Good day, everyone. Welcome to the SWK Holdings First Quarter 2025 Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Susan Xu, Investor Relations. The floor is yours.

Thank you, Kelly. Good morning, everyone, and thank you for joining SWK Holdings First Quarter 2025 financial and corporate results call. Yesterday, SWK Holdings issued a press release detailing its financial results for the three months ended March 31, 2025. The press release can be found in the Investor Relations section of swkhold.com under News Releases. Before beginning today's call, I would like to make the following statement regarding forward-looking statements. Today, we will be making certain forward-looking statements about future expectations, plans, events, and circumstances, including statements about our strategy, future operations, and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations, and you should not place undue reliance on these statements. Actual results may differ materially due to risks and uncertainties, including those detailed in the Risk Factors section of SWK Holdings' 10-Ks filed with the SEC and other filings we make with the SEC from time to time. SWK Holdings disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Joining me from SWK Holdings on today's call is Jody Staggs, President and CEO, and Adam Rice, CFO, who will provide an update on SWK's first quarter 2025 corporate and financial results. Jody, you may go ahead.

Thank you, Susan, and thanks, everyone, for joining our first quarter conference call. We are pleased with SWK Holdings' first quarter performance, headlined by strong financial segment profitability as well as the successful monetization of the majority of our royalty portfolio. First quarter SWK highlights include $8.6 million of finance segment adjusted non-GAAP net income, bringing the trailing twelve-month total to $26 million, a new $15 million financing to an innovative life science company, and continued partnership advancement between our Mod Three Pharma division and its strategic partner. Our non-GAAP tangible financing book value per share grew to $21.73, achieving our stated goal of 10% year-over-year growth. Mod Three adds an additional $0.38 per share of tangible book value, bringing our total tangible book value per share to $22.11. Pro forma for the May 2025 $4 per share special dividend, our total tangible book value per share was $18.11. Year to date, we have repurchased $1.1 million of our shares, and with the stock trading at a discount to book value and given our excess capital, I expect the board will authorize a new share repurchase program in the coming days. As of March 31, 2025, our gross finance receivables portfolio consisted of approximately $220 million of performing first lien loans and $13 million of nonaccruals, against which we have a $9 million CECL reserve, bringing net finance receivables to $224 million, and that is pro forma for the sale of the royalty portfolio. We also hold $5 million of public equities and warrants, as well as private warrants and post-workout contingent economic interest carried at zero on our books. Finally, gross cash as of today totaled approximately $22 million, and our revolving credit facility is undrawn. As of March 31, 2025, the financial receivable portfolio had an effective or modeled yield of 14.5%. So if the portfolio repays as modeled, it should generate approximately $32 million of annual interest income. We are pursuing additional financings, including upsizing existing performing borrowers as well as agreements with new partners. The market for high-quality borrowers remains competitive, and we will pick our spots to maintain a high-quality portfolio that can earn a mid-teens return. We believe the portfolio remains strong, and the most recent credit score reached an all-time high. As a reminder, we rank our portfolio from one to five, with five being the highest score. At March 31, we had three nonaccruals totaling $13 million and two two-rated credits totaling roughly $20 million. The two-rated credits are both accrual, and we are in regular conversations with both borrowers. We continue to monitor the ongoing healthcare and general economic regulatory changes, and at this time, we do not believe any of these changes pose outsized risk to our portfolio. Turning to how we are thinking about the pro forma finance segment's go-forward economics, as previously mentioned, the current portfolio should generate approximately $32 million of interest income if it repays as modeled. On the expense side, we are targeting approximately $8 million of normalized annual OpEx. The bond interest expense totals $3 million, and our revolver carrying cost is approximately half a million dollars. So a reasonable target is approximately $20 million in finance segment adjusted non-GAAP net income based on the current portfolio size. To be clear, this is not guidance and does not consider impairments, early payoffs, warrant gains, and normal OpEx, additional appointments, etc. It is really just intended to provide a framework for how to think about go-forward profitability. Turning to our Mod Three CDMO division, first quarter segment revenue was $1 million, and segment EBITDA was a loss of $0.5 million. During the quarter, we received a $1.8 million option fee from our strategic partner, which is carried in deferred revenue. The partnership remains strong, with both sides collaborating to grow the business. Our team at Mod Three is also working to monetize non-core IP. With that, I will turn the call over to our CFO, Adam Rice, to review the quarter's financial results.

Thank you, Jody, and good morning, everyone. Yesterday, we reported earnings for the first quarter of 2025. We reported GAAP pretax net income of $5.8 million or $0.48 per diluted share. Our reported first quarter 2025 net income is $4.5 million after income tax expense of $1.3 million. This includes the $300,000 decrease in finance receivables segment revenue and a $700,000 increase in pharmaceutical development segment revenue. The $300,000 decrease in year-over-year finance receivables segment revenue was primarily due to a $2.4 million decrease in interest and fees earned due to partial paydowns and payoffs. The decrease was largely offset by a $2.1 million increase in interest and fees earned due to add-on fundings and newly funded finance receivables. The previously mentioned paydown and funding activity is typical as SWK continually manages the return of capital and capital deployment. As of March 31, 2025, our GAAP book value per share was $23.94, a 6.8% increase compared to $22.42 as of March 31, 2024. Additionally, non-GAAP tangible book value per share totaled $21.73 as of March 31, 2025, a 10.5% increase compared to $19.66 as of March 31, 2024. Overall operating expenses, including interest, pharmaceutical manufacturing, research and development expense, general and administrative expense, and provision for credit losses, were $3.7 million during the first quarter of 2025, compared to $10.3 million in the first quarter of 2024. Mod Three operating expenses were $1.5 million in the first quarter of 2025 compared to $1.7 million in the first quarter of 2024. In finance receivables segment operating expenses, were $2.2 million in the first quarter of 2025 compared to $8.6 million in Q1 of 2024. The finance receivable operating expenses further break down for the first quarter of 2025 to general and administrative expenses of $2.6 million, provision for credit losses, in this case, a gain, of $1.5 million, and interest expense of $1.1 million. And for the first quarter of 2024, general and administrative expenses of $2 million, provision for credit losses of $5.3 million, and interest expense of $1.3 million. The decrease in finance receivables segment operating expenses was mainly due to a $6.8 million decrease in provision for credit losses. The decrease in provision for credit losses is most notably attributed to $1 million of asset impairments in the first quarter of 2025 versus $6 million of asset impairments in Q1 of 2024. Turning to our share repurchase program, we bought back approximately 52,000 shares at a total cost of $900,000 during the quarter. And since quarter close, we have repurchased an additional 11,000 shares for a total cost of $200,000. With that, I'll turn it back over to Jody.

Thanks, Adam. We are pleased with our first quarter results and believe we are positioned for a successful 2025. We have simplified the business and are focused on earning an appropriate return on our equity capital. The management team and board are focused on achieving value for our shareholders. With that, let's open the call to questions.

Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. I ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold a moment while we poll for any questions.

Good morning, and congrats Jody, to you and the team. Great progress again, and thank you for the special dividend return of capital. That was great. I guess my first question is on those you mentioned the two that scored a number two on your credit, the $20 million. Are those loans, or are those royalties, or is it a combination?

Yeah. Those are both loans. So we have three non-accruals that are post-reorganization royalties, as I will define them, and those are situations where we have taken them through some type of process, and really, we are just largely passive check collectors at this point in time. The two loans are still first lien term loans, where we have the full lien covenants, etc.

Okay. Excellent. And I just, you know, congratulations on seeing some of these big upsize borrowers, Eton, Journey. Yeah. Both have, yeah. I wish I owned both of the stocks this week. You know? And I am glad that you at least have equity warrants on each Eton or Eton. That is right. That is right. Pushing twenty and Durham up, what, 19% yesterday. And they have an at-the-market offering open, so they could keep raising, you know, capital, and they have got a pretty good cash balance. So congratulations on seeing those borrowers performing well. So when you talk about competition out there, you know, clearly, there is a lot of focus on private credit and other people. Are you seeing people just in the space in general leaking into your space, or are you at the size where it does not really, you know, benefit them? The clients that you talk to.

Yes. So I think our space is still very interesting, the kind of $10 to $25 million space. But there are other folks in our space, and, you know, you can imagine some of these, some of the names that you mentioned. Those people are going to get hit up to refinance to reprice. I mean, those are big enough to definitely catch people's attention. So, you know, we have got to really be good partners, be proactive in those situations. And, you know, new names, I mean, if it, how would frame it if it is a $25 million loan that is just obvious, you know, obviously over-collateralized, there are going to be folks around that. So we have won some of those. We have to really be creative and thoughtful with the proposals and show excellent customer service. And then we need to find some of the tens and fifteens that maybe are not quite as obvious on day one, to, you know, where we feel, hey. Look. Fits our underwriting criteria. We are underwriting to a sub 40% LTV. You know, we feel like this is a low, not an obvious piece. But maybe it is not just so obvious where you just sort of say, hey. Look. This is a $200 million market cap, and they have got a bid on the company, and it is a no-brainer, if that makes sense.

Right. Yeah. No. It does. And so when you talk about, like, tangible book and I, you know, you look on your 10-Qs or Ks, and you see things like, you know, to be determined, like molecular light. You know, it says you know, you might have some warrants. That was a really interesting company. I am not surprised they paid you back. You know, how are those things or Zevra with you get CVR rights, like, are those just carried at zero, like a lot of things? So yeah. My point being that there can be both up and downside. It could stay at zero, but there is potential that some of that stuff could, you know, help cover up when challenging times arise. Is that kind of how I should read those sets or, you know, potential assets, warrants?

Yeah. Yeah. That is right. So I have got the file pulled up here. We have 12 discrete instruments, I will call them, that are either private warrants or, you know, we have got you mentioned this TBR. We have got a couple of reorganization tail payments. Those are all carried at zero. And some of them are not going to be worth anything, but I think they are worth more than zero. You know, there are a couple of there that could be pretty interesting. The challenge is, you know, these private companies until they sell, you really do not know what they are worth. So I think it is just a fool's errand to try to value them like we probably would spend, yeah. No. Thousand a year on stuff. So we carry those at zero. And then, you know, some of these will work out, some of them will not. But, yeah, we do think there is some value there. And, again, those are all carried at zero. You know, and then the other thing, and we have not talked much about this. And, again, this is a this is not a, you know, a huge piece of value, but we do have a couple of pieces of IP at Mod Three in Terrace, actually. Well, yeah. The current Mod Three that, yeah. They fall outside the APA of the purchase option agreement that, you know, we have said is out there. And there are a couple of interesting things there. Can we find a way to get something for those? I do not know. And I doubt it would be a big chunk upfront, but, you know, maybe there are some tail payments there as well. So, yeah, to your point, there is some, you know, some of the portfolio, you know, there is always some risk there and, you know, versus how we think things play out. But there is also, you know, there are a number of things marked at zero on our books where there could be upside too.

Okay. Awesome. Thank you. I will get out of the queue, and then congratulations again. Nice progress.

Thank you, Scott.

Once again, if you do have any questions or comments, please press 1 at this time. Hold a moment while we poll for any additional questions. We have a question from Davana Ladaby with Canal. Please pose your question. Your line is live.

Hey. Is this for Miss Stefano? This is for Miss Stefano. Hey. How are you, Jody?

Good. Good. Thanks for the question.

Of course. So what is the best use of capital at this point for you guys?

Yeah. Great question. That kind of is the question. You know, look. We kind of mentioned the pro forma book values, tangible book values, $18.11, and laid out where there could be some upside. So I think buying back stock is really interesting here. You know, we know the portfolio. We can buy in a situation that we know that is diversified. So I think that is a great use of capital for us. We, of course, have a fair amount of excess capital to do that, and I do not think that we are in a position to use all that capital on that. So that would be one. I think we should do. We did pay the special dividend. I think that shows that the board is open to that. You know, and at this time, there is nothing else like that planned, but I think the board showed you that they will do that. And so that could be a use. And the third, I think, is high, you know, selective additional loans. Really keeping kind of right in our sweet spot. To make sure we have got a portfolio that is stable to maybe modestly growing, that is sort of somewhat homogenous and that is easy for everyone to see that, hey, look, this is value. What we say it is valued at, it should trade there. So I think it is kind of those three things. It is pretty simple.

Thank you, Jody. One more. In terms of, you know, possible loans you can do in here, how would you configure the current situation and the current pipeline of possible loans versus, let us say, you know, sequential quarter over quarter and last year. You think it has improved? There are more opportunities? The same.

Yeah. You know, if you had asked me two months ago, I would have said, wow, it is actually really pretty interesting. Everyone had pulled back. There was a little bit of fear. You know, we have kind of in sixty days, switched to, okay. That is a little bit more, animal spirits have pulled back in. So the pipeline is probably, I would say, roughly the same as it has been over the past year. It is not, I will call it neutral. It is not extremely attractive like it might have been seventy-five days ago, sixty days ago. But there are still some opportunities, particularly in, you know, our neck of the woods where, you know, some of the smaller companies still have a hard time getting capital. So I would call it kind of neutral over the past twelve months and maybe modestly worse opportunity set sequentially given that we have kind of moved away from some of the fear around the tariffs.

Okay. Thank you, Jody. Thank you for taking my question.

Absolutely. Thank you.

There appear to be no further questions in queue at this time. I would now like to turn the floor back over to Jody Staggs for closing remarks.

Hey. Great. Thank you for joining the call. Thank you for the Adam and myself will be around today. Feel free to call if you have any questions and just to say it, if you know, if anyone does have blocks that they want to talk about as it relates to capital allocation, please call myself or Adam. Happy to take those calls and discuss it with you. Everyone has a great Friday. Bye-bye.

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.