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Beneficient (BENF)·Q3 2024 Earnings Summary

Executive Summary

  • Beneficient delivered a second consecutive profitable quarter on a GAAP basis as net income attributable to common shareholders reached $12.9M (Class A basic EPS $2.98) despite an operating loss, driven by a $23.5M non‑operating gain on liability resolution and lower operating costs .
  • Total revenues were $8.6M, down sequentially from $10.0M, as consolidated results reflect mark‑to‑market movements; segment results improved with Ben Liquidity operating income at $2.9M and Ben Custody at $4.3M, while Corporate & Other incurred a $(16.4)M loss .
  • Balance sheet actions reclassified ~$126M of preferred equity from temporary to permanent, reducing the permanent equity deficit from $(148.3)M to $(13.2)M by 9/30; post‑quarter, Nasdaq confirmed the company regained compliance with equity and audit committee requirements, a potential catalyst for investor confidence .
  • Cash was $4.5M and total debt ~$124.1M at quarter‑end; management reiterated near‑term liquidity actions (SEPA registration effective) and expects to resume closing transactions later in the quarter after increasing authorized shares .
  • Segment KPI momentum: Ben Liquidity base interest revenue rose ~10% QoQ to $12.0M; Ben Custody revenue was stable at $5.4M; investments at fair value were $335.0M; asset distributions remain muted industry‑wide but show early signs of improvement .

What Went Well and What Went Wrong

What Went Well

  • Delivered a second straight quarter of positive fully diluted EPS for common shareholders, aided by $23.5M gain on liability resolution and lower comp/benefits; Class A basic EPS was $2.98 (diluted $0.03) .
  • Segment execution improved: Ben Liquidity operating income swung to $2.9M (from a loss in Q1) on higher base interest revenue and lower credit loss adjustments; Ben Custody operating income improved to $4.3M on lower impairment charges and slight cost/revenue tailwinds .
  • Strategic and capital milestones: ~$126M reclassification to permanent equity reduced deficit to $(13.2)M; standby equity purchase registration declared effective; post‑quarter, Nasdaq compliance regained—supporting listing stability and potential access to capital .

Management quotes:

  • “MAPS… reduce the time required to underwrite and value private market assets to as little as 15 days,” accelerating deal velocity .
  • “Demand for liquidity from private market assets… has not abated at all from our vantage point” .
  • “We continued to build… delivering a second consecutive quarter of positive fully diluted earnings per share” .

What Went Wrong

  • Consolidated operating loss of $(13.7)M (vs. operating income in Q1 driven by an arbitration release), highlighting sensitivity to non‑operating items; Corporate & Other swung to a $(16.4)M operating loss .
  • Cash remains tight at $4.5M with total debt ~$124.1M; management disclosed substantial doubt about going concern in the 10‑Q and the need for additional capital/refinancing .
  • Industry headwinds: distributions tracked ~28% below prior‑year rates year‑to‑date; across private markets, diversified portfolio payouts around 8% of NAV vs ~16% long‑term norms, pressuring asset‑based cash flows .

Financial Results

MetricQ2 2024 (YoY)Q1 2025 (Seq-1)Q2 2025 (Current)
Revenue ($M)$(42.761)$ $10.046$ $8.561$
Operating Income (Loss) ($M)$(381.764)$ $44.338$ $(13.715)$
Net Income (Loss) ($M)$(381.764)$ $44.310$ $9.747$
Net Inc. Attrib. to Common ($M)$(371.735)$ $47.667$ $12.914$
EPS (Class A Basic) ($)$(115.95)$ $12.11$ $2.98
EPS (Class A Diluted) ($)$(115.95)$ $0.17$ $0.03$

Notes:

  • Q1 2025 operating income included a $(54.973)M) release of loss contingency related to an arbitration award, inflating operating income in that period .
  • Q2 2025 included a $23.462M gain on liability resolution, lifting net income despite an operating loss .

Segment breakdown (activity that impacts allocation to equity holders; eliminated in consolidation):

Segment MetricQ2 2024Q1 2025Q2 2025
Ben Liquidity – Interest Revenue ($M)$13.0$ $10.8$ $12.0$
Ben Custody – Trust/Admin Revenue ($M)$6.5$ $5.4$ $5.4$
Ben Liquidity – Operating Inc (Loss) ($M)$(272.091)$ $(0.514)$ $2.905$
Ben Custody – Operating Inc (Loss) ($M)$(80.847)$ $1.287$ $4.329$
Corporate & Other – Operating Inc (Loss) ($M)$(25.234)$ $44.091$ $(16.426)$

Key KPIs (current quarter unless noted):

  • Investments at fair value (Customer ExAlt Trusts): $334.987M
  • NAV of alternatives and other securities in custody: $385.1M (vs. $381.2M as of 3/31/24)
  • Net loan portfolio (Ben Liquidity): $260.7M
  • Distributions received from alt assets: $5.3M in Q2; $12.5M YTD
  • Cash & cash equivalents: $4.482M
  • Total debt: $124.1M

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance/CommentaryChange
Liquidity transactions (closures)Near term (current Qtr)Limited in Q2 due to authorized shares constraintExpect to resume closing deals later in the quarter after approval to increase authorized shares Resumption expected
MAPS (pricing/underwriting cycle time)OngoingIn beta in Q1Launched; targeting transaction underwriting/valuation in as few as 15 days; further functionality into 2025 Enhanced
Lending platform for alternatives (new initiative)1H 2025N/A“Productive conversations” with potential partners; aim to introduce platform in 1H 2025 New initiative
Formal financial guidanceFY/QuarterNoneNone provided Maintained (none)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q‑2 and Q‑1)Current Period (Q2 2025)Trend
Demand for liquidity in alternativesQ1: Launched MAPS beta; Board approved up to $5B ExchangeTrust plan; first profitable quarter as public company Demand “not abated”; deals delayed by authorized share constraint; closings expected to resume this quarter; MAPS launched (target ~15‑day cycle) Positive demand; execution resuming
Segment performanceQ1: Ben Liquidity loss; Ben Custody modest profit Ben Liquidity operating income $2.9M; Ben Custody $4.3M Improving
Capital & listingPrior: SEPA in place; reverse split done in April $126M reclass to permanent equity; registration for SEPA effective; post‑quarter Nasdaq compliance regained Balance sheet strengthened; compliance restored
Industry distributionsQ1: Distributions subduedYTD distribution rate ~28% below prior year; industry diversified portfolios ~8% vs ~16% long‑term median; early signs of LOIs, sale processes and IPO explorations Early recovery signs
Macro/regulatoryN/AExpect more capital‑formation friendly environment over ~24 months; near‑term need for liquidity ahead of new deal cycle Constructive outlook

Management Commentary

  • Strategy and value proposition: “Ben was created to provide fiduciary products and services that deliver liquidity and primary capital for holders and managers of all types of alternative assets… our platform addresses… over $150 billion per year and growing” .
  • Technology and speed: “We… launched MAPS… reduce the time required to underwrite and value private market assets to as little as 15 days” .
  • Capital actions and shareholder structure: “Reclassification… improved our permanent equity by $126 million… from a deficit of $148.3 million to… $13.2 million” and reduction of a large shareholder’s position to ~8% of outstanding shares .
  • Segment drivers: Ben Liquidity “recognized $12.0 million in base interest revenue, up 10.4% from the prior quarter” as operating income improved; Ben Custody revenue was “flat sequentially at $5.4 million” with better operating income on lower impairments .
  • Liquidity and outlook: “We were limited in our ability to close… during our second fiscal quarter… due to [authorized share] approval… We… expect to be in a position to begin closing deals again later in this quarter” .

Q&A Highlights

  • Demand and originations: Management sees unabated demand for liquidity from private assets; MAPS should compress underwriting/valuation to ~15 days; marketing via digital, GP solutions, advisory and conferences is generating leads, with focus on closing in the back half .
  • New initiatives: Exploring an alternative‑assets lending platform connecting lenders with investors; targeting 1H 2025 launch; management views the opportunity as potentially as large as current market .
  • Macro/regulatory: Expect more capital‑formation friendly environment post‑election over ~24 months, potentially reviving IPO/M&A and distributions; near‑term, liquidity solutions can bridge to the new cycle .
  • Collateral performance: Positive unrealized NAV trends in 3 of last 4 quarters (ex‑parent interest); YTD distribution rate down ~28% YoY but early signs of LOIs and sale/IPO processes suggest future distributions could improve .
  • Capital structure: Explained $126M preferred equity reclassification mechanics and its role in Nasdaq equity compliance; emphasized need to maintain compliance going forward .

Estimates Context

  • Wall Street consensus (S&P Global) for revenue and EPS could not be retrieved at this time due to data access limits; as a result, we cannot quantify beats/misses versus consensus for the quarter. Values were unavailable via S&P Global at the time of this analysis.
  • Reported results: Revenue $8.6M; Class A basic EPS $2.98; diluted $0.03; the quarter benefitted from a $23.5M gain on liability resolution and lower operating costs, which complicates run‑rate comparisons .

Key Takeaways for Investors

  • Two consecutive profitable quarters signal progress, but core operations still show an operating loss; non‑operating items (arbitration release in Q1; liability resolution gain in Q2) materially influenced results—monitor sustainability of segment operating income improvements .
  • Ben Liquidity’s base interest revenue growth and positive operating income suggest the engine is turning; MAPS‑driven cycle‑time compression and resumed deal closings are the near‑term catalysts for revenue scale .
  • Balance sheet actions (equity reclassification, SEPA registration effectiveness) and regaining Nasdaq compliance reduce near‑term listing risk and may improve capital access—critical given $4.5M cash, ~$124.1M debt, and going concern disclosure .
  • Industry distributions remain below historical norms (~8% vs ~16%), but early signs of transaction activity are emerging; a more constructive capital‑formation backdrop over ~24 months would be a tailwind for collateral cash flows and fee/interest revenue .
  • Watch execution on alternative‑assets lending platform (target 1H 2025) and ExchangeTrust pipeline; delivering product expansion and originations without over‑extending liquidity will be key to de‑risking the medium‑term thesis .
  • Near‑term trading implication: stock may be sensitive to incremental disclosures on closed transactions, capital raises under SEPA, and any updates on distribution trends in the collateral portfolio (LOIs/IPO/M&A pipelines) .

Sources and Document Status

  • We searched for an 8‑K 2.02 earnings press release for the quarter and other press releases; none were found in the available document set for the period. This recap synthesizes the full Q2 FY2025 10‑Q (quarter ended 9/30/24) and the full earnings call transcript dated 11/15/24; we also included relevant post‑quarter 8‑K on Nasdaq compliance – – –.