Pantheon International H2 2025 Earnings Call Transcript

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July 31, 2025

Key Takeaways

  • Positive Sentiment: While deal activity remained subdued, PIN achieved a 12% distribution rate—50% higher than last year—and stayed net cash flow positive, generating £130.8M during the period.
  • Neutral Sentiment: Pre-currency headwinds, assets grew 5.9%, but a 4.8% FX drag and expenses left NAV up 1.2% overall, while the share price fell 9.2%, prompting £53.5M of buybacks to narrow a 40% discount.
  • Positive Sentiment: PIN’s portfolio is tilted towards small-to-mid market buyouts in resilient sectors (IT and healthcare), with 54% invested directly alongside leading private equity managers.
  • Positive Sentiment: Management will refine its approach by concentrating on top performing managers and stepping up active portfolio and capital management to drive long-term NAV growth.
  • Positive Sentiment: Strong liquidity is maintained with an 85% undrawn coverage ratio, a £400M revolver (expandable to £700M), plus £150M in private placement notes, keeping net debt at a conservative 8.7% of NAV.
AI Generated. May Contain Errors.
Earnings Conference Call
Pantheon International H2 2025
00:00 / 00:00

There are 4 speakers on the call.

Operator

Like many industries, the persistent macroeconomic uncertainty around the world and the higher interest rate environment have undoubtedly had an impact on private equity over the past few years. As private equity managers can wait until the timing and market conditions are right before selling their portfolio companies, we have seen a prolonged period of lower deal activity and a meaningful decline in companies being sold, otherwise known as distributions. The gradual recovery in M and A activity that was anticipated at the 2025 stalled, as investors sought to understand the potential impact of the tariffs announced by the Trump administration in April. It is difficult to predict the timing of when exit realizations may revert towards the level seen historically. However, we are aware of several of our underlying managers finalizing the sales of portfolio companies.

Operator

We believe that PINs focus on small to mid market buyouts, which are well established businesses that are typically sold to corporate buyers or larger private equity managers, positions it well for when this happens. Even in times of uncertainty though, deals can still be done by the best private equity managers. While PIN's distribution rate at 12% for the year ended 05/31/2025 was below the company's long term average, it was still 50% higher than the distribution rate in the last financial year. The call rate is when our private equity managers request capital from us that we've already committed, usually to pay for a new company they are acquiring or to support an existing portfolio company. This call rate was 20% during the financial year, which is also low relative to historical levels, reflecting the lower overall levels of deal activity.

Operator

Distributions exceeded calls during the year to the 05/31/2025. So PIN has remained net cash flow positive during the period, generating a 130,800,000.0 of cash. This is more than a threefold increase over 2024. In its history, PIN's portfolio has been consistently cash generative and over the last ten years has produced a total of 1,500,000,000.0 of net cash.

Speaker 1

Approximately 76% of PIN's portfolio is denominated in US dollars, which weakened against sterling during the period. As a result, unfavorable currency movements reduced PIN's sterling quoted net asset value or NAV by 4.8%. Before currency effects, PINS assets grew by 5.9% during the year end of 05/31/2025, and investment income added 0.9% to the NAV. In line with the listed private equity sector, the discount on the shares has continued to be wide and was 40% at the May. Given the quality of the underlying portfolio, we believe that the discount is unwarranted.

Speaker 1

In order to capture value for shareholders, invested £53,500,000 in share buybacks, which added 1.5% to the NAV. After the impact of currency and expenses and taxes, PINS NAV increased by 1.2% during the period compared to the previous year. Disappointingly, the share price declined by 9.2 during the period. With our increased focus on marketing, our aim is to stimulate demand for PIN shares and narrow the discount at which they

Operator

trade. Generating NAV performance has been more challenged in the past three years especially, but we believe that the portfolio is well positioned for when an improvement in market conditions and increase in deal activity comes through. Nevertheless, during the period, we have been working closely with the board to analyze the drivers of performance within the portfolio. We continue to believe that the tilt of PIN's portfolio towards non cyclical companies that are in more resilient sectors such as information technology and healthcare is the correct approach. These companies are benefiting from long term trends that we believe are here to stay, such as the increased demand for software as a service and cybersecurity solutions and information technology, or in healthcare responding to the demands of aging populations and the need for higher quality products and services.

Operator

At a high level, PIN provides investors with a portfolio of growing private companies alongside leading private equity managers, which we achieve through a combination of funds and individual company investments. As at the 05/31/2025, approximately 37% of PIN's portfolio is an invitation only, hard to access primary funds. Over recent years, we've focused on investing directly in private companies alongside our managers, and at the 05/31/2025, 54% of PIN's portfolio was invested directly in private companies alongside our favoured private equity managers. The key factor in assessing PIN's primary investments is always the strength of the private equity manager and their ability to outperform the public markets. This also applies to single company investments, where over the medium to long term, on behalf of PIN, we've taken more concentrated positions in companies under strong stewardship and with resilient profiles.

Operator

As a result of our ongoing work with the board, some refinements will be made to the investment approach of PIN, including more focus on the group of leading managers that we invest with. These are set out by the chair of PIN in more detail, but they also include an increased focus on active portfolio management and active capital management. The aim of these amendments is to improve the NAV performance of Pin's portfolio over the long term. This, coupled with greater demand for Pin's shares as a result of

Speaker 2

our marketing program, could translate also into better share price performance. We regularly stress test PIN's balance sheet to make sure that it is able to withstand a variety of scenarios and market conditions while still being able to take advantage of share buyback and new investment opportunities. As of thirty one May twenty twenty five, the undrawn coverage ratio was comfortable at 85%. PIN has access to a £400,000,000 multi currency revolving credit facility with the flexibility for this to be increased to £700,000,000 under the existing structure. PIN also has $150,000,000 of private placement loan notes.

Speaker 2

At the May, PIN had £103,000,000 drawn down under the credit facility and £111,000,000 of sterling equivalent loan notes outstanding. Taken in conjunction with PIN's net available cash of £21,000,000, PIN's net debt to NAV is conservative at 8.7%. During the period, in addition to investing in PIN shares, PIN has continued to invest in new opportunities sourced by PANCA. During the year to thirty one May twenty twenty five, PIN committed £143,000,000 to 18 new investments. While the last few years have been challenging, the private equity industry has grown significantly over the past two decades, and the asset class continues to attract a broadening range of investors.

Speaker 2

Over the

Speaker 3

more than thirty years that I have worked in private markets, I've seen many significant changes. One of the most striking has been how the best private equity firms, including many of those in Pin's portfolio, have been able to adapt to different market conditions over successive macroeconomic cycles. I have witnessed these leading firms evolving their own business models to employ operational expertise, sector experts, and capital market specialists as part of their in house teams. These hands on experts are able to support their portfolio companies through economic cycles and nimbly navigate the opportunities and challenges that they are faced with. It has also been pleasing to see how private equity can be a driver of growth and how it has become a creator of jobs in many local communities.

Speaker 3

With public markets becoming increasingly concentrated and inaccessible or unattractive to smaller, fast growing businesses, having exposure to the private company opportunity set could become increasingly important for all investors. Looking ahead, we believe that an allocation to private equity should remain a key component of a well diversified portfolio. And since its inception in 1987, PIN has been, and we believe continues to be, one of the most accessible ways for investors of all types and sizes to do this.

Speaker 1

If you have any questions or would like more information on PIN, please visit the website, follow PIN on LinkedIn or contact the team here at Pantheon.

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