By Michael Kim
NASDAQ:BENF
READ THE FULL BENF RESEARCH REPORT
Post-market close on 10/20/25, Beneficient (NASDAQ:BENF) reported F1Q26 (June) earnings results and filed the company’s Quarterly Report of Form 10-Q. On a GAAP basis, BENF reported a net loss of $7.19 per Class A diluted share for F1Q26 versus net income of $12.11 per share for F1Q25. The year-over-year variance primarily related to less favorable GAAP revenue trends as well as a $62.8 million arbitration loss charge in F1Q26 compared to a $55.0 million release of a loss contingency accrual in the year-ago quarter.
Adjusted segment revenues attributable to BENF equity holders comprising Ben Liquidity interest income, Ben Custody fees, and Corporate & Other totaled $13.1 million for F1Q26, down 8% from the prior quarter’s level. While Ben Liquidity interest income increased by 4% on a sequential basis, Ben Custody fees were down 22% on a sequential-quarter basis – consistent with lower NAVs of custodied assets given dispositions, distributions, and unrealized losses partially offset by new originations.
BENF reported an adjusted segment operating loss attributable to BENF equity holders of $9.9 million for F1Q26 compared to a loss of $13.9 million in F4Q25. The favorable Q/Q trend was largely a function of a lower operating loss for the Ben Liquidity segment partially offset by a step down in Ben Custody revenue/operating income. On an adjusted basis, Beneficient reported a net loss of $1.02 per Class A share versus our $0.15 estimate. Relative to our model, the miss was primarily a function of higher-than-expected operating expenses and lower shares.
Turning to Beneficient’s balance sheet, the fair value of Customer ExAlt Trust investments totaled $264 million as of June 30, 2025, down from $291 million as of March 31, 2025. Investments on the balance sheet serve as collateral for Ben Liquidity's loan portfolio. Net of allowances for credit losses, Ben Liquidity’s loan balances totaled $231 million as of June 30, 2025 compared to $244 million as of March 31, 2025. Distributions from alternative/custodied assets totaled $3.7 million for F1Q26 compared to $7.2 million in F1Q25. Finally, as of June 30, 2025, the company maintained $7.6 million of cash and cash equivalents and $108.4 million of total debt.
After updating our model for F1Q26 actuals, we are taking down our F2026 and F2027 adjusted EPS estimates. On an adjusted business segment attributable to BENF equity holders basis, we forecast net losses per Class A share of $1.61 in F2026 followed by $0.50 in F2027 – down from our prior $0.44 and $0.24 net loss per share estimates, respectively, primarily reflecting a flatter revenue trajectory and inflated expense assumptions. Looking ahead, the key revenue driver for Beneficient remains loan origination volumes, with the company generating interest income and related fees based on the level and growth of financing transactions, as well as the trajectory of underlying collateral over time.
Turning to valuation, no change to our $2.00 price target. The recent CEO turnover adds near-term uncertainty to the company’s strategic direction and ownership profile, particularly given the seemingly contentious nature of the prior CEO’s departure, as well as his holdings of Class B and preferred shares. That said, we still see considerable upside potential for the stock over time, though we recognize a meaningful upward revaluation likely necessitates sustained growth in loan origination volumes driving an inflection in profitability.
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