Apax Global Alpha Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
March 4, 2025

Key Takeaways

  • At 31 December 2024, AGA’s NAV stood at €1.23 billion (€2.51 per share) with a total NAV return per share of 0.8% in euros (–3% constant currency), and it returned €64 million in dividends plus €5 million in buybacks, equating to a 7.8% dividend yield.
  • The tech, services and internet consumer sectors all contributed positively to NAV growth, but drag from remaining retail and healthcare investments (notably the VIA writedown) and underperforming residual IPO holdings held back overall performance.
  • Investment activity picked up in the Apex 11 fund—AGA’s $700 million commitment is now 40% invested across 10 deals—while nine realizations in 2024 delivered an average gross MOIC of 2.6× (ex-VIA), and the post-period take-private of Paycor is expected to achieve a 3.3× MOIC.
  • AGA has sharpened its focus on core sectors, ceasing new healthcare and retail investments, and its debt portfolio generated a 7.5% total return in 2024; going forward AGA will no longer invest in debt of its private equity fund companies.
  • A new capital allocation framework fixes a semi-annual dividend of 11 pence per share and allocates €30 million to share buybacks, enabling AGA to return €69 million to shareholders in 2024 through dividends and repurchases.
AI Generated. May Contain Errors.
Earnings Conference Call
Apax Global Alpha Q4 2024
00:00 / 00:00

Transcript Sections

Skip to Participants
Operator

Good morning, ladies and gentlemen, and welcome to Apax Global Alpha 2024 full year results. At this time, all participants are in listen-only mode, and the team will answer the questions at the end of the call. If you wish to ask a question, please submit them via the Q&A box, which can be found at the bottom of the screen by clicking on the Q&A. Questions can be submitted at any time during the webinar. Please note you'll be unable to submit a question through the Q&A box if you've dialed in using a mobile or landline, but you can send questions via email to investor.relations@apaxglobalalpha.com. Questions will follow after the presentation. I would like to remind all participants that this call is being recorded. I will now hand over to Ralf Gruss to start the presentation.

Ralf Gruss
Partner at Apax

Thank you. Hello and good morning, everyone. Thanks for joining Apax Global Alpha's 2024 full year results presentation. My name is Ralf Gruss. I'm a partner at Apax and a member of AGA's Investment Committee. With me today is Salim Nathoo. Salim is also a member of AGA's Investment Committee, as well as a member of the investment committees of the Global Buyout funds, the Apax Digital Fund, and Apax Global Impact. I hope to give you an overview of AGA's portfolio and the performance in the year ending 31st December 2024. Salim will then cover the private equity portfolio in more detail before we open up for questions. At 31st December 2024, AGA's NAV was about EUR 1.23 billion, which translates to EUR 2.51 or GBP 2.08 per share.

Ralf Gruss
Partner at Apax

Total NAV return per share for the year was 0.8%, which is clearly disappointing, and I will discuss the key drivers of this over the next few pages. In the year, AGA returned EUR 69 million to investors via dividends and buybacks. The dividends paid in the year equate to a dividend yield of 7.8% against the 31 December 2024 share price. Turning to the next page, as I mentioned, total NAV return per share was broadly flat at 0.8% in euro terms, or negative 3% on a constant currency basis. Importantly, the three core Apax sectors of tech, services, and internet consumer all contributed positively to NAV growth, albeit consumer and cyclically exposed portfolio companies experienced some slowdown during the year.

Ralf Gruss
Partner at Apax

The main driver of the subdued performance in 2024, however, were challenges in the remaining retail and healthcare investments, in particular the write-down of Via across both the private equity and net portfolios. Having said that, we believe that the issues that have impacted performance in the last three years now appear in the rearview mirror, and I will speak more about this over the next few pages. With regards to investment activity, there has been a pickup in both investment and exit activity at the Apax funds. The Apax XI Fund, to which AGA has a commitment of approximately $700 million, has signed a total of 10 investments to the end of 2024. A new investment in CohnReznick announced just last week, bringing Apax XI to 40% invested and committed to the 11 investments.

Ralf Gruss
Partner at Apax

Similarly, there has also been an increased pace of realizations in the portfolio, with a total of nine realizations signed in a year, delivering an average gross money of invested capital of 2.6 times when excluding the write-down of Via. Post-period end, the take private of Paycor was announced at a 69% uplift to the last announced fair value of 30 September 2024. At transaction close, this deal is expected to deliver a gross money of invested capital of 3.3 times. Back to my comment on the portfolio experiencing challenges in recent years. This bridge shows the key drivers of NAV movement over the last three years since December 2021. Performance in the last three years has been impacted by two key effects.

Ralf Gruss
Partner at Apax

The first and main effect is the drag from the listed holdings in the private equity portfolio, which are largely residual holdings from companies that were IPO'd in 2020 and 2021. We have discussed the impact from these listed holdings through 2024, but as a reminder, the Apax funds choose to exit a number of deals, in particular in tech, during 2020 and 2021 through IPOs to take advantage of the very high valuations available in public markets at the time. These listed investments have together created a lot of value for AGA to date, returning more than three times gross cost. However, they were a material part of the portfolio and underperformed following their respective IPOs, causing a material drag on performance, as you can see from this chart.

Ralf Gruss
Partner at Apax

The second effect and key drag on performance has been the remaining retail and healthcare investments within the portfolio, and particularly Via. Again, as a reminder on Via, following materially deteriorating trading at the company, Via filed for Chapter 11 in 2024 and has been completely written off in the private equity portfolio with the remaining debt positions sold. The effect of these two key issues in the portfolio were offset by positive contributions from the core private equity sector and debt investments. AGA also returned significant amounts of cash to shareholders through regular dividends. You can see the impact on this on NAV on the right-hand side of the chart. The key message we want to convey here is that these challenges now appear in the rearview mirror.

Ralf Gruss
Partner at Apax

The listed private equity positions in the portfolio have been actively reduced with full exits of Genius Sports, the Baltic Classifieds Group and GTCR, the tech private of Thoughtworks by the Apax funds, and the post-period end tech private of Paycor by Paychex. Pro forma for Paycor, remaining listed holdings in the portfolio now only represent 2% of AGA's NAV. To put this in perspective, this is down from approximately 25% at the peak, so you should expect less of a headwind from these listed positions going forward. Now, also at Apax, we have recently decided to no longer have a dedicated team focused on healthcare. The decision was driven by our view that fewer opportunities suited the hidden gems strategy and the opportunities in this sector. The funds also have long stopped making retail investments, with the last retail investment made in 2017.

Ralf Gruss
Partner at Apax

Now combined, the remaining healthcare and retail investments represent 8% of year-end NAV, and the most recent Apax Global Buyout Fund has no investments in the healthcare sector. Turning now specifically to the 2024 bridge. The core sectors of tech, services, and internet consumer were positive contributors to NAV, as I've already mentioned. However, we've seen some slowdown in consumer-exposed businesses and those exposed to cyclical headwinds, for example, companies such as Thoughtworks, Toi Toi Dixi, and Infogain. As I discussed on the prior page, the key drag on performance were the remaining healthcare and retail investments, again, in particular Via, which, as you can see, the effect here on the middle of the chart. The Via bucket includes the effect on both the private equity and the debt portfolios. Let me now hand over to Salim to discuss why we are optimistic for the future.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Thank you, Ralf. Before I actually dive into the AGA portfolio, I briefly wanted to touch on the market backdrop. 2024 has marked the establishment of a new normal, a landscape characterized by higher interest rates, sluggish growth, and heightened geopolitical tension. The investing landscape has changed. With slower growth and a higher cost of capital, the skills needed to generate returns are fundamentally different. The days of low interest rates and easy gains, where firms could succeed just by buying high and selling higher, are behind us. Now the real value comes from operational transformation. To stand out, investors need to uncover opportunities for long-term growth by improving the businesses they invest in. That takes experience, the right mindset, and a refined skill set, things that just aren't built overnight.

Salim Nathoo
Partner and Member of Investment Committee at Apax

That is why we fundamentally believe the Apax funds' hidden gems approach is uniquely positioned to deliver strong, scalable returns, even in uncertain times, with a specialized skill set to execute on operational transformations. Now, after a quieter period for private equity in 2024, private equity 2024 marked a comeback in transaction value. While these are still below the highs of the pandemic years, momentum has been building. Taking a step back, during the active markets experienced in 2020 to 2022, the Apax funds were net sellers and distributors of capital, maintaining a disciplined approach and avoiding the rush to deploy capital at peak valuations while selling investments when valuations were high. As you can see from the chart on the left, the private equity market as a whole showed significant net drawdowns during the period, investing significantly more than was distributed at peak valuations.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Looking ahead to 2025, dealmaking is expected to maintain the momentum we have seen, as there is a record level of deployable capital and an increasing need for liquidity events demanded by investors. While sponsors are showing increasing willingness to transact at current valuations, there are still many cases of valuation gaps between buyers and sellers, and geopolitical trade, inflationary, and macro uncertainties may continue to weigh on market activity. In the last couple of years, the Apax fund's portfolio companies, with the help of the operational excellence team, have been investing in the foundations of their next stage of profitable growth, with their number of proof points already evident. As a result of this, the pipeline of ready-to-exit companies has been steadily rebuilding. As the portfolio continues to mature, we anticipate continued exit activity driven by interest from both strategic and financial investors.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Furthermore, we believe that alongside a disciplined approach to deploying capital, the Apax hidden gem strategy is well suited to identify attractive investments in this more uncertain environment. Now, on this next slide, I wanted to talk a bit further about the latest generation of the Apax Global Buyout Fund, Apax XI, which closed in January 2024. AGA has made a $700 million commitment to Apax XI, and the underlying portfolio investments will therefore be a key driver of AGA net asset value performance. It is worth noting that most of these companies fall under AGA's top 30 look-through holdings. To put that in perspective numerically, the chart on the left-hand side shows that the Apax XI portfolio companies represent 21% of NAV at the end of December 2024.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Note that this figure includes the current value of Apax XI portfolio companies plus the expected calls for Apax XI in the next 12 months. This has grown significantly from when AGA made its commitment in 2022, and at this stage, Apax XI is only 37% invested and committed to the 10 portfolio companies you see in the middle of the page, meaning that the percentage of NAV that the fund will represent will only increase as new investments are made. The top 10 portfolio companies of Apax XI all operate within the three core sectors and are executed within the hidden gems investment strategy framework, leveraging Apax's subsector expertise and offering operational transformation capabilities. These investments were executed at about a 20% discount to peers on average, and as part of their investment thesis, are showing potential for accretive M&A, with several already having initiated their M&A strategies.

Salim Nathoo
Partner and Member of Investment Committee at Apax

For example, Zellis, Palex, and OTS Finwave, which have already completed or signed transformational acquisitions since the initial investment from the Apax funds. I'm pleased to report these investments are off to a good start, having showed good momentum in 2024, with average revenue growth of 15% and EBITDA growth of 14%. Despite an average holding period of only eight months at December 2024, the investments are on average marked at 1.3 times gross money multiple. Let me now turn to AGA's overall portfolio, which is invested on the next page. At the 31st of December 2024, private equity investments represented 83% of AGA's invested portfolio, providing shareholders with exposures to around 80 companies. The investment in AGA's private equity portfolio has been made over a number of years as the private equity funds are deployed prudently, with new investments being made over three to four years per fund.

Salim Nathoo
Partner and Member of Investment Committee at Apax

This provides for vintage year diversification and has helped overexposure in recent years to historically high multiples during the pandemic years. The pie chart on the left shows the structure of the portfolio, calling out the 10 largest companies in the private equity portfolio, and the names you can see fall primarily in the tech and services sectors. Combined with the internet consumer sector, the core Apax sectors represent 95% of AGA's private equity portfolio. Capital not currently invested in private equity has primarily been invested in debt instruments, which provide capital flexibility and balance sheet robustness. Continuing with the topic of the portfolio, on page 11, you can see the operating metrics for the private equity portfolio. These numbers represent the last 12 months and are compared to December 2023.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Over the past 12 months, average revenue growth and EBITDA growth across the private equity portfolio, whilst robust, have decelerated. As Ralf discussed, this has primarily been driven by the remaining healthcare and retail investments and a slowdown seen by consumer-exposed businesses and companies exposed to cyclical headwinds, such as Toi Toi, Dixi, which is exposed to the German construction cycle, and some of our tech services companies, such as Infogain and Thoughtworks, which, while they showed year-over-year revenue deceleration, did demonstrate stability on a quarter-on-quarter basis in 2024. Valuation multiples have increased over the year against a backdrop of increasing public and private equity comps going from an average of 16.6 times enterprise value to EBITDA to 17.8 times at the end of the year.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Leverage levels across the portfolio remained at lower levels compared to the wider industry, with the average across AGA's private equity portfolio of four and a half times net debt to EBITDA. All in all, despite the slight deceleration you see on the page, the portfolio continues to demonstrate steady revenue and earnings growth. Moving now to the next slide to take a closer look at AGA's look-through exposures. Here you can see the top five portfolio companies in AGA's private equity portfolio, starting on the left with PIB Group. As a reminder, this is a highly diversified insurance distributor consolidator operating primarily across the U.K., with a presence in Europe. PIB is a solid business in a subsector the Apax funds knew well. The industry is highly attractive due to its recession-resilient and non-discretionary characteristics, and PIB is well diversified across business lines and geographies.

Salim Nathoo
Partner and Member of Investment Committee at Apax

The Apax funds identified this as an opportunity to execute a buy-and-build strategy in Europe, as we had successfully done with our US insurance broker investments, HUB and AssuredPartners. The investment continues to trend well, with organic revenue growth ahead of plan, despite the macro and geopolitical headwinds in 2024. The second largest holding in the AGA PA portfolio is the combination of Alchemist and Veriforce. Let me remind you of what these businesses are. Veriforce is a global provider of supply chain risk management solutions, or SCRM, serving a multitude of end markets with hubs in the United States, Canada, and the U.K. Alchemist is headquartered in the U.K., with a strong presence in Canada and is similar to Veriforce in that it provides a suite of SCRM solutions.

Salim Nathoo
Partner and Member of Investment Committee at Apax

These businesses fall within an attractive industry with significant growth driven by increasingly complex regulatory pressures and more demanding commercial requirements, and are highly sticky with recurring revenue characteristics. Over the coming months, these two companies will begin to integrate and will provide an update in due course. Turning now to Thoughtworks, which is an old friend. Thoughtworks is a global technology consultancy that integrates strategy, design, and engineering to drive digital innovation. It's where a Fortune 2000 company would go to build a complex application or transformation or technology such as artificial intelligence. It's a familiar name, which the Apax IX fund invested in in 2017. Thoughtworks was IPO'd in 2021 at a very attractive valuation, with Apax IX receiving three times invested cost in proceeds on or before the IPO and remaining the majority shareholder in Thoughtworks following the IPO.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Now, as you saw on the bridge that Ralf talked through earlier, the share price fell dramatically over the last three years. In August, the Apax XI fund reached an agreement to purchase all the outstanding shares in the company and take it private, with Apax IX, together with related co-investors, rolling its majority stake in the company. The 4% NAV figure you see on the bottom of the page relates to AGA's combined look-through from both the Apax IX and Apax XI fund. As an update on the company, Thoughtworks was negatively impacted by post-COVID shifts in IT spending from big corporates and pricing pressures. However, its reputation amongst customers and employees remains very high for technical innovation, and we believe technology and innovation such as artificial intelligence should provide long-term tailwinds.

Salim Nathoo
Partner and Member of Investment Committee at Apax

We believe there is now an opportunity to accelerate deep transformation and operational improvements that can only be done in a private setting. Whilst revenue and EBITDA declined year over year in 2024, revenues stabilized in 2024 on a quarter-on-quarter basis, with the second half of the year EBITDA growing on a year-over-year basis. Turning now to AssuredPartners, this is a mid-market property casualty and employee benefits insurance brokerage. Towards the end of 2024, Apax IX announced the full sale of its minority co-controlled stake in Assured to a strategic buyer, Arthur J. Gallagher & Co. The funds first invested in Assured in 2015 through a majority capital recapitalization led by Apax VIII. Following the exit of Apax VIII's investment in AssuredPartners, Apax IX, alongside an investor group led by GTCR, another private equity firm, acquired a significant minority co-controlled stake in the company in February 2019.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Over the course of nine years, the Apax funds have supported Assured's growth into a national leader in insurance brokerage in the United States. During the fund's ownership, AssuredPartners expanded rapidly, completing 400 acquisitions as it implemented its strategic M&A program and scaling its higher-growth specialty segment through the acquisition of Keenan & Associates. The Apax funds bolstered its organic growth and profitability by investing in operational improvements, including technology, salesforce, and infrastructure capabilities. While the signed exit is expected to deliver an attractive gross money multiple of 2.7 times, making it a very successful deal for the funds, it was sold at a 10% discount to the last unaffected valuation. That is unlike our other material exits in 2024, Healthium and idealista, which were sold at premiums, and indeed Paycor, which was sold after period end at a material premium to the 31 December net asset value.

Salim Nathoo
Partner and Member of Investment Committee at Apax

AssuredPartners is the largest company in the Apax funds portfolio in terms of enterprise value, and so is not typical. For assets of this size, there are two main exit routes: IPO and strategic sale. While the IPO route would have probably delivered a more premium valuation, hence why it was marked where it was pre-disale, post-IPO, the valuation of the remaining stake would have been subject to future share price volatility and external market dynamics, and it would have taken significantly longer to fully exit the investment. As a result, the Apax funds, alongside GTCR, our co-investors, decided to take the full exit, which in summary still represents a very successful deal for AGA. Finally, moving to Zellis Group, which is another good example of the Apax hidden gems approach leading to a transformative add-on acquisition early on in the company's growth journey.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Now, for those of you who are less familiar with the company, this is an Apax XI investment that is signed in April 2024. Zellis is one of the leading providers of payroll and HR software solutions to customers in the U.K. and Ireland, which are highly sticky. It is also an emerging leader in the global benefits administration software market. During the due diligence phase preceding the investment in Zellis, the deal team recognized the potential opportunity for a transformational day-one acquisition of Benify. Benify is an employee benefits software provider in the Nordics and was identified as an opportunity to rapidly enhance the company's existing benefits business and establish the company as a key player in the global fragmented and expanding market for benefits administration software.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Together, Zellis Group's existing benefits business and Benify will create a real leader in global benefits, rewards, recognition, and employee engagement software with an enhanced value proposition to customers globally. The two businesses are highly complementary, and this acquisition creates a truly global solution, which will allow customers to benefit from a deeper suite of platform integrations across HR, payroll, and benefits. Within these top five holdings of AGA, you're seeing the benefits of diversification, some of these being relatively early in the investment life cycle, whilst others are closer to exit, having had time for the Apax funds to execute on the respective value creation plans. Let me now move to the next page to give you an update on investment activity. This page shows the new investments in 2024.

Salim Nathoo
Partner and Member of Investment Committee at Apax

AGA expects to deploy a total of EUR 166 million, which includes investments closed in the period, together with an investment in Smith & Williamson, which is expected to close in the first half of 2025. Apax XI made six new investments in the year. The first was WGSN, a leading consumer trend forecasting company, which was a carve-out from the publicly quoted Essential. APAX has a long history with WGSN's parent company, Essential, where earlier funds acquired the business in 2008 as part of the acquisition of EMAP PLC. Working closely with our operational excellence team, the internet consumer team intends to leverage several organic growth initiatives, including improved product packaging and pricing strategies to grow the business. There's also an opportunity to expand into new products and new verticals through M&A.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Apax XI also invested in Altus Fire and Safety, a leading provider of regulation and mandated fire and safety services in the northeastern region of the United States. The transaction draws on the fund's experience in the services subsector of density-based business models. Other investments in that area include Safety-Kleen, which, as a reminder, is Europe's largest service provider for parts washers, and SavATree, a lawn and tree care company in the United States. For Altus, the investment thesis is to support the company through its growth journey by investing in sales and marketing, increasing the recurring revenue mix, and capitalizing on the highly fragmented fire and safety market through M&A, trying to build a national champion. I spoke about Zellis, Thoughtworks, and Veriforce on the prior page, so I won't go into much more detail here.

Salim Nathoo
Partner and Member of Investment Committee at Apax

As Ralf mentioned earlier, and not on this page, Apax XI announced its 11th investment in CohnReznick last week, in which AGA is expected to invest EUR 35 million on a look-through basis. In case you haven't seen the press release, CohnReznick is one of the leading advisory, assurance, and tax firms in the United States. Sitting with the mid-market, CohnReznick serves companies in a range of industries with a particular focus on real estate. The transaction draws on the Apax funds' experiences in the service sectors with investments such as Smith & Williamson, PIB Group, and the exited AssuredPartners. The thesis is to build a business where there is a mission-critical need and strong market position in certain niches, improve operations, and execute M&A, which is much easier to do with a PE-backed company as opposed to sitting in a partnership structure.

Salim Nathoo
Partner and Member of Investment Committee at Apax

The final three investments on the page were for the Apax Global Impact Fund and for Apax Digital Fund II. The Apax Global Impact Fund acquired a controlling stake in Integrated Environmental Solutions, IES, an energy simulation software provider with significant opportunity to scale globally, helping to decarbonize through reducing carbon emissions in buildings. The Apax Digital Fund II agreed to acquire IONS, a provider of tech-enabled research and advisory services to the cybersecurity industry, and also Great HR, a leading full-suite human resources management and software platform in India. Signed, but not yet closed, is the acquisition of professional services business of Evelyn Partners, which, upon completion, will be rebranded Smith & Williamson. I will go into this into more detail on the next slide. As I mentioned, towards the end of the year, the Apax funds announced the acquisition of the accountancy and advisory practice of Evelyn Partners.

Salim Nathoo
Partner and Member of Investment Committee at Apax

The carve-out transaction will create the leading standalone U.K. mid-market accountancy business, which, upon completion, will be rebranded Smith & Williamson, building on the heritage of the brand, which some of you will recognize and actually dates back to 1881. Evelyn Partners' accountancy and advisory practice, which is based in London and serves clients across the U.K., offers a range of accountancy services, including audit and business outsourcing, business tax, private client tax, and advisory. The investment thesis is to support the newly branded Smith & Williamson on its growth journey, cementing its place as a leader in the mid-market space in the U.K. Being an independent company with a management team fully incentivized and with capital for M&A, this should really unlock the potential.

Salim Nathoo
Partner and Member of Investment Committee at Apax

The Apax funds, in partnership with our operational excellence team, will help the business unlock multiple value creation levers, including optimizing go-to-market strategies and driving cross-sell, accelerating talent hire, investing in technology to fuel revenue growth and aiming to enhance margins, and expanding into new service lines to meet client needs. Finally, pursuing strategic M&A in a very fragmented market. We have tracked the accountancy advisory space for several years on both sides of the Atlantic, developing a solid understanding of the market and its various players. Also worth noting, the OEP carve-out experience, which will help to de-risk the carve-out plan from Evelyn Partners, having executed 36 carve-outs in the last 10 years, including three alone in Apax XI. Turning now to realizations, where we've also seen increased activity in 2024, particularly in the second half, as the stock of ready-to-exit companies has steadily been rebuilt.

Salim Nathoo
Partner and Member of Investment Committee at Apax

To put the size of these realizations into perspective for AGA, you can see the bottom row for each deal indicates AGA's look-through investment amount, as well as the gross proceeds received or expected to be received. We have discussed many of these already, including the listed sell-downs and subsequent full exits, so I just wanted to focus on some of the larger exits in the year. In September 2024, Apax IX closed its exit of Healthium, delivering a gross MOIC of 3.4 times for AGA. Apax IX acquired Healthium in 2018, and over the course of the investment, drove substantial transformation at the company from a domestic Indian player into a global med tech leader. At entry, Healthium traded at a discount of over 20% of the comp set compared to a 20% premium at exit.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Again, Healthium is another great example of a truly hidden gem and showcases the Apax strategy in motion. Realizations in Apax X for AffiniPay and idealista also closed in the second half of the year. AffiniPay was a software carve-out where the funds retained a minority stake when the business was sold to a financial sponsor. The stake has now been realized, leading to a very attractive return on the overall deal of 4.1 times cost. The gross multiple of 2 times you see here for idealista is for the second investment made in the company via Apax X. Those of you that have followed the interim results will remember that the Apax funds had previously made a successful investment in the company back in 2015, which realized 5.3 times for the funds.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Overall, a good uptake in realization activity in the second half of the year, and with the portfolio continuing to mature with the pipeline of ready-to-exit investments rebuilding, we anticipate continued exit activity in 2025. I will now hand back to Ralf to give you an update on the debt portfolio.

Ralf Gruss
Partner at Apax

Thanks, Salim. As a reminder, the debt portfolio absorbs capital that is not currently invested in private equity. This portfolio limits cash drag, generates additional returns and income by providing another source of funding towards the dividend payment and the distribution pool, which I will talk about more in the next slide. The debt portfolio primarily comprises first and second-line loans and investments in companies and sectors where Apax can leverage insights from its private equity activities.

Ralf Gruss
Partner at Apax

In 2024, the debt portfolio achieved a total return of 7.5% or 2.9% on a constant currency basis, weathering the impact from the Via write-down, but it was also supported by beneficial foreign exchange movements during the year. If you were to exclude the impact of Via, total return of the debt portfolio would have been 13.2% or 8.7% constant currency. To better manage portfolio risk going forward and avoid dual impacts such as Via, AGA will not invest in the debt of Apax funds portfolio companies anymore. Also not on the page, but worth highlighting, AGA has two remaining derived equity positions, which represent less than 1% of the invested portfolio at 31 December 2024. Over the year, AGA exited a derived equity position, with the remaining two positions being valued at EUR 5 million.

Ralf Gruss
Partner at Apax

Before wrapping up now and moving on to the Q&A, I want to also provide a quick update on AGA's capital allocation framework. In the first half of the year, the AGA board undertook a review of AGA's capital allocation and sought feedback from shareholders. As a conclusion of that review, at the capital markets day in June, the board announced a new capital allocation framework, which reflects shareholder and analyst views. To summarize, the new capital allocation framework comprises the following elements. First, the continued payment of a regular dividend to shareholders semi-annually, with the dividend being fixed at an absolute level of GBP 0.11 per share per annum. Second, the distribution pool, which earmarks funds on AGA's balance sheet for share buybacks, which allows the board to take advantage of the opportunity presented by NAV discounts if they arise.

Ralf Gruss
Partner at Apax

The distribution pool was seeded with EUR 30 million in June, allowing AGA to commence share repurchases immediately. In total, in 2024, AGA returned EUR 69 million via dividends and buybacks to shareholders. This is split into EUR 64 million paid in dividends, which represents a very attractive dividend yield of 7.8% to December 2024 share price, and EUR 5 million of share buybacks to acquire approximately 2.9 million shares or 0.6% of opening share capital. Buybacks contributed to 0.2% of NAV accretion in 2024, which can be seen on page 20 in the appendix of the presentation, which you can get a copy of from the AGA website. The AGA board obviously continuously monitors the effectiveness of the share buyback program, and as some of you may have noticed from the recent transactions and own share announcements, the board has sought to increase the velocity of share repurchases.

Ralf Gruss
Partner at Apax

At the end of 2024, EUR 25 million remained in the distribution pool. Let me summarize a few key takeaways from the presentation. We recognize the performance in the year has been disappointing. However, despite the recent challenges we've discussed, the underlying portfolio is well positioned to create value from here. The key issues that impacted performance in the last three years now appear largely in the rearview mirror. One, the listed private equity investments exposure reduced to 2% of NAV at the end of December from a peak of 25% at the end of 2021. There's also a sharpened focus from the Apax funds on the three core sectors of tech, services, and internet consumer. As a result, the Apax funds will no longer make healthcare investments. Going forward, there will be no debt investments in portfolio companies of the Apax funds.

Ralf Gruss
Partner at Apax

Looking ahead, the recent Apax XI investments are off to a good start and are well positioned to build on the early momentum we've seen. With the early performance indicators showing promising returns, these investments are poised to be key value drivers for AGA's long-term NAV performance. With that, Salim and I are now happy to open up to any questions you may have, and back to you, Operator, for this.

Operator

Thank you. We will now start the Q&A. As a reminder, if you wish to ask a question, please submit them via the Q&A box, which can be found at the bottom of the screen by clicking on the Q&A box. Alternatively, you can send any questions via email to investor.relations@apaxglobalalpha.com. We will just pause for a moment for the Q to form. We have one investor asking for thoughts on the underperformance from the IPO to date.

Ralf Gruss
Partner at Apax

I can take this. I mean, first of all, the performance since IPO has been below the targets set out over the long term, which is disappointing. I mean, Salim and I have set out why we're optimistic in terms of what the fund can achieve from here. The key reasons for this are the ones that we have set out. I would also add that following the IPO in the earlier years, AGA was underexposed to private equity assets, which, of course, is structurally the higher returning asset class versus the debt. Post-IPO or at IPO, only about 30% of the NAV was in private equity. That increased to about 50% at the end of 2016. It's now at north of 80%. Also, we're seeing good exposure, better exposure in the private equity portfolio now, given its diversification across vintages and portfolio companies, which would help returns going forward.

Ralf Gruss
Partner at Apax

An additional, obviously, to returns, also just as an additional point that I'd like to highlight is, it's also worthwhile looking at capital returns from IPO to date. We've run the numbers since IPO, AGA has returned the most capital to shareholders relative to peers. If you put it in numbers, it's about GBP 0.95 per share that were paid out in dividends alone since IPO. To summarize, yes, returns have been below the target range. We've discussed the issues, and Salim and I set out, we are optimistic in terms of the outlook, but obviously need to acknowledge that we have been below target.

Operator

Thank you. Our next question will come from Conor Finn from Barclays. The question is, can you outline where portfolio companies have the most exposure to tariffs and any mitigating strategies that might be considered?

Salim Nathoo
Partner and Member of Investment Committee at Apax

Yes, obviously a very topical item.

Salim Nathoo
Partner and Member of Investment Committee at Apax

The good news across our portfolio is we do not have a huge amount of companies that are exposed to tariffs because most of our portfolio, things like software, tech services, business services, are either domestic businesses or they might rely on some services outsourcing, but not goods outsourcing. I think in all, my estimate would be sub 15% of the portfolio would be subjected to tariffs and where it really impacts are medical devices and consumer, which are relatively small parts of the portfolio. Now, the whole tariff thing is actually very detailed, and we have yet to see, I think, the full detail versus what is the headline. Our companies are preparing for this, and we will sort of have to see the mitigation.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Some of it will involve passing the prices on, some looking at alternative manufacturing locations or shipping and logistics, but the companies that do have exposure to this are planning as we speak.

Operator

Our next question is, for Apax exit, can you give more detail on the drivers behind the 1.3 times multiple after only an eight-month holding period for the portfolio companies?

Salim Nathoo
Partner and Member of Investment Committee at Apax

Yes. I think two impacts here. One, particularly, well, three impacts. One, the portfolios that were the investments done in 2023 have performed very strongly out of the gate. Companies like Bazooka, like IBS Software are performing strongly. Second, I mentioned the performance was strong, 15% revenue growth and 14% EBITDA growth with some multiple expansion through the year as conditions improved and together with leverage, that got you some of it.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Finally, some of these transformative acquisitions we talked about, things like Zellis and OGS Finwave, where there are real synergies day one of executing those acquisitions. A combination of all those factors has led to the performance for Apax XI.

Operator

Yeah. Our next question is, can you explain your choice to value AssuredPartners at the potential IPO's value given AGA's experience with that exit rate? How was the impact, and how has that impacted your valuation policy going forward? Will it be more conservative?

Salim Nathoo
Partner and Member of Investment Committee at Apax

Yeah, I think, look, let's put this in context. Assured was the one investment we sold below cost. All the others were, sorry, above FMV, below FMV. All the others were above FMV. I think if you take the blend through the year, it was slightly above FMV on average, unaffected valuation of FMV.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Assured was a little bit of a one-off. I would not say we are aggressive with our marking policy at all. In terms of the question of, well, what about the IPO? I think we certainly thought the IPO was the route we were likely to exit. I think this is an insurance broker, so it is far more stable than some of our tech portfolio that had the volatility. It was an opportunistic buy by Arthur J. Gallagher & Co. They approached us and moved quickly. We had no visibility that they would come along six months ago, and they did. We did believe you would get a higher valuation on IPO, but it would take longer, and you would be obviously subject to some volatility. We actively debated, should we just hold this?

Salim Nathoo
Partner and Member of Investment Committee at Apax

Because actually, this is the sort of company that should be stable and predictable in the public markets.

Operator

Our next question is, in the context of Paycor's acquisition by Paychex, can you comment more broadly on what you've seen so far this year in terms of interest of strategic investors in your portfolio holdings compared to sponsor-to-sponsor deal opportunities?

Salim Nathoo
Partner and Member of Investment Committee at Apax

Yes. I mean, I think there was obviously Paychex's acquisition of Paycor and lead Arthur J. Gallagher & Co.'s interest and their purchase of AssuredPartners. If I look at our exit pipeline at the moment, it's a combination of strategics and sponsors. I definitely think strategics are active. Financing is cheap, so that's good, and our portfolio lends itself, I think, once the gem is fully polished, to being acquired by strategics. There is also sponsor interest in a number of our companies. I'd say both exit options are open.

Salim Nathoo
Partner and Member of Investment Committee at Apax

IPO is, I think, more limited, and it's really the more stable big companies where we'd look to IPO.

Operator

The follow-up to that one was, will you make any new debt investments before your distribution pool reaches 5% of NAV?

Ralf Gruss
Partner at Apax

The answer is yes. Please keep in mind that the debt portfolio is used to also be a reserve for outstanding commitments to the private equity portfolio. In order to efficiently manage that reserve on the balance sheet and avoid the cash drag on these reserves, the debt portfolio will, we will make or the fund AGA will make investments in debt to avoid the cash drag if needed to keep the reserve for future commitments.

Operator

Thank you. Our next question is, exiting by IPOs at high multiples saw good exit uplifts, only to then see NAV hit as ratings fall.

Operator

Given this NAV volatility, can you give some color on your appetite to exit by IPOs and the amounts locked in as a consequence?

Salim Nathoo
Partner and Member of Investment Committee at Apax

Yes. I think we went through clearly a very hot IPO market in 2021, and we recognized that valuations might be nearer their peak than their trough. As part of those IPOs, we took three times cost out in cash proceeds. These were highly successful investments. What that did leave was obviously a lot of NAV in the ground. I think particularly with investments like Thoughtworks, we did not expect the decline that we saw. You saw from Ralf's slide just the impact of Thoughtworks alone on the NAV decline. I think it was a little bit of an idiosyncratic period, and we de-risk the IPO investments by taking cash out.

Salim Nathoo
Partner and Member of Investment Committee at Apax

On a go-forward basis, as I indicated, I expect the IPO exits will be for the very large companies where they're stable and predictable, and the vast majority of exits will be to strategics and sponsors.

Operator

Our next question is asking you to talk about the balance sheets, sort of cash versus commitments and the expected drawdowns.

Ralf Gruss
Partner at Apax

I can take this. You can find details in the appendix to the presentation, high level. The balance sheet is robust. If you look at calls in the next 12 months, they are covered 2.4 times. There is an RCF of $250 million, which has been undrawn at year-end. As I said to the question earlier, we also use the debt portfolio as a reserve for future commitments. Details are in the presentation in the appendix.

Operator

Okay.

Operator

That seems like we have got to the end of our questions here on the written question side. I am going to hand back to Ralf for closing remarks.

Salim Nathoo
Partner and Member of Investment Committee at Apax

Nothing from me other than to thank you all for participating in today's call. If you have any further questions that we did not address in the call right now or would like to arrange a meeting with us, please feel free to contact the investor relations team. With that, I wish you a good day and goodbye.

Analysts
    • Salim Nathoo
      Partner and Member of Investment Committee at Apax
    • Ralf Gruss
      Partner at Apax
Powered by Quartr