Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Onex Corp (ONEXF, Financial) reported a solid third quarter with progress in realizations, investing activity, and fundraising in core areas.
- The company announced a substantial issuer bid (SIB) to accelerate share buybacks, leveraging a strong cash position of over $1.8 billion.
- Onex Corp's structured credit business has become a market leader, completing 23 transactions and raising $5.6 billion in new fee-generating assets.
- The private equity segment showed positive momentum, with Oncap Five securing over $1 billion in total commitments and the Opportunities Fund nearing $1.2 billion.
- Year-to-date, Onex Corp has returned over $2.7 billion of capital to limited partners, demonstrating strong portfolio quality and client delivery capabilities.
Negative Points
- The private equity industry continues to face challenges around realizations, impacting Onex Corp's ability to capitalize on certain investments.
- Some sectors, such as healthcare and consumer verticals, experienced more challenging results, indicating uneven performance across the portfolio.
- The company faces the ongoing challenge of balancing capital allocation between share buybacks and maintaining liquidity for future investment opportunities.
- Onex Corp's free-related earnings (FRE) were at break-even for Q3, highlighting the need for improved efficiency and revenue growth in asset management.
- There is uncertainty regarding the continuation of strong CLO fundraising levels into 2025, as current demand may not be sustainable.
Q & A Highlights
Q: How is the pricing range determined for the modified Dutch auction, and is there flexibility to adjust it if the stock price advances?
A: We have the ability to amend the bid, which would extend the end period. We considered our past stock buyback activity, liquidity, and recent stock price movements. We believe the chosen range is beneficial for shareholders seeking liquidity and creates value for continuing shareholders. It's not scientific, but we're comfortable with the range. (Respondent: Unidentified_6)
Q: Were there any outliers in the private equity returns compared to public benchmarks this quarter?
A: We tend to lag big moves in public markets due to our asset valuation methods. There was some earnings volatility in our healthcare and consumer portfolios, but it's more of a lag effect than anything fundamental. (Respondent: Unidentified_7)
Q: What measures are being taken to incentivize and retain investment personnel on the Onex Partners side, given the stalled fundraising?
A: We've reallocated carry from Onex Partners Five and the Opportunities Fund to remaining team members. Given the size of the team and managed dollars, we're in good shape on that front. (Respondent: Unidentified_7)
Q: Are you complete with fundraising for the Onex Partners Opportunities Fund and Oncap Five?
A: Fundraising for Oncap Five will continue for about three more months, with more commitments expected. The Opportunities Fund is on the same timeline, with Oncap likely having more upside. Both will wrap up in January. (Respondent: Unidentified_7)
Q: Will you remain active in share buybacks if cash levels build and the stock trades below NAV?
A: We plan to continue being active buyers of our shares if they trade in the current range. We're also working on efficient capital allocation to avoid cash drag, and we'll update shareholders as plans become clearer. (Respondent: Unidentified_7)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
