Hello, and welcome to Eurazeo Q1 2025 trading update. My name is Rus D, and I will be your coordinator for today's event. Please note this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad. I will now hand the call over to your host, Mr. William Kadouch-Chassaing, to begin today's conference. Thank you.
Thank you. Good morning, all. Thanks for joining this call. I'm pleased to welcome you to our Q1 2025 trading update. Let me walk you through the key highlights for the quarters pertaining to, first, fundraising, AUM, and management fees; second, asset rotation; and third, the underlying performance of the unbalance sheet portfolio. We will then be available to take your questions. Let's start with our fundraising activity. We had a strong quarter in Q1 2025, with EUR 944 million raised during the period. The strong performance was driven by a pickup in private equity fundraising, which totaled EUR 491 million, which is almost fourfold the amounts raised in Q1 2024. This was due to the final close of EC5, our latest MLBO program, mid-large buyout program, which closed at EUR 3 billion, exceeding its target size.
The first closing of EPBF, Eurazeo Planet Boundaries Fund, our impact fund focusing on buyouts, securing EUR 300 million in Q1 out of a target of EUR 750 million. We also enjoyed the continued momentum in the private debt strategy, with EUR 447 million raised in Q1, which is five times more than in Q1 2024. In terms of distribution channels, Wealth Solutions was particularly strong, with EUR 307 million raised in the quarter, which is a plus 90% increase year on year. We continue to benefit from our leadership position in France and the momentum of our blockbuster Evergreen Semi-Liquid Fund, EPVE3, which was awarded the prize of the best private market mass affluent product by IPAM in January 2025. We have run our first ever ad campaign in French general and specialized press in May to build on this success as brand awareness is critical in the space.
We also had a successful fundraising in Belgium together with our partners, Belfius and Allianz, and continue to develop in Germany, Switzerland, and Italy. The Wealth Solutions segment accounts now for EUR 5.1 billion, which represents 19%, one-nine, of the group's third-party AUM. As we highlighted during our first-year results, our pipeline of fundraising for 2025 is solid and diversified, both on the institutional side and on the Wealth Solutions segment. Let me give you an update on where we stand based on Q1. First, as you can see, we have four flagships on the road, which are expected to fundraise in 2025. We continue to benefit from the ongoing momentum in our direct lending and secondaries programs. We expect the first closing for Eurazeo Growth Equity 4 in H1 and the launch of our FIPS program in the lower mid-market buyout segment later this year.
Second, we are on the road with five thematic funds. Three are impact funds qualifying as Article 9, EPBF, which I already mentioned and had a successful first closing; SME2, which is a debt fund focusing on shipping decarbonation financing; and a second vintage in sustainable infrastructure that should be launched towards the end of the year on the back of the great success of our first-time infrastructure fund. We also have started the marketing of Eurazeo Operational Real Estate Fund, ESOR, on the back of the strong performance of previous programs. In addition, our biotech franchise, PIRMA, is on the road with its fourth vintage and has already completed, as you may remember, successfully its first closing. On Wealth Solutions, as we announced, we are working on the launch of new Evergreen programs, and we are initiating another growth fund for wealth investors.
That translates in a steady increase in both AUM and fee-paying AUM. Fee-paying AUM were up 9% year on year, with fee-paying AUM from third parties up double-digit at plus 12%. Total AUM stood close to EUR 37 billion as of 31 March 2025, which is up 7% year on year, with AUM from third party also up double-digit at 12%. Logically, recurrent revenues from asset management posted solid growth. Management fees from third parties are up 13%, one-three, excluding catch-up fees. Management fees from third parties are up 12% year on year. Management fees related to Eurazeo balance sheet came at EUR 29 million, down 1%, which is due to disposals and lower balance sheet commitment in funds in line with the strategy announced at the end of 2023. As a result, total management fees, including balance sheet, were up 9% year on year. Let me turn to asset rotation.
Starting with deployment, we had good deployments, I should say even strong deployments, totaling EUR 800 million for the first quarter of 2025, which compares to EUR 400 million roughly for the same period of last year. Deployments are very active in private debt and secondaries, in line with the dynamism of fundraising and availability of opportunities. In April, we also had further steps in buyouts with our mid-large buyout and small buyout strategies, which signed agreements to acquire Malpa in Spain, Hotel Software, and EcoScan Integrity, which is an ultrasonic non-destructive testing company acquired by our SMBO franchise. Our dry powder from third parties was up 20% in the first quarter year on year, and we think we are then well placed to grasp investment opportunities. Any uncertain environment represents challenges, but also great opportunities for investors.
Group realizations in Q1 2025 amounted to EUR 200 million, which compares to EUR 400 million in Q1 2024. Nevertheless, taking into consideration the finalization of the Albingia disposals on May 13 for EUR 485 million, of which EUR 325 million pertain to the balance sheet, in reality, realizations are up strongly at EUR 716 million year to date. Let me focus on the balance sheet more particularly, which is an important point in the execution of our strategy. Announced and completed disposals for the balance sheet, including Albingia, which I've just mentioned, amount to roughly EUR 525 million to date, which represents 6.5% of the value of the portfolio at the end of 2024.
In addition to the closing of Albingia already mentioned, again, Eurazeo signed an agreement in early May 2025 with a reputable US-based secondaries firm to sell around 20% of its stakes in three MLBO portfolio assets, Questel, Planet, and Aromazone, for over EUR 200 million, which will be paid in the course of 2025. This transaction is in line with the balance sheet asset rotation strategy and is being carried out on sound financial terms. It offers a limited discount relative to the end-2024 NAV, thanks to an earn-out mechanism. This discount could even be fully offset, thanks to another mechanism of sharing future value. Within this framework, the group will create a fund that will generate management fees and performance fees on top.
Furthermore, we have other divestment processes that we have initiated, as we mentioned several times, and the group has an exit program which would result in a further increase in realization volumes in 2025, in arguably a more uncertain environment that has started to materialize in the past months. Let me finish with the performance of the underlying performance of the portfolio companies that are owned by the balance sheet through the funds and programs. In the first quarter, the companies in the balance sheet portfolio continued to perform well in spite, again, of a more difficult and uncertain environment. Companies in the buyout portfolio grew 7% year on year, if I exclude WorldStrides, which is a company that had trouble, and we wrote down significantly at the end of last year. Companies in the growth portfolio posted overall a 14%, one-fourth average growth.
Business remains good on the main balance sheet assets. Companies like Doctolib or Back Market have revenue growth in excess of this 14% I have just mentioned. The most recent investments, and this is very important to stress in the course of the fundraising, the most recent investments through our EGF4, i.e., the fourth vintage of Eurazeo growth, are very strong, and they post an average sales growth of over 40% year on year. In real assets, hospitality revenues were stable in the first quarter, traditionally a low contributor. Bookings for the second quarter appear very positive to date. Finally, sales of companies in our sustainable infrastructure portfolio are up by a strong 20% on average. At March 31, 2025, the investment portfolio carried on the balance sheet was marked at EUR 7.9 billion net, and as usual, is not revalued during the quarter.
The portfolio value per share was EUR 109.6 at the end of March 2025, up 1.7%, thanks to the share buybacks program and the cancellation of the shares pertaining to that program. Thank you very much for listening, and we are now available to take your questions.
Thank you, sir. As a reminder, if you'd like to ask a question or make a contribution onto this call, please press star one on your telephone keypad. We'll take our first question from Nicholas Vaysselier from BNP Paribas. Your line is open. Please go ahead.
Hi, good morning. Thank you very much. I hope you're doing well. My questions would be the first one, a bit technical, but on the management fee dynamics, I can see that the private markets management fees, the third parties, were flat Q on Q despite fee-paying AUM growing 2.3%. So I'm wondering what I'm missing here in terms of modeling. I was expecting some growth given your fundraising was good in private equity. While I'm at it, I wanted to know what's the AUM at IMGP? Second question is more on your exit. It's interesting, the secondary transaction that you've done. If you could tell us a bit more about the rationale of the transaction, is it something you want to use to accelerate cash returning to the balance sheet? Also, from memory, those three assets are among your best-performing assets in the buyout portfolio.
I wonder why a complete exit was not possible or was not something you wished. Maybe quickly, if you could come back a bit on the growth at portfolio companies, what you are seeing right now in terms of dynamics in the current environment, because it seems that it has slowed a little bit versus what you communicated in Q4. Thank you very much.
Thank you very much, Nicolas, for your questions. Let me start with the first question. These things are not completely linear in terms of correlation, because, as you know, I mean, you may have a sequential AUM growth, but in the AUM, you also have some portions which are non-fee-paying, such as non-debt. We do not have much, but usually, we are very concentrated on fee-paying AUM. Then you have the usual pertaining to the debt segment, meaning debt-generated fees only when you deploy and not just based on AUM. That is why we focus more on the dynamic on a year-on-year basis, which remains quite consistent. When we say we have 12% fee-paying AUM growth year-on-year, that is consistent with a 10% or both 10% growth for the private market. It is 20% for IMGP and translating in this 13% I mentioned.
I would not draw too much conclusion from the Q on Q based on the revenue dynamic. I mean, what we see in terms of revenue dynamic, looking forward and assuming, obviously, the environment does not deteriorate further, is more consistent with the numbers we highlight on a year-on-year basis. On the rotation, as we said, we have a strong program of exits, a number of processes that have been launched. It is important to mention that we are willing to be flexible in the way we realize assets. We have to be pragmatic, and we also have to be mindful of the fact that there are more types of asset sales than just straight sales through an M&A process. Last year, we exited the balance sheet from iTracing in the lower mid-market buyout space through continuation funds.
There was a great exit three times combined with management fees generated for the future. This year, we have here a combination of a straight sale with Albingia and secondary sales with the portfolio I mentioned. This is what we intend to do going forward. We seek to see, engage at every time, at any point in time, what is the best way forward. We have sometimes competing processes within the group, and at the end of the day, we retain those which are the most value-creating for shareholders. The environment has become more uncertain. There is no debate about that. We continue to think that we should be able to execute well our plan, but it is clear that ever since the start of the year, the climate on M&A has changed a little. Why did we pick these three assets for a secondary sale?
Why did not we sell these assets full? We picked these three assets because they are high-quality assets with embedded future value creation. Nobody will go into a continuation fund, or nobody would buy with a small discount or a reasonable discount an asset that has not the capacity to increase in value in the next years. That is the reason why, by definition, you have here quality assets. Aromazone, Questel, and Planet are high-quality assets. Now, we did not want to sell these assets because it is too early. It is much too early for Aromazone, which is a great company, delivering strong growth. It has been acquired less than three years ago. It is too early to sell it. Same applies to Planet. The continuation of Planet is fairly recent. The successful transformation of Planet has allowed stronger EBITDA generation. There is more to come.
We want to keep that exposure. Now, what is important when we think in terms of managing the balance sheet is that we are also mindful of the promise we've made to the market that we want to move the business model towards an asset-lighter business model and return capital to our shareholders. It is to us a sound policy to reduce, to crystallize a bit some of the upside we've already got in a portion of the balance sheet invested in an asset while keeping strong value creation for the future. What we're talking about here, in aggregate, we're selling a 20% stake for the balance sheet in high-quality, high-growth assets, and we keep 80%. In the balance, we consider it's a sound financial policy.
Thank you very much.
You had a question on IMGP. Sorry, I forgot about it. If you look at.
Just the AUM, if you have it.
Yeah, the AUM. In fact, when you look at the proportionate AUM, because there are GP stakers, so their asset under management are in excess of $44 billion. In fact, if you would take the total non-prorata of their stake of the implied IMGP's AUM, that would be in excess of $100 billion. Here, we have $44 billion based on their share in the funds, which is up 7%. Now, interestingly, because we do not disclose these numbers in our AUM, in fact, IMG has also its own asset management arm. The AUM pertaining to its 100% own asset management arm are about $3 billion. If we were comparing things with others, you may want to add this $3 billion in other words. We have taken the conservative policy of being transparent about the IMG AUM, but not computing this AUM in our AUM base.
Very clear. Thank you.
You had the fourth question. Thank you, Pierre, reminding me on the portfolio growth. Listen, what we observed was, if I step back a little and put ourselves at the end of 2024, is companies across the board, with a few exceptions, I have named one, that have presented fairly strong budgets for 2025. That was on the back of good revenue growth and an improved drop-through, i.e., capacity to generate operating leverage, which is a bit of the reversal of what we had seen in the past years, where we may have had decent revenue growth, but the drop-through had deteriorated because of inflation and what you know about the disruption of value chains. We are in a situation where this has translated, generally speaking, in very strong months of January, February. Arguably, as you have heard from other players, March was a little softer.
We obviously monitoring the situation. It depends very much from the companies. Some companies didn't even see anything like this in March, depending upon the sectors they operate. Generally speaking, good start of the year, March a bit softer because people have become a bit more worried about the environment. I guess you hear that from pretty much everyone. The thing I'd like to highlight is that when you look at the EBITDA growth, which we don't publish in a trading update, in a quarterly trading update, this remains fairly strong. Usually, value creation is more based on EBITDA growth and revenue growth per se. We are in a more uncertain environment. The animal spirits adapt, and logically to that. We would expect that things will be clarified in the course of the second quarter.
A lot will depend upon the ongoing discussions on trade, the dollar, etc. I mean, nothing new to you.
Very clear. Thank you.
If you find that your question has been answered, press star two to remove yourself from the queue. We'll now take the question from Oliver Carruthers from Goldman Sachs. Your line is open. Please go ahead.
Hi, good morning, William. Oliver Carruthers from Goldman Sachs. I just got two questions. Can you give some color on the balance sheet realization rate that forms your base case for this year? Is it plausible that we get to the normal level of 20-25%, given that you talk about some other divestment processes that have been initiated? It'd be helpful to get a sense of scale here, particularly as markets are uncertain but seem to be getting more relaxed. The second question, a technical one. I think you're currently buying back stock in the market at a pace which is similar to the 2024, $200 million annual pace. When should we expect this to accelerate to the $400 million annual pace that you've reiterated today? Thank you.
Thanks, Oliver. First, we had said during our annual results that given the strong pipeline of exits and realizations that we foresee for 2025, we should be able to reach the lower end of our historical turnover rotation of balance sheet, which is in the range of 20% to 25% historically. If you take a 20%, that's EUR 1.6 billion roughly realization based on the EUR 7.9 billion of NAV of the balance sheet at the end of 2024. It is challenging, and it is all the more challenging in the context that we highlighted, which has arguably deteriorated ever since the beginning of the year. We are committed to the target, given the quality of the assets we have in the pipeline.
Arguably also the fact that all the processes that we've launched are going their course, and there was not a disruption or a walk away for many parties in the past weeks or quarters. I think people continue to be quite, people are more cautious, but people also have liquidity, can finance themselves, and want also to deploy money in opportunities. That's the market we are in. Share buyback. Share buyback, we have said that we would double the amounts that we would realize in 2025 relative to 2024, which was already a doubling from the year before. We are committed to execute it. Now, we have an ongoing program of daily share buyback. Arguably, and I know we could debate that given the stock price, we are a bit cautious, so expect that it will increase more in the second half of the year.
We want to have more visibility, obviously, on the exits. We are committed to this program, so do not get me wrong. We will execute that program. I think it is sound financial policy that we increase it gradually in the next quarters.
Okay. Very helpful and very clear. Thank you.
Once again, star one to ask a question. We'll now take the line from Alexandre Girard from CIC. Please go ahead.
Hi, good morning, William. Good morning, Pierre. Three questions on my side. The first one is related to private debt. You mentioned that we are in a more challenging environment. Are you monitoring maybe any raising default rates in that strategy? Can you comment also maybe on how spreads are behaving? We can read articles almost every day regarding the systematic nature of that category. Do not you fear that in the long term, the private debt might be more regulated, slowing down your development? This is my first question. The second question is regarding one of the goals that you had set at the November 2023 capital market day regarding improving your operational efficiency.
Can you maybe comment or give us examples of initiatives that you took to that regard, maybe commenting maybe about how your cost base is going to behave in 2025, maybe a few words on hirings? The third question is regarding your corporate development. Can we have maybe the acquisition price of the 30% stake that you just acquired in PIRMA? On the NAS side, are there any interesting opportunities that you might be looking at? Thank you.
Thank you, Waltheire. Private debt, that's still let's remember that when we talk about Eurazeo in private debt, we're talking about mostly, first of all, a direct lending franchise focusing on lower mid-market, pan-European. We were one of the largest players in the lower mid-market private debt direct lending, which I insist on that because it is different from the upper mid-market direct lending in the sense that there is less competition, the spreads are higher, it's more diversified, usually you have more securities, there is no covenant manufacturers, and it yields better as the asset manager. That's really a different spot than the mid-large, which tends to be more sort of today a bit more vanilla, a bit more competitive.
The spreads are holding well, but in fact, if anything, there is pressure downwards because there is a lot of liquidity in the system and a lot of people would like to lend. The uncertainties in the macro environment would tell you that spreads should increase. In fact, because there is a scarcity of deals in the upper end of the category, there is a bit more competition here. They continue to be materially higher than what you would find in mid-large by a good 150-200 basis points, which is a good thing. We have not seen an increase in default rates. Our default rates tend to be very low, close to new when you adjust it for recovery. So far, we have not seen any pickup.
To your question on the systemic nature of direct lending, I mean, there's a lot of talk about that, but I think people get a bit carried away with what we are talking about in terms of order of magnitude. The exposure of retail depositors to the category is very small still. For regulators to be focused on the systemic risk nature of an exposure, you need to have connectivity with the bank balance sheets that are largely financed by deposits. We're not talking here about heavily levered as far as Eurazeo is concerned, but a lot of players are like us, heavily levered vehicles that, in case of defaults, would have a chain effect on the bank's balance sheet. We don't collect deposits.
This is really an exposure that is associated with a certain level of risk, but this is a level of risk that is also framed today. Again, do not forget the order of magnitude. We are not talking about a huge portion of the deposits that are invested in private lending. Efficiency. We continue to be very focused on that, being mindful of the fact that we have a growth plan to deliver. A lot of the increase in the margins going forward will pertain to our capacity to scale funds, combined with increasing the maturity of our strategies. There is clearly a function, a correlation between the improving margin and the size/times number of interests that you have. You take, for example, our infrastructure fund, very successful first fundraising. Before fundraising, obviously, I mean, you lose money because you have the cost, you do not have the management fees.
You break even. You may not have an accretive strategy from the point of view of our FRE margin, the target FRE margin that we have in mind. With a second vintage, you'll improve because you would have two vintages yielding, and on top of it, there is a possibility that the size of the vintage will increase, and so forth. This is the main driver of partial efficiency. Our capacity to fundraise, scale the funds, and develop more mature vintages is a key driver. On top, of course, we are very focused on managing well our cost base in a competitive environment for the human resources. Of course, don't forget that 70% of our cost base is people, and the market remains competitive for good people across the board.
We have a policy of being very focused on making only the hires where we consider there would be an ROI. We have launched several initiatives on the operation side to digitize our processes, reporting processes, and avoid future costs linked to volumes. We also have some testing and some AI tools, including on the investment processes. That obviously helps. Again, it's about scaling, being intelligent in managing the operating model of your operations and some of your processes. It is a question of being very focused on discipline in terms of hiring. There's no miracle in the way we can deliver. For 2025, as we had already said, let me reiterate that we already reached in 2024 the bottom end of our target in terms of mid-term FRE margin, a few years ahead of the end of the plan.
We see where we end up in 2025, but I personally think it would be already a good achievement if we keep the margin steady for the year. The price for PIRMA minorities, that is really a small deal that was framed in the context of the acquisition in 2021. We do not disclose all the details, but I think the aggregate multiple was about 12 times run rate FRE for 2024. That is something in the order of magnitude, so very normal for a transaction of that type.
Any other M&A opportunities ahead for you?
As we've said many times, we have an organic plan, which we are focused on executing. We consider that M&A could be helpful to accelerate the execution of this plan. There are a number of people who are willing to talk. We have some discussions, but I think it would be an exaggeration to say that we are close to announce anything. It remains to be seen if we are able to find the right targets at the right price and if we can have enough comfort that we can integrate the teams. Yes, we are obviously more an acquirer than a target and mindful of the fact that M&A can be a good tool to accelerate some part of the plan.
Yeah. Thank you, William.
We have no further questions in the queue, so I'll hand you back to your host for any additional or closing remarks.
Thank you very much for attending this call and for your questions. We are obviously available for further questions offline with Pierre and the IR team. We will be back for H1 results.
H1 will be on the 24th of July.
Thank you very much. Have a good day.
Good day. Bye-bye.
That concludes today's conference. You may now disconnect.