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Globe and Mail
2 days ago
- Business
- Globe and Mail
CRH plc (the "Company") Form 10-Q for the quarterly period ended June 30, 2025
A Form 10-Q for the quarterly period ended June 30, 2025 (the 'Form 10-Q') has been filed with the U.S. Securities and Exchange Commission (the "SEC") today. The Form 10-Q is available to view on the SEC's website at: and the Company's website at: https://
Globe and Mail
10-07-2025
- Business
- Globe and Mail
TPG RE Finance Trust, Inc. Announces Second Quarter 2025 Earnings Release and Conference Call Dates
TPG RE Finance Trust, Inc. (NYSE: TRTX) ('TRTX' or the 'Company') today announced it will release financial results for the second quarter 2025 and file its Form 10-Q and earnings supplemental after the market close on Tuesday, July 29, 2025. CONFERENCE CALL AND WEBCAST INFORMATION The Company will host a conference call and webcast to review its financial results with investors and other interested parties at 9:00 a.m. ET on Wednesday, July 30, 2025. To participate in the conference call, callers from the United States and Canada should dial +1 (877) 407-9716, and international callers should dial +1 (201) 493-6779, ten minutes prior to the scheduled call time. The webcast may also be accessed live by visiting the Company's investor relations website at REPLAY INFORMATION A replay of the conference call will be available after 12:00 p.m. ET on Wednesday, July 30, 2025 through 11:59 p.m. ET on Wednesday, August 13, 2025. To access the replay, listeners may use +1 (844) 512-2921 (domestic) or +1 (412) 317-6671 (international). The passcode for the replay is 13753921. The replay will be available on the Company's website for one year after the call date. ABOUT TRTX TPG RE Finance Trust, Inc. is a commercial real estate finance company that originates, acquires, and manages primarily first mortgage loans secured by institutional properties located in primary and select secondary markets in the United States. The Company is externally managed by TPG RE Finance Trust Management, L.P., a part of TPG Real Estate, which is the real estate investment platform of global alternative asset management firm TPG Inc. (NASDAQ: TPG). For more information regarding TRTX, visit
Yahoo
16-05-2025
- Business
- Yahoo
Q1 2025 Innventure Inc Earnings Call
Lucas Harper; Chief Investment Officer; Innventure Inc Gregory Haskell; Chief Executive Officer, Director; Innventure Inc Dino Foderaro; Chief Revenue Officer; Accelsius David Yablunosky; Chief Financial Officer; Innventure Inc Nehal Chokshi; Analyst; Northland Capital Markets Chip Moore; Analyst; ROTH Capital Partners Operator Hello and welcome to Innventure first-quarter 2025 earnest conference call. (Operator Instructions) I would now like to turn the conference over to Lucas Harper. Sir, you may begin. Lucas Harper Thank you, operator, and thank you all for joining us for Innventure's first-quarter 2025 earnings call. My name is Lucas Harper, Innventure's Chief Investment Officer. And joining me from the company are Bill Haskell, Chief Executive Officer; and Dave Yablunosky, Chief Financial Officer. Earlier today, we issued a press release announcing our financial results, which is available on our Investor Relations website along with a supplemental slide presentation. As referenced on Slide five, we will be discussing non GAAP financial measures during this call. The most directly comparable GAAP financial measures and a reconciliation of the differences between the GAAP and non GAAP financial measures are available in our earnings release and supplemental slide presentation on our website. In addition, certain statements being made today are forward looking statements that are based on management's current assumptions, beliefs and expectations concerning future events impacting the company. These forward looking statements involve a number of uncertainties and risks, including but not limited to those described in our earnings release, Form 10 Q for the period ending 03/31/2025 and other filings with the SEC. The actual results of operations and financial condition of the company could differ materially from those expressed or implied in our forward looking statements. And now I'd like to hand the call over to Bill. Gregory Haskell Thanks, Lucas, and thanks to everyone joining us today. Given the recency of our last update, we'd like to use today's call to shift our focus from specific first quarter developments to a high level recap of the exciting opportunities that lie ahead for Innventure, the spotlight on Accelsius. AeroFlexx and Refinitiv continue to execute on their respective strategies We are excited to share more about both as we move through 2025. But given the number of inbounds we feel from investors on Accelsius, we felt today's call would be a good opportunity to speak at more length about the company. At the highest level, Accelsius has tremendous momentum, but it is important to provide additional context on the compelling market opportunity that underpins a large part of the venture's value creation potential. Today, we're excited to have Dino Fotorero, Accelsius' Chief Revenue Officer on the call to provide an insight on his perspective on Accelsius' market opportunity, technology differentiators and adoption momentum. With nearly ten years in the data center industry, first in power distribution and quality, and now over the last two and a half years in advanced cooling with Accelsius, Kimo has had a front row seat at the infrastructure challenges shaping today's market. As CRO, he leads the client operations group, applying his operations background to driving execution and ensuring a premier customer experience across every engagement. As we've repeated often, Innventure's goal is to build companies that we believe can achieve a minimum of $1 billion in enterprise value. We'd like everyone to walk away from today's call with a higher level of context and understanding about why Innventure believes in Accelsius' ability to meet and exceed that milestone. Hearing directly from Dino, who speaks with our partners and potential customers every day, seems like a good way to provide that color. With that, I'd like to turn the call over to Dino. Dino Foderaro Thanks, Bill. And thanks to the entire Innventure team for having me on the call. There are many exciting things happening at Accelsius. And today, I'll focus my remarks on three key areas. One, Accelsius' opportunity within the data center liquid cooling market. Two, the technology differentiators of our NuCool two phase direct to chip technology, and three, a deep dive into the momentum we are developing with ecosystem partners and high value end users. Let's start with the sizable, rapidly growing market that Accelsius technology and product set address. This highly attractive market was one of the key factors in Inventor's decision to commercialize the two phase direct to chip technology and one of the many reasons I joined the company. There are a few key secular tailwinds happening in the data center industry that create a compelling backdrop that Accelsius aims to capitalize on. First, it is no secret that technology companies, and more importantly, companies across all industries have publicly talked about significantly increasing their data center budgets over the next several years to keep up with the advent of AI and rapidly evolving chip technology. According to the Dell'Oro Group, worldwide data center spending was roughly $450 billion in 2024. And that number is expected to grow to over $1 trillion by 2029. This creates an incredible secular tailwind for the entire data center ecosystem and especially for critical infrastructure providers such as Accelsius. Second, the overwhelming majority of the nearly 12,000 data centers spanning the globe are still utilizing highly inefficient and antiquated air cooled solutions, and single phase water cooling technologies represent a single digit percentage of cooling installations. In the short term, single phase water based technologies are expected to expand their share of the liquid cooling market as data centers install infrastructure for this technology. However, these solutions have significant limitations. We believe that Accelsius' new cool technology is superior to single phase water based technologies. For data center operators already using single phase, switching to Accelsius new cool products does not require a seismic shift or costly rip and replace approach. Companies that currently use single phase cooling solutions can easily derisk and future proof their data centers by swapping out their single phase solutions for the Accelsius new cool technology. This allows them to adopt a more efficient and safer solution while utilizing existing infrastructure. Efficiency is among the future proofing benefits of our solution. Data center operators and end users that currently employ traditional air cooling can experience a drastic improvement in power usage effectiveness or POE, typically reducing the amount of power used for cooling by more than 80%. And while the transition from air to liquid cooling can be a bit of a journey, the simpler transition from single phase water based technologies to the NuCool solution unlocks additional savings in the form of reduced HVAC load and increased free cooling. In fact, test data captured in our lab paired with climate data provided by ASHRAE show that customers utilizing our two phase technology in comparison to single phase technology in hard to cool locations such as Southeast Asia and The Middle East can see tremendous benefits. Specifically, this study indicated that our NuCool technology allows AI data center customers in Singapore the ability to utilize free cooling 97% of the time in comparison to 34% of the time with single phase technologies. Now let's discuss how data center operators are thinking about the future. It is widely understood across the data center ecosystem that air cooling solutions are largely insufficient for existing and future generations of processors. Based on feedback we received from key customers and early single phase deployments, we believe that data center operators are increasingly recognizing the benefits of leapfrogging single phase cooling altogether as rack densities increase. Turning directly to two phase, direct to chip solutions like our NuCool platform can help data center operators meet sustainability targets, uphold service level agreements or SLAs, and protect ROI. The newest AI focused chipsets expected to enter the market in late twenty twenty five and 2026, such as NVIDIA's Rubin and AMD's m I three fifty, will require liquid cooling. We believe this dynamic will drive accelerated adoption. To demonstrate the drastic rack density impact of these ultra high thermal design power processors, a quick look into NVIDIA's five year product roadmap shows near term rack densities anticipated to eclipse 250 kilowatts per rack and rapidly approach 600 kilowatts, while other chip and server OEMs are targeting configurations landing at one megawatt per rack before 2030. The so called thermal wall is very real. And according to guidelines put forth by ASHRAE, the industry has already extended beyond the abilities of air cooling and is approaching the limitations of single phase, water based, directed chip cooling technologies at breakneck speed. Today, the current liquid cooling market is estimated at 1,300,000,000, and it is growing at an annual rate of approximately 30% according to the Dell'Oro Group, driven by advancements in AI and chip technology, as I just mentioned. The Dell'Oro Group estimates that the market will grow to a $5 billion market by 2028. This represents a significant unmet market need and Accelsius, armed with our NuCool technology, has positioned itself at the forefront of the future adoption cycle. Studies show our NuCool solution is superior to current single phase direct to chip systems and benefits a data center operator in five key ways. The first, superior heat removal. Our technology offers six to eight degrees Accelsius more headroom, which unlocks a myriad of benefits for data center operators and end users. These benefits include increased potential for heat reuse applications, reduced CapEx associated with costly infrastructure, and the ability to handle future generations of processors with increased confidence. Two, use of nonconductive dielectric fluid. Unlike leaks from water based cooling systems that can cause millions of dollars in damage to IT equipment, studies show that if a leak of our dielectric refrigerant were to occur, it would not result in IT equipment damage. To put the impact of leaks in context, current generation GPUs can cost upwards of $60,000 each and carry four to five month lead times, which can impact an operator's or end user's realized return on investment. Number three, warranty. We provide peace of mind with two and five year limited warranty options and offer additional coverage that replaces server electronics if damaged due to leaks of our refrigerant. Additionally, our relationships with server OEMs and integrators allow us to warranty Accelsius-enabled IT equipment, eliminating a large hurdle to adoption of our new pool technology. Number four, lower OpEx. Our technology can run-in an environment with up to 45 degree c facility water supply, dependent on processor and rack configuration, compared to 27 to 32 degree c facility water for single phase technologies. This allows operators to run chillers less and utilize free cooling, which can provide data center operators up to 4% energy savings per one degree C increase according to data published by Vertiv. Number five, ease of maintenance. All of our systems are built with hot swappable components that don't require a licensed technician to manage. The systems also don't need to be constantly monitored or flushed, which eliminates costly maintenance services, reduces on-site staff, and minimizes system downtime. Today, Accelsius has three products with several more in development. Rather than just technology, we offer a full product set, which provides flexibility for data center environments regardless of use case, location, or scale. Our flexible solutions within rack and multi rack form factors can be deployed within existing data center infrastructures, brownfield sites, without significant costs or downtime, and give data center design firms a full portfolio of highly efficient solutions to draw from when designing new facilities or greenfield sites. We've included specific product details within the slides accompanying today's presentation. But the most important thing to highlight between the various solutions is that each is designed to address a specific market participant need, and each product represents a platform that can and will evolve as the market continues to mature. From a competitive perspective, we believe there is only one other player in the market today that offers a viable two phase direct to chip liquid cooling technology, and the Accelsius is in a lead position. In a multiple billion dollar market such as this, even capturing a very small percentage of the market share would lead to tremendous growth and success. Now I'd like to frame the magnitude of the two phase liquid cooling adoption cycle and how that could translate to results. As you've heard from the Innventure team, Accelsius is focused on building relationships with four key groups, hyperscalers and multinational OEMs, global resellers, colocation providers, and AI as a service provider, also referred to as Neo Clouds. Today, I will focus on the available opportunities with hyperscalers, multinational OEMs, and our global resellers. First, hyperscalers regularly require large quantities of racks, with some needing approximately 1,000 racks per week. To provide an illustration for the true size of the opportunity, a single 1,000 rack order would translate into revenues approaching 9 figures. That addressable market presents a truly compelling opportunity available to us. Not only is the opportunity real, the engagement we have with the hyperscalers is real. We are currently deep in discussions with most of the major players, having met some of the companies well over 10 times. They understand the value the technology provides and know that broader adoption is only a matter of time. Winning the confidence and volume orders from a hyperscale customer is a deliberate multi phase process that requires alignment across numerous internal stakeholders with each evaluating how our technology supports their technical architecture roadmap. These are not everyday decisions. They're made in defined windows tied to platform refresh cycles and require detailed reviews, technical validation, and multiparty sign off. The process typically begins with lab testing, followed by formal proof of concept deployments that run sixty to one hundred and twenty days and may involve several iterations. From there, a pilot deployment is initiated to evaluate performance under real workloads and validate manufacturing and supply chain readiness. The questions we're fielding now focus on performance data, POC site selection, test plans, and execution timelines, clear signs we've moved from interest to evaluation. While orders take time in this space, we are seeing steady traction, strong engagement, and continued momentum as our technology proves itself in the field. Second, let's review our focus on the global OEMs that design, build, and supply the infrastructure technology used to support data center operations. OEMs represent attractive partners given their scale, reach, and extensive customer networks. It should be noted that these global OEMs generate billions of dollars of revenue and require significant volumes to have a meaningful impact on their respective business. Accelsius has a current OEM relationship to white label a solution, which includes modest minimum volume commitments. That said, our OEM partner, like other global players, typically does not white label a product for subscale volumes. They white label solutions that can scale with market demand, and we believe that Accelsius is well positioned to fulfill that need when it arises. And what's going to drive that market demand? As I touched on earlier, NVIDIA recently rolled out their GPU roadmap for the next several years, which it shows extreme anticipated increases in rack densities. The necessary computing power needed to enable AI is undeniable. Constituents across the data center ecosystem need to act quickly and need to act boldly to stay ahead of this wave. Accelsius is doing just that. Accelsius' current offering of solutions has been purpose built to handle the increasing rack densities anticipated well into 2026. We also have a sophisticated road map under development that aims to handle projected densities out to 2027 and beyond. Our deep technical team is focused on tackling the most important challenges facing data center operators and end users, which is what drives our impressive roadmap. The team is working on improved vaporator designs that enable extreme heat fluxes and challenging processor designs, evaluating developments in refrigerants and new working fluids, and developing joint solutions with HVAC equipment manufacturers to allow convenient adoption of the NuCool family of products. NVIDIA's rollout has coincided with an explosion of interest in Accelsius over the last sixty days or so. Marketing lead generation, where leads are defined as touches or interactions with market participants, has spiked over 300% in 2025 compared to the prior trailing four month period. These leads are coming in from a diverse set of data center constituents spanning the four main groups we are focused on. Hyperscalers, OEMs, resellers, colocation operators, and AI as a service operators. We've also experienced a notable uptick in our strategic partner network, which has grown by close to 200% since the start of 2025. In 2025 alone, we've added partners such as Wesco, Global Switch, Telehouse, Park Place Technologies, and others are engaged in nearing agreement. We expect several meaningful announcements in the coming weeks and months. Now over half of the opportunities that come to us originate from a selling partner or manufacturing rep, which demonstrates the value of our strategy. We believe that focusing on the four key groups I outlined above gives us the reach and scale needed to drive significant growth. For example, partnerships with value added distributors such as Avnet and Climb provide access to approximately 4,000 bars globally, which simply can't be replicated using a rifle shot approach and increases the velocity with which we can service new clients. In addition to the ramp and the number of inquiries we've received, the proposals we are generating are increasing both in total scope and average price. The average proposal size at the end of twenty twenty four was typically for single unit proof of concept systems. Today, proposals average between 2 million and 4 million which demonstrates the Accelsius inclusion and full scale production opportunities. Let's now discuss the Accelsius ability to meet these levels of demand. One question we frequently heard from investors is what's the Accelsius' current manufacturing capacity, and how does that translate into revenue and profit? We anticipate having sufficient internal manufacturing capacity to reach profitability, which we believe would happen by delivering around 100 racks per month. Clearly, the volume potential we've outlined here based on the size of the addressable market far exceeds that 100 rack per month threshold. While we aren't providing detail on longer term unit economic expectations, we do expect to achieve significant operating leverage if we receive orders that ramp into the thousands and tens of thousands of racks. This should give investors a good sense of why Innventure has such conviction in the economics and long term growth opportunity for the business. To position the company to meet anticipated market needs, Accelsius is focused on partnering with large global contract manufacturers that can support the much larger orders we would expect in the future. We currently have one such relationship today. And although we can't disclose specifics like the company name or anticipated volume, we can confirm it is with a well known contract manufacturing company whose primary focus is the tech hardware industry and who would be able to handle a 10,000 plus rack order if received today. When Accelsius receives a large scale order, fulfillment planning is already well underway. Our supply chain team operates with a proactive readiness model, aligning internal and contract manufacturing capabilities to meet volume and timeline expectations. With a North American focused supply chain and scalable production capacity, both internal and external, we are positioned to deliver at pace. In most cases, orders of this nature could be fulfilled within a ninety day window with revenue recognized upon delivery. This timeline adds to our conviction that the conversations that Accelsius is having today could lead to strong revenue growth in the back half of twenty twenty five. Thanks again for having me on today's call. We at Accelsius are incredibly proud of the hard work our team puts forth each and every day, and we are excited about the future. With that, I'd like to turn the call back over to Bill. Gregory Haskell Thank you, Dino. This is a truly exciting opportunity. Before passing it to Dave, let's recap the key takeaways we hope investors will walk away with. Number one, the liquid cooling market is sizable and growing and is estimated to reach $5 billion within the next three years. Two, given the trajectory of increasing chip densities, industry players believe adoption of liquid cooling will be all but required and Accelsius is at the forefront with the leading technology with the leading technology in the space. Number three, the company was well positioned through their contract manufacturing partnerships to capture the wave of liquid cooling adoption and fulfill potentially significant demand. And four, that demand from the large global players we are engaged with far exceeds what Accelsius needs to become a profitable and rapidly growing business. All of the factors underpin our conviction that 2025 will represent inflection point for revenue growth for Accelsius. Josh, Nino and the entire team remain laser focused on execution and are two market disruptors. Our confidence in the business has never been higher than it is today. We're excited to watch Accelsius on its journey to become what we believe is at least a $1 billion enterprise value opportunity. With that, I'd like to turn it over to Dave to cover our financials. Dave? David Yablunosky Thanks, Bill, and good afternoon, everyone. Innventure's first quarter revenue was $0.2 million representing management fees we collected from our management of the InVentus ESG fund. This was in line with our expectations and consistent with the communication on our last earnings call that we expect most of our revenue growth would be weighted to the second half of the year. As Dino highlighted in his remarks, there is a significant unmet market need for two phase direct to chip liquid cooling, and we believe Accelsius is well positioned at the forefront of adoption of this technology. We are excited about the momentum that is building at Accelsius. G and A expenses were approximately $20 million for the quarter. This number has four primary components: non cash equity based comp of approximately $5 million professional service fees of approximately $6 million for accounting, audit, and legal advisory services related to, among other things, regulatory filings and compliance as a new public company, $6 million for payroll expense, benefits and other operating expenses, primarily driven by growth at Accelsius, and $2 million of non cash amortization related to our intangible assets. It's important to point out, we have deliberately utilized outside professional services to keep our long term fixed costs related to headcount low. We expect our need to rely on outside professional accounting legal services to decrease over time, as we establish additional internal processes for compliance with public company requirements. Moving down the income statement, we booked a $233 million non-cash goodwill adjustment, driven by the write down of goodwill on the balance sheet. This was a result of the decrease in the company's share price and market capitalization, which were in part due to the general downward volatility experienced in the stock market during late February and March. Again, this was non cash. In the non operating section of the income statement, we booked a favorable non cash adjustment of approximately $16 million related to the change in fair value of our warrant and earn out liabilities. EBITDA for the quarter was a loss of approximately $248 million But after adjusting for non cash items, adjusted EBITDA was a loss of $21.8 million To say again, we believe 2025 will represent an inflection point for revenue growth at Accelsius. And due to our majority ownership of Accelsius, we expect to see the results of this revenue and earnings growth in our consolidated financial statements in future quarters. Moving to the balance sheet. As highlighted on our prior earnings call, on March 24, Executive Chairman, Mike Atworth; Chief Strategy Officer, John Scott, and another related party terminated approximately $18 million worth of Adventure and AeroFlexx debt in exchange for approximately $2.3 million Series C preferred shares. This resulted in an annual interest expense savings of approximately $3 million and reduced our cash expenditure obligations by $18 million This action underscores our founders' commitment to and confidence in our business strategy. In addition, in the second quarter, pursuant to our securities purchase agreement with Yorkville Advisors, in two tranches, we issued convertible debentures for an aggregate amount of $30 million In connection with these issuances, we received gross proceeds of $18 million on April 14 and $9 million on May 15. This added $27 million of cash to our balance sheet. These two actions illustrate the active management of our cash and both improve our capital position. Other notable items on our balance sheet. Inventory. Inventory remained steady from the end of the prior quarter at approximately $5.2 million We're acting judiciously with our cash, optimizing the need to keep inventory on hand to meet customer orders while keeping cash on our balance sheet. Intangible assets. This represents developed technology and other intangible assets and amortizes at different intervals, primarily over the next eight to fifteen years. Goodwill. As mentioned earlier, goodwill now stands at approximately $437 million as of March 31. On to the cash flow statement. In the cash from operating activities section, you can see many of the non cash items I mentioned earlier. The cash used in investing activities primarily represents the funding given to AeroFlexx through our existing facility comprised of debt securities. The cash provided by financing activities section includes approximately $8.2 million of net cash raised through the Innventure Series C preferred stock round, the issuance of shares through the Yorkville Standby Equity Purchase Agreement facility, separate from the advance mentioned earlier, and cash raised through Accelsius. It's important to say the Innventure team remains focused on additional capital raises at the Innventure and or operating company level to meet our liquidity needs and fund what we believe are very attractive growth opportunities ahead of us with the goal of creating substantial value for our shareholders. With that, we'll open up the call for questions. Operator (Operator Instructions) Nehal Chokshi, Northland Capital Markets. Nehal Chokshi Thank you. And thank you for bringing Dino on to the call to talk about in detail what Accelsius is doing to capitalize on this massive inflection point for DPhase DLC. Going into that discussion there, with respect to the go to market, addressing the four different customer types, With the white label agreement with the OEM, that was that primarily driven by a end hyperscaler engagement? Gregory Haskell I think it's broader than that, Nehal. Thanks for the question, by the way. And I can flip this over to Dino in just a second. But the OEM that we're doing the white label for has a much broader market than just the hyperscalers. Certainly, they serve various hyperscalers, but they serve a broader market. But Dino, if you have any other commentary on that, feel free to jump in and add on. Dino Foderaro Yeah, Bill. Relationship was there to driven not only by a hyperscale as you mentioned, but more of the overall market demand and kind of where the market is headed. So it could service hyperscalers as well as, as you mentioned, a wider breadth of customers. Gregory Haskell Like, players. Understood. Nehal Chokshi Right. Totally understand that going through this OEM will address the broader swath of customers that that OEM can address. But I guess what I'm trying to get is that the evolution or the original relationship start with a hyperscaler. Gregory Haskell Again, Dino, defer that one to you. You're closer to the ground on that one. Dino Foderaro Yeah. It it didn't start with a hyperscaler. It started with the it started with basically, with the OEMs driving kind of where they want the solution set or the product set to go from a liquid cooling standpoint and and the goals and objectives they want the infrastructure side to meet. It was definitely the relationship started from specifications that drove towards a larger, like that drove towards the larger market. Now we do see hyperscalers being able to use this, Neo Clouds being able to use this, as well as other users of the data center. Nehal Chokshi Okay. And with respect to this potential inflection point happening in calendar twenty five, do you expect it to be served largely through this white label agreement? Gregory Haskell I would say broadly no. Meaning, there we certainly expect some volume from those agreements, there's a much, much broader pool of customers that we're engaged with. And again, Dean, if you want to amplify on any of that, feel free to jump in. But there's a broad range. Our activity is kind of through the roof right now in terms of the activity coming to us from all of those various sources, not the scalers, colos, as a service, and and the the OEMs. Anything that you know. Dino Foderaro No, Bill. I I think you you nailed it there. Yeah. The the our pipeline is definitely filling with customers from all angles, or opportunities from all angles, especially those being driven by our our ecosystem of partners. You know, they've really they've really turned it on. The the Salesforce has has really been able to find a lot of opportunities that our product really addresses the need of that customer base. So not just driven from that OEM agreement, driven from the entire set of relationships that we have out there in the ecosystem. Gregory Haskell I mean, one of the things you saw from the chart, Naho is, we had six of these partners in January and now it's 21. So all of those have the ability to they're all channels of one form or another. Right? So we're getting, I won't say inundated, but there's a huge amount of activity going on in the space. And in terms of the trajectory, I think the entire industry was slower in the first and second quarter than they had anticipated. You can sort of see that across the board, but I think they're all quite bullish on the second half of the year and that's what we're seeing. And I think that slowdown in the first half was attributable to a number of factors, mostly tariffs, uncertainty and then Nvidia putting out their roadmap in late February of where they see the chip phone when and what type. And since that inflection point, it's been, as you can see in the data, a significant ramp up in activity. Nehal Chokshi Got it, that's great, thank you for that, detail. Could you comment on the pros and cons of flow versus pool based cooling? Dino Foderaro Bill, do you I can jump in and When we look at the pool boiling versus flow boiling, you do put in moving components, failure points into your cold plate technology that could cause issues in long standing operation, especially as we look at reliability and uptime being extremely important to these customers. Additionally, when you have pool boiling, you really have no excess for any overload or any hiccup in the facility water supply. So you're really exiting at 100% vapor quality, and that could lead to cases of dry out. Whereas the flow boiling, we always have ample fluid flowing through the cold plates and through the system that allow that additional headroom or a little bit of extra buffer. I think a rule of thumb from engineering is never to really to design something size on size or for the exact max requirement. And when you look at pool boiling, that's really what you're doing because you don't have that excess fluid that's available there if you go outside of normal operating conditions. Nehal Chokshi And what would you say the full base boiling guys would point to as shortcomings for the flow based cooling? Dino Foderaro I think the initial point that they that they point at it is pumping power and whatnot and the fact that you have to have a little bit more fluid inside your system. However, when you look at the cost associated with extra fluid, especially with the fluids that we're utilizing, which are commercially available, relatively low cost fluids when you talk about overall liquid cooling fluids in general. And the pump power being below those thresholds set by the OEMs of that 1.5%, two %, really the benefit that you get from having that resiliency, that robustness in the product that you get with the flow cooling versus the pool boiling, we see that trade off being a no brainer going towards the flow side. Nehal Chokshi Great. And then last question for me, and then I'll get back into the queue. But so my understanding is is that there are some hot spots on the Blackwall architecture, which could be a potential accelerant towards phase DLC. Any reconnaissance on whether or not NVIDIA can and will mitigate those hotspots on the next generation architecture Reuben due out in some sometime in calendar twenty six? Gregory Haskell Again, Dino, that's that's in your territory, not mine. Dino Foderaro Yeah, I would prefer not to answer that question. I would prefer not to answer that question just due to NDAs and whatnot. Nehal Chokshi Got you. Okay, understood. That's perfectly reasonable and understandable. I'll cede the floor. Thank you. Operator Chip Moore, ROTH Capital Partners. Chip Moore Hey, thanks for taking the question. I wanted to follow-up, I guess, appreciate the deep dive on Accelsius and I think the tone around revenue inflection certainly sounds like you're feeling more positive on sort of near term trajectory. Maybe just expand on that pretty notable increase in lead generation there since February, I guess. And you talked about fulfillment, you know, being able to be pretty quickly just maybe talk about potential leapfrog single phase sort of is better now needed later type mentality how those conversations are going and your confidence level in that inflection point here in the second half. Gregory Haskell Yeah, let me just start and then I'll let Dino add on first shift. Thanks for the question and thanks for the interest. So we have seen, as you saw in data, a very, very big spike in activity around late February. That point forward, it's been significant. That data is, I believe it's a kind of a three month moving average. So when you see it triple from month to month, you can see a pretty significant explosion in activity there. And I think that parallels what we're seeing from all the other players in space. Listened to some of the other earnings calls or some of the other principles in the marketplace, and I think they were experiencing the very same kind of activity. So we're kind of aligned with that. Obviously, can't give you any kind of forward looking guidance on revenues. We're not prepared to do that. But in terms of the momentum, if you want to kind of drill down with Dino on the momentum, that's perfectly good. Absolutely, Bill. Anything in particular you wanna add on to that? Dino Foderaro Yeah, in regards to momentum, I think we touched on it in the readout is that, in the update is that with the, I guess, clarity provided by NVIDIA's roadmap that was released at GTC and then released even further at some of the conferences following that, really gave direction to the data center operators, the infrastructure manufacturers, and those that are kind of in the know on where the processes are going on, what rack architectures will look like, really started to draw attention to the extremely high flow rates, not only at the rack level, but also at the chip level for single phase cooling. And that really drove a lot of attention towards two phase. Additionally, there was a very small amount of liquid cooling deployments that had actually been achieved in the prior years outside of the hyperscalers. As enterprise clients as colos started to deploy more of the single phase water, those problems, those issues that are inherent to that technology really came to roost and people got to feel those personally. And I feel that drove a large amount of attention and really kind of opened up the market to what we've been evangelizing over the last few years. And that's definitely resulted into that drive of interest and the drive of right interest. So there's been a big paradigm shift in the leads that we've captured and the conversations that we've had where it's no longer, oh, this is a neat technology. I've been saying that two phases are gonna be needed to the people that are the experts, the subject matter experts at the the polos, the OEMs, the people that are actually deploying the cooling, the MEP firms, design firms to how do I deploy this? Your solution is viable. What is the way that we get this into our data centers? So that's really, like I said, the drive and the paradigm shift, the types of conversations that we've had, definitely kind of pointed at that inflection point and that wave coming out of Accelsius. Chip Moore Great, that's helpful. Appreciate it. And maybe just one more follow-up and I'll hop back in queue. Just maybe talk about that sort of chicken and egg, you know, confidence in your ability to scale and manufacturing how that those conversations are progressed. Thanks. Gregory Haskell Yeah, no, oh, yeah, go ahead. Dino Foderaro Yeah, I mean, so as we look at the manufacturing side, obviously, we've got a great team. One of the first people that was added to the organization when we were founded is our Chief Supply Chain Officer, Tremendous amount of background there on the supply chain side. He's added a great team. But myself, being a manufacturing guy at heart and running manufacturing companies, we knew that we were going to need the support to add confidence for the hyperscalers to large clients. And that's where our Centimeters partner and our Centimeters partners have really come in to drive a lot of that confidence and help ensure that we can support those large volumes, as well as ensuring that those volumes can be met with quality that's expected in a tech market or a high reliability market. So that was really a big add for us in overall ensuring our clients that we could grow with them. Because nothing's worse than testing, evaluating, and adopting a technology, and then finding out that it can't scale with your demands. So that's kind of where we were able to add a lot of confidence from the manufacturing side. Now when we look at the design development side, again, great team of engineers and a great sourcing group that was able to identify the proper materials and really robust process to ensuring that the materials that we utilized can meet that high reliability requirements of our clients, which I'm not sure a lot of the other units that are out there or new technologies are out there take to heart because they're more concerned about getting the technology out. The three sixty approach that we took, I think has lent very good confidence or gained very strong confidence from our clients. Gregory Haskell Yeah, I think another way to frame it Chip is that as we mentioned, as Dino mentioned, we've had a lot of engagement with some of the hyperscalers that have very high volume demand. And they're confident based on the interactions they've had with us or they wouldn't be coming back. So the fact that we've had in some cases a dozen meetings or more with various large type scalers suggests that they see this as a viable path to getting to scale. And of course, they understand that we're partnering with content manufacturers to handle the larger volumes. But even internally with the kind of volumes we talked about, we can still get to some pretty meaningful size just with our current internal manufacturing capacity. And it's almost exclusively a kind of North American supply chain, at least our direct suppliers. And that was purposeful to, kind of take out the geopolitical risk out of the equation so that we would be able to access, access the materials that we needed in order to to accommodate the volumes that we can manufacture internally. Operator Thank you. Ladies and gentlemen, at this time I would like to turn the call back over to Bill Haskell for closing remarks. Gregory Haskell Well, thanks, everyone. I really appreciate everybody joining today. It's useful to get number line directly from the horse's mouth, is why we wanted Dina to come on to talk more in detail about Accelsius. We do look forward to future updates. We believe that there's, again, a lot of momentum going on in the company in all of our opening companies. Quite honestly, I feel that we're very well positioned and they're all really maturing and of coming to the fore. Very optimistic about where we go from here, but we look forward to updating you in the future. And thank you again. Operator Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Yahoo
16-05-2025
- Business
- Yahoo
Q1 2025 Crescent Capital BDC Inc Earnings Call
Daniel Mcmahon; Senior Vice President, Head of Public Investor Relations; Crescent Capital BDC Inc Jason Breaux; Chief Executive Officer; Crescent Capital BDC Inc Henry Chung; President; Crescent Capital BDC Inc Gerhard Lombard; Chief Financial Officer; Crescent Capital BDC Inc Paul Johnson; Analyst; Keefe, Bruyette & Woods Robert Dodd; Analyst; Raymond James Finian O'Shea; Analyst; Wells Fargo Mickey M. Schleien; Analyst; Ladenburg Thalmann Operator Good morning and welcome to Crescent Capital BDC Inc.'s first quarter ended March 31, 2025, earnings conference call. Please note that Crescent Capital BDC Inc may be referred to as CCAP, Crescent BDC, or the company throughout the call. I'll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please note that the past performance or market information is not guaranteed of future results. I'll now turn the call over to Dan McMahon. Daniel Mcmahon Thank you. Yesterday, after the market closed, the company issued its earnings press release for the first quarter ended March 31, 2025. And posted a presentation to the IR section of its website at The presentation should be reviewed in conjunction with the company's Form 10Q filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today's call will be CAP's Chief Executive Officer, Jason Bro, President Henry Chung, and Chief Financial Officer, Gerhard Lombard. With that, I'd now like to turn it over to Jason. Jason Breaux Thank you, Dan. Hello, everyone, and thank you all for joining us. I'll start today's call by summarizing our first quarter results, follow that with some thoughts on the market and touch on our portfolio. In terms of first quarter earnings, we reported net investment income of $16.6 million or $0.45 per share compared to $20.5 million or $0.55 per share in the fourth quarter. This quarter's NII decline was primarily driven by the following factors the impact of lower base rates resulting from the two FOMC rate cuts during the fourth quarter of last year. The roll off of certain one time and non-recurring items and a reduction in dividend income from the Logan JB resulting from the end of the reinvestment period. The last driver of the quarterly change in net investment income was our loans on non-accrual, which increased to 3.5% and 1.8% of our debt investments at cost and fair value, respectively at the end of the quarter. Well, we are not pleased with the increase in non-accruals, the four names that were added this quarter are all first lane positions and represent less than 1.2% of the total portfolio at fair value and resulted from one-off credit events at certain borrowers that were independent from one another. We've consistently taken a pre-emptive and rigorous approach to both our watch lists and re-evaluating the accrual status of our investments that have not performed to underwriting expectations, recognizing that there are a wide variety of approaches to how managers think about these categorizations. Looking ahead, we believe that this quarter's earnings are reflective of our earnings baseline in the near term. With potential near term tailwinds from our SPV asset-based facility repricing and right sizing that we completed at the beginning of the quarter, which Gerhard will discuss in more detail. As well as the full quarter impact of our portfolio and target leverage. As our baseline view, this near-term outlook does not reflect the impact of any further loans we may place on non-accrual or changes in base rates. Gerhard will take you through our financial results and outlook in more detail. So let me provide an update on what we're seeing in the market and how we are positioned. Quarter one started off as an active deployment quarter. However, our near-term expectation for a sustained pickup in M&A has been tempered by tariff announcements by the White House. The 90-day tariff pause has prompted some of our sponsors to take a wait and see approach with regards to new platform activity, further adding to the backlog of deal activity that has existed for many P/E owned assets. However, we have still seen attractive investment opportunities even following the liberation Day announcements that fit our core investment mandate of first in investments in portfolio companies backed by sponsors we have supported in multiple deals. The recent volatility requires us to maintain our selectivity and underscores the importance of consistently applying our underwriting process. For our sponsors, we believe that our tenure in the direct lending space and depth of our relationships, which have been cultivated over decades, underscore our value proposition and the ability to serve as a true partner in developing bespoke capital structures. We continue to lead the majority of our transactions and drive stringent documentation. Attributes that are much more difficult to accomplish in the upper middle market BSL replacement segment in our view. Let's shift gears and discuss the investment portfolio. Please turn to slides 13 and 14 of the presentation, which highlights certain characteristics of our portfolio. We ended the quarter with just over $1.6 billion of investments at fair value across a highly diversified portfolio of 191 companies with an average investment size of approximately 0.5% of the total portfolio. Our private credit origination platform activity has provided us the opportunity to nearly double the number of portfolio companies in our portfolio since listing, even after taking into account prior acquisitions. We believe that diversification is an important component of providing stability to our shareholders in order to help mitigate the impact of one-off credit events on both our investment income and net asset value. Our top 10 largest borrowers represented 18% of the portfolio as we are believers in modulating credit risk through position size, which we believe has served Crescent well in previous credit cycles. We have consistently maintained an investment portfolio. That consists primarily of first lien loans since inception. Collectively representing 91% of the portfolio at fair value at quarter end. We continue to focus our investing efforts on noncyclical industries and remain well diversified across 20 broad industry categorizations. And we will provide some additional detail on this in his comments, but our credit framework has positioned our portfolio in a way that naturally limits our exposure to the most severe and direct impacts of the recent tariff announcements. Finally, our investments are almost entirely supported by well capitalized private equity sponsors with 99% of our debt portfolio in sponsor backed companies as a quarter end. We have partnered with our sponsors to invest in well capitalized borrowers with significant equity capital beneath us, resulting in a 39% weighted average loan to value across our investments as a quarter end. Please click the slide 17, which shows the trends and internal performance ratings. Overall, we have seen stability in the fundamental performance of our portfolio, resulting in consistency in our risk ratings and a weighted average portfolio risk rating of 2.1. On the right-hand side of the slide, you'll see that one in two rated investments representing names that are performing at or above our underwriting expectations continue to represent the lion's share or 87% of our portfolio at fair value. Moving on to our dividend, we declared a second quarter 2025 regular dividend of $0.42 per share. The dividend is payable on July 15, 2025, to stockholders of record as of June 30. Additionally, the second in a series of three previously announced $0.05 per share special dividends related to undistributed taxable income will be paid on June 13 to stockholders of record as of May 30. We have earned our dividends since CCAP's inception, and we note that our NII continues to be in excess of our base dividend in the first quarter. We have prioritized consistency and NAB stability over the long term as opposed to simply delivering a high dividend yield. This principle guided us to not aggressively raise our base dividend when the rate hiking cycle began in 2022. This marks our 37th consecutive quarter of earning our regular dividend at CCAP. Which we've accomplished while maintaining a for share within a tight band. We are proud of this track record and are focused on earning our dividend for the foreseeable future. Our view is that dividend yields in the BDC space remain elevated given the current base rate outlook and lack of meaningful fundamental headwinds that have been demonstrated in corporate credit portfolios to date. Our positioning has and always will be for the long term. With that, I will now turn the call over to Henry. Henry. Henry Chung Thanks, Jason. Please turn to slide 15 where we highlight our recent activity. Gross deployment in the first quarter totalled $105 million as you can see on the left-hand side of the page, of which 98% was in first lien investments. During the quarter, we closed 10 new platform investments totalling $78 million. These new investments or loans to private equity backed companies with a weighted average spread of approximately 565 basis points, reflecting attractive opportunities we are still able to capture while applying the selectivity inherent in our underwriting. The remaining $27 million came from incremental investments in our existing portfolio companies. The 105 million in gross deployment compares to approximately $78 million in aggregate exits, sales and repayments, resulting in net deployment of approximately $27 million for the first quarter. The liberation Day tariff announcements prompted a platform-wide bottom-up review of the potential tariff impact on all of our portfolio companies. Given our focus on service businesses with low materials components and cost of goods sold and high free cash flow conversion, the overall direct material exposure is modest at 4%. Additionally, investing in the core and lower middle market both for US and European portfolio companies naturally points us to businesses that primarily serve their respective domestic markets with limited exposure to cross-border trade from a revenue perspective. We performed a review of the potential exposure through multiple lenses. First, manufacturing businesses that source raw materials from abroad. Second, service businesses that source intermediate or finished goods from abroad. And third, business models closely tied to the transportation of goods or export of goods to the United States. For the vast majority of these businesses, we did identify mitigating factors with the ability to pass through price increases and limited supplier concentration by individual supplier or geography. The ability to increase prices was demonstrable for most of our portfolios during the recent inflationary periods experienced, particularly in labor, which represents a much larger component of direct costs in our portfolio companies and materials. Although the full extent of tariffs, including knock-on effects, remain to be fully seen, we believe CCAP's portfolio is well positioned to weather potential volatility. Turning back to the broader portfolio, please flip the 516. You can see that the weighted average yield of our income producing securities at cost came down 50 basis points quarter over quarter to 10.4%, reflecting the impact of changes in base rates. As of March 30th, 97% of our debt investments at fair value were floating rate with a weighted average floor of 79 basis points, which compares to our 55% floating rate liability structure based on debt drawn with no floors. Overall, our investment portfolio continues to perform well, with year over year weighted average revenue and even outgrowth. The weighted average interest coverage of the companies in our investment portfolio at quarter end improved to two times. As a reminder, this calculation is based on the latest annualized base rates each quarter. In terms of managing fixed operating costs, approximately 73% of aggregate revolver capacity was available across the portfolio at the quarter end, so our portfolio companies in the aggregate remained well positioned to address fixed charges with operating cash flows and available balance sheet liquidity. With that, I'll now turn it over to Gerhard. Gerhard Lombard Thanks, Henry and hello everyone. Jason previously noted, our net investment income per share of $0.45 for the first quarter of 2025 compared to $0.55 per share for the prior quarter. There were four key drivers that drove the change in this quarter's NII. The first driver was lower base rates because our investments typically have their coupons reset at the beginning of each quarter while our floating rate liabilities reset on a daily or monthly basis, there is a lag effect on the full quarter impact from changes in base rates on that investment. This is best highlighted on slide 16. This was the largest contributor to the quarter's NII decline, resulting in approximately $0.04 of net impact. The second driver was the runoff of one-time non-recurring income. Specifically, we had runoff of one-time pick income from two portfolio companies, which contributed $0.03 of NII last quarter. The third driver was the Logan JV where dividend income declined by $0.03 per share quarter over quarter. As a reminder, we acquired the Logan JV in connection with our acquisition of the first Eagle BDC in 2023. Its largest investment is a middle market CLO. We pre-emptively ended the reinvestment period for the CLO at the beginning of the quarter, almost five months before the official expiration of the reinvestment period, given elevated broadly syndicated loan prices at the start of the year. Following the volatility in the broadly syndicated loan market after the Liberation Day announcements, we opportunistically reinvested a portion of the proceeds we had held back to take advantage of attractive entry points for high quality BSL borrowers before the contractual end of the reinvestment period. Going forward, our expectation is that the dividend income attributed to the Logan JB will reduce over time as the CLO leverages with potential lumpiness in quarter-to-quarter distribution amounts. Once the CLO is fully wound down, which we estimate in our base case to take approximately 24 months, we expect to unwind the joint venture and redeploy the proceeds into crescent directly originated investment opportunities. The fourth driver Was loans we placed on non-accrual during the quarter, which drove a $0.02 per share decrease in NII on a quarter over quarter basis. As Jason noted in his comments, a diverse portfolio with minimal single obligor concentration helped mitigate outsized impacts to our investment income from non-accruals. Our GAAP earnings per share for the first quarter of 2025 was $0.11. The net investment income of $0.45 was offset by $0.34 per share of net unrealized and realized losses. As of March 31, a stockholder's equity was $727 million resulting in net asset value per share of $19.62. Now let's shift to our capitalization and liquidity. I'm on slide 19. In December 2024, we priced $115 million of new senior unsecured notes broken down into two tranches. $35 million of senior unsecured notes due in February 2028 and $80 million of senior unsecured notes due in February 2030. Both tranches were fully drawn during the first quarter of 2025. At the beginning of April, we right sized our STV as a facility from $500 million to $400 million and reduced the spread by 50 basis points from 245 to 195. This facility resizing provides us with sufficient capacity to address any potential draws on our unfunded commitments while minimizing interest expense related to excess unfunded capacity. Our equity structure reflects our target size and leverage with our current equity base today, and we have ensured that our borrowing capacity is consistent with our investment needs. As you can see on the right side of the slide, 76% of total committed debt now matures in 2028 or later, a figure that was 42% quarters ago. So, we're pleased with our progress here. The weighted average stated interest rate on a total borrowing was 6.36% as of quarter end. Pro forma for the SPV facility amendment, the weighted average interest rate would be 6.17%. This quarter's net deployment brought our debt-to-equity ratio up from 1.19 times in the prior quarter to 1.25 times, which is within our stated target leverage range of 1.1 to 1.3 times. As Jason noted, for the second quarter of 2025, a board declared a regular dividend of $0.42 per share. Additionally, the second of three previously announced $0.05 per share special cash dividends is tabled in June. Our existing variable supplemental dividend framework remains in effect as well. The cap will not pay quarter two supplemental dividend as the measurement test cap exceeded 50% of the quarter's excess available. And with that, I'd like to turn it back to Jason for closing remarks. Jason Breaux Thank you, Gerhard. Historically, in periods of market volatility, Crescent's focus on disciplined credit underwriting, capital preservation. Strong free cash flow generation and robust debt service coverage has enabled us to stay on the right side of performance and returns across managers. In clothing, we believe Crescent and CCAP will continue to be on the right side of this performance dispersion spectrum over the long term, and we look forward to delivering on that in the quarters to come. As always, we thank you for joining our call today and look forward to connecting with many of you soon, and with that operator we can open the line for questions. Operator We are now opening the floor for question-and-answer session. (Operator Instructions) Your first question comes from the line of Paul Johnson of KBW. Your line is now open. Paul Johnson Yeah, good afternoon. Thank you for taking my questions. First one just on one of the new rules this quarter, new era of technology it was marked around 71, I believe that reflect the restructuring that was recently announced for that company. And I guess the second question to that as well it looks like it might be more of a non-traditional deal for you. It looks like it might be a potentially larger company than what you are normally. Do, maybe I'm wrong there, but if you could, give us, I guess your idea on that as well, that'd be helpful. Thanks. Henry Chung Hey Paul, this is Henry. Well, with respect to new era, the, I say the mark as you noted here is, kind of be in line with, where we expect to ultimately, restructure that name it just given the timing here that I was reflective of the latest view on the earnings outlook at the time when we did our marks, but. I would expect that to be kind of roughly in line and could you, for your second part of the question, could you. A repeat which company you were asking about. Paul Johnson The same company. Yeah, I just, I, correct me if I'm wrong, but it looks like the company might be a little bit larger than what you've traditionally targeted, I was wondering if that's kind of a non-traditional deal or off there. Jason Breaux Well, hey, it's Jason. I'm just trying to clarify here I knew era on our books has not yet restructured. It sounded like you were citing a company that had restructured recently. Paul Johnson Yeah, I guess maybe I maybe I'm referencing them all in one, but I thought that there was a Yeah, potential restructuring or something going on with that company, but. I'm wrong, I can go to the next question. Jason Breaux Interesting, we can certainly reconcile and take it offline with you. To better understand if we're talking about the same company. Henry Chung Yeah, that's fine. Paul Johnson And then I guess just kind of going along with just the no rules, so wondering if you just kind of tell us maybe about the presence just kind of overall approach to working toward a resolution if it's kind of the drive fast to a. A solution to protect value or you know this this the firm kind of takes a longer game approach here and willing to fight it out to salvage value here but wondering kind of what the underlying approach is here with some of these workout situations. Jason Breaux Yeah, maybe I can start, and Henry can chime in. Crescence approach to difficult situations, typically restructuring is really first and foremost to preserve our capital and there are a variety of ways that we can do that. Ideally, if we're partnered with a private equity sponsor that a Continues to want to support the company in the form of capital and stewardship. If we feel like they're equipped to do that and the right the right group to do that, we will try to be constructive and find ways to come to an arrangement to allow them to stay involved. That said, if that is not an available option or it's not in our view a value maximizing option. We can go in a different direction which could be a few different alternatives. It could be to put the company up for sale at that point in time. It could be to reorganize the company. Through a balance sheet restructuring and take ownership, we've done all of those things in the past, and I would expect to use all of those options at our disposal in any given situation really with the foremost interest and priority and being to protect our investment. Henry Chung Yeah, I think just to add to that, one thing that we don't do when it comes to taking the approach of non-accruals is just looking to exit via a secondary sale as quickly as possible, generally what, given where our investment focus is being top of the capital structure, there's still significant enterprise value at play in a non-accrual situation that, requires. Work and time and both of those are obviously factors that we're wanting to contribute as well as capital to the extent that there's some short-term capital needs of the business that we can help solve. So, I think to answer the first part of your question more succinctly, like, yes, we do take the longer-term view and we're able to do so because of how our positioned within the capital structure. And able to make sure that we're not doing anything in a rash manner. Paul Johnson Thank you for all that. And then this last one for me, could you just tell us maybe roughly how much of the portfolio, that's been sort of crescent led or crescent sort of originated deals, that's all for me. Thank you. Henry Chung Yeah, so as I say here today, about 8% of the total fair value is acquired assets. The remaining 92% are loans that we acquired from either First Eagle or Alentra. There's only, there's really only one position of size from the Al Centra acquisition to date, but the vast majority is Crescent originated assets. Operator Your next question comes from the line of Robert Dodd of Raymond James; your line is now open. Robert Dodd Okay, one on Logan first. I mean, can you explain, I mean, I get you pre-empted the end of the reinvestment period, but I mean, effectively the dividend dropped almost 50% sequentially. I get, it's going to wind down and over the next 24 months, right? I mean, I would have expected the dividend to decline over that kind of time period rather than suddenly as soon as and then. Declined further from that lower level. So can you explain what the driver of the big sequential decline was given, I mean, the fair value of the portfolio was written or the position or the equity position was written up in the quarter versus where it was last quarter. So, what was behind that big sequential decline just because the reinvestment period ended? Henry Chung Yeah, so there's two components. This is Henry, thanks for the question. There are two components to the Logan dividend, the two largest components. We hold two tranches of the underlying middle market COO. There's a mezzanine tranche, which provides kind of a stated consistent coupon, and then there's an equity tranche which pays out based on residual cash flows. The determination date of what the residual cash flows is, there's actually about a month and a half timing mismatch between our quarter end and when those payment determination dates are. So as a result, what you'll see is the most kind of lumpy part of the cash distributions which are related to the equity tranche. What we've seen that really kind of bump around on a quarter-to-quarter basis. And with the end of the reinvestment period, I think our expectation here is that that's likely going to continue to be the case as the structure be levers. So, it's not as if the equity tranche has liked a stated coupon per se and it's consistently paying out over time. It's one component of the dividend that we receive is just going to have a little bit more volatility while we're in this deleveraging period for that structure. Robert Dodd Understood, right? I mean, and the equity just distributes your own roughly speaking, your ownership share of the residual cash flows, but I mean, did the cash flows within Logano sites. Got something else on my mind. Did the cash flow within Logan drop materially, right? Or was it a timing mismatch? I mean, basically is the dividend. Is this 1.2 kind of for now like the low, and you could see the equity, is it the low end of the equity trans volatility range, or it just seems like a pretty big drop given it doesn't sound like, I mean we don't see the details of the portfolio of Logan anymore, but it doesn't sound like the portfolio itself. You just sell some assets but then you reinvest it. I mean with the income within that vehicle down materially in quarter one. Henry Chung Yes, your observation is correct. The overall holdings of the portfolio and the credit profile did not change particularly on a quarter over quarter basis, as you may already be aware, there are over collateralization tests within COOs, and part of the residual cash flows for this particular distribution in this quarter. Were retained as part of the overcollateralization tests that are in place within the structure. So that was really kind of the driver there is those tests are not tested at quarter end, they're actually tested about a month after quarter end and that's just based on when the underlying COO is actually priced. So, I think the view there is or that's really kind of what drove. Be the difference in this particular quarter and that's why we kind of think of the distributions related to the structure as starting to be a little likely potentially lumpier on a quarter over quarter basis. I will say to the second part of your question with respect to the $1.2 million dollar distribution, kind of, a low relative to our expectations. I do think that there is some near-term upside. We did mention this during our prepared remarks, but we were able to redeploy some of the cash, or the reinvestment proceeds at a pretty favorable time post liberation Day, which is obviously after quarter end, which we think will provide some lift in terms of the near-term outlook for Logan, but. Overall, when we kind of think about from now until full wind down, we do expect just some lumpiness with the equity distribution. Robert Dodd Got it. Thank you. I appreciate that. On the non-accruals. So, obviously it went up to 3.5% on cost basis, two on the when I look at your internal ratings, right, it for last quarter, right, the high rate, the ratings four and five were under 1%, right, which was basically what one of non-accruals were at that time. So, I mean on these new non-accruals was there just zero visibility heading into quarter two that there were any, there were no warning signs at all on these new assets. I mean, can you give us, any color on that like because I mean obviously if new no calls aren't visible in in the internal risk ratings the quarter before it does raise the question of Are there more to come that we just don't know about and you don't know about yet? Henry Chung Yeah, that's a fair question, and I think how I'd characterize that is the non-accrual that we designate as non-accrual this quarter. They were all prior watches names. So, in terms of the concern around did these just come completely out of left field, and that is not, I would say that's not the case. These are companies that we've kind of a noted as watch list companies, some for several quarters now. I would say that, when you think about how we determine a company going on no accrual, it's if from our perspective it's do we think that there's sufficient near-term headwinds that sitting here today we think that there is risk to us recovering our cost based on investment and I would say that. For each of these names there were developments at the respective borrowers, not related to one another, but just at the specific borrowers that warranted that redetermination and as a result, we made that election just given that there was a further deterioration in the situation that that warranted that classification. Robert Dodd Got it. I mean, I think that's being, I mean flipping it the other way. Were any of those assets that were placed on accrual still paying cash interest? Henry Chung Let us get back to you and take that off. Robert Dodd Thank You. Henry Chung Yeah. Operator And your next question comes from the line of Finan O'Shea of Wells Fargo. Your line is now open. Finian O'Shea Hey everyone, good afternoon, and if you could let me know what the take is on the cash interest as well, I'd appreciate it. But just sticking with the non-accruals, Henry, you named a few challenged potentially challenged sectors last quarter software wasn't one of them, but three of these were. I know you just sort of outlined to Robert that it was a sort of ongoing determination on their performance, but seeing if anything is going on there, more broadly if there's a reckoning on these being too far behind, sponsors not supporting and so forth, just given the concentration and sector and the sort of surprise here. Thanks. Henry Chung Yeah, and maybe to clarify the comment on the three being in software then, because I'm looking at the names here, and these were all in different industries and they're not. Or two of them are software, but I guess is the question here, are we seeing something more broadly within the software space as a whole? Finian O'Shea Yeah, I mean, sounds like I have one wrong, so but yeah, I guess sort of still question applies its recent trend we're seeing that a lot of the lets say smaller software companies at least are seeing headwinds. Henry Chung Yeah, so I think I'll take that in two parts. The first is for one of the non-accruals within the software space, I'd say that was really just related to the end market. We were just seeing some more challenging kind of demand drivers within a specific end market that that software company was serving, which we're not heavily mixed to across. Kind of our broader software allocation as a whole, the other which I think Paul referenced as well, the new era that's a managed services provider business so I would kind of think of it as not like a pure play fast business, so to speak, and what I would kind of comment on with what we're seeing more broadly in that space as well is. There were kind of more company specific drivers there versus any particular issues that we're seeing like more broadly across the MSP space as a whole. Finian O'Shea Okay. That's helpful and then just a small one on the. Top line I know you mentioned the one-time items were light. Was there any additional headwind with timing of fundings or is it or spread compression as the portfolio moved and just seeing if there's any other headwinds on the top. Jason Breaux In terms of the deployment. Yeah, well. Finian O'Shea It just, it was a bit felt like a bit more of a drop than many. I know there's the there's the no accruals there's the one time, but seeing if there's any just, thinking about the sort of exit rate into second quarter if there were any irregularities in, yeah, deployment, so average portfolio, or spread. Henry Chung Yeah, so average portfolio, for the quarter, our portfolio is obviously or was we were net up this quarter, so I think if your kind of where to look at quarter two just assuming all else being equal, there should be a little bit of a kind of pick up just based on aggregate portfolio size on the spread piece. The way the average spread of our new investments for the quarter was 565, which was actually in excess of what we've seen over the past two or three quarters here. So, with respect to the spread piece of the equation, we actually saw some kind of good origination and origination activity attractive spread during the quarter. Jason Breaux Yeah, that was a little bit spreads were actually a bit wider in terms of Deployment platform deployment in quarter one versus quarter four for us then we were low 500 in quarter four and as Henry said mid 500s for quarter one. Finian O'Shea Okay, very good all for me, thank you so much. Thanks. Operator Our next question comes from the line of Mickey Schleien of Ladenburg Thalmann. Your line is now open. Mickey M. Schleien Yes, good afternoon, Jason, I wanted to ask you about your sentiment to the overall market. We've seen, large growth in private PDCs and all that capital that's been introduced into the market, but at the same time, risks have increased, obviously volatility has increased. We saw some spread stability. So, do you think the market's more balanced and what is your outlook for spreads? Jason Breaux Yeah, thanks a lot, Mickey. I probably try to segment the market a bit, into different sizes of the middle market, your first comment on the non-traded BDC inflows, that's no doubt significant. Last time I looked at that we were looking at probably $3 billion or so a month of inflows, and those are all coming in. Immediately and so, that's forcing deployment into the market. A Right Way as opposed to capital call structure vehicles where capital is called as deals become available, that that does put pressure certainly on spreads and what I would say though, however, is in that segment of the market, if you think about where the $3 billion is coming in, it's generally coming in. Into managers that are deploying into the upper mid-market, typically companies with even DAs of north of $200 million and not necessarily surprising when you're taking in significant inflows you've got to deploy in scale, but our estimation is 90% of the inflows are focused on the upper midmarket. So that's one piece that I would relay in terms of outlook and deal activity. We started the year with pretty good activity, and I think there was a fair amount of optimism around activity for the balance of the year that that was certainly impacted. A by an April ninth, and the 90 days pause and we're seeing news trickle in daily or weekly on that, but I do think that that has translated into a Fairly meaningful slowdown in deal activity. What did happen was good companies that still came to market were getting deals done in the private market because the public market was shut for a number of weeks. That has seemed to thaw somewhat at this point. And what our observation is on the public market is that spreads are much wider than where they were the liberation day, maybe 25 bits or so. I wouldn't say that we've seen material widening or any widening, frankly on the private side, which always tends to lag a bit, but. My hope is that after we get some resolution on tariffs and or trade deals that will give some more certainty to the market to start to transact again, which would bring that supply demand balance maybe more in line where we tend to focus is in lower and core less competition from certainly the non-traded BDCs with the significant inflows, so. We are still seeing activity, and we are going to be very selective in terms of what we're doing, particularly because CCAP on its own is a fully rounded portfolio at this point. So, we sit next to a $35 billion-dollar private credit platform that is still very active in the market and transacting, but for CCAP's purposes we will be. We will be very selective in picking which deal going forward. Mickey M. Schleien Jason, if I could follow up, given all the uncertainty that's out there, a lot of folks are focused on follow on investments, basically investing in their existing portfolio, particularly since everyone's chasing anything that doesn't have any tariff risks, so those spreads are probably not as interesting. But another way to invest in your portfolio is to buy back your stock, is the board Thinking about that, is the discount meaningful enough for that to start to occur, any guidance you could give us on that would be helpful. Jason Breaux Yeah, thanks, Mickey. This is something that we continue to evaluate. Especially now where our shares are trading relative to where they were trading at the beginning of the year. The buybacks certainly provide short term benefit, and I would note that we've always taken a long-term view with CCAP and positioning it for the long term, which includes having a stable equity base. Our goal is to keep our portfolio invested in high quality assets, not chase yields, earn our dividend and generate a stable NAV. We're also mindful of the amount of buybacks we could do given where we are in terms of the size of the portfolio and the leverage profile that we have today. So, the short answer is we will continue to look at it, but there are, various considerations that we think about in light of a buyback program. Mickey M. Schleien I understand. Those are all my questions. Thank you for your time this afternoon. Jason Breaux Thank you. Operator Thank you so much. I'd now like to hand back the call over to Jason for final remarks. Jason Breaux Well thank you everyone for your time and attention today and for the questions. We certainly appreciate your interest in CCAP, and we look forward to speaking with you soon. Operator Thank you for attending today's conference call. You may now disconnect. Goodbye. Sign in to access your portfolio
Yahoo
15-05-2025
- Business
- Yahoo
Q3 2025 NetSol Technologies Inc Earnings Call
Patti McGlasson; General Counsel; NetSol Technologies Inc Najeeb Ghauri; Chairman of the Board, Chief Executive Officer, Director; NetSol Technologies Inc Roger Almond; Chief Financial Officer; NetSol Technologies Inc Todd Felte Operator Good morning and welcome to NETSOL Technologies fiscal 3rd quarter 2025 earnings conference call. On the call today are Najeeb Ghauri, founder, Chairman and Chief Executive Officer, Roger Almond, Chief Financial Officer, and Patti McGlasson, General Counsel, who I would like to turn the call over to in order to provide the necessary cautions regarding the forward-looking statements made by management during this call. Please go ahead, Patti . Patti McGlasson Good morning, everyone and thank you for joining us. Following our review of the company's business highlights and financial results, we will open the call for questions. Before we begin, I will now provide the necessary cautions regarding the forward-looking statements made by management during this call. Please note that all the information discussed on today's call is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. The company's discussion may include forward-looking statements reflecting management's current forecast of certain aspects of the company's future, and our actual results could differ materially from those stated or implied. These forward-looking statements are qualified by the cautionary statements contained in NETSOL press release and SEC filings, including our annual report on Form 10K and quarterly reports on Form 10Q. I would also like to point out that we will be discussing certain non-gap measures. The press release issued earlier today contains a reconciliation of these non-GAAP financial results to the most comparable GAAP measures. Finally, I would like to remind everyone that this call will be recorded and made available for replay at and via a link available in today's press release. Now I'll turn the call over to Najeeb Ghauri, our founder, Chairman and CEO. Najeeb. Najeeb Ghauri Thank you, Perri, and good morning, everyone. Today I'm happy to be dialling in from my Encino Office in California. We delivered solid performance in the 3rd quarter of fiscal year 2025 with strong growth in our services revenue and continued momentum in our subscription business. Our results reflect the growing demand for our digital solutions for the global finance and leasing industry under our unified transcend platform alongside the strengths of our global delivery model. As we continue transitioning towards revenue generated from the recurring revenue model, we remain focused on driving innovation, operational efficiency, and long term value for our customers and shareholders. This quarter we successfully completed a major deployment of our transcend finance platform for a financial institution in Australia, an existing customer of NETSOL further deepening our partnership and expanding the use of our technology for their operations. Following this successful implementation, Kabuta, a leading Japanese powerhouse that provides products and technologies in various fields including tractors and other agricultural machinery. Is now using our solution for their financial operations in both Australia and New Zealand. In addition, we signed two new multi-million dollar contracts with financial services providers in both country of Oman and Indonesia. We signed an agreement with Sindbad Management SPC in Oman for the implementation of Transcend Finance. The customer is a major musket, which is the capital of Oman. Oman-based company which provides big ticket asset financing and leasing covering various asset types such as marine vessels, aircraft, machinery, and other equipment. Alongside vehicles in Oman and other countries. The successful implementation of this project will serve as a model for future collaboration in the Middle East, reinforcing our commitment to expanding our footprint and delivering world-class technology solutions to a region that is ripe for growth and innovation. The 2nd multi-million dollar agreement signed during this quarter was with a Chinese leasing company known as Yu Long, which is acquired by BYD, a Chinese giant, for the implementation of Transcend finance in Indonesia. This marks the customer's expansion into the Indonesian market. The company offers a diverse range of leasing solutions across various industries with a strong focus on equipment leasing, asset financing, and commercial leasing. Our powerful technology platform combined with tailored regional customization makes us the ideal partner to support their success in the Indonesian market. These winds are a clear signal of the growing confidence our clients place in us to drive the digital transformation agendas. At a time when institutions are under pressure to modernize and differentiate our ability to consistently deliver mission critical solutions at scale sets us apart and cements our position as a preferred technology partner for financial institutions worldwide. The goal for Kubota in Australia during this period plus these two major multi-million dollar signings reinforce our reputation as a trusted strategic technology partner to the global asset finance and leasing industry. These developments serve as a powerful endorsement of the products, innovation and service excellence we deliver in an increasingly competitive marketplace. At the core of our transition to becoming an AI first organization is our commitment to redefining how technology can drive smarter, faster, and more secure decision making across the financial services ecosystem. In Q3, we announced the launch of Transcends AI labs, our dedicated innovation hub focused on developing cutting edge AI solutions tailored primarily for the asset retail, finance, and leasing sectors. Transcends AI labs brings together our deep domain expertise with advanced machine learning and generative AI capabilities enabling us to create next generation solutions for our clients that unlock the real business value. Whether through intelligent automation, hyper personal personalized experiences, or predictive analytics that empower risk, decisions, and overall operations. As part of our ongoing AI initiatives, we appointed Dario Morelli as our new Vice President of artificial intelligence in this quarter. Dario is a proven business leader and AI strategist within with over 15 years of experience spanning data analytics and AI. His vision and leadership will be instrumental in scaling our AI capabilities and embedding intelligence across every layer of our product portfolio. But Dao at the helm and the launch of Transcend AI labs, we are well positioned to lead our industry into the AI power future. Further, a quick update, our BMW USA retail platform rollout in 350 dealership in the US is on track. Looking at our business through a long term lens, I'm pleased with the progress we have achieved this quarter, and I'm optimistic about the momentum carrying into the final quarter of fiscal 2025 and beyond. I'm confident that our strategic investments, especially in. And the ongoing evolution of our revenue mix will drive stronger profitability and deliver lasting value for our shareholders. I now like to turn the call over to our CFO Roger Almond, who will go through the financial of the Q3 of fiscal year 2025. Over to you, Roger. Roger Almond Thanks, Najib. Good morning, everyone, and thank you for joining us to review NETSOL's financial results for the 3rd quarter fiscal year 2025. I'll take you through our key financial metrics and provide some context on our performance drivers. We delivered solid top line growth in the 3rd quarter, driven by continued strength in our services, business, and stable subscription revenue performance. Total net revenues for Q3 fiscal year 2025 increased 13%. To 17.5 million compared to 15.5 million in the third quarter of fiscal 2024. This increase was primarily fuelled by significant growth in services revenue. Services revenue increased 24% to $9.7 million compared to $7.8 million in Q3 of last year. The increase was primarily driven by a cumulative catch up of approximately 2.3 million related to a contract amendment for an ongoing implementation project. Total subscription, Sass and cloud, and support revenues increased 10% to $7.9 million compared to $7.1 million in the prior year period. Gross profit for the quarter was $8.7 million, or 50% of total revenues compared with $7.5 million or 48% in Q3 of fiscal year 2024. Operating expenses for the quarter totaled $7.2 million or 41% of sales compared to $6.2 million or 40% of sales in Q3 of fiscal year 2024. This increase aligns with our ongoing investment in growth areas including customer delivery, marketing, R&D, and employee development. GAAP net income attributable to nets so was 1.4 million or $0.12 per diluted share compared to $320,000 or $0.03 per diluted share in Q3 of fiscal year 2024. Included in our GAAP net income in the quarter was a foreign currency exchange gain of 322,000 compared to a foreign currency exchange loss of 964,000 in the prior year period. Because we operate in several geographical regions, a significant portion of our business is conducted in currencies other than the US dollar. A decrease in the value of the US dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues, but it also increases our expenses denominated in currencies other than the US dollar. Similarly, as the US dollar gains strength relative to foreign currency exchange rates, it tends to reduce our revenues, but it also reduces our expenses denominated in currencies other than the US dollar. Moving to our non-gap metrics, non-GAAP EBITDA for the third quarter fiscal 2025 was 2.2 million or $0.19 per diluted share compared with non-GAAP EBITDA $767,000 or $0.07 per diluted share in the prior year period. Non-gap adjusted EBITDA for the third quarter of fiscal 2025 was 1.8 million or $0.15 per diluted share compared with a non-GAAP adjusted EBITDA of 810,000 or $0.07 per diluted share in the third quarter of the previous fiscal year. Please see the reconciliation schedules contained in our earnings release for our revised calculations of adjusted EBITDA for the quarters ended March 31st, 2025, and 2024. Turning to our balance sheet, as of March 31, 2025, we held $18.8 million in cash and cash equivalents compared to $19.1 million at June 30, 2024. Our working capital is $23.7 million as of March 31, 2025, compared to $23.6 million at June 30, 2024. In summary, Q3 of fiscal year 2025 was a strong quarter across the board comprising of double-digit revenue growth, increased gross margins, and a significantly improved net income. These results reinforce the strength of our operating model as we continue to execute our strategy. We remain committed to sustainable growth, product innovation, and delivering long-term value to our shareholders. Back to you Najeeb. Najeeb Ghauri Thank you, Roger. Much appreciated. Before I hand the call over for questions, let me take this opportunity to remind our shareholders that our annual meeting is scheduled for June 24, 2025. We encourage all shareholders to please vote at this meeting and ask that you vote yes for each of the proposals approved by the board of directors. Finally. As mentioned earlier, I am very pleased with the progress we achieved in the 3rd quarter of fiscal 2025. We continue to focus on innovation and are actively investing in our products and services under our Transcend platform. We are also encouraged by the growing number of opportunities we are seeing across the diverse markets we operate in. As always, we remain committed to a long term strategic approach, and we believe we are well positioned for continued growth in the final quarter of fiscal 2025 and into the future. With that, I now turn the call over to operator for questions. Operator. Operator Thank you, we will now be conducting the question-and-answer segment. (Operator Instructions) Our first question comes from the line of Todd Felte with StoneX Wealth Management. Please proceed with your question. Todd Felte Hey guys, thank you for taking my questions. Congratulations on an outstanding quarter. It's nice to see the subscription and support revenue grow to $7.9 million for the quarter. Do you expect that to be at least a baseline that continues to grow moving forward? Najeeb Ghauri Thank you for your comments. Yes, I think we do, because our sales revenue is in a very possibly growing side, and, there's, numerous things happening in the retail fund, so I believe this trend will continue. Todd Felte Okay, and now that we're moving more towards a stable profitability, I hope you anticipate for the next fiscal year possibly giving out a revenue and earnings guidance. Najeeb Ghauri I think we'll do that absolutely as we close the year in next couple of months so but we are pretty optimistic Todd, because one thing I want to address here or say company initiated a few months back, and I was driving this whole exercise in the company to look at all the areas of productivity and efficiency improvement. And at the same time look at the headcount, so I think we made good progress and I am enjoying the the results and this is to me just a start and we will maintain the same. The way we have managed this company in this last 9 months, so I think the future is quite bright for the company both from the revenue and from the bottom line. Todd Felte Sure, and a final question, the results today are outstanding and it seems like the future looks very promising. Do you plan on, kind of letting the investor community know are you planning on engaging any, another IR company or or getting analyst coverage? Najeeb Ghauri Well, I think we'll let us deliver the year end first, and we'll weigh in carefully. One of the advantage we've seen by using in house is that they have a lot more knowledge, understanding of the business tech in the technical terms. So for now I'm enjoying, in our service, but we'll see how we plan in the next fiscal year budget if we can. And bring back an hour from, but we'll decide at the time right now. I'm happy with what they're doing, but we'll see we'll definitely weigh in and pay attention to your suggestion. Todd Felte Okay, thank you for taking my questions and congratulations again. Najeeb Ghauri Thank you, do again. Operator As a reminder, if you would like to ask a question, press one on your telephone keypad. One moment please while we repoll for any additional questions. Thank you. This concludes our question and answer segment. If your question was not addressed during the Q&A session, please contact Netsol's investor relations team by emailing them at investors@ or by calling them at 818-222-9195. I would now like to turn the call back over to Mr. Ghauri for closing closing comments. Najeeb Ghauri Thank you, operator, and thank you for joining us today for our fiscal 3 quarter 2025 earnings call. We appreciate the time you have taken to join us today and look forward to providing further updates on our next earnings call. Until then, we wish you a pleasant day. Thank you all. Operator Thank you for joining us today for NETSOL fiscal 3rd quarter 2025 earnings conference call. You may now disconnect. Najeeb Ghauri Thank you everyone.
