Investing Capital Per Share: $113.70, up 6% from the previous year. Share Repurchases: 2.3 million shares repurchased in Q4, totaling 5.7 million for the year. Private Equity Capital Raised: $1.5 billion in 2024. Capital Returned to Investors: Over $3 billion, including $1 million to Onex. Fee-Generating AUM: Over $35 billion at year-end, a 3% increase in Q4. Structured Credit AUM Growth: 34% increase over the last 12 months. Fee-Related Earnings (FRE): $1 million loss in Q4, with a $6 million contribution from asset management platforms. Structured Credit FRE: $12 million in Q4, $44 million for the year, a 45% increase. Liquidity: Approximately $1.6 billion, or 19% of investing capital. Credit Investments Return: $16 million net gain, or 2% return in Q4, 9% return for the year.

Warning! GuruFocus has detected 8 Warning Signs with ONEXF.

Release Date: February 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Onex Corp (ONEXF) had a solid fourth quarter, with significant progress across all platforms, particularly in private equity and credit. The private equity team successfully raised $1.5 billion in 2024 and returned over $3 billion of capital to investors, showcasing strong performance. The credit platform outperformed expectations, ranking as the number 7 issuer of global broadly syndicated CLOs and executing 30 transactions in 2024. Onex Corp (ONEXF) completed a substantial issuer bid, buying back 2.3 million shares, which is seen as a positive statement for shareholders. The company ended the year with strong liquidity, maintaining about $1.6 billion or 19% of investing capital, positioning it well for future opportunities.

Negative Points

The US dollar return was below target for the year, although the five-year compound annual return was 13%. Returns in the private equity portfolio were impacted by unfavorable foreign exchange, resulting in a mark-to-market loss of about $60 million. Some healthcare and consumer companies within the portfolio faced challenging results, affecting overall returns. Onex Corp (ONEXF) reported a modest fee-related earnings (FRE) loss of $1 million for Q4, with some decline in existing management fees expected over the course of the year. The company does not expect to reach its goal of a breakeven run rate contribution for its PE platforms and public company costs in 2025.

Q & A Highlights

Q: Can you discuss the outlook for consolidated fee-related earnings (FRE) in 2025? Is there potential for a positive FRE contribution? A: Christopher Govan, CFO, stated that they are optimistic about the credit platform's performance, expecting meaningful growth in FRE during 2025. While the private equity (PE) business is harder to predict due to episodic fundraising, they anticipate a slightly positive overall FRE contribution in 2025. However, the real value in the PE business lies in the carry opportunity, which adds cash generation and value beyond FRE.

Story Continues

Q: Are there specific plans for portfolio realizations in the PE business this year? A: Robert Le Blanc, CEO, mentioned that while the comment was general, there are specific plans for capital return from both OP and ONCAP platforms, market conditions permitting. They expect to be active in this area in 2025.

Q: Can you provide an update on PowerSchool and the recent cyber incident? A: Robert Le Blanc, CEO, noted that the management team has effectively communicated with customers about the incident, which posed limited risk. He does not anticipate any capital needs for the business related to the event.

Q: How do you plan to address the discount to NAV, and what are your strategies beyond buybacks? A: Robert Le Blanc, CEO, emphasized that selling assets at or above NAV helps validate the NAV value. He highlighted the credit business's growth and profitability as a source of shareholder value. Additionally, he is focused on capital allocation strategies for the $8.5 billion of investing capital.

Q: What are your fundraising targets for 2025, particularly for CLOs and other products? A: Robert Le Blanc, CEO, expects structured credit, including ASCO and ONCAP, to have another strong year. While specific targets were not disclosed, most new capital is anticipated to come from the credit business, with potential contributions from PE through secondary market activities.

Q: With $1.6 billion in cash, will you continue to be active on the NCIB, or consider another SIB? A: Robert Le Blanc, CEO, confirmed they will remain active on the NCIB and are open to another SIB if opportunities arise, especially at current share price levels.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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