Runway Growth Finance Corp. Q1 FY2024 earnings call

• David Spreng welcomed back and discussed Q1 portfolio highlights, including 2 investments, $25M funded loans, and investment income growth. Focus on credit quality and working with portfolio companies to mitigate risk.
• Market view: Companies using debt as minimally dilutive alternative, resilient economy, low leverage ratio and dry powder position. Role as lender to support best companies for growth potential.
• Greg Greifeld discussed U.S. economic resilience, venture activity, Runway's value proposition, and joint venture with Cadma Capital Partners for financing late and growth-stage companies.
• Tom Raterman talked about pipeline activity, investment performance, risk rating, loan-to-value, NAV, liquidity, dividend declaration, and stock repurchase program.

In the first quarter of 2024, Runway Growth Finance completed 2 investments in new and existing portfolio companies, representing $25 million in funded loans. Total investment income was $40 million and net investment income was $18.7 million, both up approximately 2% from the prior year period. The weighted average portfolio risk rating increased to 2.44% from 2.39% in the fourth quarter of 2023. The loan-to-value ratio improved slightly from 27.6% to 26% sequentially. The total investment portfolio had a fair value of approximately $1.02 billion, excluding treasury bills, a decrease of 1% from the fourth quarter of 2023 and 10% from the comparable prior year period. Net assets were $529.5 million, with NAV per share at $13.36. Two loans were on nonaccrual: Ming Healthcare with $4.3 million in outstanding principal and $3.2 million fair value, and Snagajob with $42.3 million in outstanding principal and $35.5 million fair value, representing 3.8% of the total investment portfolio at fair value.

• Anticipate more deal flow in the second half of 2024, with acceleration in deals. Confidence in net originations to replace earnings power from prepayments. Confidence in dividend coverage through prepayment fees and spillover income.

• Uncertain market conditions, rising interest rates, and changing economic conditions. Potential nonaccrual loans (Ming Healthcare and Snagajob) and the need to work through these situations.

Q: Melissa Wedel asked about pipeline activity in Q2 and details on Snagajob's nonaccrual.

A: David Spreng said pipeline activity was heightened, with higher quality opportunities, and Greg Greifeld discussed Snagajob's fluid situation with active involvement with management and equity sponsors.

Q: Casey Alexander inquired about the rationale for the JV when the company is under leveraged.

A: Tom Raterman explained it allows participation in later-stage deals while maintaining portfolio diversification and target hold range.

Q: Bryce Rowe asked about prepayment visibility, dividend coverage, and buyback activity.

A: Tom Raterman discussed prepayment activity timing, dividend coverage confidence, and buyback based on NAV discount.

Q: Vilas Abraham asked about nonaccrual impact on interest income, leverage, and pipeline verticals.

A: Thomas Raterman said nonaccrual impact is forward-looking, leverage target range, and pipeline spread across tech, life sciences, etc.

Q: Mickey Schleien asked about market outlook and dividend income.

A: David Spreng discussed market choppiness and dividend income from CareCloud, expecting resumption later.

Q: Erik Zwick asked about lender-friendly market indicators and interest rate sensitivity.

A: David Spreng and Greg Greifeld discussed improving terms in tech, JV benefits, and stable interest rates outlook