This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Welcome to ONNQ's first quarter of 2024 conference call and webcast. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session with pre-qualified analysts. At that time, if you have a question, please press star 1-1 on your telephone keypad. As a reminder, this conference is being recorded. And now I'd like to turn the conference over to Jill Hominack, Managing Director, Shareholder Relations and Communications at ONNQS. Please go ahead.
spk03: Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby LeBlanc, ONNQS' Chief Executive Officer, and Chris Govind, our Chief Financial Officer. Earlier this morning, we issued our first quarter 2024 press release, MVNA, and Consolidated Financial Statements, which are available on the shareholder section of our website and have also been filed on CDAR. Our supplemental information package is also available on our website. As a reminder, all references to dollar amounts on this call are in US unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks. With that, I'll now turn the call over to Bobby.
spk08: Good morning, everyone. In Q1, ONNQS showed good progress in areas that are important to our ability to grow our business. Fee jett earning AUM grew by 4% from the previous quarter. We're not yet in a position to formally announce anything. The teams are working hard on future realizations. Our portfolio companies are being managed well, and we believe there's a strong potential to create more value in the quarters to come. ONNQAP is exhibiting good momentum on fundraising. ONNQAP 5 has now closed on commitments of approximately $800 million with a strong pipeline heading towards a final close later this year. The team secured good co-investment support for last year's BioAmerica transaction and continues to actively pursue realization opportunities. ONNQS Partners is building a good deal pipeline within our specialty areas of focus. The team has been making progress in securing capital for future transactions with the support of some of our long-standing partners. In addition, they are working hard on opportunities to deliver more DPI, or return of capital, to LPs. On that front, we're happy to report that OP4 will reach 1.1 times DPI when the ASM sale closes later this year. Credit has had a productive start to 2024. Across many of our products, we are seeing incremental progress supported by our ability to deliver customized and innovative solutions. Our ONNQAP offering that originated through our Mercer partnership is a good example. We are also now able to actively market our products through our Canadian private client partnerships. While this growth is expected to take time to accelerate, it feels positive to be in a position where we are looking forward to growing our FGAUM through this channel. Our CLO business continues to deliver outstanding results. So far in 2024, the team has priced four new CLOs and refinanced or reset four others. That totals over $1.8 billion of new FGAUM and another $1.7 billion of extended FGAUM. Euro CLO 9 is our biggest European CLO to date, pricing at roughly 500 million euros. The team continues to attract new investors to our platform while opportunistically reducing ONNQA's equity holdings, which allows the platform to scale with less ONNQA's capital. ONNQA's work in CLOs is a prime example of what we can accomplish when we focus our efforts in areas where we have a demonstrated right to compete and win. We were a top 10 global issuer last year and continue to hold that position into 2024. As we work to create more value for shareholders and clients, we will increasingly focus our capital and resource allocation decisions on priority areas. These include those areas where we see the most long-term opportunities and ability to drive NAV and earnings growth. Across our business, I see momentum growing and brighter spots emerging. Where we see good opportunities to strengthen ONNQA's, we will move quickly to act.
spk09: We are
spk08: wholly focused on building the best ONNQA's for you, our shareholders, and we will continue to proactively communicate our progress. With that, I'll now hand it over to Chris.
spk05: Thanks, Bobby, and good morning, everyone.
spk06: ONNQX ended the first quarter with investing capital per share of $107.44, reflecting a return of 11% over the past year and essentially unchanged from year end. In Canadian dollars, investing capital was over $145 per share, up 2% since year end, given some strengthening of the U.S. dollar. Over the past five years, investing capital per share has compounded at an annual rate of 14%. We repurchased approximately 600,000 shares in the first four months of the year and renewed our normal course issuer bid in April. As we've indicated before, share buybacks will remain part of our capital allocation plans while the shares trade at a wide discount. Over the last two years, we've used the balance sheet to reduce our share count by approximately 10% to a little under 77 million shares outstanding. For our continuing shareholders, these buybacks have captured approximately $440 million of hard NAV. We ended the first quarter with cash and near cash of $1.4 billion, representing about 17% of investing capital, consistent with year end. As a reminder, the pending sale of ASM from Onyx Partners 4 is expected to provide net proceeds to Onyx of about $275 million, which will more than offset the pending acquisition of accredited in OP5 and therefore further build our liquidity for share buybacks and other opportunities ahead of us. As Bobby mentioned, our PE teams are actively pursuing realization opportunities while also seeing a growing investment pipeline. Looking at private equity, our portfolio produced a $30 million net gain or a return of 1% in Q1. OP was flat for the quarter as gains from private investments were substantially offset by decline in value for a couple of public investments. OnCap experienced a 3% decline, driven by one investment being significantly impacted by a change in its regulatory environment. However, this investment has already locked in a very good return. More than offsetting this decline was a $69 million contribution from our direct investments driven by Ryan's specialty. Overall, our diversified portfolio of more than 40 companies continues to perform and we expect meaningful contribution to our NAV going forward. Turning to credit investing, credit strategies delivered a $13 million net gain or a 2% return in Q1. The gain this quarter was again driven by our CLO investments, which continue to perform well after a very strong 2023. Now let's turn to the with just over $35 billion of fee generating AUM, up 4% from year end. Our teams raised $1.8 billion of new FGAUM in Q1, predominantly from two new CLOs and capital raised for ONIX partners opportunities and OnCap 5. Our CLO platform had a strong start to the year, raising or extending a total of $3.5 billion of FGAUM, including two US CLOs closed in Q1 and the pricing of our next US and Euro CLOs. Once the two price deals close in Q2, we'll already be close to the growth we targeted for all of 2024 with the team taking advantage of a strong underlying market. As of the end of April, we had over Canadian $4 billion of FGAUM with private wealth clients, largely unchanged from our last update. With our client assets transitioned to our distribution partners, focus has shifted to growth, supporting our distribution partners, building new distribution relationships, marketing our existing products, and developing new products where we have a right to compete. Turning to fee related and distributable earnings, first quarter total FRE was a loss of $12 million, with a $4 million loss from the asset management platform. While year over year FRE benefited from cost savings actioned, this was partially offset by the impact of management fee reductions associated with the end of OP5's commitment period. As telegraphed last quarter, though we expect full year FRE performance to decline in 2024, fundraising plans should drive progress in run rate FRE over the course of the year. To that end, run rate management fees were $197 million at quarter end, up $6 million or 3% from FGAUM. With our current distribution partners, we generated $45 million of DE in Q1, driven by recurring distributions from our credit investments. Finally, an update on OX's carried interest opportunity. We ended the quarter with $264 million of unrealized carried interest, reflecting a decline attributable to the OP4 public investments I mentioned earlier. As a reminder, OX has over $31 billion of private equity and credit AUM subject to carry, representing a meaningful opportunity for value creation going forward. As Bobby discussed, we made solid progress in Q1 across a number of important factors. We're focused on leveraging the areas where we have a right to compete, and our actions will continue to reflect a drive for profitability, growth, and shareholder value. That concludes the prepared remarks, and we'll now be happy to take any questions.
spk02: Certainly, and as a reminder, ladies and gentlemen, if you have a question, please press star 1-1. And our first question comes from the line of Jeffrey Kwan from RBC Capital Markets. Your question, please.
spk04: Hi, good morning. I just have one question. It's just on your kind of opportunities fund. How's the field pipeline today versus the CAFA that you have to be able to put to work? And what I mean by that is, are there, for example, lots of opportunities such that you can maybe be a little bit more particular about the usual around which deals you want to pursue?
spk08: No, I hope we're always very particular about which opportunities you want to pursue. But the pipeline for OP and ONCAP, it's still not, and you asked about OP specifically, it's still not as normal as it would have been three or four years ago. But it is more active. We'll be very careful, like we always are, in choosing which investments to pursue and make sure we know that that's meant to be sort of a 12 to 18-month fund and make sure that we have that timeline in terms of not doing everything all at once.
spk04: Actually, maybe I'm going to ask a follow-up question. Are you getting a sense out there because of some of the issues within traditional private equity that if you're in situations where there's multiple bidders or whatnot that you're not seeing as much competition today than you would have, again, to your point three to four years ago?
spk07: No, the competition feels
spk08: the same. It's just the inventory is not as much. Particularly on PE to PE deals, those deals have slowed down. When I look at the pipeline for realizations across the firm, again, it's not totally strategic, but it's more skewed towards strategic buyers than it has been in the past, which is surprising given the amount of dry water out there for private equity.
spk01: Okay, thank you.
spk02: Thank you. One moment for our next question. And our next question comes from the line of Graham Writing from TD Securities. Your question, please.
spk08: Well, hi. Good morning. The opportunities fund, is this the bridging fund that you were referring to last quarter? Should we expect some further fundraising on this fund, or what's your expectation here? Hey, Graham, sorry. That is the same fund, and I think your expectation should be for us to have a final close of that fund within three to five months of where we sit today. Okay, so similarly to On Cap Five, there's one more fundraise expected? One more, yeah. I think it turns to closings, but yeah, one more major close. And just so you understand, the way fundraising is working now, because fundraisers, generally speaking, across the alt will have been elongated. In particular, last closes are going to be the biggest closes, right? So you really, the most momentum you'll see is on a last close, like for an On Cap, because people at this point are typically waiting for the last close. There'll be people who want to allocate because they have to allocate within a quarter. But you should expect to see the last close be the largest close in those situations. Okay, great. And on the credit side, then, you've obviously had some real strong activity on the CLO side. What's your expectation for the remainder of the year, looking past Q2? Will it be further CLOs, or have you sort of hit your budget or
spk05: your target already? No,
spk08: no, like as long as the markets are open and wanting more and more paper and CLO formation, I'd like nothing more for us to blow through our budget and have Ronnie and the team continue to do what they've done in the first four months of the year for the last eight months of the year. So we won't take the foot off the accelerator at the market side. Okay, understood. And my last question, if I could, just, you talked about earlier, just you got a question about your opportunities to deploy capital. But can you give us a sense for how the market is changing for opportunities for portfolio realizations? Is the opportunity becoming slightly better than perhaps it was three, six, maybe 12 months ago? It's definitely better than it was three and six months ago. But I wouldn't call it normal yet. Like we obviously are working on several realizations internally, some partial, some full. But again, like the pipeline we're seeing on the New Deal front, the same is really true on the realization front. It's better than it was, but it's not what I would call normal if you were to look at an overall five-year period. Understood. That's it for me. Thanks.
spk02: Thanks, Graham. Thank you. This does include the question and answer session of today's program. I'd like to hand the program back to Bobby LeBlanc for any further remarks.
spk08: Thank you for your time. If you have any questions, feel free to call Jill or Chris or me or anybody you'd like and we'll be happy to answer your questions. And I hope you all have a nice weekend. Thank you.
spk02: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
spk00: Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
spk02: Thank you. Welcome to ONIX first quarter of 2024 conference call and webcast. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session with pre-qualified analysts. At that time, if you have a question, please press star 1-1 on your telephone keypad. As a reminder, this conference is being recorded. And now I'd like to turn the conference over to Jill Hominack, Managing Director, Shareholder Relations, and Communications at ONIX. Please go ahead.
spk03: Thank you. Good morning, everyone, and thanks for joining us. We're broadcasting this call on our website. Hosting the call today are Bobby LeBlanc, ONIX's Chief Executive Officer, and Chris Govind, our Chief Financial Officer. Earlier this morning, we issued our first quarter 2024 press release, MV&A, and Consolidated Financial Statements, which are available on the shareholder section of our website and have also been filed on CDAR. Our supplemental information package is also available on our website. As a reminder, all references to dollar amounts on this call are in US unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks. With that, I'll now turn the call over to Bobby.
spk08: Good morning, everyone. In Q1, ONIX showed good progress in areas that are important to our ability to grow our business. Fee jet earning AUM grew by 4% from the previous quarter. While not yet in a position to formally announce anything, the teams are working hard on future realizations. Our portfolio companies are being managed well, and we believe there's a strong potential to create more value in the quarters to come. OnCap is exhibiting good momentum on fundraising. OnCap 5 has now closed on commitments of approximately $800 million with a strong pipeline heading towards a final close later this year. The team secured good co-investment support for last year's BioAmerica transaction and continues to actively pursue realization opportunities. ONIX partners is building a good deal pipeline within our specialty areas of focus. The team has been making progress in securing capital for future transactions with the support of some of our long-standing partners. In addition, they are working hard on opportunities to deliver more DPI, or return of capital, to LPs. On that front, we're happy to report that OP4 will reach 1.1 times DPI when the ASM sale closes later this year. Credit has had a productive start to 2024. Across many of our products, we are seeing incremental progress supported by our ability to deliver customized and innovative solutions. Our OnCap offering that originated through our Mercer partnership is a good example. We are also now able to actively market our products through our Canadian private client partnerships. While this growth is expected to take time to accelerate, it feels positive to be in a position where we are looking forward to growing our FGAUM through this channel. Our CLO business continues to deliver outstanding results. So far in 2024, the team has priced four new CLOs and refinanced or reset four others. That totals over $1.8 billion of new FGAUM and another $1.7 billion of extended FGAUM. Euro CLO 9 is our biggest European CLO to date, pricing at roughly 500 million euros. The team continues to attract new investors to our platform while opportunistically reducing ONIX's equity holdings, which allows the platform to scale with less ONIX capital. ONIX's work in CLOs is a prime example of what we can accomplish when we focus our efforts in the where we have a demonstrated right to compete and win. We were a top 10 global issuer last year and continue to hold that position into 2024. As we work to create more value for shareholders and clients, we will increasingly focus our capital and resource allocation decisions on priority areas. These include those areas where we see the most long-term opportunities and ability to drive Mav and earnings growth. Across our business, I see momentum growing and brighter spots emerging. Where we see good opportunities to strengthen ONIX, we will move quickly to act.
spk09: We are
spk08: wholly focused on building the best ONIX for you, our shareholders, and we will continue to proactively communicate our progress. With that, I'll now hand it over to Chris.
spk05: Thanks, Bobby, and good morning, everyone.
spk06: ONIX ended the first quarter with investing capital per share of $107.44, reflecting a return of 11% over the past year and essentially unchanged from year end. In Canadian dollars, investing capital was over $145 per share, up 2% since year end, given some strengthening of the U.S. dollar. Over the past five years, investing capital per share has compounded at an annual rate of 14%. We repurchased approximately 600,000 shares in the first four months of the year and renewed our normal course issuer bid in April. As we've indicated before, share buybacks will remain part of our capital allocation plans while the shares trade at a wide discount. Over the last two years, we've used the balance sheet to reduce our share count by approximately 10% to a little under 77 million shares outstanding. For our continuing shareholders, these buybacks have captured approximately $440 million of hard NAV. We ended the first quarter with cash and near cash of $1.4 billion, representing about 17% of investing capital, consistent with year end. As a reminder, the pending sale of ASM from Onyx Partners 4 is expected to provide net proceeds to Onyx of about $275 million, which will more than offset the pending acquisition of accredited in OP5 and therefore further build our liquidity for share buybacks and other opportunities ahead of us. As Bobby mentioned, our PE teams are actively pursuing realization opportunities while also seeing a growing investment pipeline. Looking at private equity, our portfolio produced a $30 million net gain or a return of 1% in Q1. OP was flat for the quarter as gains from private investments were substantially offset by decline in value for a couple of public investments. OnCap experienced a 3% decline, driven by one investment being significantly impacted by a change in its regulatory environment. However, this investment has already locked in a very good return. More than offsetting this decline was a $69 million contribution from our direct investments driven by Ryan's specialty. Overall, our diversified portfolio of more than 40 companies continues to perform and we expect meaningful contribution to our NAV going forward. Turning to credit investing, credit strategies delivered a $13 million net gain or a 2% return in Q1. The gain this quarter was again driven by our CLO investments, which continue to perform well after a very strong 2023. Now let's turn to the asset management side of the business. ONIX ended the quarter with just over $35 billion of fee generating AUM, up 4% from year end. Our teams raised $1.8 billion of new FGAUM in Q1, predominantly from two new CLOs and capital raise for ONIX partners' opportunities and OnCap 5. Our CLO platform had a strong start to the year, raising or extending a total of $3.5 billion of FGAUM, including two US CLOs closed in Q1 and the pricing of our next US and Euro CLOs. Once the two price deals close in Q2, we'll already be close to the growth we targeted for all of 2024 with the team taking advantage of a strong underlying market. As of the end of April, we had over Canadian $4 billion of FGAUM with private wealth clients, largely unchanged from our last update. With our client assets transitioned to our distribution partners, focus has shifted to growth, supporting our distribution partners, building new distribution relationships, marketing our existing products, and developing new products where we have a right to compete. Turning to fee related and distributable earnings, first quarter total FRE was a loss of $12 million, with a $4 million loss from the asset management platform. While year over year FRE benefited from cost savings actioned, this was partially offset by the impact of management fee associated with the end of OP-5's commitment period. As telegraphed last quarter, though we expect full year FRE performance to decline in 2024, fundraising plans should drive progress in run rate FRE over the course of the year. To that end, run rate management fees were $197 million at quarter end, up 6 million or 3% from year end. Looking at distributable earnings, we generated $45 million of DE in Q1, driven by recurring distributions from our credit investments. Finally, an update on OX's carried interest opportunity. We ended the quarter with $264 million of unrealized carried interest, reflecting a decline attributable to the OP-4 public investments I mentioned earlier. As a reminder, ONIX has over $31 billion of private equity and credit AUM subject to carry, representing a meaningful opportunity for value creation going forward. As Bobby discussed, we made solid progress in Q1 across a number of important factors. We're focused on leveraging the areas where we have a right to compete, and our actions will continue to reflect a drive for profitability, growth, and shareholder value. That concludes the prepared remarks, and we'll now be happy to take any questions.
spk02: Certainly, and as a reminder, ladies and gentlemen, if you have a question, please press star 1-1. And our first question comes from the line of Jeffrey Kwan from RBC Capital Markets. Your question, please.
spk04: Hi, good morning. I just have one question. Just on your kind of interim opportunities fund, how's the field pipeline today versus the capital that you have to be able to put to work? And what I mean by that is, are there, for example, lots of opportunities such that you can maybe be a little bit more particular about than usual around which deals you want to pursue?
spk08: No, I need to ask this, Bobby. I hope we're always very particular about which opportunities you want to pursue. But the pipeline for OP and ONCAP, it's still not, and you asked about OP specifically, it's still not as normal as it would have been three or four years ago. But it is more active. But we'll be very careful, like we always are, in choosing which investments to pursue and make sure we know that that's meant to be sort of a 12 to 18-month fund and make sure that we have that timeline in terms of not doing everything all at once.
spk04: Actually, maybe I can ask a follow-up question. Are you getting a sense out there because of some issues within traditional private equity that if you're in situations where there's multiple bidders or whatnot, that you're not seeing as much competition today than you would have, again, to your point three to four years ago?
spk07: No, the competition feels
spk08: the same. It's typically on PE to PE deals, like those deals have slowed down. When I look at the pipeline for realizations across the firm, again, it's not totally strategic, but it's more skewed towards strategic buyers than it has been in the past, which is surprising given the amount of dry powder out there for private equity.
spk01: Okay, thank you.
spk02: Thank you. One moment for our next question. Our next question comes in the line of Graham Writing from TD Securities. Your question, please.
spk08: Well, hi. Good morning. The Opportunities Fund, is this the bridging fund that you were referring to last quarter? Should we expect some further fundraising on this fund, or what's your expectation here? Hi, Graham. Yeah, that is the same fund. I think your expectation should be for us to have a final close of that fund within three to five months of where we sit today. Okay, so similar to OnCap 5, there's one more fundraise expected? And one more, yeah. I think in terms of closings, but yeah, one more major close. And just so you understand, the way fundraising is working now, because fundraisers, generally speaking, across y'all will have been elongated, PE in particular. Last closes are going to be the biggest closes, right? So you really, the most momentum you'll see is on a last close, like for an OnCap, because people at this point are typically waiting for the last close. There'll be people who want to allocate because they have to allocate within a quarter, but you should expect to see the last close be the largest close in those situations. Okay, great. Understood. And that's the credit side then. You've obviously had some real strong activity on the CLO side. What's your expectation for the remainder of the year? Looking past Q2, will it be further CLOs or have you sort of hit your budget or
spk05: your target already?
spk08: No, no. As long as the markets are open and wanting more and more paper and CLO formation, I'd like nothing more for us to blow through our budget and have Ronnie and the team continue to do what they've done in the first four months of the year for the last eight months of the year. So we won't take the foot off the accelerator if the market's set. Okay, understood. And my last question, if I could, just you talked about earlier, just you got a question about your opportunities to deploy capital, but can you give us a sense for how the market is changing for opportunities for portfolio realizations? Is the opportunity becoming slightly better than perhaps it was three, six, maybe 12 months ago? It's definitely better than it was three and six months ago, but I wouldn't call it normal to get like we obviously are working on several realizations internally, some partial, some full. But again, like the pipeline we're seeing on the New Deal front, the same is really true on the realization front. It's better than it was, but it's not what I would call normal if you were to look at an overall five-year period. Understood. That's it for me.
spk02: Thanks. Thanks, Graham. Thank you. This does conclude the question and answer session of today's program. I'd like to back to Bobby LeBlanc for any further remarks.
spk08: Thank you for your time. If you have any questions, feel free to call Jill or Chris or me or anybody you'd like and we'll be happy to answer your questions. And I hope you all have a nice weekend. Thank you.
spk02: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Disclaimer