Alaris Equity Partners Income 6 25 Senior Unsecured Debentures T.AD.DB.A

RE:RE:RE:Q2 results - ??

[HermannHaller]

From national bank:

Alaris Equity Partners Income Trust

Q2/23 Results: Bullseye, in line, as expected, steady as she goes

AD.UN (TSX) STOCK RATING TARGET EST. TOTAL RETURN C$15.39 Outperform (Unchanged) C$23.00 (Unchanged) 58.3%

Solid quarter, no surprises in Q3 guidance

Q2/23 revenues were $36.9 million, just north of our $35.9 million call and below consensus of $38.1 million. EBITDA of $39.9 million came in well above our $30.3 million forecast primarily due to net unrealized gains on investments of $9.9 million. Though Alaris does not disclose it, we calculate an Adj. EBITDA of $31.6 million (85.9% margin), backing out net unrealized gains/losses among other items, in line with our $31.1 million estimate (86.6%) and the Street's $31.7 million (83.1%). For the same reasons as the outperformance on the EBITDA line, EPU of $0.61 (NBF: $0.43; Street: $0.43) was materially above expectations. CFO ex-working capital of $28.3 million was in line with our call for $29.0 million.

Q3/23 guidance calls for ~$37.6 million in revenue Run-rate revenue of $157.3 million is expected over the next twelve months, with a payout ratio of 65-70% (NBF: 66%). This includes ~$5.7 million common dividends, an additional US$2.4 million of deferred PFGP distributions, and the return of LMS to a regular distribution schedule in Q3. We also note a $1 million decrease in run-rate G&A to $15.5 million due to the settlement of the Sandbox litigation (see our Q1/23 note). We account for such changes, adding LMS distributions to Q3e while trimming one quarter of catch-up payments out of 2024e as we had previously assumed Q3/23 distributions would be deferred.