Release Date: November 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net book value increased by $0.78 per unit to $22.80, marking a record high for Alaris Equity Partners Income Trust (ADLRF, Financial).
- Partner distribution and transaction fee revenue of $65.9 million exceeded previous guidance and the same quarter last year, driven by higher common dividends.
- Net distributable cash flow for Q3 2024 increased by over 63% to $31.8 million, resulting in a low payout ratio of 53%, providing flexibility for future investments.
- Alaris invested an additional USD35 million into convertible preferred equity into Ohana, yielding a 14% return, enhancing future growth potential.
- The portfolio continues to perform well, with a weighted average ECR of approximately 1.5 times, and 10 out of 19 partners exceeding this threshold.
Negative Points
- Sono Bello faced higher advertising costs and a decline in conversion rates, impacting immediate EBITDA, though these are considered temporary issues.
- Heritage is taking longer to return to profitability, with negative margin projects leading to a deferral of preferred distributions until 2025.
- SCR experienced a decline in revenue and EBITDA due to slower business development and reduced capital spending, resulting in a fair value decrease of $5.5 million.
- Ohana's common equity decreased by USD6.7 million, partly due to an increase in preferred equity and a one-time common equity dividend.
- The expected increase in US deal flow in the second half of the year did not materialize, impacting new investment opportunities.
Q & A Highlights
Q: What was the payout ratio for Fleet's common equity holders in the prior year, and was the dividend increase funded by earnings?
A: Fleet did not pay out all of their earnings. Alaris owns 42% of Fleet's common equity, receiving USD15 million, which was not all of Fleet's income. The dividend increase was funded entirely by earnings, not asset sales or divestitures.
Q: Can you explain the Ohana dividend recap and your comfort level with its distribution sustainability?
A: The Ohana recap was part of a larger transaction, and the investment is temporary. Alaris is comfortable with Ohana's ECR, which includes CapEx. Ohana's ECR appears low because they reinvest earnings into growth, but their free cash flow is higher than the ECR suggests.
Q: What is the current deal flow split between new companies and existing partners?
A: The deal flow is about 50/50 between new companies and existing partners. Four of Alaris's 19 partners are working on acquisitions needing Alaris's backing, which aligns with Alaris's focus on partners with growth opportunities.
Q: Are there any anticipated redemptions in the near future?
A: Alaris expects a healthy list of redemptions over the next 24 months, although nothing is imminent in the next few months. Redemptions are anticipated in 2025.
Q: What are the potential impacts of the US election results on Alaris's business?
A: There are no significant impacts anticipated from the US election results. None of Alaris's partners are expected to be affected by potential tariffs or similar issues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
