Q1 2020 Apax Global Alpha Ltd Earnings Call ST PETER PORT Jul 9, 2020 (Thomson StreetEvents) -- Edited Transcript of Apax Global Alpha Ltd earnings conference call or presentation Friday, May 15, 2020 at 8:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Ralf Gruss Apax Partners LLP - Partner & COO * Salim Nathoo Apax Partners LLP - Partner ================================================================================ Conference Call Participants ================================================================================ * Matthew Lloyd Hose Jefferies LLC, Research Division - Equity Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, welcome to the Apax Global Alpha Q1 '20 results. My name is Alicia, and I'll be your conference operator today. (Operator Instructions) I will now hand over to your host today, Ralf Gruss, COO of Apax Partners. Ralf, please go ahead. -------------------------------------------------------------------------------- Ralf Gruss, Apax Partners LLP - Partner & COO [2] -------------------------------------------------------------------------------- Thank you, and good morning, everyone. Thanks for joining AGA's First Quarter Results Call for 2020. My name is Ralf Gruss. I'm the COO of Apax Partners and a member of Apax Global Alpha's Investment Committee. Also with me on the call today is Salim Nathoo. Salim is a member of our Apax Global Alpha's Investment Committee as well, but he's also a member of the Investment Committee of the Global Buyout Funds and the Apax Digital Fund. Now Salim will cover the Private Equity portfolio in today's call and discuss the impact of the COVID-19 crisis on the portfolio. We are both looking forward to talking you through the presentation. We will answer any questions at the end of the call. Before going into the presentation, let me make a couple of more general remarks there. Since we've last updated you on AGA's results in early March to cover the 2019 annual results, it has become clear that the world is confronting one of the greatest crisis of our generation with substantial humanitarian, social and economic consequences. Unlike a typical cyclical downturn, the population lockdowns are pausing many types of economic activity with unusual effects. First and foremost, our thoughts are with communities, individuals, health care workers and all those most directly hit by the COVID-19 crisis. We also hope that you and your families are all safe and well. At Apax, our top business priority during this crisis has been to protect the portfolio. We want portfolio companies to be able to trade through the trough and eventually take advantage of the recovery when it comes. We are therefore pleased to report that as of now, much of the portfolio proves to be less impacted by the economic impact of COVID-19. The reductions of valuations in the Private Equity portfolio are, to a large extent, driven by reductions in comparable multiples. Salim will discuss the COVID-19 impact on the portfolio in more detail later on. Apax itself is functioning well. Our transition to working from home has been seamless from the very beginning of the crisis, and we remain fully operational. We also have a culture of pulling together and acting as one team. And in times like these, where there are multiple disciplines and experiences that need to be brought to bear as quickly as possible, this is invaluable. Let us go into the presentation now. AGA provided an update in late March that the COVID-19 crisis will have impact on valuation. Let me turn to Page 3 to provide you with more details. AGA's total NAV return in the first quarter was negative at minus 11.9%. The adjusted NAV of the fund has reduced to EUR 936.1 million. On a per share basis, adjusted NAV now stands at EUR 1.91 or GBP 1.69. Private Equity had a negative return of 11.6% during the first quarter. Despite the drop in valuations in Q1, the last 12 months' total return for Private Equity remained positive at 5%. And Private Equity also remained the largest exposure in AGA's portfolio at 71%. Turning to the Derived Investments and the Derived Debt first. Loan market significantly dislocated in March, and whilst the Derived Debt portfolio outperformed broader market indices, Derived Debt returns were down in the quarter at minus 7.7%. Unsurprisingly, the Derived Equity portfolio got caught in the public market volatility, and its total return during the quarter was negative 25.1%. We will also see this from the next Page 4, where movements in adjusted NAV during the quarter and Q1 performance are broken down to more granular detail. Starting with the top chart on the page, you can see the reduction of the adjusted NAV from the year-end number of EUR 1,092.1 million to EUR 936.1 million at the end of March. That's a delta of EUR 156 million. During Q1, AGA paid a dividend to shareholders, which makes up EUR 26.4 million of the difference. So that's obviously not a value movement but a distribution to shareholders. Current exchange movements only had an immaterial impact during Q1, so I won't focus on these as we go through the presentation. As I've already highlighted, the key reason for the value movements in Private Equity were changes in valuation multiples during the quarter. This led to a reduction of adjusted NAV in the Private Equity portfolio of EUR 87 million. For Derived Investments, portfolio marks were impacted by reducing pricing and valuation levels in credit and public markets at the end of March. Impacts on Derived Debt were EUR 21.5 million and Derived Equity were EUR 18.3 million. We will explain both impacts in more detail in the sections of Private Equity and Derived Investments. On the bottom of the page, you can see the total NAV return for the first quarter broken down. Whilst the return was negative at 11.9%, AGA outperformed major market indices. For instance, if you look at the MSCI World, which was down 19.6% in euro terms over the period. Let's have a look at the structure of the portfolio and the liquidity position of AGA before we go into more detail in Private Equity. Let's turn to Page 5. What you can see on this chart is the structure of AGA's portfolio. AGA remained close to fully invested at the end of March at 97%. In line with the revised portfolio approach for AGA, the biggest exposure in AGA remained Private Equity, which now represents 71% of the invested portfolio. The biggest exposure in Private Equity are to those portfolio companies that sit in the Apax VIII and IX Funds. Apax X, the new Global Buyout Fund currently being raised, has made 3 investments so far. The value of these investments doesn't show up yet in the graph. The reason is that the corresponding capital calls to investors have not been made yet bridged to the Fund's capital call facility. Now moving on to the Derived Investment side. As a reminder, the Derived Investments are a bespoke portfolio of investments with a high due diligence hurdle that lever off the Private Equity activities of Apax Partners. AGA uses these investments to absorb cash which is not invested in Private Equity, whilst, at the same time, targeting an attractive level of return. The portfolio largely consists out of debt positions by now. Derived Debt represented 83% of the Derived Investments or 25% of the investment portfolio. Derived Equity represented 17% of Derived Investments or 5% of the invested portfolio. The Derived Debt portfolio's total return was negative at 7.7% due to the mark-to-market losses, and negative 21 -- sorry, 25.1% for Derived Debt, again, for the same reason. Realized returns during the quarter remained strong across the Derived Investments with a gross IRR of 13.6% realized from Derived Debt, and a gross IRR of 18.3% realized for Derived Equity on positions that were fully exited. So this is the portfolio of current investments. In this current environment, liquidity and balance sheet strength are obviously very important, and therefore, I'd like to cover this on the next slide. The key point to take away from Page 6 is that AGA has a strong balance sheet and a comfortable liquidity position when compared to its unfunded Private Equity commitments. Starting with the unfunded commitments shown on the left-hand side of the chart, AGA's commitment to the Apax X Fund is the largest portion. This commitment is expected to be drawn down in the next 3 to 4 years or so. They also sell smaller unfunded commitments or recallable distributions outstanding for the other funds, but Apax X is the lion's share for obvious reasons. On the right-hand side of the chart, you can see an illustration of AGA's current balance sheet and funding sources. AGA has a total balance sheet of EUR 936.1 million, with EUR 265.8 million sitting in Derived Investments. As you know, Derived Investments are a potential source of capital to fund investments in Private Equity. And at the end of March, Derived Investments represented 28% of the NAV. In terms of immediately accessible liquidity, AGA had a cash position of EUR 29.2 million at the end of March in addition to a EUR 140 million undrawn revolver. Now to clarify the EUR 27.2 million number on the slide, the cash position was EUR 29.2 million, but there were also EUR 2 million of liabilities on the balance sheet and that's why we are showing available liquidity as EUR 27.2 million on this chart. In terms of visibility of calls from the Private Equity funds, the Apax Funds operate short-term facility to bridge capital calls for up to 12 months. At the end of March, AGA's portion of drawn amounts in the facilities equated to approximately EUR 60.6 million, and AGA should expect that these amounts are called over the next 12 months. It's important to note, though, that it is possible that the Private Equity funds could make ad-hoc calls of undrawn commitments outside these capital call facilities. And therefore, you shouldn't look at the EUR 60.6 million number as a ceiling for capital calls over the next 12 months. So to summarize again, overall, we believe AGA has a comfortable liquidity position with its credit facility remaining completely undrawn. Also, the Derived Investments represent 28% of NAV and our source of liquidity to fund future commitments. We're obviously keeping a close eye on this as the impact of the COVID-19 crisis continue to unfold. With this, I'd like to hand over to Salim, who will cover the Private Equity portfolio in this presentation. Salim? -------------------------------------------------------------------------------- Salim Nathoo, Apax Partners LLP - Partner [3] -------------------------------------------------------------------------------- And just want to turn to Slide 8. Maybe give you an update on the impact we're seeing from the COVID-19 crisis on the Private Equity portfolio first. The key point to take away here is that while COVID has impacted the portfolio, currently much of the portfolio is seeing less severe impacts. And the investment thesis for most of the portfolio companies remain intact. But let's go into more detail, and let's do this sector by sector. The Tech & Telco sector is seeing less of an impact from COVID-19. It's the largest share of the portfolio, as you can see, so this is good news. The sector generally benefits from secular tailwinds towards digitization, cybersecurity or cloud migration. While some of these companies may see some short-term headwinds in terms of growth, they're very resilient and we expect them to emerge from the crisis in strong positions. Portfolio companies in this category include ThoughtWorks, Coalfire, ECi or Duck Creek. Now for the sake of completeness, there are a small number of portfolio companies in tech and telecom that are facing short-term headwinds or headwinds in a portion of their businesses as their customers are more impacted. Examples include Paycor, which is indexed to employment levels in the U.S.; and Inmarsat, where the aviation business is impacted due to reduced levels of air travel. The second largest exposure in AGA's Private Equity portfolio is the Services sector, including online marketplaces. Now this is a diversified portfolio and is seeing mixed impacts. On the positive side, Tosca, which is providing reusable plastic crates into the food distribution supply chain, is a beneficiary and has seen increased volumes due to U.S. and Italian consumers stockpiling groceries and earing more at home. The online marketplace investments of Apax Funds have been impacted in the short term, for instance, real estate agents not being able to operate. But generally speaking, they all have lean cost structures, ample liquidity, and we expect them to recover with lockdowns easing. Healthcare is the third largest exposure in the Private Equity portfolio. Again, there are mixed impacts across the portfolio companies. There are some clear beneficiaries. Vyaire, which is one of the largest global producers of ventilators, is seeing very strong increase in demand for its products across the globe. Neuraxpharm, a producer of generics for the central nervous system, is largely unaffected or even seeing a slight positive impact. But then there are companies in the health care space that are seeing reduced volumes. Candela, which is a provider of equipment for aesthetic treatments, is affected by reduced volumes as their customers are in lockdown. And we have Unilabs, which is seeing different effects across its business, with routine testing volumes down as people postpone tests partially offset by COVID-19 testing. Consumer, excluding online marketplaces, is the smallest exposure in AGA's Private Equity portfolio, with 13% of the portfolio invested in that sector. Here, the impact is unsurprisingly the biggest. In-person retail is a subsector which has been most impacted by the mandatory shutdowns. Cole Haan, for instance, has been affected by store closures. But it's worthwhile to note that Cole Haan also has a growing digital business. And then we have MatchesFashion in the luxury online space. That business has been affected by excess supply and discounting. However, the long-term trends towards online shopping for luxury remains intact, and that may be even accelerated by the crisis. And lastly, there are companies in the education sector which were also impacted during periods of school closures, and that affected our investment in Cadence Education, as an example. We expect revenue to rebound strongly as schools are reopened. As you can see from these examples, when going into the detail, the COVID-19 crisis has actually had quite a nuanced impact on individual portfolio companies. But as I said at the beginning, the key point to take away here is that while COVID has impacted the portfolio, currently, much of the portfolio is seeing less severe impacts and the investment thesis for most portfolio companies remains intact. Now let me spend a minute overall on the valuation impacts in Private Equity, if we turn to Slide 9. The overall performance of the Apax Buyout Funds was a negative 13.5% during the quarter. The AGA Private Equity portfolio actually performed slightly better than this at a minus 11.6%. This is mainly due to different mixes and exposures due to the different funds entities. Now I think it's important we put that in context and then it -- that compared to a performance of negative 20% to 30% decline in rest of the major public market indices, so a clear outperformance. If you look at the relative performance of the 4 Apax sectors, there are some interesting observations that I would like to go through, with a couple of comparisons and conclusions. The Apax Funds investment in the tech and telecom sector outperformed the relative index. In this part of the portfolio, the funds were exposed to the most resilient and secular growth subsectors, such as software or tech-enabled services. In Consumer, we are seeing an underperformance compared to the public markets. Consumer is a sector where the investments are exposed to in-person retail and education, and we do not have exposure to grocery, which brought up the performance of the public markets. In Healthcare, the Apax Buyout Funds portfolio has performed well. Vyaire, which is 1 of the largest producers of ventilators globally, have seen a strong valuation uplift. And last on Services, where, again, we are seeing outperformance versus the public markets. Again, the companies in our subsectors have generally been more resilient than the market as a whole. With these overview comments on the impact of the COVID-19 crisis on the portfolio valuation, let me now go through the usual update on the Private Equity portfolio. I'm obviously happy to address any further questions in relation to the COVID-19 impacts at the end of the call. So turning to Slide 10, which covers the Private Equity portfolio highlights. The total return of the Private Equity portfolio was negative 11.6% during the quarter. The main driver of the reduced valuations during Q1 are valuation multiples, as we can see, which were down 1.2%. Now over the last 12 months, the portfolio companies have performed well and continued to grow with EBITDA growth of 12.4% and revenue growth at 18.7%. COVID-19 obviously had a limited impact on these LTM numbers, but as we will see in a moment, earnings growth also continues to provide a positive contribution to returns during the first quarter. In terms of new investments, the Apax Funds closed their investments in Cadence, which is a U.S. preschool child education provider, where the investment thesis was predicted on market consolidation and the roll-up; the Apax Digital Fund invested in Accurate during the quarter, a tech-enabled workforce screening provider, where the proceeds will be used to acquire and merge with a competitor generating synergies; and Verint and Cadence (sic) [Coalfire], the 2 investments that closed after quarter end. Coalfire is a U.S. provider of cybersecurity assurance and consulting services for large corporates, where the opportunity is to grow both sales and margins in a subsector of previous Apax expertise with structural tailwinds. Verint, a U.S.-listed business providing software for improved call center engagement, was also signed in 2019 and closed in May. On the exit side, there were 2 closed exits and 1 singed but not yet closed exit: Sophos closed, generating a 3.9x MOIC on the overall investment; and Aptos also closed, generating a 6.2x MOIC. Those were software deals in the Apax VI and VII funds and demonstrate the market appetite for our companies in technology. Engineering is an IT services company where an exit was agreed during the first quarter. We expect this transaction to close during the summer. Let me also briefly comment on movements in adjusted NAV on the following page before discussing the drivers of return in the Private Equity portfolio. Turning to Slide 11, adjusted NAV in the private portfolio company has reduced from EUR 759 million to EUR 643 million during the quarter, as Ralf mentioned. Two main distribution -- the 2 main drivers here are distributions, proceeds received from the exits of Sophos and Aptos that I just talked about. In addition, there were also some distributions received from a number of partial realizations in the Apax VIII Fund. In terms of fair value movements, there were unrealized losses of EUR 87 million, which are largely from contracting valuation multiples during the quarter. Let me also comment on the largest value movers in the portfolio briefly. On the positive contributors to NAV, I've also mentioned Vyaire, as a producer of ventilators, it is seeing huge demand for its products amongst the current crisis. Tosca is a supplier of reusable plastic containers for supermarkets and their suppliers of food products and is benefiting from food consumption shifting to in-home consumption. Cengage is a leading provider of learning solutions for [structures] and institutions in higher education around the world, which is a cash-generative business and is benefiting from the trends in higher education. On the detractive side, the 2 in-person retail investments in Takko and Cole Haan have been affected from COVID-19, as we have already discussed, resulting in decreased valuations. Whilst Idealista continues to be the market leader in real estate classifieds in Spain and Portugal, with a strong Italian business, it was negatively impacted by the real estate lockdown in those countries, resulting in a reduction in fair market value. Now on the following, Page 12, we usually show the bridge with LTM performance drivers. However, given the significant difference in performance between the last quarter and the preceding 3 quarters, we have instead provided you with the performance drivers in Q1. You can find the LTM breaks in the appendix of the presentation. So turning to Slide 12. As we have mentioned, PE NAV was down by 11.6%. What is immediately visible from the chart at the top is that decreasing valuation multiples are the key reason why valuations in the Private Equity portfolio are down during the quarter. Now the underlying earnings of the portfolio continued to grow during Q1, contributing 0.9% to total returns in Private Equity. Leverage had a negative effect on returns. That is because absolute levels of debt have increased, both as portfolio companies have increased their usage of credit facilities but also due to M&A that concluded during the quarter. And it's important to highlight that in the current context, leverage levels are actually quite modest at 4.2x LTM EBITDA across the portfolio, which was quite high. So the portfolio has entered the core COVID-19 crisis with relatively low levels on average. With this, let me hand it back to Ralf to cover Derived Investments. -------------------------------------------------------------------------------- Ralf Gruss, Apax Partners LLP - Partner & COO [4] -------------------------------------------------------------------------------- Thanks, Salim. Before going into the Derived portfolio, let me spend a minute on market context as well. We've seen a significant market dislocation and volatility at the end of March, and what's shown here on Page 14 of the presentation on the left-hand side is the average pricing of levered loan indices in both the U.S. and Europe, and on the right-hand side, the development of the S&P 500 and STOXX 600 are shown. You can see prices dropping sharply during March. In loan markets, we have seen selling activity during this period, and even high-quality credits were traded at dislocated prices. Average loan pricing dropped more than 20% peak to trough during the quarter. A similar picture in public equity markets, with major indices down approximately 35% peak to trough. Since the quarter end, markets has bounced back, but clearly, the portfolio context for the Derived portfolio at the end of March was one of significant pricing dislocation. With that in mind, let's turn to Page 15 for a summary of the Derived Investments. Let me cover Derived Debt first as this is the larger part of the Derived portfolio. The total return of the portfolio in Q1 was negative 7.7%, this is better than the overall market performance we just reviewed, and the decision to move parts of the Derived Debt portfolio away from second lien instruments into first lien was clearly beneficial in the market context. First lien positions represented 35% of the Derived Debt portfolio at the end of March. AGA kept its more conservative approach to investing during the first quarter, with both Ad Astra and Cotiviti being first lien positions. Ad Astra is a software provider to universities, and Cotiviti is a position that was picked up during the market dislocation in March, a health care analytics company and super solid credit, where the first lien price dislocated into the 80s. From a portfolio perspective, most of the Derived Debt investments are in Tech & Telco and Services businesses, sectors where you would expect to find companies that are less severely impacted by the COVID crisis. For the realized debt positions, returns remain strong and above targets. The 4 positions realized generated a gross IRR of 13.6% and a gross money multiple of 1.2x. So bottom line for Derived Debt, we are looking at a portfolio which is now more risk diversified across the capital structure and where the majority is invested in Tech & Telco and Services. Returns were negative during the quarter, but the downdraft was less pronounced than what we have seen in broader markets. Realized returns have remained strong. On the Derived Equity side, no new investments were made. AGA exited its investment in Sophos in parallel to the Apax Funds, generating a 2.8x money multiple, which is an excellent outcome for an unlevered investment in public equity and the type of Derived Equity investment we are aiming to identify for AGA going forward. Strides on the other side was realized at a loss. After periods of continued underperformance, we concluded to recommend an exit from this [position]. The result of this investment was disappointing, returning 0.7x invested capital. In a similar way to Private Equity, ongoing monitoring of the Derived Investment portfolio remains a top portfolio. We expect to receive additional information on the impact of the COVID-19 crisis as we go along, and we'll obviously keep you updated in our future calls. Before concluding the presentation, let me briefly touch up on Page 16, where you can see a breakdown of each of the Derived Debt and Derived Equity performance during the quarter. On the top of the chart, you can see the usual bridge setting out drivers of returns in Derived Debt. And again, the bridge illustrates that it's the unrealized losses in the Derived Debt portfolio which are the key reason for the negative overall total return. On the bottom of the page, same bridge for the Derived Equity portfolio is illustrated. The exit from the Sophos position drove the positive contribution of 2.4% in realized gains. Unrealized losses are from reduced mark-to-market valuations. So this concludes the main part of the presentation. Let me summarize a couple of takeaways before we go into Q&A. Clearly, the first quarter performance of AGA was affected by the COVID-19 crisis. Having said that, we however believe that much of the Private Equity portfolio is invested in subsectors which are currently less impacted by COVID-19 and should experience long-term growth. Mark-to-market valuations are, however, down at 31st March. And despite outperforming market indices, total return of AGA is negative 11.9% during the quarter and flat over the last 12 months. The liquidity position of AGA remained healthy. There are EUR 29.2 million of cash available to AGA at the end of March, and AGA had access to its full revolver of EUR 140 million. And a reminder that during Q1, AGA paid a dividend of 4.68p per share, in line with AGA's stated dividend policy. Now looking forward, let's start first with Private Equity. Now in Private Equity, we believe that the Private Equity portfolio will benefit from the good to great transformative deal strategy of the Apax Funds in the current crisis. This is mainly because having multiple levers of value creation, which is really at the core of this transformative strategy, is very helpful when it comes to cushion the impact of the crisis but also to emerge stronger thereafter. In addition, this strategy usually comes with the lower average levels of indebtedness. If you look across the portfolio, the leverage levels are at only 4.2x EBITDA. Second, with regards to the current portfolio, there is very limited exposure to travel and energy and an overexposure to technology and digital in the portfolio. Looking forward, the key priority remains to weather the storm, to improve productivity and to pursue organic and M&A opportunities to emerge stronger from the crisis, so both defensive but also front-foot actions when it comes to the portfolio. The funds are also open for business. Though our Investment Committee is taking a selective approach when recommending new investments, focusing in areas and subsectors of Apax expertise. And with the new Buyout Fund Apax X, there is firepower to deploy in potentially attractive vintage following the crisis. On the Derived Investment side, we are looking at a portfolio which is primarily invested in Tech & Telco and Services, and where the portfolio structure is more risk diversified than it has historically been. In the current environment, we expect less refinancing activity of existing indebtedness. And at the same time, current market pricing often makes it unattractive to realize existing positions. It's therefore likely that we will see less portfolio activity in Derived Investment and that the approach we will take in recommending investments is to focus more on relative value between new and existing opportunities. And of course, in terms of new opportunities, clearly a very selective approach, weighing risk and liquidity in each opportunity. And with this, both Salim and I am now happy to answer any questions. And for this, I'll give it back to the operator. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question comes from Matthew Hose from Jefferies. -------------------------------------------------------------------------------- Matthew Lloyd Hose, Jefferies LLC, Research Division - Equity Analyst [2] -------------------------------------------------------------------------------- I see that Vyaire Medical got a large ventilator order from the U.S. government in April. I just wondered, is that in the uplift at the end of March? Or is that still to come? -------------------------------------------------------------------------------- Salim Nathoo, Apax Partners LLP - Partner [3] -------------------------------------------------------------------------------- We have modeled some of the improvement in the business in the March FMV, but I think it's fair to say that not all of the activity in orders are reflected in the FMV. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- The next question comes from [Charles Murphy] from [Millburn Investments]. -------------------------------------------------------------------------------- Unidentified Analyst, [5] -------------------------------------------------------------------------------- I've got a couple of questions. Just on the second lien marks as at the 31st of March, do you think they're reflective of value? Or is there more a case of actually where the market truly was? I imagine there was quite a lot of illiquidity around coming up with those numbers. -------------------------------------------------------------------------------- Ralf Gruss, Apax Partners LLP - Partner & COO [6] -------------------------------------------------------------------------------- Charlie, yes, we believe the marks at the end of March are reflective of value, and we've interestingly actually seen some more liquidity in some of the positions even after quarter end. -------------------------------------------------------------------------------- Unidentified Analyst, [7] -------------------------------------------------------------------------------- That's brilliant. That's good to hear. My other question is Apax operates globally, what lessons are you learning? Have you learned from one geography to the other as the sort of pandemic evolves around the world? -------------------------------------------------------------------------------- Salim Nathoo, Apax Partners LLP - Partner [8] -------------------------------------------------------------------------------- Yes. Maybe I can take that. We -- obviously, China, I guess, was at the forefront of the pandemic. And for instance, we have ThoughtWorks, which operates in China, so it was the first to see the lockdown and the impacts of that and also, I guess, the first to see the recovery. So in terms of lessons learned there, we were very much on the front foot in terms of taking cost action early once we've seen what was happening in China and that this was going to happen potentially in the rest of the world. So as soon as it became clear that it was serious outside China, we were very quick to take cost action. We are seeing also what does the new normal look like a little bit. Of course, every geography will be different. And it is true China is coming back, but it is not at full capacity in terms of operations. So we very much, as a global business, do have our pulse on the different geographies. As an Investment Committee, we are meeting very regularly. The deal teams are presenting regularly on the portfolio companies. So we're using that knowledge to inform us as to what's going on and what the outlook is. -------------------------------------------------------------------------------- Unidentified Analyst, [9] -------------------------------------------------------------------------------- Okay. I have my final question back on Vyaire. Earlier, you were having issues with the sort of spinout and just getting it to -- getting all the systems in place. Is the uptick in valuation a partial reflection of the fact you've resolved those issues as well as just its improved COVID-related demand? -------------------------------------------------------------------------------- Salim Nathoo, Apax Partners LLP - Partner [10] -------------------------------------------------------------------------------- Yes. I think 2019 was a tough year for Vyaire, as you represent, and there were issues to do with production and systems. A lot of time and investment went into sorting those out. And so many of those issues were sorted out pre-COVID. Having said that, obviously, the boost in demand is very, very significant relative to the pre-COVID business. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- (Operator Instructions) No other questions on the phone lines, so Ralf, back to you. -------------------------------------------------------------------------------- Ralf Gruss, Apax Partners LLP - Partner & COO [12] -------------------------------------------------------------------------------- Well, thank you for all these questions and also for participating in today's call. I wish you a good day. Thank you, everybody, and goodbye. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect your lines.