CaliberCos Inc. Q1 FY2025 earnings call

• Strategic repositioning: Continued in Q1 2025, focusing on core verticals (hospitality, multifamily, multi-tenant industrial) with aim to achieve profitability in 2025, especially second half. - Cost savings: Executing cost savings initiatives, full impact expected in Q3. Target annual EBITDA margin of 25%+. - Core verticals: Centering on hospitality, multifamily, multi-tenant industrial; reducing exposure to long-term development activities to 30% of portfolio. - Financing: Improving commercial real estate financing environment; seeking new asset-level financing. - Platform performance: Updated and published platform performance document covering 2019 to Q1 2025; estimated performance allocations totaled $87.7 million as of March 31, 2025. - Announcements: Offered Series AA cumulative redeemable preferred stock, launched 1031 exchange program, made progress in fundraising with wholesale distribution gaining traction. - Project updates: Canyon project received Phoenix City Council approval for conversion; SP10 construction paused for refinancing; PURE Pickleball & Padel project got design review board approval; DoubleTree by Hilton Hotel refinanced; CHD entered development rights agreement with Hyatt for 15 Hyatt Studios hotels; CHT assessing impact of LTD transaction shift. - Fund closing: Making progress in closing prior funds, listing Alaska fishing properties for sale, finalizing Eclipse Townhomes sale, etc.

In Q1 2025, total platform revenue was $3.5 million, a 25% decrease compared to prior period, driven by fewer active development projects. Platform expenses were $6.1 million, a 21% decrease from Q1 prior year, primarily due to lower payroll and related expenses. Platform-adjusted EBITDA loss was $1.4 million in Q1 2025, better than the $1.7 million loss in the same period a year ago. Managed capital was $495.2 million, a 9.1% increase compared to the year-ago quarter.

• Aim to achieve profitability in 2025, especially second half. - Target annual EBITDA margin of 25% or greater on sustainable basis. - Expect improving financing environment to aid AUM growth. - Reassessing 2026 financial targets due to LTD termination, still aiming to achieve CHT goals but analyzing timing. - Bullish on prospects as investors turning back to real estate and picking up new CHT contributors.

• Market headwinds affecting results. - Potential changes in asset plans impacting performance allocations. - Challenges in fundraising continuing longer than expected. - Uncertainties in achieving financial targets due to external factors like investor decision-making delays.

Q: Just wanted to talk about the Hyatt deal. Can you go into detail on how that ultimately developed. Maybe kind of walk us through the near-term and long-term financial impact of that deal.

A: The Hyatt deal was worked on for many years. Hyatt announced the Studios brand, Caliber was identified as a preferred developer. It's an estimated $400 million in projects, $400 million of assets under management if built, with about $2 million in fees per asset constructed and annual recurring fees from managing assets.

Q: I wanted to pivot to fundraising, Chris. I know you mentioned it's obviously been a challenging environment for two years or so. I know you mentioned the impact of the LTD termination and that has led you to kind of reassess some of those financial targets you talked about. Are you able to provide any kind of insight to, I guess, on those 2026 financial targets. I know the fundraising goal there had been $750 million. Just curious, I know a big part of that was for CHT, but really just curious as to how investors kind of think about those targets going forward.

A: We're still working through the timing of those targets because of the LTD transaction not closing. We're still aiming to achieve CHT goals, but analyzing if it'll be by end of 2026 or pushed to 2027. Feeling bullish due to investors turning back to real estate and new CHT contributors.

Q: On the wholesale distribution channel front, it sounds like the first quarter of 2025 was pretty strong relative to 2024. What's the progress like there? What are your expectations for wholesale heading into the last three quarters of the year?

A: Feeling good about the channel. Same order flow in Q1 2025 as all of 2024. Selling agreements and relationships activated. Expect momentum to continue as there's a strong fit between advisors' needs and Caliber's offering.

Q: One more question for me just on the assets under development and really on the refocus of your kind of business strategy here. As you kind of move forward and maybe monetize some of those non-core development projects, do you expect there to be a material impact on performance allocations?

A: You can expect typical fees from sales like brokerage fees. Probably not sizable performance allocations associated with selling non-core projects, but estimates already included in the $87.7 million of estimated performance allocations.

Q: One last question just on the outlook for profitability. You mentioned the back half of this year is a little bit more favorable for profitability. I guess what factors can really drive maybe an outperformance or underperformance relative to your expectations?

A: Outperformance driven by improving financing environment and fundraising. Underperformance due to continued lack of investor decision-making.