Q2 2026 Beneficient Earnings Call
Speaker #1: Good day, and thank you for standing by. Welcome to the Beneficent's second quarter fiscal 2026 earnings conference call. At this time, all participants on the listen-only mode.
Speaker #1: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11, which will send an automated message advising that your hand is raised.
Speaker #1: your telephone. To withdraw your question, please press star 11 again. Please You will then hear an be advised that today's conference is being recorded.
Speaker #1: I would now like to hand the conference over to your speaker today, Dan Callahan, Director of Communications. Please go ahead.
Speaker #2: Good morning, everyone, and thank you for joining us on Beneficent's fiscal second quarter 2026 conference call and webcast. In addition to the call and release last Friday that was posted webcast, we issued a results press website at shareholders.trustben.com.
Speaker #2: Good morning, everyone, and thank you for joining us on Beneficent's fiscal second quarter 2026 conference call and webcast. In addition to the call and release last Friday that was posted webcast, we issued a results press website at to shareholder section of our Today's webcast, as the operator indicated, is being recorded, and a replay will be available on the company's website.
Speaker #2: Prepared remarks may contain, on today's call, management's forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Actual results and uncertainties that could cause deviations from those discussed in these forward-looking statements are described in our earnings press release and the Risk Factors section of our Form 10-K, and in subsequent filings.
Speaker #2: subsequent filings, we make with the securities and exchange Forward-looking statements represent management's current estimates and beneficent assumes no obligation to update any forward-looking statements in the future.
Speaker #2: Today's call also contains certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website, for important disclosures regarding such measures, including reconciliation to the most comparable GAAP financial measures.
Speaker #2: This time, I'm pleased to introduce James Silk, the interim CEO for Beneficient. He was appointed to that position by the board in July of this year.
Speaker #2: Executive Vice President and Chief Mr. Silk previously served as Legal Officer for Beneficient. From January 2020 until May, he was integral to the development of the company's corporate structure, the completion of the company's business combination transaction, and the navigation of the complex legal issues associated with running the company's business.
Speaker #2: Additionally, Mr. Silk oversaw the company's operations, underwriting risks, and legal groups. After James completes his remarks, Greg Ezell, Chief Financial Officer, will provide some financial highlights.
Speaker #2: I'll now hand the call over to
Speaker #3: Thank you,
Speaker #3: Everyone, well, a lot has happened over the past six months. I think Beneficent has faced some meaningful challenges. Beneficent's business and the market opportunity remain strong.
Speaker #3: When I talked to the board about returning, this was back in July. It was clear they were united and committed to Ben, which is important to me.
Speaker #3: And since my return, management, myself, and others have been focused on stabilizing the company. Getting our mission to provide liquidity, primary capital, customers, and the alternative asset company to a place where we can execute in the market.
Speaker #3: It's our core business. And I'm committed to that mission, and it has been energizing to lead the charge during this transition developments, as we previously period.
Speaker #3: Heppner, that occurred just before our annual chairman and CEO, Brad report was to be filed. That separation occurred after the company identified credible evidence that Mr. Heppner had committed fraud against the company.
Speaker #3: Also, as previously disclosed, Mr. Heppner was recently indicted and now faces multiple criminal charges. As it relates to the recent company, we are considering all available options related to Mr. Heppner's conduct, including counterclaims and litigation against Mr. Heppner.
Speaker #3: The company also intends to vigorously pursue claims regarding the validity of over 100 million of debt reportedly owed to an entity related to Mr. Heppner.
Speaker #3: Unpleasant; we believe this is an opportunity for the company to move past Mr. Heppner, both reputationally and substantively. Ultimately, this will better position the company to execute going forward.
Speaker #3: Another important recent development concerns are previously disclosed agreements to settle all claims pending in the lawsuits related to GWG against the company at subsidiaries in each of their current and former directors and officers.
Speaker #3: approved by the GWG Barrington Court. The district court for the Northern That settlement has been District of Texas has granted the motion for preliminary approval of that settlement, and a hearing on final approval of that settlement has been set for January of 2026.
Speaker #3: So, important progress on that front. Importantly, the settlement is within insurance limits and requires no out-of-pocket payments by the company. I would also note that the claims against Mr. Heppner's entities are not included in that settlement. The company is also working to regain compliance.
Speaker #3: with NASDAQ listing rules. As previously disclosed, the company was not in compliance with the NASDAQ periodic reporting requirement with our filings being delayed primarily due to the timing
Speaker #1: few weeks ago . A back in line with our reporting , and in periodic our thanks to accounting fact , team , we filed a incredibly and two just 10-q in six weeks .
Speaker #1: So much 10-K credit to that over . We've also gained with the market listed securities requirement Finally , the company take steps to gain continues to Nasdaq bid price compliance with we anticipate holding a special meeting list two .
Speaker #1: of its We presented that plan to the Nasdaq panel , been on that executing . plan for Importantly , as part of that plan to regain compliance with plan Nasdaq , listing requirements I would strong show of a and we've confidence in the company's and what view as future .
Speaker #1: Hicks, our board chair, converted approximately 53 million of our units in the company's subsidiary into the Class A common shares in Tom Company's connection conversion.
Speaker #1: We agreed not to sell the shares October 20th . until October 1st , 2028 . three years . So also agreed We've to forego any potential appreciation of the converted shares during that lockup period .
Speaker #1: And we also that lockup agreed during period to those vote with the board's recommendations . shares than the matters election of directors For all We believe other it our interests with those of our common shareholders and aligns reinforces leadership's confidence in the company's future note mission and on developments .
Speaker #1: We also focus on . Final relationships in relate to continue to Kansas . We to committed Kansas and Kansas . We are to work to our deliver on obligations to Kansas and its communities I've focused on recent So far , developments , developments . .
Speaker #1: We also focus on . Final relationships in relate to continue to Kansas . We to committed Kansas and Kansas . We are to work to our deliver on obligations to Kansas and its communities I've focused on recent So far , developments , developments .
Speaker #1: to end , we've cut costs in operating that expenses , which Greg will discuss further . reduced our We've also legitimate third party debt from 27 million in January to under $4 million as of today .
Speaker #1: Minimal extra costs example , we're reviewing our existing tools and We and are looking for ways to put them , for to use .
Speaker #1: tech
Speaker #2: Ladies and gentlemen , please stand by your conference will resume momentarily . Once again , please stand by . Your conference will resume momentarily .
Speaker #3: We're just having a little technical difficulty bit of with James's line . So with us , if you we'll be back with James in just a few just bear moments we'll .
Speaker #3: In the why don't Greg , have you run we meantime , through the financials and then we'll pick up with we're able to get James when on the line ?
Speaker #3: I apologize to everybody.
Speaker #3: this good .
Speaker #4: Dan . That sounds Yeah , we'll our turn results now or our attention now to quarterly results . And financial position . As September 30th , 2025 .
Speaker #4: of First , I'll start with a few from the quarter . We reported investments with a fair value of $244 million . These investments serve as collateral for Ben liquidity net loan portfolio of $223 million .
Speaker #4: Revenues were a point negative two 8,000,015.4 million for the second quarter and year to date periods in fiscal 2026 , as compared to a positive 8.6 million and 18.6 million in the prior year .
Speaker #4: revenues GAAP principally reflect mark adjustments on the investments to market that serve as collateral to Ben's loan portfolio , which for the current fiscal year also includes adjustments to fair value for investments that have we probable of deemed being sold at an amount than the less most recently reported GP .
Speaker #4: value arise specific to our These sales initiatives that we previously asset . Operating disclosed expenses were 15.1 million in quarter of the second as compared to 22.3 million in the same period .
Speaker #4: For On a year to date fiscal 2026 , basis , operating expenses for fiscal 2025 . fiscal were 95.1 million , which included the accrual of a loss contingency of 62.8 million and additional interest expense on the loss contingency accrual of 1.7 million .
Speaker #4: As compared to -$12.0 million for the prior quarter, which included the release of a loss accrual of $55.0 million and a contingency non-cash goodwill impairment of $3.7 million.
Speaker #4: non-cash Excluding the goodwill impairment and the or a loss accrual contingency , including release of Post-judgment in each period as applicable interest , operating expenses were 13.4 million in the second quarter of fiscal 2026 , as compared to same period for 22.0 million in the fiscal 2025 , with these same exclusions on a year to date basis , operating expense for fiscal 2026 was 30.6 million , as compared to 39.3 million in the prior year .
Speaker #4: Reported GAAP loss net attributable to Ben's common shareholders for the current quarter was $3.6 million , and to date 68.7 million for the current year period , primarily , primarily reflecting negative mark to market on adjustments investments .
Speaker #4: As asset part of the initiative and the accrual of the loss contingency , including Post-judgment interest impacting both the current quarter to date and the year period for fiscal 2026 .
Speaker #4: During the current fiscal we have year , completed asset equity sales or redemptions of certain investments held by the customer , exalt trust , has resulted which in an aggregate of $46.4 million in gross proceeds on a year to date basis through the filing date of our form 10-q last Friday .
Speaker #4: These proceeds have been used to down certain pay debt and working capital provide . Next , we'll move on to our primary business segments .
Speaker #4: Ben generates which liquidity , interest for revenue supplying liquidity balance sheet and off the custody , which produces fee revenue for the and trust platform services as typical , I be will focusing my on these discussion business segments as it's their operations , along with corporate and use of the other , that accrues to Ben's equity holders during the quarter of second fiscal 2026 .
Speaker #4: Ben liquidity $8.5 million of interest income , a decrease of from the quarter ended recognized June 30th , 3.8% 2025 , primarily due to a higher of loans being percentage Nonaccrual on status , partially placed offset by the effects of compounding interest on the remaining loans .
Speaker #4: Ben liquidity recognized $17.3 million of interest income for the six months September 30th , 2025 , down 24.1% compared to the prior year period , primarily due to lower loans , net ended of credit allowance for loss levels of higher loans and from loan Non-accrual prepayments , partially offset by new loans originated during the period .
Speaker #4: Operating loss for the second quarter fiscal was $0.8 million , an improvement from an operating loss of 6 million second for the quarter or for the quarter ended June 30th , 2025 .
Speaker #4: The increase in operating performance was due to lower inter-segment credit losses in the current fiscal period, as compared to the quarter ended June 30, 2025. This improvement was, in part, due to the disposition of certain investments during the period, which generated loan repayments at Ben.
Speaker #4: Liquidity that had sooner been in prior estimated periods. Calculation of the inner segment losses. Operating loss was $6.8 million for the six months ended September 30th, 2020.
Speaker #4: Five, declining from operating income of $2.4 million in the prior year period. This decrease is partially due to lower revenues period over period, as well as an increase in credit losses in the current fiscal year inter-segment, as compared to the same period in the prior year.
Speaker #4: Ben custody alternative Nav of assets and other securities held in custody was 271.4 million as of September 30th , 2025 , compared to 338.2 million March 31st , as of The decrease was driven by 2025 .
Speaker #4: disposition of certain alternative assets , distributions and unrealized losses on existing assets , principally related assets . As part of disposition of our to the sales initiative and adjustments to Nav based on updated information reported from the fund's investment sponsor or during the period , manager offset by 11.8 million of new originations revenues applicable to Ben custody were 3.1 million for the fiscal second quarter , compared to 4.2 million for the quarter ended June 30th , 2025 .
Speaker #4: The decrease result of the lower was a nav alternative of assets and other securities held in custody at the beginning of the period , when such fees are calculated , along certain with upfront intersegment fees that are amortized into revenue over time being fully recognized in a prior period .
Speaker #4: Custody revenues for Ben were $7.3 million for the six months ended September 30, 2025, down 32.5% compared to the prior year period. This decline was primarily due to lower NAV of alternative assets and other securities held in custody, along with certain intersegment upfront fees that are amortized over time.
Speaker #4: fully Being recognized in a prior year period . Operating income the second fiscal for quarter decreased to from 2.3 million , 3.1 million for the quarter ended June 30th , 2025 .
Speaker #4: The decrease was primarily due to the decline in revenues operating to this segment . As described earlier applicable , and employee and professional services expenses offset by slightly lower segment operating expenses .
Speaker #4: Operating income was 5.4 million for the six months ended September 30th , compared to 2025 , operating income of 5.6 million in the prior year period .
Speaker #4: While revenues the current year period as compared to the same period in the prior declined in expenses declined . Operating similar amount , primarily due to non-cash goodwill impairment .
Speaker #4: In year the prior period of 3.4 million . No such impairment was recorded in the current year period . Adjusted operating income for the six months ended September 30th , 2025 was 5.4 million , compared to adjusted operating income of 9.0 million in the prior year period , with the decrease in adjusted operating income , to lower primarily due revenue related to lower Nav of alternative assets , all set by slightly higher operating expenses during the current year fiscal period .
Speaker #4: As of September 30th , 2025 , the company equivalents had cash of $4.9 million and total debt of 104.0 million . Distributions received from alternative assets and other securities held in custody totaled 7.8 million , and proceeds received from asset sales totaled 37.2 million .
Speaker #4: For the six months ended September 30, 2025, this concludes my prepared remarks on the financials.
Speaker #3: Well , we're going to throw it to James , who is back and up and James will ask , you were talking about the running . conversion .
Speaker #1: All right . Can you guys Dan , can you hear me ?
Speaker #5: . Okay .
Speaker #5: .
Speaker #6: is Well this exciting . Obviously while we're doing live , it this is not recorded as unless this is one of the more creative ways to demonstrate live performance .
Speaker #6: Moving back to the conversion.
Speaker #1: So as part of our plan to compliance with the Nasdaq , continued listing requirements , Tom Hicks , or board chair and myself converted units 53 million of our preferred into the company's class A common shares .
Speaker #1: Now , in connection with that conversion , we agreed not to sell the shares until October 1st , 2028 . So three years .
Speaker #1: We've also agreed to forego any potential appreciation in the value of the converted shares lockup period during the . Finally , also agreed to vote those shares with the board's recommendation for all matters other than in the election of the directors .
Speaker #1: I believe this transaction aligns our interests with our common shareholders and reinforces confidence in the company's mission and future. I want to point out.
Speaker #1: I also want to highlight that we continue to focus on our relationship with Kansas . In short , we're committed to Kansas . We appreciate Kansas and will continue to work to deliver on our obligations to Kansas and its communities .
Speaker #1: But that's the that's developments . recent we But next steps are realize the crucial on the success of our business plan . strategy And .
Speaker #1: that end , To cut costs and operating expenses , which we've Greg outlined . We've also reduced our legitimate third party from debt 27 million in January to 4 million as of under today .
Speaker #1: Also, streamlining operations to plan. We're exploring simpler ways to provide capital liquidity to our customers. We're also exploring adjacent markets where our work with solutions may incur minimal extra costs.
Speaker #1: For our review example, we are assessing our existing tools and tech and are looking for new ways to put them to use. Put simply, we're working towards making Beneficient leaner, more flexible, and easier for our target market to understand and do business with.
Speaker #1: By outlining these steps, we believe we'll be better positioned to seize new opportunities. The demand for early liquidity services is large and growing. A Jefferies study in July found that private market secondaries accelerated to a record level in the first half of this year.
Speaker #1: Global transaction volumes reached $103 billion . That's a 51% increase from 68 billion in the first half of 2024 . Accordingly , we believe investors and alternative assets need other liquidity and services , and we have the solutions to meet those needs close by simply .
Speaker #1: saying that I'm very excited about our future . I'm glad to be back . Helping management and I'll positive on our path With that , I'll turn it back forward .
Speaker #1: To over Dan to close out and take any questions.
Speaker #3: Operator . Yeah . We're available for and anybody would And we hit star one ? can ask questions questions . Have questions us for .
Speaker #2: Thank you. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced.
Speaker #2: To withdraw your question , please press star one one again . Please stand by . While we compile the Q&A roster . Our first question comes from the line of Michael Kim with Zach Cap .
Speaker #2: Cap small research. Your line is now open.
Speaker #1: Good Hey everyone . morning .
Speaker #7: Thanks for taking my questions . First , James , I understand that the core value propositions of the company remain intact , but just curious how your strategic vision might might differ a what your bit and priorities are going forward as it relates , particularly to accelerating volumes ?
Speaker #7: origination Thanks .
Speaker #1: Thank you Michael . That's a very good question . I think management forward going focused on will be implementing business the model in our core space , which is the sort of high net worth ultra high or net worth market focusing on transactions in that 5 to 25 million range .
Speaker #1: you know , has been That , a sort of a core part of our early model . I think the difference would be the that previously there's been a focus on perhaps larger transactions , more foundational .
Speaker #1: I And our think approach will be more approaching with more of an incremental approach in terms the size of the transactions . Thank you .
Speaker #1: Michael .
Speaker #7: Got it . Makes Okay . And then maybe sense . as you have discussions with some of these high net worth investors , have you gotten sense that a maybe prospective customers might be taking a bit of a pause in terms of allocation decisions , just of market given sort as you volatility ?
Speaker #7: Work through sort of the management transition, and then that relates to any updates on timing as it relates to naming a permanent CEO.
Speaker #1: So a couple questions there . In terms of dealing with our customer our base , I think the need for liquidity and sort of taking timing , I think the need is there think the .
Speaker #1: Obviously , I market wants to see us stabilize begin before we to move forward , which is we've what what we're doing . And quite frankly , believe what we've what I done .
Speaker #1: And positioned ourselves to move forward in terms of my role interim CEO as the , we to continue continue to evaluate sort of this transition and I'm sure the board will be communicating .
Speaker #1: And , you know , short order in terms of its terms of the approach , in CEO position . But the right now has focus been on stabilizing .
Speaker #1: now We're shifting more to optimizing our model . As I mentioned before , we're simplifying our to our approach to products . And I think that will be the point at which we'll we'll have a .
Speaker #1: Further development in that regard.
Speaker #7: Got it . And then maybe just one question for Greg . Appreciate some of the incremental around on the expense side . But as we as we look forward , just curious to get your perspective on sort of further opportunities to rationalize the cost base , particularly as it relates to sort of corporate and other expenses .
Speaker #7: Thanks .
Speaker #4: Yeah . Good question . Michael I mean , we . Yeah . continually evaluate all of our , you know , vendors and ways to be more efficient .
Speaker #4: I think we've we've , you know , as you've seen over time , we've ratcheted really those kind of base expenses down . There are some additional that we opportunities evaluate .
Speaker #4: I think we've we've , you know , as you've seen over time , we've ratcheted really those kind of base expenses down . There are some additional that we opportunities evaluate there But I think they'll be more modest and and reductions incremental versus some of the more drastic changes that we've seen .
Speaker #4: You know, comparing the last six months in terms of cost reductions.
Speaker #7: Okay. Makes sense. Thanks for taking my questions.
Speaker #2: Thank you . Our next question comes from the line of Brendan McCarthy with Sidoti Company . Your line is now open .
Speaker #8: Greg , good morning everybody . Appreciate you questions here . I taking my just wanted to have a or start start off on the balance sheet .
Speaker #8: in the I think press release it mentioned there was roughly 104 million in debt . On the balance sheet . Can you provide color on , I guess kind of the breakdown of that debt is all of that stemming from the credit agreement with with BCH ?
Speaker #8: And how can we kind of think about the debt going forward?
Speaker #4: Yeah , it's a good question . I'll take that . Greg . So on our balance sheet , as of September 30th , 104 million , about seven , about 8 million of that was related to our we call it the Hicks Credit Facility called H.H.
Speaker #4: in the footnotes , the rest that is of primarily related to the help loans and the loans . As a reminder , are the notes Brad related Brad Heppner related entities that were investigating the , you know , the validity of those those amounts at this time .
Speaker #1: And , Greg , it'd be worth noting . Sorry , just to follow up on that . Right . The the loan is is now the balance of that is below $4 million .
Speaker #1: And as Greg noted , the loan is the the debt , related which Brad Heppner , you know , we intend to obviously been the challenge and is centerpiece of the criminal indictment against against Mr. Hepner .
Speaker #1: So we will pursue all remedies as they relate to that debt.
Speaker #8: Understood . I appreciate that , and I think there was there was talk about , you know , really exploring adjacent markets , perhaps ways to simplify the operating model .
Speaker #8: How can investors really think about what that ultimately means, looking ahead for Beneficent?
Speaker #1: Sure . From from the standpoint simplifying of the model , it's both a cost and transparency process . The product , current way things are designed , results in a fair number of internal entities that increases costs and complications on our side .
Speaker #1: So we're simplifying that from an internal standpoint . And then from a transparency standpoint , the the goal is to develop products where the the revenues and the cash flows from those products and from those services flow more cleanly into the basically into the public company in a way that that shareholders can understand easier .
Speaker #1: And also designed to basically provide more value to the common shareholders by going through a bit of a cleaner approach in terms of the adjacent markets. The company has, over time, developed a significant amount of internal tools for its technology purposes, including generated tools that use AI for both portfolio management and portfolio data extraction.
Speaker #1: And that has been a these internal have been tools . And we're looking now to externalize those either some of through directly through technology or together with some of the trust , trust related services that we can provide .
Speaker #8: Got it . That's helpful . That makes sense . Has there been a conversation with end with market customers just related to potentially outsourcing technology , or is that still in the more that
Speaker #8: . Early
Speaker #7: Yeah .
Speaker #1: we're having .
Speaker #1: some So conversations , not nothing to yes report . But , you know , we both the are receptiveness market as well as ways to refine what we have internally and make it more outward facing .
Speaker #1: And so those discussions that we're part of having.
Speaker #8: great . Great , That's hear . And last good to question for me , on the the core liquidity business is most of the pipeline still , you know , more focused in the PCP channel or is there , you know , other interest in in general the broad kind of liquidity transaction area ?
Speaker #1: Right now , it's it's the channel has reflects sort of were , where we say I'd 3 or 4 months just given ago , the focus on getting stabilizing , ourselves current on our filings , resolving the compliance Nasdaq matters and obviously moving forward off Hefner .
Speaker #1: Right now , it's it's the channel has reflects sort of were , where we say I'd 3 or 4 months just given ago , the focus on getting stabilizing , ourselves current on our filings , resolving the compliance Nasdaq matters and obviously moving forward off Mr. So the is or pipeline rather , you know , the deal flow is probably more leaning But towards the a that's PCP .
Speaker #1: you know , we are sort of moving we've gotten this , into you know , current on filings . We're sort of the the process .
Speaker #1: So , you know , that's that will reopening think , over medium the near term the , .
Speaker #8: That's great . Thanks , James . Thanks , Greg . That's all for me . Congrats on progress .
Speaker #1: Thank you Brendan .
Speaker #2: you . And Thank I'm currently showing no further questions at this time . I will now like to call back over to turn the Dan Callahan for remarks closing .
Speaker #3: Thank you, everybody, for joining us and bearing with us through our technical difficulties. If you would like to listen to the replay, it will be available in the shareholder section of Husband Comm.
Speaker #3: Thanks again for joining us this morning. Have a great rest of your day.
Speaker #3: Thanks again for joining us this morning. Have a great rest of your day!