Ladies and gentlemen, thank you for standing by. And welcome to the Runway Growth Finance Fourth Quarter 2022 Earnings Conference Call. Please be advised that today’s conference is being recorded. I would now like to hand the call over to Mary Friel, Assistant Vice President, Business Development and Investor Relations. Please go ahead.

Thank you, Operator. Good evening, everyone. And welcome to the Runway Growth Finance conference call for the fourth quarter and fiscal year ended December 31, 2022. Joining us on the call today from Runway Growth Finance are David Spreng, Chairman, Chief Executive Officer, Chief Investment Officer and Founder; and Tom Raterman, Chief Financial Officer and Chief Operating Officer. Runway Growth Finance’s fourth quarter and fiscal year 2022 financial results were released just after today’s market close and can be accessed from Runway Growth Finance’s Investor Relations website at Investors runwaygrowth.com. We have arranged for a replay of the call at the Runway Growth Finance webpage. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including, and without limitation, market conditions caused by uncertainty surrounding the rising interest rates, the impact of the COVID-19 pandemic, changing economic conditions and other factors we identify in our SEC filings. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained on this call are made as of the date hereof and Runway Growth Finance assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of the SEC related filings, please visit our website. With that, I will turn the call over to David.

Thank you, Mary, and thank you all for joining us this evening to discuss our fourth quarter results. I’d like to start by providing fourth quarter 2022 highlights, then I will discuss broader market dynamics and the outlook for 2023. 2022 was a pivotal year for Runway. It was our first full calendar year as a public company. We believe our investment thesis was validated and we demonstrated the value in pursuing a portfolio that focuses on the latest stage companies in the venture market. Despite a volatile backdrop, Runway continued to prudently deploy leverage to fuel non-dilutive growth for its portfolio companies, while delivering five consecutive quarters of dividend increases to our shareholders. Since inception, we have built a track record of lending to what we believe to be the highest quality, late and growth stage companies. I want to take a moment to summarize our very successful year. Runway delivered record originations of $878 million. We expanded leverage more than seven-fold to 0.97 times. We grew ROE by 165 basis points to 10.3%. We increased our base dividend per share to $0.40, marking an 11% increase from our prior quarter and a 60% increase since our initial public offering. Additionally, we declared a supplemental dividend of $0.05 per share payable with the first quarter dividend, along with our intention to pay a similar dividend in each quarter of 2023. We recorded zero realized credit losses. We expanded our investment in finance teams by over 40% and we grew our strategic footprint with new offices in Boston and Dallas. Now let’s turn to our fourth quarter results. Runway closed 2022 with record fourth quarter portfolio growth. We completed 12 investments in new and existing portfolio companies. This represents $327 million in new commitments, including $233 million in funded loans. Runway is committed as ever to focusing on quality, high growth potential companies in the sectors we know best, including life sciences, technology and select consumer service and product industries. Notably, our team deployed two loans to PE-sponsored companies during the fourth quarter, highlighting our strategy to migrate towards larger, less risky opportunities. We view growth-focused PE-backed companies as an integral segment of the platform that offers compelling risk-adjusted returns. We also increased our core leverage ratio from 0.6 times to 0.97 times in the fourth quarter, reaching our target range on an accelerated schedule. This is an important achievement for Runway as we unlock the full potential of our balance sheet’s earnings power and expand our return on equity. Runway delivered total investment income of $37 million and net investment income of $18 million in the quarter. This represents an increase of approximately 109% and 68%, respectively, from the prior year period. Net assets were $576 million at the end of the fourth quarter, down 5% from $606 million in the prior year period, yet up from $574 million at the end of Q3 2022. Tom will dive deeper into our continued credit quality, but our weighted average portfolio rating improved to 2.1%, compared to 2.2% in Q3. We are pleased with the strength and resilience of our portfolio. While we anticipate continued macro turbulence in 2023, we believe our durable portfolio is built for all economic environments. Our top priority is the quality of our portfolio and due to persistent Fed rate increases and inflationary pressure, our team has been even more selective in evaluating additions to the Runway portfolio. We demonstrated our ability to grow and execute during times of uncertainty. However, we redouble our diligence efforts and become even more patient. Our next area of focus is our structuring and underwriting. We focus on mutually beneficial terms that position Runway at the top of the cap table. Relative to other listed venture debt BDCs, we believe Runway is exposed to the least amount of risk. This is demonstrated by our concentration in first-lien senior secured loans, as well as our weighted average active loan-to-value at origination of 17.4% across the entire portfolio. As we have done in the past, we also calculated the loan-to-value for loans that were in our portfolio at the end of Q3 and Q4. In comparing this consistent grouping of loans, our dollar weighted loan-to-value ratio was consistent at 22% in Q3 and 23% in Q4. This reflects the extremely conservative approach to valuation our credit team takes during the underwriting process to insulate our portfolio from exaggerated valuations. For our existing positions, we pride ourselves on our monitoring process. From term sheet to final payment, we are in regular communication with our portfolio companies to proactively assess their ability to identify and navigate potential challenges. Our communication cadence with portfolio companies is built into our terms on each loan. We do not take a one-size-fits-all approach. Portfolio monitoring is built on a core set of requirements for all portfolio companies and is customized from that base to ensure an ongoing program that meets our needs as a lender while allowing the borrower to operate as efficiently as possible. Additionally, each position in our portfolio undergoes a comprehensive valuation process internally on a quarterly basis and periodically by a third-party. For perspective, every material investment in our portfolio was reviewed by a third-party valuation specialist at least twice throughout 2022. This gives us confidence in our marks, even amid challenging operating environments for our portfolio companies. Looking at the broader market outlook, three themes are clear: valuations are declining, deployments are down, and exit activity is slowing to recent year lows. We view these trends as a natural part of the venture cycle. There are also demand drivers for non-dilutive growth loans as an alternative to expensive equity. Our credit bar is high and we see increasing demand for Runway's creative financing solutions. Our team continues to originate high-quality deals while focusing on companies with sound fundamentals and proven business models. The latest venture capital data reinforces these points. According to recent PitchBook data, late-stage venture capital activity continued to decline through 2022 as the market faced ongoing volatility. However, it’s important to note, 2022 late-stage deal values remain historically high, outpacing 2020 and 2019 by 34% and 62%, respectively. Compared to record levels in 2021, deal count only declined by 5%. In other words, late-stage companies are continuing to raise equity capital but in smaller increments. The venture capital ecosystem is nearing the end of a 10-year expansion cycle. According to PitchBook data, even though U.S. venture capital raised in 2022 was a record $163 billion, venture capital fundraising slowed significantly in the fourth quarter as the full impact of the denominator effect became apparent in investor commitments. We expect this trend to continue for the foreseeable future, suggesting that VCs will be very judicious in deploying available dry powder. On the venture debt side, according to PitchBook, 2022 was the fourth consecutive year surpassing $30 billion in new loan fundings. This demonstrates the resilience of venture-backed companies embracing debt as non-dilutive growth capital, which bodes well for Runway. Before I turn the call over to Tom, I want to highlight a performance metric we prioritize: our consistent dividends to shareholders and sustained shareholder return. Since becoming a public company, we have increased our dividend for five consecutive quarters, representing 60% total growth. We achieved this while building what we believe to be the most stable portfolio in the venture debt landscape. While the macro environment likely will continue to impact our portfolio companies, we have confidence that we can continue to execute our disciplined strategy to drive long-term shareholder value. Turning to 2023, we continue to prioritize financing recession-resistant companies with proven business models and minimal downstream financing risk. The cost differential between debt and equity capital continues to be a tailwind for the Runway platform. As a reminder, the first quarter tends to be seasonally the slowest period in terms of originations activity, which is consistent with what we have experienced year-to-date. This market dynamic is not expected to impact the supplemental dividend program we discussed earlier on this call, subject to Board approval. The team continues to see a robust pipeline of opportunities in the marketplace and we will continue to evaluate these deals with discipline and rigor that we have employed to date. I will now turn it over to Tom.

Thanks, David, and good evening, everyone. Runway completed 12 investments in new and existing portfolio companies in the fourth quarter, representing $327 million in new commitments, which included $233 million in funded loans. Runway’s weighted average portfolio rating improved to 2.1% from 2.2% in the third quarter. As a reminder, our risk rating system is based on a scale of 1 to 5, where 1 represents the most favorable credit rating. At quarter end, we continued to have only one portfolio company rated 5 and on non-accrual status. At the end of the fourth quarter, our total investment portfolio, excluding U.S. treasury bills, had a fair value of approximately $1.1 billion, compared to $910.2 million at the end of the third quarter and $684.5 million for the comparable prior year period. This represents a sequential increase of approximately 24% and a year-over-year increase of 65%. As of December 31, 2022, Runway had net assets of $576.1 million, increasing from $573.7 million at the end of the third quarter. NAV per share was $14.22 at the end of the fourth quarter, compared to $14.12 at the end of the third quarter. We are pleased with our stable NAV, which we feel reflects industry-leading levels of scrutiny. With respect to interest rates, our loan portfolio is comprised of 100% floating rate assets, which will continue to benefit from higher rates. All loans are currently earning interest at or above agreed upon interest rate floors, which generally reflects the base rate plus the credit spread set at the time of closing or signing of the term sheet. In the fourth quarter, we received $16 million in principal repayments, a decrease from $55 million in the third quarter of 2022. We expect prepayment activity to remain relatively low, given equity valuations and a pullback in the refinancing markets. However, a number of our late-stage companies remain attractive acquisition targets in any environment, which makes it difficult to predict future prepayments. In the fourth quarter, we generated total investment income of $36.8 million and net investment income of $18.4 million, compared to $17.6 million and $10.9 million in the fourth quarter of 2021. This was driven by our growing portfolio and rising interest rates. Our debt portfolio generated a dollar weighted average annualized yield of 15.5% for the fourth quarter 2022, as compared to 14.0% for the fourth quarter of 2021. Moving to our expenses. For the fourth quarter, total operating expenses were $18.4 million, increasing from $6.7 million for the fourth quarter of 2021, driven by an increase in interest expense and management and incentive fees. Our performance-based incentive fee was $4.6 million for the fourth quarter, compared to $2.7 million for the fourth quarter of 2021. Our base management fee was $3.4 million, up from $2.3 million in the fourth quarter of 2021 due to the increase in the average size of our portfolio during the year. Beginning in Q1 2023, our management fee declined from 1.6% per annum to 1.5% per annum with our total assets now exceeding dollars. Runway had a net realized loss of $2 million in the fourth quarter, compared to a net realized gain of $8.2 million for the fourth quarter of 2021. We recorded net unrealized depreciation of $2.1 million in the fourth quarter, primarily driven by adjustments to the equity portfolio. Weighted average interest expense was 6.5% at the end of the fourth quarter, increasing from 5.5% during the third quarter of 2022. End-of-period leverage was 97% and asset coverage was 203% as compared to 60% and 266%, respectively, at the end of the third quarter 2022. All investments in the fourth quarter were funded with leverage as part of our strategy to generate non-dilutive portfolio growth. Turning to our liquidity. At December 31, 2022, our total available liquidity was $93.8 million, including unrestricted cash and cash equivalents and borrowing capacity of $88 million under our revolving credit facility, all subject to existing terms and conditions. This compares to $255.8 million and $250 million, respectively, on September 30, 2022. Subsequent to quarter-end, we further enhanced our liquidity by increasing our credit facility by $50 million to a total of $475 million subject to the terms and conditions as reflected in the amended credit facility agreement. Runway continues to be disciplined in deploying capital at favorable terms while maintaining market-leading credit quality. Our credit quality reflects our rigor across the entire lifecycle of a loan, including sourcing, negotiating, underwriting and monitoring, while focusing on industries with long-term growth potential. We continue to have dry powder and available leverage capacity for growth. Runway is opportunistically positioned to grow earnings while driving shareholder value. As leverage builds to the upper end of our target range, we believe it will unlock the full potential of our earnings power. On that note, we achieved our core leverage target for the portfolio, which is between 0.8 times and 1.1 times, marking tremendous progress. As we have said in previous calls, we believe we can safely increase our leverage ratio to 1.3 times, which is more in line with our publicly traded BDC peers. In 2022, our Board of Directors approved a stock repurchase program to acquire up to $25 million of Runway’s common stock. The program expired on February 23, 2023, and the Board has not renewed the program at this time. In aggregate, during 2022, Runway purchased 871,000 shares at a price of $10.8 million. Finally, on February 23, 2023, our Board declared a base dividend distribution for the first quarter of $0.40 per share, an 11% increase from our fourth quarter dividend of $0.36 per share and our fifth consecutive quarterly dividend increase. In addition, our Board approved a supplemental dividend of $0.05 per share payable with the base dividend and our intention to pay a similar dividend in each quarter of 2023. This concludes our prepared remarks. We will now open the line for questions.

Thank you. Our first question comes from Mickey Schleien with Ladenburg.

Yes. Good evening, everyone. David, I wanted to ask you about the Internet and Direct Marketing Retail segment. I realize it’s not particularly large, but obviously, we are all aware of the headwinds that the consumer is facing, and I am curious how this segment is performing in light of those headwinds?

Yeah. Thanks for the question, Mickey. So of the different sectors that we focus on and just as a quick reminder, within tech, we really like mission-critical enterprise technology, we like life sciences and healthcare broadly, and the third bucket that would be the one we are kind of being most cautious on is the consumer. We have always focused on recession-resistant businesses. So for something in the consumer space for us to do it today, it’s going to have to be recession-resistant and have very impressive momentum and economics. The new deal that was done in the last quarter meets those standards, and that’s Madison Reed. You are right; it was not a very big loan, but the company is really well run, has really good economic metrics, and is quite recession-resistant. They built a fantastic business direct-to-consumer and then through COVID actually raised quite a bit of equity to roll out an omnichannel approach where they have these color bars in big cities with a very small footprint, a great economic model. Most importantly, the revenue model is mostly on a subscription basis where a woman primarily could pay a fixed monthly charge and come into the color bar as much as they want or on a regular basis. So it’s the smallest part of our portfolio. It’s the highest bar to get into the portfolio today, but we do think that selectively there is room for continued investment in that space.

That’s good to hear, David, and I appreciate that transparency. You mentioned in your prepared remarks a focus on more sponsored deal flow and I don’t recall off the top of my head what proportion of the portfolio is sponsored today, but to the extent there are headwinds developing in your portfolio, anything anecdotal you can tell us about how sponsors are behaving in the portfolio in terms of supporting your portfolio companies?

Yeah. Of course. The comment that I made in the prepared remarks was referring to PE-backed companies, so a different category of sponsor than the traditional VC. We did two deals in Q4 with PE sponsors, one that was sponsored by Mainsale and one that was sponsored by BlackRock, and we really like their backing. They are obviously very sophisticated and are very committed to their companies and a great counterparty for us. So we plan to continue to look for more PE-sponsored companies. The broader question you asked is about how sponsors are behaving within the portfolio. I would say that in venture land, you are seeing a lot of VCs doing triage on their portfolios and deciding that the limited amount of capital that they have access to, although there is a lot of dry powder in the system right now, most VCs are thinking, 'Okay, this is going to have to last us a long time, and we are really only going to feed our very best companies.' The ones that don’t make the cut will be nice to them and let them know we still love them, but we are going to let them know we don’t have additional dry powder. For our companies, we have really advised them to test that and go back to their venture investors and ask how much dry powder do you have and is it still good, and if possible, actually do a round. We have seen situations where VCs have backed out of what were otherwise commitments. As a result, you will see occasionally what we call a down-and-dirty or wipe-out round where the go-forward investors say we will continue to invest, but we are not going to let the guys that aren’t investing right on our coattails. We are going to do a round that wipes those folks out. It’s a mixed bag. We are lucky because we really focus on the latest stage companies and our average company, as a reminder, is doing more than $50 million of revenue and they have raised over $100 million of venture equity. So the investors, for the most part, are very committed and they are going to think twice before flushing $100 million down the toilet. They might be more prone to flush a company where they have only invested a little bit. So the venture industry is very choppy, it’s very mixed, and you are finding a lot of VCs remaking on prior commitments. But that’s a phenomenon that’s happening much more at the earlier stages than the late stages.

That’s also good to hear. I appreciate that. Just one question on liquidity. I appreciate that you expanded the credit facility, but even with that expansion, your liquidity relative to your unfunded commitments is pretty tight. However, within those unfunded commitments, there’s a lot of discretion. Can you give us a sense of how much of those unfunded commitments are at Runway’s discretion and your comfort with your liquidity level?

Sure, Mickey. This is Tom. Total unfunded is $315.7 million. What’s eligible at 12/31 to be funded because of milestones and other requirements was only $56 million. Out of that $315 million, $131 million have been set to expire during 2023. So we believe that we have got more than adequate liquidity to cover that, and we have expanded the credit facility. We also believe we will continue to have access to the debt capital markets.

Well, I was going to say, Mickey, I would add another phenomenon that’s hard to put numbers on, but we have seen a couple of companies that had access because they achieved the milestones actually decide not to take the available capital because they had done a really good job of cutting their burn and they no longer need the capital and don’t want to pay interest on money they don’t need. Again, impossible to quantify that, but I think we will see more of that as we go through the year in 2023.

Okay. Well, that’s not a bad equation then. And just a question on the portfolio. You have one investment, Cadence, which has been marked at 80% of amortized costs for a couple of quarters and now Mingle Healthcare is also down at that level. Those are pretty distressed valuations generally speaking. I don’t know if that’s being impacted by market technicals or if there’s anything you can tell us about how those companies are progressing.

Yeah. It’s not really a market technical thing. It’s more specific to each of those companies and without giving details, I think that they are stumbling, and we are trying to be conservative in our valuations. For some of those companies, we will use scenario analysis as the best way to come up with the value. Keep in mind our value is reconfirmed by a third party and then reconfirmed again by our auditors and our audit committee. So it’s a fairly extensive process, and in both cases, there are just things happening at those businesses that we think will come to fruition, which will put the credit in a better position, but until they happen, we are conservative on valuation.

Okay. Understand. That’s it for me this evening. I appreciate your time. Thank you.

Yeah. Thank you, Mickey.

Thank you. Our next question comes from the line of Erik Zwick with Hovde Group.

Thank you. Good evening, everyone. I wanted to start first with a question on the leverage and the comments you made, that you believe you can safely increase the leverage up to 1.3 times, and I am curious, just given the amount of economic uncertainty, is that more of a mid- and long-term target, and in the near-term would you stick within kind of the initial range with that 1.1 times is the top? I guess even here in the near-term, could we see you move closer to that 1.3 times, if you are seeing attractive origination opportunities?

Yeah. Thanks, Erik. Not an unanticipated question, of course. This is something that we look at continuously and evaluate continuously. Our thought and our process in expanding that range starts really with the quality and the stability of the income and the cash flow that’s coming off the portfolio, a portfolio that is well seasoned and very late stage, 99% first-lien loans and a portfolio that has the majority, 90%-plus in our number two rating. So we are very confident in the quality of the portfolio. As we first became a public company, we used a narrower range because we thought it was prudent to demonstrate our ability to build a quality portfolio to our public investors. Now that we have done that and we see that we can support more leverage, we are going to be very judicious about adding it, but we don’t intend to raise equity below NAV. So the way we can take advantage of these opportunities that are presenting themselves, and as David mentioned, the economic terms and the non-economic terms are improving. So we may well exceed that 1.1 times opportunistically and then we will see how things season out over time.

It’s great. I appreciate the commentary there. And turning to the non-sponsor portion of the portfolio, curious just about the, I guess, maybe a two-part question. One, just the general underwriting, how that differs from the sponsor side, just given that there’s not a big fund behind these? And two, the second part is, how that potentially plays out in a stressed economic environment in terms of how you would manage them and work out, find resolutions in situations that don’t work out optimally based on original expectations?

Sure. First, regarding underwriting, a non-sponsored company lacks a backing investor or investors, which we define as having someone who can be contacted to provide capital on short notice. Venture capitalists and private equity firms typically fill this role. A non-sponsored company may be owner-operated or a public or private entity with venture investors who, while being on the Board, are out of capital and unable to support the business. In such cases, if there is no reliable financial support available, our underwriting will place a greater emphasis on liquidity, profitability potential, and revenue predictability. Consequently, our underwriting will be more stringent. These companies are usually more established, often having been in operation for years, and may have been profitable historically. However, they might pursue growth initiatives that temporarily disrupt profitability with the expectation of regaining it later. We analyze this closely to understand the scenarios that could lead to extended periods of non-profitability. Our approach is characterized by a conservative and cautious strategy, demanding more liquidity and potentially stricter covenants. In difficult situations, it varies depending on the type of non-sponsored company. For example, an owner-operated business may prompt its leader to do everything possible to avoid losing control, while in the venture model, investors are generally ready to abandon underperforming investments due to the expectation of future successes. This is different for owner-operated businesses, as their entire livelihood is at stake, making them highly motivated to prevent issues. Public companies, particularly those in biotech, can access capital through the public markets using ATM structures, an important aspect of our underwriting. We closely evaluate how quickly we can exit an investment, as many of our companies eventually undergo mergers and acquisitions. In default situations, our goal is not foreclosure but to motivate a sale of the business. Understanding potential buyers, market multiples, and the speed of sale is crucial, especially for non-sponsored companies. We have not experienced losses or significant issues with non-sponsored companies; out of four losses or workouts in total, very few have come from this segment of our business, which remains largely unblemished.

Thank you for that detail there. That was very informative. One last one for me and then I will step aside. Curious if you could expand or provide a little more detail into the term and I quote, 'similar,' with regards to the supplemental dividend. I am curious if you have a methodology in mind for how you determine that on a quarterly basis. I know a number of other BDCs have come out with some sort of percentage relative to adjusted NII to the regular dividend, curious if you are thinking about it in a similar fashion or maybe some other way?

Well, at this point, when we came into 2023 with a bit of a spillover, spill-back dividend and as the Board looked at it and we looked at the portfolio as it stands today and the cash flow that’s coming off of it, the thought would be to stay in that $0.05 range for the balance of the year. So no formula at this point; we will see as we spend a full year now to get the top end or close to the top end of our leverage range.

Hi. Thanks. Good evening. I wanted to maybe ask the dividend question a different way, and hearing the supplemental being put in place here, I assume that this does not preclude you all from further regular base dividend increases as we work through 2023?

That’s correct. That’s a good assumption.

Okay. That’s helpful, Tom. And then, looking at, I guess, the revenue stream here this quarter, I think, in past presentations, you have kind of broken out what prepayment income would have been, and perhaps there just wasn’t much here in the fourth quarter. But just curious if there’s a component of prepayment income within the interest income bucket?

Not really significant. The prepayment fees were, as you can see, about just under $700,000. But there wasn’t a significant amount of prepayment in the fourth quarter, and we kind of expect that to be the status quo for the near term.

Okay. Okay. That was it for me. I appreciate the answers.

Sure. Thanks, Bryce.

Thank you. And that concludes today’s Q&A segment. I would now like to hand the call back over to CEO, David Spreng, for any closing remarks.

Thank you, Operator. We believe that our success in 2022 is validation of the execution and investment strategy we pursued. While we expect a challenging backdrop during the next year, the Runway team and myself are confident in our ability to generate stable earnings and drive shareholder value in any market environment. Thank you all for joining us today and for your support, and we look forward to updating you on first quarter 2023 results in May.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating, and you may now disconnect.