Alaris Equity Partners Income Trust

Good day, and thank you for standing by. Welcome to the Alaric Q3 2025 Earnest Release Conference. 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 that 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 first speaker today, Amanda Frazier, Chief Financial Officer. Please go ahead.

Thank you, Tanya. Good morning, everyone, and thank you for joining us today to discuss our Q3 2025 results. I am joined on the call by Steve King, our President and CEO. Before we begin, I'd like to remind everyone that all financial figures discussed are in Canadian dollars unless otherwise indicated. Please note that some comments made during this call may include forward-looking statements. These statements are based on current assumptions and involve risks and uncertainties, so actual results may differ materially. For more detailed information on the factors, assumptions, and risks involved, please refer to our press release issued last night and the management discussion and analysis under the headings Forward-Looking Statements and Risk Factors, available on CDAR at cdarplus.com and on our website. We will also be referencing certain non-IFRS financial measures, which may be presented differently than similar measures by other companies. Additional information and reconciliations related to these measures can be found in the press release and the MD&A. With that out of the way, let's turn to the highlights. ALERA has delivered a record quarter in Q3 2025, underscoring the consistency of our model and the strength of our partner portfolio. We achieved strong fair value gains, solid recurring partner distributions, and expanded our long-term revenue base through capital deployment. Net worth value per unit increased 6% from last quarter to 2510, a record high, reflecting $1.90 per unit of earnings and comprehensive income, another Alaris record, which included a $0.41 per unit foreign exchange recovery, partially offset by the $0.34 quarterly distribution. Year-to-date NCIB repurchases added approximately $0.06 per unit, as we repurchased and canceled 465,000 units at an average price of $18.87, enhancing per-unit value while maintaining balance sheet flexibility. Total revenue and operating income rose 7.8% compared to Q3 2024, supported by a $47.9 million net unrealized fair value gain across nine investments offset by a decline in two. These fair value adjustments are non-cash, but they reflect the underlying earnings growth and continued value creation within our partner base. Partner revenue exceeded guidance, coming in at $58.1 million, which included $57.4 million in distributions and $700,000 in management and transaction fees. The increase was driven by new investments McCoy and follow-on in Cary, as well as higher-than-expected common distributions. Preferred distributions increased 7.3% in Q3 and 6% year-to-date, totaling $40.7 million and $120.8 million, respectively. While common distributions were, as expected, lower year-over-year, notably leads $10.3 million common dividend this quarter versus $14.7 million U.S. last year. The annualized yield on preferred capital remained strong at approximately 12%, highlighting the portfolio's continued ability to generate steady cash flow. Total return on invested capital was 6.6% for the quarter and 13.3% year-to-date, reflecting both strong reoccurring cash yields and improved valuations. Alaris' net distributable cash flow decreased 26% in Q3 and 14% year-to-date, largely due to the notable variability of common distributions. the timing of cash tax payments, and transaction costs. Underlying portfolio cash generation remains solid and in line with expectations. Our payer ratio was 48% for the quarter and 50% year-to-date, both below our target range of 65% to 70%. This conservative level provides flexibility to fund reinvestment and debt repayment while sustaining unit holder distributions. Alaris generated free cash flow after distributions of 21.9 million in Q3 and 38.9 million year-to-date prior to the NCIB repurchases. In the quarter, we deployed 32.2 million, including an initial 27 million U.S. investment in McCoy and a 5.2 million U.S. follow-on investment in Cary. Subsequent to the quarter end, we invested an additional $20.5 million U.S. into Crescent, supporting their strategic acquisition. These deployments bring total capital invested year-to-date to approximately $228 million, reflecting continued demand for Alaris' capital solution. Our portfolio fundamentals remain strong, with the majority of partners continuing to deliver year-over-year revenue and EBITDA growth. with a weighted average earnings coverage ratio of 1.5, and 13 of 21 partners maintaining either no debt or less than one-time senior debt to EBITDA, emphasizing strong balance sheets and stable earnings coverage. Looking forward, we expect Q4 partner revenue of approximately $43.5 million. This includes our previous estimate for FNP, although we continue to evaluate the impact of the ongoing U.S. government shutdown. FNP remains well-positioned with a surplus of cash on the balance sheet and undrawn senior credit facility. The guidance also reflects lower expectations for GWM, while we continue to evaluate the longer-term impact to the 12-month cash flows and the navigation of GWM's banking covenants. And on that note, I'll turn it over to Steve for his comments.

Great. Thanks, Amanda. Thanks, everybody, for tuning in. Obviously very pleased with our record quarter that we just published. As you can see, our portfolio is larger, more diversified, and performing better than it ever has in our 21-year history. We've added another $1.50 in book value. Our coverage ratios remain near all-time highs. Debt levels remain extremely low, and the nature of our businesses have been largely unaffected by tariffs or inflationary pressures. Having 19 out of our 21 partners performing at or above expectations is exceptional for any private equity portfolio. Our payout ratio, even with the announced dividend increase, remains below our target, leaving more upside for dividend increases in the coming year. Deployment outlook continues to be extremely vibrant. Aleris will shatter our previous record for deployment in this calendar year, and the outlook heading into 2026 remains very strong. Our unique structure, which delivers the majority of our return in low volatility cash payments, allows us to be more confident and successful in environments where traditional private equities, which relies on high debt levels and buoyant exit multiples, are retreating. 2026 also promises to be a year where some of our planned exits are scheduled to begin. Alaris investors are already seeing the emphasized returns coming from our common equity positions and our book value increases, and we expect to display some crystallizations some of these positions over the next 12 to 26 months. Those won't just further grow our book value, but it will also be a huge part of funding our continued deployment in the new quality companies. So, Tanya, I'll open it up to questions if you want to take them right now.