Q1 2022 Onex Corp Earnings Call

May 13, 2022

Welcome to onx's first quarter 2022 conference call in webcast.

During the presentation, all participants will be in a listen-only mode.

Afterwards, we will conduct the question-and-answer session with prequalified analysts.

At that time. If you have a question, please press star one on your telephone key pad.

If any time during the conference you need to reach the operator, please press star than zero.

As a reminder, this conference is being recorded.

I will now turn the conference over to Jo ommonick, managing Director, shareholder Relations and Communications at onx. Please go ahead.

Thank you, good morning everyone and thanks for joining us. We're broadcasting this call on our website hosting. On the call today are Jerry schwartz, our Founder and CEO , Bobby La block, onx's President and Head of onx partners, and Chris Kevin, our Chief Financial Officer. Earlier this morning, we issued our first quarter 2022 press release, mdna and consolidated financial statements, which are available on the shareholder section of our website and have also been filed on sedarour. Supplemental information package is also available on our website.

As a reminder, all references to dollar amounts on this call are in U's, 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 turn the call over to Jerry.

Thanks Jill.

Good morning everybody and thanks for being with us today.

I'm pleased to report. I'm very happy to report that onyx had a solid start to the year.

With continued progress in our plan to grow the business and increase shareholder value.

Our investing capital per share or, as we used to call it, avv per share.

Grew for the eighth straight quarter, ending a? U's $92 and 94 cents.

Up 3% of the quarter and 19% over the last 12 months.

Bobby and Chris are going to provide more detail about those results.

Recently we held our limited partner annual meetings in Toronto. They were really robust, well attended and informative.

And that was the first time in three years, since our last person in-person event.

It was really nice to see so many of our long-standing LPs.

Is well domain new ones.

It was also a time to reflect on how much has happened since the pandemic.

And how much challenge and uncertainty we've all managed through.

And I might add.

Continue to endure, to some extent lesser, but to some extent.

Through it all, yionx team has main resolute in our commitment to driving value for our clients and, of course, for our shareholders.

I'm very proud of our team and their accomplishments during this difficult period.

Our team is success.

I think is directly linked to our values: consistent principles.

one of onx's earliest principles has been to be a responsible Investor.

And I can remember that being right on the top of our agenda as early as one thousand nine hundred and eighty-four.

More recently, we've expanded on that foundation.

As we continue to evolve our ESG program.

That was really evident in our LP meetings.

Where our investors heard how we're creating more discipline.

With how we track and report our ESG efforts.

As well.

We're using ESC more effectively.

For example within our P platforms.

We see it as an opportunity to identify and to execute on value creation for our operating company.

And we've seen it in several instances already.

Another area where onx should been making real progress.

Is diversity and inclusion.

It's important.

That we continue to build on our commitment to increase.

Diversity.

andto prioritize inclusion.

Our objective is to create a program that's inclusive of all, on locations and all forms and aspects of diversity.

We have a DNI leadership Council in its co-chair by Bobby and chill, and it saving an active agenda.

Which includes advancing our engagement.

With external stakeover.

Shareholders, of course, are an important part of that engagement.

And we look forward to updating you to keep you abreast of our progress.

Let me stop there and I'll turn it over to Bobby for more on the quarter Bobby.

Thank you Jerry, and good morning everyone.

I had active start to 2002 with progress across all of our businesses.

Our invested capital per share was up 3% in the quarter.

Reflecting the resiliency and diversification of our portfolio.

We're making headway and expanding fee-generating assets under management, which I'll provide an update on shortly.

We updated our financial reporting this quarter to present fee-related and distributable earnings, part of our commitment to increase transparency and comparability with our alternative asset management peers.

Chris will focus more on the results in his remarks.

Most importantly, we remain committed to the strategy we presented at Investor Day.

I feel confident that we're on the right path to create value for our shareholders.

With that said, there is no question that we are operating in a challenging geopolitical, economic and market environment.

But that doesn't diminish the solid fundamentals of our business.

We believe we're in a stronger position today than we have been for years which is reinforced by the following.

one we have a great team and we're attracting the right people to expand our expertise and diversify our skills.

It might seem cliche to say that our success is driven by our people. What is true?

We have the people, the culture and the commitment to deliver.

Two.

Our private equity portfolio is well positioned, with good diversification.

Today we have active investments in 41 companies.

one of the highest numbers in our history.

Our companies managed effectively through a COVID-19 and are now executing on plans to drive future value.

Since before the pandemic, our private equity returns are more than double that of the most relevant mid-cap index.

Like all of you, we're closely watching a situation in Ukraine.

And our thoughts are with those directly impacted, including the family and friends of our onx team members.

The human impact is immense.

And the economic considerations are real.

From a portfolio perspective, we have a limited direct exposure.

We continue to monitor the broader secondary impacts but currently expect any exposure to be immaterial in the context of our overall portfolio.

Three.

onx has weathered many market cycles before making us preferred partner and tough market conditions.

Not many firnms can say they've been in business for four decades.

We bring that experience to bear every day in the decisions we make on behalf of our clients and shareholders.

This experience is important as we navigate the current inflationary environment.

Until now, we've been able to manage price press throughs and have felt limited direct impact across the PE portfolio.

This is a result of investing in businesses with brilient value propositions.

With pressures ongoing and the expectation that price increases may eventually impact demand, we remain cautious and continue to seek out additional ways to mitigate impacts.

Four.

Recent industry consolidation reinforces our understanding of the value of our asset manager.

Our CLO business is just one example.

As we saw at carlyisle's acquisition. Announcement of the c-bam portfolio of assets.

Acquirers are willing to pay a premium to acquire CLO businesses with strong earnings.

Ours is a leading CLO business which we will continue to grow.

We priced our twenty-fourth U's CLO last month and ranked sixteenth for CLO managers for global issuance in 2020. -two and.

But these types of transactions are important reminders of the value-on X shareholders already owned.

Finally we have operational momentum.

Over the past year we significantly enhanced our ESG program, accelerated progress in di.

And put an increased emphasis on employee engagement.

Although these are often viewed as behind the scenes' initiatives, they are critical to our ability to drive business and financial performance and attract and retain the best talent.

We are making progress in all areas of our planant.

The team is United and wanted to continue to grow our business and increase shareholder value.

Here are examples of how we're doing that.

As you heard from Jerry, we recently hosted our limited partner annual Investor meetings in Toronto.

Was an important opportunity to get people back together and engaged directly with LPs as we move forward with fundraising.

In PE. We continue to anticipate a first close for onyx partner six in late Q2 or early Q3.

On capiital formmly launch fundraising in the fall.

As I commented last quarter, it's a crowded fundraising environment.

Recently we heard more industry participants acknowledge how this is impacting fundraising time lines.

We remain confident in our own plans and our ability to grow fee-generating AUM through our PE platforms.

Over time, onx has succeed by seeing true to our investing DNA.

We invest in complexity and dig deeper to search out businesses with long-term resilient value, all in a disciplined way within our chosen verticals.

These messages continue to resonate with our LPs.

For the first time, the PE and credit Investor meeting were fully integrated, a clear indication of the one-onx approach becoming embedded in our culture.

Following the meeting we closed on a long-term credit investing partnership with Mercer.

It's a customized cross-platform solution allowing investments to be dynamically allocated by our team.

Mercer considered 50 firms in their process, choosing onx as one of his five partners.

The arrangement is for 165 million in fee generating AUM in 2020 -two.

With the opportunity to meaningfully grow the partnership in years to come.

This is a first of what we expect to be many BPO rions for clients.

Made possible by the breadth of the full credit business we are building.

As we told you at Investor Day, we're also exploring other new opportunities to add PE, generating a.

I'm pleased to share that we are forming a new platform focused on investing in transportation-related assets used for land air, marine and industrial applications.

The strategy will focus on investments involving hard assets with long lives, contractual cash flows and an element of inflation protection.

We think it will appeal to infrastructure and cash yield-oriented investors looking to rebalance into the physical economy.

To launch the fund, we brought on board westick, a former senior executive at bebam, a world leader and aircraft investing and asset management.

We know westwell and we're pleased to have him joined the onx team.

This initiative is very much aligned with our strategy of building out new businesses that leverage our sector knowledge and add value to our growing asset manager business.

We expect to officially launch the fund later this fall and we'll share more details with you. As Eric confirmed.

If I have a message for our shareholders today, it's a consistent one.

We have the right people, plan and foundation to execute on our strategies.

Over time, we will grow our asset management business and our NAV with the goal of increasing shareholder value.

We'll keep working to ensure that the price of onic shares reflect not only the full value of our investing capital, but also the inherent value of our future growth expectations.

With that, I'll hand it over to Chris for more, our Q1 performance.

Thanks Bobby, and good morning everyone.

Segment earnings in the quarter were 76 cents per share.

Included our 69 cents from our investing capital and seven cents from asset management.

Starting this quarter, the pro forma adjustment for fees on ononex capital is no longer reflected in our investing and asset management segment earnings.

We've adjusted prior year comparatives to be like-for-like on this basis.

This change is connected to our broader shift in focus to fee-related earnings, or FE, and distributable earnings as the primary measures for the asset management segment.

For the quarter. We had a fee-related loss of $15 million and distributable earnings of twenty-five million.

I'll dig into those numbers when we get there, but let's start with our investing results for the quarter.

ourpe portfolio was up 2%, very good considering the challenging and volatile marketting conditions in the quarter.

A large component of the return came from on-cap.

Driven by a mix of factors across the portfolio, including a number of companies with strong operating performance, real earnings and cash generated in the quarter.

These businesses did a terrific job managing inflationary pressures through price increases supported by strong end market demand.

We're also seeing strong demand for our Canadian-based businesses.

As the opening of the economy here catches up with the? U S.

How however as most of you would suspect.

Margin management is likely to be more challenging going forward.

onyx experienced positive contributions across most of its core PE verticals.

Industrials and health care both delivered strong returns in the quarter: nine percentand 7% respectively.

As with the case for the on-cap portfolio, these returns at onx partners were driven by operating performance.

With market factors having an overall negative impact on Q1 valuations, as you'd expect.

The negative return from the services vertical was attributable to the significant decrease in clliabatess trading price.

You'll recall that we've already returned two X our original investment in clarire 8, including a large secondary, just last year. That left us with about 30% of our original investment.

Despite the recent sell-off, clarirevate continues to be a great investment and we expect to see meaningful value generated from the recent lows.

Overall in the context of a difficult market backdrop, we're very pleased with our resilient and diversified PE portfolio.

Turning to our credit investments.

We experienced a modest loss in the quarter substantially all from CLO equity. A reflection of the risk-off markets that developed in Q1 and.

Of course, we focus on our CLO's long-term cash returns.

And in this respect the CLOs continue to perform, with onx receiving 19 million in regular quarterly distributions.

All told, our invest capital per share ended the quarter at $92 and 94 cents.

Returning 3% since year end.

That return includes the benefit of buying back some of our shares at a hefty discount.

Q1 represents our eighth consecutive positive quarter.

With investing capital per share returning 75% over those two years.

We're pleased with the investing results this quarter, with the PE portfolio of strong operating performance, managing to offset broad-based market weakness.

Now let's look at the asset management side of the business.

Our fee generating AUM was up 2% in the quarter.

The increase was driven by over $7 million of incremental cloum which importantly, required minimal incremental capital for monyx.

In addition, we priced our twenty-fourth U's CLO in April , which will add another four million to fee generating AUM, and secured the first commitment from the Mercer strategic partnership that Bobby described earlier.

We continue to expect consistent fee-generating AUM growth throughout the year in credit.

With increases of private equity ramping up over the second half of the year.

As you recall, our goal to grow fee generating AUM 15% this year is part of the five -year plan from Investor Day.

As we focus on raising capital to build onx's capacity to generate FRE and distributable earnings, let's turn to where we're at on those measures today.

As a quick reminder, the difference between our asset management segment, earnings and FRE.

Is the exclusion of carried interest from FRE.

Carry is reflected in distributable earnings on a realized basis, as you can see towards the bottom of the table.

In the quarter we had an FRE loss of $15 million, which included a loss of seven million from the asset management platforms directly.

An eight million of costs related to the public company and investing onx's balance sheet.

This compares to an frre loss of four million in Q1 last year.

The year-over-year change was driven by lower management fees at PE.

The lack of performance fees at credit, which is not a surprise given the market and our investment in an expanded credit team.

The decrease in PE fees was tied to the expiration of fee periods for op three and on-cap two late in two thousand and twenty-one.

The decrease in PE fees was tied to the expiration of fee periods for op three and on-cap two late in 2021 .

And the decreasing fee basis from realizations in fully invested funds.

We expect PE fees to continue to decline as we move towards final closings of op six and on-cap five in 2023, but expect a step function increase at that point.

Compensation expense in the credit business which, as a reminder, includes wealth management operations.

Reflects the fully annualized level associated with the team we built to ramp up AUM.

As credits AUM and underlying invested capital grow, we expect an unusually high percentage of the incremental management fees to fall to the bottom line.

By and large, our results are in line with where we expected to be at this stage of the Investor Day road map.

As we continue along that path, we also expect to exploit additional levers for growth that were not part of the five -year model.

A good early example is the transportation-focused platform body introduced.

Given our fundraising expectations.

The platform will make a positive contribution to FRE with its very first fundt.

And like any of our platforms, we expect to benefit from a growing series of successor funds.

I plan to come back to our five -year plan as part of the Q2 call in August to provide updates on our progress and midterm targets, especially for fee generating AUM.

Turning quickly to distributable earnings.

A relatively quiet quarter, for realizations resulted in 25 million of distributtor earnings.

We expect onx to consistently generate be in the coming years, which is an important foundation to our growth plan.

While realized carry interest is included in de on a mark-to-market basis. We generated $2 million of carry in Q1, compared to 96 million a year ago.

Given the broader market's weakness.

The year-over-year decline isn't a surprise.

However with $25 billion of carrye paying AUM, we expect carry to contribute meaningfully to shareholder value in the coming years.

While we're happy with our Q1 results in this challenging environment, we are reminded of the discipline and tenacity that has seen us through choppy periods before.

As Bobby mentioned, we're known as a partner for tougher markets.

And that's a reputation we plan to maintain.

That concludes our prepared remarks, So we'll be happy to take any questions.

Certainly Ladies and gentlemen, if you have a question at this time, Please P a star than one on your touchstone telephone. If your question has been answered and you'd like to remove yourself from the Q, please press the pound key.

Our first question comes from the line of Jeff quu from rvc capital markets. Your question, Please.

Good morning. Had a question on in terms of both on the deal pipeline and monetization, given what we've seen in the marts kind of within your portfolio, if there's anything that?

That you think you might be able to be able to monetize in the next or now, next year, and then also like it on the deal pipeline, how that might have changed in the past couple of months.

Jeff's Bobby, I'm going to hear from you that the, the new deal pipeline, I'd say, compared to 2021, is is a is slower. I wouldn't say it's meaningfully slower, but it's slower. On the motiization said, I CAn't get into details, but I would expect us to have some announcements over the coming a couple of quarters of a couple of realizations.

And areorry just on the deal pipeline. Is that because of what's going on in the markets and then also Q is for stuff that you're looking at- have there been kind of changed in expectation on price or prices still elevated?

Yeah I think I think those two things are actually correlated a bit. When you have near term volatility, like we've seen since the beginning of the year, you know people who were sellers had price expectations in their minds in December. When the cost of capital changes, interest rates rise, you geopolitical risks, bers may not be willing to pay today. What they're willing to pay decenumberber deps on the company to I can depends on the cash profile, depends on how much of these things are inflation of the things are impacting a given business. But you know, for certain businesses there's tends to be a pause in ods of volatility and we've seen a bit of that in the new deal pipeline again. Even with that, on the realization side, I expect us to to see a couple in the coming quarter, quarter or two because fact, the businesses that we looking at our realizations are less impacted by these types of things.

Yeah I think I think those two things are actually correlated a bit. When you have near term volatility, like we've seen since the beginning of the year, you know people who were sellers had price expectations in their minds in December . When the cost of capital changes, interest rates rise, you geopolitical risks, bers may not be willing to pay today. What they're willing to pay decenumberber deps on the company to I can depends on the cash profile, depends on how much of these things are inflation of the things are impacting a given business. But you know, for certain businesses there's tends to be a pause in ods of volatility and we've seen a bit of that in the new deal pipeline again. Even with that, on the realization side, I expect us to to see a couple in the coming quarter, quarter or two because fact, the businesses that we looking at our realizations are less impacted by these types of things.

Okay perfect thingss.

Thank you. Our next question comes in the line of Graham writing from TV securities. Your question, Please.

higood morning.

I guess just you mentioned that you had a meeting with all your LP investors regarding fundraising for X partners six just itbe some commentary answer and how you're feeling your confidence to, wards like the size and the timing of that potential fundraise, any changes to sort of where your had is at before you went into those meetings?

No.

So we again, we're expecting a first close in early Q3 or hopeful that that close will include, you know, several long term partners of O P that are sort of brand name L P of including ourselves, by the way, within that first close. But look, I said it last quarter and I think you've seen a lot of our competitors say this, arter it's a very crowded fund market, fund raising market. I expect the duration of the fundraised to be longer and it's been typical for prior funds. As an example, O P five was a seven month fundrais. I expect, you know I pect us to be fund raising well into the the first half of two thousand and twenty 3, particularly because a couple of our long term L P and said they don't have the capacity this year to to fund the yearre and maybe they want to be with us but they defer to be in sort of Q1 or early Q2 of next year. So I do expect it to be a longer process, I do expect it to be more difficult than prior fundraises but you know I do expect that you know we will be able to maintain many of our current partners and and other new partners including, you know, distributing our, our O P through Gluskin and potentially other retail channels on which we're actively exploing.

So we again, we're expecting a first close in early Q3 or hopeful that that close will include, you know, several long term partners of O P that are sort of brand name L P of including ourselves, by the way, within that first close. But look, I said it last quarter and I think you've seen a lot of our competitors say this, arter it's a very crowded fund market, fund raising market. I expect the duration of the fundraised to be longer and it's been typical for prior funds. As an example, O P five was a seven month fundrais. I expect, you know I pect us to be fund raising well into the the first half of 2020 3, particularly because a couple of our long term L P and said they don't have the capacity this year to to fund the yearre and maybe they want to be with us but they defer to be in sort of Q1 or early Q2 of next year. So I do expect it to be a longer process, I do expect it to be more difficult than prior fundraises but you know I do expect that you know we will be able to maintain many of our current partners and and other new partners including, you know, distributing our, our O P through Gluskin and potentially other retail channels on which we're actively exploing.

He Bobby. Just to add onto that. On the timing point, we're well positioned leading up to that first close in terms of having room to to do probably one good size investment left in O five and, you know, in terms of our expectations around that first clothese will will it'll be kind of seamless in terms of our ability to continue on investing at our normal deal size. The other thing I I think I mentioned on a prior call, but just to make the point again that ultimately, regardless of the timeline to the final clothes, from a management fee perspective, LP pay fees back to you know the first date we start investing from O six So know you'd like the fundraise to be shorter because it takes up less energy andunless time, the kind of from an economic and operational perspective it's sort of a bit of a non event.

ok understood, and then you know F Re was.

Negative this quarter. It sounds like it's going to continue to be that way until these private equity fees ramp up and also.

Fees on the credit side ramp up.

Reasonable to expect positive FRE in 2023 once that sort of catch-up occurs.

That you're talking about. Yeah, I think that would be a reasonable way to think about it Graham, and to your point, you know what we're seeing, we're going to see over the next 12 months or up to 18 months, is: one from a credit perspective. For the most part- and I think we've talked about this before- on these calls, fees are earned on invested capital and so there's a bit of a lag even between fundraising and fees on the credit side and then on the private equity side, although you know we ultimately get fees back to the effective date of op 6, from a gap perspective, you CAn't record those fees. You've actually got the commitments, So there will be, I think, if you think about our private equity business, between now and mid 2023, the probably be a pretty consistent and at some point, a pretty significant, you know- temporary decline in fees until we get to that final clothes. But Yeah, I think I agree with which everything you said in terms of expectations.

Okay great, and just to follow up on your comment there, on the credit side, you've been have it's pretty good momentum there in growing your fee generating credit. What your management fees have been going sideways over sort of past four or five quarters is that, because you're invested, capital has not really changed that much, even though you're FE generating. When is going up?

Yes I think that's a fair statement. There's also a bit of on- particularly in our MS business, much like private equity's- also the impact of realizations and distributions. The mss business is a bit more like private equity in that regard in terms of closed end funds and callable capital. So it's kind of those two things that play out,' say, in the credit business at the moment. But what you know, with good momentum, raising AUM, it's really kind of just a matter of time to get the revenue to catch up with the asset raising.

And that mass product is in market right now, looking for it to raise its next fund, which will be larger than last month.

Correct that's a great Thank you.

Scot, you might have your phone of MU.

Can you hear me?

Up Oh sorry I didn't. I didn't hear My name going to call UH So ry, but that good morning on. So just on the new UH fun vertical, the transportation, but I know it's very early but I do anticipate like a target raise of like onx partners or on all encapsusize or somewhere in between.

No we haven't. We haven't roundounded out of what we're going to target internally yet, but it'll be nowhere near an onx partners type size fund I would. I would say would be somewhere in the ONCAP size range get or take.

ok and then just in terms of your you know private equity marks this quarter and when I looked at your. Like all manager peers it was very similar can you remind. Us you know kind of marking process because some the companies that that came out you know kind of really delay at a couple of quarters as the public market in fact on the multiplees. So maybe an update just on kind of the private equity marks and kind of what went into it. This quarter sure you Yeah. Our process is a quarterly we process got. So we do the valuations that you see flowing through into our public reporting our March 30 first valuation the private equity side particularly on the large cap private equity side that makes up the vast majority of of the valbalance sheet exposure. We have an independent valuations team within finance that that leads that process obviously with lots of input from the portfolio companies and the investment teams that oversee them and ultimately the evaluations come forward into a evaluation committee and are reviewed and audited by our auditors. We have many different approaches to valuation depending on the company the industry it's peers and quite frankly depending on the the model or thesis under which we bought the company. So it's kind of hard to you know kind of describe one methodology but we do have a pretty even mix overall between the use of current market. Multiples that can include reference to the private market multiples that we see and more long term D C F models that ultimately as you know still depend upon a an exit multiple. So you know it is fresh. It does reflect you know the state of the markets at marks. ch 30 first 2020 two.

ok and this lastonestly just on the on cap performance. This quarter up 16% quarter quarter- was any kind of themes or speist investments, that bit performman it was. It was actually pretty widespread. The portfolio did well as a whole. I couldn't draw one name out of a hat at all to tell you that's where the value generation came from. iand I think it just reflects, you know, perhaps a little bit of caution at year end, but you know, but being proven out in Q1 where those teams and those companies just did a really great job from an operating perspective. The other thing to keep in mind is we're never going to follow the market directly right, because we do invest with a thesis, I don't know body, if you want to give a little color in terms of you know how we think of a value creation and West's role.

Yes no, but that's exactly So. Look, we have to ground the evaluations in numerics, D C's and in comparables every quarter. But to the extent that we're tracking against our underwriting plan in, the business is going well, other than the cost of capital or higher discount rate, which obviously have to to take into account for valuations. If we, if we're tracking better than we're expecting, that's often offsetting the higher cost of capital in the comparable analysis rate and- and that is it's important- we're doing a much better job with West in that team. You know, creane those value creation plans and having K P i- just a handful by a company to to really know what drives the business. So there's total transparency and if you do see a problem we're able to look backack it quickly, like we again, we were always all over these things. That you think we're a much more systematic in our approach to the data analytics and the K PI with West the team than than we have been pass to just part of continuous improvement.

Just to clarify. But just clarify, Bobby's talking about West pringle and his operations group, not West <expletive> in his transportation group.

Okay and I appreciate the Internet disclosure specifically related to the the credit performance this quarter. Thank you.

Happy to help.

Thank you.

And our next question is a follow-up on the line of Graham trying from T V securities. Your question, Please.

Yes I just wanted to ffollow up on that theme a little bit. In Q2 we've obviously seen a pretty material pull back here. In public equity markets we've seen a very, very material move higher in interest rates.

So it's reasonable to assume that that will be a factor in your sort of valuation process.

For your private equity investments. And then whatever is happening at the company level operationally.

That will sort of e. that will be another factor that could offset or could also have a big influence on.

You're your priimate agre performance. Yes, I think that's exactly right Graham, you. And what we hope to see quarter over quarter, regardless of whether the martssgoing up for the marketts going down, is as the teams execute on those value creation plans. What we typically see is our view of value narrowing relative to the comps. What we're often doing is markeking our company that a discount to public comps and larger comps while we are executing on a plan to deliver value and as we execute on that plan and improve margins or grow the business, create additional MOEs in the business from competition, we see narrowing of the of those discounts to multiple. So we do some. We do expect to see valuations for our businesses not to line up directly with the market, but Yeah, what's happening in the market is definitely a headwind to value creation in Q2.

Okay perfect, and then I apologize, I didn't. I didn't get all of the infolow. You mentioned this partnership with Mercer. Could I? Could you maybe just revisit the details on that comment?

Yes So the credit team frommed the a partnership with Mercer whereby our site of credit products will be put into a coingle fund and, within rules that we're creating with Mercer, our team will figure out how to allocate the credit products within that structure. It's a very- it's a very exciting new platform within credit and it's one that we're hoping to replicate with other Mercer taes in the world and, in particular, with Mercer, who's been a great partner so far to date. We expect, you know, the dollars that we're managing on their behalf to grow pretty meaningfully over the coming years.

ok great, that's just for Thank you.

Thanks PR.

Thank you. This does conclude the question-and-answer session at today's program. I'd like to have the program back to MR Jerry chwartz for any further remarks.

Thanks operator, and thanks to everybody for participating today.

We believe me.

Appreciate deeply your continued support and we look forward to seeing you speaking with you again in August .

In the meantime, I wish you all the best.

As we head into the summer months and let's enjoy some of this good spring weather we're be seeing today.

Thank you ready.

Thank you, Ladies and gentlemen, for your participation in today's conference. This does.

Include the program. You may now disconnect. Good day.

And I.

Please.

No.

Welcome to Onex's first quarter 2022 conference call and webcast.

During the presentation, all participants will be in a listen-only mode.

Afterwards, we will conduct the question-and-answer session with prequalified analysts.

At that time. If you have a question, please press star one on your telephone key pad.

If any time during the conference you need to reach the operator, please press star than zero.

As a reminder, this conference is being recorded.

I will now turn the conference over to Jo ommonick, managing Director, shareholder Relations and Communications at onx. Please go ahead.

Thank you, good morning everyone, and thanks for joining us. We're broadcasting this call on our website hosting. On the call today are Jerry schwartz, our Founder and CEO , Bobby La block, onx's President and Head of onx partners, and Chris Kevin, our Chief Financial Officer. Earlier this morning, we issued our first quarter 2022 press release, mdna and consolidated financial statements, which are available on the shareholder section of our website and have also been filed on SEDAR. Our supplemental information package is also available on our website.

With that, I'll turn the call over to Jerry.

Thanks je.

Good morning everybody and thanks for being with us today.

I'm pleased to report. I'm very happy to report that onyx had a solid start to the year.

With continued progress in our plan to grow the business and increase shareholder value.

Our investing capital per share, or as we used to call up avv per share.

Grew for the eighth straight quarter, ending a? U's $92 and 94 cents.

Up 3% in the quarter and 19% over the last 12 months.

Bobby and Chris are going to provide more detail ababoutve those results.

Recently we held our limited partner annual meetings in Toronto. They were really robust, well attended and informative.

And that was the first time in three years, since our last person in-person event.

It was really nice to see so many of our long-standing LPs.

Is well omain new ones.

It was also a time to reflect on how much has happened since the pandemic.

And how much challenge and uncertainty we've all managed through.

And I might add.

Continue to endure, to some extent lesser, but to some extent.

Through it all, yionx team has made resolute in our commitment to driving value for our clients and, of course, for our shareholders.

I'm very proud of our team and their accomplishments during this difficult period.

Our team is success.

I think is directly linked to our values: consistent principles.

one of onx's earliest principles has been to be a responsible Investor.

And I can remember that being right on the top of our agenda as early as one thousand nine hundred and eighty-four.

More recently, we've expanded on that foundation.

As we continue to evolve our ESG program.

That was really evident in our LP meetings.

Where our investors heard how we're creating more discipline.

With how we track and report our ESG efforts.

As well.

We're using ESC more effectively.

For example within our P platforms.

We see it as an opportunity to identify and to execute on value creation for our operating company.

And we've seen it in several instances already.

Another area where I should be making real progress.

Is diversity and inclusion.

It's important.

That we continue to build on our commitment to increase.

Diversity.

andto prioritize inclusion.

Our objective is to create a program that's inclusive of all, on locations and all forms and aspects of diversity.

We have a DNI leadership Council in its, co-chairred by Bobby and chill, and it's saving an active agenda.

Which includes advancing our engagement.

With external stakeover.

Shareholders, of course, are an important part of that engagement.

And we look forward to updating you to keep you abreast of our progress.

Let me stop there and I'll turn it over to Bobby for more on the quarter Bobby.

Thank you Jerry, and good morning everyone.

onest had active start to 2002 with progress across all of our businesses.

Our invested capital per share was up 3% in the quarter.

Reflecting the resiliency and diversification of our portfolio.

We're making headway and expanding fee-generating assets under management, which I'll provide an update on shortly.

Chris will focus more on the results in his remarks.

Most importantly, we remain committed to the strategy we presented at Investor Day.

I feel confident that we're on the right path to create value for our shareholders.

With that said, there is no question that we are operating in a challenging geopolitical, economic and market environment.

But that doesn't diminish the solid fundamentals of our business.

We believe we're in a stronger position today than we have been for years which is reinforced by the following.

one we have a great team and we're attracting the right people to expand our expertise and diversify our skills.

It might seems cliche to say that our success is driven by our people. What is true?

We have the people, the culture and the commitment to deliver.

Two.

Our private equity portfolio is well positioned, with good diversification.

Today we have active investments in 41 companies.

one of the highest numbers in our history.

Our companies managed effectively through a COVID-19 and are now executing on plans to drive future value.

Since before the pandemic, our private equity returns are more than double that of the most relevant mid-cap index.

Like all of you, we're closely watching a situation in Ukraine.

And our thoughts are with those directly impacted, including the family and friends of our onx team members.

The human impact is immense.

And the economic considerations are real.

From a portfolio perspective, we have a limited direct exposure.

We continue to monitor the broader secondary impacts but currently expect any exposure to be immaterial in the context of our overall portfolio.

Three.

onx has weathered many market cycles before making us preferred partner and tough market conditions.

Not many firnms can say they've been in business for four decades.

We bring that experience to bear every day in the decisions we make on behalf of our clients and shareholders.

This experience is important as we navigate the current inflationary environment.

Until now, we've been able to manage price press throughs and have felt limited direct impact across the PE portfolio.

This is a result of investing in businesses with brilient value propositions.

With pressures ongoing and the expectation that price increases may eventually impact demand, we remain cautious and continue to seek out additional ways to mitigate impacts.

Four.

Recent industry consolidation reinforces our understanding of the value of our asset manager.

Our CLO business is just one example.

As we solidat carlyisle's acquisition. Announcement of the c-bam portfolio of assets.

Acquirers are willing to pay a premium to acquire CLO businesses with strong earnings.

Ours is a leading CLO business which we will continue to grow.

We priced our twenty-fourth U's CLO last month and ranked sixteenth for CLO managers for global issuance in 2020. -two and.

But these types of transactions are important reminders of the value-on X shareholders already owned.

Finally we have operational momentum.

Over the past year we significantly enhanced our ESG program, accelerated progress in di.

And put an increased emphasis on employee engagement.

Although these are often viewed as behind the scenes' initiatives, they are critical to our ability to drive business and financial performance and attract and retain the best talent.

We are making progress in all areas of our planant.

The team is United and wanted to continue to grow our business and increase shareholder value.

Here are examples of how we're doing that.

As you heard from Jerry, we recently hosted our limited partner annual Investor meetings in Toronto.

Was an important opportunity to get people back together and engaged directly with LPs as we move forward with fundraising.

In PE. We continue to anticipate a first close for onyx partner six in late Q2 or early Q3.

On capital formmally launch fundraising in the fall.

As I commented last quarter, it's a crowded fundraising environment.

Recently we heard more industry participants acknowledge how this is impacting fundraising time lines.

We remain confident in our own plans and our ability to grow fee-generating AUM through our PE platforms.

Over time, onx has succeed by seeing true to our investing DNA.

We invest in complexity and dig deeper to search out businesses with long-term resilient value, all in a disciplined way within our chosen verticals.

These messages continue to resonate with our LPs.

For the first time, the PE and credit Investor meeting were fully integrated, a clear indication of the one-onx approach becoming embedded in our culture.

Following the meeting we closed on a long-term credit investing partnership with Mercer.

It's a customized cross-platform solution allowing investments to be dynamically allocated by our team.

Mercer considered 50 firms in their process, choosing onx as one of his five partners.

The arrangement is for 165 million in fee generating auum in 2020 -two and.

With the opportunity to meaningfully grow the partnership in years to come.

This is a first of what we expect to be many bespoke rasions for clients.

Made possible by the breadth of the full credit business we are building.

As we told you at Investor Day, we're also exploring other new opportunities to add p-generating a.