Ladies and gentlemen, thank you for standing by and welcome to the Runway Growth Finance First Quarter 2025 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Quinlan Abel, Assistant Vice President, Investor Relations. You may begin.

Thank you, operator. Good evening, everyone and welcome to the Runway Growth Finance conference call for the first quarter ended March 31st, 2024. Joining us on the call today from Runway Growth Finance are David Spreng, Chief Executive Officer; Greg Greifeld, Chief Investment Officer of Runway Growth Capital LLC, our investment advisor; and Tom Raterman, Chief Financial Officer and Chief Operating Officer. Runway Growth Finance's first quarter 2025 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 to be available on 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 uncertainties surrounding interest rates, changing economic conditions and other factors we identified in our filings with the SEC. 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 SEC-related filings, please visit our website. With that, I will turn the call over to David.

Thank you, Quinlan, and thanks, everyone, for joining us to discuss our fourth quarter 2025. Today, I'll start by discussing first quarter highlights and how we are optimizing our portfolio in the current environment. Then Greg will shed light on the evolving venture landscape. And to conclude, Tom will provide a deeper dive on our financial performance. For the first quarter, Runway delivered total investment income of $35.4 million and net investment income of $15.6 million. We touched on this during our fourth quarter earnings call in March, but it's worth reiterating that given the current volatility in the market, our team has been focused on the health of our portfolio, enhancing our origination channels given our recently completed merger with BC Partners Credit, and continuing to apply discipline to our underwriting practices. To that end, in the first quarter, we executed on three investments in existing portfolio companies, representing $50.7 million in funded loans. The first quarter tends to be a seasonally slower period, but we've also been selective in our evaluation practices. This selectivity has been informed by the knowledge that our platform and opportunity set would be expanding in short order with the completion of our merger with BC Partners. As we've said, since we announced the BC Partners transaction, we don't anticipate this expansion to result in portfolio growth overnight, but we believe we have ample liquidity and are positioned to move opportunistically when the right investments arise. As we look to the balance of the year, Runway Growth Capital is seeking originations in the total loan size of $30 million to $150 million, with the ideal allocation to the BDC remaining between $20 million and $45 million. We believe this range will further diversify our BDC's portfolio over time as we look for new opportunities that meet our high credit standards. Our investors in turn are positioned to benefit from a strategic focus that will further diversify our portfolio and mitigate risk. Before I turn the call over to Greg, I want to highlight the current inflection point for the Runway Growth story. We are excited about the opportunities we have in front of us in this next phase at Runway Growth. To both our existing and potential investors, I want you to walk away from our call knowing the following three things. First, we believe Runway is well positioned to optimize our portfolio in the quarters ahead. We have expanded origination channels to ensure that our investment mix is built for the quarters and years to come. Second, we intend to remain credit-first in our underwriting practices. This may mean more episodic portfolio expansion over a longer time horizon, but we believe this is how we're going to deliver for our shareholder base over the long term. Finally, we have a strong decade-long track record and we have low loss rates compared to our peers and the BDC sector overall. We are seasoned credit professionals who know how to build our portfolio for any economic cycle. Today, we believe Runway Growth represents an attractive entry point for investors who are looking for a prudent portfolio manager, exposure to the venture ecosystem, and clear upside opportunity. We are confident in the path ahead and thrilled to officially be a part of the broader BC Partners Credit platform. With that, I'll turn it over to Greg.

Thanks, David, and good evening, everyone. As David mentioned, I'd like to take a step back and speak to the dynamics we see shaping the venture ecosystem and how we are positioned today as a result. In 2021, we saw VC funds raise capital at unprecedented levels. At the time, the only hurdle for them to raise the next vintage of a fund was deploying the funds that they had. With that backdrop, we saw investors make a high volume of investments, often at progressively larger sizes, which was additive for many firms in their pursuit to raise their next fund. As a result, we saw venture-backed companies operate at higher burn levels and deliver, in our view, artificially enhanced growth rates. In effect, many companies were able to buy revenue that wasn't necessarily the highest quality or beneficial to the long-term health of the business. Then in 2023 through 2024, venture capital and growth equity firms experienced slower fundraising environments and this delayed some fund launches. Instead of the next vintage being launched in 6 to 12 months, we saw firms seeking to return to a state of normalcy with deployment taking place over the course of 3 to 4 years. As that played out, venture-backed companies had to reckon with the new landscape. They had to either raise dilutive equity at a lower valuation than previous rounds or seek non-dilutive financing solutions. Additionally, this pushed companies to place a renewed focus on profitability over top-line growth and reduced cash burn, which involved cutting product expansions. As a result, we saw companies avoid the addition of more capital to the balance sheet via larger loans or equity raises. Today, we believe that the sentiment has begun to shift again and many companies have reached a point where they must begin demonstrating growth again to attract investment or achieve a successful exit. The management teams we are seeking with now have charted paths for more reasonable growth moving forward, and we believe companies are now prioritizing sustainable growth over the next few years. While we expect new deal activity in 2025, as companies delay or cancel deals in response to the broader market uncertainty, we believe companies will require non-dilutive growth capital to become attractive targets for potential M&A or IPO in the years to come. To that end, we recently completed a new $40 million investment to Autobooks, an accounting and bookkeeping solution, funding $27 million of loans. In line with my earlier commentary, this was a transaction that was scheduled to close in the first quarter and due to various market conditions was slightly delayed. We are thrilled to kick off this partnership and our flexibility around timing demonstrates our belief in this investment. In our view, Runway is attractively positioned to further optimize our portfolio for a few reasons. Our ability to source non-sponsored deals, which often face less competition and allow us to originate loans at more favorable terms sets us apart from peers, while adding an additional point of differentiation to our portfolio. We are now part of an expanded platform following the completion of our combination with BC Partners, which will offer a larger funnel of investment opportunities to evaluate and a more comprehensive suite of solutions to offer borrowers. We look forward to updating you all on how we're executing against our ability to maximize our portfolio in the coming quarters and demonstrate the core earnings power of this next chapter for the BDC. Now, I want to turn the call over to Tom to discuss our financial results.

Thank you, Greg, and good evening, everyone. During the first quarter of 2025, Runway completed three investments in existing companies representing $50.7 million in funded loans. Our weighted average portfolio risk rating remained at 2.33 in the first quarter of 2025, consistent with 2.33 in the fourth quarter of 2024. Our rating system is based on a scale of 1 to 5, where 1 represents the most favorable credit rating. As with previous quarters, we calculated the loan to value for loans that were in our portfolio at the end of the fourth quarter and at the end of the first quarter. In comparing this consistent grouping of loans, we found that our dollar-weighted loan to value ratio increased from 28% to 29.1%. Our total investment portfolio had a fair value of $1 billion, a decrease of 6.7% from $1.08 billion in the fourth quarter of 2024 and a decrease of 1.2% from $1.02 billion for the comparable prior year period. Our loan portfolio continues to be comprised almost exclusively of first-lien senior secured loans. As of March 31, 2025, Runway had net assets of $503.3 million, decreasing from $514.9 million at the end of the fourth quarter of 2024. NAV per share was $13.48 at the end of the first quarter, a decrease of 2.2% compared to $13.79 at the end of the fourth quarter of 2024. Our loan portfolio is comprised of 97% floating-rate assets. All loans are currently earning interest at or above agreed-upon interest rate floors, which generally reflect the base rate plus the credit spread set at the time of closing or signing of the term sheet. During the first quarter, we experienced three prepayments totaling $71.9 million and scheduled amortization of $3.7 million. We generated total investment income of $35.4 million and net investment income of $15.6 million in the first quarter of 2025 compared to $33.8 million and $14.6 million in the fourth quarter of 2024. Our debt portfolio generated a dollar-weighted average annualized yield of 15.4% for the first quarter of 2025 as compared to 14.7% for the fourth quarter of 2024 and 17.4% for the comparable period last year. Moving to our expenses. Total operating expenses were $19.8 million for the first quarter of 2025, an increase from $19.2 million for the fourth quarter of 2024. We recorded a net gain on investments of $6.1 million in the first quarter of 2025 compared to a net realized loss on investments of $2.9 million in the fourth quarter of 2024. At March 31, 2025, we continued to have two loans on non-accrual status, Mingle Healthcare and Snagajob. Our loan to Mingle Healthcare has a cost basis of $4.9 million and fair market value of $2.4 million or 49% of cost. Our loan to Snagajob has a cost basis of $3.8 million and fair market value of $2.6 million or 68% of cost. Together, these loans represent only 0.5% of the total investment portfolio at fair value as of March 31, 2025. At the end of the first quarter of 2025, our leverage ratio and asset coverage were 0.99x and 2.01x respectively compared to 1.08x and 1.92x at the end of the fourth quarter of 2024. As of March 31, 2025, our total available liquidity was $315.4 million including unrestricted cash and cash equivalents, and we had borrowing capacity of $297 million. As discussed during our fourth quarter 2024 earnings call, during the first quarter, we extended our credit facility with KeyBanc by 3 years subject to the terms and conditions as reflected in the amended credit facility agreement. Subsequent to quarter end, we restructured our privately placed senior unsecured notes as a result of the triggering of the change of control provision applicable to the company's external advisor. This provision required us to make an offer to repurchase our senior unsecured notes resulting in a prepayment of the August 2027 notes and an exchange and upside of our December 2026 notes. Total unsecured notes inclusive of our baby bonds increased to $264.3 million from $247.3 million. As of March 31, 2025, we had a total of $162.2 million in unfunded commitments, which was comprised of $132.8 million to provide debt financing to our portfolio companies and $29.4 million to provide equity financing to our joint venture with Cadma. Approximately $25 million of our unfunded debt commitments are eligible to be drawn based on achieved milestones. Most of our unfunded commitments are subject to specific performance milestones. Looking ahead, we believe we have sufficient liquidity to fund existing unfunded commitments, selective portfolio growth and potential share repurchases. On May 07, 2025, our Board of Directors approved a new stock repurchase program of $25 million which will expire on May 07, 2026 or earlier if we repurchase the total amount of stock authorized for repurchase under the program. We believe the program reflects our view that Runway Growth stock is significantly undervalued and presents an attractive entry point as well as management's confidence in our 2025 performance. Finally, on May 07, 2025, our Board declared a regular distribution for the second quarter of $0.33 per share as well as a supplemental dividend of $0.02 per share payable with the regular dividend. With that, operator, please open the line for questions.

Thank you. The first question comes from Erik Zwick with Lucid Capital Markets. Your line is open.

Hi. Good afternoon, guys.

Good afternoon.

Wanted to start with a question. Just one of the comments on Slide 7 indicates that median and late-stage deal sizes are down and that healthcare lending is low. And I guess maybe on the second part of that statement, just curious if you could maybe add a little commentary there in terms of if this is a new term development where healthcare lending has slowed or if there's something larger at play and maybe kind of why you elected to include that in that statement in there.

Yes, Erik, those are the numbers from across the industry as reported in the PitchBook Venture Monitor. I think that Greg can comment more specifically on healthcare, but I just know listening to the feedback from our folks and from the peers that it's just been a little bit of a softer, slower, more cautious quarter. And I think that's what's driving those results.

Got it.

Yes. And regarding healthcare, I would say that that remains one of the three core pillars of verticals we look at between technology, broadly healthcare as well as a very selective amount of risk. I would say looking across our pipeline, we've seen some more interesting things come on the technology side recently. And given the announcement today about potential impact to drug prices coming out of the potential executive order, that's going to be something that we will be very focused on seeing those details as they come out.

Thanks. I appreciate the additional comments there. And maybe just a follow-up on that, the pipeline. I noticed Q1 activity was almost 70% refinances. As you look at the pipeline today, curious how it looks in terms of add-on refinance and new opportunities?

Yes. And to echo my comments about the deal we closed with Autobooks, that is a term sheet that we had signed and anticipated to occur in Q1. Ultimately, the use of proceeds there was to help Autobooks fund an M&A deal, which given the turbulence, I think, that we all experienced in Q1, the negotiations of the finer point of that acquisition itself took longer than I think either buyer or seller expected, which caused it to push into Q2. I think those are the types of dynamics that we are seeing in this rapidly evolving market where there is desire to do deals, but folks are trying to make sure that they have the appropriate structure and pricing.

Okay. And could you provide an update on the joint venture, if there's been any recent investment activity there?

Yes. I would say that the JV investment activity continues to be somewhat muted as the overall environment and our approach for credit, as Greg mentioned, has been cautious. So the JV is experiencing that same level of speed, if you will, and ramp or lack thereof just the general cautiousness of the approach to credit today.

Thank you for taking my question today.

The next question comes from Melissa Wedel with JPMorgan. Your line is open.

Good afternoon. Thanks for taking my question. I wanted to start first with NII trends. I mean, obviously, there was a pickup quarter over quarter, and but despite that increase, I noted that your declared dividend or the supplemental dividend declared for Q2 was actually a little bit lower than what you paid in the first quarter. Just curious if you can contextualize that and help us frame how you're thinking about the earnings power of the portfolio?

Thank you, Melissa, for joining the call and for your question. I want to take a moment to clarify our dividend policy. In March, we announced a revised policy with a base dividend of $0.33 per share, along with a supplemental dividend that can be up to 50% of net investment income. Right now, our focus is more on increasing net asset value per share rather than raising the dividend, as we aren't receiving adequate recognition for the dividend in the market. We are confident in the portfolio's core earnings strength and its capacity to support the base dividend, which we projected based on various portfolio scenarios, including the potential for falling rates and different outcomes regarding non-accruals. We believe the portfolio can maintain that dividend going forward. As for the supplemental dividend, we aim for the target of up to 50%, but it may not reach 50% every quarter.

Okay. I appreciate that. So just putting a finer point on sort of earnings power of the portfolio, I'm hearing you say that the supplemental dividend declared for the second quarter isn't reflective necessarily of your expectations of the earnings power, but more of a function of a decision to be billed NAV versus payout up to half of NII earnings above the base dividend.

That's correct.

Okay. So that being the case, assuming stable base rates, do you feel like the NII per share of $0.42 that you saw in the first quarter is fully reflective of the ongoing dynamics, again, given stability in the base rates? Or were there some special one-time things we should be thinking about?

No. Again, I think we feel good about the earnings power of the portfolio, the ability to cover the base dividend. And the NII will vary quarter to quarter based on the growth of the portfolio or on the acceleration of income related to prepayments.

Thank you.

And the next question will come from Mickey Schleien with Ladenburg. Your line is open.

Yes. Good afternoon, everyone. Wanted to start by asking about terms. Clearly in the conventional private credit arena, we it's been very borrower-friendly and spreads have generally been tight with the market imbalance. But as you mentioned in your prepared remarks, the demand for private debt capital is better. And I'm curious how that's impacting the trends that you're seeing in your pipeline versus perhaps a year ago?

Yes. So I'll take a first crack at that. This is Greg. I do think that we are seeing an improvement in terms of the structure of the pipeline and the opportunities that we're seeing. There's the things that get reported in the schedule of investments, as you said, in terms of spread, flow rate and other things like that. But I would say most encouraging as well, we're seeing lower asks in terms of leverage from a loan-to-value perspective. We're seeing maintenance of amount of and quality of covenants. So, I think we feel that we're in a good place in terms of the economics, but as importantly, if not more importantly also the structural protections of the underlying documents.

That's really good to hear. Within the pipeline or just thinking broadly, what kind of companies within the AI landscape are you attracted to for investment, if any?

Yes. So what I would say in general is, as I'm sure many folks in the market have seen, there's a large race for everyone to try to find a way to reinvent themselves as an AI company. In general, where we play in the market, we're looking for more mature, larger businesses that are generating a meaningful amount of revenue without a too high of a burn amount. So a lot of the really early-stage companies are still too nascent and immature for us to make loans to, but it is something that we do look for larger businesses. An example in our portfolio is a company, Interactions, which has been in for a few years, but we're definitely interested in AI. But again, we're not necessarily willing to go earlier stage than we typically look across the portfolio.

I imagine for those larger, more mature AI companies you're referencing, there must be enormous demand to get those deals. Are the terms and are the risk-adjusted returns you can get in that space interesting at all?

I would say that as with everything, there's a need to be opportunistic. But that being said, you're completely right that anytime there's a really hot sector out there, you're going to see folks chase those deals in terms of either economics or structure. And that's why as we look to stick to our netting, you don't necessarily see the most current hot sector come into the portfolio.

Yes, makes sense. Just following up on the healthcare question. It is, if I'm not mistaken, your second largest allocation. To what extent are the cuts at the NIH and the FDA impacting the sentiment and the deal flow that underlies the sort of slow pace that you referenced before?

Yes. I would say that by nature, it is an industry with a tremendous amount of regulatory risk, not only in terms of achieving or not achieving approval, but also in terms of how long things might take. As a result, if you look at the majority of our healthcare book and we've had a good amount of success, particularly a number of the names in the portfolio today, it's post-approval businesses that are generating more meaningful types of revenue, which don't necessarily have that same regulatory slowdown risk than you might see for an early-stage pre-approval biotech or something like that.

Okay, that's interesting. Lastly, just sort of a housekeeping question maybe for Tom, if you could give us some highlights of what drove this quarter's realized gain and the unrealized portfolio depreciation.

Sure. Two parts. What really drove the realized gain was the previously announced closing of the sale of Gynesonics. And if you'll recall in Gynesonics, we had two pieces; we had our loan, so there was the acceleration of some income associated with the loan. But the gain was really driven by the sale of the preferred stock interest. In terms of the depreciation in the balance of the portfolio, that's a function of the ongoing valuation process. And I would say as you look at that, about 50% of that is influenced by performance and 50% is influenced by market multiples. So I think there were a couple of big movers that accounted for the majority of that change.

And Tom, did you just say some of the Gynesonics proceeds were recognized or accrued into income as a fixed fee?

Yes. But the gain on the sale of the equity is what drove that almost $7 million gain.

I understand. Okay. Thanks for your time this afternoon. Those are all my questions.

The next question will come from Douglas Harter with UBS. Your line is open.

Thanks. Your loan yield has had quite a variance over the past couple of quarters. Can you just talk about how you're thinking about what is a normalized level that you would think you would achieve as you kind of spread out some of the prepayment activity and as you think about that over the next several quarters?

Sure. I think if you look at the variability in yields, there's been spikes at times when we have accelerated or above normal kind of level of prepayments. Going forward, we see fewer prepayments. The transactions are staying in the portfolio longer, which mitigates that spike, if you will, but it also reduces the amount of acceleration from accreted income, whether it's the end-of-term payment or the OID. So you have a little bit of a less impact from that perspective. So if you normalize that yield, I think you're in the right neighborhood in terms of what we would expect. Our SOFR spreads and our prime spreads are pretty stable and you throw on the end-of-term payments and OID and that generates the core yield.

Okay. I appreciate it. Thank you.

I show no further questions at this time. I would now like to turn the call back over to David Spreng, CEO, for closing remarks. I am showing no further questions in the queue at this time. I would now like to turn the call back over to David Spreng, CEO, for closing remarks.

Great. Thank you, operator, and thank you everybody for joining today. In conclusion, we believe that our high-quality portfolio is positioned to perform amidst ongoing market volatility, and we look forward to updating you on our progress during our second quarter earnings call in August.

Great. Thank you, operator, and thank you everybody for joining today. In conclusion, we believe that our high-quality portfolio is positioned to perform amidst ongoing market volatility, and we look forward to updating you on our progress during our second quarter earnings call in August.