Thank you for standing by. My name is Jay, and I will be your conference operator today. At this time, I would like to welcome everyone to the Caliber First Quarter 2024 Earnings Call. All lines have been placed on you to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Lisa Fortuna of Investor Relations. You may begin.

Good afternoon, everyone. Welcome to Caliber's first quarter 2024 financial results conference call. With me today are Chris Loeffler, Chief Executive Officer and Co-Founder; and Jade Leung, Chief Financial Officer of Caliber. Please note that we have a quarterly earnings presentation, which will serve as a supplement to today's prepared remarks. You can access the presentation on the Investor Relations section of our website at www.caliberco.com. After management's commentary, we will open the call for questions. As a reminder, the information discussed today may include forward-looking statements that involve risks and uncertainties. Words like believe, expect and anticipate refer to our best estimates as of this call, and there can be no assurances that these will actually take place. So our actual figures could differ significantly from these statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports and filed with the Securities and Exchange Commission. It is now my pleasure to turn the call over to Chris. Please go ahead.

Thank you, Lisa, and thank you to everyone joining on the call today. Since we just reported our fourth quarter and full year results from 2023 a few weeks ago. I thought I'd keep my prepared remarks as brief as possible, providing an update on fundraising and transaction activity, our first quarter 2024 performance, the deconsolidation of six of our hotel assets, as well as our cost reduction initiatives that we spoke about in mid-April. The goal, of course, being to bring Caliber to profitability as soon as possible. Let me begin with some observations about the current fundraising environment. As I mentioned in our last call, we are stepping up our activities in fundraising and despite the ongoing muted conditions of refining in the market. We are focusing on things within our control to enhance our fundraising capabilities and move into new target areas. These include building products that are attractive to registered investment advisers and institutions, building and supporting our wholesale platform to raise capital through registered investment advisors and broker-dealers, formerly engaging with family office investors to grow our family office direct channel, issuing institutional equity offerings for the Caliber Hospitality Trust or CHT in both the equity and debt markets, directly engaging with new high net worth individuals and ultra-high net worth individuals via low-cost live and digital events and transforming our digital marketing platform with new talent and strategies to reduce our marketing costs while increasing lead generation. We're confident that a more diversified and fundraising infrastructure will support our long-term goals. Furthermore, we are now gaining improved visibility to increasing fundraising activity and pipeline levels. For example, in wholesale to date, we have signed 26 selling agreements with regional broker-dealers and registered investment advisers for investments in company-sponsored products. In total, these partners have…

Thank you, Chris. Good afternoon, everyone. We appreciate you joining us today. As we mentioned on our last call with the culmination of our work on CHT and the contribution of the first third-party hotel to the portfolio, we reassessed our consolidation conclusions and determined that we are no longer required to consolidate Caliber Hospitality LP and the underlying hotels beginning this quarter. We believe this simplifies our financial statements by removing most of the hotel performance that has historically been included in our consolidated results in accordance with GAAP. It will, however, make our comparative financial information less meaningful since the prior year results will still continue to include the historical performance of these hotel assets. So with that background, let's go through our results for the first quarter 2024. First quarter total consolidated revenue was $23 million, a decrease of 22.3% versus the same period a year ago, primarily due to a decrease in consolidated fund revenues, which was primarily due to the deconsolidation of Caliber Hospitality and a decrease in performance allocation revenue, which was earned related to the contribution of the hospitality assets to Caliber hospitality in March 2023. Consolidated expenses for the first quarter declined by 5.9% to $27.3 million due to a decrease in consolidated fund expenses, primarily driven by the deconsolidation of Caliber Hospitality again. Platform revenue decreased 25.6% to $4.7 million due to lower performance allocations. Breaking down our platform revenue a bit further. Fund management fees increased by 11% to $2.6 million and was related to the change in fee structure effective upon the contribution of the hospitality assets to Caliber Hospitality LP in March 2023. Fund management fees were based on 1% to 1.5% of the unreturned capital contributions in each hospitality fund. During the three months ended March 31,…

Thank you, Jade. Thank you all as well to the call participants. I appreciate you joining these calls and continue to engage with Caliber. A lot of you have given me some good feedback and giving the team good feedback, and we appreciate it. I've had a chance to reflect on our first year as a public company, which is coming up here in a few days. And I decided to distribute a shareholder letter that you can expect to see twice per year. Personally, I'd love to write and my goal in producing this letter is to help you follow our story and go a few layers deeper on some of the key topics that may not necessarily come up in an earnings call or in a short form presentation on Caliber. I realize that many of you lead busy lives, and I intend to structure this letter to help you stay with in touch with Caliber in an efficient manner. You can expect my first letter before the end of June and, of course, what we published, and I hope that you find the information impactful. In closing, I'd like to thank our employees for their dedication and commitment to the changes we have recently implemented, and our investors and partners for your continued interest and investment with Caliber. Thank you all, again, for your time today. We look forward to speaking and meeting with many of you in the near future. If you have any questions, we encourage you to reach out to our Investor Relations team at financial profiles. And with that, I think we can turn to questions.

Thank you. The floor is now open for questions. [Operator Instructions] Your first question comes from the line of Brendan McCarthy of Sidoti. Your line is open.

Hey. Good afternoon, guys. Thanks for taking my questions today. I just kind of wanted to start at the wholesale, the broker-dealer distribution agreements. I think you mentioned 26 selling agreements with broker-dealers that's up substantially from -- I think there was one at the end of the last -- the fourth quarter of 2023. I guess what kind of pace can investors expect with additional agreements in the future?

It's hard to – Hi Brendan, how are you? It's hard to …

Hey.

…predict pace a little bit. We're actually -- if you think about it as what we're doing in that space. We spent the better part of the first quarter, picking up these selling agreements. And now actually, our team is directing time and attention towards each of those firms that's agreed to distribute or feature our products to spend time with their actual reps. So as an example, if we pick up a selling agreement with a firm that has 40 reps, the next step is going to be going through training with all those reps and actually spending time on a one-by-one basis or, in some cases, small groups to make sure that they understand the offerings and the funds and the opportunities. And then they spend time with their clients, we get questions back and forth, and that starts to kind of build the actual pipeline of capital. So landing, selling agreements was a primary focus. As you said, we only had one back in December with the increase that we've had, we've been spending a lot of time with those groups and with those companies to get their reps ready to actually distribute the product and ultimately bring in capital. I anticipate -- I didn't anticipate, we were going to get as many selling agreements as quickly as we did. So our -- based on where we're at today, we're above what we expected in our pace. But I anticipate, we should be able to see those selling agreements continue to grow throughout the year.

Got it. Thanks Chris. That's helpful. As a follow-up question, I know historically, our fundraising has been weighted towards Q4. I think Q4 is typically the best quarter for fundraising. Considering new selling agreements as well as the growth of the wholesale channel, do you think that seasonality will shift at all or change?

Yeah. I think we've been focused a lot on fundraising seasonality, because the opportunities to invest the capital are available throughout the year. And so making sure that we can have relatively stable and growing fundraising results is very important to caliber. I think that what we will see is some of the seasonality in our retail channel will continue, because individual investors tend to make decisions after-tax time and then again for some reason after Thanksgiving. But on the wholesale side, these advisers are engaged with their clients consistently. They're consistently looking to do portfolio allocations, and we're expecting to see more normalized fundraising throughout the year. And then, of course, on the Institutional and the family office side, that's going to be a lumpier style of fundraising where we might get larger checks in a single shot like we got the $10 million commitment that we just announced. But as we build our name and reputation in the channel, hopefully, we'll see that build on itself as well.

Got it. And I appreciate the insight on the cost reduction initiatives. Just to clarify and apologies if I missed this, were those figures regarding the unconsolidated cost structure or the consolidated expense structure?

Yeah, that would have all been related to -- we call the platform cost structure or the unconsolidated cost structure to use the accounting term.

Got you. And then turning to the acquisition environment, I know last earnings call, you've talked in detail about distressed opportunities coming more into light. Are you still seeing a similar environment? Or has anything changed from the last discussion?

Yeah, it's only been a couple of weeks, so not much has changed.

Yeah, we're still seeing the same thing. We're still seeing real opportunities that we're underwriting at this point in time. Jade and I have recently had some interesting meetings with banks and financial institutions starting to see that they're seeing it and trying to work through their issues as well. And so at this point in time, I don't see the volume going down. I see it going up, and our primary focus is to be to make sure that the funds that we have recently opened half capital available for the opportunities.

Got it. And then last question for me. Just looking at the balance sheet, Caliber's balance sheet. Wondering if you could speak to the debt maturity profile and maybe how you plan to address upcoming maturities?

Sure. Sure. Jade, do you want to go through that, and I'll add anything if I can.

Sure. So we're in a constant state of monitoring of our debt. Obviously, we monitor both the debt of the – debt sitting on the platform as well as the debt that's sitting at our various assets. And I'll speak to them individually. So the debt at our -- in our platforms, we start working on those six to nine months out and really start to try to identify whether there's a path to renew and extend or whether we're looking to completely refinance and maybe even try to look at a possible cash out refinance. So those are ongoing constantly. And we work to really make sure that those decisions are aligned with how the asset strategy is. On the corporate side, we take a similar approach, but a lot of those programs are with individual investors. And so those tend to be more discussions that had one-on-one versus how they're done with the assets.

Yes. I'll just add on the corporate side. The debt for the corporate company or the unconsolidated business is roughly $50 million, $55 million, about $20 million of that it relates to debt related to the acquisition of our corporate headquarters, which is a combination of some unsecured notes and a CMBS loan we assumed when we acquired the headquarters building. The building was acquired in a relatively distressed purchase, because we had a right of first refusal to acquire the building if the seller decided to sell, and he'd accepted an offer to buy the building at what we thought was a favorable price that would actually reduce our overall cost structure over time. So in doing that, if you kind of tranche out that debt, the remaining $30 million in debt that we have is, as Jade mentioned, primarily unsecured debt, primarily from a bunch of individual investors who are also happen to be customers of caliber in many ways that have lent the company money, the company takes that capital and actually has used it to acquire or invest into the underlying funds and assets that we manage. And so the $30 million in unsecured debt can be traced to the roughly $46 million or so in a combination of investments that we've made into the assets and the funds that we own, intercompany receivables and other forms of receivables that are owed back to Caliber. And so we're using the capital to almost like a warehouse line to grow our funds and facilitate our business. To the extent that those individual investors indicate to us that they want to redeem their notes, we go through sort of a redemption process. And one of the first lines of defense is there is collecting receivables that were owed or selling off assets we're replacing the capital in an underlying fund with permanent capital. And so the company's goal or objective for that debt has been to reduce it over time. And then we, of course, see an opportunity to refinance with more of an institutional debt provider or credit provider, which does two things for us. One is it refinances the debt and extends the maturity out and two, is it recycles that capital back to our investors, and we hope that they would invest with us and other things. So there's kind of a double benefit there.

Got it. That's very helpful. Thanks, Chris. Thanks, Jade. That's all for me.

Sure.

With no further questions, that concludes our Q&A session. I'll now turn the conference back over to CEO, Chris Loeffler, for closing remarks.

Yes. I just wanted to reiterate the fact that pleased to keep an eye out for the shareholder letter that will come out, and stay engaged with us. We've had quite a few people that when they come to Scottsdale, they give us a heads up and it gives us an opportunity to meet in person. So please let us know, if you find yourself in town. And thank you very much.

This concludes today's conference call. You may now disconnect.