Runway Growth Finance Corp. Reports Fourth Quarter and Fiscal Year Ended 2023 Financial Results
Runway Growth Finance Corp. (Nasdaq: RWAY) announced total investment income of $39.2 million and net investment income of $18.3 million for the fourth quarter of 2023. The company's investment portfolio reached $1.0 billion, with a net asset value of $13.50 per share. Runway Growth declared first quarter 2024 dividends and discussed its operating results, portfolio activity, and recent developments.
Positive
Strong total investment income of $39.2 million and net investment income of $18.3 million for the fourth quarter of 2023.
Robust investment portfolio standing at $1.0 billion and net asset value of $13.50 per share.
Dollar-weighted annualized yield on debt investments of 16.9% for the quarter.
Completed eight investments totaling $154.6 million in new and existing portfolio companies.
Low credit loss ratio of 14 basis points on a gross basis and 11 basis points on a net basis.
Declared first quarter 2024 regular dividend of $0.40 per share and supplemental dividend of $0.07 per share.
Net asset value per share at $13.50 as of December 31, 2023, with total net assets of $547.1 million.
Available liquidity of approximately $281.0 million as of December 31, 2023.
Approved a share repurchase program of up to $25.0 million of outstanding common stock.
Recent developments include a loan placed on non-accrual status and a new co-management agreement with Cadma Capital Partners LLC.
Conference call scheduled for March 7, 2024, to discuss financial results.
Website links provided for participation in the conference call and webcast.
Negative
Net realized loss on investments of $17.2 million for the quarter ended December 31, 2023.
Net decrease in net assets resulting from operations of $4.8 million, or $0.12 per share, for the quarter ended December 31, 2023.
Increased total operating expenses driven by higher interest rates and financing expenses.
Net asset value per share decreased to $13.50 as of December 31, 2023, compared to $14.22 in the prior year period.
The reported financial results of Runway Growth Finance Corp. reflect a robust total investment income of $39.2 million for Q4 2023, with net investment income at $18.3 million. The key metric here for stakeholders is the net asset value (NAV) per share, which stands at $13.50, a notable figure for assessing the company's per-share asset value. However, this represents a decline from $14.22 the previous year, indicating a potential area of concern regarding asset valuation. Additionally, the dollar-weighted annualized yield on debt investments is exceptionally high at 16.9%, which may attract investor attention due to the higher returns on debt investments compared to industry averages.
Investors should also consider the company's investment portfolio growth to $1.0 billion, suggesting a significant scale of operations. The low credit loss ratio averaging 14 basis points on a gross basis signals strong credit quality and risk management practices. However, it is crucial to scrutinize the increase in total operating expenses to $20.9 million, driven by higher interest rates and financing expenses, as this could affect future net investment income. The declaration of both regular and supplemental dividends for Q1 2024 reflects a commitment to shareholder returns, but the impact of such distributions on the company's capital structure and liquidity should be monitored closely.
Runway Growth's strategic focus on providing capital solutions to late- and growth-stage companies places it within a niche market segment that may have unique growth trajectories compared to more traditional investment avenues. The company's investment activity, with eight new investments in Q4 2023 and a total of $259.2 million in fundings over the year, indicates an aggressive approach to portfolio expansion. This could signal confidence in the market's growth prospects or a competitive positioning strategy.
One point of interest is the company's liquidity position, with approximately $281.0 million in available liquidity, which is a critical factor in its ability to sustain operations and fund new investments. The core leverage ratio has increased to approximately 95%, up from 79% in the previous quarter, suggesting a higher degree of borrowing relative to equity. While leverage can amplify returns, it also increases risk and stakeholders should assess this in the context of current market conditions and interest rate environments.
From a regulatory and compliance perspective, the establishment of a Joint Venture with Cadma Capital Partners LLC is a strategic move that could diversify investment opportunities and spread risk. However, joint ventures also introduce complexities in governance and management that must be navigated carefully to protect stakeholder interests. Additionally, the share repurchase program indicates a management belief in the undervaluation of the company's stock, or a desire to return value to shareholders and such programs are typically well-received by the market.
It is also important to note the non-accrual status of the loan to Mingle Healthcare Solutions, Inc., which reflects the company's proactive approach to risk management. Non-accrual loans are those for which interest income is no longer recognized due to doubts about collectability and this action may influence investor perceptions of credit risk within the portfolio.
03/07/2024 - 04:07 PM
Delivered Total and Net Investment Income of $39.2 million and $18.3 million , Respectively
Investment Portfolio of $1.0 billion
Conference Call Today, Thursday, March 7, 2024 at 5:00 p.m. ET
MENLO PARK, Calif., March 07, 2024 (GLOBE NEWSWIRE) -- Runway Growth Finance Corp. (Nasdaq: RWAY) (“Runway Growth” or the “Company”), a leading provider of flexible capital solutions to late- and growth-stage companies seeking an alternative to raising equity, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2023.
Fourth Quarter 2023 Highlights
Total investment income of $39.2 million Net investment income of $18.3 million , or $0.45 per share Net asset value of $13.50 per share Dollar-weighted annualized yield on debt investments of 16.9% for the quarter Eight investments completed in new and existing portfolio companies, representing $154.6 million in funded loans and other investments Aggregate proceeds of $63.4 million received from principal prepayments 2023 Fiscal Year Highlights
Total investment portfolio at year-end 2023 of $1.0 billion at fair value, excluding US Treasury Bills Net investment income of $78.3 million , or $1.93 per share Net asset value (“NAV”) at 12/31/2023 of $547.1 million , or $13.50 per share Total investment fundings of $259.2 million : $83.5 million in four new portfolio companies and $175.7 million in 14 existing portfolio companies Low credit loss ratio of an average 14 basis points per year on a gross basis and an average 11 basis points per year on a net (debt and equity) basis, based on cumulative commitments since inception First Quarter 2024 Distributions
Declared first quarter 2024 regular dividend of $0.40 per share Declared first quarter 2024 supplemental dividend of $0.07 per share “In 2023, Runway Growth drove shareholder return while taking a measured approach to portfolio management as we preserved industry-leading credit quality,” said Greg Greifeld, Acting Chief Executive Officer of Runway Growth, and Deputy Chief Investment Officer and Head of Credit of Runway Growth Capital. “Over the course of the year, Runway Growth expanded its return on equity by 33 basis points and ended the fourth quarter with eight investments in new and existing portfolio companies.”
Greifeld continued, “We are proud of our team’s thoughtful due diligence, consistent partnership with borrowers, and the momentum we delivered to end the year. We have applied a critical lens to evaluating our pipeline of opportunities, and are in a position to originate attractive investments that meet our high credit bar in the year ahead. Runway Growth is committed to generating shareholder value, which is reinforced by our strong and consistent base dividend and ongoing supplemental distributions.”
Fourth Quarter 2023 Operating Results
Total investment income for the quarter ended December 31, 2023 was $39.2 million , compared to $36.5 million for the quarter ended December 31, 2022.
Net investment income for the quarter ended December 31, 2023 was $18.3 million , or $0.45 per share, compared to $18.4 million , or $0.45 per share, for the quarter ended December 21, 2022.
The Company's dollar-weighted annualized yield on average debt investments for the quarter ended December 31, 2023, was 16.9% . The Company calculates the yield on dollar-weighted debt investments for any period measured as (1) total investment-related income during the period divided by (2) the daily average of the fair value of debt investments outstanding during the period.
Total operating expenses for the quarter ended December 31, 2023 were $20.9 million , compared to $18.1 million for the quarter ended December 31, 2022. The increase was driven by higher interest rates and increased financing expenses on borrowings.
Net realized loss on investments was $17.2 million for the quarter ended December 31, 2023, compared to a net realized loss of $2.0 million for the quarter ended December 31, 2022.
For the quarter ended December 31, 2023, net change in unrealized loss on investments was $5.9 million , compared to a net change in unrealized gain of $2.1 million for the comparable prior year period.
Portfolio and Investment Activity
As of December 31, 2023, Runway Growth’s investment portfolio had an aggregate fair value of approximately $1.0 billion and was comprised of approximately $978.5 million in term loans, 98.5% of which are senior secured loans and $46.5 million in warrants and other equity-related investments in 52 portfolio companies.
During the fourth quarter of 2023, Runway Growth completed eight investments in new and existing portfolio companies, representing $154.6 million in funded loans.
Total portfolio investment activity for the three and twelve months ended December 31, 2023, and 2022 was as follows:
Three Months Ended December 31, Years Ended December 31, 2023 2022 2023 2022 Beginning investment portfolio $ 1,010,927 $ 910,169 $ 1,126,309 $ 729,516 Purchases of investments 94,937 229,899 200,464 622,719 Purchases of U.S. Treasury Bills 41,999 — 76,973 — PIK interest 4,590 2,310 19,924 8,655 Sales and prepayments of investments (63,407 ) (16,000 ) (289,078 ) (159,144 ) Scheduled repayments of investments (285 ) (2,488 ) (7,331 ) (9,754 ) Sales and maturities of U.S. Treasury Bills — — (35,000 ) (45,000 ) Amortization of fixed income premiums or accretion of discounts 1,350 2,287 8,682 6,863 Net realized gain (loss) on investments (17,209 ) (2,000 ) (18,387 ) (1,061 ) Net change in unrealized gain (loss) on investments (5,893 ) 2,132 (15,547 ) (26,485 ) Ending investment portfolio $ 1,067,009 $ 1,126,309 $ 1,067,009 $ 1,126,309
Net Asset Value
As of December 31, 2023, net asset value (“NAV’”) per share was $13.50 , compared to $14.22 as of December 31, 2022. Total net assets at the end of the quarter of 2023 was $547.1 million , down 5.0% from $576.1 million in the prior year period.
For the quarter ended December 31, 2023, net decrease in net assets resulting from operations was $4.8 million , or $0.12 per share, compared to a net increase in net assets of $18.5 million , or $0.46 per share, for the quarter ended December 31, 2022.
Liquidity and Capital Resources
As of December 31, 2023, the Company had approximately $281.0 million in available liquidity, including unrestricted cash and cash equivalents of $3.0 million and $278.0 million in available borrowing capacity under the Company’s credit facility, subject to existing terms, advance rates and regulatory and covenant requirements.
The Company ended the quarter with a core leverage ratio of approximately 95% , compared to 79% for the quarter ended September 30, 2023.
Distributions
On February 1, 2024, the Company’s board of directors declared a regular quarterly distribution of $0.40 per share for the first quarter of 2024, payable on February 28, 2024, to stockholders of record as of February 12, 2024. In addition, the Company’s board of directors declared a supplemental dividend of $0.07 per share for the first quarter of 2024 that is also payable on February 28, 2024, to stockholders of record as of February 12, 2024.
Share Repurchase Program
On November 2, 2023, the Company’s board of directors approved a share repurchase program (the “Share Repurchase Program”) under which the Company may repurchase up to $25.0 million of its outstanding common stock. Under the Share Repurchase Program, purchases may be made at management’s discretion from time to time in open-market transactions, in accordance with applicable securities laws and regulations.
Recent Developments
The Company evaluated events subsequent to December 31, 2023 through March 7, 2024, the date the consolidated financial statements were issued.
Effective January 1, 2024, the Company placed one loan to Mingle Healthcare Solutions, Inc. on non-accrual status, representing an outstanding principal of $4.3 million at a fair market value of $3.8 million as of December 31, 2023. The loan comprised 0.37% of the total fair value of the Company's investment portfolio, excluding U.S. Treasury Bills, as of December 31, 2023.
On February 14, 2024, the Company received a partial prepayment of $7.1 million from MarleySpoon SE on its senior secured loan.
On March 7, 2024, the Company and Cadma Capital Partners LLC entered into a Limited Liability Company Agreement to co-manage Runway-Cadma I LLC (the "Joint Venture"). The Joint Venture is expected to invest in various types of investments, including, but not limited to, first and second lien senior secured term loans, including delayed draw and multi-tranche loans, and secured revolving credit facilities.
Conference Call
Runway Growth will hold a conference call to discuss its fourth quarter and fiscal year ended December 31, 2023, financial results at 2:00 p.m. PT (5:00 p.m. ET) on Thursday, March 7, 2024. To participate in the conference call or webcast, participants should register online at the Runway Investor Relations website . The earnings call can also be accessed through the following links:
A live webcast will be available in the investor section of the Company’s website , and will be archived for 90 days following the call.
About Runway Growth Finance Corp.
Runway Growth is a growing specialty finance company focused on providing flexible capital solutions to late- and growth-stage companies seeking an alternative to raising equity. Runway Growth is a closed-end investment fund that has elected to be regulated as a business development company under the Investment Company Act of 1940. Runway Growth is externally managed by Runway Growth Capital LLC, an established registered investment advisor that was formed in 2015 and led by industry veteran David Spreng. For more information, please visit www.runwaygrowth.com .
Forward-Looking Statements
Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Runway Growth’s filings with the Securities and Exchange Commission. Runway Growth undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.
Important Disclosures
Strategies described involve special risks that should be evaluated carefully before a decision is made to invest. Not all of the risks and other significant aspects of these strategies are discussed herein. Please see a more detailed discussion of these risk factors and other related risks in the Company’s most recent annual Form 10-K report in the section entitled “Risk Factors”, which may be obtained on the Company’s website, www.runwaygrowth.com, or the SEC’s website, www.sec.gov.
IR Contacts:
Stefan Norbom, Prosek Partners, snorbom@prosek.com
Thomas B. Raterman, Acting President, Chief Financial Officer and Chief Operating Officer, tr@runwaygrowth.com
RUNWAY GROWTH FINANCE CORP. Consolidated Statements of Assets and Liabilities (In thousands, except share and per share data) December 31, 2023 December 31, 2022 Assets Investments at fair value: Non-control/non-affiliate investments at fair value (cost of $1,005,024 and $1,126,879 , respectively) $ 972,604 $ 1,114,935 Affiliate investments at fair value (cost of $58,861 and $4,551 , respectively) 51,456 2,084 Control investments at fair value (cost of $950 and $19,172 , respectively) 950 9,290 Investment in U.S. Treasury Bills at fair value (cost of $42,014 and $0 , respectively) 41,999 — Total investments at fair value (cost of $1,106,849 and $1,150,602 , respectively) 1,067,009 1,126,309 Cash and cash equivalents 2,970 5,761 Interest and fees receivable 8,269 8,766 Other assets 905 930 Total assets 1,079,153 1,141,766 Liabilities Debt: Credit facility 272,000 337,000 2026 Notes 95,000 70,000 2027 Notes 152,250 152,250 Unamortized deferred debt costs (9,172 ) (10,293 ) Total debt, less unamortized deferred debt costs 510,078 548,957 Incentive fees payable 12,500 8,808 Interest payable 6,764 6,221 Accrued expenses and other liabilities 2,740 1,728 Total liabilities 532,082 565,714 Net assets Common stock, par value 414 414 Additional paid-in capital 605,110 605,774 Distributable earnings (losses) (47,637 ) (19,320 ) Treasury stock (10,816 ) (10,816 ) Total net assets $ 547,071 $ 576,052 Shares of common stock outstanding ($0.01 par value, 100,000,000 shares authorized) 40,509,269 40,509,269 Net asset value per share $ 13.50 $ 14.22
RUNWAY GROWTH FINANCE CORP. Consolidated Statements of Operations (In thousands, except share and per share data) Three Months Ended December 31, Years Ended December 31, 2023 2022 2023 2022 Investment income From non-control/non-affiliate investments: Interest income $ 32,743 $ 33,515 $ 136,912 $ 95,264 Payment-in-kind interest income 4,667 2,310 20,083 5,558 Dividend income 318 318 1,279 1,338 Fee income 757 315 3,342 1,383 From affiliate investments: Interest income 604 — 2,090 5 Payment-in-kind interest income — — — 96 Fee income — — 15 8 From control investments: Interest income — — — 1,112 Payment-in-kind interest income — — — 2,985 Other income 136 — 488 2 Total investment income 39,225 36,458 164,209 107,751 Operating expenses Management fees 4,113 3,394 16,711 11,882 Incentive fees 4,052 4,592 19,046 13,183 Interest and other debt financing expenses 10,371 8,464 43,143 16,761 Professional fees 846 456 2,350 2,133 Administration agreement expenses 478 507 2,125 1,838 Insurance expense 223 210 1,028 1,016 Tax expense 614 290 664 291 Other expenses 211 185 867 851 Total operating expenses 20,908 18,098 85,934 47,955 Net investment income 18,317 18,360 78,275 59,796 Net realized and net change in unrealized gain (loss) on investments Net realized gain (loss) on non-control/non-affiliate investments, including U.S. Treasury Bills (196 ) — (1,374 ) 939 Net realized gain (loss) on control investments (17,013 ) (2,000 ) (17,013 ) (2,000 ) Net realized gain (loss) on investments, including U.S. Treasury Bills (17,209 ) (2,000 ) (18,387 ) (1,061 ) Net change in unrealized gain (loss) on non-control/non-affiliate investments, including U.S. Treasury Bills (12,984 ) (4,594 ) (20,491 ) (18,870 ) Net change in unrealized gain (loss) on affiliate investments 741 (97 ) (4,938 ) (3,476 ) Net change in unrealized gain (loss) on control investments 6,350 6,823 9,882 (4,139 ) Net change in unrealized gain (loss) on investments, including U.S. Treasury Bills (5,893 ) 2,132 (15,547 ) (26,485 ) Net realized and unrealized gain (loss) on investments (23,102 ) 132 (33,934 ) (27,546 ) Net increase (decrease) in net assets resulting from operations $ (4,785 ) $ 18,492 $ 44,341 $ 32,250 Net investment income per common share (basic and diluted) $ 0.45 $ 0.45 $ 1.93 $ 1.46 Net increase (decrease) in net assets resulting from operations per common share (basic and diluted) $ (0.12 ) $ 0.46 $ 1.09 $ 0.79 Weighted average shares outstanding (basic and diluted) 40,509,269 40,531,403 40,509,269 40,971,242
What was Runway Growth Finance Corp.'s total investment income for the fourth quarter of 2023?
Runway Growth reported total investment income of $39.2 million for the fourth quarter of 2023.
What was the net investment income for Runway Growth in the fourth quarter of 2023?
Runway Growth's net investment income was $18.3 million for the fourth quarter of 2023.
What was the company's investment portfolio value at the end of 2023?
Runway Growth's investment portfolio reached $1.0 billion at fair value at the end of 2023.
What was the net asset value per share of Runway Growth as of December 31, 2023?
The net asset value per share of Runway Growth was $13.50 as of December 31, 2023.
What dividends were declared for the first quarter of 2024 by Runway Growth?
Runway Growth declared a regular dividend of $0.40 per share and a supplemental dividend of $0.07 per share for the first quarter of 2024.
What was the total net assets of Runway Growth as of the end of the quarter of 2023?
The total net assets of Runway Growth at the end of the quarter of 2023 were $547.1 million.
What was the core leverage ratio of Runway Growth at the end of the quarter?
Runway Growth ended the quarter with a core leverage ratio of approximately 95%.
What program did Runway Growth's board of directors approve on November 2, 2023?
Runway Growth's board of directors approved a share repurchase program allowing the repurchase of up to $25.0 million of its outstanding common stock on November 2, 2023.
What recent event affected Runway Growth's loan portfolio?
Effective January 1, 2024, Runway Growth placed one loan to Mingle Healthcare Solutions, Inc. on non-accrual status.
When is the conference call scheduled for discussing financial results?
The conference call to discuss Runway Growth's fourth quarter and fiscal year ended December 31, 2023, financial results is scheduled for 5:00 p.m. ET on Thursday, March 7, 2024.