BUR

• **Portfolio Diversification & Performance

  • The firm holds a diversified global portfolio of hundreds of active litigation matters, with no reliance on any single large asset. Aggregate historical ROIC is 82%, but removing six very large, lower-ROIC cases lifts aggregate ROIC to 99%. The firm intentionally underwrites large cases with lower ROIC to manage binary risk, and has a demonstrated track record of stable, low loss rates over 17 years of operation, with almost $4 billion in total cumulative cash generated from the portfolio.
  • Pre-pandemic vintage (pre-2020) investments remain active and productive: since end-2022, the firm has deployed an additional $250 million into these vintages and generated close to $1 billion in realizations, with remaining deployed capital still on the books, and returns comparable to newer vintages. Cross-collateralized portfolio deals with law firms mean older vintages frequently add new cases, so they are not stagnant 'old assets'.
  • Multiple recent positive catalysts across the portfolio including a July jury verdict, arbitration win, German Supreme Court ruling, and a recent UK ruling confirm ongoing portfolio activity, with positive developments consistently outweighing negative ones.

• **New Business Strategy Update

  • In response to post-YPF market feedback and liquidity concerns, the firm has reduced activity in very large, moderately profitable deals to balance growth with deleveraging and liquidity preservation. This shift is visible in the new business mix: commitments for the highest profitability tier of new business have more than doubled, while commitments for lower profitability large deals have declined significantly.
  • Burford is the undisputed market leader in commercial legal finance, with deep, long-standing relationships with law firms and corporate clients across global jurisdictions that give it a strong pipeline of attractive underwriting opportunities. Structural demand for legal finance remains strong, particularly as U.S. law firms seek flexible equity capital solutions that are not widely available from other providers.

• **Liquidity & Cost Management

  • As of quarter-end, the firm holds $733 million in cash and marketable securities, with only $400 million of debt maturing over the next four years. The weighted average life of total outstanding debt is 5.2 years, providing ample maturity coverage relative to the expected pace of portfolio realizations. Management notes the firm could pay off all near-term debt immediately if it chose to do so, and existing debt is covered 2.3x by projected portfolio cash flow (excluding any proceeds from YPF).
  • Management has implemented cost cutting, achieving $10 million in annualized compensation expense savings via targeted streamlining of senior and middle management functions, with a one-time net cost of only $2 million to implement these changes. Overall G&A has remained steady year-over-year and is slightly lower than the prior year.

Management did not provide explicit numerical forward guidance in this call. Key forward-looking priorities include:

• Deleveraging and liquidity management are core daily priorities for the management team, alongside continued controlled growth of the portfolio, in response to existing market anxiety around the balance sheet following the YPF decision.
• The firm expects continued strong activity and cash generation from the existing diversified portfolio, with catalysts from recent procedural wins expected to drive future settlement resolutions.
• No additional broad operating cost cuts are planned after the current round of streamlining; the firm will manage headcount growth aligned with expansion to maintain operating leverage.

This call reports results for two business segments: Principal Finance and Asset Management.

• Principal Finance: The total portfolio (including the YPF position) has a fair value of approximately $4.1 billion. Of this, total deployed capital is $1.9 billion, with roughly $400 million in unrealized gains, representing a 22% markup on deployed cost. Quarterly cash realizations came in at $94 million, up from $62 million in the year-ago quarter. The portfolio is diversified across geographies and asset types, consistent with the firm's broad litigation finance strategy.
• Asset Management: Year-to-date cash income from the segment is approximately $5 million, in line with year-ago levels. The segment's performance is stable, as older funds wind down and newer funds (such as the BOSC fund and Advantage Fund) generate steady income. Performance fee intake is expected to remain steady as the Advantage Fund continues to meet return hurdles.

• Litigation outcomes and timing are inherently unpredictable, and court system-wide delays have lengthened average case duration beyond the firm's and market's historical expectations, which has slowed cash generation from the portfolio.
• Following the YPF decision, market anxiety around the firm's leverage has led to higher implied yields on the firm's traded long-term debt than management believes is justified by underlying risk, which creates market-based constraints on future capital activity.
• Individual cases may require cost write-downs that flow through the income statement rather than being capitalized, even if the cases remain active; the firm recorded $27 million in such expenditures in the quarter, $25 million of which relates to costs for the active funded portfolio.
• The inherently long-duration nature of litigation finance creates a timing mismatch between the incurrence of operating and capital costs and the realization of cash proceeds from resolved cases.

Q: The analyst asks for internal perspective on timelines for the recent high-profile catalyst cases (mining arbitration, U.S. jury verdict, German Supreme Court ruling) through year-end and Q3. / A: Management notes the purpose of highlighting these cases is to show broad portfolio momentum, not to predict these specific cases will resolve for cash by year-end. Most matters (roughly 80% of the portfolio) resolve via settlement rather than final adjudication, and catalysts like jury verdicts drive recalibration of counterparty risk assessments that open the door to settlement negotiations. The portfolio has hundreds of active matters with ongoing activity and existing catalysts that are already in settlement discussions.

Q: The analyst asks if the recent $10 million annualized cost cutting is the start of broader operating expense cuts, or if this is the full planned savings. / A: Management states Burford is already a lean business with only ~160 total employees, so broad serial layoffs like those seen in big tech are not planned. The recent round of retirements and function streamlining was a one-time action. Going forward, the firm will manage headcount growth aligned with business expansion, supported by efficiency gains from technology that allow more activity with slower headcount growth than in prior years.

Q: The analyst observes net debt has increased roughly $100 million over the first half of the year, and asks to confirm this and clarify sequential Q1 to Q2 changes. / A: Management explains the full first half increase reflects new debt issued in January, along with cleanup of historical UK debt issuance in the June quarter. Quarter-over-quarter from Q1 to Q2, cash and marketable securities only changed by ~$10 million, and total debt balance was largely unchanged between the end of Q1 and end of Q2, leaving net leverage largely stable sequentially.

Q: A webcast participant asks if the high deployed cost on pre-pandemic cases means these cases have produced little or no net profit. / A: Management rejects this framing, noting the return profile (ROIC) of pre-pandemic cases is fully comparable to the overall firm portfolio. IRRs are slightly lower due to extended duration from court delays, but high gross returns mean after covering the firm's low single-digit average cost of debt, significant net returns remain for these assets.