Runway Growth Finance Corp. Q2 FY2025 earnings call

• David Spreng discussed second quarter financial highlights, first half operational review, and outlook for remainder of 2025. • Greg Greifeld shared portfolio optimization progress and venture debt market outlook, noting investment in Swing, credit quality, and market trends. • Tom Raterman detailed financial results, including investment income, expenses, net realized loss, portfolio management, net assets, leverage, liquidity, stock repurchase program, and dividend declaration. • Runway is part of BC Partners credit platform, benefiting from broadened origination channels and expanded financing solutions. • Second quarter investment activity included 3 investments in new and existing portfolio companies across technology, health care, and select consumer sectors, totaling $37.8 million in funded loans, with subsequent post-quarter end deals announced. • Focus on highest quality late and growth stage companies within technology, health care, and select consumer products and services industries. • Portfolio structured with almost exclusively first lien senior secured loans, reflecting focus on risk mitigation.

For the second quarter, Runway delivered total investment income of $35.1 million and net investment income of $13.9 million. Total investment portfolio had a fair value of $1.02 billion, an increase of 2.1% from $1 billion in the first quarter. Loan portfolio is 97% floating rate assets. Net assets were $498.9 million, decreasing from $503.3 million at the end of the first quarter. NAV per share was $13.66 at the end of the second quarter, an increase of 1.3% compared to $13.48 at the end of the first quarter. Leverage ratio and asset coverage were 1.05 and 1.95x respectively at the end of the second quarter, compared to 0.99 and 2.01x respectively at the end of the first quarter. Total available liquidity was $297 million, including unrestricted cash and cash equivalents, and borrowing capacity was $291 million. Unfunded commitments were $164.9 million, with $135.5 million for debt financing to portfolio companies and $29.4 million for equity financing to JV with Cadma. Approximately $35.7 million of unfunded debt commitments are eligible to be drawn based on achieved milestones.

• Management is pleased with pipeline and remains focused on providing superior risk-adjusted returns for shareholders. • Anticipate elevated level of repayments in Q3 that will benefit NII for the quarter, with offsetting impact of increased interest expense, and work to originate additional opportunities to replace anticipated repayments in subsequent quarters. • Board approved $25 million stock repurchase program expiring May 7, 2026, with repurchases done through 10b5-1 based on stock trading as percent of NAV. • Expect pipeline to increase over next several quarters with benefits from portfolio optimization and origination side bringing additional growth into portfolio.

• Forward-looking statements subject to uncertainties and factors causing actual results to differ, including market conditions from interest rates, economic conditions, etc. • Mingle Healthcare loan on nonaccrual status, though making cash interest payments. • Impact of macroeconomic conditions on portfolio companies, such as evolving tariff policy and potential knock-on effects. • Constrained equity allocations in BDC sector and venture debt market, affecting exit opportunities. • Uncertainty in timing and amount of unfunded commitments being drawn down.

Q: Nonaccruals have been low, but PIK as a percent of total investment income has been increasing. How much is force PIK vs optionality?

A: PIK used for offensive and defensive reasons. Used to help borrowers with short-term cash flow or win transactions. Rates being high led to more transactions with interim PIK.

Q: How might share repurchase program play out?

A: Done through 10b5-1 based on stock trading as percent of NAV, more aggressive at higher discount to NAV, less aggressive when discount diminishes.

Q: Onetime costs associated with refinancing?

A: About $0.04 a share in Q2, with $0.015 onetime costs from acceleration of deferred financing costs and $0.025 ongoing increase in interest expense.

Q: How much of $35 million unfunded commitments eligible to be drawn might be drawn down?

A: Historically about 50-50, as performance of companies is good but milestones achieved depend on company performance.

Q: Repayment activity line of sight for 3Q?

A: Elevated repayments in Q3 to benefit NII, with offsetting impact of increased interest expense, and working to originate to replace anticipated repayments.

Q: New originations, were they larger deals with BC platform?

A: Autobooks and Swing done exclusively in BDC, subsequent events deals were portions of larger deals run by BC.

Q: Reconciling first half deal flow implying strong year with cautious remarks?

A: Environment mixed, focusing on quality, diversification is theme, with deals like Swing helping diversification and growth with company.

Q: AI skewing numbers?

A: AI is a sector, but latest stage opportunities for AI might be a couple of years away from being meaningful in book.

Q: Approach to consumer sector investments?

A: Focus on 3 sectors, allocation shifts with macro, target larger scale consumer companies with proven track record and less tolerance for burn.

Q: Update on Cadma JV?

A: Cadma JV is ramping up, expect additional transactions by end of year, judicious underwriting reduces opportunities, benefits from ROE in a few additional quarters.

Q: New products market reaction?

A: All new products well received, rolled out structured second lien, revolver, part of product expansion from BC Partners platform.

Q: Why slower M&A pick up in venture market?

A: Companies cut burn and growth, now seeing green shoots for organic growth and exit value increase, IPO window seen as opportunity for debt raises in combination.

Q: Turnaround for larger growth targets in first half of 2026?

A: Pipeline expected to increase over next several quarters, benefit from portfolio optimization and origination, comfortable with current position to cover base dividend.