Runway Growth Finance Corp. Reports Fourth Quarter and Fiscal Year Ended 2022 Financial Results

Rhea-AI Summary

Runway Growth Finance Corp. (Nasdaq: RWAY) reported record financial results for the fourth quarter and fiscal year ended December 31, 2022, with net investment income of $18.4 million and $59.8 million respectively. The company's investment portfolio grew to $1.1 billion, with a dollar-weighted annualized yield on debt investments of 15.5%. The company declared a dividend of $0.40 per share for Q1 2023, an 11% increase quarter-over-quarter, alongside a supplemental dividend of $0.05 per share. The core leverage ratio of the portfolio rose to 97%, reflecting a prudent deployment of leverage to maximize shareholder returns.

Positive

• Net investment income increased by 69% year-over-year to $18.4 million.
• Investment portfolio reached a record $1.1 billion.
• Declaring a regular dividend of $0.40 per share, an 11% increase QoQ.
• Maintained a low credit loss ratio of 6 basis points annually.

Negative

• Total operating expenses rose significantly to $18.4 million, up from $6.7 million YoY.
• Net realized loss on investments was $2.0 million for Q4 2022, compared to a gain of $8.2 million in Q4 2021.
• Total net assets decreased by 5% from the prior year to $576.1 million.

Delivered Record Quarterly and Annual Net Investment Income of $18.4 and $59.8 Million, Respectively

Increased Core Leverage Ratio of Portfolio to 97%

Grew Investment Portfolio to Record $1.1 Billion

Conference Call Today, Thursday, March 2 at 6:00 p.m. ET

WOODSIDE, Calif., March 02, 2023 (GLOBE NEWSWIRE) -- Runway Growth Finance Corp. (Nasdaq: RWAY) (“Runway Growth” or the “Company”), a leading provider of flexible capital solutions to late- and growth-stage companies seeking an alternative to raising equity, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2022.

Fourth Quarter 2022 Highlights

• Total investment income of $36.8 million
• Net investment income of $18.4 million, or $0.45 per share
• Net asset value of $14.22 per share
• Dollar-weighted annualized yield on debt investments of 15.5% for the quarter
• 12 investments completed in new and existing portfolio companies totaling $327.0 million in new commitments including $232.6 million in funded loans
• Aggregate proceeds of $16.0 million received from principal repayments
• Declared first quarter 2023 dividend of $0.40 per share, up 11% quarter over quarter
• Declared a first quarter 2023 supplemental dividend of $0.05 per share

2022 Fiscal Year Highlights

• Total investment portfolio at year-end 2022 of $1.1 billion at fair value
• Net investment income of $59.8 million, or $1.46 per share
• Net asset value (“NAV”) at 12/31/2022 of $576.1 million, or $14.22 per share
• Total investment fundings of $628.8 million: $401.1 million in 14 new portfolio companies and $227.7 million in 12 existing portfolio companies
• No credit losses and industry-leading low credit loss ratio of 6 basis points per year on a gross basis and 1 basis point per year on a net (debt and equity) basis, based on cumulative commitments
  

“Runway Growth delivered its fifth consecutive record quarter, which we believe validates our investment strategy in high quality, late-stage companies,” said David Spreng, Founder and CEO of Runway Growth. “During 2022, Runway continued to prudently deploy leverage achieving its objective range, to unlock increasingly attractive shareholder returns while fueling minimally dilutive growth for our portfolio companies.”

Spreng continued, “Runway Growth’s success speaks to the value of our differentiated and durable model that offers sustainable yield despite market volatility. Increasingly, later-stage companies are turning to Runway Growth to embrace debt as minimally dilutive growth capital as the cost differential between equity expands. Looking to 2023, our funnel remains robust and Runway Growth is confident in our disciplined strategy to drive earnings and long-term shareholder value.”

Fourth Quarter 2022 Operating Results
Total investment income for the quarter ended December 31, 2022 was $36.8 million, compared to $17.6 million for the quarter ended December 31, 2021. The year-over-year improvement is primarily due to portfolio growth and an increase in interest income on investments resulting from the new loans originated.

Net investment income for the quarter ended December 31, 2022 was $18.4 million, or $0.45 per share, compared to $10.9 million, or $0.28 per share, for the quarter December 31, 2021.

The Company's dollar-weighted annualized yield on average debt investments for the quarter ended December 31, 2022 was 15.5%. The Company calculates the yield on dollar-weighted debt investments for any period measured as (1) total investment-related income during the period divided by (2) the daily average of the fair value of debt investments outstanding during the period.

Total operating expenses for the quarter ended December 31, 2022 were $18.4 million, compared to $6.7 million for the quarter ended December 31, 2021. The increase was driven by growing management fees, incentive fees and interest expenses.

Net realized loss on investments for the quarter ended December 31, 2022 was $2.0 million, compared to a net realized gain of $8.2 million for the quarter ended December 31, 2021.

For the quarter ended December 31, 2022, net change in unrealized appreciation on investments was $2.1 million, compared to $0.1 million for the comparable prior year period, due to the increase in fair value of our equity portfolio.

Portfolio and Investment Activity
As of December 31, 2022, Runway Growth’s investment portfolio had an aggregate fair value of approximately $1,126 million and was comprised of approximately $1,094 million in term loans, 99% of which are senior secured loans, and $32.5 million in warrants and equity-related investments in 43 portfolio companies.

During the fourth quarter of 2022, Runway Growth originated 12 investments totaling $327.0 million in commitments, including $232.6 million in funded loans, as well as six investments in new portfolio companies and six new investments in existing portfolio companies.

Total portfolio investment activity for the three and twelve months ended December 31, 2022 and 2021 was as follows:

		Three Months Ended December 31,								Fiscal Year Ended December 31,
		2022				2021				2022				2021
		(unaudited)				(unaudited)				(unaudited)				(unaudited)
Beginning Investment Portfolio		$	910,169			$	646,353			$	729,516			$	621,827
Purchases of Investments			229,883				187,410				622,719				424,441
Purchases of U.S. Treasury Bills			—				95,002				—				210,002
PIK interest			2,326				568				8,655				2,996
Amortization of Fixed Income Premiums or Accretion of Discounts			2,287				2,202				6,863				7,742
Sales or Repayments of Investments			(16,000	)			(100,291	)			(159,144	)			(297,825	)
Scheduled Principal Payments of Investments			(2,488	)			(105	)			(9,754	)			(5,777	)
Sales and Maturities of U.S. Treasury Bills			—				(110,000	)			(45,000	)			(234,999	)
Net realized Gain (Loss) on Investments			(2,000	)			8,249				(1,061	)			4,154
Net Change in Unrealized Appreciation (Depreciation) on Investments			2,132				128				(26,485	)			(3,045	)
Ending Investment Portfolio		$	1,126,309			$	729,516			$	1,126,309			$	729,516

Net Asset Value
As of December 31, 2022, net asset value (“NAV’”) per share was $14.22, compared to $14.12 as of September 30, 2022. Total net assets at the end of the fourth quarter of 2022 were $576.1 million, down 5% from $606.2 million in the prior year period.

For the quarter ended December 31, 2022, net increase in net assets resulting from operations was $18.5 million, or $0.46 per share, compared to a net increase of $19.3 million, or $0.49 per share, for the quarter ended December 31, 2021.

Liquidity and Capital Resources
As of December 31, 2022, the Company had approximately $93.8 million in available liquidity, including unrestricted cash and cash equivalents, and $88 million in available borrowing capacity under the Company’s credit facility, subject to existing terms, advance rates and regulatory and covenant requirements. Subsequent to quarter end, we increased our credit facility by $50 million, bringing our total available liquidity to $143.8 million, including unrestricted cash and cash equivalents, and borrowing capacity of 138 million under our credit facility and our aggregate facility commitment to $475 million.

The Company ended the quarter with a core leverage ratio of approximately 97%, compared to 60% for the quarter ended September 30, 2022.

Distributions
On February 23, 2023, the Company’s board of directors declared a regular quarterly distribution of $0.40 per share for the first quarter of 2023, payable on March 21, 2023, to stockholders of record as of March 7, 2023. This dividend represents an increase of 11% over the dividend declared in the prior quarter. In addition, the Board of Directors declared a supplemental dividend of $0.05 per share for the first quarter of 2023 that is also payable on March 21, 2023, to stockholders of record as of March 7, 2023. Runway Growth intends to declare and pay a similar supplemental dividend for each subsequent fiscal quarter during 2023, subject to future approval by the Board of Directors.

Conference Call
Runway Growth will hold a conference call to discuss its fourth quarter and fiscal year ended December 31, 2022 financial results at 3:00 p.m. PT (6:00 p.m. ET) on Thursday, March 2, 2023. To participate in the conference call or webcast, participants should register online at the Runway Investor Relations website. The earnings call can also be accessed through the following links:

• Conference Call
• Webcast

A live webcast will be available in the investor section of the Company’s website, and will be archived for 90 days following the call.

About Runway Growth Finance Corp.
Runway Growth is a growing specialty finance company focused on providing flexible capital solutions to late- and growth-stage companies seeking an alternative to raising equity. Runway Growth is a closed-end investment fund that has elected to be regulated as a business development company under the Investment Company Act of 1940. Runway Growth is externally managed by Runway Growth Capital LLC, an established registered investment advisor that was formed in 2015 and led by industry veteran David Spreng. For more information, please visit www.runwaygrowth.com.

Forward-Looking Statements
Statements included herein may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance, condition or results and involve a number of risks and uncertainties, including the impact of COVID-19 and related changes in base interest rates and significant market volatility on our business, our portfolio companies, our industry and the global economy. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Runway Growth’s filings with the Securities and Exchange Commission. Runway Growth undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

IR Contacts:
Stefan Norbom, Prosek Partners, snorbom@prosek.com
Thomas B. Raterman, Chief Financial Officer and Chief Operating Officer, tr@runwaygrowth.com

Runway Growth Finance Corp.
Consolidated Statements of Assets and Liabilities
(In thousands, except share and per share data)
		December 31, 2022				December 31, 2021
Assets
Investments at fair value:
Non-control/non-affiliate investments at fair value (cost of $1,126,879 and $647,449, respectively)		$	1,114,935			$	655,384
Affiliate investments at fair value (cost of $4,551 and $0, respectively)			2,084				—
Control investments at fair value (cost of $19,172 and $34,874, respectively)			9,290				29,131
Investment in U.S. Treasury Bills at fair value (cost of $0 and $45,001, respectively)			—				45,001
Total investments at fair value (cost of $1,150,602 and $727,324, respectively)			1,126,309				729,516
Cash and cash equivalents			5,761				4,697
Accrued interest receivable			6,741				2,369
Other assets			2,955				1,766
Total assets			1,141,766				738,348
Liabilities
Debt:
Credit facilities			337,000				61,000
2026 Notes			70,000				20,000
2027 Notes			152,250				—
Unamortized deferred debt costs			(10,293	)			(1,511	)
Total debt, less unamortized deferred debt costs			548,957				79,489
Reverse repurchase agreement			—				44,775
Incentive fees payable			8,808				6,010
Interest payable			6,221				249
Accrued expenses and other liabilities			1,728				1,630
Total liabilities			565,714				132,153
Commitments and contingencies (Note 3)
Net assets
Common stock, par value			414				414
Additional paid-in capital			605,774				606,048
Distributable (losses)			(19,320	)			(267	)
Treasury Stock			(10,816	)			—
Total net assets		$	576,052			$	606,195
Shares of common stock outstanding ($0.01 par value, 100,000,000 shares authorized)			40,509,269				41,380,614
Net asset value per share		$	14.22			$	14.65

 

	Runway Growth Finance Corp.
	Consolidated Statements of Operations
	(In thousands, except share and per share data)
			Three Months Ended December 31,								Fiscal Year Ended December 31,
			2022				2021				2022				2021
	Investment income
	From non-control/non-affiliate investments:
	Interest income		$	33,515			$	15,684			$	95,264			$	63,226
	Payment in-kind interest income			2,310				568				5,558				2,992
	Dividend income			318				364				1,338				1,395
	Fee Income			664				964				2,184				3,627
	From affiliate investments:
	Interest income			—				—				5				—
	Payment in-kind interest income			—				—				96				—
	Fee Income			—				—				8				—
	From control investments:
	Interest income			—				—				1,112				113
	Payment in-kind interest income			—				—				2,985				4
	Other income			—				—				2				1
	Total investment income			36,807				17,580				108,552				71,358
	Operating expenses
	Management fees			3,394				2,342				11,882				8,989
	Incentive fees			4,592				2,733				13,183				9,232
	Interest expense			7,685				251				13,756				2,554
	Professional fees			745				329				2,815				1,844
	Overhead allocation expense			307				172				1,020				827
	Insurance expense			210				270				1,016				339
	Administration fee			160				159				658				579
	Debt financing fees			779				150				3,005				1,638
	Directors' fees			91				92				352				293
	Tax expense			290				—				291				1
	Other expenses			194				154				778				570
	Total operating expenses			18,447				6,652				48,756				26,866
	Net investment income			18,360				10,928				59,796				44,492
	Realized and unrealized gain (loss) on investments
	Realized gain (loss) on non-control/non-affiliate investments, including U.S. Treasury Bills			—				8,249				939				4,172
	Realized gain (loss) on control investments			(2,000	)			—				(2,000	)			—
	Net realized gain (loss) on investments			(2,000	)			8,249				(1,061	)			4,172
	Net change in unrealized appreciation (depreciation) on non control/non-affiliate investments, including U.S. Treasury Bills			(4,594	)			(5,252	)			(18,870	)			(16,231	)
	Net change in unrealized appreciation (depreciation) on affiliate investments			(97	)			—				(3,476	)			—
	Net change in unrealized appreciation (depreciation) on control investments			6,823				5,380				(4,139	)			13,186
	Net change in unrealized appreciation (depreciation) on investments and U.S. Treasury Bills			2,132				128				(26,485	)			(3,045	)
								—				—				—
	Net realized and unrealized gain on investments			132				8,377				(27,546	)			1,127
	Net increase in net assets resulting from operations		$	18,492			$	19,305			$	32,250			$	45,619
	Net increase in net assets resulting from operations per common share		$	0.46			$	0.49			$	0.79			$	1.33
	Net investment income per common share		$	0.45			$	0.28			$	1.46			$	1.30
	Weighted-average shares outstanding			40,531,403				39,593,658				40,971,242				34,183,358

FAQ

What were Runway Growth's net investment income figures for Q4 2022?

Runway Growth reported a net investment income of $18.4 million for Q4 2022.

How much did Runway Growth's investment portfolio grow by at year-end 2022?

Runway Growth's investment portfolio increased to a record $1.1 billion at fair value as of December 31, 2022.

What is the dividend declared by Runway Growth for Q1 2023?

Runway Growth declared a dividend of $0.40 per share for Q1 2023, which is an 11% increase from the previous quarter.

What was the net asset value per share for Runway Growth at the end of 2022?

The net asset value per share for Runway Growth was $14.22 as of December 31, 2022.

When is Runway Growth's earnings conference call scheduled?

Runway Growth's earnings conference call is scheduled for March 2, 2023, at 6:00 p.m. ET.