Alaris Equity Partners Income Trust

and thank you for standing by. Welcome to ALARIS Q3 2023 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Amanda Fraser, Chief Financial Officer. Please go ahead.

Thank you, Amy. We appreciate everyone taking the time to join us this morning as we present our Q3 results. I'm joined on this call by Steve King, President and Chief Executive Officer of Alaris. Before we begin, I'd like to remind our listeners that all amounts given are in Canadian dollars unless otherwise noted. Listeners are cautioned that the comments made today may contain forward-looking information. This forward-looking information is based upon a number of important factors and assumptions, and therefore, actual results could differ materially. Additional information concerning the underlying factors, assumptions, and risks is available in last night's press release and our MD&A under the heading Forward-Looking Statements and Risk Factors, copies of which are available on CDAR at cdar.com, as well as our website, Non-IFRS data is also presented and may differ from the way that other companies present such data. As with the forward-looking statements, please refer to last night's press release and our MD&A for more clarifying information regarding these non-IFRS measures. Now for the Q3 highlights. Q3 revenue of $47.2 million was up 10% over the prior period, driven largely by the $5.9 million U.S. distribution received from fleet. While comparable to the prior year's distribution, a portion had previously been recorded as an unrealized gain. The impact of our new investments in Sagamore, FNP, and the shipyard also increased our three-month results. EBITDA for Q3 of $83.9 million and per unit of $1.85 represents an increase of approximately 110% as compared to Q3 2022, and for the nine month period, an increase of approximately 3% respectively. The increase in EBITDA was largely attributable to capital appreciation on our common portfolio. EBITDA isn't a metric that we have historically focused on as we primarily look to cash flow metrics. As our portfolio over the last four years has introduced common, currently in 13 of our 20 companies, unrealized gains have become a more meaningful metric, reflecting the growing value of this portfolio. Cash generated from operations prior to changes in working capital of $36.2 million was a decrease of 17.7% over the prior period and a result of an increase in current tax expense in the quarter. Basic earnings per unit of $1.40 is 109% above the prior period and represents a record quarter for Alaris. As we paid out $0.34 per unit of distributions, the resulting $1.06 increase to book value represents a 7% increase and brings book value per unit to $20.90 at September 30th. Also contributing to the increases in the noted metrics was our second consecutive quarter with a greater than 26% decrease in G&A. With the wrap-up of the sandbox matter and salaries and wages based on a more normalized operations as compared to an unusually profitable 2022, we expect G&A to maintain these lower levels. Q3 earnings were impacted by a $39.6 million gain in net realized and unrealized fair value of investments. as compared to a net loss of $7.1 million in the prior period. The gain was driven by a $37.2 million increase in the common portfolio and a $2.2 million gain on the preferred investments. Key drivers of these fair value increases were Fleet of $20.5 million U.S., Ohana, formerly Planet Fitness Growth Partners, of $5.2 million U.S., and Brown & Settle of $4.8 million U.S. Fleet continues to generate increases in syndications through both new customers and growth in current relationships. With an ever-growing backlog, their outlook for the remainder of 2023 and 2024 continues to be very positive. The business continues to prove that their data-driven approach to fleet management has entrenched them within their syndication customers. While we continue to expect there to be cycles within the business and the industry, there has been a permanent and sustainable growth in the business. Ohana Partners is firmly back in growth mode after emerging from the aftermath of COVID, expecting to finish 2023 ahead of budget and further aided by the tailwinds of positive announcements from Planet Fitness Corporate. Ohana expects this momentum to continue well into 2024 and the coming years. Continued growth and demand in the NOVA data center market has driven year-over-year increases in both revenue and EBITDA for Brown and Settle, as well as a continued record level of backlog. Other less significant movements in a number of our partners, including DNM, Axient, Amer, SCR, Edgewater, Heritage, and Carey Electric, rounded out our changes in the quarter. With the completion of our investment into the shipyard at the end of August, we have invested a total of approximately $130 million year-to-date, and with no redemption so far in 2023, the incremental annual yield contributes $0.30 of revenue per unit. We currently have $265 million of senior debt outstanding, resulting in $185 million of available capacity for new investments. On the portfolio side, our portfolio continues to perform well with a slight decline in weighted average ECR to above 1.5 times, with 10 of our 20 partners continuing to be above this threshold. Slight movements in the number of partners have contributed to the decrease. 13 of our 20 partners have either no debt or less than one times debt as compared to EBITDA in their businesses. Our current outlook calls for $39.9 million of revenue in Q4 and a 12-month run rate of $166.4 million, up from $157.3 million last quarter. Our G&A expectations remain consistent with the prior quarter at $15.5 million. I'll turn it over to Steve now for his comments.

Great. Thank you, Amanda, and thanks, everybody, for tuning in. Obviously, we're very pleased with the performance of the portfolio in this quarter. Our investment criteria that we've strived for and executed on for the last 20 years has resulted in a group of companies that on a combined and diversified basis has shown that it's capable of delivering low volatility cash flow in every different economic and fiscal environment. So we're very pleased with that. We don't see any change in that performance going forward for the portfolio. And obviously adding $1 of book value per share just in the quarter displays the value creation that's occurring, a good portion of which is tied to the common equity positions we've been building over the last five years. Well, there's a stock clearly from looking at the graph has been directly correlated to a fixed income product. And if you're just basing us on our cash yield, you're going to be missing out on a really good cash value creation story that we've developed here by adding common shares to our portfolio the last five years. While ECRs have come down marginally, we're still very comfortable at the level that they're at. 1.55 is actually above historical levels. And with such little debt in the portfolio, as well as some fundamental factors that we already know have reversed in companies such as LMS, it'll be soon showing Employment front, we look forward to adding on to our successful additions of FMP and Shipyard this year with additional new partners, hopefully by year end. We continue to be very competitive in this higher rate environment, and our capital is pretty much in bed. But on the side, we do have to stay very disciplined in our approach, particularly given the very high cost of our own equity at the current valuations of our stock. So, operator, we'll turn it back to you, and happy to open it up to any questions.