Q3 2025 Beneficient Earnings Call
Good day, and thank you for standing by walking to the beneficiary third quarter fiscal 2025 earnings webcast. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question.
And answer session.
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Please be advised that today's conference is being recorded.
Speaker Change: Now, let's turn the conference over to your Speaker for today, Dan Callahan. Please go ahead.
Speaker Change: Good morning, everyone and thank you for joining us for Beneficent fiscal third quarter 2025 conference call and webcast. In addition to the call and webcast. We issued an earnings press release that was posted to the shareholder section of our website at shareholders that trust and Dot Com today's webcast.
Speaker Change: As the operator indicated is being recorded and a replay will be available on the company's website.
Speaker Change: On today's call management's prepared remarks may contain forward looking statements 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.
Speaker Change: And the risk factors sector sector section of our Form 10-K and in subsequent filings, we make with the Securities and Exchange Commission.
Speaker Change: Forward looking statements represent managements current estimate and beneficent assumes no obligation to update any forward looking statements in the future. Today's call also contains certain non-GAAP financial measures, including tangible book value attributable to bend the public company stockholders. Please refer to our earnings press release, which.
Speaker Change: Available on our website for important disclosures regarding such measures, including reconciliation to the most comparable GAAP financial measures.
Speaker Change: On the call today are Brad Heffner, the CEO, and chairman and Greg <unk>, Chief Financial Officer, I'll hand, the meeting over to Brad Hepner go ahead Brad.
Speaker Change: Thank you Dan and good morning, everyone and thank you for joining us I'm here. This morning to share with you the accomplishments that the beneficial team has achieved over the last quarter as we work to build on our previous success two quarters of positive GAAP earnings per share.
Speaker Change: For our fiscal year to date as of December 31, 2024, and is earned $10 30.
Speaker Change: Basic earnings per share and 12 centers fully diluted earnings per common share.
Speaker Change: I will lead off with key platform developments designed to accelerate our capabilities for delivering both liquidity and primary capital to investors in and managers of alternative assets, while preparing for the future emergence of digital alternative asset markets.
Speaker Change: Over the past quarter, we have strengthened our team improved our balance sheet and continued to execute our liquidity and primary capital financings in the private asset marketplace.
Speaker Change: We continue to educate the market regarding Ben's unique business model, our technology platform and our growing service offerings that we believe have the potential to drive shareholder value.
Speaker Change: Then was created to provide fiduciary products and services that deliver liquidity and primary capital for holders and managers of all types of alternative assets in.
Speaker Change: In addition to serving general partners, who manage and sponsor alternative assets. We are developing our business to focus on the target markets of high net worth individuals and small to mid sized institutions. These.
Speaker Change: These markets have been underserved when it comes to exiting alternative assets prior to their maturity. We believe this market includes an unmet demand for liquidity of over $60 billion annually for smaller investors and institutions.
Speaker Change: Plus another more than $150 billion annually in general partners seeking liquidity for their limited partners through restructurings and continuation vehicles in the secondary markets.
Speaker Change: Unfortunately, the traditional process, especially for our targeted market of smaller investors seeking liquidity, it's incredibly complex, it's expensive and it's time consuming if liquidity can be found at all.
Speaker Change: Our internally developed proprietary Fintech platform, we branded as all access provides a simple expedient and cost expansion online tool to complete these important transactions online in a matter of days to weeks if it's desired.
Speaker Change: In addition to demand for liquidity from alternative assets, our market faces substantial demand for more primary capital into new alternative assets.
Speaker Change: The <unk> data shows that it has been taking an average of 18 months for general partners to raise their private equity funds.
Speaker Change: Now thats approximately double what it took them just three years ago.
Speaker Change: We believe we now have a solution to help address that need as well.
Speaker Change: These are the foundations of our business and we produced profitable progress for our stock holders of <unk> 12 of earnings per common share for the nine months ended December 31, 2024, which we believe will accelerate our capabilities going forward.
Speaker Change: Now I'll move on to the fiscal third quarter highlights.
Speaker Change: In October we announced the addition of banking legal and compliance veteran Patrick Donigan to our board of directors, which I discussed on our last call.
Speaker Change: In November we announced the addition of Kevin when Dell to our board of Directors. She currently serves as president and CEO <unk> blockchain and cyber security Advisory firm Trust chains, Karen brings deep expertise in the digital asset markets technology M&A cyber secure.
Speaker Change: <unk> corporate governance, and the emerging block block chain in <unk> space.
Speaker Change: Her expertise provides unique decision, making skills for board level strategic and tactical requirements. She has held executive and board roles in U S and global private and public companies. In addition to being an independent director been appointed her to serve on our audit products.
Speaker Change: A related party transactions.
Speaker Change: And enterprise risk Committee of our board of directors.
Speaker Change: Now in December we announced the <unk> entered into an agreement to acquire Mercantile Bank International Corporation subject subject to certain closing conditions.
Speaker Change: In connection with this important proposed acquisition, we announced the hiring of Louise Jones, as managing director of capital markets and custody operations for beneficent.
Speaker Change: Louise his career on Wall Street spans four decades, including being the youngest enrolment to hold his seat as a member of the New York Stock Exchange.
Speaker Change: Among her responsibilities she will manage the integration of mercantile bank and she will spearhead dense capital markets activities as well as oversee expansion of the company's fee based alternative asset custody business, including the launch of a depository receipt companion line.
Speaker Change: Yeah.
Speaker Change: Transactions that we completed in our fiscal third quarter include this proposed acquisition of Merck Merck until bank, which is a proposed.
Speaker Change: Puerto Rico, which is a Puerto Rico based international financial entity known as in IFC.
Speaker Change: Puerto Rico is a leading jurisdiction working in conjunction with the OCC to provide expanded authorization for IRB banks to engage in activities such as asset management coding services and digital asset market solutions among other key areas.
Speaker Change: Okay.
Speaker Change: It is licensed and regulated by the office of financial institutions of Puerto Rico.
Speaker Change: And may provide specific banking and other financial activities for persons entities and organizations around the globe that are nonresidents.
Speaker Change: We believe this acquisition will enable us to offer an expanded range of companion custody clearing and control account fee based services that complement our existing businesses on a broader scale, which we expect has potential to generate additional cash flow in the near term.
Speaker Change: The objective of this acquisition is to deliver additional custody services for international investors and digital asset investors generally have a higher fee rate structure and potential for higher margins than traditional custody services.
Speaker Change: We also believe the proposed acquisition of <unk> has the potential to enhance and broaden our current offerings in ways that may open new international opportunities, allowing us to further democratize the market for illiquid alternative assets.
Speaker Change: In Rfps authorized activities may include custody clearing.
Speaker Change: Payments and related traditional and digital asset market products and services as approved by the OCI F <unk>.
Speaker Change: Fees can also offer traditional banking services.
Speaker Change: <unk> correspondent deposits.
Speaker Change: Lending investments and trusts, we anticipate the proposed acquisition if and when completed would position them to offer alternative asset custody services that include among other potential items, a companion line of business focused on issuing depository receipts to assist holders of foreign investment.
Speaker Change: Gain access to the capital markets in international jurisdictions, and May yield higher fee assessments than more traditional customary offerings.
Speaker Change: Also in late December as part of a separate transaction, we entered into an agreement to revise the liquidation pride to priority a beneficent company Holdings LP, that's a subsidiary.
Speaker Change: The company, we referred to as BCH in order to among other things enhance and further.
Speaker Change: Enhance our current and future shareholder value, especially for Vince public common stock.
Speaker Change: Stockholders and to drive long term growth.
Pursuant to the agreement the holders of the preferred equity or BCH agreed to amend the governing documents of BCH to allow the company's public company common stockholders to share in through the indirect ownership of the company in BCH liquidation priority previously reserved only for the preferred equity.
Speaker Change: We anticipate this transaction will result in creating tangible book value attributable to band common.
Speaker Change: Public company stockholders, which we believe will provide substantial value for our stockholders and enhanced long term growth opportunities.
Speaker Change: Additionally, we anticipate this transaction has the potential to be a catalyst for closing future liquidity transactions and demonstrates our commitment to delivering shareholder value.
Speaker Change: Also during the fiscal third quarter, we continued to strengthen our capital structure, increasing our permanent equity by $35 million.
Speaker Change: <unk> designation of certain preferred equity.
Speaker Change: Yes.
Speaker Change: To permanent equity.
Speaker Change: Furthermore, during the fiscal.
Speaker Change: Fiscal third quarter, we closed a $1 $4 million primary capital commitment transaction.
Speaker Change: Our originations team is now focused on progressing future prospective transactions now both liquidity and primary capital and we look forward to building on this initial momentum all through 2025, as we continue to evaluate additional opportunities that align with our strategic objectives.
Speaker Change: These developments continue to provide meaningful enhancements to our business model and.
Speaker Change: And improved.
Speaker Change: And improvements on the competitive dynamics, we believe we already possessed.
Speaker Change: Im very proud of our efforts over the last three quarters to broaden our capabilities and improve the product offerings of the business and welcome new experienced talent to our management team and our board of directors, we've taken steps to improve our financial position and are back to originating new financing.
Speaker Change: These steps have culminated in banner $10 30 to basic earnings per share and 12 cents of fully diluted earnings per share to date as of our third quarter ending 30, <unk> December 31 2024.
Speaker Change: With these improvements in motion, we will continue to work to educate the market on who we are.
Speaker Change: What we do and on the value and growth opportunity, we represent for our shareholders now with that I will turn the call over to our CFO Gregg has helped to go over our operating and financial results.
Gregg: Thank you Brad, let's now turn to our quarterly results and financial position as of December 31, 2024, first I'll start with a few highlights from the quarter we.
Gregg: We reported investments with a fair value of $334 3 million up sequentially from $329 1 million at the end of our prior fiscal year.
Gregg: These investments serve as collateral for been liquidities net loan portfolio of $266 million and $256 2 million respectively revs.
Gregg: Revenues were a positive $4 4 million and 20 301 million for the third quarter and year to date periods in fiscal 2025 as compared to negative $10 2 million of negative $55 7 million in the prior year GAAP.
Gregg: GAAP revenues, principally reflect mark to market adjustments on the investments that serve as collateral to Ben's loan portfolio.
Gregg: Excluding the noncash goodwill impairment in the prior comparable period operating expenses declined 38% to $13 9 million in the third quarter of fiscal 2025 as compared to $22 5 million in the same period for fiscal 2024 on.
Gregg: On a year to date basis, excluding the noncash goodwill impairment and the loss contingency released in each period as applicable operating expenses were $53 2 million in fiscal 2025 as compared to $111 7 million in fiscal 2024.
Gregg: Permanent equity improved from a deficit of $148 3 million as of June 32024 to a positive $14 3 million as of December 31, 2024 through a combination of transactions re designating approximately $165 million of temporary equity to permanent equity and additional capital from <unk>.
Gregg: Sales and liquidity transactions offset by net loss allocable to permanent equity classified securities of $6 9 million during the applicable period.
Gregg: Reported GAAP net loss attributable to Ben's common shareholders for the current year of $8 6 million and GAAP net income of $51 9 million for the year to date period, which led to a basic loss per share of $1 32 for the current quarter and basic earnings per share of $10 30 for the year to date period.
Gregg: Should also note that in our conversion to diluted that 99% of that difference relates to the impact from the conversion of our preferred a zero and a one equity that is largely held by insiders on our board and management team.
Gregg: We announced the transaction on December 23, 2020 forward to revise the liquidation priority of BCH and provide tangible book value and other benefits to Ben's public common company shareholders, which on a pro forma basis amounted to $9 $2 million of tangible book value to Vince Public company stockholders using December 31, two.
Gregg: 24 financial information.
Gregg: And we announced an agreement to acquire Mark until bank in exchange for an aggregate purchase price of $1 5 million as Brad described.
Gregg: Next we'll move on to our primary business segments been liquidity, which generates interest revenue for supplying liquidity off the balance sheet and bank custody, which produces fee revenue for the use of the platform and trust services as typical I will be focusing my discussion on these business segments as it's their operations, along with corporate and other that accrues defense equity.
Gregg: Orders during.
Gregg: During the third quarter of fiscal 2025 been liquidity recognized $11 3 million of interest income a decrease of five 7% from the quarter ended September 32024, primarily due to a higher percentage of loans being placed on non accrual status, partially offset by the effects of <unk>.
Gregg: Compounding interest on the remaining loans and.
Gregg: And liquidity recognized $34 1 million of interest income for the nine months ended December 31, 2024 down 6% compared to the prior year period, primarily resulting from higher level.
Gregg: Nonaccrual loans and loan prepayments, partially offset by new loans originated.
Gregg: Operating loss for the fiscal third quarter was $2 9 million a decline from operating income of $2 9 million for the quarter ended September 32024.
The decline in operating performance was due to higher intersegment credit losses in the current fiscal period as compared to the quarter ended September 32024.
Gregg: Operating loss was <unk> 5 million for the nine months ended December 31, 2020 forward improving from an operating loss of $1 8 billion in the prior year period. The prior year period loss was primarily driven by a noncash goodwill impairment totaling $1 7 billion in credit losses, largely related to securities of our former parent company.
Gregg: Adjusted operating loss was $5 million for the nine months ended December 31, 2024, compared to adjusted operating loss of $11 8 million in the prior year period with the improvement in adjusted operating loss, primarily related to lower credit loss adjustments recognized in the current fiscal year.
Gregg: And lower employee compensation due to lower head count.
Gregg: Moving on to bank custody.
Gregg: And then the alternative assets and other securities held in custody during the fiscal third quarter increased to $385 1 million as of December 31, 2024, compared to $381 2 million as of March 31, 2020 for the.
Gregg: The increase was driven by $1 4 million of new alternative assets held in custody and unrealized gains on existing assets principally related to Nab adjustments based on updated financial information received from the Fund's investment manager of our sponsor during the period offset by distributions during the period.
Gregg: Revenues are applicable to bank custody were $5 4 million for the fiscal third quarter compared to $5 4 million for the quarter ended September 32024.
Gregg: Similar amounts of revenue for the period were a result of stable NAV of alternative assets and other securities held in custody at the beginning of each applicable period when such fees are calculated.
Gregg: Revenues were $16 2 million for the nine months ended September 31, 2024 down 14, 7% compared to the prior year period, primarily due to lower NAV of alternative assets and other securities held in custody.
Gregg: Operating income for the fiscal third quarter decreased to $3 5 million from $4 3 million for the quarter ended September 32024. The decrease was primarily due to credit losses related to certain fees collateralized by securities of our former parent company. Additionally.
Gregg: Additionally, there was no cash and there was no noncash goodwill impairment.
Third fiscal quarter as compared to non cash goodwill impairment of <unk>.
Gregg: <unk> 3 million for the quarter ended September 32024.
Gregg: Operating income was $9 1 million for the nine months ended September 31, 2024, compared to operating loss of $538 8 million in the prior year period with the increase in operating income principally related to significantly larger noncash goodwill impairment in the prior year period of $554 6 million.
As compared to $3 4 million in the current fiscal year.
Gregg: Adjusted operating income for the fiscal third quarter was $4 8 million compared to adjusted operating income of $4 6 million for the quarter ended September 32020 for.
Gregg: The increase was due to slightly lower operating expenses, principally related to lower employee compensation due to lower head count.
Gregg: Adjusted operating income for the nine months ended December 31, 2024 was $13 9 million compared to adjusted operating income of $15 8 million in the prior year period with the decrease in adjusted operating income primarily due to lower revenues related to lower Nab of alternative assets and other securities held in custody.
Gregg: Actually offset by slightly lower operating expenses during the current fiscal year.
Yes.
Gregg: As of December 31, 2024th the company had cash and cash equivalents of $4 1 million and total debt of $122 9 million.
Gregg: Distributions received from alternative assets and other securities held in custody totaled $19 3 million for the nine months ended December 31, 2024, compared to $38 4 million for the same period of fiscal 2024.
Gregg: Total investments at fair value of $334 3 million at December 31, 2024 supported liquidity its loan portfolio.
Gregg: This concludes my prepared remarks on the financials, we will now open the call to questions from our covering research analyst Operator will you. Please give the instructions for Q&A.
Gregg: Thank you.
Gregg: If you would like to ask a question. Please press star one on your telephone you hit the automated messages biopsy. You had just raised we also ask that you. Please wait for your name and company to be announced before proceeding with your question one moment, while we compile the Q&A roster.
Michael Kim: Our first question today will come from the line of Michael Kim.
Speaker Change: Of Zacks Your line is open.
Speaker Change: Hey, everyone. Good morning.
Speaker Change: First.
Speaker Change: I know you recently closed the.
Speaker Change: The primary capital commitment with Adas.
Speaker Change: Debt management, but just be curious to get your perspectives on how important the recently announced.
Speaker Change: Public stockholder enhancement transactions.
Speaker Change: We will be just in terms of facilitating.
Speaker Change: Reaccelerate Exchange Trust activity and then just related to that would you expect a more meaningful step up after the transactions.
Speaker Change: <unk> been approved and completed later this year.
Brad Hepner: Hi, Michael It's Brad Hepner al.
Speaker Change: Answer your question here.
Speaker Change: We have been as you are maybe aware we have been.
Speaker Change: Out of market with the exchange Trust product line for the better part of 15 months and so we introduced <unk>.
Speaker Change: Back into the market the exchange Trust product line as far as closings, we have kept people informed about it during that period of time, but as far as closing that product line with potential <unk>.
Speaker Change: <unk>.
Speaker Change: We re.
Speaker Change: <unk> entered the market here, just a few weeks ago.
Speaker Change: And.
Speaker Change: Last month.
Speaker Change: And we're just prior to our year end, rather and as part of that we wanted to be able to introduce the capital stack enhancements delivering.
Speaker Change: Additional tangible book value to our common shareholders for the purpose of being able to point to the parties are counterparties in it that.
Speaker Change: There is a.
Speaker Change: A meaningful tangible current tangible book value and how that grows over time, we do believe as you suggest we do believe that that is going to be an attractive.
Speaker Change: Economic element for our one attractive element.
Speaker Change: Attractive economics for our Counterparties in the transaction so.
Speaker Change: We are pointing them to that transaction to that announcement and I believe that once it is.
Speaker Change: The formal completed process is done and that transaction is in place.
Speaker Change: It will lead to additional transactions being done and the ability to for us to accelerate.
Speaker Change: Closings in the near term so I think it is.
Speaker Change: Positive development and has been very well received in the market and should help us accelerate closings once we have it fully completed.
Speaker Change: Got it that's helpful and then just a second.
Speaker Change: I know in aggregate the loan portfolio was essentially flat on a sequential quarter basis. So just any color on that.
Speaker Change: Maybe some of the underlying moving parts during the quarter as it relates to.
Speaker Change: Unrealized marks our deal flow and our distributions.
Greg: Greg would you like to.
Speaker Change: Provide a first answer and then I'll.
Greg: Follow up with a little more color as well.
Greg: Theyre microphone, maybe on mute here sorry.
Greg: Alright.
Greg: We were on mute.
Greg: Yes, as you noted Michael the sequentially the the investments that collateralized the loan portfolio was.
Greg: Basically flat period over period.
Greg: The.
Greg: As a percent I think.
Greg: The unrealized gains came in at about 67% of our.
Greg: As the unrealized gain for the quarter.
Greg: On an annual basis distributions.
Greg: For the fourth quarter were about where we expected it maybe a little less.
Greg: With about I think $4 million or so $5 million of distributions for the quarter that really offset those.
Greg: Unrealized gains on the portfolio.
Greg: And I'll add a little more color as well as we move into the December 31.
Greg: Marks and so forth and get a little more understanding of how valuations may change as of the end of the calendar year. Those thats typically a time in which there is a driver.
Greg: We will start to see the.
Greg: The valuation movements here coming up.
Greg: In the next month or two.
Greg: As it relates to year end private company marks.
Greg: The election results.
Greg: Have a positive impact.
On what our expectations are so we.
Greg: <unk> enthusiastic about what we're seeing.
Greg: Under the new administration for opening up the capital markets for more M&A.
Greg: And putting that.
Greg: Putting a.
Greg: <unk> direction and momentum for Ipos.
Greg: Which will lead to additional.
Greg: We expect gains and realization events and then you have the offsetting impact of watching what the.
Greg: The economics related to the tariff strategies may have on.
Greg: On either delaying those realization events or or.
Greg: Having.
Greg: Suppressing the expected gains out of the transaction. So we're moving into that period of time.
Greg: With some positive very positive momentum behind us given the.
Greg: The direction that the markets have taken the expectations of the underlying general partners, who manage these investments in particular, we have a very large portfolio of over 800 different portfolio companies and many of them are primed for realization events, which we.
Greg: Expect to have some.
Greg: Okay.
Greg: Some unrealized appreciation to be recognized upon those realization events.
Greg: Great. That's helpful. Thanks for taking my questions.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And the next question will come from the line of Ashish Shah of Sidoti. Please go ahead.
Ashish Shah: Hi, gentlemen, and thank you for taking my question.
Ashish Shah: Can you tell me about your timeline around when the liquidity transactions could pick up and what that does and it provides the upside or downside to your expectations.
Ashish Shah: Sure.
Ashish Shah: Timeline that we expect here is the approval of the BCH transaction that I discussed in my remarks will.
Ashish Shah: We will be coming and when that is done we expect.
Ashish Shah: An uptick in the transactions.
Ashish Shah: That are.
Ashish Shah: Being worked on right now with Counterparties and also additional interested parties coming in as I said have just really re engaged with all the counterparties.
Ashish Shah: Completing the BCH transaction, so it's really in the.
Ashish Shah: And the.
Ashish Shah: We need to go ahead and move forward with getting that transaction. All completed that does require a proxy votes and thats all being worked on right now and then we would expect to see an uptick as you put it.
Ashish Shah: More frequent and.
Ashish Shah: A greater volume of transactions closing here in the near term.
Ashish Shah: Alright, Thank you and can you provide detail on how the underlying alternative asset collection portfolio is performing more broadly.
Ashish Shah: And then can you.
Ashish Shah: And on the distribution activity and how that impacts your outlook.
Speaker Change: Yes, so I'll pick up where Greg provided some of this insight here in his last remarks.
Speaker Change: Third in our fiscal third quarter ending December 31, we saw unrealized depreciation in the neighborhood of 7%. We saw a similar percentage in distributions Thats why you see the portfolio remaining fairly unchanged on the balance sheet.
Speaker Change: And that comes on two previous quarters of similar type results very similar type results.
Speaker Change: With the expectation of in the U S economy.
Speaker Change: We would expect the distribution rates through 2025, we would expect those to increase and we would expect realization events.
Speaker Change: To be the driver behind that.
Speaker Change: And that we would expect those realization events to reflect a more positive outlook on the <unk>.
Speaker Change: U S economy that we would hope will generate a greater level of unrealized depreciation being realized so seeing some additional pent up value in the portfolio finally being realized in realizing that into distributions.
Speaker Change: Our expectations for 2025 based on the outlook of the U S capital markets is.
Speaker Change: Much more or.
Speaker Change: <unk> is greater than what we experienced in the calendar year 2024.
Speaker Change: And again, that's based on the overall outlook of the <unk>.
Speaker Change: <unk> economy, and the U S capital markets.
Speaker Change: Okay. Thank you so much for taking my questions.
Speaker Change: Thank you and that does conclude today's Q&A session I would like to go ahead and turn the call back over to Dan Callahan for closing remarks. Please go ahead, yes.
Speaker Change: Yes, thanks to everyone for participating on the call and webcast today again, a replay will be available on our website at shareholders Dot Trust and Dot com have a great rest of your day and thanks again.
Speaker Change: Thank you for joining today's conference call.
Speaker Change: You may disconnect.
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Speaker Change: Good day, and thank you for standing by welcome to the beneficial third quarter fiscal 2025 earnings webcast. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
Speaker Change: To ask a question during the session you will need to press star one on your telephone.
Speaker Change: We'll then hear an automated message advising your hand is raced to withdraw your question. Please press star one again please.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: I'd now like to turn the conference over to your Speaker for today, Dan Callahan. Please go ahead.
Speaker Change: Good morning, everyone and thank you for joining us for Beneficent fiscal third quarter 2025 conference call and webcast. In addition to the call and webcast. We issued an earnings press release that was posted to the shareholder section of our website at shareholders that trust and Dot Com today's webcast.
Speaker Change: As the operator indicated is being recorded and a replay will be available on the company's website.
Speaker Change: On today's call management's prepared remarks may contain forward looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today.
Speaker Change: <unk> results and future events could materially differ from those discussed in these forward looking statements because of factors described in our earnings press release, and the risk factors sector sector section of our Form 10-K and in subsequent filings, we make with the Securities and Exchange Commission.
Speaker Change: Forward looking statements represent managements current estimate and beneficent assumes no obligation to update any forward looking statements in the future. Today's call also contains certain non-GAAP financial measures, including tangible book value attributable to Ben's public company stockholders. Please refer to our earnings press release, which.
Speaker Change: Is available on our website for important disclosures regarding such measures, including reconciliation to the most comparable GAAP financial measures.
Brad Hepner: On the call today are Brad Heffner, the CEO, and chairman and Greg <unk>, Chief Financial Officer, I'll hand, the meeting over to Brad Hepner go ahead Brad.
Brad Hepner: Thank you Dan and good morning, everyone and thank you for joining us I'm here. This morning to share with you the accomplishments that the beneficent team has achieved over the last quarter as we work to build on our previous success of two quarters of positive GAAP earnings per share.
Brad Hepner: For our fiscal year to date as of December 31, 2024 vendors or $10 30.
Brad Hepner: Basic earnings per share and 12 <unk> of fully diluted earnings per common share.
Brad Hepner: I'll lead off with key platform developments designed to accelerate our capabilities for delivering both liquidity and primary capital to investors in and managers of alternative assets, while preparing for the future emergence of digital alternative asset markets.
Brad Hepner: Over the past quarter, we have strengthened our team.
Brad Hepner: Proved our balance sheet and continued to execute our liquidity and primary capital financings in the private asset marketplace.
Brad Hepner: We continue to educate the market regarding Ben's unique business model, our technology platform and our growing service offerings that we believe have the potential to drive shareholder value.
Brad Hepner: Then was created to provide fiduciary products and services that deliver liquidity and primary capital for holders and managers of all types of alternative assets.
Brad Hepner: In addition to serving general partners, who manage and sponsor alternative assets we have.
Brad Hepner: We're developing our business to focus on the target markets of high net worth individuals and small to mid sized institutions.
Brad Hepner: Markets have been underserved when it comes to exiting alternative assets prior to their maturity. We believe this market includes an unmet demand for liquidity of over $60 billion annually for smaller investors and institutions.
Brad Hepner: Another more than $150 billion annually in general partners seeking liquidity for their limited partners through restructurings and continuation vehicles in the secondary markets.
Brad Hepner: Unfortunately, the traditional process, especially for our targeted market of smaller investors seeking liquidity, it's incredibly complex, it's expensive and it's time consuming if liquidity can be found at all or.
Brad Hepner: Our internally developed proprietary Fintech platform, we branded as all access provides a simple expedient and cost expansion online tool to complete these important transactions online in a matter of days to weeks if it's desired.
Brad Hepner: In addition to demand for liquidity from alternative assets, our market faces substantial demand for more primary capital into new alternative assets.
Brad Hepner: The <unk> data shows that it has been taking an average of 18 months for general partners to raise their private equity funds.
Brad Hepner: Now thats approximately double what it took them just three years ago.
Brad Hepner: We believe we now have a solution to help address that need as well.
Brad Hepner: These are the foundations of our business and we've produced profitable progress for our stock holders of <unk> 12 of earnings per common share for the nine months ended December 31, 2024, which we believe will accelerate our capabilities going forward.
Brad Hepner: Now I'll move on to the fiscal third quarter highlights.
Brad Hepner: In October we announced the addition of banking legal and compliance veteran Patrick Donigan to our board of directors, which I discussed on our last call.
Brad Hepner: In November we announced the addition of Kevin when Dell to our board of Directors. She currently serves as president and CEO <unk> blockchain and cyber security Advisory firm Trust chains, Karen brings deep expertise in the digital asset markets technology M&A side.
Brad Hepner: Security corporate governance, and the emerging block block chain in <unk> space.
Brad Hepner: Our expertise provides unique decision, making skills for board level strategic and tactical requirements. She has held executive and board roles in U S and global private and public companies. In addition to being an independent director been appointed her to serve on our audit products in.
Brad Hepner: Related party transactions.
Brad Hepner: <unk> Enterprise risk committee of our board of directors.
Brad Hepner: Now in December we announced the ban entered into an agreement to acquire Mercantile Bank International Corporation subject subject to certain closing conditions.
Brad Hepner: In connection with this important proposed acquisition, we announced the hiring of Louise Jones, as managing director of capital markets and custody operations for beneficiaries.
Brad Hepner: Louise his career on Wall Street spans four decades, including being the youngest enrollment to hold his seat as a member of the New York stock exchange.
Brad Hepner: Among her responsibilities she will manage the integration of mercantile bank.
Brad Hepner: And she will spearhead Ben's capital markets activities as well as oversee expansion of the company's fee based alternative asset custody business, including the launch of a depository receipt companion line.
Brad Hepner: Transactions that we completed in our fiscal third quarter include this proposed acquisition of Merck Merck until bank, which is a proposed.
Brad Hepner: Puerto Rico, which is a Puerto Rico based international financial entity known as in IFC.
Brad Hepner: Puerto Rico is a leading jurisdiction working in conjunction with the OCC to provide expanded authorization for IRB.
Brad Hepner: Banks to engage in activities, such as asset management clearing services and digital asset market solutions among other key areas.
Brad Hepner: Okay.
Brad Hepner: It is licensed and regulated by the office of financial institutions of Puerto Rico.
Brad Hepner: And may provide specific banking and other financial activities for persons entities and organizations around the globe that are nonresidents.
We believe this acquisition will enable us to offer an expanded range of companion custody clearing and control account fee based services that complement our existing businesses on a broader scale, which we expect has potential to generate additional cash flow in the near term.
Brad Hepner: The objective of this acquisition is to deliver additional custody services for international investors and digital asset investors that generally have a higher fee rate structure and potential for higher margins than traditional custody services.
Brad Hepner: We also believe the proposed acquisition of <unk> has the potential to enhance and broaden our current offerings in ways that may open new international opportunities, allowing us to further democratize the market for illiquid alternative assets and.
Brad Hepner: In Rfps authorized activities may include custody clearing.
Brad Hepner: Payments and related traditional and digital asset market products and services as approved by the OCI F.
Speaker Change: <unk> can also offer traditional banking services such as correspondent deposits.
Speaker Change: Lending investments and trusts, we anticipate the proposed acquisition if and when completed will position <unk> to offer alternative asset custody services that include among other potential items, a companion line of business focused on issuing depository receipts to assist holders are foreign.
Speaker Change: <unk> gained access to the capital markets in international jurisdictions, and may yield higher fee assessments than more traditional customary offerings.
Speaker Change: Also in late December as part of a separate transaction, we entered into an agreement to revise the liquidation pride to priority a beneficent company Holdings LP.
Speaker Change: Its a subsidiary of the company, we referred to as BCH in order to among other things enhance and further.
Speaker Change: Enhance our current and future shareholder value, especially for Vince public comment.
Speaker Change: Stockholders and to drive long term growth.
Speaker Change: <unk> to the agreement the holders of the preferred equity or BCH agreed to amend the governing documents of BCH to allow the company's public company common stockholders to share and through the indirect ownership of the company in BCH liquidation priority previously reserved only for the preferred equity.
Speaker Change: We anticipate this transaction will result in creating tangible book value attributable to band common.
Speaker Change: Public company stockholders, which we believe will provide substantial value for our stockholders and enhanced long term growth opportunities.
Speaker Change: Additionally, we anticipate this transaction has the potential to be a catalyst for closing future liquidity transactions and demonstrates our commitment to delivering shareholder value.
Speaker Change: Also during the fiscal third quarter, we continued to strengthen our capital structure, increasing our permanent equity by $35 million through a re designation of certain preferred equity.
Speaker Change: Hmm.
Speaker Change: To permanent equity.
Speaker Change: Furthermore.
Speaker Change: During the fiscal third quarter, we closed a $1 $4 million primary capital commitment transaction.
Speaker Change: Our originations team is now focused on progressing future prospective transactions now both liquidity and primary capital and we look forward to building on this initial momentum all through 2025, as we continue to evaluate additional opportunities that align with our strategic objectives.
Speaker Change: Developments continue to provide meaningful enhancements to our business model and.
Speaker Change: And improved.
Speaker Change: And improvements on the competitive dynamics, we believe we already possessed.
Speaker Change: Im very proud of our efforts over the last three quarters to broaden our capabilities and improve the product offerings of the business and welcome new experienced talent to our management team and our board of directors, we've taken steps to improve our financial position and are back to originating new financing.
Speaker Change: These steps have culminated in band, earning $10 30 to basic earnings per share and 12 cents of fully diluted earnings per share to date as of our third quarter ending 30, <unk> December 31 2024.
Speaker Change: With these improvements in motion, we will continue to work to educate the market on who we are.
Speaker Change: What we do and on the value and growth opportunity, we represent for our shareholders now with that I will turn the call over to our CFO Gregg as Hell to go over our operating and financial results.
Speaker Change: Thank you Brad, let's now turn to our quarterly results and financial position as of December 31, 2024, first I'll start with a few highlights from the quarter we.
Speaker Change: We reported investments with a fair value of $334 3 million up sequentially from $329 1 million at the end of our prior fiscal year.
Speaker Change: These investments serve as collateral for Ben Liquidities, net loan portfolio of $266 million and $256 2 million respectively Rev.
Speaker Change: Revenues were a positive $4 4 million and 23.01 million for the third quarter and year to date periods in fiscal 2025 as compared to negative $10 2 million negative $55 7 million in the prior year GAAP.
GAAP revenues, principally reflect mark to market adjustments on the investments that serve as collateral to Ben's loan portfolio.
Speaker Change: Excluding the non cash goodwill impairment in the prior comparable period operating expenses declined 38% to $13 9 million in the third quarter of fiscal 2025 as compared to $22 5 million in the same period for fiscal 2024 on.
Speaker Change: On a year to date basis, excluding the noncash goodwill impairment and the loss contingency release in each period as applicable operating expenses were $53 2 million in fiscal 2025 as compared to $111 7 million in fiscal 2024.
Speaker Change: Permanent equity improved from a deficit of $148 3 million as of June 32024 to a positive $14 3 million as of December 31, 2024 through a combination of transactions re designating approximately $160 5 million of temporary equity to permanent equity and additional capital from <unk>.
Speaker Change: <unk> sales and liquidity transactions offset by a net loss allocable to permanent equity classified securities of $6 9 million during the applicable period.
Speaker Change: Reported GAAP net loss attributable to Ben's common shareholders for the current year of $8 6 million and GAAP net income of $51 9 million for the year to date period, which led to a basic loss per share of $1 32 for the current quarter and basic earnings per share of $10 30 for the year to date period.
Speaker Change: Should also note that in our conversion to diluted that 99% of that difference relates to the impact from the conversion of our preferred a zero and a one equity that is largely held by insiders on our board and management team.
Speaker Change: We announced the transaction on December 23, 2024 to revise the liquidation priority at BCH and provide tangible book value and other benefits to Ben's public common company shareholders, which on a pro forma basis amounted to $9 $2 million of tangible book value to Ben's public company stockholders using December 31, two.
Speaker Change: Thousand 24 financial information and.
Speaker Change: And we announced an agreement to acquire Mark until bank in exchange for an aggregate purchase price of $1 5 million as Brad described.
Speaker Change: Next well move onto our primary business segments been liquidity, which generates interest revenue for supplying liquidity off the balance sheet and bank custody, which produces fee revenue for the use of the platform and trust services as typical ill be focusing my discussion on these business segments as it's their operations, along with corporate and other that accrues to <unk> equity.
Speaker Change: Orders.
Speaker Change: During the third quarter of fiscal 2025 been liquidity recognized $11 3 million of interest income a decrease of five 7% from the quarter ended September 32024, primarily due to a higher percentage of loans being placed on non accrual status, partially offset by the effects of.
Speaker Change: Compounding interest on the remaining loans.
Speaker Change: And liquidity recognized $34 1 million of interest income for the nine months ended December 31, 2024 down 6% compared to the prior year period, primarily resulting from higher level.
Speaker Change: Non accrual loans and loan prepayments, partially offset by new loans originated.
Speaker Change: Operating loss for the fiscal third quarter was $2 9 million declined from operating income of $2 9 million for the quarter ended September 32024.
Speaker Change: The decline in operating performance was due to higher intersegment credit losses in the current fiscal period as compared to the quarter ended September 32024.
Speaker Change: Operating loss was <unk> 5 million for the nine months ended December 31, 2024, improving from an operating loss of $1 8 billion in the prior year period. The prior year period loss was primarily driven by a noncash goodwill impairment totaling $1 7 billion in credit losses, largely related to securities of our former parent company.
Speaker Change: Adjusted operating loss was $5 million for the nine months ended December 31, 2024, compared to adjusted operating loss of $11 8 million in the prior year period with the improvement in adjusted operating loss, primarily related to lower credit loss adjustments recognized in the current fiscal year.
Speaker Change: And lower employee compensation due to lower head count.
Speaker Change: Moving on to band custody.
Speaker Change: I have a alternative assets and other securities held in custody during the fiscal third quarter increased to $385 1 million as of December 31, 2024, compared to $381 2 million as of March 31, 2024. The increase was driven by $1 4 million of new alternative assets held in custody and unrealized gains on <unk>.
Speaker Change: <unk> assets.
Speaker Change: Really related to Nab adjustments based on updated financial information received from the Fund's investment manager our sponsor during the period offset by distributions during the period.
Speaker Change: Revenues applicable to bank custody were $5 4 million for the fiscal third quarter compared to $5 4 million for the quarter ended September 32020 for a similar amounts of revenue for the period were a result of stable NAV of alternative assets and other securities held in custody at the beginning of each applicable period when such fees.
Speaker Change: Our calculated.
Speaker Change: Revenues were $16 2 million for the nine months ended September 31, 2024 down 14, 7% compared to the prior year period, primarily due to lower natural alternative assets. Another securities held in custody opt.
Speaker Change: Operating income for the fiscal third quarter decreased to $3 5 million from $4 3 million for the quarter ended September 32024. The decrease was primarily due to credit losses related to certain fees collateralized by securities of our former parent company.
Speaker Change: Additionally, there was no cash there was no noncash goodwill impairment.
Speaker Change: Third fiscal quarter as compared to non cash goodwill impairment of <unk>.
Speaker Change: <unk> 3 million for the quarter ended September 32024.
Speaker Change: Operating income was $9 1 million for the nine months ended September 31, 2024 compared to operating loss of 500.
Speaker Change: $38 8 million in the prior year period with the increase in operating income principally related to significantly larger noncash goodwill impairment in the prior year period of $554 6 million as compared to $3 4 million in the current fiscal year.
Speaker Change: Adjusted operating income for the fiscal third quarter was $4 8 million compared to adjusted operating income of $4 6 million for the quarter ended September 32024, the increase was due to slightly lower operating expenses principally related to lower employee compensation due to lower head count.
Speaker Change: Adjusted operating income for the nine months ended December 31, 2024 was $13 9 million compared to adjusted operating income of $15 8 million in the prior year period with the decrease in adjusted operating income primarily due to lower revenues related to lower Nab of alternative assets and other securities held in custody.
Speaker Change: Firstly offset by slightly lower operating expenses during the current fiscal year.
Speaker Change: As of December 31, 2024, the company had cash and cash equivalents of $4 1 million and total debt of $122 9 million distributions received from alternative assets and other securities held in custody totaled $19 3 million for the nine months ended December 31, 2024 compared to $38.
Speaker Change: $4 million for the same period of fiscal 2024.
Speaker Change: Total investments at fair value of $334 3 million at December 31, 2024 supported in liquidity is loan portfolio. This.
Speaker Change: This concludes my prepared remarks on the financials, we will now open the call to questions from our covering research analyst Operator will you. Please give the instructions for Q&A.
Speaker Change: Thank you.
Speaker Change: I would like to ask a question. Please press star one on your telephone you hit the automated messages biasing you had just raised.
Speaker Change: We also assets you. Please wait for your name and company to be announced before proceeding with your question one moment, while we compile the Q&A roster.
Michael Kim: Our first question today will come from the line of Michael Kim.
<unk> Zacks your line is open.
Michael Kim: Hey, everyone. Good morning.
Michael Kim: First.
Michael Kim: I know you recently closed the.
Michael Kim: The primary capital commitment with Adas asset management, but just be curious to get your perspectives on how important.
Michael Kim: The recently announced.
Michael Kim: Public stockholder enhancement transactions will be just in terms of facilitating reoccur.
Michael Kim: Reaccelerate Exchange Trust activity and then just related to that would you expect a more meaningful step up after the transactions.
Michael Kim: Been approved and completed later this year.
Speaker Change: Hi, Michael It's Brad Hepner al.
Michael Kim: Answer your question here.
Speaker Change: We have been as you are maybe aware we have been.
Speaker Change: Out of market with the exchange Trust product line for the better part of 15 months and so we introduced <unk>.
Speaker Change: Back into the market the exchange Trust product line as far as closings go we have kept people informed about it during that period of time, but as far as closing that product line with potential <unk>.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: We.
Speaker Change: Re entered the market here, just a few weeks ago.
Speaker Change: And.
Speaker Change: Last month.
Speaker Change: And we're just prior to our year end, rather and as part of that we wanted to be able to introduce the capital stack enhancements delivering.
Speaker Change: Additional tangible book value to our common shareholders for the purpose of being able to point to the parties are counterparties in it that there is.
Speaker Change: A meaningful tangible current tangible book value and how that grows over time, we do believe as you suggest we do believe that that is going to be an attractive.
Speaker Change: Economic element for our one attractive element.
Speaker Change: Attractive economics for our Counterparties in the transaction so.
Speaker Change: We are pointing them to that transaction to that announcement.
Speaker Change: And I believe that once it is.
Speaker Change: Fine.
Speaker Change: Formal completed process is done and that transaction is in place it will lead to additional transactions being done and the ability to for us to accelerate.
Speaker Change: Closings in the near term. So I think it is a very positive development and has been very well received in the market and should help us accelerate closings once we have it fully completed.
Speaker Change: Got it that's helpful and then just a second.
Speaker Change: I know in aggregate the loan portfolio was essentially flat on a sequential quarter basis. So just any color on.
Speaker Change: Maybe some of the underlying moving parts during the quarter as it relates to.
Speaker Change: Unrealized marks our deal flow and our distributions.
Greg: Greg would you like to.
Speaker Change: Provide a first answer and then I'll.
Greg: Follow up with a little more color as well.
Greg: Theyre microphone, maybe on mute here sorry.
Greg: Yes, sorry.
Greg: We were on mute.
Greg: Yes, as you noted Michael the sequentially the the investments that collateralized the loan portfolio was.
Greg: Basically flat period over period.
Greg: As a as a percent I think the unrealized gains came in at about 67% of our.
Greg: As the unrealized gain for the quarter.
Greg: On an annual basis distributions.
Greg: For the fourth quarter were about where we expected it maybe a little less.
Greg: With about I think $4 million or so $5 million of distributions for the quarter that really offset those.
Greg: Unrealized gains on the portfolio.
Greg: And I'll add a little more color as well as we move into the December 31.
Greg: Marks and so forth and get a little more understanding of how valuations may change as of the end of the calendar year. Those that's typically a time in which there is a driver.
Greg: We will start to see the.
Greg: The valuation movements here coming up.
Greg: Really.
Greg: In the next month or two.
Greg: As it relates to year end private company marks.
Greg: The election results.
Greg: Have a positive impact.
And what our expectations are so we.
Greg: Particularly enthusiastic about what we're seeing.
Greg: Under the new administration for opening up the capital markets for more M&A.
Greg: And.
Greg: Putting that.
Greg: Putting a.
Greg: Positive direction and momentum for Ipos, which will lead to additional both we expect gains and realization events and then you have the offsetting impact of watching what the economics related to the tariff strategies may have on.
Greg: On either delaying those realization events or or.
Greg: Having them.
Greg: Pressing the expected gains out of the transaction. So we're moving into that period of time.
Greg: With some positive very positive momentum behind us given the.
Greg: The direction that the markets have taken the expectations of the underlying general partners, who manage these investments in particular, we have a very large portfolio you know of over 800 different portfolio companies and many of them are primed for realization events, which we.
Greg: Expect to have some.
Greg: Okay.
Greg: We have some unrealized appreciation to be recognized upon those realization events.
Greg: Great. That's helpful. Thanks for taking my questions.
Greg: Thank you, we'll now makes up the next question.
Ashish Shah: And the next question will come from the line of FCC Shah of Sidoti. Please go ahead.
Ashish Shah: Hi, gentlemen, and thank you for taking my question.
Ashish Shah: Can you tell me about your timeline around when the liquidity transactions could pick up and what's that doesn't provide the upside or downside to your expectations.
Ashish Shah: Sure.
Ashish Shah: Timeline that we expect here is the approval of the BCH transaction that I discussed in my remarks, we.
Ashish Shah: We will be coming and when that is done we expect.
Ashish Shah: An uptick in the transactions.
Ashish Shah: And that are.
Ashish Shah: Being worked on right now with Counterparties and also additional interested parties coming in as I said have just really re engaged with all the counterparties.
Ashish Shah: Completing the BCH transaction. So it is really in the.
Ashish Shah: And the.
Ashish Shah: We need to go ahead and move forward with getting that transaction. All completed that does require a proxy votes and thats all being worked on right now and then we would expect to see an uptick as you put it.
Ashish Shah: More frequent and.
Ashish Shah: A greater volume of transactions closing here in the near term.
Ashish Shah: Alright, Thank you and can you provide detail on how the underlying alternative assets collection portfolio is performing more broadly.
Matt: And Matt can you.
Ashish Shah: And on the distribution activity and how that impacts your outlook.
Speaker Change: Yes, so I'll pick up where Greg provided some of this insight here in his last remarks.
Speaker Change: Third in our fiscal third quarter ending December 31, we saw unrealized depreciation in the neighborhood of 7%. We saw a similar percentage in distributions Thats why you see the portfolio remaining fairly unchanged on the balance sheet.
And that comes on two previous quarters of similar type results very similar type results.
Speaker Change: With the expectation of in the U S economy.
Speaker Change: We would expect the distribution rates through 2025, we would expect those to increase and we would expect realization events.
Speaker Change: To be the driver behind that.
Speaker Change: And that we would expect those realization events to reflect a more positive outlook on the <unk>.
Speaker Change: U S economy that we would hope will generate a greater level of unrealized depreciation being realized so seeing some additional <unk>.
Speaker Change: Value in the portfolio finally, being realized and realizing that in the distributions.
Speaker Change: Our expectations for 2025 based on the outlook of the U S capital markets is.
Speaker Change: Much more or.
Speaker Change: Is greater than what we experienced in the calendar year 2024.
Speaker Change: And again, that's based on the overall outlook of the <unk>.
Speaker Change: <unk> economy, and the U S capital markets.
Speaker Change: Okay. Thank you so much for taking my questions.
Speaker Change: Thank you and that does conclude today's Q&A session I would like to go ahead and turn the call back over to Dan Callahan for closing remarks. Please go ahead, yes.
Dan Callahan: Thanks to everyone for participating on the call and webcast today again, a replay will be available on our website at shareholders Dot Trust and Dot com have a great rest of your day and thanks again.
Dan Callahan: Thank you for joining today's conference call of homes concluded you may disconnect.