Q3 2019 Earnings Call

November 6, 2019

Good evening My name is neonate and I'll be your conference operator today at this time I like to walk him every one to Alaris Rotary Corp. Q3, 2019 earnings conference call.

Operator: Good evening. My name is Leonie, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Alaris Royalty Corp. Q3 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. Thank you. I would now like to turn the conference over to Curtis Krawetz, VP, Investments and Investor Relations. Please go ahead.

And shopping placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

If you like to I say questions you're in this time simply press Star then the number one on your telephone keypad. If you like to withdraw your question. Please press star followed by two thank you.

I would now let's turn the conference over to Curtis Kravitz.

VP investments and Investor Relations. Please go ahead.

Thank you Leoni no good evening, ladies and gentlemen, and welcome to alerts Realty Corp. conference call and webcast to discuss the actual results for the three and nine months ended September Thirtyth 2019, as well as a brief corporate update.

Curtis Krawetz: Thank you, Leonie. Good evening, ladies and gentlemen, and welcome to Alaris Royalty Corp.'s conference call and webcast to discuss the financial results for the three and nine months ended 30 September 2019, as well as a brief corporate update. I am Curtis Krawetz, Vice President of Investments and Investor Relations, and I'm joined on the call today with Stephen King, President and Chief Executive Officer, as well as Darren Driscoll, Chief Financial Officer. After a short presentation from Steve and Darren, there will be a question-and-answer session. The lines will be placed on mute until then to avoid background noise. Before we begin, I would like to remind our listeners that all amounts given are in Canadian dollars unless otherwise noted. Listeners are cautioned that comments made today may contain forward-looking information.

I have Curtis Tourettes, Vice President of investments Investor Relations that I'm joined on the call today.

Steve King President and Chief Executive Officer, I, Suppose Derica School, Chief Financial Officer.

After a short presentation from Stephen there and there would be a question answer session. The lines will be placed on mute until then to sacrifice.

Where we begin I'd like to remind our listeners that all amounts given her in Canadian dollars unless otherwise noted listeners are cautioned that comments made today may contain forward looking information as forward looking information that's based upon a number of important factors and assumptions and as a result actual results could differ materially.

Curtis Krawetz: This forward-looking information is based upon a number of important factors and assumptions, and as a result, actual results could differ materially. Additional information concerning the underlying factors, assumptions, and risks is available in today's press release and our MD&A for the period under the headings Forward-Looking Statements and Risk Factors, copies of which are available on SEDAR as well as our website. Non-IFRS data is also presented and may differ from the way other companies present such data. As with forward-looking statements, please refer to today's press release and our MD&A for the period for more clarification regarding non-IFRS measures. I'll now pass the call over to Darren Driscoll, Alaris' Chief Financial Officer.

Additional information concerning the underlying factors assumptions and risks is available in today's press release. Other end do you need for the period under the headings forward looking statements and risk factors coffees copies of which are available on SEDAR. That's all those are website.

Oh, Yeah first data is also presented it may differ from the way other companies presents such data as with forward looking statements. Please refer to today's press release.

DNA for the period for more clarification regarding non I stressed measures I'll now pass the call over to during fiscal <unk>, Chief Financial Officer [noise].

Thanks, Chris and thanks, everyone for joining us Oh starts to let's just say like sort of quarter summarized the three separate areas. The first being a really fantastic financial results this quarter.

Darren Driscoll: Thanks, Curtis, and thanks everyone for joining us. I'll start with just highlights from the quarter, summarized in three separate areas. The first being really fantastic financial results this quarter. Alaris' highest revenue and EBITDA quarter ever. Revenue in the quarter of CAD 30 million as estimated in our Q2 outlook. That's up over 30%, compared to CAD 22.7 million in Q3 of last year, and up almost 10% over the previous quarter of this year, 27.4 in Q2 of this year. A normalized EBITDA in the quarter of CAD 25.9 million, and that's up nearly 30% compared to CAD 20.2 million in the same quarter last year, and again up over the previous quarter of CAD 24 million in Q2. Year-to-date results also excellent.

Well, there's this highest revenue and EBITDA quarter ever.

Revenue the quarter of 30 million.

It is estimated at our Q2 outlets and that's up or 30% compared to 22.7 million in Q3 last year and up almost 10% over the previous quarter of this you're a 27.4 in Q2 this year.

Normalized EBITDA on a quarter of 25.9 million and that's up nearly 30% compared to 20.2 million and the same quarter last year and again up over the previous quarter of 24 million in Q2.

Year to date results also excellent year to date revenue up 14% and normalized EBITDA of 23%.

Darren Driscoll: Year-to-date revenue up 14% and normalized EBITDA up 23%. All those numbers are on a gross and a per share basis. The main driver being deployment over the last 12 months, gross deployment of CAD 230 million, net of just over CAD 200 million, plus the positive resets experienced in January. The second area is significant portfolio improvements to report on. Most significantly, Body Contour Centers delivered as promised and better. Not only is the ECR back above 1, it's above 1.2 times. We are extremely pleased with the effort and commitment shown by the BCC management team as they have delivered exactly as they promised us a few months back. SCR continues to put out month after month of solid results.

All those numbers are our girls Santa per share basis, and the main driver being deployment over the last 12 months a gross deployments of 230 million. That's I was just over 200 million plus the positive resets experienced in January .

The second there is significant portfolio improve its to to report on Oh, most significantly on a body contours delivered as promised and better not only is easy our back above one it's about 1.2 times and we are extremely pleased with the African commitment shown by the BCC management team as they have delivered exactly as they.

That's promised us a.

A few months back.

SCR continues to put out month after month to solid results.

Darren Driscoll: Again, they bumped the monthly amount from CAD 200,000 to 250,000 starting in Q4, with additional increases expected in 2020. Another solid year of resets are expected. We're 8, 9 months into this year and have a good handle on what our resets are going to be, and we do expect in the range of at least 6 to 7 cents a share of positive resets in January. Amur Capital, our first common dividend, well ahead of schedule. We received CAD 0.4 million just at the end of Q3, declared and received, and really weren't expecting that till the earliest Q4 and even to Q1 of next year.

Again, they bought the monthly amount from 200000.

250000, starting in Q4 with additional increases expected in 2020.

And then again another solid year resets are expected were eight nine months in to this year and have a good handle on what our resets are going to be and we do expect tonight in the range of at least six or seven cents a share of positive resets in January .

I've heard capital our first common dividend well ahead of schedule Oh, we received point Fourmillion I just at the end of Q3 or declared and receives and are really weren't expecting that till the earliest Q4 and even the Q1 next year.

Our payout ratio was in the low eightys and that doesn't include any common distributions any increases from SCR next year or the resets coming in January 2020.

Darren Driscoll: Our payout ratio is in the low 80s, and that doesn't include any common distributions, any increases from SCR next year, or the resets coming in January 2020. A couple of interesting stats to share are, again, the weighted average earnings coverage ratio of the portfolio is still approximately just over 1.5 times. Excluding Sandbox, who's undergoing a sales process, our top 10 largest partners by distribution, that's over CAD 100 million on a run rate basis, almost 85% of the portfolio, has an earnings coverage ratio of above 1.2 times. As you go through the MD&A, you'll see 14 of our 17 partners representing over 91% of our revenue are reporting year-to-date results better than the previous year.

A couple of interesting staffs to share again, the weighted average earnings coverage ratio. The portfolio is still approximately just over one and a half times.

And excluding sandbox is undergoing a sales process our top 10 largest partners by distribution that's over 100 million on a run rate basis, almost 85% of the portfolio hubs as an earnings coverage ratio of about 1.2 times.

And as you go through the M.D. in AOCI 14 of our 17 partners representing over 91% of our revenue are reporting year to date results better than the previous year.

The third area is our deployment runway is in good shape, a alongside the continued support and confidence shown by our senior lending Syndicate, just a few days ago oppose on an amendment to our six to extend our senior credit facility from 300 to 330 million under the same covenants to allow us to execute on our deployment goals again each other.

Darren Driscoll: The third area is our deployment runway in good shape, alongside the continued support and confidence shown by our senior lending syndicate. Just a few days ago, we closed on an amendment to our to extend our senior credit facility from CAD 300 to 330 million under the same covenants to allow us to execute on our deployment goals. Again, each of the six members of the syndicate really took an extra pro rata piece, all jumping in to help support our deployment plans. With CAD 266 million drawn today, that gives us about CAD 115 million of dry powder today. Our Q3 deployment was CAD 83 million, anchored by that Planet Fitness deal in July, and approximately CAD 170 million of gross deployment year to date.

Six members of the syndicate, it really took an extra pro rata a p. so jumping in to help support our deployment plans. So at 266 million drawn today that gives us about 115 million a dry powder today.

Our Q3 deployment was 83 million Canadian anchored by that planet fitness steel in July and approximately 170 million of girls deployment year to date.

Other items throw the financials casting expenses as expected that just under two and half filling in the quarter I still on track for approximately 10 million a total cash <unk> expenses for 2019.

Darren Driscoll: Other items to note in the financials, cash G&A expenses, as expected, at just under CAD 2.5 million in the quarter, still on track for approximately CAD 10 million in total cash G&A expenses for 2019. Transaction costs of CAD 1.1 million in the quarter, versus nil in the prior year. You'll recall in prior years, that number was capitalized as part of the cost or value of a new deal. We've added it back to normalized EBITDA, and we'll continue to do so going forward. Again, this number will be lumpy and deal timing specific. We previously guided to 1% to 1.5% of invested capital, and year to date, that number is about 1.2% of invested capital.

Oh transaction costs of 1.1 million in the quarter.

Versus nail on the prior year, but you'll recall or priors that number was capitalized as part of the cost for value of a new deal. So we've added it back to normalized EBITDA I must continue to do so going forward.

And again this number will be lumpy and deal timing specific.

We previously guided to 1% to 1.5% of invested capital and a year to date that number is about 1.2% of invested capital.

The noncash stock based compensation expenses in the quarter do require little explanation I never spiked in Q3 to 1.9 million.

Darren Driscoll: The non-cash stock-based compensation expenses in the quarter do require a little explanation. The number spiked in Q3 to CAD 1.9 million. Since we were under trading restrictions most of the last twelve months, there was a tranche of RSUs that should have been issued last September. At the end of the day, they were granted and vested in the current quarter, which required an accelerated expensing of an entire year's worth of expense around that, those pieces of the RSUs. Add to that, the company achieved a performance metric which increased the value of the portion of those RSUs, and that translates into an extra CAD 1 million of non-cash stock-based comp in the quarter.

Since we are under creating restrictions most of the last 12 months. It was a tranche of ours. She was it should've been issued last September and at the end or the day, they were granted and vested in the current quarter, which required accelerate expensing of entire years' worth of expense around that those pieces. The IRS use add to that the company achieved a performance batch.

Which increased the value of the poor so those are shoes or issues and that translates into an extra $1 million of noncash stock based comp in the quarter.

Darren Driscoll: Next quarter, you'll see the non-cash comp number come back to around CAD 1 million a quarter and about CAD 250,000 for that specific piece. We had a realized gain of CAD 9 million during the period, and that relates to crystallizing that $7 million US gain on the Planet Fitness transaction, previously recognized as an increase in fair value. You'll see a flip on our income statement in Q3 from unrealized increase in fair value to the realized gain. You'll see the year-to-date number is a wash when you combine the two. A number of fair value adjustments in the quarter with a handful up, LMS, SCR, GWM, and Unify, and three down, Kimco, Providence, and Sandbox, for a net no change in the fair value of the portfolio.

Next quarter, you'll see the noncash comp number come back to around a million a quarter and about 200 250000 for that specific piece.

We had I realized gain of $9 million during the period and that relates to crystallizing that 7 million dollar U.S. gain on the planet fitness transaction I previously recognized as an increase in fair value. So you'll see a flip on our income statement in Q3 from unrealized increase in fair value to the realized gain so you'll see that year to date numbers a wash.

When you combine the two.

A number of fair value adjustments to the quarter with a handful up LMS SCR GW, I mean, unify and three down kimco provinces sandbox for and that's no change in the fair value of portfolio.

Darren Driscoll: Each of the changes up and down are a result of just adjusting expectations for distributions in 2020 and beyond. I'll just add a quick update on the continuing disclosure in our tax note relating to potential changes in the US. We get a lot of questions on those, and still none of the proposed changes are final. It remains to be determined if and when they would take effect, and the later into 2019 progresses, the less likely it seems it would be backdated to January 2019, but we just don't know either way. Secondly, the amount of $8 million in the note for the first three quarters of the year is based on our current capital structure, which would certainly change if the guidelines change.

And each of the changes up and down are a result to just adjusting expectations for distributions in 2020 and beyond.

I'll just a quick update on the continuing disclosure in our tax dollars.

Related to potential changes in the U.S., we get a lot of questions on those and still not on the proposed changes or final.

It remains to be determined if and when they would take effect and the later into 2019 progress is less likely it seems that would be backed into January 2019, but we just don't know either way.

And secondly, the amount of $8 million and the notice for the first three quarters here is based on our current capital structure, which would certainly change if the guidelines changed.

Darren Driscoll: Very important to note that our current run rate payout ratio of 83% already assumes an increase in our overall tax rate, and we continue to actively manage our tax structure with our advisors. If the guideline changes were retroactive, yes, we'd have to pay that extra tax, but it will only cause a small increase, maybe 1% to 2% to our run rate payout ratio, and that's only if we can't find a more efficient structure. Additionally, there are a number of items out there that are not included on our run rate payout ratio that would more than make up for some extra tax, and that includes increased distributions from SCR, more common dividends from Amur, and the resets expected for 2020.

So very important to note that our current run rate base show a payout ratio of 83% already assumes an increase in our overall tax rate.

We continue to actually manage our tax structure with our advisors.

So I forget the guideline changes were retroactive, yes, we'd have to pay that extra tax, but what I call. It a small increase maybe 1% to 2% to our run rate patient payout ratio and that's only if we can't find a more efficient structure.

Additionally, there are a number of items out there that are not included our run rate based show payout ratio.

That would make up more of that make up for some extra tax and that includes increased distributions from SCR more common dividends for remember and the resets expected for 2020.

Darren Driscoll: This is something we are managing internally but should not be a topic of concern. The record numbers of revenue and EBITDA portfolio continues to strengthen alongside an improving payout ratio and a lending syndicate showing full support. We're pleased to provide yet another strong quarter for our shareholders, and I'll pass it over to Steve for some further comment.

So this is something we are managing Charlie but should not be a topic of concern.

So a record numbers of revenue EBITDA portfolio continues to strengthen alongside an improving payout ratio and a lending syndicate showing full support we're pleased to provide the at a another solid quarter for our shareholders and all I pass over to Steve for some further comment great. Thanks, there, obviously extremely proud of our financial and operating.

Stephen King: Great. Thanks, Darren. Obviously extremely proud of our financial and operating performance over the last many quarters. To be able to show 30% year-over-year growth in a business that's designed to limit volatility and pay out a high percentage of its cash flow is extraordinary. I won't go into any more detail on Darren's comments on our individual companies. Happy to answer questions once I'm done here. I will talk about kind of the current landscape and our deployment outlook. From a macro point of view, the economic environment for our current partners remains very strong. We haven't seen any slowdown in the macroeconomics of any of our companies in the States or in Canada. From a competitive standpoint, private equity remains very active. Multiples remain at all-time highs.

So over the last many quarters.

Able to show a 30% year over year gross in the business.

Volatility.

On a high percentage of its cash flow is extraordinary.

I also wanted any more detail on various comments on our individual companies.

Happy to answer questions, a onetime down here, but I will talk about that kind of the current landscape and our appointment outlook.

From a Mac macro point of view.

Our economic.

Like environment for our current partners remains very strong we haven't seen.

Any slowdown in the macroeconomics of any of our companies on the states or in Canada.

From a competitor standpoint.

He remains very active multiples remain that all time highs the only slight change that we've seen in the industry publications is a slight decrease and debt levels being offered by senior lenders, they've tightened up a little bit which is a positive for us since we don't rely on debt leverage to deliver our returns like private equity does.

Stephen King: The only slight change that we've seen in industry publications is a slight decrease in debt levels being offered by senior lenders. They've tightened up a little bit, which is a positive for us since we don't rely on debt leverage to deliver our returns like private equity does. In the near term, we do expect to be active over the next six weeks before the end of the year. We have a few smaller transactions that we hope to close starting fairly soon here. So that's the reason why we wanted to make sure that we had ample room on our debt facility, regardless of the timing of the Sandbox disposition. Overall, deal flow remains very strong.

In the near term, we do expect to be active over the next six weeks before the end of the year.

A few smaller transactions that we hope to close.

Starting fairly soon here.

So that's the reason why we.

Wanted to make sure that we had ample room on our debt facility.

Regardless of the timing of the sandbox disposition.

Overall deal flow remains very strong are we seeing lots of opportunities and we're in the process on several transactions that we would hope to close in the in Q1 should they perceive.

Stephen King: We're seeing lots of opportunities, and we're in the process on several transactions that we would hope to close in Q1 should they proceed. Leonie, I'll turn it back to you to open the floor up to any questions.

So oney I'll I'll turn it back to you to to open the floor at any questions.

Thank you.

Operator: Thank you. Ladies and gentlemen, should you have a question, please press star followed by one on your touchtone phone. If you're using a speakerphone, please lift your handset before pressing any keys. One minute, please, for your first question. Your first question is from Gary Ho from Desjardins Capital Markets. Gary, please go ahead.

Ladies and gentlemen should you have a question. Please press star followed by one on your Touchtone phone, if we're using AI speakerphone. Please lift your handset before pricing any Keith one minute. Please for your first question.

Your first question is from Gary Ho from <unk> capital markets. Gary. Please go ahead.

Thanks, Mike first question, maybe start off on a BCC Olympic a decent turnaround this quarter.

Gary Ho: Thanks. My first question is maybe to start off on BCC. You know, it looks like a decent turnaround this quarter. Wondering if you can elaborate, and can you remind us, you know, what the financial thresholds they need to hit before you provide tranche two funding?

[Analyst 1]: Thanks. My first question is maybe to start off on BCC. You know, it looks like a decent turnaround this quarter. Wondering if you can elaborate, and can you remind us, you know, what the financial thresholds they need to hit before you provide tranche two funding?

Wondering if you can you elaborate and can you remind us what the financial thresholds.

He to hit it for you provide tranche two funding.

Oh sure area. The threshold is a after funding and any CR of over one of the half. So you know they have that made it a tremendous strides have had that's good months, even a expecting a good finished so this year as well, but thats still I would expect it at least.

Darren Driscoll: Sure, Gary. The threshold is after funding an ECR of over 1.5. You know, they have made tremendous strides, have had good months, even expecting a good finish to this year as well. That's still, I would expect it, at least a year away. We're certainly that those follow-on tranches are looking a lot more realistic now than they were three months ago.

The year away, but we're certainly.

The that those follow on trucks is our looking a lot more realistic now than they were three months ago.

Great and then Steve I think in your prepared remarks, you're talking about few small transactions.

Gary Ho: Great. Then Steve, I think in your prepared remarks, you talked about a few small transactions over the next couple of weeks. Can you give us a range to help us with the modeling? Are these more follow-ons? Are these new partners?

[Analyst 1]: Great. Then Steve, I think in your prepared remarks, you talked about a few small transactions over the next couple of weeks. Can you give us a range to help us with the modeling? Are these more follow-ons? Are these new partners?

The next couple of weeks can you give us a range to help us with the modeling and are these more follow on studies that new new partners.

Stephen King: Mix of the two, Gary. They're all, you know, on their own, not material, kinda in the $6 to 12 million range. All three transactions we're hoping to do are US. Yeah, they're not material on their own, but add up to a decent amount and, you know, supporting our current partners and also adding a small cap new one as well.

Make sense to Gary there.

Overall.

On their own.

Cereal and.

Six to six to 12 million a U.S. range. All all three transactions were hoping to do or are you S.

So yeah, there, they're not material on their own but add up to a decent amount.

Supporting our our current partners and also a adding smallcap doing as well.

Okay, and then just lastly.

Gary Ho: Okay. Just lastly, just on the Sandbox there, can you give us an update? Sounds like you guys, they drew on their facility, but also there was a write-down. Can you give us an update on the sale process?

[Analyst 1]: Okay. Just lastly, just on the Sandbox there, can you give us an update? Sounds like you guys, they drew on their facility, but also there was a write-down. Can you give us an update on the sale process?

Just on need and box there can you give us and an update sounds like you guys added drew on there's.

Facility, but also there was a write down can you give us an update on the sale process.

Stephen King: Yeah. The write-down was just a result of reduced expectations for their distribution resets. That's kind of more of a formulaic process that KPMG and Darren go through every quarter on each of our partners. The process continues to proceed. We are being guided to a closing in December of this year. That's very positive. You know, we'll keep on working through that, and hopefully that closes successfully because that would, you know, add a significant amount of cash, or, you know, reduce our debt by a significant amount.

Yeah, the write down was.

I was just a result of reduced expectations for or their distribution recess. So that's kind of more of a formulaic.

A process that KPMG Andr and go through every corner on HR partners process continues to proceed we are being guided to do a closing in December of this year. So that's a that's very positive.

So we'll keep on working through that and hopefully that poses successfully is that what.

A significant amount of cash.

Yeah.

To start that by a significant amount.

Okay, Great doesn't my question, thanks, very much thanks.

Gary Ho: Okay. Great. Those are my questions. Thanks very much.

[Analyst 1]: Okay. Great. Those are my questions. Thanks very much.

Stephen King: Thanks.

Operator: Thank you. Your next question is from Scott Fromson from CIBC. Scott, please go ahead.

Thank you. Your next question is from Scott from Samsung CBC Scott. Please go ahead.

Good evening gentlemen, I just following on the Gary's question is on the sandbox how much of the a and correct me if I got these numbers wrong 40 million preferred investment and 52 or 321 million senior.

Scott Fromson: Good evening, gentlemen. Just following on the Gary's questions on Sandbox, how much of the, and correct me if I got these numbers wrong, CAD 40 million preferred investment and CAD 21 million senior debt do you expect to recover? In other words, what kind of cents on the dollar?

That do you expect to recover and what kinda in other words, what kind of a sense on the dollar.

Yeah, we're hoping to recover everything or Scott is our is our objective here so everything lined up correctly that should be the case I think.

Stephen King: Is our objective here. If everything lines up correctly, that should be the case. I think, you know, it's you never know when you're dealing with these processes. A lot of deals get repriced at the end, but we don't expect that to happen. We're hoping to recover everything.

You never know when you're dealing with these processes a lot of a lot of deal to get repriced at the end, but we don't expect that to happen or where we're hoping to recover everything.

Okay. Thanks, and you anticipate taking any of that consideration in the form of equity.

Scott Fromson: Okay, thanks. Do you anticipate taking any of that consideration in the form of equity?

Stephen King: No.

No.

Okay.

Scott Fromson: Okay. Just one more question. On the deal pipeline, you mentioned that it's looking good into the next year. Are there any specific regions or industries that are prominent?

Just one more question on the deal pipeline, you mentioned that smoking good a into the next year are there any specific regions or industries that that a a prominent.

No.

Scott Fromson: No, we actually had a lot of fun today in our board meeting 'cause we've got probably the most diverse group of companies in our pipeline that we've ever had in industries, quite frankly, that I didn't know existed. It's good. I mean, that is our goal to build as diverse a portfolio as possible. No, there's no specific sector that stands out more than the others. The one thing I would say from a deal flow point of view, we are seeing kind of more cyclicals showing up in our inboxes than we did a year or two ago.

We've got [noise].

Yeah, we actually had a lot of fine today in our in our board meeting because we've got probably the most diverse group of companies that are in our pipeline that we've ever had in industries quite frankly that I didn't know existed.

So it is good I mean that that is our goal is to build as diverse.

Portfolio as possible. So no there's no there's no specific sector that.

That stands out more than the others that the one thing I would say from a.

You will fall point of view, we are seeing kind of more kind of cyclicals.

Showing up in our in our in boxes that then we did a year or two ago.

Stephen King: I think, you know, a lot of those companies feel that this is a good time to raise money if they're, you know, if people are getting nervous about a recession in the US and, you know, they're trying to get to the market before that happens. You know, a lot of the companies that we've seen really aren't heavy cyclicals. They're companies that have made money in every market. There's lots of good opportunities out there. I'm actually quite excited about 2020. I think we can beat our record again. You know, we'll see how it goes.

So I think you know as companies feel at this is a good time to to raise money. If there you know people are getting nervous about had been a recession in the U.S. and they're trying to get to the market before that happens but.

A lot of the company that we've seen really arent heavy cyclical there there are companies that have made money in every market and.

So there's there's lots of good opportunities out there I'm actually quite excited about 2020, a I think we can.

We can we can be direct our record again, but oh, we'll we'll see how it.

How it goes we only have about 90 days of visibility really on or on our pipeline but.

Stephen King: We only have about 90 days of visibility really on our pipeline, but you know, the next 90 days look good.

The next 90 day and look good.

And how are your your underwriting standards of the they are they straight more stringent are they more lenient or you know they have they change do you feel you have a better choice of investment.

Scott Fromson: How are your underwriting standards? Are they more stringent? Are they more lenient? Or, you know, how have they changed? Do you feel you have a better choice of investment?

We do.

Scott Fromson: We do. Yeah, I mean, we've always tried to be strict. I mean, you know, you always learn more and more as you go as an investor, and this is, you know, we're almost into year 17 here at Alaris. You know, I think we've gotten better over the years for sure. You know, when we look at companies that may have some exposure to the economy, you know, we would build in a huge ECR at the start, knowing that it can come down from there. We need to make sure that they can pay our distribution even at a trough. We would never allow any debt in front of us in those situations.

Stephen King: We do. Yeah, I mean, we've always tried to be strict. I mean, you know, you always learn more and more as you go as an investor, and this is, you know, we're almost into year 17 here at Alaris. You know, I think we've gotten better over the years for sure. You know, when we look at companies that may have some exposure to the economy, you know, we would build in a huge ECR at the start, knowing that it can come down from there. We need to make sure that they can pay our distribution even at a trough. We would never allow any debt in front of us in those situations.

I mean, we've always tried to be a tried to be strength, but you always learn more and more as you go as an investor and this is.

ER or almost into a year 17 here and there. So I think we've got a better over the years for sure.

Are we look at companies that may have some exposure to the economy.

You know we wouldn't build in a huge easy are at the start and knowing that it can come down from there. We think we need to make sure that they can pay our distribution even at a trough.

We would never allow any debt in front of us in those situations and so you know.

Stephen King: You know, yeah, I think we're much better investors than we were 10 years ago, and hopefully we'll be saying the same thing 10 years from now.

Yeah, I think I think we're much better investors than we were 10 years ago and.

Hopefully, we'll be saying the same thing 10 years from now and I. Just asked Scott I think were also a much better remediate or said another way, where you know I think we mentioned last call and some of the things we've done with the with the senior debt and the ability to get in sooner as well as some of the and yeah.

Darren Driscoll: Can I just add, Scott? I think we're also much better remediators than we were. You know, I think we mentioned last call on some of the things we've done with the senior debt and the ability to get in sooner, as well as some of the fixes that we've got in place in a situation like Sandbox. We are better at repair than we used to, and then we'll continue to try to get better at that going forward.

Fixes that we've got in place today in a situation like sandbox. So we are better at a at a repair than we used to and that will continue to try to get better at that going forward sandbox is a great example.

Stephen King: Yeah, Sandbox is a great example. You know, we acted very quickly on that one. You know, what ended up not being a great situation, but we'll still end up with a nice, double-digit IRR on a tough situation. We're proud of that.

We acted very quickly on that one.

Ended up not being a great situation, but we'll still end up with a with a nice double digit IR are on a on a tough situations, where we're proud of that.

Good stuff like the tough new Alaris.

Scott Fromson: Good stuff. I like the tough new Alaris. Thanks so much.

Hi, gentlemen, [laughter] thanks, guys.

Stephen King: Thanks, Scott.

Thank you. Your next question is from Derek Spronck from RBC. Please go ahead Derek.

Operator: Thank you. Your next question is from Derek Spronck from RBC. Please go ahead, Derek.

Derek Spronck: Okay. Thanks, guys, for taking my questions. Just on the capital deployment, without the Sandbox sale, how much capital do you have available to deploy?

[Analyst 2]: Okay. Thanks, guys, for taking my questions. Just on the capital deployment, without the Sandbox sale, how much capital do you have available to deploy?

Okay. Thanks, guys for taking my questions just just on that the capital deployment without the sandbox sale, how much a capital do you do you have available to deploy.

About a 115 the that includes the 50 million dollar accordion. So we are drawn to 266 today, we've got lots of room on our covenants. So we can go to threethirty on the base plus another another 50 so.

Darren Driscoll: About CAD 115 million, and that includes the CAD 50 million accordion. You know, we're drawn to CAD 266 million today. We've got lots of room on our covenants, so we can go to CAD 330 million on the base plus another CAD 50 million. CAD 114, 115 million today.

A 101 hundred 1400 15 today, Okay. That's great.

Derek Spronck: Okay, that's great. Just in terms of, sorry, the overall portfolio trends from an ECR perspective, I mean, as you see it right now, do you feel that you're in a bit of an upswing, stable, kinda downswing? I mean, you've had a nice lift, but how do you see that trending by and large?

[Analyst 2]: Okay, that's great. Just in terms of, sorry, the overall portfolio trends from an ECR perspective, I mean, as you see it right now, do you feel that you're in a bit of an upswing, stable, kinda downswing? I mean, you've had a nice lift, but how do you see that trending by and large?

And just in terms of.

Sorry, the B, we're all portfolio trends.

From an SCR perspective, I mean as you see it right now do you feel that.

You're in a bit of an upswing stable.

Downswing, I mean, you've had a nice lift but.

How do you see that trending by and large.

Yes, I mean all of our companies.

Stephen King: Yeah. I mean, all of our companies. Well, I shouldn't say all, but as Darren mentioned, 14 out of our 17 are technically on upswings at the current time. We're seeing really good trends from those companies. The fact that, you know, BCC, you know, not just got above one, but went to the next range of 1.2 to 1.5, I thought was tremendous just for one quarter. We were with them in Seattle on the weekend, and they couldn't be more excited about where their business is going. We've got a lot of that, you know, GlobalWide and Planet Fitness. We've got some really high-performing companies right now and very few that are having a tough time.

But as Darren mentioned 14 out of our 17 are technically on upswings.

The current time.

We're seeing really good trends from a from those companies the fact that BCC.

No not just got above one by one or the next range of 1.2 to 1.5 I thought was tremendous just for one quarter.

And we were with them and Seattle on the weekend.

Yeah, they couldn't be more excited about where their business is going so and we've got a lot of that.

Global light and add planet fitness, we've got some really high performing companies right now and that very few that are they're having a setup.

Okay, that's great. Thanks, Steve.

Derek Spronck: Okay. Yeah, no, that's great. Thanks, Steve. The CAD 120 million run rate, does that include or anticipate any sort of positive rate resets?

[Analyst 2]: Okay. Yeah, no, that's great. Thanks, Steve. The CAD 120 million run rate, does that include or anticipate any sort of positive rate resets?

So the 120 million a run rate.

Does that does that include or anticipate any sort of positive rate resets.

Darren Driscoll: No, that is exactly as it stands today, so it doesn't include any of the small cap or follow-on deployment we have in place. It doesn't include any of the resets, as we mentioned, and it also doesn't include any further common distributions. We won't include those common dividends from Amur until we see a real steady state quarter after quarter after quarter. Again, pleased with that first one we got, but we won't include that in our run rate until it's a reliable source.

No that is a that is exactly as it stands today. So it doesn't include any of the small cap or a follow on to plant. We haven't place. It doesn't include any of the.

Resets as we mentioned and it's also doesn't include any any further common distributions. We won't include those common dividends from IMR until we see a real steady state quarter after quarter after quarter and again pleased with that first when we got but we want include that in our run rate until it's a it's a arrival.

Of course.

Derek Spronck: Okay, that's great. With the majority of the rate resets coming up here, do you have any visibility into that as it stands, or is it a process that you still need to go through?

[Analyst 2]: Okay, that's great. With the majority of the rate resets coming up here, do you have any visibility into that as it stands, or is it a process that you still need to go through?

Okay, that's great and with the majority of the rate resets coming up here do you have any visibility into that as it stands or set a process that you still need to go through.

Stephen King: Well, I think it has a chance to be a bit anomalous on the upside, and a lot of that has to do with LMS, which is our one company that doesn't have a collar on it, and they're experiencing a really extraordinary year. They're always a tough one to judge because they do sometimes have some end-of-year adjustments that go through the audit process. We won't know for sure until probably March. Yeah, I think this has a chance to be a pretty big year because of them.

I think it as much as to be a bit anomalous on the on the upside and allow that has to do with with LMS.

Which is our.

Company that doesn't have a color on it and they're experiencing a.

I really extraordinary year, so they're always a tough one of the judge because a they do sometimes have some.

End of year adjustments that are going through the audit process, we won't know for sure until probably March but.

Yeah, I think I think this has a chance to be a pretty big here because of that.

Derek Spronck: Okay. No, that's great. Okay, well then that's it for me. I'll turn it over. Thanks, guys.

[Analyst 2]: Okay. No, that's great. Okay, well then that's it for me. I'll turn it over. Thanks, guys.

Okay, No that's great okay.

For me I'll turn it over a thanks, guys hey, thanks there.

Stephen King: Great. Thanks, Derek.

Thank you. Your next question is from Jeff Fenwick from Cormark Securities. Please go ahead.

Operator: Thank you. Your next question is from Jeff Fenwick from Cormark Securities. Please go ahead.

Hi, guys, Yes, I think we've covered most of the questions that I had there, but when we talk a little bit of but that im were a.

Jeff Fenwick: Hi, guys. You know, I think we've covered most of the questions that I had there, but why don't we talk a little bit about that Amur common equity dividend there. It sounds like that was a bit of an unanticipated one for you so early into the investment. How do the owners there look at that distribution? Is it just purely at their option? Do they have a bit of a policy around what they're looking to do there? And, you know, as you say, you're a little bit reluctant to build it into the run rate just yet. How are you thinking about that going forward?

Common equity dividend there it sounds like that was a bit of an unanticipated one for you. So early into the investment that how did the.

How did the owner there look at that distribution is it just purely add their auction do they do you do they have a bit of a policy around what they're looking to do there and as you say or the or little bit reluctant to build it into the run rate just yet so how are you thinking about that going forward.

Stephen King: Yeah, I think, from their point of view, there's a few different factors. First of all, the top two people who own the company and are running the business, they don't take a penny of salary. Their only compensation is by way of common equity dividend. So I think it will be fairly regular. But they're not quite ready to make kind of a formal policy yet because there's some growth initiatives that they're looking at that could require them to, you know, to pay out a little less than what they currently can. They are gonna kinda keep communicating with us on that. They haven't kind of really formed that yet, and they'll work with us on that.

Yeah I think.

From their point of view there in a few different factors first of all the talk to people who own the company in our are running the business. They don't take a penny of salary. They are only compensation is by way of common equity dividends.

So I think it will be fairly regular.

But they're not they're not quite ready to make kind of a formal policy yet because there's some growth initiatives that that they're looking at that could require them to.

To pay out a little less than 10, what they currently can so so they're going to kind of keep communicating with us on that they haven't kind of really formed that yet no work with us on that but thats, the only reason or not.

Stephen King: Yeah, that's the only reason we're not, you know, wanting to commit to a firm number because they haven't either. It is their only way of getting paid as individuals, so we think it will be quite regular.

I wanted to commit to a two affirmed number because they haven't either but it is there only way of.

Im getting paid as individuals. So we think it will be quite regularly.

Jeff Fenwick: Okay. Fair. And then, thanks for the color on the RSU and the non- or the equity-based comp in the quarter. Now, Q4 is typically one where we do see, I guess under the structure you adopted, I think it was last year or the year before, where you're taking some of the annual bonus. Is that still? I assume that's still gonna be a factor in Q4, separate from this current allocation.

Okay Fair and then thanks for the color on the RSU and the non non or are they the equity based comp in the quarter now Q4, as typically one where we do see now I guess on the under the structured adopted I think as last year. The year before we are taking some of the annual bonus. So is that so I assume that's still going to be a factor in the fourth.

Quarter separate from this this current allocation.

Darren Driscoll: Yes. Right now, that's sort of our preliminary estimate for that bonus would combine with all of our cash G&A and still come in around CAD 10 million all in. You know, we've got sort of a running estimate now. Having said that, we haven't accrued anything because we do have to hit certain targets to achieve that cash bonus. While we expect to, there's still we still need to finish off our year with another good, strong Q4, and you will see that number in Q4. Again, it will be in and around that, a part of that CAD 10 million all-in cash G&A number.

Yes, and then and right now that sort of our preliminary estimate for that bonus.

Good combined with all of our cash DNA and still come at around $10 million, all and so I'm you know we've got sort of.

Running as spend now having said that we haven't accrued anything because we do have to hit certain targets to add to achieve that cash bonus and so well, yes, we expect to a there's still we still need to finish off our a a goods with another good strong Q4, and a and you will see that number in a in Q4, but again it will be a in and around that.

Part of that 10 million all in cash generic number.

Okay, Great. That's all I had thanks guys.

Jeff Fenwick: Okay, great. That's all I had. Thanks, guys.

Darren Driscoll: Thanks.

Stephen King: Thanks, Jeff.

Yes.

Thank you. Your next question is from Jamie going from National Bank Financial. Please go ahead.

Operator: Thank you. Your next question is from Jaeme Gloyn from National Bank Financial. Please go ahead.

Yes, thanks, good evening.

Jaeme Gloyn: Yeah, thanks. Good evening.

Stephen King: Jamie.

Stephen King: Jaeme.

Jamie.

Jaeme Gloyn: First question is related to the Sandbox sale process. I think, correct me if I'm wrong, but last quarter, you were making comments that would imply that there was a 10% premium included in any sale. Is that still the case? Is that adjusted lower, or is it wiped out completely, at this point?

First question is related to the sandbox sell process I think.

We have a rami last quarter.

We're making comments that would imply that there was a 10% premium included any any sale is that is that still the case is that adjusted lower or is it white, though completely at this point.

Yes.

Stephen King: Yeah. We don't know yet, unfortunately, is the answer. There's a whole bunch of different factors in play in terms of other stakeholders within Sandbox that need to be sorted out in terms of, you know, the waterfall of proceeds. Until all of that gets sorted out, we don't know whether we're gonna get a premium on our preferreds or not. Yeah, that'll kinda play out over the next two to three weeks here.

Don't know yet unfortunately as the answer.

There's a there's a whole bunch of different factors in play turns out.

Are there other stakeholders.

Within sandbox that need to be sorted out in terms of the waterfall of proceeds so until all of that gets sorted out we don't know whether we're going to get.

Premium on our on our preferred or not so yeah that also kind of play out over the next two to three weeks here.

And if you can can you just.

Jaeme Gloyn: If you can you just dive into or refresh me on, I guess, exactly what's going on with Sandbox in terms of what's driving that decline in ECR? Is it geographic specific? Is it a product specific? Is there some sort of change in regulatory environment? What's going on exactly?

Dive into or refresh me on I guess exactly what's going on with sandbox in terms of what's driving that that decline and PCR ways that geographic specific isn't a product specific as or some sort of changing regulatory regulatory environment, what's what's going on exactly.

Darren Driscoll: They did lose a customer or two and are replacing them, but just, they were a couple of sizable customers. You know, this is, you know, we're going from maybe expecting it to be up 2% or 3% to down 4% or 5%. It's not a massive swing, but that does change our DCF model. This is still making good, healthy top line and bottom line. Still servicing all of its commitments. Again, we're looking to get this across the finish line here in December, but you know, nothing at all that big concerning or catastrophic at Sandbox.

It's a they they they did lose a customer to and our and our replacing them, but just if there were a couple of sizable customers and so a you know if this is.

We're going from maybe expecting it to be up two or 3% to down four or 5%. So it's not a it's not a massive swing, but that does change our our DCF model. So this is still making good healthy topline and bottom line.

I'm still servicing.

All of its commitments and a again, we're looking to get this across finish line here in December but nothing nothing at all.

Big concerning our catastrophic sandbox.

Curtis Krawetz: Well, this is Curtis here. I'll just add one thing. There was just a bit of CapEx this period that you asked about the ECR.

This is curtis or others that one thing there was just a bit of Capex. This period, yes, DCR came down a little bit just because there was a bit of capex and moving into a new floor in their office building that got included an easier.

Darren Driscoll: Yeah.

Darren Driscoll: It came down a little bit just 'cause there was a bit of CapEx and moving into a new floor in their office building that got included in the ECR. EBITDA was up year over year.

Curtis Krawetz: It came down a little bit just 'cause there was a bit of CapEx and moving into a new floor in their office building that got included in the ECR. EBITDA was up year over year.

But EBITDA was up.

Year over year.

Darren Driscoll: Yeah.

Jaeme Gloyn: Okay. In terms of getting just, I guess, back to the sale process, are you able to sort of talk about who the natural buyers are of this business? Is it consolidators of the market or other PE? What, like, who's been looking at it? Who's shown interest at this point?

Okay and in terms of getting just saying it's back to the sale process.

Are you have this sort of talk about who the natural buyers are of this.

Business as it comes orders in the market or other PE who's who's been looking at it who's Who's joined interest at this point, yeah, we anticipate that it'll be a strategic buyer.

Stephen King: Yeah, we anticipate that it'll be a strategic buyer.

Okay.

Jaeme Gloyn: Okay. Shifting to the RSU commentary. I just wanna make sure I understood this correctly. It was RSUs that were issued in Q3 2018, but due to blackout periods were not able to be, I guess, given out to employees and therefore that occurred in Q3 2019, and then they were expensed in Q3 2019. Is that what I understand? Is that correct?

I'm.

Just getting shifting to the add to the RSU commentary.

I just want to make sure I understood. This correctly you is ours use that were issued in Q3 2018, but due to blackout periods, where we're not able to the.

I guess.

Yes.

Given out to two employees and therefore the.

That occurred in Q3 2019, and then their expense in Q3 2019 is that that what I understand that credit that's bang on so yes. So they should have been issued in Q3 of of last year, we were unable to grab them until until this this current quarter. So they were granted the first third vested.

Darren Driscoll: That's bang on. Yeah. They should have been issued in Q3 of last year. We were unable to grant them until this current quarter. They were granted the first third vested and accelerated because of a performance metric. The entire year's expense was recorded in the current quarter.

And accelerated because of the performance metric and so that the entire years of expense was recorded in the current quarter.

Okay as opposed to they supposed to gradually ticking up through the Ed Yeah. I did just to put is quite simply had they've had we not been a under any trading restrictions you would've seen 250000 a quarter in.

Jaeme Gloyn: Okay. As opposed to gradually ticking up through the

Darren Driscoll: Yeah.

Jaeme Gloyn: previous quarters.

Darren Driscoll: Just to put it quite simply, had we not been under any trading restrictions, you would have seen CAD 250,000 a quarter in. Well, you wouldn't have seen, you would've seen half of that because of performance metric, but you would've seen a chunk accrued each of the, or booked each of the previous three quarters.

Well you wouldn't have seen.

It would have seen half of that because Ah because of performance metric, but you wouldn't see that Chuck a crude each of the our book to each of that previous a three quarters right right understood and then in terms of the RSU.

Jaeme Gloyn: Right. Understood. In terms of the RSU compensation, is that something that is recurring? I'm not talking about the one-third vesting and going to future years, but RSUs as a component of the compensation. Should we expect to see this number go from, let's say, the CAD 1 million per quarter run rate for non-cash stock-based comp? Should we see that increase in subsequent years as this becomes a piece of the compensation platform?

Compensation is is that something that.

Is recurring I'm not talking about the one third vesting and go into future years, but.

Ours use as a as a component of the compensation should we expect to see this number go from let's say the 1 million.

For quarter run rate for noncash stock based comp should we see that increase in subsequent years as this becomes a piece of the compensation platform.

Darren Driscoll: A year ago, we did change our compensation program, so the option plan is now done. There are a few options. They're all out of the money at the moment, but there are still some that are out there. We are more of an RSU, PSU based comp plan now. Half are just time-vested RSUs, the other half are performance units, and those performance units are based on increasing the book value of the business. Better alignment, I think from a shareholder standpoint, better achievability from an employee or management standpoint. As far as it growing, I think, you know, right now, I mean, as they fall off and vest, more will be granted. Will that increase?

A year ago, we did change our comedies program. So the option plan is now done. So there are a few options there all of the money at the moment that there are still some that are.

Out there we are more of an IRS U P. S U.

Based comp plan now so a half or just tie invested our shoes the other half our performance.

Units and those performance units are based on increasing the book value a of the business so better alignment.

I think from a shareholder standpoint.

It or achieve ability from an employee or management standpoint.

As far as it growing.

I think right right now.

As a falloff invest more will be.

We'll be granted a will that increase a that would be up to the compensation committee, but I think for now I sort of a steady state of a million a quarter is is a good number to use us for modeling.

Darren Driscoll: That'll be up to the compensation committee. I think for now, sort of a steady state of CAD 1 million a quarter is a good number to use, for modeling.

Okay, and then last one is just around the the debt capacity senior debt to EBITDA to 47, I think based on the the presentation.

Jaeme Gloyn: Okay. Last one is just around the debt capacity. Senior debt to EBITDA 2.47, I think, based on the presentation. Where are you comfortable taking that, assuming, you know, a scenario where Sandbox doesn't repay? Where are you comfortable taking that, if an investment is to come across the line?

Where are you comfortable taking that assuming.

An area, where sandbox isn't a dozen doesn't repay.

Where are you comfortable taking that.

They are.

In investment is to come across the line.

Yeah, I think thats, probably a as.

Stephen King: Yeah. I think that's probably as high as we're comfortable with. You know, sometimes you're gonna have some, you know, short-term changes in that that you'd carry for a little while. But, you know, I don't think we'd wanna be any above that. We always want, you know, at least CAD 100 million of room on our balance sheet to show prospective companies that we can fund without them taking on market risk. We don't wanna be a high-risk entity for our investors in terms of our balance sheet. You know, I think, you know, somewhere between 1.5 and 2.25 is what we're comfortable with long term.

Hi, as we're comfortable with.

So sometimes you're going to have some.

Short term.

Changes in that or that you didn't carry for a little while but no I don't think would be.

Want to be at any above that we always want to at least 100 million a room on our on our balance sheet to.

To show perspective companies that we can find without one time without taking on market risk.

So and we don't want to be a high risk and any for for our investors in terms of our balance sheet. So.

Thank you know somewhere between.

One of that tend to in a quarter range is what we're comfortable with long term, but we're not afraid to have kind of short term spikes and not if we know something like sandbox is coming or.

Stephen King: We're not afraid to have kind of short-term spikes in that if we know something like Sandbox is coming or, you know, if we're gonna do an equity raise soon. In this case, you know, we're totally comfortable where we are, if not, you know, a little higher 'cause we know, you know, Sandbox has a very good chance of closing here in the next six weeks.

We're going to do an equity raise seven.

So this case, where we're totally comfortable where we are a.

A little higher because we know sandbox has very good chance of closing here in the next please.

And that's a you know that 60 U.S. So thats you know 80 to 90 coming off that 266 million so that as a material change that the to that covenant. So we are entirely comfortable closing. The next couple of small cap investments on our facility. Our Max Covenant is three times, but again, we we want always operate with some room as Steve mentioned.

Darren Driscoll: That's you know that's $60, so that's you know 80 to 90 coming off that 266 million. That is a material change to that covenant. We are entirely comfortable closing the next couple of small cap investments on our facility. Our max covenant is 3x, but again we wanna always operate with some room as Steve mentioned.

Jaeme Gloyn: Okay. You know, I take it the confidence level over that statement, Steve, around you know, within sort of 6 weeks period, you know, that's a very high confidence that this thing is gonna get done in that timeframe. Like, there's not. Like, what, I guess, what would be a risk or what would be the risk that it doesn't occur?

Okay and I.

I take it the confidence level over that are without Stephen see around a you know within sort of six weeks period.

That's a that's a very high confidence that this thing is going to get done in that in that timeframe like theres not a well I guess, what would be a risk or what would be the risks that it doesn't isn't a great. Yeah, there's always risk Oh im going to this business a long time, what we're seeing.

Stephen King: Yeah. There's always risk. You know, we've been in this business a long time, and we've seen lots of strange things happen. But you know, we're dealing with a very legitimate buyer that has lots of resources already in place to fund it. It's really just getting through the last bits of due diligence. There's always risk in any of those transactions.

We've seen lots of strange things happened, but we're dealing with.

Very legitimate a buyer that has has a lot the resources.

Nice to.

It's really just getting through the last of due diligence.

Work.

But.

There's always risk.

Any of those transactions.

Okay, great. Thanks very much.

Jaeme Gloyn: Okay, great. Thanks very much.

Stephen King: Yep.

Yes.

Thank you.

Operator: Thank you. Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. Your next question is from Anoop Prihar from GMP Securities. Please go ahead.

Ladies and gentlemen, as a reminder, should you have a question. Please press star followed by one.

Your next question is from I knew.

Yeah, our from GMP Securities. Please go ahead.

Anoop Prihar: Oh, good evening, guys. Most of my questions have been answered. Just one quick one. Just an update on Kimco down, if you wouldn't mind, please.

Good evening guys. Most of my questions have been answered just one quick one just an update on can go down given mines was.

Yes, we had another small write down on a core a you know we they continue to plug along and they're making a reasonable amount there servicing their dad their servicing.

Stephen King: Yeah, we had another small write-down on the quarter. They continue to plug along, and they're making a reasonable amount. They're servicing their debt. They're servicing our debt. Really that's just that expectation of we really wanna get that CAD 100,000 a month just to get it started. We thought it may have happened by now. They have the group we have in there now has done a tremendous job at rightsizing expense side. Right now, I think it's a revenue issue. They are optimistic. They've made some significant changes in their sales force and management team and are expecting that to get back on track.

Our debt.

But really that's just set expectation of a you know we really want to get that $100000 I'm not just to get it started to we thought it may have happened by now and and you know they have a the group we have in there now has done a tremendous job at Rightsizing expense side, but right now I think it's a revenue issue.

There are optimistic they've made some significant changes in their sales force and management team and a and are expecting that to to get back on track, but it is one that we are certainly frustrated with and wish it was recovering a little faster.

Stephen King: It is one that we are certainly frustrated with and wish it was recovering a little faster, and, really, quite frankly, as is the management team, because they are incentivized to get those distributions back on as well. Really just another small write-down, just pushing out our expectation into, well, into next year as far as when those might restart again.

That really quite frankly as as a management team.

Because they are incented to get those distributions back a lot as well so I'm really just another small write down just pushing out our expectation into well into next year as far as when those might a restart again.

Anoop Prihar: I guess I'm a bit curious to know just how patient are you guys willing to be? 'Cause we've been. It is a small issue, but we've been dealing with it for a while now. Steve, how much longer do we wait?

I guess I'd be curious to know just hoping you guys are willing to be because we've been we've been it is a small issue, but we've been dealing with it for a well known so Steve how much longer we ways.

And it's a tough question I mean.

Stephen King: Yeah, it's a tough question. I mean, it's not a material, you know, part of our portfolio. Hasn't been contributing revenue for a long period of time. So it's not like there's a gun to our head on it, and you don't wanna sell low, if you can help it. You know, the management team has asked us for a little more time. They've just added some significant resources on the revenue generation side. We're inclined to give them a little bit more time. You know, certainly it is a topic of discussion, you know, when would be the right time to sell the business?

It it's not a material.

Part of our portfolio hasn't been contributing revenue for for a long period of time.

So it's not like we're not like that again to our head on it then you don't want to you don't want to sell low.

You can help it. So you know the management team has asked us for a little more time, there just added some significant resources on the on the revenue generation side, where I climbed to give them a little bit more time, but.

Certainly it into the topic of discussion.

No.

When would be the right time to add to sell business.

Yeah. Thanks, guys.

Anoop Prihar: Yeah. Thanks, guys.

Thank you we have a follow up question from Scott from some CBC. Please go ahead.

Operator: Thank you. We have a follow-up question from Scott Fromson from CIBC. Please go ahead.

Just a quick one do you anticipate any further redemptions other than samsung's.

Scott Fromson: Just a quick one. Do you anticipate any further redemptions other than Sandbox?

We don't have anything anything that we know where the current time Scott.

Stephen King: We don't have anything that we know of at the current time, Scott. We just had, you know, a small redemption from PFGP of CAD 10 million. We've got Sandbox. We don't know of anything else or anybody that's considering that. We've had, you know, obviously, we have extensive conversations with all of our partners on a regular basis. There isn't anything that's come up.

I just had a small redemption from FBR.

10 million.

We've got to US advice, we don't know of or anything else.

Our anybody that say considering that we've had.

Yeah.

So we have extensive conversations that all of our partners on regular basis, there isn't a.

Anything that a that's come up.

Right. Thank you.

Scott Fromson: Great. Thank you.

Stephen King: Yeah, thanks.

Correct.

Thank you.

Operator: Thank you. There are no more questions at this time. Please proceed, Mr. King.

There are no more questions at this time. Please proceed mr. king.

Okay, well, thank you everybody for a for dialing in.

Stephen King: Okay. Well, thank you, everybody, for dialing in at a late hour, especially for those of you out east. Darren and I are off tomorrow morning to a Deloitte conference with about 260 private companies looking for capital. We thought it was important that we be there, and we would appreciate you all accommodating us in the evening this quarter. We look forward to reporting more great results in our Q4. Thank you very much.

Lead our especially for those of you.

I would east.

They're in and I are off Tomorrow morning to delight conference with Oh 260, private companies looking for capital. So we thought it was important to we've either and so anyway I. Appreciate you all accommodating us.

In the evening this quarter and look forward to our reporting more great results.

In a in our Q4, so thank you very much.

Ladies and gentlemen. This concludes your conference call today, we thank you for participating and ask that you. Please disconnect your lines.

Operator: Ladies and gentlemen, this concludes your conference call today. We thank you for participating and ask that you please disconnect your lines.

Yeah.

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