Runway Growth Finance (RWAY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Runway Growth Finance reported total investment income of $36.7 million and net investment income of$15.9 million for Q3 2024, compared to $34.2 million and$14.6 million in Q2 2024, respectively [37] - The net asset value (NAV) per share increased to $13.39 at the end of Q3 2024 from$13.14 at the end of Q2 2024 [35] - The total investment portfolio's fair value rose to approximately $1.07 billion, up from$1.06 billion in Q2 2024, marking a 5.5% increase from $1.01 billion year-over-year [34] Business Line Data and Key Metrics Changes - The company completed two investments in new companies and five investments in existing companies, totaling$75.3 million in funded loans during Q3 2024 [31] - The weighted average portfolio risk rating remained stable at 2.48 in Q3 2024, compared to 2.47 in Q2 2024 [25][32] - The dollar weighted loan-to-value ratio increased from 26.7% to 28.6% sequentially [33] Market Data and Key Metrics Changes - The venture equity deal activity in the U.S. saw high deal counts but low deal values, with late-stage deal value being 53% lower than peak levels in 2021 [27] - The Federal Reserve's recent rate cuts are viewed positively for borrowers, particularly those with floating rate loans [19] Company Strategy and Development Direction - The company announced a strategic acquisition by BC Partners Credit, which is expected to enhance origination capabilities and diversify investment offerings [10][12] - The focus remains on reaccelerating portfolio expansion with selectivity and prudence, aiming for long-term returns for shareholders [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current environment, particularly with the potential for further rate cuts and the positive impact on deal flow [54] - The company anticipates that the market for borrowers will gradually improve, benefiting from a strong pipeline [28][29] Other Important Information - The company recorded a net unrealized gain on investments of $9.2 million in Q3 2024, compared to a net unrealized loss of$6.3 million in Q2 2024 [38] - Total available liquidity at the end of Q3 2024 was $251.6 million, reflecting an increase from$249.8 million at the end of Q2 2024 [39] Q&A Session Summary Question: Is BC Partners buying just the Oaktree stake or the whole thing? - BC Partners is acquiring 100% of the adviser, including Oaktree's stake and shares held by other shareholders [48] Question: How will the acquisition impact the earnings profile of the portfolio? - The expansion of the product suite is expected to maintain similar income streams historically, without changing return targets [52] Question: What is the outlook for M&A activity in the current environment? - Management is optimistic about M&A activity, anticipating that lower financing costs will lead to increased opportunities for both existing portfolio companies and new investments [55] Question: Can you provide context on the $30 million of repayments post-quarter end? - The company expected prepayments at the beginning of the quarter and is working to redeploy those assets strategically [58] Question: What is the status of the Snagajob investment? - Snagajob is expected to remain on non-accrual status in the short term, with plans in place to protect the asset's value [60]