Eurazeo SE (RF) Earnings Call Transcript & Summary

Welcome to the Eurazeo 2026 Half Year Results Presentation. Today's conference will be hosted by William Kadouch-Chassaing, Co-CEO; and Christophe Baviere, Co-CEO. [Operator Instructions] Now I will hand the conference over to the speaker. Please go ahead.

Thank you very much. Good morning. Thank you for joining this call. Christophe and I are pleased to welcome you to our 2026 half year results presentation. Our presentation will be in 3 parts. First, I will share with you the financial highlights for H1. Second, Christophe will focus on fundraising, commercial dynamic and asset rotation. Third and last, I will detail our financial results. We'll then be available to take questions. We published a good set of results for the first year -- for the first half of 2026, showing further progress in the execution of our strategic plan. Let me share the key highlights for H1. First, asset management posted another semester of solid growth. Fundraising stands at EUR 2.3 billion with some notable closings in fee and debt, confirming the attractiveness of our franchises to clients. We continue to demonstrate our ability to scale our flagship strategies. Christophe will come back to this in a moment. And as a result, we continue to grow our earnings with management fees from third parties up 14%, EBITDA growth of 20% and strong growth in operating cash flows as we grow our third-party fees and performance fees start to materialize more meaningfully. Second, our balance sheet return has announced positive value creation in H1 with a growth of plus 2.3% per share. Realizations continue to be on plan with a good pipeline of exits expected for the rest of 2026, allowing us to reshape the business model as per our strategic plan. Third and last, we are on track to deliver the announced EUR 2.3 billion in shareholder return by the end of 2027. We have already returned EUR 1.3 billion since the beginning of 2024. In 2026, we have already distributed a dividend per share increasing by 10% and executed half of the share buyback program for the year.

Thank you, William. Let's now dig into details. And as you know, the development of an asset management platform starts with good fundraising. Eurazeo raised EUR 2.3 billion from clients in H1 2026, ahead of last year's already strong performance. This is, I would say, particularly encouraging given a challenging environment for fundraising. No doubt, this success highlights the quality of Eurazeo's franchises as well as the relevance of Eurazeo's positioning as a European mid-market growth and impact focused investment firm. Our strategy is to be the go-to investment firm for this deep and growing investment universe of mid-market companies all over Europe. We have had several marquee successes in H1 with, in particular, the final close of EPD VII in direct lending, the final close of ESF V in secondaries, the first close of PME V in buyout and successes also in thematic funds such as Kurma Biofund IV and ESMI II. And Wealth Solutions, Wealth Solutions channel continues to deliver despite a more competitive and challenging market backdrop. One of the keys to Eurazeo's success in the development of its asset management platform is its ability to scale existing flagship franchises. Let me take you through a clear example of how this works, look at direct lending, this side of our more recent program, EPD VII increased by 70% at EUR 5.5 billion, driven by its leadership position and strong performance of the strategy focused on the lower mid market. Look at secondaries. Our fifth program more than doubled at EUR 2.3 billion with growth both on the institutional flagship fund and in wealth and mandate solutions. Note that these 2 programs, for these 2 programs, demand has exceeded their cap, which is quite unique in current market conditions for fundraising. Look at the lower mid-market buyout segment. Eurazeo is currently raising it's fifth vintage, PME V and we have good traction among investors, thanks to the strong performance of the previous vintages. The first closing of the fifth vintage has already exceeded the final closing of the fourth vintage with, I would say, plenty of room to grow further. In our strategic road map, William and I outlined our ambition to further expand our client franchise through the internationalization of the LP base. As in recent years, we have extended our coverage in Europe, in the Middle East and in Asia. And the results are there around 70% of our inflows are now coming from outside of France. And a growing share of this fundraising is coming from outside of Europe with repeated successes all around Asia as we are signing new clients in China, in Korea and in Japan. Our Wealth Solutions franchises also continues to grow at a steady pace with now EUR 6 billion of AUM, a 17% CAGR for the past 5 years. Yes, our flagship evergreen fund, EPVE 3, surpassed EUR 3.7 billion in AUM, thanks to the positive inflows. But in parallel, we are actively working with our partners to distribute our new international evergreen funds all over Europe for the rest of the year. For the rest of the year, Eurazeo will pursue on its fundraising on the back of a solid and diversified pipeline, both on the institutional side as well as on the Wealth segment. As you can see, our funds are at different stages in their fundraising. We continue to raise on our flagship, Eurazeo Growth IV and PME V. And we have mainly thematic fund on the road like EPBF, ESMI II, future industries III, EZORE and ETIF II. Let me now turn to deployments and realization. Eurazeo deployments amounted to EUR 1.9 billion in H1, down 17% for the same period of last year with transaction reflecting and expanding pan-European investment approach. Main deals including Denmark EPBF. Eurazeo's [indiscernible] acquired T1A, a leading electronic recycling firm. In Germany, Eurazeo's PME V bought Nextron, a leading cybersecurity software firm. And in France, through capital, Eurazeo invested in Netco, a conveyor belt maintenance business. And in the infrastructure, we financed Lauralu, achieving deployable infrastructures. Eurazeo is well placed to continue to grasp opportunities with EUR 8.3 billion of firepower, out of which EUR 6.6 billion are third-party money. Realization, realization stood at EUR 700 million. Eurazeo has had several exits, notably with Fermax and Ex Nihilo, a buyout, Memo Therapeutics in biotech. We maintain [indiscernible] legal place in venture and several exits in secondaries. Regarding H2 2026, we are making at a solid pipeline of exit across strategies. I now hand over to William, who will get you through our results.

Thank you, Christophe. I will now take you through the financial results for H1 indeed. Let me start with the asset management activity. Overall, as you can see on the chart, AUM growth and fee paying AUM growth illustrates the dynamism of our asset management business. Total assets under management, we're up 9% in H1 relative to the year past, surpassing EUR 40 billion with third-party AUM up a strong 13%, which is above market. Fee paying AUM were up 6% at EUR 29.4 billion with third-party fee-paying AUM growing also a strong 13%. Management fees stood at EUR 213 million in H1, up 6% from previous year on a comparable basis. Third-party management fees were up 14% with strong performance of private markets up 18% and a better performance of iM Global Partner at plus 2% like-for-like. The growth of IMG was driven by positive net inflows, particularly in active ETF. Balance sheet management fees were down 14% as we voluntarily limit our new commitments in our fund and execute our exit plan. Of note, our private market fee rate remained stable at over 120 basis points. With a steady growth of our third-party assets and fees and the managed downsizing of our balance sheet, we are well on track to reduce the weight of our balance sheet in the funds below 20% faster than initially planned. You may remember, we had announced that target back in November '23 in our Capital Markets Day. At the end of 2023, our balance sheet represented 31% of our total AUM. AUM from the balance sheet now represent only 22% of total AUM. Likewise, management fee from the balance sheet represented around 31% end of 2023 and are now down to 23% in H1 2026. Logically, the combination of growth in third party management fees, strict cost discipline and a more meaningful contribution of performance fees leads to a jump in the cash flow of our asset management business. This is how the model works. As you can see, fee-related earnings are up 11% in H1 with further margin improvement. EBITDA is up 20%, reaching EUR 100 million. Finally, operating free cash flow from the asset management activity reached EUR 54 million, up 75% from a year before. So in a nutshell, the contribution of the asset management activity, excluding financial costs and other income is up plus 38% in H1 on a like-for-like basis. As mentioned, we continue to be very disciplined on costs with OpEx up [ 3% ] only year-on-year. Financing costs at iMGP are down significantly, especially in H1 '25 as H1 '25 figures were impacted by negative ForEx impact. It also reflects the reduction of the indebtedness at IMG. Let me now turn to the investment company. As announced, we returned to a slight positive value creation in H1 2026 at 0.3% organically or plus EUR 20 million. Buyout, we posted plus 0.2% in value creation. We continue to have positive earnings momentum in our portfolio companies. We, however, remain disciplined on multiples given the context in some sectors, notably in SaaS and Business Services. Growth equities posted a positive value creation of 1%, driven by further progress in our new vintage, EGF IV. In real assets, we enjoy a good momentum in infrastructure and in operational real estate. We adjusted down some specific valuations in direct real estate to reflect multiples and cap rates. On a per share basis, our portfolio is up 3.3% to EUR 105.4 per share in H1. Our share buyback program thus added plus 2% on the portfolio value in H1. So let me come back to the fundamentals behind this performance. As said, overall H1 2026 was another illustration of the quality of the underlying assets in spite of a mixed macro environment with some headwinds in Q2 from the Iran war. First in buyout, which represents 57% of the total value of the portfolio. You can see revenues and EBITDA were up, respectively, 4% and 7%. Going into details, April and May were slower, arguably, but we have been seeing green shoots in June and July. Second, companies in our growth portfolio, which represents 22% of portfolio value, posted an aggregated revenue growth of 22% with our largest companies outperforming. The EGF IV portfolio continues to perform strongly above plus 50% revenue growth. Third, in our real asset portfolio, which accounts for 14% of Eurazeo portfolio value, EBITDA in the hospitality business was up 6%, while infrastructure continues to perform very well. You will find in the appendices of the presentation, and we will do that regularly, further details on the balance sheet performance and components and in line with our deep dive of April -- sorry, April 29. Turning now to the investment company P&L. As mentioned, we returned positive value creation in H1 on the portfolio at plus EUR 20 million. IMG had a positive impact on the fair value of a partner, in particular with the sale of its stake in RBA. Combined with lower internal fees, cost discipline and lower financial expenses, [indiscernible] contribution improved by nearly EUR 300 million compared to H1 2025 to reach minus EUR 69 million. Turning now to the group P&L, with a stronger contribution from asset management activity and an improvement in the investment activity, net result group share improved by EUR 300 million to be close to 0. Let us finish with portfolio rotation and capital distribution. We announced and realized around EUR 300 million in exits pertaining to the balance sheet during H1 2026, corresponding to 4.3% of last year's NAV. We have a good pipeline of exits for H2, as said by Christophe, with some promising processes already underway. This should put us on the path to towards our of historical average in realization. During H1, we continue to prove our ability to sell assets with an uplift above NAV. We realized the exit of 2 buyout companies early in H1 at more than 2.5x cash on cash each and together with an uplift of 150% on our last mark. We sold the portfolio of Spanish hotels at NAV. And our Kurma franchise, our biotech function, sold the company with 150% minimum uplift with further upside depending on the achievement of certain milestones. Let me stress again that for us, this is the best proof point to assess the quality of our portfolio valuation approach and processes. As I mentioned at the beginning of the presentation, we continue to deliver on our capital return promise. Since our Capital Markets Day, we distributed EUR 1.3 billion through [ EUR 600 million, EUR 700 million ] in ordinary dividends and EUR 700 million in share buyback. We already acquired 14% of our own shares through H1 2026. Looking ahead, we plan to continue to increase our ordinary dividend and to buy another 11% of our own shares by the end of '27, maximizing our legal limits. Depending on the price at which we will do the share buybacks, we will consider adding extraordinary dividends to complement our distribution to shareholders to reach our targets. So in a nutshell, we had a strong set of results in H1 '26. We continue to grow fast our asset management and to transform our business model. Our balance sheet is back to positive value creation, and we continue to deliver on shareholder return. We believe this momentum should drive a re-rating of our stock. And as a reminder, let me just come back to how, with Christophe and team, we see Eurazeo's fundamental value drivers. We are first a fast-growing asset manager, profitable and cash generative. Based on undemanding multiples, it should be worth up to EUR 40 per share. We have a balance sheet portfolio net of carry, tax and debt that is worth EUR 105 per share rounded, and we have a net debt that should be deducted of EUR 21 per share. Hence, our calculations brings us to this total value between EUR 115 and EUR 125, giving significant upside for the current share price that is for you to judge. Thank you for your attention. We can now open to the Q&A session.

[Operator Instructions] The next question comes from Nicolas Vaysselier from BNP Paribas.

The first one, I want to check a bit extraordinary dividend potential. On my tracking, assuming the share price, you would be at about EUR 1.1 billion of share buyback since 2024 at the end of '27. The CMD had highlighted the target of EUR 1.5 billion. Would do you say that the extraordinary dividend could be as high as EUR 400 million to make for the gap? Then secondly, exit activity has been muted in H1 on the balance sheet side. You expect an acceleration in H2. I wanted to know if you view the current pipeline as enough to deliver the 20% asset disposal pace that you're trying to aim every year. And thirdly, you also flagged potential for improving investment returns in H2. However, I've noticed that the growth figures you are quoting in the press release when it comes to EBITDA growth and revenue growth in buyout seem to be slowing a bit versus prior reporting period. So what makes you confident that returns can accelerate? Is it that do you expect market -- I mean, the multiple to start increasing, reflecting strong markets you're seeing right now? Or do you think the macro environment improved from here?

Thank you, Nicolas. So I'll take these 3 questions. First, on the distribution, what we say here is that we're committed to the portion on the dividend, ordinary dividend, I think we have a track record of increasing it by 10% or above in the past years. I won't commit, of course, for next year. This is a Board and general assembly decision, but expect that we will continue to strive growing the dividend per share. Then we are committed to execute the 25%, the [ equitization ] of the company through the share buyback and the combination of shares. We've already completed a significant portion of it. When you look at the math, I mean, clearly, there is a factor which needs to be taken into consideration, which is the average price at which we buy shares. So what we are saying here, effectively, I think your understanding is correct is that conceptually, we will compensate the shortfall in euro amount for the share buyback with other means, i.e., dividends. Exit activity, and I hope it's clear. If it's not, please reiterate your question. But again, 2.3% and 25%, the equitization of the key commitments we take. Exit activity. I think it's very much, as we have said, I mean, arguably, the environment is not good. And I think everyone would tell you that. We've been able to sell what we had in mind to sell in H1, and we've launched a number of processes for H2. So yes, we are confident that we will continue to execute on our exit plan and converge towards the historical average. I mean, I think we have now established a track record of being able to rotate assets faster than market, which translates into DPI, by the way, in the funds, which are almost in every category in [indiscernible] range. So we'll see how it goes. But we reiterate we have a rather good pipeline for second half. Investment return on the investment company, let me be a bit more specific. I don't think we've said we see an increase in H2. We said from 2026 onwards, we see a gradual improvement in value creation after the adjustments we had to do in the past 2 years, partly because some companies we have to write down, partly because we have to factor in the new elements in the market, the AI impact on SaaS multiples and some companies more impacted by some macro events. Now we said we have a strong portfolio that continue to perform really. So we're going into a gradual improvement rather than a marked improvement. And this is how you see that. So we are resuming with value creation in other words, and we see the pattern has been more or less dynamic, depending upon the multiple environment. Fundamentally on the buyout company's performance, there is a very good element into it, which is that it is very broad-based companies across the board, including, by the way, in SaaS, do perform well. There are a few companies which had more difficulties and now have been marked down quite significantly. So this should be an issue for the future. So that's how you can see the dynamic on the earnings. In other words, I'm trying to say that we are not betting on multiples. We continue to mark up assets, primary, I should say, even solely on the earnings growth.

The next question comes from Oliver Carruthers from Goldman Sachs.

I just have one follow-up question from your final point. Did I just hear you correctly on this returning to positive value creation. I don't want to put words in your mouth, but it sounds like on the buyout side, this is a broad-based, I guess, flat to up dynamic in the first half. So it's not being driven by uplift from a couple of big assets, it's broad-based. And it sounds like the language you're using is that we're kind of at the end of this multiyear multiple adjustment period, which would be a bit of an inflection point. But I just wanted to check if I understood that correctly. And then sorry, the second question, just on the acceleration in realizations that you're -- in terms of strong pipeline for the second half. Could you just comment on the types of exit processes that we should be looking out for just to understand the sensitivity to the market dynamics.

Maybe you comment on the pipeline, which is going to be a short answer probably. But on the value creation, let us be very cautious there. Yes, I think we take the word of inflection point because there were a few companies we have adjusted. Remember the 29th of April presentation where together with the team, we really showed where we had made some adjustments and there were a few companies that are now have been put to 0. That was the bulk of the adjustments. By the way, some of these companies can recover value a bit in the future because some of them have better trends, but that's not taken into account as of yet. And then we said we also have taken into consideration some multiple compression in some areas, but mainly software. And then we have said at the time, by the way, that we have not started adjusting these multiples just beginning of '26, but there was a story already starting in '25 for us. Looking forward, the reason why I'm cautious is because we live in a very uncertain environment, you can see that we have an improvement, as I said, in the pattern of growth, both revenues and EBITDA in buyouts in June and July. After reasonably slower Q2 because of what you know. We'll see how it goes for the rest of the year. So inflection point, yes. But that's going to be a gradual improvement in '26, even what I've just said. But the good thing is we are able to sell always with an uplift to the last NAV, and we continue to have a broad-based difference to good performance on the underlying metrics. On realizations, Christophe will take the question.

On realization, yes, you are right to point out that the EUR 700 million is a 6-month picture. It doesn't reflect our goal for the 12 months of 2026. As we said previously, we are aiming for our historical yearly realization over the course of the plan, and we have no bad news on this because we have a quite healthy pipeline of exit candidates, and several monetization processes are being initiated. We are using the full range of what can be used. We are obviously working on some plan [indiscernible] exit, but we also use dividend recap. And we can use, in some cases, continuation vehicles of tools like that to reach the 2026 targets. But as you know, we cannot comment on any specific transaction. But again, we continue to aim for historical average levels, and we will reach 15% to 20% of our previous year's NAV rotation.

The next question comes from Arnaud Palliez from CIC CIB.

I have two questions. The eleven is on real assets that are a bit lagging behind in terms of fundraising, value creation. So I would like to know what is for you the outlook for these real assets. That's the first question. And the second one is more general question. Following rising inflation and interest rates, do you see any change in the outlook for your investment policy? So that's the two questions.

On real assets, we answer together with Christophe. Just starting with the value creation. As you can see, the underlying metrics, we didn't give the number because it is on a small base. So it's double digit on infra increase in revenues and hospitality, which is a bulk of what we have in real estate, I mean, has a growth of plus 6%, as you can see. So I'd say the value drivers are pretty good, but we are in a real estate market that remains difficult overall. It's improving, let's say, stabilizing. So it's not the time where you really take on more value on assets. And we have adjusted a few nonoperational assets in the portfolio. I mean, which has translated to this slight value [indiscernible] in real assets in the first half. So [indiscernible], I mean the trend is clearly operational, the operational trend is improving. On your comment on fundraising, maybe Christophe?

Yes, yes. Well, as you know, on fundraising, it's based on -- we need the fund to raise, and there has not been funds that were opened. But with [indiscernible], which is indicated to infrastructure is now almost fully invested. And yes, we are preparing the next vintage. I remind you that [indiscernible] targeting EUR 500 million, and we've reached EUR 750 million, which is quite a good result for something that was a first time fund. It was not the first time investing [indiscernible], but it was for Eurazeo, the first time fund in infrastructure. So we have, during the phase of this fundraising, we have conducted a large number of LPs that were a little bit cautious on the first [ time, ] and we will benefit for the fundraising of the second vintage from this work that has been completed when we did 3 years ago, 4 and 3 years ago, and we already have a solid robust pipeline of not only European investors, but also investors that have seen the proof of concept of [ Fund I. ] I remind you that we have in infrastructure quite a differentiated approach, what we do is energy transition infrastructure. It fits with the DNA of Eurazeo, which is to be a main market player with probably north of EUR 750 million for the second vintage. We will still be a new market player in infrastructure. So this is the core of what we do. But again, what we perceive is that this mid-market investment [indiscernible], Europe is deepening, and we see a lot of appetite for very differentiated investment strategies in the infrastructure world.

Now on your point on the investor strategy, as we have highlighted many times with Christophe ever since the Capital Market Day, we do consider that our investment approach, the type of focus we have regionally size of companies and sectors. The value creation playbook, which is a transformational valuation playbook aiming at increasing earnings as opposed to optimizing financial structures. And that's well suited to exactly the world you described, world where the investment rate, the interest rates are sustainably higher for longer. And so as you can -- we will continue to give you data points, but fundamentally take a view that at least 2/3 of the value creation of the companies we invest into across the board stem from earnings, more rarely from deleveraging, sometimes increase in multiples because at the onset, given that there are small companies in the -- you tend to have a calibration, a discount to the reference multiples. And so that we think is the right approach. The mid-market Europe, first operational and focus on 5 sectors, which are financial services, health care, business services, tech environmental solutions, which are driven by structural shift in the global economies and societies. I mean that's the way we address from an investment case standpoint, the approach to that environment. You see because we put that back in the appendices, the type of leverage we have when we do a buyout or real estate. And you can see that we are pretty conservative on that. So there is clearly an increase in the cost of debt in the deals. I wouldn't say we are not sensitive. We are obviously sensitive to it, but to a limited extent, given what I just said.

The next question comes from Nicolas Vaysselier from BNP Paribas.

Sorry for coming back. I just had a very technical question on the extraordinary general dividend. In terms of timing, would you wait until the end of 2027, i.e., announcing it in 2028? Or is this something we can expect for next year?