Have a $20.00 target. GLTA
A Relatively Uneventful Q2 Print Our Conclusion
Alaris reported what we interpreted to be a fairly straightforward quarter.
Revenue was a little better than expected, but this was largely driven by a
subsequent follow-on investment and favourable FX tailwinds. Portfolio
company performance appeared to be very stable in the quarter, and there
was nothing particularly chunky announced from an investment/redemption
standpoint (with the exception of a very minor redemption from Stride).
Guidance for Q3 revenue could prove conservative, but that will ultimately
depend on the timing of when Fleet elects to pay its common share dividend.
Key Points
Revenue was a bit better than expected. Alaris reported revenue of $42.1
million, which was above prior guidance at $39.3 million. Management
attributed the variance to the Shipyard investment (that occurred subsequent
to quarter-end) as well as a stronger U.S. dollar. For Q3/24, the company
expects total revenue from its Partners of $38.7 million (which could be
conservative, in our view, if Fleet ends up paying a common share dividend
in the period).
G&A increased slightly in the quarter. G&A came in at $4.7 million, which
was a bit above the previously communicated annual run-rate of $16.5
million. However, the G&A line item doesn’t necessarily travel in a linear
fashion, and the YTD total looks closer to the annualized run-rate.
Weighted average ECR was stable. The weighted average ECR remained
at 1.5x in Q2, which was unchanged sequentially. Quite unusually, there was
also no movement between bands for any of the private company partners in
the quarter.
One minor redemption was announced. On July 31, 2024, Stride
redeemed all of its outstanding preferred units for gross proceeds of US$4.1
million. Stride only represented 1% of run-rate distributions so the impact is
fairly trivial.
Payout ratio remains unchanged. Alaris did not announce any other
material investments or redemptions with Q2 reporting. The run-rate payout
ratio remains unchanged at 65% to 70%. This comfortably supports a healthy
dividend yield of 8.4%.
Estimate revisions were fairly minor. Our 2025 EPS estimate increases
8%, but this largely reflected a reset on the diluted share count which
declined by a commensurate magnitude Q/Q. Our fundamental view on the
earnings power of the broader entity has not changed at all (aside from a
very minor impact from the Stride redemption)