Caliber(CWD) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2024, total consolidated revenue was $12 million, a decrease of 29.5% compared to the same period last year, primarily due to a decrease in consolidated fund revenues [22] - Consolidated expenses declined by 60.8% to$ 11.1 million, mainly due to the deconsolidation of certain assets [22] - Net income attributed to Caliber was $0.1 million or$ 0.1 per diluted share, compared to a net loss of $3.4 million or$ 0.16 per diluted share in the same period last year [22] - Total platform revenue increased by 98.9% to $7.4 million, driven by development and construction fees and higher fund management fees [22][23] - Platform adjusted EBITDA for Q3 was$ 2.4 million, compared to a loss of $1.5 million in the same period last year [24] Business Line Data and Key Metrics Changes - Asset management revenues nearly doubled over the quarters, contributing to positive adjusted EBITDA and platform earnings [5] - The increase in platform revenue was primarily driven by development and construction fees due to new projects and milestones related to existing activities [23] - Fund management fees increased due to a rise in managed capital and fees from the growth in the Caliber Hospitality Trust [23] Market Data and Key Metrics Changes - The company noted a decrease in commercial real estate values and a slowdown in fundraising into private real estate funds due to macro trends such as rising interest rates [7] - However, a recent survey indicated that 88% of real estate industry experts expect revenues in commercial real estate to grow next year [7] - The company observed that asset prices, which had been declining, are now decelerating, suggesting a potential inflection point for real estate investments [8] Company Strategy and Development Direction - The company aims to acquire more income-generating real estate investments, particularly through the Caliber Hospitality Trust, targeting middle-market hotels [9] - Plans include creating more single asset investment offerings to attract investment capital [11] - The company is also focused on utilizing unique financing sources to drive revenue growth and has launched a qualified opportunity zone fund Roll Up Program to raise larger investments [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the business's trajectory, noting that they are tracking slightly ahead of their objectives [6] - The company remains confident in achieving positive net operating income at the platform level for the full year 2025 [15] - Management acknowledged ongoing volatility in the business but emphasized their commitment to achieving strategic objectives [6][15] Other Important Information - The company executed a reduction in force of approximately 10% of its employees in May, with expected annual savings of$ 4 million [25] - The company is actively seeking opportunities to refinance and recapitalize its balance sheet [26] Q&A Session Summary Question: Update on Caliber Hospitality Trust (CHT) and preferred equity environment - Management confirmed they are on track to close on the remaining eight assets by year-end and have secured the majority of the equity necessary for the transaction [29] Question: Details on the increase in platform revenue - Management noted that the increase in platform revenue is linked to the growth in managed capital, which directly impacts fund management fees [30][32] Question: Fundraising channels and origination - Management indicated that they are beginning to see benefits from the wholesale channel, particularly from independent registered investment advisors [33] Question: Performance allocations outlook - Management stated that predicting performance allocations is challenging due to market conditions, but they are starting to see opportunities to realize gains in their asset pool [34]