.
Interest expense was $5.9 millionfor the three months ended June 30, 2025, which was generally consistent with interest expense of $6.1 millionfor the three months ended June 30, 2024.
Other income was $1.2 millionfor the three months ended June 30, 2025, compared to other income of $0.4 million for the three months ended June 30, 2024, and consisted primarily of interest income in each period.
Change in fair value of warrant liabilities of $19.4 million for the three months ended June 30, 2025 was due to a decrease in the fair value of the warrants from March 31, 2025 to June 30, 2025.
Six Months Ended June 30, 2025 and June 30, 2024
Investment income was $6.5 million for the six months ended June 30, 2025 compared to $7.0 million for the six months ended June 30, 2024, primarily due to the change in value of private and public market investments.
Interest expense of $11.6 millionfor the six months ended June 30, 2025 was generally consistent with the interest expense of $12.1 millionfor the six months ended June 30, 2024.
Other income was $2.0 millionfor the six months ended June 30, 2025 compared to $0.9 millionfor the six months ended June 30, 2024, and consisted primarily of interest income in each period.
Change in fair value of warrant liabilities of $10.6 million for the six months ended June 30, 2025 was due to a decrease in the fair value of the warrants from December 31, 2024 to June 30, 2025.
Provision for Income Taxes
Three and Six Months Ended June 30, 2025 and June 30, 2024
Provision for income taxes primarily reflect U.S. federal and state income taxes on our share of taxable income generated by us, as well as local and foreign income taxes of certain of the our subsidiaries.
Our effective tax rate was (1)% and 20% for the three months ended June 30, 2025 and 2024, respectively, and 8% and (273)% for the six months ended June 30, 2025 and 2024, respectively. Our overall effective tax rate was greater than the statutory rate primarily due to the portion of income allocated to the noncontrolling interest holders, including profit interest expense, as well as a valuation allowance recorded against deferred tax assets and discrete tax adjustments recorded in the periods.
Net Income (Loss) Attributable to Noncontrolling Interests
Three and Six Months Ended June 30, 2025 and June 30, 2024
Net income (loss) attributable to noncontrolling interests in subsidiaries was $1.0 million and $(0.9) million for the three months ended June 30, 2025 and 2024, respectively, and $1.2 million and $0.4 million for the six months ended June 30, 2025 and 2024, respectively. The increase for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, was primarily attributable to an increase in income generated by our consolidated subsidiaries not wholly owned by us.
Net income (loss) attributable to noncontrolling interests in GCMH was $23.5 million and $9.1 million for the three months ended June 30, 2025 and 2024, respectively, and $21.7 million and $(13.3) million for the six months ended June 30, 2025 and 2024, respectively. The change in net income (loss) attributable to noncontrolling interests in GCMH for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, was primarily attributable to an increase and decrease in partnership-interest based compensation for the three and six months ended June 30, 2025, respectively, which was fully allocated to noncontrolling interest in GCMH .
Fee-Paying AUM
FPAUM is a metric we use to measure the assets from which we earn management fees. Our FPAUM comprises the assets in our customized separate accounts and specialized funds from which we derive management fees. We classify customized separate account revenue as management fees if the client is charged an asset-based fee, which includes the vast majority of our discretionary AUM accounts. Our FPAUM for private market strategies typically represents committed, invested or scheduled capital during the investment period and invested capital following the expiration or termination of the investment period. Substantially all of our private markets strategies funds earn fees based on commitments or net invested capital, which are not affected by market appreciation or depreciation. Our FPAUM for our absolute return strategy is based on NAV, which includes impacts of any market appreciation or depreciation.
Our calculations of FPAUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers. Our definition of FPAUM is not based on any definition that is set forth in the agreements governing the customized separate accounts or specialized funds that we manage.
| Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||
| (in millions, unaudited) | Private Markets Strategies | Absolute Return Strategies | Total FPAUM |
Private Markets Strategies |
Absolute Return Strategies |
Total FPAUM | |||||||||||||||||||||||||||||
| Fee-paying AUM | |||||||||||||||||||||||||||||||||||
| Balance, beginning of period | $ | 44,398 | $ | 22,001 | $ | 66,399 | $ | 42,717 | $ | 22,048 | $ | 64,765 | |||||||||||||||||||||||
| Contributions | 1,342 | 650 | 1,992 | 3,707 | 977 | 4,684 | |||||||||||||||||||||||||||||
| Withdrawals | (52) | (141) | (193) | (79) | (517) | (596) | |||||||||||||||||||||||||||||
| Distributions | (530) | (69) | (599) | (1,045) | (78) | (1,123) | |||||||||||||||||||||||||||||
| Change in market value | 25 | 1,088 | 1,113 | 53 | 1,065 | 1,118 | |||||||||||||||||||||||||||||
| Foreign exchange and other | 278 | 83 | 361 | 108 | 117 | 225 | |||||||||||||||||||||||||||||
| Balance, end of period | $ | 45,461 | $ | 23,612 | $ | 69,073 | $ | 45,461 | $ | 23,612 | $ | 69,073 | |||||||||||||||||||||||
Contracted, not yet fee-paying AUM ("CNYFPAUM") represents limited partner commitments which are expected to be invested and begin charging fees over the ensuing five years.
| As of | |||||||||||
| (in millions) |
June 30, 2025
|
December 31, 2024 | |||||||||
| Contracted, not yet Fee-Paying AUM | $ | 8,748 | $ | 8,202 | |||||||
| AUM | $ | 85,931 | $ | 80,077 | |||||||
Of the $8.7 billion CNYFPAUM as of June 30, 2025, approximately $2.3 billion is subject to an agreed upon fee ramp in schedule. The ramp in schedule will result in management fees being charged on approximately $0.3 billion, $0.8 billion and $1.2 billion of such amount in the remainder of 2025, in 2026, and in 2027 and beyond, respectively. Management fees will be charged on the remaining approximately $6.4 billion of CNYFPAUM as such capital is invested, which will depend on a number of factors, including the availability of eligible investment opportunities.
Three Months Ended June 30, 2025
FPAUM increased $2.7 billion, or 4%, to $69.1 billion during the three months ended June 30, 2025 due to $2.0 billion of contributions and a $1.1 billion increase in market value, respectively, partially offset by $0.6 billion of distributions.
•Private markets strategies FPAUM increased $1.1 billion, or 2%, to $45.5 billion during the three months ended June 30, 2025, primarily due to $1.3 billion of contributions, partially offset by $0.5 billion of distributions.
•Absolute return strategies FPAUM increased $1.6 billion, or 7%, to $23.6 billion during the three months ended June 30, 2025, primarily due to a $1.1 billion increase in market value and $0.7 billion of contributions, respectively, and partially offset by $0.1 billion of withdrawals.
CNYFPAUM increased $0.5 billion, or 6%, to$8.7 billion during the three months ended June 30, 2025 due tothe closing of new commitments during the period, net of reductions for CNYFPAUM that became FPAUM during the period.
AUM increased$4.0 billion, or 5%, to $85.9 billion during the three months ended June 30, 2025, primarily driven by a $2.7 billion increase in FPAUM and a $0.5 billion increase in CNYFPAUM, as well as mark to market increases that do not impact FPAUM.
Six Months Ended June 30, 2025
FPAUM increased $4.3 billion, or 7%, to $69.1 billion during the six months ended June 30, 2025, primarily due to $4.7 billion of contributions and a $1.1 billion increase in market value, offset by $0.6 billion and $1.1 billion of withdrawals and distributions, respectively.
•Private markets strategies FPAUM increased $2.7 billion, or 6%, to $45.5 billion during the six months ended June 30, 2025, primarily due to $3.7 billion of contributions, partially offset by $1.0 billion of distributions.
•Absolute return strategies FPAUM increased $1.6 billion, or 7%, to $23.6 billion during the six months ended June 30, 2025, primarily due to a $1.1 billion increase in market value and $1.0 billion of contributions, respectively, partially offset by $0.5 billion of withdrawals.
CNYFPAUM increased $0.5 billion, or 7%, to$8.7 billion during the six months ended June 30, 2025 due tothe closing of new commitments during the period, net of reductions for CNYFPAUM that became FPAUM during the period.
AUM increased $5.9 billion, or 7%, to $85.9 billion during the six months ended June 30, 2025, primarily driven by a $4.3 billion increase in FPAUM and a $0.5 billionincrease in CNYFPAUM, as well as mark to market increases that do not impact FPAUM.
Non-GAAP Financial Measures
In addition to our results of operations above, we report certain financial measures that are not required by, or presented in accordance with, GAAP. Management uses these non-GAAP measures to assess the performance of our business across reporting periods and believes this information is useful to investors for the same reasons. These non-GAAP measures should not be considered a substitute for the most directly comparable GAAP measures, which are reconciled below. Further, these measures have limitations as analytical tools, and when assessing our operating performance, you should not consider these measurements in isolation or as a substitute for GAAP measures including revenues and net income (loss). We may calculate or present these non-GAAP financial measures differently than other companies who report measures with the same or similar names, and as a result, the non-GAAP measures we report may not be comparable.
Summary of Non-GAAP Financial Measures
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Revenues | |||||||||||||||||||||||
|
Private markets strategies(1)
|
$ | 60,148 | $ | 58,807 | $ | 127,073 | $ | 114,384 | |||||||||||||||
|
Absolute return strategies(1)
|
38,334 | 37,690 | 76,109 | 74,065 | |||||||||||||||||||
| Management fees, net | 98,482 | 96,497 | 203,182 | 188,449 | |||||||||||||||||||
| Administrative fees and other operating income | 1,475 | 1,074 | 2,938 | 3,937 | |||||||||||||||||||
| Fee-Related Revenue | 99,957 | 97,571 | 206,120 | 192,386 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
|
Cash-based employee compensation and benefits, net(2)
|
(37,134) | (38,103) | (75,231) | (75,090) | |||||||||||||||||||
|
General, administrative and other, net(3)
|
(21,206) | (20,219) | (42,615) | (39,923) | |||||||||||||||||||
| Fee-Related Earnings | 41,617 | 39,249 | 88,274 | 77,373 | |||||||||||||||||||
|
Fee-Related Earnings Margin(4)
|
42 | % | 40 | % | 43 | % | 40 | % | |||||||||||||||
| Incentive fees: | |||||||||||||||||||||||
| Performance fees | 1,433 | 4,346 | 5,251 | 10,333 | |||||||||||||||||||
| Carried interest | 14,825 | 11,691 | 26,075 | 15,822 | |||||||||||||||||||
| Incentive fee related compensation and NCI: | |||||||||||||||||||||||
| Cash-based incentive fee related compensation | (3,832) | (5,260) | (8,990) | (9,449) | |||||||||||||||||||
|
Carried interest compensation, net(5)
|
(8,564) | (6,805) | (14,583) | (9,356) | |||||||||||||||||||
| Carried interest attributable to noncontrolling interests | (1,306) | (466) | (1,758) | (1,051) | |||||||||||||||||||
|
Realized investment income, net of amount attributable to noncontrolling interests in subsidiaries(6)
|
3,339 | 1,853 | 5,092 | 2,444 | |||||||||||||||||||
| Interest income | 1,019 | 577 | 1,899 | 1,156 | |||||||||||||||||||
| Other (income) expense | 163 | (26) | 129 | (52) | |||||||||||||||||||
| Depreciation | 822 | 315 | 1,503 | 620 | |||||||||||||||||||
| Adjusted EBITDA | 49,516 | 45,474 | 102,892 | 87,840 | |||||||||||||||||||
| Depreciation | (822) | (315) | (1,503) | (620) | |||||||||||||||||||
| Interest expense | (5,908) | (6,134) | (11,571) | (12,057) | |||||||||||||||||||
| Adjusted Pre-Tax Income | 42,786 | 39,025 | 89,818 | 75,163 | |||||||||||||||||||
|
Adjusted income taxes(7)
|
(10,696) | (9,639) | (22,454) | (18,565) | |||||||||||||||||||
| Adjusted Net Income | $ | 32,090 | $ | 29,386 | $ | 67,364 | $ | 56,598 | |||||||||||||||
____________
(1)Excludes fund expense reimbursement revenue, net of $3.2 million and $3.3 million, for the three months ended June 30, 2025 and 2024, respectively, and $7.8 million and $7.3 million for the six months ended June 30, 2025 and 2024, respectively, and excludes net revenue of noncontrolling interests of $0.2 million and $0.3 million in a consolidated subsidiary for the three and sixmonths endedJune 30, 2025, respectively. There was no net revenue of noncontrolling interests in a consolidated subsidiary for each of the three and sixmonths endedJune 30, 2024.
(2)Excludes severance expense of $1.5 million and $0.6 million for the three months endedJune 30, 2025 and 2024, respectively, and $2.6 million and $0.9 million for the six months ended June 30, 2025 and 2024, respectively.
(3)Excludes amortization of intangibles of $0.3 million for each of the three months endedJune 30, 2025 and 2024, and $0.7 million for each of the six months ended June 30, 2025 and 2024. Also excludes $0.1 million and $1.6 million for the three and six months ended June 30, 2025, respectively, of completed and contemplated corporate transaction related costs, and $3.1 millionand$3.2 million for the three and six months ended June 30, 2024 of debt amendment and extension expenses, respectively. Also excludes other non-core expenses of $0.7 million and $1.2 million for the three months ended June 30, 2025 and 2024, respectively, and $1.1 million and $2.3 million for the six months ended June 30, 2025 and 2024, respectively. Non-core expenses include office relocation costs of $0.9 million and $1.8 million for the threeand six months ended June 30, 2024, respectively. Also, excludes fund reimbursement expenses related to general, administrative, and other of $3.2 million and $3.3 million for the three months endedJune 30, 2025 and 2024, respectively, and $7.9 million and $7.3 million for the six months ended June 30, 2025 and 2024, respectively.
(4)Fee-related earnings margin represents fee-related earnings as a percentage of our fee-related revenue.
(5)Excludes the impact of non-cash carried interest compensation and other of $0.7 million and de minimis for the three and six months ended June 30, 2025. The net non-cash carried interest compensation and other for the three and six months ended June 30, 2024 was de minimis.
(6)Investment income or loss is generally realized when we redeem all or a portion of our investment or when we receive or is due cash, such as a from dividends or distributions.
(7)Represents corporate income taxes at a blended statutory rate of 25.0% and 24.7% applied to Adjusted Pre-Tax Income for the three and six months ended June 30, 2025 and 2024, respectively. The 25.0% and 24.7% are based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 4.0% and 3.7%, respectively.
Net Incentive Fees Attributable to GCM Grosvenor
Net Incentive Fees Attributable to GCM Grosvenor is a non-GAAP measure used to highlight fees earned from incentive fees that are attributable to GCM Grosvenor. Net Incentive Fees Attributable to GCM Grosvenor represent incentive fees excluding (a) incentive fees contractually owed to others and (b) cash-based incentive fee related compensation. Net incentive fees provide investors useful information regarding the amount that such fees contribute to our earnings and are used by management in making compensation and capital allocation decisions.
The following table shows reconciliations of incentive fees to Net Incentive Fees Attributable to GCM Grosvenor for the three and six months endedJune 30, 2025 and 2024:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Incentive fees: | |||||||||||||||||||||||
| Performance fees | $ | 1,433 | $ | 4,346 | $ | 5,251 | $ | 10,333 | |||||||||||||||
| Carried interest | 14,825 | 11,691 | 26,075 | 15,822 | |||||||||||||||||||
| Less incentive fees contractually owed to others: | |||||||||||||||||||||||
| Cash carried interest compensation | (9,281) | (6,860) | (14,606) | (9,402) | |||||||||||||||||||
| Non-cash carried interest compensation and other | 717 | 55 | 23 | 46 | |||||||||||||||||||
| Carried interest attributable to other noncontrolling interest holders | (1,306) | (466) | (1,758) | (1,051) | |||||||||||||||||||
|
Firm share of incentive fees(1)
|
6,388 | 8,766 | 14,985 | 15,748 | |||||||||||||||||||
| Less: Cash-based incentive fee related compensation | (3,832) | (5,260) | (8,990) | (9,449) | |||||||||||||||||||
| Net Incentive Fees Attributable to GCM Grosvenor | $ | 2,556 | $ | 3,506 | $ | 5,995 | $ | 6,299 | |||||||||||||||
(1)Firm share of incentive fees represents incentive fees net of contractual obligations but before discretionary cash-based incentive compensation.
Adjusted Pre-Tax Income, Adjusted Net Income and Adjusted EBITDA
Adjusted Pre-Tax Income, Adjusted Net Income and Adjusted EBITDA are non-GAAP measures used to evaluate our profitability.
Adjusted Net Income is a non-GAAP measure that we present on a pre-tax and after-tax basis to evaluate our profitability. Adjusted Pre-Tax Income represents net income attributable to GCM Grosvenor Inc. including (a) net income (loss) attributable to GCMH, excluding (b) provision (benefit) for income taxes, (c) changes in fair value of warrant liabilities, (d) amortization expense, (e) partnership interest-based and non-cash compensation, (f) equity-based compensation, including cash-settled equity awards (as we view the cash settlement as a separate capital transaction), (g) unrealized investment income, (h) changes in tax receivable agreement liability and (i) certain other items that we believe are not indicative of our core performance, including charges related to completed and corporate transactions, employee severance, office relocation costs, and loss on extinguishment of debt. Adjusted Net Income represents Adjusted Pre-Tax Income fully taxed at each period's blended statutory tax rate.
Adjusted EBITDA is a non-GAAP measure which represents Adjusted Net Income excluding (a) adjusted income taxes, (b) depreciation and amortization expense and (c) interest expense on our outstanding debt.
We are a holding company with no material assets other than its indirect ownership of equity interests in GCMH and certain deferred tax assets. The GCMH Equityholders may from time to time cause GCMH to redeem any or all of their GCMH common units in exchange, at our election, for either cash (based on the market price for a share of the Class A common stock) or shares of Class A common stock. As such, net income (loss) attributable to noncontrolling interests in GCMH is added back in order to reflect the full economics of the underlying business as if GCMH Equityholders converted their interests to shares of Class A common stock. Other noncontrolling interests do not have the ability to convert those interests into our equity interests, and as such, income (loss) attributable to these noncontrolling interests are not adjusted for in our non-GAAP financial measures.
We believe Adjusted Pre-Tax Income, Adjusted Net Income and Adjusted EBITDA are useful to investors because they provide additional insight into the operating profitability of our core business across reporting periods. These measures (1) present a view of the economics of the underlying business as if GCMH Equityholders converted their interests to shares of Class A common stock and (2) adjust for certain non-cash and other activity in order to provide more comparable results of the core business across reporting periods. These measures are used by management in budgeting, forecasting and evaluating operating results.
The following table shows reconciliations of net income attributable to GCM Grosvenor Inc. and Adjusted Pre-Tax Income, Adjusted Net Income and Adjusted EBITDA for the three and six months endedJune 30, 2025 and 2024:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Adjusted Pre-Tax Income & Adjusted Net Income | |||||||||||||||||||||||
| Net income attributable to GCM Grosvenor Inc. | $ | 15,437 | $ | 4,800 | $ | 15,900 | $ | 6,924 | |||||||||||||||
| Plus: | |||||||||||||||||||||||
| Net income (loss) attributable to noncontrolling interests in GCMH | 23,474 | 9,062 | 21,746 | (13,271) | |||||||||||||||||||
| Provision (benefit) for income taxes | (202) | 3,244 | 3,389 | 4,354 | |||||||||||||||||||
| Change in fair value of warrant liabilities | (19,388) | 180 | (10,612) | 2,324 | |||||||||||||||||||
| Amortization expense | 330 | 329 | 658 | 657 | |||||||||||||||||||
| Severance | 1,524 | 630 | 2,628 | 916 | |||||||||||||||||||
|
Transaction expenses(1)
|
101 | 3,103 | 1,555 | 3,159 | |||||||||||||||||||
| Loss on extinguishment of debt | - | 157 | - | 157 | |||||||||||||||||||
|
Changes in TRA liability and other(2)
|
14 | 893 | 65 | 1,896 | |||||||||||||||||||
| Partnership interest-based compensation | 16,323 | 11,588 | 28,548 | 41,590 | |||||||||||||||||||
| Equity-based compensation | 6,776 | 5,335 | 27,077 | 30,805 | |||||||||||||||||||
| Other non-cash compensation | (7) | 179 | 177 | 350 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
| Unrealized investment income, net of noncontrolling interests | (2,313) | (530) | (1,336) | (4,744) | |||||||||||||||||||
| Non-cash carried interest compensation and other | 717 | 55 | 23 | 46 | |||||||||||||||||||
| Adjusted Pre-Tax Income | 42,786 | 39,025 | 89,818 | 75,163 | |||||||||||||||||||
| Less: | |||||||||||||||||||||||
|
Adjusted income taxes(3)
|
(10,696) | (9,639) | (22,454) | (18,565) | |||||||||||||||||||
| Adjusted Net Income | $ | 32,090 | $ | 29,386 | $ | 67,364 | $ | 56,598 | |||||||||||||||
| Adjusted EBITDA | |||||||||||||||||||||||
| Adjusted Net Income | $ | 32,090 | $ | 29,386 | $ | 67,364 | $ | 56,598 | |||||||||||||||
| Plus: | |||||||||||||||||||||||
|
Adjusted income taxes(3)
|
10,696 | 9,639 | 22,454 | 18,565 | |||||||||||||||||||
| Depreciation expense | 822 | 315 | 1,503 | 620 | |||||||||||||||||||
| Interest expense | 5,908 | 6,134 | 11,571 | 12,057 | |||||||||||||||||||
| Adjusted EBITDA | $ | 49,516 | $ | 45,474 | $ | 102,892 | $ | 87,840 | |||||||||||||||
____________
(1)Represents 2025 expenses related to completed and contemplated corporate transactions, and 2024 expenses incurred related to a debt amendment and extension.
(2)Includes $0.9 million and $1.8 million of office relocation costs for the three and sixmonths ended June 30, 2024, respectively.
(3)Represents corporate income taxes at a blended statutory rate of 25.0% and 24.7% applied to Adjusted Pre-Tax Income for the three and six months ended June 30, 2025 and 2024, respectively. The 25.0% and 24.7% are based on a federal statutory rate of 21.0% and a combined state, local and foreign rate net of federal benefits of 4.0% and 3.7%, respectively.
Adjusted Net Income Per Share
Adjusted Net Income Per Share is a non-GAAP measure that is calculated by dividing Adjusted Net Income by adjusted shares outstanding. Adjusted shares outstanding assumes the hypothetical full exchange of limited partnership interests in GCMH into Class A common stock of GCM Grosvenor Inc., the dilution from outstanding warrants for Class A common stock of GCM Grosvenor Inc. and the dilution from outstanding equity-based compensation. We believe adjusted net income per share is useful to investors because it enables them to better evaluate per-share performance across reporting periods.
The following table shows a reconciliation of diluted weighted-average shares of Class A common stock outstanding to adjusted shares outstanding used in the computation of adjusted net income per share for the three and six months endedJune 30, 2025 and 2024:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, except share and per share amounts; unaudited) | |||||||||||||||||||||||
| Adjusted Net Income Per Share | |||||||||||||||||||||||
| Adjusted Net Income | $ | 32,090 | $ | 29,386 | $ | 67,364 | $ | 56,598 | |||||||||||||||
| Weighted-average shares of Class A common stock outstanding - basic | 51,074,156 | 44,934,623 | 48,367,585 | 44,302,442 | |||||||||||||||||||
| Exchange of partnership units | 142,823,480 | 144,235,246 | 143,525,463 | 144,235,246 | |||||||||||||||||||
| Exercise of private warrants - incremental shares under the treasury stock method | 63,298 | - | 94,589 | - | |||||||||||||||||||
| Exercise of public warrants - incremental shares under the treasury stock method | 1,163,618 | - | 1,749,494 | - | |||||||||||||||||||
| Assumed vesting of RSUs - incremental shares under the treasury stock method | 1,214,043 | 1,008,404 | 1,904,029 | - | |||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding - diluted | 196,338,595 | 190,178,273 | 195,641,160 | 188,537,688 | |||||||||||||||||||
| Effect of RSUs, if antidilutive for GAAP | - | - | - | 1,639,536 | |||||||||||||||||||
|
Adjusted shares
|
196,338,595 | 190,178,273 | 195,641,160 | 190,177,224 | |||||||||||||||||||
|
Adjusted Net Income Per Share
|
$ | 0.16 | $ | 0.15 | $ | 0.34 | $ | 0.30 | |||||||||||||||
Fee-Related Revenue and Fee-Related Earnings
Fee-Related Revenue ("FRR") is a non-GAAP measure used to highlight revenues from recurring management fees and administrative fees. FRR represents total operating revenues less (a) incentive fees, (b) net revenue of noncontrolling interests in consolidated subsidiary and (c) fund expense reimbursement revenue, net. We believe FRR is useful to investors because it provides additional insight into our relatively stable management fee base separate from incentive fee revenues, which tend to have greater variability.
Fee-Related Earnings ("FRE") is a non-GAAP measure used to highlight earnings from recurring management fees and administrative fees. FRE represents Adjusted EBITDA further adjusted to exclude (a) incentive fees, (b) other non-operating income, (c) depreciation expense and (d) realized investment income, net of amount attributable to noncontrolling interests in subsidiaries, and to include (a) incentive fee-related compensation and (b) carried interest attributable to other noncontrolling interest holders, net. We believe FRE is useful to investors because it provides additional insights into the management fee driven operating profitability of our business.
The following table shows reconciliations of Total Operating Revenues to Fee-Related Revenue for the three and six months endedJune 30, 2025 and 2024:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Fee Related Revenue | |||||||||||||||||||||||
| Total Operating Revenues | $ | 119,657 | $ | 116,954 | $ | 245,503 | $ | 225,820 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Incentive fees | (16,258) | (16,037) | (31,326) | (26,155) | |||||||||||||||||||
| Fund expense reimbursement revenue, net | (3,247) | (3,346) | (7,775) | (7,279) | |||||||||||||||||||
|
Other adjustments(1)
|
(195) | - | $ | (282) | $ | - | |||||||||||||||||
| Fee-Related Revenue | $ | 99,957 | $ | 97,571 | $ | 206,120 | $ | 192,386 | |||||||||||||||
____________
(1)Represents net revenue of noncontrolling interests in consolidated subsidiary
The following table shows reconciliations of Adjusted EBITDA to Fee-Related Earnings for the three and six months endedJune 30, 2025 and 2024:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| (in thousands, unaudited) | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 49,516 | $ | 45,474 | $ | 102,892 | $ | 87,840 | |||||||||||||||
| Less: | |||||||||||||||||||||||
| Incentive fees | (16,258) | (16,037) | (31,326) | (26,155) | |||||||||||||||||||
| Depreciation expense | (822) | (315) | (1,503) | (620) | |||||||||||||||||||
| Other non-operating expense | (1,182) | (551) | (2,028) | (1,104) | |||||||||||||||||||
|
Realized investment income, net of amount attributable to noncontrolling interests in subsidiaries(1)
|
(3,339) | (1,853) | (5,092) | (2,444) | |||||||||||||||||||
| Plus: | |||||||||||||||||||||||
| Incentive fee-related compensation | 12,396 | 12,065 | 23,573 | 18,805 | |||||||||||||||||||
| Carried interest attributable to other noncontrolling interest holders, net | 1,306 | 466 | 1,758 | 1,051 | |||||||||||||||||||
| Fee-Related Earnings | $ | 41,617 | $ | 39,249 | $ | 88,274 | $ | 77,373 | |||||||||||||||
(1)Investment income or loss is generally realized when we redeem all or a portion of our investment or when we receive or are due cash, such as a from dividends or distributions.
Liquidity and Capital Resources
We have historically financed our operations and working capital through net cash provided by operating activities and borrowings under our Term Loan Facility and Revolving Credit Facility (each as defined below). As of June 30, 2025, we had $136.3 million of cash and cash equivalents and available borrowing capacity of $50.0 million under our Revolving Credit Facility. On July 9, 2025, the SEC declared effective our Registration Statement on Form S-3, pursuant to which we may issue a combination of securities described in the prospectus in one or more offerings from time to time. Our primary cash needs are to fund working capital requirements, invest in growing our business, make investments in GCM Funds, make scheduled principal payments and interest payments on our outstanding indebtedness, pay dividends to holders of our Class A common stock, and pay tax distributions to members. Additionally, as a result of the Transaction, we need cash to make payments under the tax receivable agreement. We expect that our cash flow from operations, current cash and cash equivalents and available borrowing capacity under our Revolving Credit Facility will be sufficient to fund our operations and planned capital expenditures and to service our debt obligations for the next twelve months and the foreseeable future.
We are required to maintain minimum net capital balances for regulatory purposes for certain of our foreign subsidiaries as well as our U.S. broker-dealer subsidiary. These net capital requirements are met by retaining cash. As a result, we may be restricted in our ability to transfer cash between different operating entities and jurisdictions. As of June 30, 2025 we are in compliance with these regulatory requirements.
Cash Flow
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands, unaudited) | |||||||||||
| Net cash provided by operating activities | $ | 75,241 | $ | 41,682 | |||||||
| Net cash used in investing activities | (7,631) | (16,497) | |||||||||
| Net cash provided by (used in) financing activities | (22,052) | 5,664 | |||||||||
| Effect of exchange rate changes on cash | 1,322 | (1,282) | |||||||||
| Net increase in cash and cash equivalents | $ | 46,880 | $ | 29,567 | |||||||
Net Cash Provided by Operating Activities
Net cash provided byoperating activities is generally comprised of our net income (loss) in the respective periods after adjusting for significant non-cash activities, including equity-based compensation for equity-classified awards, non-cash partnership interest-based compensation, the change in fair value of warrant liabilities, changes in payable to related parties pursuant to the tax receivable agreement and the change in equity value of our investments, all of which are included in earnings; proceeds received from return on investments; inflows for receipt of management and incentive fees; and outflows for operating expenses, including cash-based compensation; and lease liabilities.
Net cash provided by operating activities was $75.2 million and $41.7 million for the six months ended June 30, 2025 and 2024, respectively. These operating cash flows were primarily driven by:
•net income of $82.6 million and $62.3 million for the six months ended June 30, 2025 and 2024, respectively, after adjusting for $43.8 million and $68.3 million of net non-cash activities for the six months ended June 30, 2025 and 2024, respectively;
•a decreasein working capital of $14.1 million during the six months ended June 30, 2025 as compared to $24.4 million in working capital during the six months ended June 30, 2024. The decrease is largely due to higher payments made for cash-based compensation, which were partially offset by an increase in collections related to incentive fees, during the six months ended June 30, 2025; and
•proceeds received from investments of $6.8 million and $3.7 million for the six months endedJune 30, 2025 and 2024, respectively.
Net Cash Used in Investing Activities
Net cash used in investing activities was $(7.6) million and $(16.5) million for the six months endedJune 30, 2025 and 2024, respectively. These investing cash flows were primarily driven by:
•purchases of premises and equipment of $(2.4) million and $(8.9) million during the six months endedJune 30, 2025 and 2024, respectively;
•contributions/subscriptions to investments of $(15.1) million and $(12.0) million during the six months endedJune 30, 2025 and 2024, respectively; partially offset by
•distributions received from investments of $9.8 million and $4.4 million during the six months endedJune 30, 2025 and 2024, respectively.
Net Cash Used in Financing Activities
Net cash provided by (used in) financing activities was $(22.1) million and $5.7 million for the six months endedJune 30, 2025 and 2024, respectively. These financing cash flows were primarily driven by:
•capital distributions paid to partners and member of $(38.3) million and $(15.9) million during the six months ended June 30, 2025 and 2024, respectively;
•capital distributions paid to noncontrolling interest holders of $(7.9) million and $(7.1) million during the six months endedJune 30, 2025 and 2024, respectively;
•principal payments on the Term Loan Facility of $(2.2) million and $(1.0) million during each of the six months ended June 30, 2025 and 2024, respectively;
•the settlement of equity-based compensation to satisfy withholding tax requirements of $(15.4) million and $(10.3) million during the six months endedJune 30, 2025 and 2024, respectively; and
•dividends paid of $(12.1) million and $(10.3) million during the six months endedJune 30, 2025 and 2024, respectively; partially offset by
•proceeds from the Term Loan Facility amendment of $50.0 million during the six months endedJune 30, 2024;
•proceeds from the exercise of warrants of $2.8 million during the six months endedJune 30, 2025, and
•proceeds from the Share Purchase Agreement, net of $49.8 million during the six months endedJune 30, 2025.
Indebtedness
On January 2, 2014, GCMH entered into a credit agreement (as amended, amended and restated, supplemented or otherwise modified, the "Credit Agreement") that provides GCMH with a senior secured term loan facility (the "Term Loan Facility") and a $50.0 million revolving credit facility (the "Revolving Credit Facility" and, together with the Term Loan Facility, the "Senior Secured Credit Facilities"). Under the Revolving Credit Facility, $15.0 million is available for letters of credit and $10.0 million is available for swingline loans.
On June 23, 2021, we amended our Term Loan Facility to increase the aggregate principal amount from $290.0 million to $400.0 million. On June 29, 2023, we entered into Amendment No. 7 to the Credit Agreement to incorporate changes for the contemplated transition to the Term Secured Overnight Financing Rate ("Term SOFR"), and on July 1, 2023, in conjunction with a Benchmark Transition Event, the interest rate defaulted to the Term SOFR plus a Benchmark Replacement Adjustment as recommended by the Relevant Governmental Body (all terms as defined in the Amended Credit Agreement).
On May 21, 2024, the Company amended the Term Loan Facility to, among other things, increase and extend the maturity date of the Term Loan Facility. The amendment increased the aggregate principal amount available from $388.0 million to $438.0 million, extended the maturity date from February 24, 2028 to February 25, 2030, decreased the interest rate margin to 2.25% over Term SOFR and removed the Benchmark Replacement Adjustment of 0.11%.
As of June 30, 2025, GCMH had borrowings of $433.6 million outstanding under the Term Loan Facility and no outstanding balance under the Revolving Credit Facility. As of June 30, 2025, we had available borrowing capacity of $50.0 million under our Revolving Credit Facility.
See Note 11 of our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of our outstanding indebtedness.
The terms of the Company's current debt instruments contain covenants that may restrict the Company and its subsidiaries from paying distributions to its members. As a holding company, we are dependent upon the ability of GCMH to make distributions to its members, including us. However, the ability of GCMH to make such distributions is subject to its operating results, cash requirements and financial condition, restrictive covenants in our debt instruments and applicable Delaware law. These restrictions include restrictions on the payment of distributions whenever the payment of such distributions would cause GCMH to no longer be in compliance with any of its financial covenants under the Term Loan Facility. Absent an event of default under the Credit Agreement governing the terms of the Term Loan Facility, GCMH may make unlimited distributions when the Total Leverage Ratio (as defined in the Credit Agreement) is below stated thresholds. As of June 30, 2025, the Total Leverage Ratio was below such stated thresholds and we were in compliance with all financial covenants.
See Note 12 of our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of our interest rate derivatives to hedge interest rate risk related to the Company's outstanding indebtedness.
Dividend Policy
We are a holding company with no material assets other than our indirect ownership of equity interests in GCMH and certain deferred tax assets. As such, we do not have any independent means of generating revenue. However, management of GCM Grosvenor expects to cause GCMH to make distributions to its members, including us, in an amount at least sufficient to allow us to pay all applicable taxes, to make payments under the tax receivable agreement, and to pay our corporate and other overhead expenses. On August 4, 2025, GCMG's Board of Directors declared a quarterly dividend of $0.11 per share of Class A common stock to record holders as of the close of business on September 2, 2025.The payment date will be September 16,
2025. The payment of cash dividends on shares of our Class A common stock in the future, in this amount or otherwise, will be within the discretion of GCMG's Board of Directors at such time.
Stock Repurchase Plan
On August 6, 2021, GCMG's Board of Directors authorized a stock repurchase plan which may be used to repurchase our outstanding Class A common stock and warrants to purchase Class A common stock. Our Class A common stock and warrants may be repurchased from time to time in open market transactions, in privately negotiated transactions, including with employees or otherwise, pursuant to the requirements of Rule 10b5-1 and Rule 10b-18 of the Exchange Act, as well as to retire (by cash settlement or the payment of tax withholding amounts upon net settlement) equity-based awards granted under our 2020 Incentive Award Plan, as amended and restated (and any successor plan thereto), with the terms and conditions of these repurchases depending on legal requirements, price, market and economic conditions and other factors. We are not obligated under the terms of the program to repurchase any of our Class A common stock or warrants, the program has no expiration date and we may suspend or terminate the program at any time without prior notice. Any shares of Class A common stock and any warrants repurchased as part of this program will be canceled. GCMG's Board of Directors has made subsequent increases to its stock repurchase authorization for shares and warrants. As of December 31, 2024, the total authorization was $140 million, excluding fees and expenses. On February 6, 2025, GCMG's Board of Directors increased the Company's existing share repurchase authorization by $50 million, from $140 million to $190 million. On August 4, 2025, GCMG's Board of Directors further increased the firm's existing repurchase authorization by $30 million, from $190 million to $220 million.
For the six months endedJune 30, 2025, we spent $24.9 million to reduce Class A shares to be issued to employees, which reflects both RSUs that were settled in cash and shares retired in connection with the net share settlement of equity-based awards. Other than the deemed repurchases described above, no shares of Class A common stock or warrants were repurchased during the sixmonths ended June 30, 2025. As of June 30, 2025, $57.2 million remained available under our stock repurchase plan.
We review our capital return plan on an on-going basis, considering our financial performance and liquidity position, investments required to execute our strategic plans and initiatives, acquisition opportunities, the economic outlook, regulatory changes and other relevant factors. As these factors may change over time, the actual amounts expended on repurchase activity, dividends, and acquisitions, if any, during any particular period cannot be predicted and may fluctuate from time to time.
Tax Receivable Agreement
Exchanges of Grosvenor common units by limited partners of GCMH result in increases in the tax basis in our share of the assets of GCMH and its subsidiaries that otherwise would not have been available. These increases in tax basis increase our depreciation and amortization deductions and create other tax benefits, and therefore may reduce the amount of tax that we would otherwise be required to pay in the future. The tax receivable agreement requires us to pay 85% of the amount of these and certain other tax benefits, if any, that we realize (or are deemed to realize in certain circumstances) to the TRA Parties. During the sixmonths ended June 30, 2025, the conversion of 2,569,415 Partnership common units for 2,569,415 Class A common stock resulted in a step-up in tax basis under IRS §754. Any net tax benefits recognized because of this step-up will result in future tax benefit payments under the tax receivable agreement. The increase in the payable to related parties pursuant to the tax receivable agreement liability due to this exchange is approximately $9.0 million as of June 30, 2025. As of June 30, 2025, the amount payable to related parties pursuant to the tax receivable agreement was $60.6 million.
Contractual Obligations, Commitments and Contingencies
See Note 13 in the notes to the Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for a summary of the lease payments. There are no other material changes outside of the ordinary course of business in our contractual obligations, commitments and contingencies from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements requires us to make estimates that affect the reported amounts of assets, liabilities, revenue and expenses. We base our judgments on our historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making estimates about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
For a more complete discussion of the accounting judgments and estimates that we have identified as critical in the preparation of our Condensed Consolidated Financial Statements, please refer to Note 2 in the notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
Our critical accounting policies are more fully described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Recent Accounting Pronouncements
Information regarding recent accounting developments and their impact on our results can be found in Note 2 in the notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.
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