Alaris Equity Partners Income Trust

Q4 2022 Earnings Conference Call


spk_0: good day of thank you for standing by walking to the alerts que for twenty twenty two earnings release at this time operatives sort of listen only mode after the speakers presentation they'll be a question and answer session to ask the question during the session and depressed star one one on your telephone you will then hear an automated message despising your hand is raised to withdraw your question please press darwin when again please be advised so these cops is being recorded our like to and the cops of you speak today amanda freighter chief financial officer please go ahead
spk_1: thank you karen we appreciate everyone's a new hampshire they offended by that i keep our results and china with carbon dating president and chief executive officer of the last official position of people either will be a question and answer session before we quit again i would like to remind our best that all announced given our in canadian dollars unless otherwise noted letters caution to the comments later they make and him forward looking information that's why we're looking information based on a number of important factors as assumption and therefore actual results could differ materially additional information concerning the underlying actors assumptions and risks is available at last life gradually add a pen dna under the heading forward looking statements and risk factors copies of which are available on seat are at c dot com as well as our website non i am that it is also prevented a may differ from the way other companies put up such data as with the forward looking statements please refer to laughlin press release and are and dna for more clarification regarding not i have oppressed measure hello the keep or highlights include cuba revenue of five fifty one point one million with an increase of thirty six per cent over the prior period and exceeded previous guy of to mainly to the receipt of five point two million us and distributions out by up and see upon redemption as part of all of our investment we have a three year medical provision and distribution op's with a third anniversary our owing in the event of a transaction also the catch up payment of three million us received a late twenty twenty two from planet fitness and regards to amount to perjuring the colbert pandemic during the year pilot bit of made a total oh five point four million us in cash payments and four point two million remains outstanding for the year revenue of one hundred and ninety million with an increase of twenty eight point seven over the pyre period and driven by the redemption of kimco and fnc during the year each of which resulted in the collection of suffered and out of period distribution also after the consideration of the out of period amounts revenue of one hundred and sixty five point seven million was twelve point two percent higher than and twenty one driven by the follow on investments and me played an accent as well as thirteen point million received and common distribution an approximate ten percent yield on our common equity portfolio and a three times increase over the prior year cash generated from operations prior to change to working capital of forty seven point two million for the quarter and hundred and seventy one million for the year was an increase of thirteen percent and twenty two percent respectively over the prior period during the year earlier is generated basic earnings per unit of two dollars and eighty nine cents and paid out a dollar thirty three per unit and distribution resulting in a dollar fifty six increase and book value the actual payout ratio with thirty nine percent therefore by generating ninety three million of accept cash flow from operations which with used to pay down debt and for nothing purposes earning for both a quarter and here and were impacted by the decrease and fair value games as compared to the prior period as that relies and unrealized fair value of investments with twenty million lower for the quarter and fifty five point two million lower for the year and the prior year the portfolio was benefiting from the recovery of coca decline and resulted in significant game i mean comparison the portfolio and twenty twenty two with impacted by the increasing interest rates effect on good can't wait for multiple despite these factors we saw an overall increase in fair value for cube or four point four million please revenue anybody have both improve that compared to the prior year primarily due to an increase in syndication of new unit also in queue for twenty twenty two weeks backlog of syndication work for twenty twenty three and into twenty twenty four increase substantially with new contract when as a result of this growth and backlog and it's impact a bleak outlook coupled with a strong result during twenty twenty two the fair value of grief and batsman increased by fifteen point two million us in the quarter as a result of the contemplated ptp transaction as of year and the fair value of the investment with increased by sixty seven million us to bring the total up to the value realized and que one that's disgusting previous quarter t w m had not realized the growth expected at the time of our investment and a slowdown in early two thousand and twenty three with have further impacted their growth expectations for the gear this shift and expectations coupled with continued discount rate increases and declining multiple have resulted in a decrease in fair value during the quarter of nine point five million us math and revenue have an increased year over year however as a result of the increase of fuel prices elements as margins have been compressed and gross profit has declined although lms has worked to include steel price of glacial features a new contract they still have to work through current lower way contract and on hand higher price feel in inventory which is expected to occur during the first half of twenty twenty three with the latter half of the year expected to bring improvements to gross margin based on the expected negative twenty five percent read that for twenty twenty three there was a decrease to the fair value of the element of allah during the quarter of four point three million
spk_2: based on the mind on audited financial results for the year the reset and twenty twenty three as expected to be a positive six percent however due to rising interest rates in late twenty twenty two and the expected impact this will have on new loan origination command there was a net decreased the fair value of this investment a seven point
spk_1: you million in the corner enough point twenty two redemptions me your how to cost base of one hundred and thirty million and attracted annual distributions of seventeen point two million the proceeds from these reductions included thirty two million and realized premium for total proceeds of one hundred and sixty two million this is a twenty five percent premium over the and
spk_3: affleck cosby deployment in the year totaled approximately one hundred and six fifty six million which included initial annual contractor distributions of ninety million as a result of the turnover in the portfolio we generated increased book value seventy one cents per unit of realize game and increase our annual revenue by
spk_1: ten percent subsequent to the come quarter we completed a strategic transaction involving btc and cosponsor brookfield we exchanged one hundred and forty five million of our preferred equity for comfortable preferred units and redeemed the remaining equity which resulted in a life premium of nine point seven million us the new convertible property units for of i had a minimum eight and a half percent yield twelve point three million us annually on the convertible preferred paid quarterly with the ability to participate in any common distributions and accept that eight a half percent as well as an annual one point five million transactions be as a result of the pcc redemption of twenty million us as well as the smaller partial redemptions for fleet and unify received on december thirtieth subsequent to the quarter we decreased or senior debt outstanding we currently have one hundred and four million us an additional ten million canadian outstanding and have three hundred million of available capacity on the facility this is approximately a one point four times senior leverage ratio and people we'll start up or polio have a weighted average easy are over one point six time the only reason for that a client below one point seven times with the revisions a b c based on the new transaction thirteen of are eighteen partners continue to have an easy are over one and a half with elements the only part or below one and as mentioned earlier we expect them to be back above one in the later half of the year are anticipated aggregate partners reserve totaled one point two percent and twenty twenty three an increase of approximately one for one point four million or three cents per unit this estimate is reduced due to the redemption and subsequent from version of btc have preferred equity and comfortable prefer top of the color results are expected from kind of our partners our current outlook called for forty seven million of revenue and que one and a twelve month run rate of one hundred and fifty one million or gm expectations have increase from seventeen million for seventeen and the half to reflect the impact of higher tax rates on us to nominated expenses and continued elevated legal spending
spk_4: i'll turn it over to team now for his further comment three man and think that very poor
spk_5: volume last twelve the bronx and refuel genes rulers both in terms of our own business
spk_4: the world around us
spk_6: starting with your portfolio we continue to operate and new record levels of with volume of my challenging labor supplies and brewing conditions that a large negative impact on other companies having a portfolio required to be company that food manufacturing company that little or no that with a huge contributed to this continues drinks
spk_4: twenty twenty do i brought us sir are forty eighth consecutive year of positive overall portfolio read that as something i'm extremely proud of as a manager this company
spk_6: or track record shows there a remarkable level of consistency of cash flow rational there's around id near history the deep increase in interest rate that was the last year had been a double edged sword for us
spk_4: on the negative side the impact that of higher rate than a tighter that might get a tad on the private equity and the entire capital market and street
spk_5: it has reduced the number of quality out that that have come the market with the in a recent pick up in the opo which we will continue the goes throughout the year on the positive side are structured equity model now look far more attractive the most companies are compared to traditional private equity will live on my debt levels or straight that option that are now extremely expensive compared to where we were just months ago that allow us to win a higher percentage of transaction that were bidding on and it also means that will be a significant decrease in redemptions compared to the norm
spk_4: as a result i'm quite confident in his stone that the pointed out gum or twenty twenty three
spk_5: the other very exciting change during the past year with the introduction of our first asset management initiative
spk_4: i believe that the recently announced as actual at the ah ourselves and brookfield is a significant complementary beast or business
spk_5: not only did the transaction allow us to keep us hundred and forty five million dollars deployed in a world class company it allowed it to increase or applied participation dramatically my not only having an increased return profile on our own bad investment but also and economic interest on the for us four hundred million dollars that brookfield put it
spk_4: him the partnership not only underlines the quality of our portfolio that of a value seen by brookfield and eleven our team
spk_6: creating a return on third party capitalism thing that we feel will have a very positive impact on a return on equity well off to improving our net the pointed lot
spk_0: future asset management initiatives are being considered down the road but the bogus or named on the plane capital in the more great companies like the ones that allowed to post another record year without like we get announced kevin that bad happy to open it up to a question from a job
spk_7: leaf geomancy of question or comment at the time police for star one one on your telephone if your question has been introducing yourself in the queue please press darwin when again when number for first question i first question comes from jeff with obviously your light is often
spk_5: i get money on the front of the ask on the and but your transaction is he able to spend a safe there's been any discussions about additional conjecture that you make one to get another with an existing portfolio is definitely looking at going forward and often just in general here to say thing i didn't have enough data
spk_4: in terms of extending that their party capital business
spk_5: yeah yeah they're they're not been any material discussions on and any of our other portfolio companies them i think
spk_4: suffice to say that the several of the groups that we went marketing to on btc we have expressed interest in other parts of our portfolio but about not something that said it on the front burner
spk_5: every company in a portfolio has it's own story or in terms of management and owner need them and out the where they are and in the their growth cycle and and whatnot so are we don't see anything imminent in terms of another hello continuation fund like we just did with be easy i think go one thing that we are still are still are considering is that a common equity fund with a third party capital they will take advantage of our proprietary deal flow caused by you know are doing i preferred equity business know that's probably the next thing that you'll see from us but again that
spk_7: that's not anything that's gonna be short term now we're gonna roll out relatively slowly
spk_4: really still focusing on going our business expanding our portfolio with that with more practice
spk_5: and that when you talk about the deal flow and thing better than last year that than i thought loves that's what it does kind of curious week which is seen the deal for right now i mean how you would characterize and what you see today vs code like a more eyes on the environment
spk_6: yeah it seems the i would they compared to like compared to two thousand my team i think the number of deals would be very comparable
spk_5: i still think the quality of the deal that maybe a little less than what it would have been and twenty nine game but they're certainly better than know what it was that the time last year as interest rates were really starting the pick up steam and people just really you know left the market so where's the a good deal for now was a good quality a perfectly not at record levels but like a set in my notes
spk_8: we are
spk_5: again where we were competing against the very very inexpensive capital both on the equity and that five and has kind of a hybrid between the two and if they're really not perfect environment for us where you know the kind of cash returned that we're looking for on our prefer
spk_6: mergers i don't have the same sticker shock that they did and twenty nineteen for broad printers and will or worse we're seeing senior interest rates as senior that interstate the in the us now and the private that market ah well and of a double digits so brasil targeting a fourteen fifteen percent cash return or
spk_5: that actually not that
spk_7: much of what senior rates are right now so bad as going to be a real positive breast and on traditional equity or others
spk_4: those multiples or how they become down because they they can't get the yeah the debt in their structure is bad that the that they could even a year ago so far it's been a huge change her greg competitors are much less oh brasil i think we're going to see a much higher or win rate and bad you know we are starting to see that them the in reality to a week
spk_5: hope to be pretty out of here with our deployment in the short term
spk_4: okay and i can just maybe as well as question and on lns is and that investment to can be something that will be with you over the long term or is there a scenario that would say that invests and get redeemed at some point in and what kind of sneer like that sort of look like yeah every year every investment has life cycles
spk_6: lms by don't see an exit the in the near term and bar and i hope we don't to be quite honest diaper it a wonderful company run by wonderful people and their you know they've gone through a very strange environment here out with the fuel prices having gone through what they want your over the last year birthday are based on the forecast that we've built out just what their work on hand
spk_9: we're going to be looking at a really significant game on lms in the next twelve months so we're probably a bigger game than we've ever had on any i read that in our history so
spk_0: you know whether it's we've been with the elements for about sixteen years already and like as they were were certainly not looking to exit i think there's one thing that we can do going forward after we get this you know large positive reset that will be able to glue that out into the future but there were literally not letting that bullet
spk_7: okay thank you
spk_4: remember for an expression
spk_5: the next question comes from gary how desert answer lines of him thanks great and bag morning and thief that the just wondering with the higher and straight environment that that changed the way you look at casco deployment your industry that my damn that you might wanna white or how you underwrite the deal just wanna pick your brain that
spk_4: yeah i mean we are very long term in iraq in our horizon gary as you know so you know we try not to the flavor of the day investors were looking for fallen cashflows dream that exist in any kind of economic and interstate environment and the nothing is gonna change their and it largely why we have i've been you know untouched if you will from from things that have happened over the last few years back because of that that focus that we've always had so now you know that there's there's not many companies in a portfolio that are that are impacted by it is really you know if something
spk_7: that we see in terms of a new deal ah has you know really big dependent on the on low interest rates obviously we're going to evaluate that better again
spk_10: we know we keep an open mind way we can the kept our same investment criteria for nineteen years and and bam you know so you know that a lot of smart people are within the company
spk_6: looking at these companies and a lot of third party advisors that help about go out in i really don't see too much stay there and and bam you know the didn't really an area that has or will impact this
spk_7: got it okay that that couple and then not my next question me before amanda on the if ya changed
spk_11: next times
spk_1: the kids that you did mention the uk marks some that is related to btc can you can walk me through that piece you know what the brookfield ah investment considered at det er det like it's not sure how are we can and that not not sure if you can parse out how much of the crop was bbc related
spk_7: so
spk_12: you know that the change in there is the are is really driven by you know having a larger amount of now that crap attracting the eight a half percent
spk_7: and i should have added to my remarks that we do expect that you know with the global growth trajectory that the cc has you know we will see that pick up over the course of the year so you know i don't think it's gonna be a too many quarters before we see that btc easy or moved back about one the laugh okay and but that was the biggest contributor from the grab one point seven down to one point six was was the bp via via via the ccc hadn't have moved that matter quit of remains about one point that i got it so in that that is entirely busy
spk_1: yeah okay and then just me
spk_7: on the discount
spk_13: rate increase you mention you know have
spk_0: have you know market up to market or is there gonna be more gradual increase his overtime can see a fag know they could be further your belly but down looking out
spk_14: so yeah are just go it's are currently march to current the interest rate other december you know hit canada upholding flag fans now so that should cease to be
spk_5: of pressure on our canadian portfolio you know lot to see what the us continues to do because as they continue to change rates that will impact further of the us portion of our portfolio okay that it doesn't make wasn't that you that would put in for an expression
spk_15: or next question comes from zachary ever said with national bank financial your land is open
spk_16: he cute the morning everyone gets on the quarter
spk_17: like that
spk_14: to to some good color on the deal pipeline from earlier question maybe give us a little bit of color around the redemption outlook for twenty twenty three it does seem to be lower but is there anything it's headed that way
spk_1: we we actually don't see anything on the rise in know this year that of the things can change but you know just in speaking individually with each other or each of our partners knowing that you know for the companies that maybe would have been interested in selling in the normal environment they're certainly not interested in selling in this environment so you know that the reason that we we are seeing fewer high quality the older the black the reason that are high quality companies are not interested in doing anything into the spelling so so yeah i think it will be very late year and unusually late year for redemptions would share of zoo if i that especially given how well or companies are performing
spk_18: make sense thanks and than we do it
spk_1: featured hedging
spk_19: disclosures are you'll continue to hedge interest rates are let that expire
spk_0: are we to run under their heads rolling on the got to entrust swap that roll off and june and another one that brought route on
spk_5: i think you know what the level of that that we currently have outstanding our still pretty well covered even you know what that that's what happens i think it's a fifty million dollar us spot for that be such a brothel about that
spk_6: i don't think that we read through anything near term i think
spk_5: a longer view
spk_0: stop or lower your you're looking around three profoundly my fucked up thing in a further out beyond that current twenty twenty three swap robot that the i don't agree with layer on anything additional at that point
spk_20: that's helpful thanks i'll turn over and i'm showing any further questions the family turn call back over to the for the consumer
spk_21: great thank you very much everybody and and i will just make every time i've done on the on the
spk_6: the rates that are used to add to value or are very values and
spk_5: the fish in an environment like this like i just talked about where redemptions are going to be very unlikely a built to be honest paid too much attention to do the decline in in verbally that are based on on the rates that are used by by kpmg evaluations for to use of the i did meet him up we just have had another person cute does the me one of the a promoter lanka okay pepper
spk_6: or next question comes from trevor and us would actually be capital your line is often
spk_5: he guides i'm just on that on that deal pipeline
spk_22: what to do any related to can add on deal the seen any potential there
spk_23: the partners
spk_20: we're we're actually seeing significant potential their trevor
spk_24: you know and and again in another offshoot from a difficult market for a lot of people if you think about it
spk_5: there's gonna be more companies that find themselves in a position where they need the cells they need to refinance their a cheaper novel now i'm extremely difficult environment to do that and so was the and more acquisition opportunities for our partners
spk_6: we're working on several of them as we speak and there could be releasing a good their part of our or deployment budget for this year great and then numb
spk_25: are you able to provide any any more color on the and on gw and then kind of what's the what's driving that
spk_6: maybe just when when you start to see that the turning around central
spk_5: yeah the the many with uma gw i'm still are extremely bullish and it's it's one of the thing that i am was find is is misleading leading only fair values as you know this is villa a very good company in there we're not looking at a company that been a huge date of decline ah this is just you know can out of using a fairly conservative flat out look for them for the next year as opposed to you know the the traditional road curved that they had so still very very good company they did have them from of their end users the you know large advertisers that cut back their budgets
spk_4: you know trying to be conservative leaving him to potentially recession in the us
spk_0: so that was fairly standard throughout the the advertising industry as zero the us so they can i just went along with the industry we do expect them to to get back on that goat to sectarian they've got several initiatives that they're extremely excited about so we're having still a very good holding force

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