Q3 2025 Abacus Global Management Inc Earnings Call
Speaker #3: Good day . And welcome to the Abacus Global Management . Third quarter 2020 earnings Conference call . All participants will be in a listen only mode should you need assistance , please signal a conference specialist by pressing the star key .
Speaker #3: Then zero after today's presentation , there will be an opportunity to ask questions , to ask a question , you may press star , then one on the touch tone phone to withdraw your question .
Speaker #3: Please press star , then two . Please note this event is being recorded . I would now like to turn the conference over to Rob Phillips , Global Management Senior Vice President of Investor Relations and Corporate Affairs .
Speaker #3: Please go ahead .
Speaker #4: Thank you . Operator and thank you , everyone , for joining Abacus Global Management's third quarter 2020 earnings call . Here with me today are Jay Jackson , Chairman and Chief Executive Officer , Elena Plesco .
Speaker #4: Chief Capital Officer . And Bill Macaulay , chief financial officer . This afternoon at 4:05 p.m. Eastern Time , Abacus Global Management released its third quarter 2020 results this afternoon's call will allow participants to ask questions about our results .
Speaker #4: Before we begin , Abacus Global Management refers participants on this call to the investor web page . IR . For the press release , investor information and filings with the SEC for a discussion of the risks and uncertainties that can affect the business .
Speaker #4: Abacus Global Management , specifically refers participants to the presentation today on form 8-K with the Securities Exchange Commission and to remind listeners that some of the comments today may contain forward looking statements and as such , will be subject to risks and uncertainties which , if they materialise , could materially affect results .
Speaker #4: For more information on the risks , uncertainties and assumptions relating to forward looking statements , please refer to Abacus Global Management's public filings .
Speaker #4: During the call , we will reference certain non-GAAP financial measures , although we believe these measures provide useful supplemental information about our financial performance , they are not recognized measures and do not have standardized meanings under us .
Speaker #4: Generally accepted accounting principles or GAAP . Please see our public filings for additional information regarding our non-GAAP financial measures , including references to comparable GAAP measures .
Speaker #4: With that , I'd now like to turn the call over to Jay Jackson , Chief Executive Officer .
Speaker #5: Thank you , and good afternoon , everyone . I'm pleased to report that abacus delivered another record quarter . Our 10th consecutive quarter of beating consensus projections , keeping us firmly on track with our long term growth targets .
Speaker #5: Our third quarter results were just as impressive . Total revenue increased 124% year over year to 63 million . Adjusted net income rose 60% to 23.6 million , and adjusted EBITDA increased 127% to 37.9 million .
Speaker #5: Due to these strong Q3 results , we are once again in a position to increase our 2025 guidance to 80 to 84 million , resulting in a year over year growth of 72 to 81% for 2025 .
Speaker #5: I want to highlight an important inflection point for abacus that further reinforces our commitment to long term shareholder value creation . Earlier today , we announced the initiation of an annual dividend of $0.20 per share and a $10 million share repurchase program .
Speaker #5: These actions represent a defining moment for abacus , underscoring both our confidence in the strategy and its validation as we continue building durable , recurring earnings .
Speaker #5: Our balance sheet and cash generation are at record levels supported by increasing capital inflows into our longevity funds , growing fee income and expanding margins .
Speaker #5: As stated in the release . We have the capital strength to fund ongoing growth through new originations , accretive acquisitions and technology investment , while also returning capital to shareholders .
Speaker #5: I'm incredibly proud of what our team has built and the position of strength . Their unwavering dedication has created for abacus . The introduction of a dividend and buyback is not a shift in strategy , but a natural evolution of it .
Speaker #5: With recurring revenues expected to approach 70% of total revenue over time . Our capital allocation framework is designed to balance growth investment with consistent shareholder returns .
Speaker #5: Importantly , these actions also further align abacus with leading public alternative asset managers . Many of whom have long demonstrated that recurring fee based earnings can support both strong growth and meaningful capital returns .
Speaker #5: This disciplined approach ensures we continue to scale our platform , strengthen our market position , and allow shareholders to directly benefit from the visibility and sustainability of our earnings .
Speaker #5: I think it's important to take a moment and reflect on where abacus stands relative to our public asset manager , peer group . The numbers tell a clear story , one that I believe deserves your close attention .
Speaker #5: When we look across our peer group of publicly traded alternative asset managers , Abacus Performance continues to stand out across key financial metrics .
Speaker #5: We lead our public peer group in year over year revenue growth by five times . Abacus has revenue of 124% year over year by comparison , other public alternative managers reported average year over year revenue growth between 20 and 30% during the same period .
Speaker #5: These are projections or aspirations . These are results we're delivering today , quarter after quarter , demonstrating both our market leadership and the depth of our growth opportunity .
Speaker #5: Abacus growth trajectory remains the strongest in the asset manager industry and is expected to continue outpacing public peers , driven by disciplined execution , strong origination and increasing investor demand for uncorrelated returns .
Speaker #5: The company's accelerating fundamentals , combined with increasing visibility , highlight a clear path toward sustained value creation that sets abacus apart . When we look at the broader valuation picture , the disconnect becomes more pronounced .
Speaker #5: The average publicly traded alternative asset manager trades at roughly 20 times projected 2025 earnings . Abacus trades in the mid-single digits . This disconnect represents a deep discount to our peer group and an opportunity for investors .
Speaker #5: While valuation comparisons have their limits , the combination of strong fundamentals , consistent execution and short term share price dislocation reflects a familiar dynamic one that historically corrects itself in favor of fundamentals abacus , we are continuing to diversify our revenue with increased assets under management .
Speaker #5: Year to date , we have raised $468 million across all of our fund strategies . In Q3 , inflows represented 102 million . We are committed to increasing our AUM and generating a greater portion of our total revenue from recurring fee based revenue , which naturally commands higher valuations .
Speaker #5: Now , let me be direct . I take responsibility for ensuring the market fully understands this evolution . While we're executing operationally and consistently , exceeding expectations , we have more work to do to communicate the depth of our business model and the durability of our results .
Speaker #5: Beginning with last quarter's results , we introduced new KPIs specifically to simplify our message and to make the abacus story more transparent and .
Speaker #5: accessible . We're committed to clear , consistent At communication that helps investors understand what drives our business and how we measure success together .
Speaker #5: We also made significant strides in expanding our investor outreach program between now and the end of 2025 , we continuing into 2026 , you'll see abacus represented at more conferences , more speaking engagements , and increased visibility through television and media advertising .
Speaker #5: Our management team remains fully accessible and engaged across both institutional and retail channels , prioritizing transparency and long term relationship building . We're also advancing strategic accretive acquisitions that enhance our competitive position and broaden both our origination and global wealth platforms .
Speaker #5: The recently announced acquisition of Aquacoat is a clear example . Aquacoat , a premier online life insurance brokerage , provides customers with quotes from multiple insurance providers through a single digital platform .
Speaker #5: This transaction is strategically and financially accretive , adding a new digital origination funnel , expanding our client life cycle coverage , and supporting accelerating growth in policy origination and asset acquisition volumes .
Speaker #5: Near term , Aquacoat contributes modestly to revenue and profit over the long term , it will serve as a scalable growth engine , feeding directly into our underwriting and asset management businesses .
Speaker #5: Our strong free cash generation and high returns on invested capital gives us the flexibility to continue funding strategic initiatives while returning capital to shareholders .
Speaker #5: Let me address the current market environment , our longevity based assets are fundamentally uncorrelated to traditional markets . Their performance is driven by actuarial and demographic trends , not market sentiment or interest rate cycles .
Speaker #5: This structural differentiation provides consistent non-correlated exposure at a time when diversification is most needed to that point , we achieved a major milestone following quarter end with a 50 million above investment grade securitization product .
Speaker #5: Note backed by life insurance assets sold to institutional investors , insurance companies and banks . This transaction marks the beginning of a scalable and recurring funding mechanism .
Speaker #5: While validating the strong institutional demand for longevity-linked, less correlated assets, it also reinforces Abacus's position as the market leader in a highly regulated industry supported by favorable demographic trends expected to persist for decades.
Speaker #5: We view this transaction as the first of many . As we continue building the infrastructure to make it a repeatable and scalable component of our long term funding strategy , lowering our cost of capital , expanding our distribution channels to banks and insurance investors , converting balance sheet assets into recurring service and fee based income , and further enhancing profitability and return on equity to summarize , the financial performance is clear ten consecutive quarters of strong earnings growth , industry leading returns on capital expanding , recurring revenue , and a defined path towards greater visibility and scale .
Speaker #5: Our focus remains on translating these fundamentals into long term shareholder value . With that , I'll now turn the call over to Elena Plesco , our chief capital officer , to discuss our key performance indicators and capital structure in more detail .
Speaker #6: Thanks , Jay . I'd like to highlight some recent strategic milestones and then discuss our balance sheet , efficiency metrics and KPIs . As Jay mentioned , we announced a significant milestone on October 22nd .
Speaker #6: We successfully sold 50 million of securitized life insurance assets structured as an investment grade rated collateralized note with a mid-single digit yield . This transaction represents a strategic breakthrough for abacus on multiple fronts .
Speaker #6: First , it establishes a new institutional distribution channel that complements our existing monetization pathways , allowing us to access a broader universe of capital providers , including banks , insurance companies , and fixed income investors , who typically require a rated structures .
Speaker #6: Second , it validates our underwriting and portfolio construction capabilities , specifically , the ability to secure an investment grade rating demonstrates that our credit and actuarial processes meet institutional standards .
Speaker #6: Third , this transaction creates a scalable template for future executions , potentially improving our overall capital efficiency as we develop a track record in the securitized products market .
Speaker #6: Finally , by demonstrating that life insurance assets can be packaged into rated instruments with mid-single digit yields , were effectively expanding the addressable market for these assets and reinforcing abacus position as a leader in bringing institutional grade structures to the longevity space .
Speaker #6: This is not just a one time financing event , it's a proof of concept that opens up significant optionality for how we think about asset monetisation and balance sheet management going forward .
Speaker #6: Now , turning to our operational metrics . Last quarter , we stated that our long term target for portfolio turnover is one and a half to two times for Q3 2025 .
Speaker #6: Our annualized turnover ratio was two in line with expectations . Another key indicator of our balance sheet management efficiency is our ability to monetize seasoned policies at optimal timing .
Speaker #6: In the third quarter of 2025 , policies we sold had been held on our balance sheet for an average of 363 days , compared to 253 days for policies still owned , underscoring our ability to efficiently rotate , mature inventory while preserving overall portfolio quality .
Speaker #6: This 110 day delta for sold policies validates our proactive approach of realizing gains on well-seasoned positions , rather than engaging in reactive selling .
Speaker #6: This metric clearly demonstrates that we're managing the balance sheet strategically rather than simply churning newer acquisitions . As we've discussed previously , some assets spend a longer period than our balance sheet .
Speaker #6: Those are our best ideas . At the end of Q3 2025 , 19.6% of our total portfolio value , including cash , was held for over 365 days .
Speaker #6: This season . Holdings maintain a weighted average grade reflective of their low risk and strong credit profile . Weighted average life expectancy of 49 months and weighted average age of 86 years , underscoring the quality of our long term hold decisions .
Speaker #6: This concentration in our best ideas reflects our disciplined approach to portfolio construction and our confidence in our underwriting capabilities . Finally , while portfolio turnover demonstrates capital efficiency , profitability of our sales is equally important , measured by the difference between what abacus paid to originate a policy and the actual sales price received , our average realized gain on sale for Q3 2025 was 36.9% .
Speaker #6: As you can see , this quarter we have been able to result inventory that we have purchased a year ago during a different interest rate environment , validating our strategic balance sheet management approach and rigorous cost discipline through our operations .
Speaker #6: With that , I will now hand it over to our CFO Bill McCauley , to discuss the specifics of our third quarter results .
Speaker #4: Thanks , Elena .
Speaker #7: And hello , everyone . As Jay mentioned , we delivered another outstanding quarter of revenue growth and profitability . Total revenue in the third quarter grew 124% to 63 million , compared to 28.1 million in the prior year .
Speaker #7: This growth was driven by Strong life solutions performance , increased asset management fees and contributions from our technology services business , our Life Solutions segment continues to benefit from our highly efficient origination platform and active trading division .
Speaker #7: Capital deployed increased 10% to 102.4 million in Q3 , compared to 93.2 million last year . Beyond deployment , we had another strong quarter with regards to realized gains , realized gains for Q3 2025 were 46.4 million , which was primarily driven by the sale of 282 policies to 17 different counterparties .
Speaker #7: As of September 30th , we hold 522 policies valued at 424.7 million . On our balance sheet , based on historical track record , we expect to monetize these assets within approximately six months , with spreads averaging above 20% .
Speaker #7: We continue to be pleased with our asset management segment , which is now in its third full quarter . Following the Q4 2024 acquisitions , this business generated 8.6 million in revenue during Q3 and had 102 million of new inflows , demonstrating the value of our strategic M&A activity .
Speaker #7: Turning to expenses . Total operating expenses , excluding unrealized and realized gains and losses on investments and the change in fair value of debt , was 32.9 million compared to 19.4 million in the prior year .
Speaker #7: This increase reflects operating expenses of our acquired companies , increased G&A , higher depreciation and amortization , and strategic marketing investments to support our growth trajectory .
Speaker #7: We typically see returns on marketing spend within 90 to 120 days on an adjusted basis , excluding non-cash stock compensation , business acquisition costs , amortization and changes in warrant liability .
Speaker #7: Fair value , net income was 23.6 million compared to 14.7 million last year . Adjusted EBITDA grew 127% to 37.9 million versus 16.7 million in the prior year , with margins of 60.2% .
Speaker #7: Consistent with the comparable period . GAAP net income attributable to stockholders was 7.1 million , compared to a net loss of 5.1 million in the prior year .
Speaker #7: This improvement was driven by higher revenues across all segments , which is partially offset by increased operating costs and interest expense . Our balance sheet metrics continue to reflect our highly profitable business model .
Speaker #7: Annualized adjusted return on equity was 22% and annualized adjusted return on invested capital was 21% for the quarter . As of September 30th , we held 86.4 million in cash and cash equivalents and 424.7 million in balance sheet policy assets .
Speaker #7: As Jay mentioned in his opening remarks , given our strong performance through September , we are raising our full year adjusted net income guidance on a gross basis to a range of 80 million to 84 million , up from our prior range of 74 million to 80 million .
Speaker #7: This represents growth of 72 to 81% , compared to 2020 . Four . Adjusted net income of 46.5 million . In summary , we continue to deliver record revenue growth while significantly expanding profitability on adjusted basis .
Speaker #7: Our diversified business model is performing well across all segments , and we're well positioned for continued success . I'll now turn it back to our CEO , Jay Jackson , for closing comments .
Speaker #5: Thanks , Bill . Before I turn the call back to the operator for your questions , I want to close by reinforcing what makes abacus unique .
Speaker #5: We are executing with discipline and purpose in one of the most compelling corners of alternative asset management . Longevity based investing . Our results continue to speak for themselves .
Speaker #5: Record profitability , consistent growth , and expanding market recognition . At a time when investors are seeking stability and true diversification , abacus stands apart , offering uncorrelated assets , scalable returns and a platform designed for sustained value creation .
Speaker #5: The disconnect between our fundamentals and our current valuation is clear , but it also represents one of our greatest opportunities we're addressing that gap head on through transparent communication .
Speaker #5: Active investor engagement and continued execution across every part of our business . And further to this point , our dividend and buybacks and a clear message we have the strength , the cash flow and the conviction to invest and growth while directly returning value to shareholders .
Speaker #5: As we look ahead , our focus remains unchanged . Deliver strong financial performance , deepen institutional adoption of longevity based assets , and create enduring value for our shareholders .
Speaker #5: I'm proud of what our team has accomplished , and I'm even more excited about where we're headed with that , we want to thank you for joining our call today , and look forward to your questions .
Speaker #3: We will now begin the question and answer session . To ask a question , you may press star , then one on your touch tone phone .
Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys . If at any time your question has been addressed and you would like to withdraw your question , please press star then two .
Speaker #3: At this time we will pause momentarily to assemble our roster . The first question today comes from Patrick Davis with Autonomous Research . Please go ahead .
Speaker #8: Hey , good evening everyone . First , I have a few questions on the securitization . Firstly , are there any incremental economics for you ?
Speaker #8: Other other than just the gain on sale like a structure or a transaction fee ? Secondly , could you give us an idea of how many large institutions participated and what portion of those were new to the asset class ?
Speaker #8: And then finally , is there an opportunity to package more of these into some sort of third party asset management product that you could charge fees on ?
Speaker #8: Thank you .
Speaker #5: Sure . Hi , Patrick . Thank you . First of all , on on the securitization , the first question was related to additional fees or outcomes that we may experience .
Speaker #5: And one thing to note is that we also remain the servicer of the underlying assets . So we will retain servicing fees on these assets on a go forward basis , which ultimately produces additional fee related earnings associated with that .
Speaker #5: And you know what we stated to in the in both the initial press release and even going forward is , is that we we expect this particular type of structure to continue to grow and be very successful .
Speaker #5: It was very well received . We purposely chose to make it a little bit smaller , offering initially with , with , with 50 million .
Speaker #5: We had excess support of that or excess demand rather where we could have done larger product here . But , you know , when we were considering the partners that we wanted to do this with all of the partners were new and effective , investing directly into this type of collateralized product .
Speaker #5: So we were very encouraged by that . And they consisted of both insurance companies and commercial banks . So , you know , to that end , I think that , you know , that was a really a piece to this that was incredibly successful , right ?
Speaker #5: As you have new adoption of the asset and a lot of what they were looking for was , you know , this uncorrelated or less correlated yield in a in a rated structure .
Speaker #5: So , you know , we see this continuing to grow as , as another type of of distribution that we would be able to use to sell policies into .
Speaker #5: And really aggregate policies into at an incredibly , I think , competitive cost of capital , which is also very , very compelling to us .
Speaker #5: And then I think the last piece to that was , would we see this structure growing into other third party funds ? Certainly , taking that into consideration , there's been interest from other types of structures and vehicles who are looking for this kind of product .
Speaker #5: Even within their own third party fund . So I think as we continue to move forward , what was important was that getting this first one done was incredibly valuable , being that now we have the platform in place to where effectively we can rent and repeat and do it over again , and even larger in scale , which we anticipate doing on a regular basis .
Speaker #5: And I would expect to see more of these more consistently . And , you know , if we're trying for every quarter or every every two quarters , is is kind of the target there .
Speaker #8: Thanks . Helpful . As a follow up , the advertising blitz has broadened . It feels like in the last couple of months , to the point where I feel like Jay is living in my apartment .
Speaker #8: On some days when I'm working from home . So maybe you could update us on on any KPIs you might have on on that effort .
Speaker #8: Converting to real volumes like how are how are you measuring the success of what looks like a fairly big uptick in the marketing investment at this point ?
Speaker #8: Thanks .
Speaker #5: Sure . Thank you . Patrick . And we typically will . You'll typically see a larger advertising attempts as we get more into Q4 .
Speaker #5: We've seen that to be typically a larger quarter for us in relationship to our origination . And it brings me to my point of if you look at Q3 , compare .
Speaker #5: Q3 to Q3 of last year , we're actually up 10% on Q3 over Q3 of last year . And then we kind of ramp into some of that advertising coming into Q4 as that's historically been a very productive quarter for us .
Speaker #5: So , you know , while I apologize for living in your living room , I certainly don't apologize for my revenue point of view because it's working .
Speaker #5: So that's great news . And , you know , we'll we'll we'll try to , you know , turn them off in your zip code .
Speaker #8: Thanks a lot .
Speaker #5: Thank you . Patrick .
Speaker #3: The next question comes from Christine Love with Piper Sandler . Please go ahead .
Speaker #9: Thanks . Good afternoon . First , just on Capital deployed 102 million in the quarter below the second quarter , but still able to put a really solid life .
Speaker #9: Settlements . Revenues . Was that driven primarily from the outsized average gains in the quarter or anything else there ? Just curious on some of the the puts and takes there and then forward expectations for capital deployed is 120 million a good run rate or how are you thinking about that ?
Speaker #5: Sure . And yeah , you're exactly right . In the Q3 , if you notice the adjusted EBITDA margin increased to the highest EBITDA margin that we've ever had , over 60% .
Speaker #5: And yes , we were a little more strategic in Q3 where we saw some very interesting opportunities . Put that put that money to work .
Speaker #5: And , you know , historically , we've seen sometimes when you look at Q3 , particularly as you're coming towards the end of the summer months , you've got a little bit of a shortened period there .
Speaker #5: And then teeing up for Q4 . So we're actually quite pleased where Q3 ultimately came out . And with the increase in margins , just made a ton of sense to us .
Speaker #5: But we're how we strategically deploy capital . We still want to be very thoughtful and very smart about it . And then on a go forward run rate basis , yeah , you know , as we look at Q4 , you know , last year and compare Q4 to this year , our expectations that we'll continue to see this , you know , maintain and grow from here .
Speaker #5: You know , some of that is is capital dependent on based upon new capital that we're obviously raising within our funds , but not just that , but also demand .
Speaker #5: And we're seeing a pretty high uptick in demand from institutional capital who want to access this asset class due to the underlying nature of the asset class being that it's an uncorrelated yield .
Speaker #5: So as more volatility in the market gives us more opportunity to not just originate policies as people are seeking liquidity , but beyond that , Phil , larger portfolios for investment funds who are who are seeking to capitalize on this asset within their own funds .
Speaker #5: So , you know , we we expect that to continue to grow . We are we are definitely out there as as Patrick had alluded to , quite often , increasing our ad spend .
Speaker #5: And we're able to capitalize that . And I think in a in a successful way . And , you know , from the one whether that's going to 120 million or slightly above or below that , what we see in Q4 or even going forward , I think that that's a fair run rate .
Speaker #5: But we we are obviously driving on a consistent basis to increase it . And we're always looking to increase it . I mean , if you look at this number over the last two years , I mean , I think we're A2X or even more on that number .
Speaker #5: And at some point you go , you know , 1.5 to 2 x to , you know , where we are today . You know , we're starting to see some normalization and predictability around , as we predict capital .
Speaker #5: However , as more opportunities present themselves over the next , I think , six , six months to one year , we could see that go up .
Speaker #9: Okay . And then just on the maintaining and growing from here , kind of maintaining , growing off of the 102 million in the third quarter .
Speaker #9: Is that fair ?
Speaker #5: Yeah . I mean , I think I would look at it if you look at Q4 of of last year , right . And and even if you look at , you know , looking at Q2 , where we were north of 120 , I mean , I think that's a fair way to model , as you're looking at where where we think we would potentially be in Q4 .
Speaker #5: I think that on top of that , though , there are some opportunities that that we see in the market as we continue to .
Speaker #5: Utilize thought processes around new structures like . Securitizing or using a securitized type format in this asset , Crispin will have , I think , a significant impact on that capital deployed number .
Speaker #5: Right ? I mean , those two will ultimately go hand in hand as as you have cheaper cost of capital or lower cost of capital that's going to impact even how much more you can originate .
Speaker #5: And so we would expect that growth to continue .
Speaker #9: Perfect . Thank you . I appreciate all that . And then on the new dividend , can you share yours in the and the board's thoughts on that discussions you had versus just deploying excess capital into buying more policies or more buybacks or having a more nominal dividend .
Speaker #9: But just curious on your view on capital allocation , dividend buybacks , deploying capital ?
Speaker #5: Sure . We put a lot of thought into the dividend . And as a business , as an asset manager , it's not unusual for asset managers to pay dividends .
Speaker #5: And one of the things that you'll see is , is that as our recurring revenue continues to grow as a percentage of the recurring revenue , we're right in line with other asset managers .
Speaker #5: And what type of dividend would be paid ? And if you compare that against , for example , our adjusted net income , we're on very much the low side as conservatives , I think , as you would see out there , you know , in the low 20s , as a percent of adjusted net income , as , as a percent for that dividend .
Speaker #5: So , you know , we felt like from a dividend perspective , this was a way to capitalize our shareholders in a very thoughtful way .
Speaker #5: And not pulling anything away from the opportunities that we had to acquire new contracts . You know , we're we're targeting this year , Crispin , you know , if you look at our new guidance , we're looking at 80% year over year growth and a small dividend .
Speaker #5: I , think that that , you know , our shareholders are getting the best of both worlds . And that's not pulling back from our growth at all .
Speaker #5: We're continuing to expand and continuing to see our growth . And as we looked at our liquidity and then we looked at our reoccurring revenue , we felt as a company that is maturing over time into a larger fee related earnings business , that that the logical next step for us was to pass that as those additional earnings onto our shareholders in the form of dividend and we'll pay that dividend on an annual basis .
Speaker #5: And as we highlighted in the press release , it will be based upon , again , a very conservative metrics as a percent of of less than 25% of our adjusted net income , or 55% of our recurring revenue .
Speaker #9: All right . Great . And sorry , just one clarification . So will it be paid quarterly or it will be an annual payment ?
Speaker #5: That's that's an annual that's an annual payment . And you bring up a good point . We purposely chose to make it an annual dividend versus a quarterly so that , you know , we could opportunistically reinvest into some of these higher Rois throughout the year .
Speaker #5: And then ultimately pass that dividend on to our investors . So it was a way for us to maximize our growth and capital while still providing a dividend .
Speaker #5: And capitalization to our shareholders .
Speaker #9: Thank you . Jay , I appreciate you taking my questions .
Speaker #5: Yeah .
Speaker #3: The next question comes from Mike Grondahl with Northland Securities . Please go ahead .
Speaker #10: Hey guys . Congrats on the securitization in the quarter . You gave a lot of good insight into the securitization . Could I maybe get you guys to go one step further ?
Speaker #10: And with that , $50 million securitization , could you kind of talk about unit economics and revenue and adjusted EBITDA that comes from that transaction ?
Speaker #10: Just so as we think about 2026 , whether you're going to do one every other quarter or one every quarter , we can just kind of get a sense for how it lifts the business .
Speaker #5: Sure . Thanks for the question , Mike . And the way to think about it is , is that when you when you're looking at the unit economics on on a securitization like this , I think it's fair to say that , you know , we will be able to capture servicing fees as we would normally capture in this kind of product on a on a go forward basis .
Speaker #5: Right ? So , you know , the way that I would compare this to on a unit economics basis , you'll actually see this as our , you know , as equally profitable as a sale .
Speaker #5: I mean , it is a true sale to a securitization . And the way that we've set this structure up . And so those unit economics exist , this is just another structure that we're able to utilize to capitalize on that , on that true sale and policy .
Speaker #5: So when you look at our ROE and Roe , you know , those those numbers would effectively be an indicator as to how we're managing the unit economics of the securitization .
Speaker #5: Because those policies are being sold in a true sale to that vehicle . So I hope that makes sense . But you know , the unit economics for us are very compelling as they are for our business .
Speaker #5: What I think the securitization does really long term is that it offers us more consistency over time . When you think about , you know , when you know , we're asked frequently about maintaining the strength of our rows and rows , this structure provides that over a very long period of time .
Speaker #5: And I think that's one of the things I'm just really excited about . And , you know , as people look at our profitability or our margins , I think that this is a great structure that will allow us to maintain that profitability and margins for years to come .
Speaker #10: Great . And then it looks like you've made some progress from the slide deck on abacus Wealth Advisors , a teams together and you're hiring some .
Speaker #10: IR Arias and have an AUM goal . Can you just talk about some of the progress you've made there ?
Speaker #5: Sure . While we while we have a number of opportunities in consideration that that we're not able to disclose at this time , we are incredibly excited about the growth of of that segment of our business .
Speaker #5: You know , one of the things we were highlighting was that the addition of ACU , quote , over time and , you know , ACU quote was really one of our early steps into for those individuals that we speak to , to than we generate thousands of inquiries per month .
Speaker #5: Could we potentially , you know , meeting the life cycle of that person and potentially sell them a new insurance product versus , you know , potentially trying to buy their policy that they may not qualify for ?
Speaker #5: So that was one of the first steps into , you know , really monetizing that relationship of of individuals who may not qualify to sell their policy .
Speaker #5: And from the wealth advisory , you know , I , I know we have what looks to be a pretty compelling five year target in , in our deck in relationship to our fee related earnings diversification .
Speaker #5: And we we still feel strongly about that . We have , like I said , a number of opportunities that that we're considering right now .
Speaker #5: We have a great pipeline . And that's going to continue to build . And I'm still very confident in what we've put out as a five year target there in relationship to earnings .
Speaker #5: I think the biggest thing for us is that we are incredibly selective in any group that we speak with specifically around acquisition , and you have to be right .
Speaker #5: They have to they have to be very disciplined and you have to make sure it's the right fit and you've got to ensure that , you know , you're looking at the type of earnings that you want because , you know , we've got an A margin here , an EBITDA margin of what , 60% .
Speaker #5: And , you know , not just us , but most businesses don't have that kind of margin . And when you look across the board , we want to be thoughtful to try to capture and not sacrifice our margin on our impact negatively .
Speaker #5: Any of our other portions of our business . So that's where some of the discipline falls in . And and we're making sure that we're looking for the right type of advisors that would fit that .
Speaker #5: .
Speaker #10: Sounds good . Thank you .
Speaker #3: The next question comes from Andrew Klingerman with TD Cowan . Please go ahead .
Speaker #11: Hey good evening everyone . I was struck by the 37% realized gain , which outpaced last quarter and the year over year quarter , which were both peaks at 26% .
Speaker #11: Could could you give a little color into what drove such a large gain and and how can we think about going forward ? 37 every quarter ?
Speaker #5: Andrew , come on . Thank you for asking that . That's a it's a big number . So I think one way to think about this is that , you know , Elena touched on it during her comments .
Speaker #5: And the average days on the book of policies . We had sold was a little bit longer this quarter , meaning that on average , those were around 363 days .
Speaker #5: And when you're letting those policies mature a little bit longer , inherently your spreads are increasing . And I think it just goes to point that , you know , there is a lot of strategy around ensuring that you're , you know , selling your contracts and monetizing those contracts at the right time , either through new underwriting , additional underwriting that could be relationship to premiums as well as medical underwriting .
Speaker #5: But but lastly , as these policies age and mature , they inherently become more valuable . And if you go back a year ago and you think about where rates were right , or even more than that , a year and a half ago , when we were really buying some of the quite a year and a half , but certainly over a year ago when we were buying these policies , we were buying these policies at , you know , a effectively at a lower price .
Speaker #5: And now that you've seen , some movement in rates in a positive direction , with lower cost of capital , you're able to sell that same contract for a larger spread .
Speaker #5: And that's very simply what occurred over this time period . And if we go back to when we were having conversations a year ago , you know , we we actually kind of spoken about this opportunity where we're able to buy contracts at a very favorable pricing just due to market conditions , and we were able to capitalize on that for Q3 .
Speaker #5: I think that , you know , if you're looking to kind of mark where we are historically , I think it's fair to say that , you know , where we were in Q2 and Q1 , you know , as you track these , I think , you know , we're we're always targeting north of , north of 20% .
Speaker #5: And , and , you know , in this case , you know , we were able to capitalize on that a little bit more .
Speaker #5: But but I would look for kind of where we've been historically as our , as our norm .
Speaker #11: That's very helpful . And then you mentioned the 363 day holding period . And I think historically , at least on the outset , you were kind of targeting more like six months .
Speaker #11: But but then I think last quarter , you kind of thought about maybe letting , letting it season a little longer because of precisely what you're saying .
Speaker #11: So, are you thinking, Jay, about 363 days or a year, rather?
Speaker #5: No , I mean .
Speaker #12: It .
Speaker #5: Yeah . I mean , in the chart . In the chart above , you see , above the average realized gains , you'll see the holding period .
Speaker #5: And now if you look at , you know , the remaining days held of owned policies , it's at 253 . So , you know , for us , you know , this was potentially more opportunistic than it has been in other quarters .
Speaker #5: And that's as good stewards of capital . That's our job is to maximize revenue and maximize returns on on contracts that we think make the most sense , I think more broadly that if we continue to utilize , whether that's through funds or securitizations or , or , you know , as we see increased demand related from institutional investors who want to invest in this product , the holding period could actually come down just depending on from the balance sheet perspective .
Speaker #5: So I think that , you know , for our very best ideas , certainly you might see some of those , but I think as Elena highlighted , that was less than 20% of our balance sheet , as I would say .
Speaker #5: You know , those types of policies that were really seasoned , which is been in line with kind of where we've where we've been , we haven't seen that number significantly move .
Speaker #5: And based upon these structures , you might actually see the hold period actually come down based upon the demand we have for the balance sheet contracts .
Speaker #11: So the whole period of like 250 plus days or maybe even .
Speaker #12: Lower .
Speaker #5: Yes .
Speaker #11: That's helpful . I guess . Just lastly , Jay , acute quote , it's it's a it's a , you know , it's of course it's life insurance , but it's different than the settlements business .
Speaker #11: Do you see any or maybe I missed it on the , on the intro remarks . But are there any overlaps where acute quote could drive life settlements , business ?
Speaker #11: And secondly , I don't know if you could share any of the economics of what it what what the price tag was or anything like that .
Speaker #11: But I'd be interested if you could .
Speaker #5: Sure . In relationship to synergies and crossovers , they , they definitely exist , right . It's it's a very large audience who are looking at a variety of different ways to , you know , capitalize on initially the , you know , a new policy or potentially as the road continues to age , you know , maybe selling their policy and what we have found is that there are a number of of kind of cross-selling opportunities throughout both both books of business , but doing it in a really thoughtful way .
Speaker #5: And so we've also been , you know , utilizing their team for a variety of other things , relationship to follow up and , and , and education of of clients .
Speaker #5: So , you know , more to come there . But what we really like about that specific platform initially is to kind of keep it focused on what it does best .
Speaker #5: Right ? Which is , you know , capitalizing on and selling new term style life insurance policies . And there's a number of businesses out there that , you know , from select quote and others that are running advertisements on this .
Speaker #5: And , and to be able to offer that same type of opportunity for our clients who are calling in that don't qualify to sell their policy , we think just makes a ton of sense .
Speaker #5: So , you know , I think initially here we're going to be able to use it for what it's designed to do . But there are definitely synergies on a go forward basis in relationship to acquisition .
Speaker #5: Currently , we haven't put out the economics in relationship to the acquisition . I can tell you that from an acquisition size , meaning the scale of the acquisition , it was reasonably small in a sense that it that it wasn't necessarily material to both our earnings or balance sheet .
Speaker #5: So this was not a it wasn't large enough that we that , that , that we needed to report on it , if that makes sense .
Speaker #11: Yes. Helpful. Jay. Thank you.
Speaker #3: The next question comes from Timothy D'Agostino with B Riley . Please go ahead .
Speaker #13: Yeah . Hi . Thank you . Regardless of securitization coming in at 50 million , is investor demand increases . Could we see larger securitizations going forward ?
Speaker #13: Maybe upwards of 75 million ? Or would we just see more securitizations at 50 million ? Thanks .
Speaker #5: Thanks , Timothy . Yeah . The answer is , is that you will see larger securitizations , you know , over time . I think , you know , as we highlighted before , the the initial securitization was to ensure that the that the platform was , was effective , was efficient , that that there was demand .
Speaker #5: If we see there is excess demand for the current product, then I would expect larger securitizations and more frequent ones.
Speaker #13: All right . Great . And then if I could ask a second question on slide 27 of the earnings deck , looking at the number of lives tracked for ABL , it seems like a lot went from trial to paid lives .
Speaker #13: I was just kind of wondering how quickly those turn from trial to paid and then kind of what the growth looks like going forward.
Speaker #13: Because obviously that number in trial has now decreased as they've been turned on . Thanks .
Speaker #5: Great question . Thank you Timothy . Yes . That that can turn pretty quickly . I mean typically you'll see that turn within the quarter .
Speaker #5: So somebody will stay in trial for 30 to 60 days . And then as that happens you'll turn over a new and the actual underlying pipeline for a number of lives that we actually have is is pretty significant .
Speaker #5: I mean , we're we're on track for north of 3 million lives by end of Q4 . So , you know , just because they're not in trial , it also means that they could just be in the pipeline and they don't need a trial .
Speaker #5: Right ? We we just wanted to show what's beyond , I think , impressive to me , when you're looking at that chart is , you know , look at where that business was a year ago .
Speaker #5: I mean , you're talking about nearly a 20 , 30 time multiple over where they were in relationship to the number of lives .
Speaker #5: So , you know , the business is growing exponentially . It's growing very quickly . The demand is , is is off the charts .
Speaker #5: And these are again three and five year long term SaaS related contracts . And there was some of the largest pension funds in the country .
Speaker #5: And that , you know , I don't want to underscore this , but that gives us opportunity for financial products to represent into those same institutions where now as an approved provider , we can show them , you know , additional opportunities to work with abacus .
Speaker #5: And so even from a lead point of view , at the very top level , it's been incredibly valuable .
Speaker #13: Okay , great . Thank you so much .
Speaker #3: This concludes our question and answer session . I would like to turn the conference back over to Jay Jackson for any closing remarks .
Speaker #5: Thank you so much , everyone . Our business is built around the people and every single person who works here at abacus . Every employee keep in mind that nearly 80% of our employees own this stock .
Speaker #5: Alongside with you , and there's no greater moment than when we're able to deliver these kind of results . But we're able to deliver them because each and every person treats this business like an owner .
Speaker #5: And because of that, I think that's why we have the results that we have. We look forward to talking to you in future calls.
Speaker #5: If you want to reach out to us , please don't hesitate to reach out to our Investor Relations team . One of the things we pride ourselves on is our accessibility .
Speaker #5: And we look forward to speaking to you again soon .