Runway Growth Finance Corp. Q3 FY2024 earnings call

• David Spreng discussed third quarter financial results and the combination with BC Partners, stating the transaction positions the company for steady returns and expansion of origination channels and investment solutions.
• Greg Greifeld provided a market overview, noting Fed rate cuts are encouraging, steady portfolio diversification with seven investments in Q3, and stable credit quality with a weighted average portfolio risk rating of 2.48.
• Tom Raterman detailed financials, including $75.3 million in funded loans, net assets of $507.4 million, NAV per share of $13.39, and $15 million stock repurchase program approved by the Board.

During the third quarter of 2024, Runway Growth Finance completed $75.3 million in funded loans, with total investment income at $36.7 million and net investment income at $15.9 million. The total investment portfolio had a fair value of approximately $1.07 billion, an increase from $1.06 billion in Q2 2024. The dollar weighted average annualized yield of the debt portfolio was 15.9% in Q3 2024. Operating expenses were $20.8 million in Q3 2024, up 6% from Q2 2024. Net unrealized gain on investments was $9.2 million in Q3 2024 compared to a net unrealized loss of $6.3 million in Q2 2024.

• The combination with BC Partners is expected to accelerate originations, introduce new strategies like structured equity preferred investment and asset-based lending, and diversify the portfolio.
• Anticipate continued rate cuts and the transaction with BC Partners to act as tailwinds for the company.
• Board approved a $15 million stock repurchase program expiring July 30, 2025.

• Uncertainties surrounding interest rates, changing economic conditions, and market volatility as identified in SEC filings.
• Credit quality risks, including two loans on non-accrual status (Mingle Healthcare and Snagajob).

Q: Is BC Partners buying just the Oaktree stake or the whole thing? And what does the acquisition mean for the future of the company?

A: They are buying the whole thing. The acquisition expands origination capability, extends the leadership team, fortifies the market position, and allows participation in new financing types, positioning the company to deliver increased share value and returns.

Q: How will portfolio diversification into other solutions impact asset yield?

A: Expanding the product suite does not change the return target; it is expected to provide a similar stream of income historically.

Q: Will there be additional churn in portfolio exits as companies get acquired?

A: Optimistic about the environment with rate cuts and deal flow from BC, seeing more use of debt to avoid down rounds, and opportunities for upsizing loans and financing new M&A-related companies.

Q: When will Snagajob return to accrual status?

A: Not in the short-term, but there is a plan to protect the asset value, and over the long-term, it is expected to return to accrual status.

Q: What about deal-related expenses when the merger closes?

A: Under the '40 Act, transaction expenses are borne by the adviser.