CaliberCos Inc. Q2 FY2024 earnings call

• In May, Caliber initiated cost reduction measures to return to operating profitably, expecting to return to positive EBITDA in Q4 2024 and positive net operating income in 2025.
• Revenue growth priorities: Acquire more income generating real estate investments, with plans to close $1 billion of assets in CHT rollup, signaled institutional investor support for CHT; provide more single asset investment offerings; continue to complete development projects as revised plans.
• Financing environment: Fundraising remains challenging, focusing on enhancing capabilities despite conditions; team appointments made, including COO and Senior Vice President of Marketing Strategy and Technology.
• Q2 asset management revenues showed positive year-over-year improvement; implemented expense saving actions, on track for initial $6.5 million annualized savings in H2 2024, expect positive adjusted EBITDA in Q4 2024 and full cost improvements in 2025.
• No longer required to consolidate Caliber Hospitality LP, Elliot 10 partnership assets, simplifying financial statements by removing most historical asset performance from consolidated results.

Second quarter total consolidated revenue was $8.2 million, a decrease of 60% versus the same period a year ago due to a decrease in consolidated fund revenues, partially offset by a 70.3% increase in consolidated asset management revenues. Consolidated expenses for the quarter declined by 59.7% to $12.7 million. Total unconsolidated or platform revenue increased 24.9% to $4.2 million mainly due to higher asset management revenue. Total unconsolidated or platform expenses in Q2 were $8.2 million, a decrease of 4.1% compared to Q2 last year. Total managed capital increased by $32.2 million or 7.4% from $438 million to $470 million from December 31, 2023 to June 30, 2024.

• Expect to return to positive EBITDA in Q4 2024 and positive net operating income in 2025.
• Target to achieve $3 billion AUM by 2026, feel confident in achieving the target as accounted for market environment in original planning, with $2 billion from CHT rollup transaction leaving remaining $1 billion to be achieved over next two and a half years.

• Ongoing market conditions around fundraising remain challenging.
• Uncertainty regarding refinancing corporate debt.
• Redemption requests may increase, with need to manage asset liquidation prudently to maximize return for all investors.
• Real estate market changes, inflation, banking system challenges, interest rate fluctuations pose risks to development projects and investments.

Q: Brendan McCarthy from Sidoti asked about fund raising trended in the second quarter across the three different distribution channels.

A: Chris Loeffler said in Q1 raised less than $10 million, Q2 raised approximately $20 million, double, primarily driven by CHT and retail group, first checks from wholesale channel, and announcement of $35 million to $65 million institutional capital for CHT is additional.

Q: Brendan McCarthy asked about redemption trends and impact on 2026 financial targets.

A: Chris Loeffler said seen redemption requests increase with interest rates, but Caliber manages effectively by not being forced to sell assets at bad times; single asset offerings are easier for investors to understand, fit retail channel, and help multi-asset funds build track record, and the strategy doesn't impact 2026 targets.

Q: Brendan McCarthy asked if confidence in achieving $3 billion AUM target changed.

A: Chris Loeffler said not changed, feel confident as $2 billion from CHT rollup transaction leaves remaining $1 billion to be achieved over next two and a half years.