Earnings call transcript: Onex Corp's Q3 2025 sees strategic growth amid slight stock dip

Onex Corp reported its Q3 2025 earnings, showcasing strategic acquisitions and partnerships that bolster its market position, despite a modest decline in its stock price. The company's asset management segment generated $20 million in earnings, while private equity and credit assets under management (AUM) saw significant growth. However, the stock price experienced a slight decrease of 0.96%, closing at $116.52.

Key Takeaways

• Onex Corp ended Q3 with investing capital per share of $121.61.
• Private equity AUM increased by 22%, and credit AUM rose by 18%.
• The company announced key acquisitions, including Convex and ISC.
• Onex is transitioning to a more capital-light model, impacting investment strategies.

Company Performance

Onex Corp demonstrated robust growth in its asset management segment, with a $20 million contribution to earnings. The company's private equity and credit AUM experienced substantial increases of 22% and 18%, respectively. These figures underscore Onex's strategic focus on expanding its investment portfolio and enhancing its competitive edge.

Financial Highlights

• Revenue from asset management: $20 million
• Fee-related earnings: $1 million for the quarter
• Investing capital per share: $121.61
• Five-year CAGR on investing capital per share: 13%

Market Reaction

Onex Corp's stock saw a slight decline of 0.96%, closing at $116.52. This movement reflects a cautious market response to the earnings call, despite the company's strong performance in asset management and strategic acquisitions. The stock's current price remains above its 52-week low but below its high, indicating room for future growth.

Outlook & Guidance

Looking forward, Onex Corp anticipates generating meaningful liquidity from private equity realizations and plans to deploy its remaining $5 billion of investing capital strategically. The company expects to exit 2025 with a firm-wide run rate FRE of approximately $17 million, signaling a positive outlook for future earnings.

Executive Commentary

CEO Bobby Le Blanc emphasized Onex's strategic focus, stating, "We only want to deploy capital in areas where Onex has deep domain expertise and a clear right to compete." CFO Chris Govan added, "We're very comfortable that $500 million of liquidity is sufficient in the near term," highlighting the company's strong liquidity position.

Risks and Challenges

• Transition to a capital-light model may impact investment strategies.
• Modest fee-related earnings could affect short-term financial performance.
• Market uncertainty and economic conditions pose potential challenges.

Q&A

During the earnings call, analysts inquired about the impact of the AIG partnership on fundraising efforts and sought clarification on the FRE run rate calculation. Onex confirmed raising over $5 billion in new credit FGAUM year-to-date, showcasing its strong fundraising capabilities.

Full transcript - Onex Corp (ONEX) Q3 2025:

Conference Operator: Welcome to Onex's third quarter 2025 conference call and webcast. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session with pre-qualifying analysts. At that time, if you have a question, please press star 11 on your telephone keypad. As a reminder, this conference is being recorded. I will now turn the conference over to Jill Homenuk, Managing Director, Shareholder Relations and Communications at Onex. Please go ahead.

Jill Homenuk, Managing Director, Shareholder Relations and Communications, Onex: Thank you. Good morning, everyone, and thanks for joining us. We are broadcasting this call on our website. Hosting the call today are Bobby Le Blanc, Onex's Chief Executive Officer, and Chris Govan, our Chief Financial Officer. Earlier this morning, we issued our third quarter 2025 press release, MD&A, and consolidated financial statements, which are available on the shareholder section of our website and have also been filed on SEDAR. A supplemental information package is also available on our website. As a reminder, all references to dollar amounts on this call are in U.S. unless otherwise stated. I must also point everyone to our webcast presentation for our usual disclaimer and cautionary factors relating to any forward-looking statements contained in today's presentation and remarks. With that, I will now turn the call over to Bobby.

Bobby Le Blanc, Chief Executive Officer, Onex: Good morning, everyone. Before providing my comments on the quarter, I wanted to provide some thoughts on our pending acquisition of Convex and new strategic relationship with AIG. These transactions are a transformational step forward for Onex, with the potential to meaningfully enhance long-term shareholder value. Since becoming CEO, one of my main priorities beyond optimizing the business and focusing on those areas where we have a right to compete has been to identify opportunities to deploy our balance sheet to create enterprise value. I truly believe these relationships with Convex and AIG, two industry-leading organizations that are well aligned with our own culture and principles, is one of these opportunities.

In Convex, we are not only acquiring an outstanding organization and proven leader in the insurance industry; we are strategically and intentionally leaning into a business and ecosystem that we know extremely well and where we have been able to generate outsized returns. In just six years from its inception, the business has delivered well beyond expectations and still has excellent growth prospects. Further, the informational advantage we have built up related to Convex puts us in a far superior position with much lower risk than if we were acquiring a business we did not know as well. What Steven Catlin and Paul Brand have achieved to date with Convex is truly remarkable. We would like to thank Steven and Paul and the rest of the employees at Convex for their efforts and results.

They are one of the most talented teams in the industry and we're delighted to remain their long-term partners. In addition to the strength of the team, Convex has built a differentiated underwriting platform, one that has grown gross written premium by 22% annually since 2022. Profitability has also improved steadily, with recent combined ratios in the high 80s- to low 90s as the business continues to scale into its expense base. Convex has also demonstrated prudent underwriting and has had consistent favorable prior year reserve development since 2022. Importantly, it carries no legacy insurance liabilities, having been established as a de novo insurer in 2019 with the support of Onex and our LPs. Convex's efficient cost structure, with no legacy technology burden and a focus on outsourcing non-core functions, should allow for meaningful incremental operating leverage as the business continues to grow.

As we highlighted in the investor presentation available on our website, Convex's key performance indicators clearly position it ahead of its peers, particularly on an organic growth basis. At our entry price of 1.9 times Q3 tangible book value, we see meaningful upside as Convex continues to compound tangible book value through disciplined underwriting and retained earnings. As we have consistently outlined to our shareholders, we only want to deploy capital in areas where Onex has deep domain expertise and a clear right to compete. We've spent decades building experience and relationships across the insurance sector, and Convex is a great example of our deep domain expertise. Owning a property casualty insurer gives us two powerful engines of value creation. First, from through cycle underwriting profits, which can be reinvested back into the business or become available for future dividend distribution.

Second, as Convex's investment portfolio, which is currently around $8 billion, grows, allocation to alternative assets will grow with it, which will include Onex's own private equity and credit funds. This should drive incremental AUM growth and fee-related earnings for our asset management business. While the P&C market is not immune to cyclicality, we're comfortable with that risk, given we expect to be a long-term owner of the business, and Convex is still in the early stage of its growth trajectory. The business has significant opportunity to capture additional market share underpinned by its high-quality relationships and reputations with brokers and clients. The combination of best-in-class growth and high-quality underwriting should allow Convex to compound its equity value at attractive rates through the cycle.

We see that growth as a meaningful driver of Onex's future shareholder returns and a key contributor to the ongoing expansion of our net asset value over time. Turning to AIG's investment, this new relationship with one of the world's largest and most sophisticated insurance companies is an incredibly positive development for Onex. Their $2 billion commitment to our private equity and credit funds will contribute an incremental $15-$20 million of fee-related earnings, more than offsetting the impact of dilution. Moreover, this opens the door to a number of other benefits, including the potential to collaborate on future investments and a range of other initiatives that could prove significant over time.

Overall, our relationship with AIG not only reflects a shared perspective on both the upfront value and long-term prospects of Convex, but is also an endorsement of the Onex platform and our ability to create future shareholder value. Across our existing businesses, we are also thinking strategically about how to best enhance enterprise value. Upon closing, Convex will account for 42% of our balance sheet. With the remaining $5 billion of investing capital, we will continue to grow it and deploy it through two key areas. First, by allocating up to 10% per fund into our own strategies while relying increasingly on third-party fundraising to scale FGAUM and related FRE. Second, by pursuing direct on-balance sheet investments. These would be in areas where we have a clear right to compete, but with differing risk-adjusted return, holding period, and leverage parameters, so as not to conflict with OP and on-cap opportunities.

Added to this will be a continued focus on growing fee-related earnings. We have made significant gains on FRE throughout 2025, in large part due to the work of our credit team, and we are now positioned to exit the year with a positive total FRE run rate that is ahead of plan. This growth will be accelerated by AIG's commitment to our alternative asset strategies, as well as the additional future investment into these strategies by Convex. As we work towards our objective of closing the transaction in the first quarter of 2026, we will keep shareholders updated on key developments and will continue to look for opportunities to provide the appropriate information to understand and value this transaction, including why we believe Convex deserves to be recognized at a premium valuation within our overall NAV. Now a few comments on the quarter.

Again, credit continues to outperform our expectations this year, led by the ongoing momentum in structured credit. The team priced 22 CLO transactions through October, raising or extending $10.7 billion of fee-generating assets across our structured credit and tactical allocation platforms. The performance of our CLO portfolio continues to be top tier across important risk metrics. Our private equity teams continue to be active in Q3 with both realizations and deployments, ensuring that we continue to return capital to our limited partners while putting new investment money to work in opportunities that align with our chosen sectors. Onyx Partners announced a sale of approximately 55% of its investment in One Digital, in a transaction that values the business at more than $7 billion, which was completed at a valuation almost on top of our Q2 mark.

In addition, we successfully closed the sale of our 25% stake in WestJet at more than a 40% premium to our mark. Including these two transactions and pro forma for the closing of the Convex transaction, Onex Partners 5 will have reached a DPI of 0.7 times, a strong achievement relative to the average DPI of comparable funds in its vintage. Following a sale of Precision Concepts in Q2, the on-cap team successfully closed their sixth investment in Fund 5, which is now approximately 50% invested. On the human capital front, we announced that Meg McLellan will join Onex as our new CFO, following Chris's decision to step down from the role he has held since 2015. We are looking forward to welcoming Meg, who will assume the CFO responsibilities following our year-end call.

I'm pleased that Chris has agreed to stay on in a leadership capacity to help ensure a smooth transition and provide continued guidance and support. I also want to acknowledge Tawfiq Popatia's confirmation as Head of Onex Partners. Tawfiq has always shown great leadership and strong investment acumen and is a true ambassador of the Onex culture and entrepreneurial spirit. Finally, I want to thank everyone for their condolences and support following Nigel Wright's passing. Onex lost a friend and colleague. Nigel was a gentleman in the truest sense of the word. I'll now turn it over to Chris.

Chris Govan, Chief Financial Officer, Onex: Thanks, Bobby, and good morning, everyone. While most of my remarks will focus on our results for the quarter, I'll also take some time to address some financial aspects of our acquisition of Convex and relationship with AIG. Let's start with our investing segment. Onex ended Q3 with investing capital per share of $121.61, up slightly from Q2 and representing a return of 7% for the first nine months of the year. The five-year CAGR on investing capital per share is 13%, just below our target range. Our PE portfolio was up slightly during the quarter. While Onex Partners 5, the Onex Partners Opportunities Fund, and on-cap 4 continued to generate positive returns across a broad range of their portfolio companies, these gains were mostly offset by losses in Onex Partners 4. As Bobby said, it was an active period for our PE teams on both realizations and deployments.

In September, Onex Partners 5 announced the sale of 55% of its investment in One Digital, which is expected to close later this year. We also had two partial exits close since Q2. On-cap 4's sale of approximately 80% of its interest in Precision Concepts International and OP 5's sale of 25% of its stake in WestJet to a consortium of leading global airlines. The combined proceeds to Onex from these realizations will be approximately $360 million. It is worth noting that the last 13 realizations across our PE platforms, dating back to 2022, have been completed at attractive values relative to their prior quarter's mark. In fact, only one was executed below the prior quarter's mark, and in that case, at only a 3% discount, and five were done at premiums of 15% or more, including the recent partial sale of WestJet at a 40% premium.

On the new investment front, in September, the Onex Partners Opportunities Fund announced the acquisition of Integrated Specialty Coverages, or ISC. The company is a technology-enabled insurance platform that fits well within the portfolio, with our long history of successfully investing across the entire property and casualty insurance value chain, particularly in founder-led businesses like ISC. In October, on-cap 5 announced an investment in CSN Collision, a leading network of collision repair centers. As some of you will recall, on-cap has experience investing in this industry, having previously owned Caliber Collision, an investment that generated a 7.5 times multiple of capital to Onex Corporation. Both the Opportunities Fund and on-cap 5 are off to strong starts with investment pace on target.

On the asset management side of the business, Onex ended the quarter with $42 billion of fee-generating AUM, with private equity and credit increasing by approximately 22% and 18% respectively during the year. The increases primarily reflect the earlier commitments made to On-cap 5 and the Onex Partners Opportunities Fund, as well as the issuance of new CLOs. The asset management segment generated earnings of $20 million in Q3, of which $11 million was fee-related earnings from the PE and credit platforms. After factoring in the costs associated with managing Onex Corporation's capital and maintaining the public company, total firm-wide FRE was $1 million for the quarter and year-to-date. Credit continues its strong FRE trajectory, with an end-of-quarter run rate of $50 million. By year-end, we expect this run rate to increase to approximately $60 million, exceeding our 2023 investor-day target.

With credit FRE ahead of plan, we also expect to exit 2025 with positive firm-wide run rate FRE. As we noted in the presentation we posted last week, our forecast is to exit 2025 with firm-wide run rate FRE of approximately $17 million, based on Q4 FGAUM initiatives in process. This is before any of the benefits that will accrue from the $2 billion of allocations to our alternative asset strategies from AIG. At this point, we're estimating an incremental FRE of $15-$20 million on this $2 billion of AUM, and we'd expect an increased allocation of capital from Convex to Onex Strategies to be additive here. The actual FRE impact will depend on the strategies to which AIG and Convex ultimately allocate capital, but in all cases, we expect a very high conversion of management fees to FRE.

As we've discussed before, we're at a point in both PE and credit where the infrastructure can manage incremental capital with very little in the way of additional costs. As the capital from AIG and Convex gets allocated, we'll continue to update our run rate FRE reporting to reflect the actual benefit. Now, turning to Convex and AIG. As Bobby said, we think this is a terrific evolution of Onex, and we're confident it will allow us to accelerate enterprise value creation for the benefit of shareholders. I thought it would be helpful for me to add some color around the funding of the transaction and Onex's go-forward liquidity.

Onyx's funding could be affected by further PE realization and investment activity between now and closing, but at the moment, we expect our $3.8 billion investment in Convex to be funded by a combination of $1.5 billion of cash from our balance sheet, a $1 billion draw on the new NAV loan facility, rolling over our existing $700 million investment in Convex, including carried interest, and finally, approximately $600 million from the issuance of Onyx shares to AIG. After factoring in cash flows from PE transactions we've already announced, we expect to have approximately $300 million of cash on Onyx's balance sheet at close. In addition, Onyx will have $200 million of undrawn capacity on the NAV loan. We're very comfortable that $500 million of liquidity is sufficient in the near term.

If you look out over the next one to two years, we expect Onex to generate meaningful additional liquidity, mainly from net PE realizations. As I mentioned, we expect to generate positive overall FRE going forward, and our credit business will continue to grow without the need for meaningful net new allocations of Onex capital. That leaves our PE investing as the key driver of medium-term liquidity. Ignoring Convex, Onex has approximately $5 billion of PE investments in the ground relative to only $750 million of unfunded PE capital commitments, of which only $400 million are to funds in their commitment period. With that ratio, we expect meaningful net realizations from PE will allow Onex to pay down the NAV loan in relatively short order. Overall, the acquisition of Convex and strategic relationship with AIG position Onex to create long-term enterprise value.

In one fell swoop, we're better leveraging our balance sheet to reduce the historic cash drag, allocating about 40% of our investing capital to an investment we know really well that will compound value over the long term, and paving the way for strong growth in FRE by demonstrating our commitment to an asset-lighter model and securing significant new AUM from AIG and Convex. That concludes the prepared remarks. We'll now be happy to take any questions.

Conference Operator: Certainly. Our first question for today comes from the line of Bart Jarski from RBC Capital Markets. Your question, please.

Great. Thanks. It is RBC Capital Markets, and good morning. I wanted to ask around the AIG partnership. Bobby, we would love your thoughts in terms of how you are thinking about this having the impact around fundraising. Does it change any of the outlook in terms of OP6 timing, sizing, etc.? Thanks.

Bobby Le Blanc, Chief Executive Officer, Onex: Yeah. I think having an organization like AIG look at where we've brought our asset management business to over the last couple of years and want to invest in Onex, it's a really strong endorsement, and I think it's only additive or a positive for fundraising going forward. I don't think it impacts timing of our fundraisers coming up for OP, on-cap, or credit. Specifically for OP, I would still target sort of mid-2026 as a fundraising launch date. Chris mentioned it, the 0.7 times DPI is a very significant stat for that platform and looks very good relative to other PE firms in that vintage.

Okay. Thanks. Could you remind us what % of the fund are you in OP5, and would that be a similar % for OP6 that Onex invests in, or are you thinking maybe more capital-light direction where you'd be a lower % of that fund?

Yeah. For OP5, we were $2 billion of about $7 billion. Again, we expect to be up to 10% of our various funds going forward, so it would be a much more capital-light model, if you will, from Onex's perspective and the balance sheet perspective.

Okay. Great. Thanks. The last one for me is we're hearing lots around kind of this private credit narrative within alternative asset managers. I would love your thoughts around, are you seeing anything in your portfolio? Maybe walk us through how you differentiate in terms of origination to protect the book. Any thoughts there around private credit?

Yeah. Private credit's had a couple of big blow-ups over the last couple of months. I'm happy to report that our credit team had no exposure to those blow-ups. I think Ronnie and the team have a protective downside mentality, and when they see problems come up, not in those particular names because we were not in those names, but they tend to move very quickly when they see a problem and not wait for the problem to get confirmed. I do not think it is systematic what we are seeing. I think there were reasons why those credits went bad from governance control and other reasons. From our own portfolio, we have not been in any of those to date, which I give, again, the credit team a lot of kudos for.

Great. That's it for me. Thanks, Bobby.

Thank you.

Conference Operator: Thank you. Our next question comes from the line of Graham Wrighting from TD Securities. Is your question, please?

Hi. Good morning. Can you just talk about the strategic shift underway here with this Convex acquisition? If we look out over the next one to three years and you are successful in monetizing some of your existing PE co-investments, should we expect sort of a similar strategy going forward where you make some further concentrated investments in sort of majority-type positions? If so, what's the right mix? How many of these would you think would be the right mix to sit within your NAV?

Bobby Le Blanc, Chief Executive Officer, Onex: Yeah. Again, just to step back a bit, but I'll answer that specific question. There are really three things that I'd like our shareholders and fellow owners to focus on in the near term. First is the acquisition of Convex. We'll own 63% of it on the balance sheet. Again, we've controlled that company for six years. The informational advantage that we had going in in terms of doing six years of due diligence, essentially, and the fact that AIG invested more than $2 billion in Convex at the valuation that we had, it makes me feel very good, at least initially, right, that that part of our NAV ought to be looked at very differently than our NAV has been looked at going historically. Sorry. On the asset management side, I think it's nothing but positive to have AIG and incrementally more Convex dollars coming in.

I think it's going to help our PE platforms. It's going to help our subscale credit products that I've been talking about, wanting to get the profitability to get outsized FRE growth. Just the endorsement of those organizations on our overall platform, I think, is going to be a net positive for fundraising. You point out a very important third leg of the strategy, and that's as we become more of an asset-lighter model in terms of Onex's balance sheet commitment to our various products, there is an opportunity, and I use the word opportunity, to redeploy or reorient, is the word I like to use, that $5 billion of capital into Convex-like transactions. My goal would be that would make perfect sense to our fellow owners in terms of where we have a demonstrated right to compete as that capital gets deployed.

Think about it in terms of lower to no leverage like a Convex. It could be a junior security. It could be a control position, but we'll have enough influence in wherever we're doing to make sure that we have the ability to explain it well to our shareholders. Importantly, you're going to see much, much more transparency around those types of investments. You'll notice what we put up on our website in terms of the transparency around Convex and all the financial metrics that one looks at to evaluate a company like that. You'll see that for anything that we do on the balance sheet. Again, our fellow owners will know how to value the pieces. I see it being very concentrated, just so you understand. Maybe one or two other ones.

Insurance is obviously a very natural one for you to think about, but there are other things that we really have done remarkably well over the years that we would be open to as well. It will not be something opportunistic that is not in one of our demonstrated areas of capital-right to compete.

Okay. Great. You talk about having a six-year sort of due diligence period here on Convex. Going forward, would it make sense for you to follow a similar pattern here and look closely at your existing portfolio companies as likely candidates for further kind of concentrated investments?

Yeah. The one thing that made Convex different, because it was a de novo, it really was never a leveraged buyout, even though it had a PE return for Onex and our LPs. I think it'll be very difficult for me to do a traditional PE-type deal with a huge chunk of our capital, i.e., something I need to do five times leverage or something like that to get the appropriate return. I do not see immediate opportunities where the next one would come from that set of opportunities, but I would never close my mind to it because you never know.

Okay. Understood. On the FRE side, Chris, just want to make sure I'm understanding the guidance correctly here. You talked about in your presentation last week of a $17 million overall FRE run rate as you exit 2025. Should I be expecting or should we be expecting sort of Q4 2025 FRE annualized to be $17 million, or is it more like Q1 2026 annualized?

Chris Govan, Chief Financial Officer, Onex: Yeah. No, not Q4 because it is a run rate calculation, so there's always a little bit of a lag effect. I would think you'd probably see us grow into that on an annualized basis, probably more in Q2 when the capital we raise between now and the end of the year is kind of fully online and fully fee-paying.

Chris, just so our shareholders understand, just to define run rate and what it actually means so people truly understand it.

Sure. In a lot of cases, when we raise capital and start earning management fees, there's just a lag associated with when the management fees actually kick in versus when the capital's allocated or invested. We are simply looking at our fees—excuse me—our FGAUM that's sort of in the house and in the ground and calculating what the management fees are on that capital sort of on a fully deployed basis. We also obviously just look at our expense base sort of as where we are at that point in time, given what we need to spend to manage the capital that we're calculating the fees on. It is a bit of a forward-looking calculation as opposed to backward-looking calculation.

Okay. Essentially, by Q2 2026 then, not Q4 2025, you're expecting to be delivering kind of a $4 million-plus FRE in the quarter?

That would make sense. Again, the run rate will, again, have probably grown from annualized 17 to something much better than that at the end of Q2. Yeah, I think in terms of actual reported in the period, that would be a pretty good estimate.

Okay. Understood. My last one, if I could, just fundraising on the credit side. I always find it a little bit confusing when you make reference to sort of extended AUM and new AUM. Could you give us a bit of an update on what was the sort of new AUM fundraising in the quarter and year-to-date on the credit side?

Sure. Let me just get that data pulled up for you.

Bobby Le Blanc, Chief Executive Officer, Onex: While he's looking for that, they're also having really good success on OSCO too, which is our structured credit fund, on tap, which is our dynamic credit fund. Again, the high yield and senior credit, the fundraising for credit's been pretty good across the board. Chris, go ahead if you have those answers.

Chris Govan, Chief Financial Officer, Onex: Yeah. So across credit through the end of Q3, new FGAUM raised was, call it, just over $5 billion in the year.

Great. That's it for me. Thank you.

Bobby Le Blanc, Chief Executive Officer, Onex: Thank you.

Conference Operator: Thank you. This does include the question-and-answer session of today's program. I'd like to hand the program back to Bobby Le Blanc for any further remarks.

Thank you for your time today. We are truly excited about the strategic steps we made last week with the acquisition of Convex and the new partnership with AIG. We look forward to having a dialogue with you in the coming months to answer any of your questions and make sure you fully understand exactly how we're thinking about Onex going forward, but we think it's a very exciting time. Have a great weekend, everybody. Thanks.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.