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Operator
Thank you for standing by and welcome to ONIX third quarter 2024 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Dylan Hominick. Managing Director of Shareholder Relations and Communications at Onyx. Please go ahead.
Dylan Hominick
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, Onyx's Chief Executive Officer, and Chris Govan, our Chief Financial Officer. Earlier this morning, we issued our third quarter 2024 press release, MD&A, and consolidated financial statements. which are available on the shareholder section of our website and have also been filed on CDAR. A 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.
Bobby
Good morning, everyone. ONIX had a solid third quarter with sustained progress on realizations, investing activity, and fundraising in our core areas. We continue to align our businesses to areas where we have the greatest right to compete, while benefiting from a strong balance sheet and a considerable liquidity position. This morning, we announced a substantial issuer bid, or SIV, While we've been very active with our NCIB, buying back nearly 4 million shares over the last 12 months, the SIB allows us to accelerate and expand our efforts while our shares continue to trade well below intrinsic value, and provides all shareholders an opportunity to participate in our buyback activity. Considering our pro forma cash position of over $1.8 billion, we are confident we can execute on the SIB while continuing to effectively invest in other areas we choose to prioritize. Strategic capital allocation was a key theme of my remarks at last year's Investor Day. To continue to grow and create value for ONIX and our stakeholders, we need to be smart and disciplined in how we use our capital. Turning to our businesses, Across our platforms, we are seeing good momentum and positive outcomes. Our structured credit business, led by Ronnie Jabber and supported by a talented and experienced team of credit professionals, has become a market leader. In 2024, the team has already completed 23 transactions, raising $5.6 billion of new fee-generating AUM and extending another $5 billion. Within structured credit, we have been consistently punching above our weight of slugging bigger and more established players. For the second consecutive year, we expect to be a top 10 global CLO issuer. The outlook for continued growth remains strong as the CLO market remains very attractive for managers like Onyx with experience and track records of successfully managing through cycles. Year to date, our team has increased our structured credit fee-generating AUM by 22%. This is an achievement that should not be overlooked by our shareholders. Looking at fee-generating AUM more broadly, we are also seeing positive momentum in our private equity businesses. ONCAP 5 now has over $1 billion in total commitments, and the Onyx Partners Opportunities Fund is approaching $1.2 billion including pending co-investment commitments. Both PE teams have been active with investing and realization activities. Onyx Partners recently closed its first investment for the Opportunities Fund, FishBlock, with another, Firesound, expected to close shortly. We continue to emphasize our priority sectors and investment pieces, and both transactions are prime examples of this. On realizations, Q3 saw the close of the ASM and Englobe sales and a partial realization of PowerSchool, which closed after quarter end. The PE industry continues to face challenges around realizations, so I'm particularly proud of what our teams were able to accomplish on this front. Year to date, we've returned over $2.7 billion of capital to limited partners, with Onyx's share being over $900 million. This is an accomplishment that speaks to the quality of the portfolio and our ability to deliver for our clients in all market environments. The strategic alignment of our businesses and balance sheet to our long-term objectives continues to be my top priority. Onyx will win through smart and disciplined decision making related to how we allocate our resources. We remain committed to delivering attractive returns for our investors and shareholders. With that, I'll now turn it over to Chris.
Chris
Thanks, Bobby, and good morning, everyone. Onyx ended Q3 with investing capital per share of $113.37, reflecting a return of 3% in the quarter and 9% over the last 12 months. Investing capital per share has now returned 14% annually over the last five years, squarely in the range of through-cycle returns we targeted. We made good progress on both the realization and investment fronts since June. ONIX Partners 4 completed the sale of ASM and in October realized about half its interest in PowerSchool as part of its privatization. ONIX Partners also completed its investment in FISHFOC in October, the first investment in the Opportunities Fund. Together with ONCAP's sale of Englobe and several smaller PE distributions, These transactions generated $640 million in net proceeds to ONIX. This brings our cash and near-cash position to about $1.8 billion, or 22% of investing capital today. ONIX repurchased approximately 2.2 million shares in Q3. Over the last 12 months, share repurchases totaled over 3.9 million, or 5% of outstanding shares. These repurchases were completed at an average price of Canadian $90.80, allowing us to capture Canadian $235 million of hard NAV for continuing shareholders. The substantial issuer bid announced today will allow us to take advantage of our strong liquidity and capture meaningful value by repurchasing at what we believe remains an attractive discount to intrinsic value, while also leaving us with a lot of capital to pursue other opportunities. Looking at our investing returns for private equity, our PE portfolio produced a $96 million net gain, or 2% return in Q3. Returns in the quarter were driven by OP5 as well as direct investments. Looking at returns over the last year, we saw double-digit returns across three of our core verticals, financial services, industrials, and business services. while experiencing more challenging results in our healthcare and consumer verticals. At any moment in time, certain verticals or businesses will always have more or less momentum, but we benefit from the diversification of over 40 businesses in the PE portfolio. Turning to credit results, our credit investments delivered a $29 million net gain or 3% return in Q3. The gains were driven by our structured strategies and particularly by our CLO investments, in line with the return for the leverage loan market this quarter. On the asset management side of the business, ONIX ended the quarter with just over $34 billion of fee-generating AUM. The increase over the prior quarter reflects new commitments made to OnCap 5 and the ONIX Partners Opportunity Fund, as well as several new CLOs. In total, ONIX raised approximately $2.1 billion of FGAUM across private equity and credit in Q3. A good portion of the FGAUM growth came from our CLO business, which, as Bobby noted, continues to have a stellar year. ONIX has raised or extended over $10 billion of fee-generating assets in its CLO platform this year across 23 separate transactions. This includes $1.7 billion of FGAUM from three CLOs closed in Q3, and the pricing of our 11th European CLO will add approximately $560 million in fee-generating assets when it closes in Q4. I think it's worth taking a deeper dive into the extension activity in the CLO platform so far this year. At the start of the year, about 65% of our CLO AUM was in its reinvestment period. Once the CLO is out of its reinvestment period, the AUM begins to decline as the CLO pays off its liabilities. This decline decreases our fees and reduces returns for CLO equity investors, including ONIX. Through the team's hard work, we now have about 85% of our CLO AUM in its reinvestment period. And importantly, the weighted average reinvestment period for these CLOs now ends in October 2027. Extensions typically don't have a big impact on FGAUM growth, but rather they reflect the quasi-perpetual nature of CLO AUM and the significant value of our structured credit business. Turning to fee-related and distributable earnings, Total FRE was at breakeven for Q3, with $6 million of earnings from the asset management platform. The improvement from Q2 reflects increased fees from ONCAP 5 and structured credit, together with the continued impact of our focus on efficiency. Run rate management fees were $187 million at quarter end, up $8 million from Q2, driven by the additional CLO FGAUM previously discussed. As for distributable earnings, ONIX generated $267 million of DE in Q3, driven by realizations in PE, as well as recurring CLO distributions. Finally, an update on ONIX's incentive, fee, and carried interest opportunity. We ended Q3 with $270 million of accrued carry, which reflects $22 million generated in the quarter, primarily from ONIX Partners 5 and the Ryan Continuation Fund. As a reminder, ONIX has over $32 billion of private equity and credit, AUM, subject to carry or incentive fees, which provides a meaningful opportunity for value creation going forward. In summary, we had a solid quarter of progress across both investing and asset management, and the teams are working to ensure that continues through year end. That concludes the prepared remarks. We'll now be happy to take any questions.
Operator
Certainly, and as a reminder, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. And our first question comes from the line of Nick Preeb from CIBC Capital Markets. Your question, please.
Nick Preeb
Okay, thanks. The pricing range on the modified Dutch auction straddled the closing share price yesterday. At one point earlier today, the share price had breached the upper end. How is the determination made? on that pricing range? If the stock advances higher, do you have flexibility to bump the range? Otherwise, do you risk limited take-up? I'm not an event-driven guy, so just some insight on that dynamic would be helpful and interesting.
Chris
Yeah, I think you've got that right, Nick. We do have the ability to amend the bid at any point in time, which then extends the end period. But we gave a lot of thought to that range. We reflected on our own normal course issuer bids 5%. stock buyback activity over the last year, the liquidity in the stock, and the run-up that it's had over the last month. And we think we've chosen a range that is going to be helpful for some of our shareholders who want liquidity at these levels. But at the same time, we're very happy with the range from the perspective of the value it's going to create for our continuing shareholders. So it's not scientific. You've got to have some judgment, but we're very comfortable with where we set the range. Okay.
Nick Preeb
Yeah, fair enough. And then just turning to the private equity returns, you sort of lagged the public benchmarks in the quarter. Was there anything that stood out there as an outlier in terms of the sequential change to the individual portfolio company marks? No.
Bobby
I'm sorry. Go ahead, Chris. Go ahead.
Chris
No, go ahead. Yeah, and I was just going to confirm that, you know, as we talk about on most calls, you know, we do tend to lag big moves in the public markets, given the way we value some of our assets using DCF. But I'll let Bobby talk to the portfolio as a whole or anything specific.
Bobby
No, but Chris is right. That's exactly what I was going to say. So we're on the same wavelength. But in any given quarter, there's also just pockets of earnings volatility there. We had a little bit of that on our healthcare portfolio and some consumer businesses from past funds. But overall, again, I think it's more of a lag effect than anything fundamental. Yeah.
Nick Preeb
Okay. Fair enough. And then just last one for me, I was wondering if you could just tell us a little bit more about what's being done internally to incentivize and retain investment personnel on the Onyx partner side, just in light of the stalled fundraising and you know, how you're balancing that against the objective of stabilizing FRA as well.
Bobby
Yeah, so I think we've actually done a very good job on that front. As people have left the firm over the last year or two that were part of that team, we were able to reallocate carry and OP5 and, of course, the carry and the opportunities fund where given the size of that team and the dollars that we have to manage, I think we're in pretty good shape on that front. Okay.
Nick Preeb
All right. Fair enough. That's it for me. I'll turn it over. Thank you.
Bobby
Thanks.
Operator
Thank you. And our next question comes from the line of Graham Redding from TD Securities. Your question, please. Hi.
Graham Redding
Good morning. On the private equity fundraising side, are you complete or largely complete now on the Onyx Partners Opportunities Fund and ONCAP 5? Yes.
Bobby
um let's start with on cap um they'll be fundraising for about another three months and we do expect um more commitments within that three-month period relative to where we are today we're actually quite feeling quite good about um the next three months there and and it's the same timeline for the opportunities fund um my guess is it won't have as um on capital is a bit more upside from this point forward than op in terms of incremental dollars but they'll both be wrapped up in the first month of January.
Graham Redding
Okay. Understood. Has that been extended or I thought you were sort of looking to wrap them up.
Bobby
No, I don't recall exactly when they were extended, but they were, and that's where our LPs for both funds came out on the extensions.
Graham Redding
Okay. All right. Understood. And then how about, um, Just on the private equity side, the emphasis in 2025, are you targeting any PE fundraising or is portfolio realizations more of the focus next year?
Bobby
Yeah, I think it's going to be capital deployment, right? And portfolio realizations will be more of the focus in 2025. But I also think as a firm across our PE platform and our credit platforms that are supported by our sales team, we kind of need to be fundraising all the time, not just when the funds are coming due. And I think you'll see us, I'm doing a lot more of that going forward, but there won't be any fundraising per se for new dollars for those two platforms in 2025. Okay.
Graham Redding
Excellent. Staying on that theme then, you know, as you do monetize some of your portfolio investments in 2025, you know, particularly around Alex partners, Do you envision remaining active on the share buybacks if your cash levels build and your stock continues to trade below NAV? Or do you feel some need to keep some powder dry for 2026 if you aren't to reinitiate fundraising for Onyx Partners 6?
Bobby
Yeah, so you're hitting on probably the thing that I think about most these days, which is our capital allocation just given our pristine balance sheet and our liquidity position. Again, anywhere in the zip code that our shares trade in, I think you should expect us to continue to be active buyers of our shares. And then the question has really become is what do we do with our capital going forward to make sure we're being efficient with the cash and we don't have too much cash drag going on related to our investing activities across PE and credit. I'm working on that real time, and I promise you and all shareholders that as that becomes more clear, that strategy becomes more clear, you'll be the second to know after Chris and me.
Graham Redding
Okay, understood. Chris, just on the FRE, is this level of compensation and overall expense a reasonable run rate? Or is there anything timing related you would call out maybe for this quarter? You know, and can you generate positive FRE in 2025? Or is that more likely a 2026 dynamic dependent upon fundraisers around onyx partner six?
Chris
yeah so so there are a few i'll call it uh out of period adjustments in q3 um related to you know just you know you make small compensation adjustments uh later in the year as you get towards uh year end and you have to catch up right back to the beginning of the year so there's probably call it like two million across the firm um that i would say is a bit of a timing benefit in Q3. The run rate's probably more like a $2 million loss overall. As it relates to 2025, we're actually right in the middle of setting budget, so I don't want to get too far ahead of that. But I think what you're going to see is continued discipline across private equity and a focus in private equity of increasing FGAUM where we can, and sometimes outside of normal, I'll call it, you know, fund structures. So I think we've got outside there.
Bobby
Think continuation vehicles and things like that for that front. Right. Just to give a color. Yep.
Chris
Yep. And then I think we've got great momentum to continue to build FRE there, particularly on several of our businesses where as we scale, a tremendous amount of the top line increase will drop to the bottom line. So I think we've got good momentum to improve on that going into 2025. I don't want to give you a number quite yet.
Graham Redding
Okay, understood. And my last question, if I could, just CLL fundraising has been very strong this year, obviously. Okay. I think it came in much higher than your original $2 to $3 billion target. So what would you attribute that to, and what do you think is a reasonable target for 2025 for that business?
Bobby
Yeah, so we don't have a budget yet for 2025, but I say what drove it this year are two things. One, there's just a very high demand for CLO paper relative to historical norm. I don't think this will be a normal year when we look back. I think a normal year will be something a bit less active than this today. But I must tip the hat to the team. They were able to take advantage of this market, continue to gain market share, and once again will be, you know, a top five or 10-ish or globally of CLOs. And the active management they've had to extend existing CLOs and C-stream, as Chris mentioned in his remarks, do create a quasi permanent capital element to that business, which is really attractive. And it's important to also note that in spite of all of that growth, our metrics around impairment and size of impairment remain industry leading. So it's really just kudos to that team and how well they've done since they've taken over managing that platform. And by the way, a very scalable business. as we move forward. So when you think about 2025 FRE, think about that really being a business, that part of credit, structured credit, being a highly profitable business. And we're working on ways for next quarter to show you that in more detail.
Graham Redding
That's it for me. Thank you.
Operator
Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Bobby LeBlanc for any further remarks.
Bobby
Thank you very much for taking the time. Thanks to our team for helping put all this together for our earnings call today, and we look forward to catching up with you next quarter. Any questions in the meantime, feel free to reach out to Chris, me, or Jill. Thank you very much.
Operator
Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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