管理層發言
Good morning, everyone, and thank you for joining us for Beneficient's 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 Shareholders section of our website. Today's webcast, as the operator indicated, is being recorded, and a replay will be available on the company's website. 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 and the Risk Factors section of our Form 10-K and in subsequent filings we make with the Securities and Exchange Commission. Forward-looking statements represent management's current estimates, and Beneficient 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 for important disclosures regarding such measures, including reconciliation to the most comparable GAAP financial measures. On the call today are Brad Heppner, the CEO and Chairman; and Greg Ezell, Chief Financial Officer. I'll hand the meeting over to Brad Heppner. Go ahead, Brad.
Thank you, Dan. Good morning, everyone, and thank you for joining us. I'm here this morning to share with you the accomplishments that the Beneficient team has achieved over the last quarter as we work to build on our previous successive two quarters of positive GAAP earnings per share. For our fiscal year-to-date, as of December 31, 2024, Ben has earned $10.30 of basic earnings per share and $0.12 of fully diluted earnings per common share. 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. 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. We continued 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. Ben was created to provide fiduciary products and services that deliver liquidity and primary capital for holders and managers of all types of alternative assets. 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 midsized institutions. 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 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. Unfortunately, the traditional process, especially for our targeted market of smaller investors seeking liquidity, is incredibly complex, expensive and time-consuming if liquidity can be found at all. Our internally developed proprietary fintech platform, branded as AltAccess, provides a simple, expedient and cost-efficient online tool to complete these important transactions online in a matter of days to weeks if desired. In addition to demand for liquidity from alternative assets, our market faces a substantial demand for more primary capital into new alternative assets. The PEI data show that it has been taking an average of 18 months for general partners to raise their private equity funds, which is approximately double what it took them just three years ago. We believe we now have a solution to help address that need as well. These are the foundations of our business, and we've produced profitable progress for our stockholders of $0.12 of earnings per common share for the nine months ended December 31, 2024, which we believe will accelerate our capabilities going forward. I'll now move on to the fiscal third quarter highlights. In October, we announced the addition of banking, legal and compliance veteran, Patrick Donegan, to our Board of Directors, which I discussed on our last call. In November, we announced the addition of Karen Wendel to our Board of Directors. She currently serves as President and CEO of tokenization, blockchain and cybersecurity advisory firm, TrustChains. Karen brings deep expertise in the digital asset markets, technology M&A, cybersecurity, corporate governance and the emerging blockchain and DeFi space. Her expertise provides unique decision-making skills for Board-level strategic and tactical requirements. She's held executive and Board roles in U.S. and global private and public companies. In addition to being an independent director, Ben appointed her to serve on our Audit, Products and Related Party Transactions and Enterprise Risk Committees of our Board of Directors. Now in December, we announced that Ben entered into an agreement to acquire Mercantile Bank International Corp., subject to certain closing conditions. In connection with this important proposed acquisition, we announced the hiring of Louise Jones as Managing Director of Capital Markets and Custody Operations for Beneficient. Louise's career on Wall Street spans four decades, including being the youngest woman to hold a seat as a member of the New York Stock Exchange. Among her responsibilities, she will manage the integration of Mercantile Bank and spearhead Ben's capital markets activities as well as oversee the expansion of the company's fee-based alternative asset custody business, including the launch of a depository receipt companion line. Transactions that we completed in our fiscal third quarter include this proposed acquisition of Mercantile Bank, which is a Puerto Rico-based International Financial Entity known as an IFE. Puerto Rico is a leading jurisdiction working in conjunction with the OCC to provide expanded authorization for IFE banks to engage in activities such as asset management, clearing services, and digital asset market solutions among other key areas. It is licensed and regulated by the Office of Financial Institutions of Puerto Rico and may provide specific banking and other financial activities for persons, entities and organizations around the globe that are non-residents. 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 the potential to generate additional cash flow in the near term. 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. 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. Also during the fiscal third quarter, we continued to strengthen our capital structure, increasing our permanent equity by $35 million through a redesignation of certain preferred equity to permanent equity. Furthermore, during the fiscal third quarter, we closed a $1.4 million primary capital commitment transaction. Our originations team is now focused on progressing future prospective transactions, both liquidity and primary capital, and we look forward to building on this initial momentum throughout 2025 as we continue to evaluate additional opportunities that align with our strategic objectives. These developments continue to provide meaningful enhancements to our business model and improvements on the competitive dynamics we believe we already possess. I am 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 financings. These steps have culminated in Ben earning $10.30 of basic earnings per share and $0.12 of fully diluted earnings per share to date as of our third quarter ending December 31, 2024. With these improvements in motion, we will continue to work to educate the market on who we are, what we do and the value and growth opportunity we represent for our shareholders. Now with that, I will turn the call over to our CFO, Greg Ezell, to go over our operating and financial results.
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 reported investments with a fair value of $334.3 million, up sequentially from $329.1 million at the end of our prior fiscal year. These investments serve as collateral for Ben liquidity's net loan portfolio of $260.6 million and $256.2 million, respectively. Revenues were a positive $4.4 million and $23.0 million for the third quarter and year-to-date periods in fiscal 2025 as compared to negative $10.2 million and negative $55.7 million in the prior year. GAAP revenues principally reflect mark-to-market adjustments on the investments that serve as collateral to Ben's loan portfolio. 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 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. Permanent equity improved from a deficit of $148.3 million as of June 30, 2024, to a positive $14.3 million as of December 31, 2024, through a combination of transactions redesignating approximately $160.5 million of temporary equity to permanent equity and additional capital from equity sales and liquidity transactions, offset by net loss allocable to permanent equity classified securities of $6.9 million during the applicable period. 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. I should also note that in our conversion to diluted that 99% of that difference relates to the impact from the conversion of our preferred A0 and A1 equity that is largely held by insiders on our Board and management team. We announced the transaction on December 23, 2024, to revise the liquidation priority of BCH and provide tangible book value and other benefits to Ben's public company shareholders, which on a pro forma basis amounts to $9.2 million of tangible book value to Ben's public company stockholders using December 31, 2024, financial information. And we announced an agreement to acquire Mercantile Bank in exchange for an aggregate purchase price of $1.5 million, as Brad described. Next, we'll move on to our primary business segments, Ben Liquidity, which generates interest revenue for supplying liquidity off the balance sheet; and Ben 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 others that accrues to Ben's equity holders. During the third quarter of fiscal 2025, Ben Liquidity recognized $11.3 million of interest income, a decrease of 5.7% from the quarter ended September 30, 2024, primarily due to a higher percentage of loans being placed on nonaccrual status, partially offset by the effects of compounding interest on the remaining loans. Ben 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 a higher level of nonaccrual loans and loan prepayments, partially offset by new loans originated. 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 30, 2024. The decline in operating performance was due to higher intersegment credit losses in the current fiscal period as compared to the quarter ended September 30, 2024. Operating loss was $0.5 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 noncash goodwill impairment totaling $1.7 billion and credit losses largely related to securities of our former parent company. Adjusted operating loss was $0.5 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 and lower employee compensation due to lower headcount. Moving on to Ben Custody, NAV of 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 existing assets, principally related to NAV adjustments based on updated financial information received from the funds' investment manager or sponsor during the period, offset by distributions during the period. Revenues applicable to Ben Custody were $5.4 million for the fiscal third quarter compared to $5.4 million for the quarter ended September 30, 2024. The 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. 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. Operating income for the fiscal third quarter decreased to $3.5 million from $4.3 million for the quarter ended September 30, 2024. The decrease was primarily due to credit losses related to certain fees collateralized by securities of our former parent company. Additionally, there was no noncash goodwill impairment in the third fiscal quarter compared to noncash goodwill impairment of $0.3 million for the quarter ended September 30, 2024. 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. 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 30, 2024. The increase was due to slightly lower operating expenses, principally related to lower employee compensation due to lower headcount. 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 NAV of alternative assets and other securities held in custody, partially offset by slightly lower operating expenses during the current fiscal year. 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 $38.4 million for the same period of fiscal 2024. Total investments at fair value of $334.3 million at December 31, 2024, supported Ben Liquidity's loan portfolio. This concludes my prepared remarks on the financials. We will now open the call to questions from our covering research analysts.
分析師問答
Our first question today will come from Michael Kim of Zacks. Your line is open.
Hi, everyone. Good morning. First, I know you recently closed the primary capital commitment with 8F Asset Management. But just be curious to get your perspectives on how important the recently announced public stockholder enhancement transactions will be just in terms of facilitating reaccelerating exchange trust activity? And then just related to that, would you expect a more meaningful step-up after the transactions have been approved and completed later this year? Thanks.
Hi Michael. It's Brad Heppner. I'll answer your question here. We have been out of the market with the ExchangeTrust product line for the better part of 15 months. We reintroduced the ExchangeTrust product line for closings just a few weeks ago, before year-end. As part of that, we aimed to introduce the capital stack enhancements to provide additional tangible book value to our common shareholders, demonstrating a meaningful current tangible book value and its growth over time to our counterparties. We believe this will be an attractive economic factor for our counterparties in the transaction. Once the formal completion process is finalized and the transaction is in place, it should lead to more transactions and enable us to accelerate closings in the near term. I consider this a very positive development that is being well received in the market.
Got it. That's helpful. And then just second, I know in aggregate, the loan portfolio was essentially flat on a sequential quarter basis. So just any color on maybe some of the underlying moving parts during the quarter as it relates to unrealized marks or deal flow and/or distributions?
Greg, would you like to provide the first answer and then I'll follow up with a little more color as well.
Yes, we were on mute. Yes, as you noted, Michael, sequentially, the investments that collateralized the loan portfolio were basically flat period-over-period. As a percent, I think the unrealized gains came in at about 6%, 7% of our unrealized gain for the quarter on an annual basis. Distributions for the fourth quarter were about where we expected it, with about $4 million or so in distributions for the quarter that offset those unrealized gains on the portfolio.
I'll add a little more color as well. As we move into the December 31 marks and gain a better understanding of how valuations may change at the end of the calendar year, we will start to see the valuation movements emerge in the next month or two related to year-end private company marks. The election results have a positive impact on our expectations. We are particularly enthusiastic about what we're seeing under the new administration for opening up the capital markets for more M&A and creating positive momentum for IPOs, which we believe will lead to additional gains and realization events. We have a very large portfolio of over 800 different portfolio companies, many of which are primed for realization events, and we expect to have some unrealized appreciation recognized upon those events.
Great. That’s helpful. Thank you for taking my questions.
Thank you. One moment for the next question. And the next question will come from the line of Aashi Shah of Sidoti. Please go ahead.
Hi. I'm here for Brendan. And thanks for taking my question. Can you tell me about your timeline around when the liquidity transactions could pick up? And what factors may provide the upside or the downside to your expectations?
Sure. The timeline that we expect here is the approval of the BCH transaction that I discussed in my remarks will be coming soon. When that is done, we expect an uptick in the transactions that are being worked on right now with counterparties and also additional interested parties coming in. We have just reengaged with all the counterparties since completing the BCH transaction. We’re in the process of obtaining proxy votes and that is all being worked on right now. We expect to see an uptick of more frequent and greater volume of transactions closing in the near term.
Right. And can you provide detail on how the underlying alternative asset collateral portfolio is performing more broadly? And can you comment on the distribution activity and how that impacts your outlook?
Yes. I'll pick up where Greg provided some insight in his last remarks. In our fiscal third quarter ending December 31, we saw unrealized appreciation in the neighborhood of 7%. We saw a similar percentage in distributions. That's why you see the portfolio remaining fairly unchanged on the balance sheet. We expect the distribution rates through 2025 to increase based on the outlook of the U.S. economy and expect realization events to reflect a more positive outlook, generating a greater level of unrealized appreciation to be realized. So we have high expectations for 2025 based on the overall outlook of the U.S. economy and capital markets.
Okay. Thank you so much for taking my questions.
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. Thanks to everyone for participating on the call and webcast today. Again, a replay will be available on our website. Have a great rest of your day, and thanks again.
Thank you for joining today's conference call. The call has concluded, and you may disconnect.