CaliberCos Inc.

Ladies and gentlemen, welcome to Caliber's fourth quarter and full year 2023 earnings call. As a reminder, today's call is being recorded for replay purposes. At this time, all lines are now listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call, you require immediate assistance, please press star zero for the operator. I would now like to turn the call over to Lisa Fortuna, Investor Relations for Caliber. Please go ahead.

Good afternoon, everyone. Welcome to Caliber's fourth quarter and full year 2023 financial results conference call. With me today are Chris Loeffler, chief executive officer and co-founder, and Jade Leung, chief financial officer of Caliber. Please note that we have a quarterly earnings presentation, which will serve as a supplement to today's prepared remarks. You can access the presentation on the investor relations section of our website at www.caliberco.com. After management's commentary, we will open the call for questions. As a reminder, the information discussed today may include forward-looking statements that involve risks and uncertainties. Words like believe, expect, and anticipate refer to our best estimates as of this call, and there can be no assurances that these will actually take place. So our actual future results could differ significantly from these statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Chris. Chris?

Thank you, Lisa, and thank you to everyone joining us on the call today. This is our first full-year results call since going public in May of last year. We've enjoyed engaging with the investor community in one-on-one meetings and at conferences over the past several months as we continue to raise awareness and understanding of Caliber among investors and among analysts. Looking ahead, we plan to increase our engagement this year, and we look forward to our ongoing conversations with you all. For those of you who are still new or maybe new to the Caliber story, I'd like to start by providing a quick overview of the company. Caliber has a 15-year track record of investing, developing, and managing middle market real estate assets to deliver attractive returns to our investors. Our NASDAQ-listed parent company, CWD, creates and manages real estate investments for our investor customers in the form of private funds and a private REIT. In doing so, it earns revenue and performance fees based on the success of each real estate investment. For our funds, we invest in undervalued or distressed real estate, primarily in the Western United States, with a focus on the middle market, which we define as real estate projects ranging in size from $5 to $50 million. We have experience investing in almost every real estate asset class, from multifamily apartment buildings to mixed-use developments to qualified Opportunity Zone projects. Our opportunistic approach allows us to invest in the best asset classes based on prevailing market conditions. Our in-house services group allows us to acquire, develop, build, and manage properties. By controlling the process from start to finish, we can optimize returns for investors while reducing the risk of poor execution and increasing revenue per dollar of assets Calibre manages. Over our 15-year history, Calibre has raised over $660 million from our large and growing customer base. Fundraising is a key driver of our growth, and it occurs in the funds we create and manage, and importantly, This fundraising is non-dilutive to CWD shareholders. Caliber's in-house fundraising team raises money direct from high net worth individuals, family offices, investment advisors, and small institutions. As we fundraise, we then invest the capital and increase our assets under management, or AUM. We earn fees by providing financial and real estate services to portfolio properties. So as our AUM grows, so does our revenue. With that brief summary of Caliber, I'd like to address what we're seeing in the macro environment, including prolonged high interest rates and how this is impacting our business in the short term. In 2023, we made a number of strategic investments in people and our platform to scale our business based on our growth projections. Year over year, this resulted in an increase of $7.3 million or 75.5% in payroll, $2.7 million or 23.9% in other non-payroll operating expenses, and 100 full-time employees in total headcount by the end of the year. During that same period, the fundraising environment in our industry degraded, and the macro environment proved to be more challenging than we anticipated. In response, we've initiated a review of our current cost structure, and we will be evaluating potential reductions to better reflect current market dynamics as we are committed to our goal of growing profitably in the near term. In our medium and long-term view, we remain confident in the growth prospects for Caliber. To that end, we remain focused on meeting the three-year financial targets we announced in November of 2023, which underpin our growth plans, including the following. Cumulative fundraising of $750 million for the period between 2024 to 2026. total AUM of $3 billion at the end of 2026, and total annual platform revenue of $50 million per year, essentially our year-end revenue run rate by the end of 2026.