Q1 2024 CaliberCos Inc Earnings Call

JL: Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the Caliber First Call 24 earnings call. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is jail and that'll be a conference operator today at this time I would like to welcome everyone to the calibers.

JL: <unk> 24 earnings call.

JL: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

JL: 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. I would now like to turn the conference over to Lisa Fortuna of Nuestra Relations. You may begin.

Lisa Fortuna: We'd like to ask a question during this time.

Lisa Fortuna: Star followed by the number one on your telephone keypad.

Lisa Fortuna: If you would like to withdraw your question Press Star one again.

Speaker Change: Now I'd like to turn the conference over to Alicia for Ciena of Investor Relations you may begin.

Lisa Fortuna: Good afternoon, everyone. Welcome to Caliber's first quarter 2024 financial results conference call. With me today are Chris Loeffler, Chief Executive Officer and Co-Founder, and Jade Leong, Chief Financial Officer, at Caliber. Please note that we have a quarterly earnings presentation, which will serve as a supplement to today's prepared remarks. You can access the presentation in the investor relations section of our website at www.caliberco.com. After management's commentary, we will open the call for questions.

Lisa Fortuna: Good afternoon, everyone welcome to calibers first quarter 2024 financial results Conference call.

Speaker Change: With me today are Chris Lafleur, Chief Executive Officer, and co founder and James Liang Chief Financial Officer of caliber.

Lisa Fortuna: Please note that we have a quarterly earnings presentation, which will serve as a supplement to today's prepared remarks, you can access the presentation on the Investor Relations section of our website at Www Dot caliber co dot com.

Lisa Fortuna: After management's commentary, we will open the call for questions.

Lisa Fortuna: As a reminder, the information discussed today may include forward looking statements that involve risks and uncertainties.

Lisa Fortuna: Words like believe expect anticipate refer to our best estimates as of this call and there can be no assurance that these will actually take place.

Lisa Fortuna: So our actual figures could differ significantly from these statements.

Lisa Fortuna: Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission.

Lisa Fortuna: As a reminder, the information discussed today may include forward-looking statements that involve risks and uncertainty. Words like believe, expect, and anticipate refer to our best estimates as of this call, and there can be no assurances that these will actually take place, or actual figures could differ significantly from these statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Chris. Please go ahead.

Chris Loeffler: It is now my pleasure to turn the call over to Chris.

Chris: These go ahead.

Chris Loeffler: Thank you, Lisa, and thank you to everyone joining the call today. Since we just reported our fourth quarter and full year results for 2023 a few weeks ago, I thought I'd keep my prepared remarks as brief as possible, providing an update on fundraising and transaction activity, our first quarter 2024 performance, the deconsolidation of six of our hotel assets, as well as our cost reduction initiatives that we spoke about in mid-April. The goal, of course, being to bring Caliber to profitability as soon as possible. Let me begin with some observations about the current fundraising environment.

Chris: Thank you Lisa and thank you to everyone joining on the call today since we just reported our fourth quarter and full year results for 2023, a few weeks ago I thought I'd keep my prepared remarks as brief as possible.

Chris Loeffler: Regarding an update on fund raising and transaction activity, our first quarter 'twenty 'twenty four performance.

Chris Loeffler: The deconsolidation of six of our hotel assets as well as our cost reduction initiatives that we spoke about in mid April.

Chris Loeffler: The goal of course being to bring caliber to profitability as soon as possible.

Chris Loeffler: Let me begin with some observations about the current fundraising environment.

Chris Loeffler: As I mentioned in our last call, we are stepping up our activities in fundraising despite the ongoing muted conditions that we're finding in the market. We are focusing on things within our control to enhance our fundraising capabilities and move into new target areas. These include building products that are attractive to registered investment advisors and institutions, and building and supporting our wholesale platform to raise capital through registered investment advisors and broker dealers.

Chris Loeffler: As I mentioned in our last call we are stepping up our activities in fundraising and despite the ongoing muted conditions that we're finding in the market.

Chris Loeffler: We are focusing on things within our control to enhance our fundraising capabilities and move into new target areas.

Chris Loeffler: These include.

Chris Loeffler: Building products that are attractive to registered investment advisors and institutions.

Chris Loeffler: Building and supporting our wholesale platform to raise capital through registered investment advisors and broker dealers.

Chris Loeffler: Formerly, engaging with family office investors to grow our family office direct channel; issuing institutional equity offerings for the Caliber Hospitality Trust or CHT in both the equity and debt markets; and directly engaging with new high-net-worth individuals and ultra-high-net-worth individuals via low-cost live and digital events. And transforming our digital marketing platform with new talent and strategies to reduce our marketing costs while increasing lead generation. We're confident that a more diversified and fundraising infrastructure will support our long-term goal.

Chris Loeffler: Formally engaging with family office investors to grow our family office direct channel.

Chris Loeffler: Issuing institutional equity offerings for the caliber hospitality trust or C. H T in both the equity and debt markets.

Chris Loeffler: Directly engaging with new high net worth individuals and ultra high net worth individuals via low cost live and digital events.

Chris Loeffler: And transforming our digital marketing platform with new talent and strategies to reduce our marketing costs, while increasing lead generation.

Chris Loeffler: We're confident in a more diversified and fund raising infrastructure will support our long term goals.

Chris Loeffler: Furthermore, we're now gaining improved visibility into increasing fundraising activity and pipeline levels. For example, in wholesale, to date, we have signed 26 selling agreements with regional broker-dealers and registered investment advisors for investments in company-sponsored products. In total,

Chris Loeffler: Furthermore, we're now gaining improved visibility to increasing fundraising activity in pipeline levels.

Chris Loeffler: For example in wholesale to date, we have signed 26 selling agreements with regional broker dealers and registered investment advisors for investments in company sponsored products in total these.

Chris Loeffler: These partners have approximately 380 representatives, representing 3.4 billion in accessible AUS. It generally takes 3-6 months to build momentum in this channel once the selling agreement has been executed, and we are now starting to see the initial dollars coming in. We expect progress in the channel to accelerate this year as it has driven much of the recent growth of our fundraising pipeline. Additionally, in our family office direct channel, we recently doubled the committed capital to CHT via a $10 million equity commitment from qualified investors.

Chris Loeffler: These partners have approximately eight 380 representatives, representing $3 4 billion of accessible.

Chris Loeffler: It generally takes three to six months to build momentum in this channel. Once a signed agreement has been executed and we are now starting to see the initial dollars coming in.

Chris Loeffler: We expect progress in the channel to accelerate this year as it has driven much of the recent growth of our fundraising pipeline.

Chris Loeffler: Additionally, in our family office direct channel, we recently doubled the committed capital to CH T. The $10 million equity commitment from qualified investors. This capital continues momentum for CHP, which we expect will allow us to close our pipeline of contributed assets, while recovering some of the capital that caliber had invest.

Chris Loeffler: This capital continues momentum for CHT, which we expect will allow us to close our pipeline of contributed assets while recovering some of the capital that Caliber had invested into CHT to launch the investment strategy in 2023. We have also made meaningful progress in the past few months on our asset. On April 29, 2024, we announced the sale of areas B and C of the ridge development in Colorado, each approximately 20-acre parcels of land in Johnstown for an aggregate of about $12.3 million.

Chris Loeffler: And the CH T to launch the investment strategy in 2023.

Chris Loeffler: We've also made meaningful progress in the past few months on our assets.

Chris Loeffler: On April 29th 2024, we announced the sale of areas D and C of the ridge development in Colorado, each approximately 20 acre parcels of land in Johnstown for an aggregate of about $12 3 million.

Chris Loeffler: Earlier this week, we announced the sale of another 50 acre parcel of land in Johnstown for another $7.7 million, which was purchased in 2021 by a Caliber-sponsored single asset syndication, the Encore Funco LLC. This latest transaction was the fourth asset sale in northern Colorado by Caliber-sponsored entities since the end of 2023, bringing the total acreage sold to approximately $170,000 for a total proceeds of nearly $28 million. Given the current industry conditions and low transaction volume, these profitable transactions serve as further proof that Caliber is investing in the right markets, which is allowing us to help investors make money across all market cycles.

Chris Loeffler: Earlier this week, we announced the sale of approximately 50 acre parcel of land in Johnstown for another $7 7 million, which was purchased in 2021 by a caliber sponsored single assets indications the oncor fun co LLC.

Chris Loeffler: This latest transaction was the fourth asset sale in northern Colorado by caliber sponsored entities since the end of 2023, bringing the total acreage sold to approximately 174 for a total proceeds of nearly $28 million.

Chris Loeffler: Given the current industry conditions and low transaction volume these profitable transactions serve as further proof that caliber is investing in the right markets, which is allowing us to help investors make money across all market cycles. Additionally.

Chris Loeffler: Additionally, the impact of some of these sales includes potential performance fees for Caliber, as the sales are captured within the underlying partnerships that Caliber manages. However, in some cases, the performance fees will not be realized by Caliber until the partnerships complete a full sale of all the underlying land. The funding of Phase 1 of our SP10 project, which is the conversion of an existing Phoenix-based hotel to apartments, initiates the turnaround of an asset that was negatively affected by the COVID pandemic.

Chris Loeffler: Additionally, the impact of some of these sales includes potential performance fees for caliber as the sales are captured within the underlying partnerships that caliber managers and.

Chris Loeffler: In some cases the performance fees will not be realized until by caliber until the partnership's complete a full sale of all the underlying land.

Chris Loeffler: The funding of phase one of our S. P 10 project, which is the conversion of an existing Phoenix based hotel to apartments initiate the turnaround of an asset that was negatively affected by the COVID-19 pandemic and capitalizing our new construction loan caliber paid off an existing $11 million loan, which was passed its original maturity and combined with new investors.

Chris Loeffler: In capitalizing a new construction loan, Caliber paid off an existing $11 million loan, which was past its original maturity, and, combined with new investor equity, has fully capitalized the conversion of the hotel to apartments. This demonstrates our unwavering dedication to find a path forward for each of our assets and to protect our investors' capital to the best of our ability. I look forward to seeing this plan fully executed over the coming three to five years and including the SP10 project in Caliber's track record as a successful turnaround story.

Chris Loeffler: He is fully capitalize the conversion of the hotel to apartments.

Chris Loeffler: This demonstrates our unwavering dedication to find a path forward for each of our assets and to protect our investors' capital to the best of our ability.

Chris Loeffler: I look forward to seeing this plan fully executed over the coming three years to five years, and including ESP 10 project and calibers track record as a successful turnaround story.

Chris Loeffler: Turning to the deconsolidation, as we alluded to in our recent full year 2023 earnings call, Caliber has been working diligently with our internal team and our auditors at Deloitte to evaluate the presentation of our financial information. At the end of 2023, we changed our reporting segments to reflect a single segment.

Chris Loeffler: Turning to the deconsolidation as we alluded to in our recent full year 2023 earnings call.

Chris Loeffler: Caliber has been working diligently with our internal team and our auditors Deloitte to evaluate the presentation of our financial information.

Chris Loeffler: At the end of 2023, we changed our reporting segments to reflect the single segment presentation. We believe matches, our current view of the business and simplifies our financial reporting.

Chris Loeffler: Presentation, we believe, matches our current view of the business and simplifies our financial reporting. As of March 7th, 2024, after completing the seventh hotel contribution to CHT, we concluded that Caliber no longer needed to consolidate six hotels we had consolidated in 2023. It's important to note that the change excludes hotel results from our Q1 2024 financial information, which was a primary driver of the year-over-year decline in our revenues. For those of you who may not enjoy technical accounting, I'll share that the consolidation of an asset is typically done when an asset management business, like Caliber, controls an asset, has a sizable economic interest in that asset, and may provide some form of loan guarantee.

Chris Loeffler: The effect of that consolidation is that we bring the financial results of the asset itself into Caliber's financial results, including the debt on that asset's balance sheet, and we often eliminate other financial results, such as the fees that we earn from managing that asset, from the presentation of Caliber's results. This influences our income statement and our balance sheet, and it may make it appear, for example, that Caliber has debt inside the public company that it is not actually the borrower for. Why am I spending so much time on this topic?

Chris Loeffler: As of March 7th 2024, after completing the seventh hotel contribution to C. H T. We concluded that caliber is.

Chris Loeffler: No longer needed to consolidate six hotels, we had consolidated in 2023.

Chris Loeffler: It is important to note that the change.

Chris Loeffler: Excludes hotel results from our.

Chris Loeffler: Q1, 2024 financial information, which was a primary driver of the year over year decline in our revenues.

Chris Loeffler: For those of you who may not enjoy technical accounting I'll share that the consolidation of an asset is typically done when an asset management business like caliber controls and asset has a sizable economic interest in that asset and may provide some form of loan guarantees.

Chris Loeffler: The effect of that consolidation is that we bring the financial results of the asset itself into calibers financial results, including the debt on that assets balance sheet, and we often eliminate other financial results such as the fees that we earn managing that asset from the presentation of calibers results.

Chris Loeffler: This influences our income statement and our balance sheet and it may make it appear for example that caliber has that inside the public company that is not it is not actually the borrower for.

Chris Loeffler: I think it's a change in the current period that creates a lack of comparability to the prior period, and we want to make sure investors understand this lack of comparability. Going forward, this change will continue to affect period over period comparability, and Caliber will seek to provide investors with an understanding of what our prior history would look like on a comparison basis, excluding the deconsolidated assets. Importantly, we expect this deconsolidation to help investors better understand our balance sheet.

Chris Loeffler: Why am I spending so much time on the topic I think because it is a change in the current period that creates a lack of comparability to the prior period and we want to make sure investors understand this lack of comparability.

Chris Loeffler: Going forward. This chain change will continue to affect period over period comparability.

Chris Loeffler: Caliber will seek to provide investors with an understanding of what our prior history would look like on a comparison basis, excluding the deconsolidation assets.

Chris Loeffler: Importantly, we expect this deconsolidation to help investors better understand our balance sheet.

Chris Loeffler: As an example, the change was a primary contributor to the $98 million reduction in our assets from $299 million in Q1 2023 to $201 million in Q1 2024, as well as the reduction in our liabilities by $118 million from $233 million in Q1 2023 to $115 million in Q1 2024. Caliber will continue to take a critical eye to the structure of each of its investments and funds, and we will continue to evaluate opportunities to enhance transparency in our financial presentation.

Chris Loeffler: As an example, the change was a primary contributor to the $98 million reduction of our assets from $299 million in Q1 2023.

Chris Loeffler: The $201 million in Q1 of 2024 as.

Chris Loeffler: As well as the reduction in our liabilities by $118 million from $233 million in Q1, 2000 $23 million to $115 million in Q1 of 2024.

Chris Loeffler: Caliber will continue to take a critical eye to the structure of each of its investments in funds and we will continue to evaluate opportunities to enhance transparency in our financial presentation.

Chris Loeffler: Turning to our Q1 2024 results, I'm sure you all had a moment to read our earnings release, and Jade will go through the quarter in some detail. Having said that, I wanted to highlight a few things that I think are notable.

Chris Loeffler: Turning to our Q1 2024 results I'm sure you all had a moment to read our earnings release and Jay will go through the quarter in some detail.

Chris Loeffler: Having said that I wanted to highlight a few things that I think are notable the first is that caliber continues to see positive year over year improvement in asset management revenues, a key focus of the management team.

Chris Loeffler: The first is that Caliber continues to see positive year-over-year improvement in asset management revenues, a key focus of the management team. This is an important source of stable recurring revenue. Second, our platform results and net loss attributable to Caliber primarily reflect the increase in our year-over-year expenses that we've previously discussed and the strong performance allocations of $2.5 million that we earned in Q1 of 2023, which did not repeat in Q1 of 2024.

Chris Loeffler: This is an important source of stable recurring revenues.

Chris Loeffler: Second our platform results and net loss attributable to caliber primarily reflect the increase in our year over year expenses that we've previously discussed and the strong performance allocations of two and a half million dollars that we earned in Q1 of 2023, which did not repeat in Q1 of 2024.

Chris Loeffler: As we mentioned in our year-end call three weeks ago, we initiated a review of our cost structure to evaluate potential reductions that would better reflect current market dynamics. The entire Caliber management team is focused on a single objective, consistent profitable growth. We intend to achieve profitability as soon as possible.

Chris Loeffler: As we mentioned in our year end call three weeks ago, we initiated a review of our cost structure to evaluate potential reductions that would better reflect current market dynamics.

Chris Loeffler: The entire caliber management team is focused on a single objective consistent profitable growth.

Chris Loeffler: We intend to achieve profitability as soon as possible.

Chris Loeffler: With this objective in mind, we have identified expense savings of approximately $6 million on an annualized basis, which puts us on a path to return to annual operating costs of approximately $15 million. We have already started to implement these measures, beginning with significant reductions in non-payroll operating costs, where we expect to achieve an annualized savings of approximately $2.5 million compared to 2023. We expect to realize one and a half million in this fiscal year 2024 and the remainder in 2025.

Chris Loeffler: With this objective in mind, we have identified expense savings of approximately $6 million on an annualized basis.

Chris Loeffler: Which puts us on a path to return to annual operating costs of approximately $15 million.

Chris Loeffler: We have already started to implement these measures beginning with significant reductions in non payroll operating costs, where we expect to achieve an annualized savings of approximately $2 5 million compared to 2023.

Chris Loeffler: We expect to realize $1 5 million in this fiscal 2024 and the remainder in 2025.

Chris Loeffler: In addition, we have reduced payroll expense by $4 million on an annualized basis through a combination of attrition and a reduction in force, which will partially offset that significant increase we experienced in 2023. We expect to achieve $2 million in annualized savings in 2024, with the full $4 million to be realized in 2025. These actions have been difficult, and we don't take these decisions lightly.

Chris Loeffler: In addition, we have reduced payroll expense by $4 million on an annualized basis through a combination of attrition and a reduction in force.

Chris Loeffler: Which will partially upset offset that significant increase we experienced in 2023.

Chris Loeffler: We expect to achieve $2 million in annualized savings in 2024 with the full $4 million to be realized in 2025.

Chris Loeffler: These actions have been difficult and we don't take these decisions lightly.

Jade Leong: However, we believe that they're necessary to return Caliber to profitability and ensure that our business has a strong foundation for future growth and success. We remain confident in Caliber's medium and long-term growth prospects and are acting to ensure that we can achieve our stated goals. I'll now turn the call over to Jade, who will take you through our financials in greater detail. Thank you, Chris. Good afternoon, everyone.

Chris Loeffler: However, we believe that they are necessary to return caliber to profitability and ensure that our business has a strong foundation for future growth and success.

Jade Leong: We remain confident in calibers medium and long term growth prospects and are acting to ensure that we can achieve our stated goals.

Jade Leong: I'll now turn the call over to Jay who will take you through our financials in greater detail.

Jade Leong: Okay.

Jade Leong: We appreciate you joining us today. As we mentioned on our last call, with the culmination of our work on CHT and the contribution of the first third-party hotel to the portfolio, we reassessed our consolidation conclusions and determined that we are no longer required to consolidate Caliber Hospitality LP and the underlying hotels beginning this quarter. We believe this simplifies our financial statements by removing most of the hotel performance that has historically been included in our consolidated results in accordance with GAAP. It will, however, make our comparative financial information less meaningful since the prior year results will still continue to include the historical performance of these hotel assets.

Jade Leong: Okay.

Jade Leong: Thank you Chris Good afternoon, everyone. We appreciate you joining us today.

Jade Leong: As we mentioned on our last call with the culmination of our work on CH T and the contribution of the first third party hotel to the portfolio.

Jade Leong: We reassessed our consolidation conclusions and determined that we are no longer required to consolidate caliber hospitality LP in the underlying hotels beginning this quarter.

Jade Leong: We believe this simplifies our financial statements by removing most of the hotel performance that has historically been included in our consolidated results in accordance with GAAP.

Jade Leong: It will however, make our comparative financial information less meaningful since the prior year results. We will still continue to include the historical performance of this hotel assets.

Jade Leong: So with that background, let's go through our results for the first quarter of 2024. First quarter total consolidated revenue was $23 million, a decrease of 22.3% versus the same period a year ago, primarily due to a decrease in consolidated fund revenues, which was primarily due to the deconsolidation of Caliber Hospitality and a decrease in performance allocation revenue, which was earned related to the contribution of the hospitality assets to Caliber Hospitality in March 2023.

Jade Leong: So with that background, let's go through our results for the first quarter 2024.

Jade Leong: Consolidated expenses for the first quarter declined by 5.9% to $27.3 million, due to a decrease in consolidated fund expenses primarily driven by the deconsolidation of Caliber Hospitality again. Platform revenue decreased 25.6% to $4.7 million due to lower performance allocation, breaking down our platform revenue a bit further. Fund management fees increased by 11% to $2.6 million, and this was related to the change in fee structure effective upon the contribution of the hospitality assets to Caliber Hospitality LP in March 2023.

Jade Leong: First quarter total consolidated revenue was $23 million a decrease of 22, 3% versus the same period a year ago, primarily due to a decrease in consolidated fund revenues, which was primarily due to the deconsolidation of calendar hospitality.

Jade Leong: And a decrease in performance allocation revenue, which was earn which was earned related to the contribution of the hospitality assets to caliber hospitality in March 2023.

Jade Leong: Consolidated expenses for the first quarter declined by five 9% to $27 3 million.

Jade Leong: Due to a decrease in consolidated fund expenses, primarily driven by the deconsolidation of caliber hospitality again.

Jade Leong: Platform revenue decreased 25, 6% $4 7 million due to lower performance allocations.

Jade Leong: Breaking down our platform revenue a bit further fund management fees increased by 11% to $2 6 million.

Jade Leong: And was related to the change in fee structure effective upon the contribution of the hospitality assets to caliber hospitality LP in March 2023 Fund management fees were based on one to one 5% of the Unreturned capital contributions in each hospitality fund during the three months ended.

Jade Leong: Fund management fees were based on 1 to 1.5% of the unreturned capital contributions in each hospitality fund. During the three months ended March 31, 2024, the company earned a fund management fee of 0.7% of the Caliber Hospitality Trust's enterprise value. Financing fees decreased from $300,000 to $100,000 due to loan placement fees earned for executing two loans on behalf of our funds during the first quarter of 2023, whereas we did not earn such fees this quarter. Development and construction fees increased by 73%, and this was primarily due to fees earned from completing pre-development work for three projects during the quarter.

Jade Leong: March 31, 2024, the company earned a fund management fee of.

Jade Leong: 7% of the caliber hospitality trusts enterprise value.

Jade Leong: Financing fees decreased from.

Jade Leong: <unk> three 300000 to 100000 due to loan placement fees earned for.

Jade Leong: Turning to loans on behalf of our funds during the first quarter of 2023, whereas we did not earn such fees this quarter.

Jade Leong: Development and construction fees increased by 73% and is primarily due to fees earned from completing pre development work for three projects during the quarter.

Jade Leong: Performance allocations of $200,000 were related to the sale of land located in Johnstown, Colorado. In the same period last year, performance allocations were $2.4 million, which represented the carried interest earned related to the contribution of the hospitality assets to Caliber Hospitality. Total expenses in Q1 were $7.7 million, an increase of 19.7% compared to Q1 last year, primarily due to an increase in operating costs from additional payroll associated with increased headcount and the cost of human capital driven by our growth initiatives, as we've spoken about earlier.

Jade Leong: Performance allocations of 200000 were related to the sale of land located in Johnstown, Colorado and.

Jade Leong: In the same period last year performance allocations were $2 4 million, which represented the carried interest earned related to the contribution of the hospitality assets to caliber hospitality.

Jade Leong: Total expenses in Q1 were $7 7 million, an increase of 19, 7% compared to Q1 last year, primarily due to an increase in operating costs from additional payroll associated with increased head count and cost of human capital driven by our growth initiatives as we spoken about earlier.

Jade Leong: We also recorded an increase in depreciation and amortization expenses primarily due to the acquisition of our headquarters and our office building during the quarter. Total managed capital increased from $438 million to $454 million from December 31, 2023 to March 31, 2024. As a reminder, managed capital is defined as the total capital raised from investors in our company or our funds at any point in time, excluding common stock in CWD.

Jade Leong: We also recorded an increase in depreciation and amortization expenses, primarily due to the acquisition of our headquarters and our office building during the during the quarter.

Jade Leong: Total managed capital increase from 438 million to 454 million from December 31, 2023 to March 31 2024.

Jade Leong: As a reminder, managed capital is defined as the as the total capital raised from investors in our company or our funds at any point in time, excluding common stock.

Jade Leong: CWT.

Jade Leong: We use this information to monitor, among other things, the amount of preferred return that would be paid at the time of a distribution and the potential to earn a performance fee over and above the preferred return at the time of a distribution. Our fund management fees are based on a percentage of managed capital or a percentage of assets under management, and monitoring the change and composition of managed capital provides relevant data points for Caliber management to further calculate and predict future earnings.

Jade Leong: We use this information to monitor among other things the amount of preferred return that would be paid at the time of a distribution and the potential to earn a performance fee over and above the preferred return at the time of the distribution.

Jade Leong: Our fund management fees are based on our percentage of managed capital or a percentage of assets under management and monitoring the change in composition of managed capital provides relevant data points for caliber management to further calculate and predict future earnings.

Jade Leong: For the first quarter of 2024, net loss attributed to Caliber, which excludes net loss attributable to non-controlling interest, was $3.8 million, or $0.18 per diluted share. This compares to a net loss attributed to Caliber of $1.2 million, or $0.07 per diluted share, in the same period a year ago. Caliber's adjusted EBITDA loss for the first quarter was $1.7 million compared to adjusted EBITDA of $1 million during the same period a year ago, primarily due to a decrease in total revenue of $1.6 million and an increase in operating costs of $1 million, which was related to an increase in payroll. Interest expense in the first quarter was $1.3 million compared to $800,000 in the year-ago period.

Jade Leong: For the first quarter of 2024 net loss attributed to caliber, which excludes net loss attributable to Noncontrolling interest was $3 8 million or <unk> 18 per diluted share. This compares to a net loss attributed to caliber of $1 2 million or <unk> <unk> per diluted share in the same period a year ago.

Jade Leong: <unk>.

Jade Leong: Caliber adjusted EBITDA loss for the first quarter was $1 7 million compared to adjusted EBITDA of $1 million. During the same period, a year ago, primarily due to the decrease in total revenue of $1 6 million and an increase in operating costs of $1 million, which was related to the increase in payroll.

Jade Leong: Interest expense in the first quarter was $1 3 million compared to 800000 in the in the year ago period.

Jade Leong: The increase was primarily due to an increase in corporate notes outstanding during the three months ended March 31, 2024, as compared to the same period in 2023. Before turning the call back to Chris for his closing comments, I wanted to reiterate our three-year growth objective. First, we expect to expand our fundraising activity, bringing in $750 million from 2024 through 2026. We expect the investments we have made in our private client and wholesale distribution platforms to be the primary contributors to achieving our fundraising target, which will enable Caliber to accelerate growth in our EUM.

Jade Leong: The increase was primarily due to the increase in corporate notes outstanding during the three months ended March 31, 2024 as compared to the same period in 2023.

Jade Leong: Second, we expect to grow AUM to $3 billion, driven primarily by expanding our product offerings and growing the number of assets in the Caliber Hospitality Trust, which we anticipate reaching a billion dollars in assets. Third, we are committed to driving profitable growth by achieving $50 million in annualized total platform revenues by the end of 2026. Caliber's unique business model provides opportunities across different markets and resiliency in challenging times. Our proprietary middle market real estate funds enable us to generate multiple revenue streams from various investors, and we are well positioned for future growth as we continue to seize new opportunities and investments, particularly those that arise from market dislocation and disruption. I'll now turn it back to Chris for his final remarks before we take your questions. Thank you, Jade.

Jade Leong: Before turning the call back to Chris for his closing comments I wanted to reiterate our three year growth objectives.

Jade Leong: First we expect to expand our fundraising activity, bringing in $750 million from 2024 through 2026, we expect the investments we made in our private client and wholesale distribution platforms to be.

Chris Loeffler: The primary contributors to achieving our fundraising target, which will enable caliber to accelerate growth in our AUM.

Jade Leong: Second we expect to grow AUM to $3 billion driven.

Jade Leong: Driven primarily by expanding our product offerings and growing the number of assets in the caliber hospitality Trust, which we anticipate reaching $1 billion in AUR.

Jade Leong: Third we are committed to driving profitable growth by achieving $50 million in annualized total platform revenues by the end of 2026.

Jade Leong: Caliber has unique business model provides opportunities across different markets and resiliency in challenging times, our proprietary middle market real estate funds enable us to generate multiple revenue streams from various investments and we are well positioned for future growth as we continue to seize new opportunities and investments, particularly.

Jade Leong: Only those that horizon, markwood market dislocation and disruption.

Jade Leong: I'll now turn it back to Chris for his final remarks before we take your questions Chris.

Chris Loeffler: Thank you all as well to the call participants. I appreciate you joining these calls and continuing to engage with Caliber. A lot of you have given me some good feedback and given the team good feedback, and we appreciate it. I've had a chance to reflect on our first year as a public company, which is coming up here in a few days. And I decided to distribute a shareholder letter that you can expect to see twice a year.

Chris Loeffler: Thank you Jamie Thank you all as well to the call participants I. Appreciate you joining these calls and continuing to engage with caliber.

Chris Loeffler: Lot of you have given me some good feedback and given the teams good feedback and we appreciate it.

Chris Loeffler: <unk> had a chance to reflect on our first year as a public company, which is coming up here in a few days and I decided to distribute a shareholder letter that you can expect to see twice per year.

Chris Loeffler: Personally, I love to write, and my goal in producing this letter is to help you follow our story and go a few layers deeper on some of the key topics that may not necessarily come up in an earnings call or in a short-form presentation on Caliber. I realize that many of you lead busy lives, and I intend to structure this letter to help you stay in touch with Caliber in an efficient manner.

Chris Loeffler: Personally I'd love to write and my goal in producing this letter is to help you follow our story and go a few layers deeper on some of the key topics that may not necessarily come up in an earnings call or in a short form presentation on caliber.

Chris Loeffler: I realize that many of you lead busy lives and I intend to structure. This letter to help you stay in touch with caliber in an efficient manner.

Chris Loeffler: You can expect my first letter before the end of June, and, of course, that we will publish it, and I hope that you find the information impactful. In closing, I'd like to thank our employees for their dedication and commitment through the changes we've recently implemented, and our investors and partners for your continued interest and investment in Caliber. Thank you all again for your time today. We look forward to speaking with and meeting with many of you in the near future. If you have any questions, we encourage you to reach out to our investor relations team at Financial Profiles.

Chris Loeffler: You can expect my first letter before the end of June and of course that we published and I hope that you find the information impactful and.

Chris Loeffler: In closing I'd like to thank our employees for their dedication and commitment through the changes we've recently implemented.

Chris Loeffler: And our investors and partners for your continued interest and investment with caliber.

Chris Loeffler: Thank you all again for your time today, we look forward to speaking and meeting with many of you in the near future. If you have any questions. You can encourage we encourage you to reach out to our Investor relations team at financial profiles and with that I think we can turn to questions.

Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 0. Our first question comes from the line of Brendan McCarthy of Sidoti. Your line is open.

Speaker Change: Thank you the floor is now open for questions. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Operator: If you'd like to withdraw your question simply press Star one.

Operator: Your first question comes from the line of Brendan Mccarthy of Sidoti Your line is open.

Brendan Mccarthy: Good afternoon, guys. Thanks for taking my questions today. I just kind of wanted to start with the wholesale, the broker-dealer distribution Agreements. I think you mentioned 26 selling agreements with broker-dealers, that's up substantially from I think there was one at the end of the last. I guess what kind of pace can investors expect with additional agreements in the future?

Brendan Mccarthy: Good afternoon, guys. Thanks for taking my questions today.

Brendan Mccarthy: I was just kind of wanted to start at the the wholesale the broker dealer distribution agreements I think you mentioned 26 selling agreements with broker dealers that's up substantially from I think there was one at the end of the loss.

Brendan Mccarthy: The fourth quarter of 'twenty three.

Brendan Mccarthy: What kind of pace can when can investors expect.

Brendan Mccarthy: With additional agreements in the future.

Chris Loeffler: It's hard to, hey, Brendan, how are you? It's hard to predict, but I'll taste a little bit.

Brendan Mccarthy: It's hard to Hey, Brandon how are you.

Chris Loeffler: It's hard to predict pace a little bit.

Chris Loeffler: Actually if you think about it is.

Chris Loeffler: We're actually, if you think about it as what we're doing in that space. We spent the better part of the first quarter picking up these selling agreements, and now, actually, our team is directing time and attention towards each of those firms that have agreed to distribute or feature our products to spend time with their actual reps. So, as an example, if we sign a selling agreement with a firm that has 40 reps, the next step is going to be going through training with all those reps and actually spending time on a one-by-one basis, or in some cases, small groups, to make sure that they understand the offerings and the funds and the opportunities.

Chris Loeffler: What we're doing in that space, we spent the better part of the first quarter picking up the selling agreements and now actually our team is directing time and attention towards each of those firms has agreed to distribute or or feature our products to spend time with their actual reps. So as an example, if we pick up a selling.

Chris Loeffler: The agreement with a firm that has 40 reps. The next step is going to be going through training with all of those reps and actually spending time on a one by one basis or in some cases small groups to make sure that they understand the offerings in the funds and the opportunities and then they spend time with their clients, we get questions back and forth and that starts to kind of.

Chris Loeffler: The actual pipeline of capital so.

Chris Loeffler: And then they spend time with their clients, we get questions back and forth, and that starts to kind of build the actual pipeline of capital. Landing selling agreements was a primary focus. As you said, we only had one back in December.

Chris Loeffler: Landing selling agreements was a primary focus as you said, we only had one back in December.

Chris Loeffler: With the increase that we've had we've been spending a lot of time with those groups and in with those companies to get their reps ready to actually distribute the product and ultimately bring in capital.

Chris Loeffler: With the increase that we've had, we've been spending a lot of time with those groups and with those companies to get their reps ready to actually distribute the product and ultimately bring in capital. I didn't anticipate that we were going to get as many selling agreements as quickly as we did. So, based on where we're at today, we're above what we expected at our pace, but I anticipate we should be able to see those selling agreements continue to grow throughout the year.

Chris Loeffler: I anticipate I didn't anticipate we're going to get as many selling agreements as quickly as we did so our work based on where we're at today, we're above what we expected and our pace, but I anticipate we should be able to to see those selling agreements continue to grow throughout the year.

Brendan Mccarthy: Got it. Thanks, Chris.

Speaker Change: Got it thanks, Chris that's helpful.

Chris Loeffler: That's helpful. As a follow-up question, I know historically, you know, fundraising has been weighted towards Q4. I think Q4 is typically the best quarter for fundraising. Considering new selling agreements as well as the growth of the wholesale channel, do you think that seasonality will shift at all or change?

Speaker Change: Just as a follow up question I know historically you fund raising has been weighted towards Q4 Q4 is typically the best quarter for fundraising.

Chris Loeffler: Concerning new selling agreements as well as the growth of the wholesale channel.

Chris Loeffler: Do you think that seasonality seasonality will shift at all or change.

Chris Loeffler: Yeah, I think we've been focused a lot on fundraising seasonality because the opportunities to invest capital are available throughout the year. And so making sure that we can have relatively stable and growing fundraising results is very important to Caliber. I think that some of the seasonality in our retail channel will continue because individual investors tend to make decisions after tax time and then again, for some reason, after Thanksgiving.

Chris Loeffler: Yeah, I think we've been focused a lot on fund raising seasonality because the opportunities to invest the capital or are available throughout the year and so making sure that we can have.

Chris Loeffler: Relatively stable and growing fund raising results is very important to caliber.

Chris Loeffler: I think that what we will see is is some of the seasonality in our retail channel will continue because individual investors tend to make decisions after tax time, and then again.

Brendan Mccarthy: But on the wholesale side, these advisors are engaged with their clients consistently, they're consistently looking to do portfolio allocations, and we're expecting to see more normalized fundraising throughout the year. And then, of course, on the institutional and the family office side, that's going to be a lumpier style of fundraising where we might get larger checks in a single shot, like we got the $10 million commitment that we just announced. But as we build our name and reputation in the channel, hopefully, we'll see that build on itself as well.

Chris Loeffler: For some reason after Thanksgiving.

Brendan Mccarthy: But on the wholesale side. These advisors are engaged with their clients consistently they are consistently looking to do portfolio allocations and we're expecting to see more normalized fundraising throughout the year.

Brendan Mccarthy: And then of course on the institutional in the family office side, that's going to be.

Brendan Mccarthy: A lumpier style of fundraising where we might get larger checks in a single shot like we got the $10 million commitment that we just announced.

Brendan Mccarthy: But.

Brendan Mccarthy: As we build our name and reputation in the channel hopefully, we'll see that build on itself as well.

Chris Loeffler: Got it. And we appreciate the insight on the cost reduction initiatives. Just to clarify, and apologies if I miss this, were those figures regarding the unconsolidated cost structure or the consolidated expense structure? Yeah, that would-

Speaker Change: Got it.

Speaker Change: I appreciate the insight on the on the cost reduction initiatives just to clarify I apologize if I missed this.

Speaker Change: Where those figures.

Chris Loeffler: Regarding the consolidated cost structure or the consolidated expense structure.

Chris Loeffler: Yeah, that would have all been related to what we call the platform cost structure or the unconsolidated cost structure, to use the accounting term.

Chris Loeffler: Yes that would have all been really related to what we call the platform cost structure or the unconsolidated cost structure to use the accounting term.

Speaker Change: Got you.

Brendan Mccarthy: I'm turning to the acquisition environment. I know last during this call, you talked in detail about distressed opportunities coming more into light. Are you still seeing a similar environment, or has anything changed from the... You know, from the last discussion?

Chris Loeffler: And then turning to the acquisition environment I know last earnings call you.

Brendan Mccarthy: In detail about distressed opportunities.

Brendan Mccarthy: Coming more into light.

Brendan Mccarthy: Are you still seeing a similar environment or has anything changed from the.

Speaker Change: Yeah from the last discussion.

Chris Loeffler: Yeah, it's only been a couple of weeks, so not much, not much has changed. Yeah, we're still seeing the same thing.

Speaker Change: Yes, it's only been a couple of weeks so not much not much has changed there we're still seeing the same thing.

Chris Loeffler: We're still seeing real opportunities that we're underwriting at this point in time. You know, Jade and I have recently had some interesting meetings with banks and financial institutions that are starting to see that they're seeing it as well. And so, at this point in time, I don't see the volume going down; I see it going up. And our primary focus is to make sure that the funds that we have recently opened have capital available for the opportunity.

Chris Loeffler: We were still seeing real opportunities that we're underwriting at this point in time.

Chris Loeffler: Jayson I have recently had some some interesting meetings with banks and financial institutions, starting to see that they're seeing it and trying to work through their issues as well.

Chris Loeffler: And so at this point in time, I don't see the volume going down I see it going up and.

Chris Loeffler: Our primary focus is to be to make sure that the funds that we have recently opened have capital available for the opportunities.

Brendan Mccarthy: Yeah, and then last question for me, just looking at the balance sheet, Caliber's balance sheet. I'm wondering if you could speak to the debt maturity profile and maybe how you plan to address, you know, upcoming maturities.

Speaker Change: Got it and then last question for me just looking at the balance sheet calibers balance sheet.

Speaker Change: I'm wondering if you could speak to the debt maturity profile and maybe how you plan to address your upcoming maturities.

Chris Loeffler: Sure, sure. Jay, do you want to go through that, and I'll add anything that I can add? Sure.

Brendan Mccarthy: Sure sure Jay do you want to go through that and now I will add anything that I can add.

Jade Leong: So, we're in a constant state of monitoring our debt, obviously. We monitor both the debt that's sitting on the platform as well as the debt that's sitting on our various assets, and I'll speak to them sort of individually. So, the debt in our platforms, we start working on those six to nine months out and really start to try to identify whether there's a path to renew and extend or whether we're looking to completely refinance and maybe even try to look at a possible cash-out refinance. So, those are ongoing constantly, and we work to really, you know, make sure that those decisions are aligned with how the asset strategy is.

Jay: Sure so.

Jade Leong: We're in a constant state of monitoring of our debt obviously, we monitor both the debt of the that's sitting on the platform as well as the debts at sitting at our at our various assets and all.

Jade Leong: I'll speak to the to them sort of individually so the debt at our in our platforms. We start working on those six to six to nine months out.

Jade Leong: And really start to try to identify whether there is a path to renew and extend or whether we're looking to.

Jade Leong: Completely refinance and maybe even.

Jade Leong: Try to look at a possible cash out refinance so those are all.

Jade Leong: Ongoing.

Jade Leong: Constantly.

Jade Leong: And we work to really.

Jade Leong: Make sure that those decisions are aligned with how the asset strategy is.

Chris Loeffler: On the corporate side, we take a similar approach, but a lot of those programs are with individual investors, and so those tend to be more discussions that are had, you know, sort of one-on-one versus how they're done with the assets. Yeah, I'll just add on the corporate side: the debt for the corporate company or the unconsolidated business is roughly $50 million, $55 million, about $20 million of that. It relates to debt related to the acquisition of our corporate headquarters, which is a combination of some unsecured notes and a CMVS loan we assumed when we acquired the headquarters building.

Jade Leong: On the corporate side.

Chris Loeffler: We take a similar approach.

Chris Loeffler: But a lot of those a lot of those programs are with individual investors and so those those tend to be more discussions that are sort of one on one.

Chris Loeffler: Versus versus how they are done with the assets.

Chris Loeffler: Yes, I'll just add on the corporate side the the.

Chris Loeffler: The debt for the corporate company or the unconsolidated business is roughly.

Chris Loeffler: 50 million $55 million.

Chris Loeffler: About $20 million of that it relates to debt related to the acquisition of our corporate headquarters, which is a combination of some unsecured notes and a <unk>.

Chris Loeffler: <unk>, we assumed that when we acquired the headquarters building.

Chris Loeffler: The building was acquired in a relatively distressed purchase because we had a right of first refusal to acquire the building if the seller decided to sell, and he'd accepted an offer to buy the building at what we thought was a favorable price that would actually reduce our overall cost structure over time.

Chris Loeffler: The building was acquired in a relatively distressed purchased.

Chris Loeffler: Because we had a <unk>.

Chris Loeffler: A first refusal to acquire the building if the if the seller decided to sell and he'd accepted an offer to buy the building at a what we thought was a favorable price that would actually reduce our overall cost structure over time.

Chris Loeffler: So in doing that.

Chris Loeffler: So in doing that, if you kind of tranche out that debt, the remaining $30 million in debt that we have is, as Jade mentioned, primarily unsecured debt, primarily from a bunch of individual investors who also happen to be customers of Caliber in many ways who have lent the company money. The company takes that capital and actually uses it to acquire or invest in the underlying funds and assets that we manage.

Chris Loeffler: You kind of tranche out that debt the remaining $30 million in debt that we have is as Jay had mentioned primarily unsecured debt.

Chris Loeffler: Primarily from.

Chris Loeffler: A bunch of individual investors, who are also happened to be customers of caliber in many ways.

Chris Loeffler: That has led the company money the company takes that capital actually has used it to acquire or invest into the underlying funds and assets that we manage and so the $30 million in unsecured debt.

Chris Loeffler: And so the $30 million in unsecured debt can be traced to the roughly 46 million or so in investments that we've made into the assets and the funds that we own, intercompany receivables, and other forms of receivables that are owed back to Caliber. And so we're using the capital to grow our funds and facilitate our business. To the extent that those individual investors indicate to us that they want to redeem their notes, we go through a sort of a redemption process.

Chris Loeffler: Can be traced to the roughly $46 million or so in.

Chris Loeffler: A combination of investments that we've made into the assets in the funds that we own intercompany receivables.

Chris Loeffler: And other forms of receivables that are owed back to caliber and so we're using the capital to almost like a warehouse line to grow in our funds and facilitate our business.

Chris Loeffler: To the extent that those individual investors indicate to us that they want to redeem their notes we go through sort of a redemption process and one of the first lines of defense as there is collecting receivables that were owed or selling off.

Chris Loeffler: And one of the first lines of defense is collecting receivables that are owed or selling off assets or replacing the capital in an underlying fund with permanent capital. And so the company's goal or objective for that debt has been to reduce it over time. And then we, of course, see an opportunity to refinance with more of an institutional debt provider or credit provider, which does two things for us. One is it refinances the debt and extends the maturity out. And two, it recycles that capital back to our investors, and we hope that they will invest with us in other things. So there's kind of a double benefit there.

Chris Loeffler: Assets were replacing the capital and an underlying fund.

Chris Loeffler: With permanent capital and so that the company's goal or objective for that debt has been to reduce it over time.

Chris Loeffler: And then we of course see an opportunity to refinance with more of an institutional.

Chris Loeffler: Debt provider or a credit provider, which does two things for US one is it refinances debt and extends the maturity out and two is it recycled that capital back to our investors and we hope that they would invest with us and other things. So there is kind of a double benefit there.

Brendan Mccarthy: Got it. That's very helpful. Thanks, Chris. Thanks, Jaden. That's all for me.

Speaker Change: Got it that's very helpful. Thanks, Chris Thanks, Jade that's all for me.

Operator: With no further questions, that concludes our Q&A session. I will now turn the conference back over to CEO Chris Loeffler for closing remarks.

Brendan Mccarthy: With no further questions that concludes our Q&A session I will now turn the conference back over to CEO, Chris Loughlin for closing remarks.

Chris Loeffler: Yeah, I just wanted to reiterate the fact that please keep an eye out for the shareholder letter that will come out and stay engaged with us. We've had quite a few people that when they come to Scottsdale, they give us a heads up, and it gives us an opportunity to meet in person. So please, please let us know if you find yourself in town, and thank you very much. This concludes today's conference call. You may now disconnect.

Speaker Change: Yes, just wanted to reiterate the fact that pleased to keep an eye out for the shareholder letter that will come out and stay engaged with US we've had quite a few people that when they come to Scottsdale, They give us a heads up and it gives us an opportunity to meet in person. So please please let us know if you find yourself in town and thank you very much.

Chris Loeffler: This concludes today's conference call you may now disconnect.

Chris Loeffler: [music].