Q2 2025 Beneficient Earnings Call
Welcome to the benefits of <unk> second quarter fiscal 2025 earnings call. At this time, all participants are in listen only mode.
After the Speakers' presentation, there'll be a question and answer session and instructions will be given at that time.
As a reminder, this call maybe recorded.
Speaker Change: I'd like to turn the call over to Dan Callahan Director of Communications. Please go ahead.
Dan Callahan: Good morning, everyone. Thank you for joining us today for beneficiaries fiscal second quarter 2025 conference call.
In addition to this call we issued an earnings press release that was posted to the shareholders section of our website at shareholders' Trust band Dot Com today's webcast is being recorded and a replay will be available on the Companys website today's call management's prepared management's prepared remarks may contain forward looking.
Dan Callahan: <unk> that are subject to risks and uncertainties that could cause actual results to differ from those discussed today actual results and future events could materially differ from those discussed in these forward looking statements because of factors described in our earnings press release.
The risk factors section of our Form 10-K and.
Dan Callahan: And in subsequent filings, we made with the Securities and Exchange Commission forward looking statements represent managements current estimates and beneficent assumes no obligation to update any forward looking statements in the future. Today's call also contains certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website.
Dan Callahan: For important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.
Speaker Change: On the call. This morning are Brad Hepner, our CEO, and chairman and Greg <unk>, Chief Financial Officer, I'll hand, the meeting over to Mr. Hefner, Brad take it away.
Brad Hepner: Good morning, everyone and thank you for joining us this morning, and our second fiscal quarter ending September 30, we continued to build on the progress of the first quarter with a number of positive developments. The management team has also been busy meeting with the investment community, including our participation earlier. This week at the CT Gov Forum and other <unk>.
Brad Hepner: Mr conferences earlier in the quarter interest is high and how band is democratizing private equity and delivering custody and transaction services for all types of alternative assets.
Brad Hepner: Ben was created to provide fiduciary products and services that deliver liquidity and primary capital for holders and managers of all types of alternative assets. We are developing our business to particularly focus on the target market of mid to high net worth individuals and small to mid sized institutions, who have been underserved when it comes to exit.
Brad Hepner: And alternative assets prior to their maturity in addition to general partners.
Brad Hepner: We estimate that mid to high net worth investors and small to mid sized institutions in the U S alone account for more than two seven trillion dollars of net asset value with an annual unmet demand for liquidity of over $61 billion annually growing now to more than 100 billion.
Brad Hepner: Within the next five years.
Brad Hepner: Further the markets for general partners seeking liquidity for their linear limited partners through restructurings in the secondary market is in excess of $100 billion annually.
Brad Hepner: That means that when combined our platform addresses the demand for secondary market liquidity from mid to high net worth investors and small to mid sized institutions and general partners and Lps of over $150 billion per year and growing.
Brad Hepner: <unk> traditional process for these smaller investors seeking liquidity is incredibly complex. It's expensive it's time consuming often taking as long as 15 months or more if liquidity can be found at all to address this problem. We built our own fintech platform called Ben opt access with the goal of completing these important.
Transactions online and a fraction of that time now potentially in as few as 15 days with the introduction of our new machine automated pricing system or maps for sure. It's an application, which I will discuss shortly.
Brad Hepner: In addition to demand for liquidity from alternative assets, our market faces a substantial demand for more primary capital into new alternative assets for.
Brad Hepner: The general partners seeking this capital sourcing it has become increasingly difficult and there are a few innovative new solutions to solve this problem.
Brad Hepner: Our data shows that has been taking an average of 18 months for general partners to raise their private equity funds, which is approximately double what it took them just three years ago.
Speaker Change: The good news is that we understand both of these markets and have solutions tailored to their needs, which are the foundations of our business and have now produced two quarters in a row of profitable progress for our stockholders.
As a recap during our first quarter ended June 32024, we provided a number of positive announcements.
Speaker Change: First.
Speaker Change: We announced a unique primary capital a fiduciary financing product in that general partner, starting new funds.
Speaker Change: Which as I.
Speaker Change: Which as I just detailed we see as a robust large adjacent related market to our liquidity fiduciary financings.
Speaker Change: Second we initiated maps, which streamlines the process the pricing for our exalt loans that are backed by alternative assets maps integrates enhanced algorithmic capabilities designed to handle a higher volume of transactions with greater efficiency and reduce transaction time to potentially as little as 15 day.
Speaker Change: Yes.
Speaker Change: Third our board of Directors approved the exchange Trust product planned to complete up to $5 billion of fiduciary financings to customer <unk> Trust through <unk> Trust transactions.
Speaker Change: And fourth we reported a profitable quarter, our first as a public company. These developments last quarter provided meaningful enhancements to the operating model a beneficent they improved on the competitive dynamics, we believe we already possess.
But our work is not done and in the second fiscal quarter ended September 32024, we continued to build on those successes delivering a second consecutive quarter of positive fully diluted earnings per share for our common shareholders, which Greg will discuss in just a moment however, before we get into the numbers.
Speaker Change: I wanted to touch on a few key business highlights first in September we announced the transaction that involved reclassification of certain private at preferred equity such that it improved our permanent equity by $126 million.
Speaker Change: This improvement to our permanent equity from a deficit of $148 3 million to just the deficit of $13 2 million.
Speaker Change: We will continue through this quarter on our plan toward completing transactions that will turn the deficit to a surplus of permanent equity.
Speaker Change: Additionally, we undertook a further FCC registration filing to put into effect, our standby equity purchase agreement for issuance of up to 203 million shares of class a common stock, which could provide beneficent with significant capital I am pleased to report that this registration statement was declared effective just three days.
Speaker Change: Ago.
Speaker Change: These transactions are part of our plan to meet important illustrating requirements as well as to provide a source of capital for completing fiduciary financings backed by alternative assets as well as operating funds for growth and represent a significant expansion of our balance sheet.
Speaker Change: Mixed in October the company announced the appointment of Patrick Donigan as an independent member of the company's board Mr.
Speaker Change: Mr. Donigan brings almost 30 years of compliance legal banking and capital markets experience, Tibet, and having held various senior compliance positions, including as Chief compliance officer for bank holding companies and broker dealers and as an assistant General counsel for a securities company through his legal experience and compliance.
Speaker Change: Officer roles. Mr. Donigan has developed expertise in identifying risks and establishing policies and procedures to effectively manage those risks Mr. Donigan understanding of banking and capital market rules and the related regulatory processes enhance our efforts to maintain industry best practices across our organization.
Speaker Change: <unk>.
Speaker Change: Over the course of his career Mr. Donigan has attained 11 FINRA licenses two certifications from the American Bankers Association, including the <unk>.
Speaker Change: Certified regulatory compliance managers.
Designation.
Speaker Change: Currently holds a certified adding money laundering specialists certification. He serves on multiple committees of the Beneficent board, including our audit Committee.
Speaker Change: Finally, since our public listing in early June 2023, as much as 90% of our companies publicly listed class a common stock was in the hands of a single holder to liquidation trust of our prior parent company charged with liquidating their shares and beneficial.
Course of the last roughly 12 months that trust has been consistently in the market selling a significant amount of the beneficent holdings.
Speaker Change: As of their last filing date on October 4th the Trust now holds about 8% of our outstanding shares having sold over 90% of their position into the market. This is a significant reduction to an overhang that has weighed on our stock price performance over the past year or more.
Speaker Change: And resulted in the distribution of our shares across a much broader shareholder base.
Speaker Change: I'm very proud of our efforts to the first two quarters of fiscal 2025, we have improved the product offerings of better business been introduced to new adjacent markets in need of our solutions and streamlined our cost structure to become a leaner more efficient company ready for scale, we've taken steps to expand our balance sheet.
Speaker Change: Improve liquidity with our standby equity purchase agreement, we are methodically managing the outstanding regulatory and legal issues and the headwinds from our largest shareholder selling their stock should be now abating.
Speaker Change: With these improvements in motion, we will continue to work to educate the market on who we are what we do and the value and growth opportunity represent for shareholders. We're moving forward and I look forward to continuing to report progress on our key initiatives through the second half of this fiscal year now with that I'll turn the call over to Greg.
Speaker Change: Our CFO, Greg Zelle to go over our operating and financial results Greg.
Thank you Brad, let's now turn to our quarterly results and financial position as of September 32024, first I'll start with a few highlights from the quarter, we reported investments with a fair value of 335 zero million up sequentially from $329 1 million at the end of our prior fiscal year.
Speaker Change: These investments serve as collateral for Ben liquidity as net loan portfolio of $267 million and $256 2 million respectively for the same periods GAAP.
Speaker Change: GAAP revenues were a positive $8 6 million and $18 6 million for the second quarter and year to date periods in fiscal 2025 as compared to a negative $42 8 million and $45 5 million in the prior year GAAP revenues, principally reflect mark to market adjustments on the investments that serve as collateral to Ben's loan portfolio.
Speaker Change: Excluding the noncash goodwill impairment and the loss contingency accrual release in each period.
Speaker Change: As applicable operating expenses were 22.0 million in the second quarter, 2025, and $39 3 million in the year to date period, which reflects a decline of 31, 9% and 55, 9% in the quarter and year to date periods. The improvement was primarily related to improvements in comp and benefits content.
Speaker Change: Benefits expense was $7 1 million in the quarter compared to $15 4 million in the prior year period, and 11.0 million versus $51 2 million for the respective year to date periods.
Speaker Change: The primary reduction is related to lower share based compensation expense of $5 1 million for the quarter and $31 1 million year to date as compared to prior periods.
Speaker Change: The higher share based compensation cost in the prior fiscal year were associated with our public listing in June 2023.
The reduction also reflects lower head count in certain areas related to <unk> development, a more focused sales effort and a higher level of automation throughout the organization.
Speaker Change: GAAP net income for the current quarter was $9 7 million and $54 1 million for the year to date period, which led to basic earnings per share of $2 98 per share for the quarter and $14 58 per share for the current fiscal year for the class a common stock.
Speaker Change: On an adjusted basis for segments attributable to Ben's equity holders, we had an operating loss of $2 3 million as compared to a 12.0 million operating loss in the second quarter of the prior fiscal year.
Speaker Change: And a $6 8 million segment operating loss compared to 32.0 million segment operating loss for the respective year to date periods.
Speaker Change: Permanent equity improved from a deficit of $148 3 million as of June 32024 to a deficit of $13 2 million as of September 32024.
Speaker Change: Next we will move to our primary business segments than liquidity, which generates interest revenue for supplying liquidity off the balance sheet and been custody, which produces fee revenue for the use of the platform and trust services.
Speaker Change: As typical of how we will be focusing my discussion on these business segments as it's their operations, along with corporate and other that accrues to <unk> equity holders.
Speaker Change: During the second quarter of fiscal 2025 been liquidity recognized a 12.0 million recognized 12.0 million in base interest revenue up 10, 4% from the prior quarter due to slightly higher carrying value of the loans receivable driven by compounding interest.
Speaker Change: Set by higher allowances for credit losses.
Speaker Change: Operating income and adjusted operating income for the quarter was $2 9 million compared to an operating loss of half a million for the prior quarter. The improvement was primarily due to lower credit loss adjustments due to better comparable performance of the loan collateral portfolio along with higher revenue.
Speaker Change: Moving on to mend custody now of alternative assets and other securities and custody at period end was $385 1 million compared to $381 2 million as of March 31, 2024, the increase was driven by unrealized gains on existing assets offset by distributions during the period.
Speaker Change: Revenues applicable or have been custody were flat sequentially at $5 4 million for the quarter.
Speaker Change: Operating income increased from $4 3 million compared to $1 3 million, reflecting lower goodwill impairment charges.
Speaker Change: $3 million in the current quarter as compared to $3 1 million in the prior quarter adjusted.
Speaker Change: Operating income for the current quarter was $4 6 million an increase of four six compared to $4 4 million for the prior quarter, primarily due to slightly higher revenues and slightly lower cost.
At the end of the quarter the company had cash and cash equivalents of $4 5 million and total debt of $124 1 million distributions received from alternative assets and other securities held in custody totaled $5 3 million for the quarter and $12 $5 million year to date compared to $14 3 million and $26 3 million for the same periods in the prior year.
Speaker Change: That concludes my remarks for the quarter.
Speaker Change: Thank you we will now take questions from the analyst community.
I'd like to ask a question. Please press star one one is.
Speaker Change: For your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Speaker Change: Our first question comes from Michael Kim with Zacks small cap research your line is open.
Michael Kim: Hey, everyone. Good morning, Thanks for taking my questions.
First.
Michael Kim: I'd just be curious to get your thoughts on what you may be seeing in terms of demand trends and loan origination. So just wondering if.
Michael Kim: You've seen a step up in activity just following the introduction of the maps pricing system and the board.
Michael Kim: More recent authorization of the exchange Trust product plan, and then just related to that any any perspectives on your marketing and advertising efforts just to capitalize on that demand.
Brad Hepner: Good morning, Michael This is Brad.
Speaker Change: I'll address your question here I appreciate your attending today.
Speaker Change: What we're seeing for the demand is demand for liquidity from private market assets, it's not abated at all from our vantage point, if anything as investors continue to allocate private market assets. The pent up demand that we've been speaking about for some time continues to grow and there is still largely unmet by other industry solutions.
Speaker Change: I've always said I don't believe that there's near enough capital in the industry.
Speaker Change: The <unk>.
Speaker Change: Amount of demand the distributions have been slowing over the last two to three years completely slowing in the industry and the amount of demand is like a rat going through a snake, we've got a lot here to come out and experience once.
Speaker Change: Investors.
Speaker Change: Continue to pursue their need for liquidity now we're excited to have launched maps. This past quarter. It came out of beta and we launched it we continue to be encouraged by the results that it's going to reduce the time required to underwrite and value private market assets to as little as 15 days now that compares to institutional transactions.
Speaker Change: That can take as long as 15 months, that's how long may take.
Speaker Change: Because we have standardized documentation that is examined by banking regulators for the integrity and for the safety of our customers and because we have maps. We are now able to reduce that time, and we're hoping to get that down to one <unk>.
Speaker Change: <unk> 15 days, we plan on continuing further developments to maps with the potential for increased functionality rolling into 2025.
Speaker Change: We were limited in our ability to close liquidity and primary capital transactions during our second fiscal quarter.
Speaker Change: And that's due to us seeking stockholder approval to increase the number of authorized shares of common stock we receive that in October.
We do expect to be in a position to begin closing deals again later in this quarter. It takes time for the.
Speaker Change: <unk>.
Everything thats involved in the new issuance of our authorization of stock that fuels, our balance sheet in order to finance these attractive liquidity offerings.
But despite this limited ability to close transactions.
Speaker Change: We've actively being in the market working with our key customer segments, we are creating awareness for <unk> products and services. We've address three areas in particular that we're seeing very encouraging green shoots for our business and that includes our digital marketing and advertising strategy.
Speaker Change: That pushes been content. It includes our proprietary sourcing channels through our <unk> solutions.
Speaker Change: Unit and through the Advisory Channel and then of course, we have become much more active now in industry conferences and events, which lead to their own lead generation for US now. This market strategy. Overall has resulted in continued market awareness across all of our product suite, specifically, our GP <unk>.
<unk> primary commitment program and our exchange Trust products.
Speaker Change: We're particularly encouraged that we're getting the right results out of all of our efforts in the second quarter. It is now the third and fourth quarter here that we need to bring those home.
Speaker Change: Performance of beneficial.
Speaker Change: Got it that's very helpful. Appreciate that Brad and then.
Speaker Change: Any any updates on your new business initiatives that you've previously mentioned around.
Related services and alternative securities lending.
Yes.
Speaker Change: Yes.
Speaker Change: We continue to work on both of those with a focused with a dedicated and focused team now.
Speaker Change: Now I want to reiterate that our to answer. This question I think we need to re iterate. Our total total addressable market. It's in the Investor relations deck.
Speaker Change: We show that over two trillion dollars net asset value has held within <unk> target markets in the U S alone.
Speaker Change: Over 15 trillion in global alternative investments I may have said $2 billion two trillion in Nab held in our target markets alone.
Speaker Change: We do expect liquidity from these target markets.
Speaker Change: Our market in particular to be that.
Speaker Change: Demand for it to be in the $60 billion range.
Speaker Change: With an additional $100 billion growing to about $100 billion over the next five years alone.
Speaker Change: Industry.
Speaker Change: Participants.
Speaker Change: We can expand that overall with our scalable lending platform.
Speaker Change: This solution could exceed that for the overall liquidity. So as we see $60 billion growing to a $100 billion, if investors could effectively borrow against their portfolios.
Speaker Change: And borrow from commercial banks for example, we could see that demand.
<unk> surpassed just by borrowing.
Speaker Change: A more attractive not more but second just as attractive market for us. We believe we're nicely positioned to potentially provide a platform that will help introduce potential lenders commercial lenders credit lenders and so forth.
Speaker Change: To introduce those lenders with private market investors of all sizes seeking to borrow against their alternatives and we could provide the infrastructure to make that happen we can provide.
Speaker Change: Lean management systems, we can provide.
Speaker Change: The covenant compliance and we can sit in the middle providing that so we're continuing to have productive conversations with key partners and customers across the private market ecosystem that will hopefully introduced a lending platform and solutions for alternative asset investors in the first half of 2025. So those are ongoing just in <unk>.
Speaker Change: Summary, I view that to be.
Speaker Change: As big if not bigger market than our current market and our systems are designed to sit right in the middle to facilitate that type of lending off of our all access platform.
Speaker Change: Okay.
Speaker Change: Got it thanks for that and then maybe just finally.
Speaker Change: Just curious with with a new administration coming in.
Speaker Change: Would you anticipate that we could see a renewed cycle of investment focused on.
Speaker Change: Starting new businesses and the capital needs to support that trend and how that might potentially drive a step up in the need for liquidity.
Speaker Change: So.
Speaker Change: It's great to ask that question I'm just completed a conference here in the Corp. Dev Conference and of course, it's one of the first conferences of the industry following the election.
Speaker Change: And.
Speaker Change: Lot of discussion on this point specifically on this point and I think we first need to start answering this point from the standpoint of what does it mean for liquidity out of alternative asset portfolios and the general assumption is that we're going to becoming much more friendly capital formation economy in the United States and that will be.
Speaker Change: Led by various regulatory changes that were already hearing about in the press and reading about in the press regulatory leadership changes I might say and so the conference participants are particularly excited about the outcome of that but that outcome is going to be 24 months away and the first step of that outcome and the expectation is.
Speaker Change: A much more robust and improved public offering market initial public offering market and that then leads to the potential for liquidity, which means that we will see an uptick overall when you have it's very closely correlated when you have liquidity and distributions coming out of alternative asset portfolios you also.
Speaker Change: Then have a correlated in expansion in deals getting done and transactions getting done let's keep in mind that we're coming off of about three years of very poor fund raising results in the industry, but for the top 10 largest private equity firms. Okay. So it's not like we're coming in with a great big.
Speaker Change: The amount of dry powder of money to go to work.
Speaker Change: First thing we need to start seeing is an improvement in liquidity.
Speaker Change: Since were 12 to 24 months or more like 24 months out of actually seeing that of turning this economy and actually seen it it's going to lead to a near term demand for people to get liquidity from a beneficent and other industry participants to get liquidity, and then turn it around and invest it back into new alternative.
Speaker Change: <unk>. So in brief here in summary, we've got to see liquidity going hand in hand for new investments to happen in an expansion of deals getting done we don't have enough dry powder out there to take advantage of the potential for this golden age.
Speaker Change: More money is got to be realized and Thats, where beneficent can step in we will help to expedite the realization of that liquidity that money will be ready to go to work into the new transactions and so forth. It gets done needs to then be.
Speaker Change: Met with at the end of this needs to be met with an improved public offering market an improved M&A market and it's the first conference I have been to where people are talking about deals getting done.
Speaker Change: Two years from now.
Speaker Change: This machine turning whereas prior conferences have been about hunker down we don't know how long the storm is going to go and everybody is feeling like the storm is lifting so.
Speaker Change: From my standpoint, we are very encouraged by what we hear of industry participants and what we're already reading in the last 10 days.
Speaker Change: Understood. Thanks, a lot of sense I appreciate the color and thanks for taking my questions.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Brendan Mccarthy with Sidoti Your line is open.
Speaker Change: Yeah.
Speaker Change: Great. Thank you good morning, everybody I wanted to start off on the underlying asset alternative asset portfolio can you provide some incremental color on how that underlying.
Speaker Change: Or maybe more broadly.
And then are you seeing signs that monetization that distributions are starting to pick up.
Hey, Brendan it's Greg.
Speaker Change: I'll provide a few comments related to our collateral portfolio and then.
Speaker Change: I will share some views with the industry performance on more property I think generally speaking, we're very pleased with the underlying asset.
Speaker Change: Collateral performance.
Speaker Change: Broadly speaking when you when you look at the performance excluding the interest in.
Speaker Change: Our former parent company that's on our balance sheet. The last few quarters, including this quarter, we reported on today and three out of the last four quarters, we are seeing positive increases the unrealized NAV.
Speaker Change: Of that portfolio that doesn't necessarily mean that total NAV has increased obviously because of the distributions.
Speaker Change: Over the last two quarters total NAV with the reduction with distributions have increased.
Speaker Change: In terms of distributions as I mentioned in the prepared comments, we have seen a fall in those year to date distributions as compared to the same period last year.
Speaker Change: When you think about that as a percentage of the beginning.
Speaker Change: NAV each period, it does equate to about a 28% decline in the distribution rate.
Speaker Change: Which is well off in a long term norms that you might expect for the portfolio.
Speaker Change: As far as what we're seeing and observing related to potential activity in the collateral portfolio that might lead to distributions in the future I would describe it as being in the early innings of a potential falling of the slower distributions that have been in the alternative asset space for the last few years, our observations are coming from.
Comments that we're hearing from the general partners and our condo portfolio about letters of intent for portfolio sales company starting to be executed.
Speaker Change: Sales processes and or IPO explorations, beginning to happen are being launched.
Speaker Change: All of which are good signs that future distributions could be coming in the quarters, but as I mentioned it's in.
Speaker Change: In the early innings of that process and there is obviously.
Speaker Change: A variety of factors that could influence those events actually coming to fruition.
Brad Hepner: And then Brad do you want to share some views that you have about the industry.
Brad Hepner: Yes, I would.
Brad Hepner: If we look.
Speaker Change: Well first thing I want to welcome you to the call and your questions here I. Appreciate your taking the time to join us here.
Speaker Change: If you look at the industry overall.
Speaker Change: The norms for an alternative asset diversified portfolio diversified by vintage year.
Speaker Change: In our industry has historically seen a distribution rate of about 16% of net asset value per year. So that's a broadly diversified across many many years across many subclass of alternatives you should expect about 16% per year on a media.
And basis now if you add a band for variability between the years.
Speaker Change: Each year of about 4% of net asset value that provide you a band up 12% to 20% of NAV. Okay. Good portfolio to reach that 20% of nap in other words above median portfolios now.
Speaker Change: Starting about three years ago.
Speaker Change: And specifically for the past two years, we have seen industry distribution rates for our diversified portfolio dropped to 8% 8%.
That's 30% below the low end of the band.
Speaker Change: It's almost unheard of in the economy, that's 50% 50%.
Speaker Change: The mid.
60%.
Speaker Change: I'm, sorry, 60% below the high end now that doesn't tell the overall store okay. It's even a little more concern. The drop is led by below median performing funds in the third quartile and fourth quartile <unk> been producing no distributions to speak up.
Speaker Change: Not so its all your best.
Speaker Change: Managed funds that have continued to deliver distributions over the last two and a half year best half. Okay. So that's very troubling in the economy. So a very large base.
Speaker Change: Funds are skewing the performance overall.
Speaker Change: For our private equity shops.
Speaker Change: Now, while we're very disappointed with industry distribution rates that we've seen in the past.
Speaker Change: We have seen net asset values remained steady to slight increases in unrealized gains.
Speaker Change: That portfolio values are maintaining and improving values. Okay. So it's not like those distributions are gone forever right. They just haven't been realized and we're <unk>.
Speaker Change: Some improvement on them in our portfolio, we're seeing some pretty good improvement on a handful of a properly positioned inflation hedge type investments.
Speaker Change: And companies, it's going to take our upcoming new economy to convert that unrealized to realize distributions. These changes are going on.
Speaker Change: What we read here in the last 10 days these changes only speak good.
Speaker Change: About what can come now.
Speaker Change: With as I said in my last answer with slowing distributions, it's correlated to it doesn't cause but it is correlated to slow slowing deals deals getting done if you'd want to see realizations. So they can invest back in to the economy. So liquidity is going to have to catch up that's going to take time.
Speaker Change: Again, Thats, where Ben steps in and provides that liquidity in order to facilitate the movement of those funds.
Speaker Change: One sector, we have not seen this troubling confluence of factors is in the infrastructure private equity type deals. They continued to steam roll forward pretty well and that probably speaks to the infrastructure bills and so forth.
Speaker Change: The only real economic catalysts for business in the past few years, they continue to do fairly well.
Speaker Change: So my overall summary on this is.
We should Dennis portfolio compared to the industry.
Speaker Change: It's comparable we've had our distributions is as Greg said, we are seeing now distribution start to be.
Speaker Change: More.
Projected here more coming up more quickly.
Speaker Change: The industry has really had its first ever.
Speaker Change: Experience a real slow.
Speaker Change: Distribution slow to note distributions overall, that's going to change that's our forecast it's going to change now.
That's great. Thanks, Brian Thanks, Greg I really appreciate the color there.
Speaker Change: One more question for me can you walk us through the transaction that reclassified I think it was roughly $126 million of temporary equity to permanent equity and then can you discuss the benefits from a capital or regulatory perspective.
Speaker Change: Yes, Brian it's Greg I'll take that one it's a good question. So the transaction itself is simply dividing a portion of the existing <unk>.
Speaker Change: Referred series a.
Speaker Change: Security into a new security so 50% of the existing balance will remain under the previously existing security and then 50% into new security that has the same terms as it previously did other than there is not a cash redemption feature.
Speaker Change: Related to the new security so <unk>.
Previously the preferred security was required to be classified as temporary equity under U S. GAAP and that was really due to a combination of two factors that are features that are held in that security by the holder was the cash redemption feature and then also an equity conversion feature with the move of 50% to a new security that does not have the cash.
Speaker Change: <unk> feature.
Speaker Change: This allows the security to no longer meet the temporary equity classification, such that it can be re classed into permanent equity in our in our balance sheet now the primary benefit really pertains to our compliance with the continued listing requirements of NASDAQ those are kind of three.
Speaker Change: Features there which is.
Speaker Change: Net income component.
Speaker Change: $35 million market capitalization or positive permanent equity of $2 $5 million and temporary equity is specifically not included in that $2 $5 million positive permanent equity.
Speaker Change: When you think about our permanent equity principally due to the large goodwill impairments that we had last year, which drove net losses in our 'twenty.
Speaker Change: 2024 numbers it reflected that deficit of $148 3 million that we discussed earlier so the reclassification.
Speaker Change: Of $125 million from the temporary equity is permanent equity really moves the company closer.
Speaker Change: To the permanent equity requirement and that's obviously important to the company and then we'll also have to require the company to demonstrate going forward. Once we get compliant that we'll be able to maintain compliance.
Speaker Change: For the long term.
Speaker Change: Understood. Thanks for that detail, Greg that's all from me thanks, everybody.
Speaker Change: Thank you Brandon.
Speaker Change: Thank you there are no further questions I'd like to turn the call back over to Dan Callahan for any closing remarks.
Speaker Change: Just wanted to thank everybody for attending this morning, and a reminder, that the replay of this call will be available on the shareholders section of <unk> Dot com.
Speaker Change: And I want to wish.
Speaker Change: Wish everyone a great Friday.
Speaker Change: Thank you for your participation. This does conclude the program you may now disconnect everyone have a great day.
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Speaker Change: Hum.
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Speaker Change: Yes.
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Speaker Change: Yes.
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Speaker Change: Sure.
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Speaker Change: Yes.