Runway Growth Finance Corp (RWAY) Q4 2024 Earnings Call Highlights: Strong Loan Funding Amid Market Volatility

Ladies and gentlemen, buckle up! We're diving into the latest earnings call from Runway Growth Finance Corp (RWAY), and let me tell you, it's a rollercoaster ride of numbers, strategies, and market moves that you won't want to miss. So, grab your popcorn and let's get started!

RUNWAY GROWTH FINANCE CORP (RWAY) Q4 2024 EARNINGS CALL HIGHLIGHTS

Total Investment Income: $33.8 Million

Runway Growth Finance Corp (RWAY) reported total investment income of $33.8 million for Q4 2024, a 13.8% decline from $39.2 million in Q4 2023. While this might seem like a red flag, let's not forget that the company's investment portfolio reached $1.1 billion at fair value across 56 portfolio companies. That's right, folks! RWAY is still a powerhouse in the venture debt space, and this slight dip is just a blip on the radar.

Net Investment Income: $14.6 Million

Net investment income for Q4 2024 was $14.6 million, or $0.39 per share, compared to $18.3 million, or $0.45 per share, for the quarter ended December 31, 2023. This represents a 20.2% decrease year-over-year. But here's the kicker: despite these declines, NAV per share increased to $13.79 from $13.50 a year earlier, a modest 2.1% gain. This NAV improvement occurred despite total net assets declining by 5.9% to $514.9 million, likely supported by the company's aggressive share repurchase program. RWAY repurchased over 3.1 million shares in 2024, demonstrating management's confidence in the underlying value proposition.

Dollar-Weighted Annualized Yield: 14.7%

The company's dollar-weighted annualized yield on debt investments for the quarter ended December 31, 2024, was 14.7%. This is a slight decrease from the previous quarter but still indicates a strong yield on investments. 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, including investments on non-accrual status, outstanding during the period.

Funded Investments: $154.0 Million

RWAY completed $154.0 million in funded investments, including two new portfolio companies. This is a testament to the company's ability to identify and capitalize on attractive investment opportunities, even in a volatile market. The company's portfolio is primarily composed of first lien senior secured loans, providing a strong margin of safety.

Credit Loss Ratio: 12 Basis Points

For FY2024, RWAY achieved net investment income of $63.8 million ($1.64 per share) and maintained a low credit loss ratio of 12 basis points. This is a remarkable achievement, given the challenging macroeconomic environment. The Board declared Q1 2025 distributions of $0.33 regular dividend plus $0.03 supplemental dividend per share.

Acquisition of Runway Growth Capital by BC Partners Credit

The acquisition of Runway Growth Capital by BC Partners Credit is expected to significantly impact RWAY's future investment strategies and portfolio diversification. This acquisition brings expanded resources and expertise, which will allow RWAY to leverage a larger network of professionals and access a broader set of products. As a result, the company expects to see an expansion in its origination funnel, enabling it to capitalize on more attractive investment opportunities. This strategic move is aimed at mitigating risk and driving heightened returns for both stockholders and borrowers.

Increased Leverage Ratio

The increased leverage ratio from 95% to 108% year-over-year for Runway Growth Finance Corp. (RWAY) presents both potential risks and benefits that could impact the company's financial stability and growth prospects. While the increased leverage ratio allows RWAY to invest more in its portfolio companies, which can drive growth, it also increases the company's financial risk, as higher debt levels can make it more vulnerable to economic downturns or changes in interest rates. However, the amendment to their credit facility extending the maturity date and revolving period provides enhanced financial flexibility, allowing RWAY to manage its debt more effectively and take advantage of new investment opportunities.

Q1 2025 Dividend

The $0.36 total Q1 2025 dividend ($0.33 regular + $0.03 supplemental) represents a slight decrease from previous quarters but still offers investors a substantial yield at current prices. This dividend cut reflects a more conservative capital allocation strategy, but it's important to remember that RWAY is still committed to returning value to its shareholders.

Conclusion

In conclusion, Runway Growth Finance Corp (RWAY) delivered a mixed bag of results for Q4 2024, with total investment income and net investment income declining year-over-year. However, the company's NAV per share increased, and it completed $154.0 million in funded investments, including two new portfolio companies. The acquisition of Runway Growth Capital by BC Partners Credit is expected to significantly impact RWAY's future investment strategies and portfolio diversification, and the increased leverage ratio presents both potential risks and benefits. Overall, RWAY remains a strong player in the venture debt space, and investors should keep a close eye on this company as it navigates the dynamic macro environment taking shape in the year ahead.