Q2 2024 Alaris Equity Partners Income Trust Earnings Call
Amanda Frazer: This continues to be a record for Alaris. This brings the six-month increase in net book value to $0.90 per unit. Alaris' partner distribution and transaction fee revenue of $42.1 million was ahead of previous guidance of $33.9 and Q2 of 2023's $36.9. This was driven by follow-on investments in the quarter, a higher than expected FX rate, and higher than anticipated common dividends. Common distributions in Q2-24 were $3.7 million as compared to $1.2 million in the comparable quarter last year, with year-to-date dividends of $4.3 million as compared to $2.8 million.
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Amanda Frazer: Which continues to be a record for Alaris. This brings the six months' increase in that book's value to 90 cents per unit. Alaris is a partner distribution and transaction fee revenue of 42.1 million.
Amanda Frazer: I had a previous guidance of 33.9 and Q2 of 2023's, 36.9. This was driven by the follow-on investments in the quarter, a higher than expected at FX rate, and higher than its anticipated common dividends. Common distributions in Q2, 24 were 3.7 million, as compared to 1.2 million in the comparable quarter last year. We figure today dividends of 4.3 million as compared to 2.1 million in six months ended 2023. This was driven most notably by Edgewater's common distribution of 2.8 million. Alaris's net 15% to 55.2 million or a dollar 21 per unit. From 48.5 million and a dollar or 7 per unit in the same period of 2023, after adjusting the comparable period for non-recurring settlement and litigation cost occurred.
Amanda Frazer: $1 million in the six months ended 2023. This was driven most notably by Edgewater's common distribution of $2.8 million. Alaris' net distributable cash flow to date in 2024 has increased by 14% to $55.2 million, or $1.21 per unit, from $48.5 million and $1.07 per unit in the same period of 2023, after adjusting the comparable period for non-recurring settlement and litigation costs that occurred. The actual payout ratio for the quarter was 56%, driven lower in part by the common dividends received.
Amanda Frazer: The actual payout ratio for the quarter was 56%, driven lower in part by the common dividends received.
Amanda Frazer: Subsequent to the quarter, Stride redeemed Alaris' investment for gross proceeds of $4.1 million, bringing the total number of partner investments exited by Alaris to 22% and an overall total return from exited investments of 65% and a median IRR of 19%. Year-to-date, Alaris has invested $77.5 million, including an additional $27.5 million U.S. of preferred equity into Shipyard, $20 With regard to partners, our portfolio continues to perform well and has maintained its weighted average ECR of approximately 1.5 times, with 10 out of 19 partners continuing to be above this threshold.
Amanda Frazer: Subsequent to the quarter, Stride redeemed Alaris's investment for gross proceeds of 4.1 million US. Bringing the total number of partner investments exited by Alaris to 22 and an overall total return from exited investment of 65% and a median IRR of 19%. You're today, Alaris has invested 77.5 million, including an additional 27.5 million US, a preferred equity into shipyard, 20 million US in new partner crossover, and 35 million US into FNT just this quarter. With regards to partners, our portfolio continues to perform well and has maintained its weighted average ECR approximately 1.5 times, with 10 out of 19 partners continuing to be above this threshold.
Amanda Frazer: With regards to partner performance, it was a quiet quarter for fair value as we were essentially flat. Shipyard used proceeds of our follow-on investment in the quarter for an acquisition and, as a result of both vests and increases in the base business forecasted, base businesses forecasted EBITDA. The fair value of the common increased by 1.4 million US. During the quarter, Edgewater paid a significant dividend, resulting in receipt of 2.1 million US by Alaris. The payment of this dividend impacted the net debt position of Edgewater and, in turn, the fair value. As a result of this realization, the fair value of Alaris is interest decreased in the quarter by 1.4 million US.
Amanda Frazer: With regard to partner performance, it was a quiet quarter for fair value as we were essentially flat. Shipyard used proceeds of our follow-on investment in the quarter for an acquisition, and as a result of both this and increases in the base business forecasted, and based businesses forecasted EBITDA, the fair value of the common increased by $1.4 million U.S. During the quarter, Edgewater paid a significant dividend, resulting in receipt of $2.1 million by Alaris.
Amanda Frazer: The payment of this dividend impacted the net debt position of Edgewater and, in turn, the fair value. As a result of this realization, the fair value of Alaris' interest decreased in the quarter by $1.4 million U.S., although year-to-date Edgewater's fair value continues to be up $900,000. With relief to U.S. interest rates pushed back from expectations at the start of the year, D&M is seeing a slower recovery in lease volumes than originally forecast.
Amanda Frazer: Although year to date, Edgewater's fair value continues to be up 900,000 US.
Amanda Frazer: With release to US interest rates pushed back from expectations at the start of the year, DNM is seeing a slower recovery to least volumes than originally forecast. As a result of the updated reset metrics and anticipated EBITDA, there was a decrease in fair value of 800,000 US for both the common and preferred units. Other less significant impacts to fair value in the quarter were driven by Alhama and Carry Electric. Of our 19 partners, 11 have either no or less than one turn of debt as compared to EBITDA.
Amanda Frazer: As a result of the updated reset metrics and anticipated EBITDA, there was a decrease in fair value of $800,000 U.S. for both the common and preferred units. Other less significant impacts to fair value in the corridor were driven by Ohana and Cary Electric. Of our 19 partners, 11 have either no or less than one turn of debt as compared to EBITDA. Our current outlook calls for $38.7 million of revenue in Q3, as this period sees generally lower common distributions.
Amanda Frazer: Our current outlook calls for 38.7 million of revenue in Q3. As this period sees generally lower common distributions. That said, this 12-month run rate of 163 million is up from 158 million last quarter, partially due to higher annual common expectations. Our G&A outlook remains at 16.5 million.
Amanda Frazer: That said, the 12-month run rate of $163 million is up from $158 million last quarter, partially due to higher annual common expectations. Our G&A outlook remains at $16.5 million. And on that note, I'll turn it over to Steve.
Stephen King: And on that note, I'll turn it over to Steve. Great. Thanks, Amanda. As she just said, our second quarter came in slightly ahead of where we had expected, but generally on plan. The next sort of the last few months of the addition of a great new partner in Cresa, a commercial real estate broker with offices around the world. And we expect them to be very active with acquisitions in the over the coming years. We also saw the redemption of Stride, our smallest investment at just $4 million. Over 19 partners, I would highlight Cresa, the shipyard O'Hana, 3E, Sagamore, D&M, and Edgewater as partners that we expect to have opportunities for growth investments in over the coming months.
Steve King: Great, thanks Amanda. As she just said, our second quarter came in slightly ahead of where we had expected, but generally on plan. The last few months saw the addition of a great new partner in Cressa, a commercial real estate broker with offices around the world. And we expect them to be very active with acquisitions over the coming years. We also saw the redemption of Stride, our smallest investment at just $4 million.
Steve King: Of our 19 partners, I would highlight Cressa, The Shipyard, Ohana, 3E, Sagamore, D&M, and Edgewater as partners that we expect to have opportunities for growth investments in over the coming months. And obviously, 7 out of 19. It has become a bigger and bigger focus for us in our investment criteria to find partners that have ongoing acquisition and growth opportunities, especially now that we have common equity in those partners. Stride is actually a great example of the power of our structure and how it reduces the risk in our investment returns.
Stephen King: And obviously, 7 out of the 19, it has become a bigger and bigger focus for us in our investment criteria, defined partners that have ongoing acquisition and growth opportunities, especially now that we have common equity in those partners. Stride is a great example, actually, of the power of our structure and how it reduces the risk in our investment returns. During our years of stride, the company enjoyed some success over the last few years, has seen a contraction in their business. Despite their revenue and earnings being well below where they were when we invested, we were able to record a reasonable 15% IRR over the course of our investment.
Steve King: During our years at Stride, the company enjoyed some success, but over the last few years, their business has seen a contraction. Nevertheless, despite their revenue and earnings being well below where they were when we invested, we were able to record a reasonable 15% IRR over the course of our investment. While that's below the roughly 20% IRR that we target for new investments, it was a positive result overall. And no other redemptions are imminent, but we do expect to see two or three over the next 12 months.
Stephen King: While that's below the roughly 20% IRR that we target for new investments, it was a positive result overall. And no other redemptions are imminent, but we do expect to see two or three over the next 12 months. As for new partner deployment, we do expect an active second half of the year. With more than 75 million deployed in the first six months, we hope to beat that number in the second half, based on current partner opportunities, as well as potential new partner ads. With two rate cuts in Canada already, where we procure our debt and our equity capital, we're in a really good position given that we generate almost all of our investment opportunities in the US, who have not cut their rates yet.
Steve King: As for new partner deployment, we do expect an active second half of the year. With more than $75 million deployed in the first six months, we hope to beat that number in the second half based on current partner opportunities as well as potential new partner ads. With two rate cuts in Canada already, where we procure our debt and our equity capital, we're in a really good position given that we generate almost all of our investment opportunities in the U.S., where rates have not cut their rates yet. The U.S. investment environment is highlighted by higher growth and higher returns on structured capital like ours. So Amy, with that, I'll turn it over to any questions that the field may have.
Stephen King: The US investment environment is highlighted by higher growth and higher returns on structured capital like ours.
Operator: So, Amy, without all, turn it over to any questions that the field has. Thank you, and as a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.
Operator: Thank you, and as a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Operator: Please stand by while we compile the Q&A roster. And our first question comes from the line of Jeffrey Kwan with RBC Capital Markets. Your line is open. Hello, Jeffrey, your line is open. If you're on mute, please unmute your line. Please stand by for our next question. Our next question comes from Nik Priebe with CIBC Capital Markets. Your line is open.
Jeffrey Kwan: And our first question comes from the line of Jeffrey Kwan with RBC Capital Markets. Your line is open.
Operator: Hello, Jeffrey. Your line is open. If you're on mute, please unmute your line.
Operator: Please stand by for our next question.
Nick Preby: Our next question comes from Nick Preby with CIVC Capital Markets. Your line is open. Yeah, thanks. I wonder if you could provide it with an update on how the search process is progressing to identify a replacement CEO at Heritage. Greg is working on that quite extensively. So just for people that are listening, we've had the senior management of Heritage have a health issue and has had this step away, so we have a group that we used actually on Kimco years ago that ended up getting a great return for us on Kimco. They are in managing heritage on a day-to-day basis.
Nikolaus Priebe: Yeah, thanks. I was wondering if you could provide us with an update on how the search process is progressing to identify a replacement CEO at Heritage.
Steve King: Greg is working on that quite extensively, so just for people that are listening, we've had the senior management of Heritage have a health issue and have had to step away, so we have a group that we used on Kimco years ago that ended up getting a great return for us on Kimco. They are involved in managing Heritage on a day-to-day basis, and we are, as you pointed out, looking for a permanent manager.
Stephen King: And we are, as you pointed out, Nick, looking for a permanent manager. We're not in a big hurry because of the people that we have in there managing at the who we trust, but the search is ongoing.
Steve King: We're not in a big hurry because of the people that we have in there managing it, who we trust, but the search is ongoing, so I don't have a timeline on that yet, but that's very much a focus for us.
Stephen King: So I don't have a timeline on that yet, but that's very much a focus force. I understood.
Nikolaus Priebe: And I just want to ask a clarification question on that as well.
Nick Preby: And I just wanted to ask a clarification question on that as well. I think last quarter, you'd mentioned that you own about 40% of the common equity in Heritage, and the owner that has, or the CEO is departed on the other 60%. And then I think you suggested you have that 60% to play with in terms of bringing someone in new and offering them equity. I didn't fully understand that comment. I was just, were you suggesting that there could be the prospect of the issuance of additional equity that might dilute down your stake a little bit?
Steve King: I think last quarter you mentioned that you own about 40% of the common equity in Heritage, and the owner, or the CEO that has departed, owns the other 60%. And then I think you suggested you have that 60% to play with in terms of bringing someone in new and offering them equity. I just, I didn't fully understand that comment. I was just wondering if you were suggesting that there could be the prospect of the issuance of additional equity that might dilute your stake a little bit?
Nikolaus Priebe: No, it would be buying 60% of the company from the CEO, and I think that could be done very inexpensively at this stage. So we would be able to incentivize a new manager with that 60%.
Stephen King: No, it would be buying the 60% from the CEO. And I think that could be done very inexpensively at the stage. And so we would be able to incent a new manager with that 60%.
Steve King: Oh, I see. Okay, that makes sense. The outlook for Fleet's common equity distribution given the June 30th year-end, what's the expectation for timing there? It kind of seems based on the guidance like it could be in Q4, but I think last year it was in Q3, so what's your view on that?
Nick Preby: Oh, I see. Okay, that makes sense.
Stephen King: And it just last question for me. The outlook for fleets, common equity distribution, given the June 30th year end, is with the expectation for timing there. It's kind of seems based on the guidance, like it could be in Q4, but I think last year it was in Q3. So what's your view on that? Yeah, they generally wait until they finish the audit; the timeline is always quite tight. So just to be conservative, we have pushed that to Q4. That payment usually is made in October. And then, from accounting purposes, it really comes down to what is the date of declaration.
Nikolaus Priebe: Yeah, they generally wait until they finish the audit, so the timeline is always quite tight. So, just to be conservative, we have pushed that to Q4. That payment usually is made in October. And then from an accounting perspective, it really comes down to what the date of declaration is.
Nick Preby: I got it. Okay. That makes perfect sense.
Nikolaus Priebe: I got it. Okay, that makes perfect sense. Okay, that's it for me. Thank you.
Nick Preby: Okay. That's it for me.
Operator: Thank you.
Gary Ho: Our next question comes from the line of Gary Ho with Desjardins Capital Markets. Your line is open. Thanks. Good morning. Maybe just follow on a next last question there. So you raise your outlook for common distribution, equity investment, I think 10 and a half to 12 and a half million. I can't check on that related to fleets as you just mentioned.
Gary Ho: Our next question comes from the line of Gary Ho with Desjardins Capital Markets. Your line is open.
Gary Ho: Thanks. Good morning.
Steve King: Maybe just follow on from Nick's last question there. So you've raised your outlook for a common distribution for your equity investment, I think ten and a half to twelve and a half million, a chunk of that related to Fleet that you just mentioned. So how confident are you in that twelve and a half as a run rate when you look out to twenty five? And also, maybe give a bit of a kind of commentary on how Fleet is doing on a year-to-date basis?
Stephen King: So how confident are you in that 12 and a half as a run rate when you look out to 25 and also maybe give a bit of a commentary on how fleets is doing on a unit at eight basis. Yeah, fleets continues to do very well. I don't see as it relates to them. I don't see a downturn in their business, and they are, I think they'll remain a big chunk of our common dividends. Going forward. So yeah, I think there's probably even some upside there. And just with regards to the outlook, that is looking 12 months forward.
Steve King: Yeah, Fleet continues to do very well. I don't see a downturn in their business, and they are, I think they'll remain a big chunk of our common dividends going forward. So yeah, I think there's probably even some upside there.
Steve King: And just with regard to the outlook, that is looking 12 months ahead, so it does include the first half of 2025 in that 12 and a half number. And I think as we've been adding new investments, you know, we've brought on Cressa and, you know, Segamore, FMP is paying dividends, you know, taking out companies like Brown and Settle, who were deemed as smaller companies earlier in the year stride, but neither of those companies paid common dividends, nor did we have any common in stride. So we're just starting to replace more and more of our portfolio with companies that have common stock and pay dividends. So we're just sort of seeing that evolution flow into the outlook of what our common expectations are.
Stephen King: So it does include the first half of 2025 in that 12 and a half number. And I think as we've been adding new investments, you know, we've brought on Cresa and you know, Sega. More FMP are paying dividends. You know, taking out companies like Brown and Settle, who were deemed as earlier in this year stride small, but neither of those companies paid common dividends, nor did we have any common and stride. So we're just starting to replace more and more portfolio with companies that have common and paid dividends. So we're just sort of seeing that evolution flow into the outlook of what our common expectations are.
Gary Ho: Okay, that makes sense.
Steve King: Okay, that makes sense. And then my second question: you saw this small redemption in stride this quarter, and then Brown settled earlier this year. I think you mentioned there's no imminent redemption currently, which is good to hear. Steve, you sounded more bullish on the deployment side, you've highlighted a bunch of partners in M&A mode. Are you able to kind of highlight some of the chunkier opportunities in the near term horizon?
Stephen King: And then my second question saw this small redemption and stride this quarter and then Brown settle earlier this year. I think you mentioned there's no imminent redemption currently, which is good here. See if you sounded more bullish on the deployment side if I let a bunch of partners in M&A mode. Are you able to kind of highlight some of the chunk of your opportunities in the near-term rise? I think Ovanah is probably one that will have a chance to invest more capital into, which is great. Anybody that follows the Planet Fitness story knows that the basic membership I was just moved from $10 to $15. So that move, while it takes time because people that are current members get grandfathered in at their $10, but it has a really interesting impact in that it really stops people from canceling their membership so they can stay grandfathered at $10. And it's shown over the last year through testing and through its early release that it has not stopped new membership growth at all.
Steve King: I think Ohana is probably one that will... We'll have a chance to invest more capital in it, which is great. Anybody that follows the Planet Fitness story knows that the basic membership was just moved from $10 to $15, so that move, while it takes time because people that are current members get grandfathered in at their $10, but it has a really interesting impact in that it really stops people from cancelling their memberships so they can stay grandfathered at $10, and it has shown over the last year through testing and through its early release that it has not stopped new membership growth at all.
Gary Ho: So we expect some nice gains on our all-hanna returns, and putting more money into them would be a great thing for us. And, as I mentioned, those seven partners that I highlighted earlier, those are all companies that are very active, and our business development team here at Alaris is really been tasked with finding opportunities for those seven partners. So those are all seven over the next 12 months. I'd be surprised if we didn't put more money into at least five or six months. Okay, that's helpful. Thanks, Steve.
Steve King: So we expect some nice gains on our all HANA returns, and putting more money into them would be a great thing for us. And as I mentioned, those seven partners that I highlighted earlier, those are all companies that are very active, and our business development team here at Alaris has really been tasked with finding opportunities for those seven partners. So those are all seven over the next 12 months. I'd be surprised if we didn't put more money into at least five or six of them.
Stephen King: And then just the last one, maybe for Steve as well, just over the past few years, you've restarted increasing your dividends at a pretty steady pace while the stock offers a pretty attractive 8% yield today. How do you think about distribution increase in the back half this year? Yeah, it's a tough one. I mean, at an 8.5% yield, more than that now with today's market decline, it's really not providing incentive for us to increase the dividend. I think a two-pronged approach of increasing our growth rate by conserving capital, because we certainly don't want to raise any capital in this kind of a market.
Steve King: Last one, maybe for Steve as well, just over the past few years, you've restarted increasing your dividends at a pretty steady pace. While, you know, the stocks offer a pretty attractive 8% yield today, you know, how do you think about the distribution increase in the back half of this year? Yeah, it's a...
Steve King: Yeah, it's a tough one. I mean, at an 8.5% yield, actually more than that now with today's market decline, it's really not providing an incentive for us to increase the dividend. I think a two-pronged approach of increasing our growth rate by conserving capital because we certainly don't want to raise any capital in this kind of market. And if anything, we should look more at share buybacks than dividend increases, I would suggest.
Stephen King: And if anything, we would like more at share buybacks than dividend increases, I would suggest.
Gary Ho: Okay, that makes a lot of sense. Those are my questions. Thank you. Thanks, great. Thank you.
Operator: Thank you. And as a reminder, to ask a question, please press star 11 on your touchtone phone. Again, that's star 11. Our next question comes from the line of Thomas Boland with NBF. Your line is open.
Operator: And, as a reminder to ask a question, please press star 11 on your touch-tone phone. Again, that's star 11.
Thomas Boland: Our next question comes from the line of Thomas Boland with NBF. Your line is open. Good morning, guys.
Thomas Boland: Good morning, guys. It's actually Thomas calling in for Zach. Just a quick one here. If there are significant risks to heritage restarting distributions in the first half of 2025, what would those risks be, or is that assumption rock solid at this point?
Stephen King: It's actually Thomas Collingan for exact. Just a quick one here. Is there significant risk to Heritage restarting distributions in the first half of 2025? What would be those risks, or is that assumption wrong solid at this point? We continue to monitor the business at this point; our assumption is that we would resume in 2025. But we continue; I mean, we have a long-term view on the business, obviously, amplified by the fact that we also have common invested into it. So, we want to make sure that the business is in the best position possible before we resume distributions, just to make sure that once we do start distributions, that that is a permanent restart and it's not just sort of fits and starts.
Steve King: We continue to monitor the business at this point, and our assumption is that we will resume it in 2025. But we continue. We have a long-term view of the business, obviously amplified by the fact that we also have common invested in it. So we want to make sure that the business is in the best position possible before we resume distributions, just to make sure that, once we do start distributions, that that is a permanent restart and it's not just sort of fits and starts.
Steve King: Yeah, I agree. It's a very good, steady business, and has been so for decades, so the market has not changed for them, their place in the competitive landscape has not changed, so I'm still quite bullish on that company over the long term.
Stephen King: Yeah, I agree. It's a very good steady business; has been so for decades. So, the market has not changed for them. They're placed in, you know, the competitive landscape has not changed. So, I'm still quite bullish on that company long-term.
Thomas Boland: Great, I'll turn it over to you. Thank you.
Operator: Our next question comes from the line of one moment.
Operator: Our next question comes from the line of... One moment. Our next question comes from the line of... Please stand by for our next question. Our next question comes from Jeff Fenwick with Cormark Securities, Inc. Your line is open.
Operator: Our next question comes from the line of, "Please stand by for our next question."
Geoff Fenwick: Our next question comes from the line of Geoff Fenwick with Core Mark Securities Inc. Your line is open. Hi, guys. Good morning. Sorry. I joined the call a bit late. So I apologize if this is a repeat less question. Please, I can follow up with you afterwards.
Jeffrey Fenwick: Hi guys, good morning. Sorry, I joined the call a bit late, so I apologize. If this is a repeat question, please; I can follow up with you afterwards on the CRESA new investment there and the PIC option that you elected to include in that agreement. Can you speak to why you would do that? You give them a fair bit of runway on that option before they have to cover it, and is that something you're looking to add as something that's just indicative of a more flexible deal structure that you can offer out to your partners?
Geoff Fenwick: But I wanted to ask about the Cressa new investment there and the pick option that you elected to include in that agreement. Can you speak to why you would do that? I mean, you give them a fair bit of runway on that option before they have to cover it. And is that something you're looking to add as something that's just indicative of a more flexible deal structure that you can offer out to your partners? Yeah, we actually have that in several of our investments, Geoff, and it almost never gets used. But you hit the nail on the head.
Steve King: You know, we actually have that in several of our investments, Geoff, and it almost never gets used, but you hit the nail on the head. It is really just to provide companies with flexibility, but, you know, it compounds at that 14%. 14% yield, so if they use it, then obviously, it doesn't impact our returns, in fact, it might help it a little bit, but it gives them flexibility, and in the case of Cressa, you know, they do have acquisition opportunities that they want to funnel their free cash flow into.
Stephen King: It is really just to provide companies with flexibility. But you know, it could compound that 14% yield. So if they use it, then obviously it doesn't impact our returns. In fact, it might help it a little bit. But give them flexibility. And in the case of Cressa, you know, they do have acquisition opportunities that they want to funnel their free cash flow into. As an investor in them, that's great for us, too. So yeah, it's something that I like doing. More flexibility is better. The focus for us should be on total return, just cash return, and having healthy partners.
Steve King: You know, as an investor in them, that's great for us too. So, yeah, it's something that I like doing. More flexibility is better. The focus for us should be on total return, not just cash return and having healthy partners. So it's something I actually quite like using.
Stephen King: So it's something I actually quite like using.
Steve King: Okay, so this is about growth for them rather than seasonality or something that might impact it. And I guess in that context, you also look at it as possibly, if they're successful, that could be a good candidate for a follow-on investment. Yeah, exactly.
Stephen King: Okay, so this is a bit of growth for them rather than seasonality or something that might impact it. And I guess in that context, you also look at it as possibly if they're successful. That could be a good candidate for a follow-on investment. Yeah, exactly. So Cressa has the number of worldwide offices, alludes me, but it's quite a bit. So most of them are corporate owned. There's also some that are kind of licensees affiliates; they're called. And there's a lot of opportunity over the next couple of years to bring in-house those affiliate offices and acquire them.
Steve King: Gosh, the number of worldwide offices eludes me, but it's quite a bit, most of them are corporate owned, there's also some that are kind of licensees, affiliates they're called, and there's a lot of opportunity over the next couple of years to bring in house those affiliate offices and acquire them, so that's where all their money is being used, this isn't being taken out or anything like that, or purchasing earnings or anything, it's purely for growth, so it's a good story.
Stephen King: So that's where all their money is being used. This isn't being taken out or anything like that. Or you know, purchasing earnings or anything. It's purely for growth. So it's a good story.
Geoff Fenwick: Okay.
Stephen King: And then maybe one just on capital and investment, and you mentioned it's not really an environment. You want to be raising equity, and obviously right now, but when I look at that pay-a ratio, and it looks like the cost of funds here are going to start falling on a crowd on credit facilities. I mean, how do you think about leverage going forward? I know you've emphasized your facility periodically here. But do you think it'd be comfortable running with a little higher level of leverage as it go forward? Well, yeah, as we grow, you know, I'd probably keep it as a ratio to our EBITDA; I'd probably keep it fairly similar to what we have today. But we did take out with $100 million of convertible ventures through cash on our balance sheet last month, and so that's something that I think we have in our back pocket. If redemptions outstrip, sorry, if deployment outstrip short-emptions over the next six to 12 months, we would likely probably use that convert market before we would ever use equity.
Jeffrey Fenwick: And then maybe one just on capital and investment. I mean, you mentioned it's not really an environment you want to be raising equity in, obviously, right now. But when I look at that payout ratio and...
Steve King: It looks like the cost of funds here is going to start falling on credit facilities. How do you think about leverage going forward? I know you've upsized your facility periodically here, but do you think you'd be comfortable running with a little higher level of leverage as we go forward?
Steve King: Well, yeah, as we grow, you know, I'd probably keep it as a ratio to our EBITDA; I'd probably keep it fairly similar to what we have today. But we did take out $100 million of convertible debentures through cash on our balance sheet last month. And so that's something that I think we have in our back pocket if redemptions outstrip, sorry, if deployment outstrips redemptions over the next 6 to 12 months, we would likely probably use that conversion market before we would ever use equity.
Jeffrey Fenwick: Yeah, fair enough. Okay, thanks for that. That's all I had.
Geoff Fenwick: Yeah, fair enough.
Geoff Fenwick: Okay, thanks for that. That's all I had. Yeah, thanks, Sir.
Operator: And I'm showing no further questions at this time.
Operator: And I'm showing no further questions at this time. I would now like to turn it back to Steve King, President and CEO, for closing remarks.
Stephen King: I would now like to turn it back to Steve King, President CEO for Closery Marks. Thanks, Amy, and thanks everybody for tuning in. I'm impressed for a Friday of the year in August. So many of you came, and so many asked questions looking forward to another good solid quarter coming up in Q3. And as always, if you have any questions, please reach out to myself or Amanda and join the rest of your summer. Thank you for your participation.
Steve King: Thanks Amy and thanks everybody for tuning in. I have to say I'm impressed that for a Friday during a long weekend in August, so many of you came and so many asked questions. Looking forward to another good, solid quarter coming up in Q3 and, as always, if you have any questions, please reach out to myself or Amanda. Enjoy the rest of your summer.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: In today's conference, this does conclude the program. You may now disconnect.