Earnings call transcript: Regions Financial sees stock uptick post-earnings

Regions Financial Corporation’s stock saw a modest rise in aftermarket trading, reflecting investor optimism following the company’s latest earnings call. The stock climbed 2.08% to $22.55 in the aftermarket session, despite a decline of 1.21% during regular trading hours. According to InvestingPro data, the stock’s RSI suggests oversold territory, while maintaining a strong 19.36% return over the past year. This movement comes as the company continues to navigate a challenging economic environment with strategic initiatives aimed at growth and sustainability.

Key Takeaways

• Regions Financial’s stock increased by 2.08% in aftermarket trading.
• The company is focusing on strategic growth, including potential M&A and asset rotation.
• Regions Financial is enhancing its international presence with senior hires in key regions.

Company Performance

Regions Financial Corporation has demonstrated resilience in a fluctuating market, with a strategic focus on expanding its asset management capabilities and enhancing its international footprint. With a market capitalization of $20 billion and a healthy dividend yield of 4.53%, the company has maintained dividend payments for 22 consecutive years, as highlighted by InvestingPro analysis. The company is leveraging its strong position in the European mid-market private equity space to drive growth, particularly in sectors like healthcare and tech-enabled services.

Financial Highlights

• Total assets under management (AUM) increased by 4% to 27 billion euros.
• Third-party AUM saw a 10% rise.
• Management fees grew by 7% to 389 million euros.
• Fund Raising Earnings (FRE) were up 11%, maintaining a margin within the target range of 35-40%.

Outlook & Guidance

Regions Financial remains optimistic about its future prospects, with expectations of continued fundraising momentum in 2025. Trading at a P/E ratio of 12.54 and currently fairly valued according to InvestingPro Fair Value analysis, the company is targeting a 20-25% asset rotation and considering potential mergers and acquisitions in strategic areas. With six analysts recently revising earnings estimates upward, the company plans a 50% increase in capital returns to shareholders, emphasizing its commitment to impact investing and sustainability. Discover more detailed insights and 8 additional ProTips by accessing the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

"We are building a leader in private markets with a clear and relevant positioning on European mid-market, growth, and impact," stated William, an executive at Regions Financial. Christophe added, "Our goal is first to be an attractive platform, to be an organically growing platform."

Risks and Challenges

• Economic Uncertainty: Macroeconomic pressures could impact investment strategies and growth.
• Market Competition: Increased competition in the private equity space may affect margins.
• Regulatory Changes: Potential changes in financial regulations could pose challenges to operations.

Regions Financial’s strategic initiatives and strong performance in key sectors position it well for future growth, supported by a solid Financial Health Score of 2.17 (FAIR) from InvestingPro analysis. However, the company must navigate economic uncertainties and competitive pressures to maintain its upward trajectory.

Full transcript - Regions Financial Corporation (RF) Q4 2024:

William, Executive (likely CEO), Eurazeo: year. Second, Christophe will focus on fundraising, commercial dynamic and asset rotation. Third and last, I will detail our financial results. We will then be available to take questions. 2024 marks the first year of execution of the midterm plan we have presented to investors back in November 2023.

We have made progress in the key pillars of the plan. First, asset management is growing dynamically. Fundraising is up 23 relative to 2023 at billion, which is above our guidance of billion. Fee paying AUM from third parties are up 12% and management fees from third parties are up 14%. So again, we continue to improve operational efficiency as our FRE margin gained 110 basis points to reach 35.5%.

We are already within our 35% to 40% medium term guidance. As a result, contribution from the asset management activity is up 20%. Third, asset rotation has picked up as we announced. Asset management exits volumes overall tripled and more specifically, balance sheet

Christophe, Executive (likely CFO), Eurazeo: realizations doubled to reach 17% of the prior year net asset value with an average upside of 10% compared to our last mark.

William, Executive (likely CEO), Eurazeo: Combined with a strict discipline in balance sheet allocation to the funds, as you can see in our numbers, This means that we are moving ahead towards transforming our business model. Fourth, our portfolio remains robust. We recorded another year of strong underlying performance of portfolio companies, which led to broad based value creation in 2024. This has been nevertheless offset by the write off of a limited number of legacy assets in buyout and further cleanup of the smaller lines in the growth equity portfolio. We should see an improving trend in balance sheet value creation going forward.

As announced during our Capital Markets Day, we are committed to increase return to our shareholders through dividends and share buybacks. This is consistent with our commitment made back in November 2023. In 2024, we increased our ordinary dividend by 10% to per share and significantly increased our share buyback program that has reached million. In 2025, we proposed another 10% increase in the ordinary dividend and we doubled today our share buyback program, which is set at million for the year. All in all, returns to shareholders will increase by 50% in 2025 relative to 2024 and will represent twice the amount we returned in 2023.

As you know, we follow a two pronged strategy in sustainability, I mean, at top rankings in sustainability and striving for leadership in impact investing. Euroseo continued to be recognized as best in class on sustainability maintaining top rankings in major benchmarks, MSCI ESG, UN PRI and Sustainalytics. In 2024, Euresio also strengthened its line of impact funds with the final closing of Euresio’s transition infrastructure fund, 40% above its initial targets The first closing of its fourth vintage in biotech at million and the launch of our eighth impact fund, Eurasio Planetary Boundaries Fund, ePBF in buyout. PBF had a first closing last week at million and closed its first deal in Biocontrol for Crops.

Christophe, Executive (likely CFO), Eurazeo: Thank you, William. I invite you now to focus on operational performance of our asset management. Starting with fundraising. As William mentioned, we raised €4,300,000,000 from clients in 2024, above our guidance of about billion. This represents another 23% increase year on year after a 21% increase in 2023.

So this strong performance is very encouraging given gradually improving, but still challenging environment for fundraising in 2024. No doubt, this highlights the quality of our franchises as well as the relevance of Euroseo’s positioning as a European mid market growth and impact focus investment firm. This is also broad based. Let me give you a few example of this. First, our private debt fund recorded high inflows, thanks to the attractive risk free wall profile for clients.

We have demonstrated this with already six successful vintages in direct lending. In 2024, we nearly doubled our inflows in this asset class with notably the successful first closing of our new direct lending flagship, EPD7 Euroseo Private Debt7. Second, in private equity, we announced the successful closing of the mid large buyout program at more than billion above expectation. This success is led by a new management team, and it underlined the quality of our franchise and the appeal of our mid market positioning in an otherwise complex market for Bayer. Still in PE, we have a good momentum in our GP led secondary programs, and we continue to raise funds in our venture digital program.

Finally, in real assets, our sustainable infrastructure fund, you remember, announced a final closing of €700,000,000 40 percent above its initial target of €500,000,000 which is remarkable for a first time fund and showcasing how impact can be a strong business driver. To start of 2025, we have announced this week a very encouraging first closing for our Impact Buyout Fund, EPBF, for million. A few words on our debt franchise, which now represents billion of AUM and is a major growth driver for the group of new vintage of direct lending, EPD7, was off to a good start in 2024 with billion of sur party money collected, attracting more international LPs, notably from Southeast Asia. What are the key pillars for Kiteel’s success? These key pillars for direct lending franchise are very clear.

First, the differentiating positioning on the lower mid market, which is a deep and attractive market with lower competition from banks and higher returns for investors. Second, it’s a true pan European footprint with an international team base in five key geographies, which is deploying across the entire European market. Third, last but not least, a strong and consistent track record over a long period of time with default rates close to zero. You will recall from our Capital Markets Day that we outlined our ambition to further expand our client franchise through the internationalization of our institutional LP base and through the development of our wealth channel in France

: and

Christophe, Executive (likely CFO), Eurazeo: abroad. Well, we made progress in both direction in 2024. We signed 31 new institutional clients in 2024 for a total of four forty institutional clients at the end of twenty twenty four. These new clients represented a third of Pure Azir’s annual fundraising. In two years, we doubled our inflows coming from international institutional LPs, which now represent more than 60% of our inflows compared to less than 40% a few years ago.

To support the extension of ORRICH, we’ve made senior appointments in our coverage team in key geographies such as The Nordics, The Middle East, the Dak Region and in Japan with the opening of an office in Tokyo. Our wealth solution front size is pretty unique in our industry, and it is the other key engine of fundraising with steady and growing flows. We collected more than million or more than 20% of our total fundraising from wealth in 2024. We now have more than billion coming from individual clients representing more than 19% of our third party AUM. This success is notably supported by our blockbuster Evergreen Fund, EPV3, which has more than billion in AUM, has won the award for the best mass affluent product at IPEM just last month.

EPV3 now ranks among the top three evergreen private market funds in Europe.

William, Executive (likely CEO), Eurazeo: But we

Christophe, Executive (likely CFO), Eurazeo: also have started to expand our wealth franchise outside of France with early success in key countries such as Belgium, where we already have significant flows. And we signed agreements with distributors in Italy, Switzerland and Germany. To serve this market, this international better, we are launching two new evergreen funds dedicated to international distributors in what we will call the prime line, a prime product focused on private credit, a prime product focused on private equity, mainly through secondary transaction. So these initiatives will enable Euroseo to accelerate in this very promising space. Turning now to 2025.

As you can see, we have a solid and diversified pipeline of fundraising, both on the institutional side as well as on the wealth segment. Our funds are at different stages. In flagships, we will benefit from the ongoing momentum in our direct lending and secondary program. We expect a first closing for EuroZUR in H1 and the launch of our fifth program in the lower end of mid market buyout, PME5, later this year. We have three Article nine funds, which should be launched as well.

We already talked about EPBF, which already has had a promising first closing. SME2 in shipping decarbonation financing and a second vintage in sustainable infrastructure. We also expect the launch of Euroseo operational real estate fund, EZORIM, and we will continue to raise in venture. On Wealth Solution, I already talked about the launch of two new emerging products and we are initiating another growth fund for Wealth investors. I’ve mentioned it before, you have perceived it’s an obsession of William and I share throughout Euroseum.

Expected performance is a key driver for fundraising the driver for fundraising. In this respect, our twenty twenty five fundraising pipeline is underpinned by strong ongoing performance of our strategies with all recent vintages, in particular showing top notch track record. We have a top quartile performance in direct lending with a best in class low default rate, again, close to zero. Our secondary strategy can boost more than 20% gross IRR on its last two vintages. In growth, we have a very solid start for Eurozone growth four with the current investment position in AI and deep tech performing well.

Our PME team, which focuses on the lower end of mid market buyout, has an excellent track record. Its latest vintage delivers a 33% gross ARR and a top decile DPI of 50%. Real estate team launching its first party its first third party fund, Esorim, can rely on a top quartile performance for its first two balance sheet vintages on all metrics, DPI, IRR and DPI. And finally, the first vintage of sustainable infrastructure. So, still very long as an IRR in excess of 15% and strong tailwinds.

So, let me now turn to deployments and realization. As you know, 2023 was a low tide for M and A across the board with fewer as they are faring better than the market overall. We were optimistic and we saw a gradual improvement in 2024 in the market. There are more people willing to trade and funding is available. This is particularly true for the mid market segment.

So we’ve had a sharp pickup in realization, which tripled year on year to reach billion. Again, this highlights Euroseo’s ability to monetize its assets and generate distribution for its clients across all strategies. As we can see, Euroseo’s exit were executed in good terms, which reflects against the quality of our investment strategies, translating in strong returns for clients and our balance sheet. On average, the transaction have been concluded with high cash and cash multiples and good IRRs with on average 2.3 times on buyout, four times intake and 1.6 times in hospitality. Deployment.

We continue to deploy capital actively in our preferred sector across all asset categories. In total, we deployed billion. It’s a 19% increase year on year. Deployments continue to be healthy in private debt in line with the success of fundraising. And we’ve continued to grab interesting opportunities with companies like Ares and Raidu in financial services, ImaOne and Ponte Rai in Healthcare, Equivadis, Mistral and Konygy in the tech and AI space.

And as we have mentioned, new investment in environmental solutions. Of note, we have historically high level of dry powder at billion. I will now hand over to William, who will present financial results.

William, Executive (likely CEO), Eurazeo: Thank you, Christophe. I will now take you through the financial results for 2024. Let me start with the asset management activity. As a reminder, we decided to exit non core GPs and sold our stake in Hone Capital in 2023 and our stake in MCH in 2024. So the figures that have been presented to you are pro form a of both GPs.

Overall, AUM growth and particularly fee paying AUM growth illustrate the dynamics of our asset management business. Total assets under management were up 4% in 2024, reaching billion with third party AUM up 10% and balance sheet related AUM down 7% as we execute our plan towards an asset lighter model. Fee paying AUM were up 8% at billion with third party fee paying AUM growing 12%. Recurring revenues from asset management posted solid growth. Management fees stood at million in 2024, up 7% from previous year on a comparable basis with third party management fees up 14 excluding catch up fees in line with our long term guidance and balance sheet management fees down 3% as we voluntary limit our new commitments.

FRE related earnings for 2024 are up strongly. 2024 FREs amounted to million, up 11%. FRE margin is up 110 basis points and reached 35.5% in 2024, which is already in the 35% to 40% range we announced during our Capital Market Day. We continue to benefit from a positive Duo effect while investing in our future growth. Christophe highlighted earlier senior hires to strengthen our senior client coverage in key geographies.

In addition, we also made some hires in specific investment teams, yet have remained very disciplined on costs overall. In a nutshell, the contribution of the asset management activity amounted to million in 2024, which is up 20% year on year. Asset recurring operating income is up strongly with IFRS up 11% at million. Performance fees are up thanks to a higher level of realizations. As our funds are maturing and we return more capital to LPs, performance fees from third parties are due to increase significantly in the next years to represent up to 10% of our third party revenues over the cycle.

This is what we said during the Capital Markets Days. Let’s now turn to the investment activity starting with portfolio value creation. The main driver of the P and L of the investment activity is indeed the portfolio change in fair value. As you can see, the net value of our portfolio was billion at the end of twenty twenty four, down 5%, with scope contributing minus million, minus 1% due to the completed exits combined with disciplined investments and the change in fair value contributing minus million or minus 4%. The per share value of the portfolio amounted to at the end of twenty twenty four, down 2% only given the positive offsetting impact of the execution of our share buyback program.

2024 value creation reflects two fundamental facts. First, solid value creation in buyout, private debt and real assets across the board for plus 9%, driven by strong performance across the portfolio of underlying assets and exists realized at a premium to net asset value, yet offset by the write down of a very limited number of legacy assets. Second, we continued to adjust valuations in gross equity. Let me stress again that value creation of any portfolio is not linear. There were significant marks ups in 2021 and 2022 and value creation of the portfolio remains 10% per annum over the last five years consistent with our ten year average.

Let me now run you through more details starting with operational performance of underlying assets. Overall, 2024 was another illustration of the quality of the underlying assets in spite of still mixed macro environment. Let’s start with buyout, which represent more than 60% of the total value of the portfolio, 61% in fact. Revenues and EBITDA were prospectively 927% in 2024. Second, companies in our growth portfolio, which represent roughly 21% of the total portfolio value posted an aggregated revenue growth of 14%.

Our top holdings like Doctor. Leap or back market continue to perform very strongly with revenues up 20% to 30% and are trending towards profitability. In addition, the five companies in our most recent vintage EGA4 that Christophe alluded to have a strong growth pattern above 50% revenue growth in 2024 and two out of five of these companies are already profitable, which reflects a new approach to investing in gross equity at our level. Third, in our real assets portfolio, we should account for 12% of your Resideo portfolio value. We recorded a strong year on year operational performance with an increase in EBITDA of 11% for our hospitality business.

This performance reflects the specificities of our exposure in real assets. We are talking about operational real estate and hospitality represents more than 50% of the total with a diversified geographic exposure. Let’s dive a little deeper into our buyout portfolio. Again, this represents 61% of the balance sheet, which is invested. This billion portfolio is very granular with 50 holdings and had an overall strong performance across the board in 2024, as you can see on the slide.

This performance is nevertheless largely offset by the write off of two legacy assets, which are WealthRite, a U. S. Based company specialized in students travels acquired in 2016 and Touride, a global player in sports equipment acquired in 2017. The two combined have an impact, a negative impact of million. We also adjusted down our brands U.

S. Portfolio for about million across three assets. This portfolio has had a mixed performance since its inception in 2019 and we are in the process of exiting from this non core strategy. Bar these three specific cases, value creation in the portfolio was a strong and broad based plus 9%. And let me stress again that our most recent vintages as Christophe mentioned have strong performance which is very encouraging looking forward.

EC5 in mid large had a 10% value creation in 2024. PME4 in lower mid market had a 39% value creation. And ES5 secondaries had a stunning 33% growth in value creation. Turning to growth equity. We made further adjustment in the growth equity portfolio, which is made of 33 investments and represent 21% of the on balance sheet portfolio value.

On our top three lines, which represent close to 60% of our portfolio, we made only marginal changes. We are talking about strong companies such as Doctolib, Back Market and ContentSquare. Overall, discount to last round of fundraising for this slide is about 27%. We have had a more drastic approach on our smaller legacy lines with an average 70% discount now on their latest round financing. They are the small margin only in our portfolio.

And some indeed present some upside potential in our view such as United, which is now well capitalized and operates in a more favorable environment for consumer credit. Despite significant adjustments in ’twenty three and ’twenty four made to this portfolio, let me remind everyone that we still sit as an LP, as a balance sheet on an average cash on cash multiple of 1.3 for the historical portfolio. In addition, we recorded a slight positive value creation in our most recent vintage, EGFO, reflecting the quality of the new investment made by our growth equity team, as I mentioned. Lastly, a word on real estate, which represents 16 lines and 12% of the value of the balance sheet portfolio. Real estate value creation is 1% in 2024.

We continue to have a strong performance in our operational real estate, mostly hotels. We adjusted down valuation in other real estate assets, particularly in the office segment. Value creation in sustainable infrastructure is strong with a 12% value creation recorded in 2024. Let me now comment on asset rotation pertaining to the balance sheet, which is a key driver, as you know, of the transformation of our business model towards an asset lighter business model. Realization doubled in 2024 at more than 1,000,000,000 compared to €500,000,000 in 2023.

As Christophe highlighted already, realization crystallized strong returns for the balance sheet as well as for LPs. For the balance sheet, it’s 2.3 times in buyout, 1.6 times in partial exits for hospitality. The aggregate upside to the net asset value we achieved in selling our portfolio was plus 10%. This is a best backtesting of how serious we are in valuing our portfolio and it highlights a strong long term track record in exiting in good conditions. Let me now turn to the percentage of asset rotation.

We had a 17% pace of asset rotation in 2024, ’14 percent, ’13 percent realized, 4% in addition linked to announced deals such as Abinja. Considering our rich pipeline of exits for the year, we expect to trend back towards our historical 20% to 25% of net asset value going forward, assuming the environment of course continues to improve gradually. Turning to the P and L of the investment activity overall, contribution of the investment company was a negative million in 2024 with the following main drivers: a non cash change in fair value of the portfolio for million, intercompany management fees and performance fees paid to the asset management amounted to million. They are as you know considered as a cost for the investment company. And steering costs were down slightly year on year, which reflects our strong commitment to tight cost management at all levels.

In a nutshell, at group level, net results group share for 2024 stood at minus million for the year. This reflects again a strong contribution from the asset management activity and a non cash negative contribution of the investment activity. To recap, we’ve made good progress towards our strategy goals in 2024, both on the growth and on the transformation pillars of our plan. We are building a leader in private markets with a clear and relevant positioning on European mid market, growth and impact. We are delivering steady earning growth, thanks to revenue growth and cost management.

And finally, we are increasing capital return to shareholders, which we doubled over two years. Thank you for your attention. We can now open the Q and A session.

Moderator/Operator: Thank you. We will take the first question from the line of Niklas Wesselieu from BNP Paribas.

Niklas Wesselieu, Analyst, BNP Paribas: I just had three questions, please. The first one would be on the portfolio returns for full year 2024. It seems like the earnings growth dynamics are pretty good, but still you still had compression of valuation multiples at some assets in H2, which is a bit in contrast to what we’ve seen at peers that have reported. So could you elaborate a bit more on what has driven those multiple compression in H2? And more particularly, could you elaborate a bit more on the world strides, what’s happening at that company that made you adjust your evaluation?

My second question would be on fundraising. It seems that you have a very busy pipeline for 2025. I would like to have a bit your thinking on the quantum of that fundraising. Do you think the pipeline underpins a continued progression in growth fundraising versus 2024?

Jern Wenkelen, Analyst, Degroof: And my third question,

Niklas Wesselieu, Analyst, BNP Paribas: a bit more specifically on that pipeline, it’s more some confirmations. But I understand the real estate strategy was used to be a portfolio strategy

Jern Wenkelen, Analyst, Degroof: on your balance sheet. How much could we expect for this one? Thank you very much.

William, Executive (likely CEO), Eurazeo: Thank you. I will take the first question and Christophe will comment on fundraising. Just maybe on the third question, we are in the process of launching the fundraising of our real estate front. And so at this stage, we haven’t communicated on the target. Earnings growth was effectively strong across buyouts and in fact across the board.

And it did not translate into value creation at the portfolio level for the reasons I’ve mentioned and you highlighted, which is that we benefited from this earning growth with relatively stable multiples across the board for most of the companies that we consider in the portfolio. Yet, we had again a few limited adjustments. Sticking to buyout, there are two assets I mentioned was tried to write and there are three much smaller assets within the brands portfolio. This is what we’re talking about in a portfolio of 50 assets. Wealthride is effectively the most significant.

So this is where we have adjusted significantly the Montipon. In fact, the operational performance is okay. It is disappointing relative to its initial business plan. This company has been affected significantly by the COVID, recovered thereafter, but not to the point that it has reached the business plan. And what it does translate into is not in per se an operational issue, it translated to a capital structure issue, because this company has been levered.

And as you would imagine at some point, you may be ending with a rather tense capital situation unless your earnings picked up. And this is where we are. As company has breached a number of its liquidity covenants, we are in the process of renegotiating the total capital structure. And it was only fair according to the IFRS 10 rules and the IPEV rules to consider that we needed to value this company for the risk that potentially we go into a distressed sales process. That’s why we did a $275,000,000 markdown, which explains the bulk of what we’ve done through the buyout.

So it’s really, and I said there was a legacy asset invested at the wrong time, but nobody could potentially foresee the COVID, which is faced with a capital structure issue and for which we have just markedly the multiples resulting in what I’ve said. Now there is a case where should we exit favorably from these negotiations, maybe there is a bit of value increase to be expected, but we are cautious people and we don’t want to bet on it.

Christophe, Executive (likely CFO), Eurazeo: Regarding fundraising, you will not be surprised with my the first part of our answer, which is to say, we don’t give guidance at the beginning of the year. But your question was more on do can we keep a good momentum on this? As we covered, when you look at 2025, we have robust and diversified solid pipeline of fundraising. It’s a good combination of flagships and semantic funds. And please keep in mind that the funds we are currently fundraising are benefiting from a very good track record, a very robust track record on latest vintages.

And we also benefit at Euroseo from the fact that we are running on two legs. The first one is that, yes, we continue to internationalize our institutional LP base. We gain market shares in specific regions and we have momentum to continue. And the second leg is that, yes, the wealth market is still under penetrated. And we have here again a good combination of blockbusters on one side with EPV3, who should be soon reaching €3,000,000,000.

And also some new products that will be better adapted with Luxembourg legal structure that will be better adapted to continue to accelerate the Europeanization’s internationalization of wealth distribution.

Niklas Wesselieu, Analyst, BNP Paribas: All right. Thank you very much.

Moderator/Operator: Thank you. We will take the next question from line Jern Wenkelen from Degroof. The line is open up. Please go ahead.

Jern Wenkelen, Analyst, Degroof: Yes. Good morning. A couple of questions. First, it was mentioned that brands was being divested. So does that mean that this strategy will not have a follow-up vintage going forward?

Similar question, I think, for Venture, I don’t see a Digital five in the pipeline. So will there be a next vintage for that one? And then on growth vintage number four, which is in the pipeline, what is the target size there? Thanks.

William, Executive (likely CEO), Eurazeo: Okay. I’ll take the first question and maybe Christophe will tell you about the venture and the growth fundraising. As we said, I think a couple of quarters ago, we consider that there is limited scope for successful fundraising on the back of The U. S. Brands, so called strategy.

Consumer is not exactly the topic of the day. As you see in our buyout, but also in infra, in debt, in second reason, we are firms that invest mostly in B2B sectors across the board, including in healthcare and environmental solutions on top of tech enabled services or specialty financial services as a case in point. So we refocused really the investment approach somewhat away from consumer. But on top of that, I mean, the investment we’ve made in The U. S.

On the strategy, which was very U. S. Focused, do not completely reflect our ambition to be more relevant to our clients in terms of value proposition. We want to be seen as a leading European investor, which in certain sectors where we are strong, of course, capacity to invest in The U. S.

Or Asia, but mostly we have European centric strategy. And lastly, there was a mixed performance. So what we had said is that portfolio, we want to protect its value for the balance sheet, for the balance sheet owners, for the shareholders. And so we have a team that is dedicated to managing the assets there and gradually exit from these assets.

Christophe, Executive (likely CFO), Eurazeo: Regarding tech as a whole, and you mentioned, yes, we are currently finalizing the fundraising of what is called Euroseo Digital Fund four. So we are close to €300,000,000 already raised. And please keep in mind that in this activity, we also it’s a total program because we also have dedicated mandates, for example, in fintech and insurtech that are also that you need to aggregate in our venture activity. And yes, we are preparing the first closing of EuroZio growth number four. First, we have a very good start due to the fact that the existing investments that are already made are showing very good performance as William mentioned.

But also, we are our goal is to reach robust first closing in H1. And based on that, we expect to reach some things that will be similar in terms of size of the previous fund, EuroZio, growth three, which was reaching which has reached €1,000,000,000. Keep in mind that regarding this the tech activities, investors really look at the quality and the disruption of innovation. You remember that there has been a strong wave in favor of digitalization. There has been a strong wave in favor of iPhoneization of business model.

So new wave we are currently facing is called AI. And so the ability of entrepreneurs today to capture very interesting business model, business models that are delivering value creation very fast is definitely what investors are looking for right now.

Moderator/Operator: We will take the next question from the line of Alexander Girat from EIC Market Solutions. The line is open now. Please go ahead.

: Good morning, Christophe. Good morning, William, and thank you for that presentation. Three quick questions on my side. So the first question is related to performance fees in 2025. So you said that exit should come back to 20%, twenty five % close to the historical average.

What does that mean for performance fees and from third party performance fees in particular? So that’s my first question. Second question, you said that you, of course, you reminded us that you exited a role in MCH recently. So what about IMGP, IMGlobal, which seems to be performing well? Can you comment on your willingness to retain 50% stake in that company?

And can you also remind us the valuation of that stake? And my last question is related to the ongoing industry consolidation, of course. Are there any corporate developments initiatives that you might be that you might take in 2025? And can you remind us also your financial flexibility to do these types of small, low term M and A? Thank you.

William, Executive (likely CEO), Eurazeo: Thank you. So, I’ll take those ones. First on performance fees, we should see an increase in the performance fees going forward given the strong pipeline of exits we have. But let me say that it is not exactly going in sync with the amount of assets sold in a given year because to recognize from an accounting standpoint, the performance fees from third party, you need to have funds which have reached a certain threshold, the threshold being distribution plus hurdle already paid to your LPs, to the third party LPs. So generally speaking, we are talking about crossing rule of thumb 1.3 times the cash on cash in a fund.

So if you take, for example, EC4, where we are in the process of completing the sale of Albinja, post this one will be at 1.1. So it will take probably one or two more assets so that we can recognize the full backlog of performance fees. Overall, given the volumes and given that pace of exits have accelerated in ’twenty four and should be sustained in ’twenty five, we should see another increase in third party performance fees, but maybe not to the extent that we reach already the midterm target. IMGP, very good asset, very good management, very good return for Eurezo. Eurezo did not acquire this company.

Eurezo accompanied the greenfield development of this company and it was a wise move made by the team and we continue to support the development of IMGP as you can see. We benefit from it. So for us, it’s very different from Rome and MCH. First of all, it’s we are controlling shareholder. Secondly, it performs very well.

And yes, you may debate whether this is absolutely core to private market. This is we’re not talking about private markets. We’re talking about high alpha asset management, generating asset management, but more on liquid underlyings, U. S, Europe, credit rates and equities. What we like about the AMGP, IMGP beyond its performance is the fact that it also gives an option for both the management of IMGP and for the management of Eurasio to think through what type of products may emerge at some point between combining some liquid and less liquid underlying particularly for the wealth segment.

So right now, I mean, there is a bit of it’s a bit of kick start of this type of discussions. It’s too early to say. At the end of the day, we’ll see how it develops, but we keep the two options of remaining a shareholder and developing MGP benefiting from it or potentially realizing that asset at some point if we are not convinced about the synergies, right now we are very happy. Valuation, I mean the best thing you can do is to take the metric and apply a multiple. We don’t give you the multiple.

You should apply to your ratio, FRE overall. But I think it’s fair to say that this is probably the best way. You have the pattern of growth in revenues. You have the pattern of growth in margin and FRE. So I think we give you the keys to value that asset, which and there are some benchmarks also in the industry of listed comparables for specifically this type of business models.

And I think your third question was more on M and A. First of all, you said bolt on. If we were to do M and A, let’s be clear, we will not go back to by minorities, unsignificant businesses that do not move the middle, but yet are associated with a lot of hassle and integration issues. And so if we do something, it would be material to at least one strategy of the group. As we said with Christophe many times, our plan is an organic plan, but we accept that the industry is now consolidating and that in the story of building a leading platform across mid market in Europe, maybe we could accelerate the pace at which we reach a certain scale in some strategies by acquisition.

So that’s the type of things that we’re evaluating with Christophe, with our Board and shareholders. But should there be anything imminent, of course, we would be talking about that rather than commenting it in general terms.

Christophe, Executive (likely CFO), Eurazeo: And maybe two additional comments here. The first one is that we have done it successfully in the past. I mentioned the fact that EuroZio PME five is promising. It is based initially on the acquisition of a fee private equity. And I can elaborate on that if you want, but obviously, you can perceive that the full integration of ID Invest inside Zuorazio is quite a success.

So again, we have done it, and we are integrating our acquisition now. And the second comment is that we mentioned it during the Capital Market Day. Our goal is first to be an attractive platform, to be an organically growing platform, and we are. So we don’t only rely on this idea of external growth to be successful. As William mentioned, it’s an acceleration.

It’s a complementary option.

: Okay. Thank you. But can you just maybe remind us your financial flexibility? How many how much money you can raise for that?

William, Executive (likely CEO), Eurazeo: That was part of the question. We have ample financial flexibility. If you look at the net debt at the end of twenty twenty four, we’re talking about a gearing ratio of 17%. So, you may look at it in different ways, but it is an implicit strong investment grade ratings. We’re not rated, but with that type of gearing, which is very reasonable, it gives us ample flexibility.

On top of it, let me remind you that our plan is to generate excess cap over through the period of 02/2027. We said billion, billion exists, billion reinvestment, billion is the excess cap of which priority is to distribute back 2,300,000,000.0 to shareholders. I mentioned earlier the increase in dividend as well as the share buyback program, but that leaves a buffer of cash we will be able to recycle through M and A should we find the appropriate targets. Again, financial flexibility wouldn’t be the problem. The question is more as Christophe highlighted, is there a platform that we are happy and confident we can integrate for a successful growth together?

: Yes. Thank you very much.

Moderator/Operator: Thank you. There’s no further question over the phone. I’ll hand it back over to your host for the web questions. Thank you.

Webcast Moderator: Hi. So I have a few questions from the webcast. Maybe first one for Christophe. What is the potential of the new funds that you are launching in wealth management? I guess, he’s talking about the prime line that we announced.

Christophe, Executive (likely CFO), Eurazeo: We our idea, again, is to replicate what has been the success of what we call the blockbuster today. So the idea is definitely that the mass market is requesting more and more evergreen vehicles. We serve very well the upper end of the wealth market, family offices that have institutional behaviors. We serve them very well with our current institutional product offering. But our idea is to cover an unpenetrated underpenetrated market, which is the mass affluent.

So wealth management, not really retail, but not people that are organized with huge family offices. This is what we are talking about. This market is requesting evergreen vehicles that are much easier to use. And so our ID with what we call the prime line, our current blockbuster is doing very well, but it has a French legal structure, As you know, to entirely cover the European market, the name of the game today is to have a Luxembourg structure. And so, yes, we are launching two prime product offering, one dedicated to private debt, one dedicated to private equity with a strong we will continue to have a strong component of secondary transaction in this.

So the idea is to replicate blockbusters. It takes time, but the idea is to replicate what is today still a relatively French blockbuster into a pure pan European ones.

Webcast Moderator: Great. Maybe one last question from the web. I have some more technical that we answer directly through the webcast. But I have a question here still on asset rotation. What makes you confident that you can grow your realizations in 2025?

And should we expect a comeback to your historical average of 20% to 25%?

Christophe, Executive (likely CFO), Eurazeo: We were very sorry, but we haven’t complete. But we were remember that last year, we were asked the same question and we mentioned the fact that we were quite optimistic based on a good pipeline. Today, we face a similar situation where we have today a good pipeline of potential exit. And again, and we’ll let William complete, but keep in mind that the core of our strategy is in the mid market buyout in Europe where you rely much less on the quality of the debt market, the quality of the financing, which is very true for the large cap component. So, we are very confident that this component of the market is very active.

William, Executive (likely CEO), Eurazeo: Well, listen, as I said, it’s based on the pipeline we have and what we observe. First of all, there are few things which will come to fruition most likely in H1, which we obviously not comment upon. There are also processes that have been launched in the past weeks. So we still have some visibility on these processes and then we have also that we intend to launch in the second half of the year based on the operational performance of the companies that I highlighted before, plus the fact that these dry powder generally availability of financing. Yes, we operate in an uncertain environment.

There are still a number of risk that we are mindful of. That’s why I mentioned also that it takes as a view that we continue to have a gradually improving environment, but clearly we have strong assets on the block. Let me remind you to your question on the 20%, twenty five %. To get to 13%, we need 1,000,000,000 program. And so we are reasonably confident we should break the 20% in 2025.

Again, absent a major systemic crisis, but I think we would have different discussions in that context.

Webcast Moderator: Great. Thank you. That’s it for the questions.

William, Executive (likely CEO), Eurazeo: Thank you very much to you all and have a good day.

Christophe, Executive (likely CFO), Eurazeo: Thank you. Bye bye.

Webcast Moderator: Thank you very much.

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