Runway Growth Finance (RWAY) 12 Nov 242024 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Runway Growth Finance Third Quarter 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Quinlan Abel, Assistant Vice President, Investor Relations. Please go ahead.

Thank you, operator. Good evening, everyone, and welcome to the Runway Growth Finance Conference Call for the third quarter ended September 30, 2024.

Officer call President Runway Greg Raterman, close Chief Officer. Runway and Finance's accessed Runway and and Director, Chief the third Officer can David Finance Greifeld, Growth on Credit released Deputy just Chairman, of Investor and Spreng, results Chief Investment Growth us today Growth Growth from are Managing of at XXXX Joining be Runway Head Capital; financial were Financial and Executive investors.runwaygrowth.com. Relations after Chief Finance's Tom Operating quarter today's website market from Officer;

have the Growth available We arranged to for page. web of a Runway call the replay on be Finance

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based on be And assumptions inaccurate. those Although based we the assumptions as those to on prove believe incorrect. a that statements which statements are forward-looking forward-looking of these can the can are reasonable, assumptions result, be any

or visit no of Runway events. reliance as assumes that, copies obligation to the SEC-related the contained this made call on will should turn Finance website. With on of forward-looking over update obtain David. filings, forward-looking the To statements forward-looking and hereof, call not these please I statements to You place our statements. subsequent undue The date are Growth

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through that strategies capabilities fund-level fund other as in originations asset-based Growth Runway our will ability lending to from Runway new will and in resources, our sponsor will the We enhance by also the Further, Growth and place. We to investment Runway network. transaction combined Capital's preferred this will finance operate BC in anticipate Growth leadership enable teams continue accelerate Capital investors remain believe and and to to our introducing independently investment The such joining borrowers our Finance. Following industry-leading investment, remain expertise the structured scale, we equity operate adviser offerings. combination leasing. It strengthen ideal platform benefit is set will equipment and current due Partners' alike the size. us transaction, to to relationships and believe our

to solutions additional and portfolio funnel wider investments. the both of team products help further our size across and our diversify both financing expect We

access For this shareholders, opportunities transaction designed current of broader positions a the the to to investment reiterate, this enhance Runway its attractive it range more long-term execute and and potential exposure translates returns. To Growth late Capital existing We for to risk-adjusted our value us companies. Growth Runway stage Finance strengthen of enable of lending will strategy leadership growth to believe and and to to high-quality our vision.

believe and focus our and ways we several ahead. Through the expanded portfolio have adviser established manifested the the for origination For clear it and year. and throughout infrastructure positions expansion on Runway all Namely, investments portfolio. that has BC meaningfully and operational potential our we've done investment in This solutions channels, for augment transaction our quarters, focused our Partners, driving made an strategies and with proposed reaccelerating the opportunities BDC. both be been joint venture consistently the prudence, originations with are while attractive several that to selectivity that we we last executing this that both we have growth

for efforts that, portfolio that before, returns. With in it have portfolio quarter-to-quarter, As Greg. turn confident these are expansion are and to not said I'll our we positioning stockholders long-term will but result we linear necessarily we over

a David. of discuss the the performance Thanks, offer on in market our ecosystem. venture then hone overview, will portfolio I and

encouraging does we subject an cuts While our companies are cuts BDC the rate to of to with Reserve's loans come to the loans. early are often This approach across ability benefit and pipeline still Federal rate believe in taper, floating on our fundamentals. we the sign over innings only rate sound investments, will potential the who borrowers not to high-quality landscape execute and its to change recent to quarters believe

As maintain focus strategy said, as we will through follow borrowers experience That rate will our continue as we to on portfolio. we improved standards. dynamic to with opportunistic our our underwriting conditions, on deployment environment, diversifying disciplined be enter this we

loans. our As share smaller of deals with replace will we them some large refinance,

investments processing in X X new potential to fund We are companies. third ability were objective. execute and on included in investments confident high-growth business the in our pleased that which companies, we quarter, to software to And technology

new partnered on Credit included quarter during completion a $XX Mobile, term loan million senior the secured senior the Zinnia. Vista term of a with secured Our loan and to to Snap! investments we

of the technology million. and annuity senior platform business merchandise, portion financing fundraise, their and provides These schools companies solutions late-stage loan organizations and to the industry. portfolio. provides Our while $XX.X manage Zinnia technology our Snap! designed life sell and processing weighted a help to high-performing rosters software insurance the within exemplify industries was

Airship to a the We coming in and portfolio, and believe over to joint the on loan, portfolio loans investments progress portion purchased of diversifying venture as making JV add are our new and investment million quarters our expanding subsidiary. in the steady months $X Our equity resulting a meaningfully mature. we our expect we

to Lastly, touch quality. I want on credit

X.XX in third X.XX portfolio weighted second to of Our quarter compared stable remained risk average quarter in the at XXXX. the rating

top the investing commitment originating the regardless and believe junior We significant capital may and of that at our situations continue on to to the proactively market our associated in with play often of avoiding we stack issues potential downstream our uphold arise of exposure supporting throughout monitor capital conditions, earlier-stage Further, lifetime the that with reduces risk portfolio while our volatility companies. entire of investments at financing risk borrowers focus to for we loan. a

low continued to was venture moment ongoing to counts lower PitchBook during According take to value contrasted I'd high with value deal the peak activity data, like liquidity deal deal deal U.S. than focus quarter, to levels experience the constraints. late-stage is on XXXX. Now it to a which XX% recent equity at third in

markets and face apt stem as in to to with the benefit marketing dilution. Despite that improve our constraints and most companies and growth companies to the election later outreach market cycle. the liquidity of stage opportunities venture stages for some cuts, economy previously, pressure over coming lengthen capitalize late stay at environment uncertainty a in ability attractive the the been borrowers our gradually and XXXX have noted Fed's grappled third is As relationships, targeted of efforts. continue our to with with rate to testament our most associated dynamic the many the sector the quarters recent along shaped We cautious fundraising the the pipeline. Further, deep quarter new out Runway anticipate strong U.S. the on and will further to would

combined continued over Capital's will with BC for as Runway company and serve the we our expect I cuts, forward. With financials. the to breadth into Growth of Partners pending as focus dive moving rate investments turn reach to our transaction it with that, tailwinds now We deeper that our amplifying on will Tom

Greg, evening, Thank and everyone. you, good

continued Runway companies, completing XXXX, in flow, in of new deal quarter $XX.X third in to existing X and expand loans. funded investments million the companies X representing During investments

to second the X.XX portfolio risk rating remained quarter our XXXX. at of mentioned, quarter average Greg third X.XX the in compared As weighted in stable

rating. scale a of most on rating where is represents credit to Our the favorable X based system X X,

loan-to-value increased quarter sequentially. and loans on at As dollar our we third for our second found loans XX.X% XX.X% with loan-to-value grouping were at end investments consistent of this the the that from previous prior the In quarters, comparing in the of held in that we quarter, based the the end quarter. calculated of portfolio to weighted ratio

quarter $X.XX Our an in second prior of billion X.X% the from increase of the value XXXX comparable an total year investment billion, from and $X.XX period. portfolio had of billion for increase approximately fair $X.XX a

continues secured comprised to be loans. almost exclusively first Our loan of portfolio lien senior

quarter $XXX.X at net million, to XXXX. the had million Runway the $XX.XX from of $XXX.X end $XX.XX compared second of quarter the per quarter the XXXX, XX, second of third XXXX. September of the NAV of end As assets was share of end at of the at increasing

an currently income XXXX closing million credit $XX.X generated at reflect second of investment million and or rate third We XXXX. net comprised of we plus of principal quarter, received are $XX income $XX.X total interest million base portfolio set term million of repayments, XXXX. the or the loan at spread in second $XX.X third which of compared is investment of floating and quarter to quarter Our interest quarter floors, rate All in $XX.X the million above increase in signing earning from time the in of million the the the $XX.X assets. loans of agreed-upon XXX% the generally sheet. In rate

second debt XX.X% period third weighted yield generated for to of the the and quarter a XXXX comparable the compared as XX.X% annualized for Our of year. quarter for portfolio XX.X% last XXXX dollar of average

up quarter, Total $X.X a recorded the of of Gynesonics $X.X in and net a third investments loss due second Snagajob. fair value to for change on primarily was gain net our in X% to in third of the were quarter million to gain the investments XXXX. investments from million operating quarter unrealized our expenses. in second the quarter We on an compared of increase million net for in The Moving unrealized the million unrealized $XX.X $XX.X of expenses XXXX.

status, nonaccrual Healthcare on As of and loans Mingle XX, we September XXXX, had X Snagajob.

of Mingle to fair has Healthcare basis X.X respectively, compared of second $XX.X of of of cost loan quarter Our and to XX% cost. At million cost million quarter end and $XX.X a XX% and asset million million basis or cost, market fair while the X.XX market coverage X.XXx, the X.XXx the of our were value end our ratio XXXX. leverage of and the of $X.X $X Snagajob of has third a or value XXXX, to loan at a of and

XX, of As were million, from and the million, $XXX had available had unfunded commitments of to million XXXX. an cash we end, to majority reflects XX, $XXX $XXX.X June on unrestricted milestones. our and liquidity which $XXX.X companies September At portfolio we cash respectively, increase including financing total specific million. borrowing of performance equivalents, quarter of This subject $XXX.X XXXX, capacity and was million,

its $X XXXX, senior sold Holdings our of million. company's loan. continued the to of warrants portfolio yield for million Dtex Systems senior prepaid outstanding term monitor proceeds prepayment loan to $X.X long-term in October the of its scheduled end, third October our XXXX, experienced and $XX full our During manage and October, to CloudPay. secured $X.X for principal million. stockholders. X, totaling balance In on repayment XX, quarter we quarter, The Subsequent principal on included on prepayment benefits the of Betterment secured million amortization we to And outstanding company

balance we end partial million $X.X principal of secured as and a October, $XX.X FiscalNote from senior Sharethis, of known received of loans. Additionally, outstanding its million repaid Holdings Predactiv, on at formerly the prepayment its

the our last drive health believe prepayments pipeline to of half of discussed Runway replenishment performance demonstrates across expansion. prepayments latter portfolio enabled our We capital in As the deploy and borrowers. of the strong to our level quarter, and XXXX

earlier expire if of $XX on stock As mentioned the XX, or a July program. stock our amount earnings for will our of July call, XX, XXXX, we under on previous on XXXX, repurchase Directors Board which approved total million, program repurchased new of the repurchase authorized

shares Runway the company's of the repurchased XXX,XXX quarter, stock. During

Growth into Credit. to a earlier, be end, As to definitive Capital Runway David touched agreement Partners by quarter subsequent on BC acquired entered

statement information is proxy approval the materials a BDC agreement proxy new advisory We will that and with connection of have in filed transaction. the preliminary More into seeking file enter stockholders' available the have will our we SEC. on the the with investment

of XXXX, the Finally, Board quarter distribution our Directors $X.XX on November per for X, fourth of a declared share. regular

the has Additionally, capital our create value as Management allocation building shareholders. With open the is for line for and Board NAV questions. to focus our paused growth preserving we dividend Board our accelerate to believe and seek supplemental that, program. and it strategy please near-term the on operator, prudent

with O'Shea [Operator WFS. the first question of Finian from Instructions] Our comes line

the BC Partners just thing? then it And looks the or bought questions also, again. Is can from of stake adviser like being buying A fund the a couple Oaktree you merger it's -- to whole start. on

So fund of you kind less sort And of company. maybe the could the strategic for is than that investment? another it future means on of what if opine

remainder in other shareholders. whole Fin. adviser are the thing, as Oaktree's Greg. stake aren't many. all the the the Tom buying Thanks owned and Sure, well the myself There question. and as Most for is of adviser They by the of of

be I of it's us share very deals. active and of currently it will for intention importantly, that leadership looking plan. long-term expands with Goldthorpe so investment. buying able to market soon. types don't working origination fund, be Ted much be forward in and We'll do part capability. adviser. to increased into It the And extends team. part important us shareholders it has And a that It's acquired they already other holding by our to the some team. and return we and to is which strategic terms of a growth their XXX% is be a it being position increased participate believe really but his lets their value announcing us us in us, and and It fortifies we're their a showing very quite of to It plan, tap originations, to allows in in the our But deliver on for our positions financing and of been our most

JPMorgan. Our Melissa line from the next question of comes with Wedel

about BC to follow I Partners. the by wanted up on question acquisition the

sort expands solutions. that you indicated think the types then in offerings I earlier the curious, diversify and asset going profile I release other portfolio announcement products, that sort -- one of how and the there's and lot things understand the press other of just there's in the earnings was of to to I'm you impact think -- as forward of the that of you that the it a solutions do will the into yield portfolio? about on the expect how

is borrowers, wall asset in say our for change expect both historically. and levered are we've this offer to of that that to to potential a able the Thanks, does key what stream Melissa. basis, target return to not and think the it's I expanding terms it income on suite of provide do we similar And the us level we unlevered seen product

Okay.

could environment As terms range think at the a in environment what of going the outlooks we've be. sort heard of of M&A we I forward, look

of administration space in As valuation where rate be to could there operate? overhang an in where is your get are Or quite as you thinking on you churn additional start acquired? exits from still may pro-growth, terms environment a to an that cuts in portfolio see the you coming just look is new or forward additional this you companies that

Thanks, Melissa.

really current we the about environment. optimistic So are

feel what's The election think we brought the really And of good the there flow most having getting has the when I certainty are in BC, we market. and to the is us a likely about we're some seeing with on that entrepreneurs market. that behind that important. view combine a hearing trajectory that deal and and optimism from positivity rates the happening, from we're interest lot downward

contrast the at where that that venture other you are there the market the invested, with quite some being often, on a round. down equity place taking is in it's hand, of money Now but difficulties

for a of I in rounds. high rounds all-time avoid think of way down at round And terms we're debt. all to down an to use percentage one is

So more you and more some do want more people are coming to us. to Greg, add color?

antitrust is also as one greater venture in upsize from much look and growth since latest we financing in that of a borrowers going the us thing opportunities. are existing And The Yes. of only bigger things additional acquirers. of to terms significant potential stage M&A be they're in our M&A, use opportunities potential would coming out finance terms in add do potentially and only not certainty terms they portfolio to we of to there's down, to becoming new who case cheaper part, go there find other but rates for that, we do for companies, believe also as the companies companies, and like M&A targets have but to I companies not most our potentially see looking to loans play back seeing

Okay. out quarter you post release for today, identified surprised, I about Are think you $XX to quarter $XX busy the rotate million repayments million I final in seasonally of first surprised see if that fourth quarter? not end. be a In Understood. could. you us? One of month guess, I Can maybe can help press question, the Fourth and contextualize one.

third the replace the get a the the And you in a the -- of always, the fourth lot assets year, for Earlier prepayments is of our and at happens at beginning you and tend end of expectations quarter talked during of prepayments level level what Melissa. about thanks, -- as quarter. of to we Earlier the the quarter.

So sale the other one refinancing business these a One of strategic us that the transactions were of sense. of company's and made was good was out units.

So weren't we're we not surprised. --

and them, quarter are M&A this and there prepayment. expected close that add transactions that are announced yet We other could that to

working surprise, to we're and redeploy So no assets. those

Your next question the from Schleien comes Thalmann. Ladenburg Mickey with line of

on Can outcome Most of other go is your or get have expected to now to investment the soon been to just quickly near accrual asked, closer valued that I which par. on insight expect wanted but my back in we much questions some Snagajob, future?

Mickey. Thanks,

Our strategy preserve NAV. and with Snagajob to is restore really

plan long protecting the term the that will will And will accrual stay a protects don't it plan I short basis. it asset so expect there there it the be an in NAV. that lead term, for place in to would a that But in value the is term, short back on accrual expect us. to We over the place status. nonaccrual, but that of does return really the is in on

Finian of with Your question WFS. O'Shea from line comes next the

on and a deal-related question like Just we follow-up when it any like? Should housekeeping just the what a might expect that expenses look on merger. closed

Fin. Thanks,

'XX cost a from adviser. expenses, anything legal of related the the by the the the cost transaction all cost to Act, of deal transaction proxy, under of that, around is So perspective borne

Thank you. I And closing at time. this no like it now to to Spreng David questions turn back for further I'm showing would remarks.

operator. you, Thank

momentum the are with positioned Runway and third We believe quarter to meaningfully accelerate during originations. advantageously pleased the is achieved

joining our for financial We and and returns look on you stockholders. us Partners, drive all quarter XXXX our forward today. updating in year attractive investments to diversify look With on of forward to that full long-term results you our fourth March. portfolio the executing partnership we for BC Thank

you now and conclude may does the disconnect. This program,