BENF

Hello, and thank you for standing by. Welcome to Beneficient's Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Dan Callahan. You may begin.

Thank you, operator. Good afternoon, and thank you all for joining us for Beneficient's Fiscal Third Quarter 2026 Conference Call and Webcast. In addition to the call and webcast, we issued a results press release today that was posted to the Shareholders section of our website at shareholders.trustben.com. Today's webcast, as the operator indicated, is being recorded, and a replay will be available on the company's website. On today's call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Actual results and future events could materially differ from those discussed in these forward-looking statements because of factors described in our earnings press release and in the Risk Factors section of our Form 10-K and in subsequent filings we make with the Securities and Exchange Commission. Forward-looking statements represent management's current estimate and Beneficient assumes no obligation to update any forward-looking statements in the future. Today's call also contains certain non-GAAP financial measures, including adjusted operating expense. Please refer to our earnings press release, which again is available on our website for important disclosures regarding such measures, including reconciliation to the most comparable GAAP financial measures. Hosting the call today will be Beneficient's Interim CEO, James Silk. Following his remarks, Greg Ezell, Chief Financial Officer, will provide some financial highlights. I'll turn the call over to James. Take it away, James.

Thank you, Dan. Good afternoon, everyone, and thank you for joining us. Before I get into the third quarter, I'd like to address the passing in December of Tom Hicks, who has been a member of the Board since 2017. Tom was a legendary figure in American business, a pioneer in private equity and a dedicated leader who brought extraordinary vision, discipline and experience to Beneficient. We appreciate his many contributions to the company and his guidance and friendship will be missed. Pete Cangany, a Board member since 2019, was appointed Chairman of the Board effective December 15, 2025. In addition to his experience with Ben as a long-standing Board member, Pete brings deep experience from a more than 30-year career at Ernst & Young, including as a partner from 1993 until his retirement in 2017. We are fortunate to have his leadership along with all members of the Board, and they are closely engaged in setting Ben's go-forward strategy as we seek to unlock value in private assets. For the past several quarters, the Beneficient management team has been working through a number of challenges related to the separation from our former CEO. These challenges have required significant resources and management attention. But we believe executing on our plan to address these challenges is a necessary step to better position the company to realize and execute on its business strategy. The company continues to see strong market opportunity. And during our fiscal third quarter, we were able to accomplish numerous critical items to stabilize and strengthen our core business that we believe better positions the company to close additional liquidity and GP primary commitment financings in the future. In December, we closed our first new GP primary commitment financing since June of last year, signaling our dedication to our business strategy and continued market interest in company products. Our third quarter results are also indicative of our continued focus and discipline on operational and financial management. We continue to prioritize creating an efficient technology and AI-enhanced services platform. a platform designed to allow the company to operate more efficiently with a focus on delivering steady, profitable deal flow and growth. This increased focus is demonstrated by a reduction in adjusted operating expenses of 6.5% year-over-year and 18% year-to-date, excluding onetime and nonrecurring expenses. We have also worked to pay down the company's payables. To achieve this, we generated approximately $50 million in gross proceeds through asset sales and equity redemptions. That capital has, among other things, allowed us to systemically reduce debt, including approximately $27.5 million that was ultimately owed to a Texas State Bank. We believe these actions have collectively strengthened our financial position. And going forward, we will continue to focus on expense reduction as well as potential simplifications of our capital structure to deliver long-term shareholder value. In January, we received notification from NASDAQ that we have regained full compliance with NASDAQ continued listing requirements. Given the circumstances, this was no small feat as we completed an annual audit. We filed financials for multiple periods in a compressed time frame. We engaged in extensive external reviews. We improved our balance sheet equity and we increased the stock price to satisfy NASDAQ's minimum listing requirement. Throughout this process, the company maintained regular contact with the exchange, submitted plans to regain compliance and executed on those plans. We are also very pleased to have reached the final court-approved settlement related to the GWG Holdings litigation and to have done so within the limits of our existing insurance policies. Collectively, these milestones represent a turning point that allows us to focus more fully on driving growth and enhancing the value of our liquidity solutions. In addition to resolving the GWG matters, we have cooperated fully with the United States District Court for the Southern District of New York on matters relating to our previous CEO. Our former CEO's criminal trial related to his conduct is scheduled for early April 2026. We are considering all options that the company may pursue related to our former CEO's conduct, including bringing litigation against our former CEO, his entities and other parties for potential financial, equitable and/or other relief. Of specific note, the company intends to vigorously pursue claims regarding the validity of over $100 million in debt purportedly owed to an entity related to our former CEO. Looking forward, we are working on a number of initiatives that we believe will broaden our financing options, increase our capacity to grow our loan portfolio backed by alternative assets and ultimately improve the returns for our stockholders. This includes focusing on our core mission of liquidity and primary capital, implementing simpler, more streamlined approaches to providing these services and broadening our deal flow opportunities and capabilities. As we head further into 2026, we believe we will be well positioned to better leverage our infrastructure and maximize the robust and diverse markets we serve. Building a stable base for growth has been a priority of management since my return to the company. By addressing the key issues I mentioned earlier, we believe we are now able to bring more of the company's resources to growing the core business, and I look forward to providing more details on that in the coming quarters. Now I'd like to turn the call over to Greg Ezell, Beneficient's CFO, to go over some of the financial highlights. Following Greg's remarks, we'll take a few questions from the analyst community. Greg?

Thank you, James. Let's now turn to our quarterly results and financial position as of December 31, 2025. As James stated earlier, due to circumstances surrounding the resignation of our former CEO, we were unable to grow our investment portfolio through new financings other than one transaction that closed in December for approximately $3.0 million in NAV. We reported investments with a fair value of $206 million compared to $291 million at the end of the prior fiscal year. These investments serve as collateral for Ben Liquidity's net loan portfolio of $188 million and $244 million, respectively. Asset sales or equity redemptions of certain investments held by the Customer ExAlt Trusts resulted in an aggregate of $50 million in gross proceeds on a year-to-date basis, which have been used to pay down certain debt and provide working capital. As of December 31, 2025, Ben's loan portfolio was supported by a highly diversified alternative asset collateral portfolio, providing diversification across approximately 150 private market funds and approximately 430 investments across various asset classes, industry sectors and geographies, a breakdown of which is available in the accompanying earnings release as well as on our shareholder website. GAAP revenues were $18.7 million for the current quarter and $3.3 million for fiscal 2026 on a year-to-date basis. The positive GAAP revenues were driven by a $44.1 million increase in fair value of a derivative asset related to the appreciation forfeiture provision included in the conversion of preferred stock to Class A common stock by Mr. Hicks and Mr. Silk. Adjusted revenues, which excludes the derivative asset fair value adjustment, were a negative $25.4 million for the current quarter and $40.8 million negative on a year-to-date basis. This derivative asset settles in January 2028 and will be fair valued each period until then. Upon settlement, a portion of the Class A common stock issued to Mr. Hicks and Mr. Silk could be returned to the company based on the terms of the appreciation forfeiture provision. Operating expenses were approximately $15 million compared to approximately $14 million in the prior year third quarter and included a $1.7 million noncash accrual. Excluding this noncash item, operating expenses declined 6.5% period-over-period. On a year-to-date basis, excluding the noncash and related items in each period as applicable, operating expenses were approximately $44 million as compared to $53 million for the first 3 quarters of fiscal 2025, a decline of 18%. Next, we'll move on to our primary business segments, Ben Liquidity, which generates interest revenue for supplying liquidity off the balance sheet and Ben Custody, which produces fee revenue for the use of the platform and trust services. As typical, I will be focusing my discussion on these business segments as it's their operations along with corporate and other that accrues to Ben equity holders. Ben Liquidity recognized $8.2 million of interest income during the third quarter of fiscal 2026, a decrease of 3.6% sequentially, primarily due to a higher percentage of loans being placed on nonaccrual status, partially offset by the effects of compounding interest on the remaining loans. Year-to-date, Ben Liquidity recognized $25.5 million of interest income, down 25.2% compared to the prior year period, primarily driven by lower loans net of allowance for credit losses, resulting from higher level of nonaccrual loans and loan prepayments, partially offset by new loans originated. Operating loss for the fiscal third quarter was $29.2 million, a decline from an operating loss of $0.8 million sequentially. The decrease in operating performance was due to higher intersegment credit losses in the current fiscal period as compared to the quarter ended September 30, 2025, due to larger declines in NAV arising from updated financial information received from the fund's investment manager during the period and asset sales transacting generally at lower prices as a percentage of NAV during the quarter than in prior quarters, which resulted in lower relative loan paydowns. Year-to-date operating loss was $36.0 million versus operating loss of $0.5 million in the prior year period. The increase in the operating loss is partially a result of the lower revenues period-over-period plus an increase in the intersegment credit losses in the current fiscal year as compared to the same period in the prior year. Turning to Ben Custody. NAV of alternative assets and other securities held during the third fiscal quarter was $230.2 million as of December 31, 2025, compared to $338.2 million as of March 31, 2025. The decrease was driven by disposition of certain alternative assets, distributions and unrealized losses on existing assets, principally related to adjustments arising from updated financial information received from the fund investment manager during the period or the fair value of investments deemed probable to be sold at an amount that differs from NAV, offset by $14.8 million of new originations. Revenues applicable to Ben Custody were $2.9 million for the fiscal third quarter compared to $3.1 million for the quarter ended September 30, 2025. The decrease was a result of lower NAV of alternative assets and other securities held in custody at the beginning of the period when such fees are calculated, along with certain upfront intersegment fees that are amortized into revenue over time being fully amortized in the prior year period. Operating income for the third fiscal quarter decreased to $2.0 million from $2.3 million sequentially, largely attributable to the decline in revenues applicable to this operating segment as described above and slightly higher employee compensation and benefits expense. Year-to-date revenues were $10.2 million, down 36.9% compared to the prior year period, largely the result of lower NAV of alternative assets and other securities held in custody, along with certain upfront intersegment revenues that are amortized into revenues over time being fully recognized in a prior period. Operating income was $7.4 million for the 9-month period compared to operating income of $9.1 million in the prior year. While revenues declined in the current year period as compared to the same period in the prior year, operating expenses declined by $4.3 million, reflecting noncash goodwill impairment in the prior year period of $3.4 million and intersegment provision for credit loss of $1.3 million. No such impairment or credit losses were recorded in the current year period. Adjusted operating income was $7.4 million for the 9-month period compared to $13.9 million in the prior year. This decline is principally related to lower revenues in fiscal 2026 as compared to the same period in the prior year. As of December 31, 2025, the company had cash and cash equivalents of $7.9 million and total debt of $100.3 million. Distributions received from alternative assets and other securities held in custody totaled $11.3 million for the 9 months ended December 31, 2025, compared to $19.3 million for the same period of fiscal 2025. Total investments at fair value of $205.8 million at December 31, 2025, supported liquidity's loan portfolio. This concludes my prepared remarks on the financials. We will now open the call to questions from our covering research analysts. Operator, will you please give the instructions for Q&A.

[Operator Instructions] Our first question comes from the line of Michael Kim with Zacks.

That's better. Sorry, can you hear me okay?

We've got you Michael.

It's actually Giles Hock. I'm the Managing Director at Zacks Investment Research. Michael is on an airplane. I had a chat with them this morning. I wanted to ask about the core liquidity platform, particularly with the sort of high net worth and smaller institutional clients. Could you give us a quick update on how you're approaching channels like advisers, family offices, private banks and how you're thinking about marketing and awareness building there?

Well, I think the -- as we mentioned on the call, the focus has been on really stabilizing and develop that platform for sort of rollout as we move forward. I do think the -- going forward, it will be a focus on the really the family office and the adviser network as well as continuing to provide follow-up through our AltQuote product, which is on our website, which provides a sort of quick and easy access into a preliminary indication of interest on the assets. So we'll have more to, I think, announce on that as we move forward, but it's -- that's really where we're going directionally.

And then on the legal side, you mentioned the litigation briefly. Was there sort of any forward momentum or anything investors should keep in mind from a sort of balance sheet or debt perspective with regards to the litigation?

We're not going to comment too much about litigation. As mentioned before on the call, the former CEO's criminal trial is set to commence on April 6. We would anticipate, again, not within our control. It's obviously the U.S. government, that to take a few weeks, 3, 4 weeks to run its course. And we will be closely monitoring that situation, and we've preparing a variety of different options as that outcome is determined. And certainly, one thing that we've mentioned before and we'll focus on as part of that is to attack the validity of the debt that is purportedly held by a party related to our former CEO of approximately $120 million or so. But we would expect to likely expand our litigation approach beyond just the debt as well.

Our next question comes from the line of Brendan McCarthy with Sidoti.

Just wanted to start off looking at the results and liquidity. Obviously, the revenue line item looks pretty stable, just considering where loans receivable came in at. But can you walk us through the operating loss there? Is that just mostly driven to the asset sales? Or is that really more so from updated NAV values?

Brendan, it's Greg. Yes, a lot of it, I would attribute it to the asset sales activity that were happening during the quarter. But equally, there were some updated financial information marks that kind of a couple of larger negative ones that are attributing to it as well, right? So mainly asset sale related, but also has a flavor coming from GP reported NAV updates.

Got it. I appreciate that. And it's probably safe to assume those are probably more just kind of one-off instances just considering you run a pretty diversified portfolio.

Yes, I believe that is correct.

Okay. And then just looking at operating expenses overall, I'm sorry, I actually think within liquidity, OpEx continues to come down. I think you're at like $13 million for the quarter. Is that a fair quarterly run rate at this point? Or do you think you have much more room to continue cutting there?

Yes. I think it's getting close to fair. There's still a little bit that we're going to try to take advantage of in reducing expenses in that operating segment and not just in that operating segment, but across the board. But in particular, for Ben Liquidity, there still is a little bit of room in there. We think that we can reduce those costs a little bit further in the future.

Got it. And then just wondering -- just curious about the pipeline for liquidity transactions. It seems like you've had good momentum in the primary capital space with GPs. Can you talk about the pipeline a little bit?

Yes. We have continued to have discussions and inquiries coming in over the last few months being out of the market with the financials as we were for a significant period of time, as we discussed, put a hold on that. And really, where we are now is sort of following up on the opportunities that we have, both potentially, let's call it, larger scale transaction or 2, but also really trying to for the next quarter as we go forward, beginning to sort of act on what we have in front of us, which is a fair amount of contacts and potential opportunities. And we've had some positive experiences with some of our counterparties over the last quarter plus that have participated in these previously. So I think we do have some very solid momentum that we'll be looking forward to providing more information on, particularly as we get through that April period, I think that's going to be an important period of time for the company given the clarity that it will likely provide or potentially provide to the company on some of these other obligations.

Just last question for me on the balance sheet. I think it said you had cash of right around $8 million, total debt of $100 million. Does that $100 million debt include the amount owed to entities related to the previous CEO?

Yes. Of that $100.3 million, I believe, of debt, all of the balance relates to an entity associated with our former CEO, except $3.7 million.

Okay. Okay. Maybe one last question here. So I know you've done a great job, obviously, navigating the management transition, regaining NASDAQ compliance, cleaning up the balance sheet a little bit. What can investors really take away? What's the near-term priorities for you guys going forward?

The market opportunity is still very strong. I think the near-term priorities for the company in addition to sort of continuing to resolve some of these outstanding matters is to begin to demonstrate the validity of the business model by executing on some of the transactions that we have in front of us, perhaps not in volume, but in terms of how we are structuring them from the standpoint of potentially approaching them from a more efficient and simplified way and, let's just say, a clearer description to the market in terms of how those deals attach to the bottom line. As I said, that will still take, I think, some time to do that in volume, in particular, as you get -- but I think as you get through the spring period, I think that's where I think the opportunity really lies. But near term, it's going to be executing on a handful of deals that demonstrate that the market is still there and that the product is still viable and that the way we're thinking about doing these newer deals is a better way to do it, I guess, is the way I'd characterize it.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Dan for closing remarks.

I want to thank everybody for tuning in today. Again, you can read the press release about the third fiscal quarter and listen to the replay of this webcast on the Shareholder website at shareholders.trustben.com. Thanks again, and have a great evening.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Beneficient Second Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Callahan, Director of Communications. Please go ahead.

Good morning, everyone. And thank you for joining us on Beneficient's Fiscal Second Quarter 2026 Conference Call and Webcast. In addition to the call and webcast, we issued a results press release last Friday that was posted at Shareholders section of our website at shareholders.trustben.com. Today's webcast as the operator indicated, is being recorded, and a replay will be available on the company's website. On today's call, management's prepared remarks may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ from those discussed today. Actual results and future events could materially differ from those discussed in these forward-looking statements because of factors described in our earnings press release and the Risk Factors section of our Form 10-K and in subsequent filings we make with the Securities and Exchange Commission. Forward-looking statements represent management's current estimates and Beneficient assumes no obligation to update any forward-looking statements in the future. Today's call also contains certain non-GAAP financial measures. Please refer to our earnings press release, which is available on our website for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. At this time, I am pleased to introduce James Silk, the interim CEO for Beneficient. He was appointed to that position by the Board in July of this year. Mr. Silk previously served as Executive Vice President and Chief Legal Officer for Beneficient from January 2020 until May 2024. During that time, he was integral to the development of the company's corporate structure, the completion of the company's business combination transaction and the navigation of the complex legal issues associated with running the company's business. Additionally, Mr. Silk oversaw the company's operations, underwriting risks and legal groups. After James completes his remarks, Greg Ezell, Chief Financial Officer, will provide some financial highlights. I'll now hand the call over to James.

Well, a lot has happened over the past 6 months, has faced some challenges. The of Beneficient's business and our market opportunity remains strong. When I talked to the Board about returning, this was back in July, it was clear they were united and committed to Ben, which is important to me. And since my return, management, myself and others have been focused on stabilizing the company, getting the company to a place we can execute on our mission to provide liquidity, primary capital customers in the alternative asset market. It's our core business. And I'm committed to that mission and has been energizing to lead the chart during this transition period As it relates to recent developments, as we previously disclosed, in June, we separated from our former Chairman and CEO, Brad Heppner. That occurred just before our annual report was filed. That separation occurred after the company identified credible evidence that Mr. Heppner had committed fraud against the company. Also, as previously disclosed, Mr. Heppner was recently indicted and now faces multiple criminal charges. The company is considering all available options related to Mr. Heppner's conduct, including counterclaims and litigation against Mr. Heppner. The company also intends to vigorously pursue claims regarding the validity of over $100 million of debt poorly owed to an entity related to Mr. Heppner. Overall, while unpleasant, we believe this is an opportunity for the company to move past Mr. Heppner, both reputationally and substantively and ultimately better position the company to execute going forward. Another important recent development concerns the previously disclosed agreement to settle all claims pending in the lawsuits related to GWG against the company, its subsidiaries in each of their current and former directors and officers. That settlement has been approved by the GWG Busy Court. The district court for the northern history of Texas has granted the motion for preliminary approval of that settlement and the hearing on final approval of that settlement has been set for January of 2026. So important progress on that front. Importantly, the settlement is within insurance limits and requires no out-of-pocket payments by the company. I would also note that the claims against Mr. Heppner's entities are not included in that settlement. The company has also worked to regain compliance with NASDAQ listing rules. As previously disclosed, the company was not in compliance with the NASDAQ periodic reporting requirement with our filings being bladed primarily due to the timing of the developments surrounding Mr. Heppner's reputation. Now as of the first quarter 10-Q filing a few weeks ago, we're now back in line with our periodic reporting. And in fact, thanks to our incredibly dedicated accounting team, we filed a 10-K and 2 10-Qs in just over 6 weeks. So much credit to that team. We've also regained compliance with the market value of listed securities requirement with two. Finally, the company continues to take steps to regain compliance with NASDAQ good price requirements. More specifically, we anticipate holding a special meeting on December 1, 2025, to seek shareholder approval of a reverse stock split of its common stock. Bottom line in terms of NASDAQ compliance is that we worked on a plan of compliance. We presented that plan to the NASDAQ panel, and we've been executing on that plan. Importantly, as part of that plan to regain compliance with NASDAQ's continued listing requirements and what I would view is a strong show of confidence in the company's future. Tom Hicks, our Board Chair, converted approximately $53 million of our preferred units in the company's subsidiary into the company's Class A common shares. In connection with that conversion, we agreed not to sell the shares until October 1, 2028, to 3 years. We've also agreed to forego any potential appreciation of the converted shares during that lockup period. And we also agreed during that lockup period to vote those shares with the Board's recommendation for all matters other than the election of directors. We believe this transaction aligns our interest with those of our common shareholders and reinforce leadership's confidence in the company's mission in the future. Final note on developments, we also continue to focus on our relates to Kansas, we are committed to Kansas. We appreciate Kansas, and we'll continue to work to deliver on our obligation to Kansas and its communities. So far, I focused on recent development -- to that end, we've cut costs and operating expenses, which Greg will discuss further. We've also reduced our legitimate third-party debt from $27 million in January to under $4 million as of today. We are also streamlining operations and plan to roll out simpler ways to provide liquidity and capital to customers. We're also exploring adjacent markets where our solutions may work with minimal extra cost, for example, we're reviewing our existing tools and tech and are looking for ways to put them to use.

Ladies and gentlemen, please stand by your conference. We'll resume momentarily.

We're just having a little bit of technical difficulty with James' line. So you bear with us, we'll be back with James in just a few moments. In the meantime, Greg, why don't we have you run through the financials, and then we'll pick up with James when we're able to get him back on the line. I apologize to everybody for this.

That sounds good, Dan. Yes, we'll turn our results now our attention now to the quarterly results and financial position as of September 30, 2025. First, I'll start with a few highlights from the quarter. We reported investments with a fair value of $244 million. These investments serve as collateral for Ben liquidity's net loan portfolio of $223 million. Revenues were a negative $2.8 million and $15.4 million for the second quarter and year-to-date periods in fiscal 2026 as compared to a positive $8.6 million and $18.6 million in the prior year. GAAP revenues principally reflect mark-to-market adjustments on the investments that serve as collateral to Ben's loan portfolio, which for the current fiscal year also includes adjustments to fair value for investments that we have deemed probable of being sold at an amount less than the most recently reported GP value. These arise specific to our asset sales initiatives that we have previously disclosed. Operating expenses were $15.1 million in the second quarter of fiscal 2026, as compared to $22.3 million in the same period for fiscal 2025. On a year-to-date basis, operating expenses for fiscal 2026 were $95.1 million, which included the accrual of a loss contingency of $62.8 million and additional interest expense on the loss contingency accrual of $1.7 million, as compared to negative $12.0 million for the prior quarter, which included the release of a loss contingency accrual of $55.0 million and a noncash goodwill impairment of $3.7 million. Excluding the noncash goodwill impairment and the accrual or release of a loss contingency, including post-judgment interest in each period as applicable, operating expenses were $13.4 million in the second quarter of fiscal 2026 as compared to $22.0 million in the same period for fiscal 2025. With these same exclusions on a year-to-date basis, operating expense for fiscal 2026 was $30.6 million as compared to $39.3 million in the prior year. Reported GAAP net loss attributable to Ben's common shareholders for the current quarter was $3.6 million and $68.7 million for the current year-to-date period. Primarily reflecting negative mark-to-market adjustments on investments as part of the asset sales initiative and the accrual of the loss contingency including post-judgment interest impacting both the current quarter and the year-to-date period for fiscal 2026. During the current fiscal year, we have completed asset sales or equity redemptions of certain investments held by the customer ExAlt Trust, which has resulted in an aggregate of $46.4 million in gross proceeds on a year-to-date basis through the filing date of our Form 10-Q last Friday. These proceeds have been used to pay down certain debt and provide working capital. Next, we'll move on to our primary business segments. In liquidity, which generates interest revenue for supplying liquidity off the balance sheet and Ben custody, which produces fee revenue for the use of the platform and trust services. As typical, I will be focusing my discussion on these business segments, as it's their operations along with corporate and other that accrues to Ben's equity holders. During the second quarter of fiscal 2026, Ben's liquidity recognized $8.5 million of interest income, a decrease of 3.8% from the quarter ended June 30, 2025, primarily due to a higher percentage of loans being placed on nonaccrual status, partially offset by the effects of compounding interest on the remaining loans. Ben liquidity recognized $17.3 million of interest income for the 6 months ended September 30, 2025, down 24.1% compared to the prior year period. Primarily due to lower loans net of the allowance for credit loss resulting from higher levels of nonaccrual loans and loan prepayments, partially offset by new loans originated during the period. Operating loss for the fiscal second quarter was $0.8 million, an improvement from an operating loss of $6 million for the second quarter -- or for the quarter ended June 30, 2025. The increase in operating performance was due to lower intersegment credit losses in the current fiscal period as compared to the quarter ended June 30, 2025, due in part because of the disposition of certain investments during the period, which generated loan repayments at Ben liquidity sooner than had been estimated in prior period calculation of the intersegment credit losses. Operating loss was $6.8 million for the 6 months ended September 30, 2025, declining from operating income of $2.4 million in the prior year period. This decrease is partially a result of lower revenues period-over-period, plus an increase in the intersegment credit losses in the current fiscal year as compared to the same period in the prior year. Moving on to bank custody. NAV alternative assets and other securities held in custody was $271.4 million as of September 30, 2025, compared to $338.2 million as of March 31, 2025. The decrease was driven by disposition of certain alternative assets, distributions and unrealized losses on existing assets, principally related to the disposition of assets as part of our asset sales initiative and adjustments to NAV based on updated information reported from the fund's investment sponsor or manager during the period, offset by $11.8 million of new originations. Revenues applicable to Ben custody were $3.1 million for the fiscal second quarter, compared to $4.2 million for the quarter ended June 30, 2025. The decrease was the result of the lower NAV of alternative assets and other securities held in custody at the beginning of the period when such fees are calculated, along with certain upfront intersegment fees, that are amortized into revenue over time being fully recognized in a prior period. In custody revenues were $7.3 million for the 6 months ended September 30, 2025, down 32.5% compared to the prior year period, primarily due to lower NAV alternative assets and other securities held in custody, along with certain upfront intersegment fees that are amortized into revenues over time being fully recognized in a prior year period. Operating income for the second fiscal quarter decreased to $2.3 million from $3.1 million for the quarter ended June 30, 2025. The decrease was primarily due to the decline in revenues applicable to this operating segment as described earlier, and employee and professional service expenses, offset by slightly lower segment operating expenses. Operating income was $5.4 million for the 6 months ended September 30, 2025, compared to operating income of $5.6 million in the prior year period. While revenues declined in the current year period as compared to the same period in the prior year, operating expenses declined by a similar amount, primarily due to noncash goodwill impairment in the prior year period of $3.4 million. No such impairment was recorded in the current year period. Adjusted operating income for the 6 months ended September 30, 2025, was $5.4 million compared to adjusted operating income of $9.0 million in the prior year period, with the decrease in adjusted operating income primarily due to lower revenue related to lower NAV of alternative assets, offset by slightly higher operating expenses during the current year fiscal period. As of September 30, 2025, the company had cash and cash equivalents of $4.9 million and total debt of $104.0 million. Distributions received from alternative assets and other securities held in custody totaled $7.8 million and proceeds received from asset sales totaled $37.2 million for the 6 months ended September 30, 2025. This concludes my prepared remarks on the financials.

Well, we're going to throw it to James, who is back and up and running. James, we'll ask, you were talking about the conversion.

All right. Can you guys -- Dan, can you hear me?

Yes.

Okay. Well, this is exciting, obviously. While we're doing it live, this is not recorded unless this is one of the more creative ways to demonstrate live performance. Moving back to the conversion. So as part of our plant to regain compliance with the NASDAQ continued listing requirements, Tom Hicks, our Board Chair and myself, converted $53 million of our preferred units into the company's Class A common shares. In connection with that conversion, we agreed not to sell the shares until October 1, 2028, so 3 years. We've also agreed to forgo any potential appreciation in the value of the converted shares during the lockup period. Finally, also agreed to vote those shares with the Board's recommendation for all matters other than in the election of the directors. We believe this transaction aligns our interest with our common shareholders and reinforces leadership's confidence in the company's mission and future. I also want to point out -- I also want to highlight that we continue to focus in our relationship with Kansas. In short, we're committed to Kansas. We appreciate Kansas, and we'll continue to work to deliver on our obligations to Kansas and its communities. But that's the recent developments, but we realize the next steps are crucial on the success of our business plan and strategy. To that end, we've cut costs and operating expenses, which Greg outlined. We've also reduced our legitimate third-party debt from $27 million in January to under $4 million as of today. We're also streamlining operations and plan to roll out simpler ways to provide liquidity and capital to customers. We're also exploring adjacent markets where our solutions may work with minimal extra cost, for example, we are reviewing our existing tools and tech and are looking for new ways to put them to use. Put simply, we're working towards making beneficial leaner, more flexible and easier for our target market to understand and do business with. By carrying out these steps, we believe we'll be better positioned to seize new opportunities. The market for early liquidity services is large and growing. A Jefferies study in July found that private market secondaries accelerated and reached a 6-month record in the first half of this year. Global transaction volumes reached $103 billion. That's a 51% increase from $68 billion in the first half of 2024. Accordingly, we believe investors and alternative assets need liquidity and other services, and we have the solutions to meet those needs. I'll close by simply saying that I'm very excited about our future, and I'm glad to be back helping management and the employees on our positive path forward. With that, I'll turn it back over to Dan to close out and take any questions.

Yes. Operator, we're available for questions.

[Operator Instructions] Our first question comes from the line of Michael Kim with Small-Cap Research.

First, James, I understand the core value propositions of the company remain intact. But just curious how your strategic vision might differ a bit and what your priorities are going forward, particularly as it relates to reaccelerating origination volumes?

Thank you, Michael. That's a very good question. I think management going forward will be focused on implementing the business model in our core space, which is the sort of high net worth or ultra-high net worth market, focusing on transactions in that $5 million to $25 million range that has been sort of a core part of our early model. I think the difference would be that the -- previously, there's been a focus on perhaps larger transactions, more foundational. And I think our approach will be more approaching with more of an incremental approach in terms of the size of the transactions.

Thank you, Michael. Got it. Makes sense. Okay. And then maybe as you have discussions with some of these high net worth investors, have you gotten a sense that maybe prospective customers might be taking a bit of a pause in terms of allocation decisions, just given sort of market volatility and as you work through sort of the management transition? And then related to that, any update on timing as it relates to naming a permanent CEO?

So a couple of questions there. In terms of dealing with our customer base, I think the need for liquidity and sort of taking timing, think the need is there. Obviously, I think the market wants to see us stabilize before we begin to move forward, which is what we're doing, and quite frankly, what I believe we've done and positions ourselves to move forward. In terms of my role as the interim CEO, we continue to -- we continue to evaluate sort of this transition period. And I'm sure the Board will be communicating in short order in terms of its approach in terms of the permanent CEO position. But the focus right now has been on stabilizing. We're now shifting more to optimizing our model. As I mentioned before, we're simplifying our approach to our products. And I think that will be the point at which we'll have a -- for further developments in that regard.

Got it. And then maybe just one question for Greg. I appreciate some of the incremental color around on the expense side. But as we look forward, just curious to get your perspective on sort of further opportunities to rationalize the cost base, particularly as it relates to sort of corporate and other expenses.

Yes, good question, Michael. I mean, we continually evaluate all of our vendors and ways to be more efficient. I think we've -- as you've seen over time, we really ratcheted those kind of base expenses down. There are some additional opportunities there that we evaluate, but I think there'll be more modest and incremental reductions versus some of the more drastic changes that we've seen comparing the last 6 months in terms of cost reductions.

Our next question comes from the line of Brendan McCarthy with Sidoti & Company.

Great. Just wanted to have a -- start off on the balance sheet. I think in the press release, you mentioned there was roughly $104 million in debt on the balance sheet. Can you provide color on, I guess, kind of the breakdown of that debt? Is all of that stemming from the credit agreement with BCH? And how can we kind of think about the debt going forward?

Yes, it's a good question. I'll take that. It's Greg. So on our balance sheet as of September 30, $104 million, about -- about $8 million of that was related to our -- we call it the HICS credit facility called HHBDH in the footnotes. The rest of that is primarily related to the HCLP loans and the HCLP loans, as a reminder, are the notes with Brad related Brad Heppner-related entities that we're investigating the validity of those amounts at this time.

And Greg, it's worth noting -- sorry, just to follow up on that, right, the HIC/TCV loan is now -- the balance of that is below $4 million. And as Greg noted, the HCLP loan is the Brad Heppner-related debt, which we intend to challenge and has obviously been the centerpiece of the criminal indictment against Mr. Heppner. So we will pursue all remedies as it relates to that debt.

Understood. I appreciate that. And I think there was talk about really exploring adjacent markets, perhaps ways to simplify the operating model. How can investors really think about what that ultimately means looking ahead for Beneficient?

Sure. From the standpoint of simplifying the model, it's both the cost and transparency process. The current product, the way things are designed, results in a fair number of internal entities that increases some costs and complications on our side. So we're simplifying that from an internal standpoint. And then from a transparency standpoint, the -- the goal is to develop products where the revenues and the cash flows from those products and from those services flow more cleanly into the -- basically into the public company in a way that shareholders can understand easier and also designed to basically provide more value to the common shareholders by going through a little bit of a cleaner approach. In terms of the adjacent markets, the company has developed over time, a fair amount of technology for its internal purposes, including AI-generated tools that help in both portfolio management, as well as data extraction. And that has been a -- these have been internal tools, and we're looking now to externalize some of those, either directly through technology or together with some of the trust related services that we can provide.

Got it. That's helpful. That makes sense. Has there been a conversation with end market customers just related to potentially outsourcing that technology? Or is that still more...

Yes, we're having some conversations, nothing to report. But yes, we are exploring both the market receptiveness, as well as ways to refine what we have internally and make it more outward facing and so those are part of discussions that we're having.

Great. That's good to hear. And last question for me just on the core liquidity business. Is most of the pipeline still more focused in the PCP channel? Or is there other interest in the general kind of broad liquidity transaction area? Right now, it's the channel has -- reflects sort of where we were, I'd say, 3, 4 months ago, just given the focus on stabilizing, getting ourselves current on our filings, resolving the NASDAQ compliance matters and obviously moving forward off of Mr. Heppner. So -- the pipeline is -- or rather the deal flow is probably more leaning towards the PCP, but that's a -- we are sort of moving forward, as you've gotten into this current on our filings, we're sort of reopening the process. So that will evolve, I think, over the sort of the near medium term.

I'm currently showing no further questions at this time. I would now like to turn the call back over to Dan Callahan for closing remarks.

Thank you, everybody, for joining us and bearing with us through our technical difficulties. If you want to listen to the replay, it will be available on the Shareholders section of trustben.com. Thanks again for joining us this morning, and have a great rest of your day.

This concludes today's conference. Thank you for your participation. You may now disconnect.