Burford Capital - Q1 2023

Transcript

Operator (participant)

Hello, welcome to the Burford Capital first quarter 2023 results conference call. My name is Alex, I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star followed by one on your telephone keypad. If you'd like to withdraw your question, you may press star followed by two. I'll now hand it over to our host, Christopher Bogart, CEO, to begin. Please go ahead.

Christopher Bogart (CEO)

Thanks very much, and hello, everybody. Thank you again for joining us. It feels like we've been talking to you a lot lately. I think this is our third call in three months. Welcome to our very first ever set of quarterly results. All part of the journey towards a full U.S. listing with the New York Stock Exchange. I'm joined, as usual, by Jon Molot, the Chief Investment Officer, and Jordan Licht, the Chief Financial Officer. We are going to adopt the process of having these calls be when we just do the quarterly numbers, having these, you know, given our propensity to talk, we'll try to be brisker for these quarterly calls than we have been for annual calls. Happy to take whatever questions you all have.

I'm gonna start on slide three, and, you know, I have to say, this slide and our numbers in general really do speak for themselves. It was an extraordinary quarter, and it reflected exactly what we have been saying about what we're seeing out there in the court system and in the market in which we operate. We have seen a return to normalcy in the court system. We've seen our backlog of cases moving through the courts, and that's generating an increase in velocity, and that's translating into revenue. We've got numbers on the slide here that are consolidated numbers. As you know, those numbers get a little bit diluted by the fact that they include some consolidated funds. Let me just, for the sake of simplicity, frame Burford-only numbers for you.

In other words, the portion of these numbers that accrues to Burford's equity shareholders like you and like me. On a Burford-only basis, our revenue went up 214% to $315 million or so. Significantly, $125 million of that was from our portfolio, just the general operation of our portfolio, the return to normalcy. That's almost double what it was in the first quarter of last year. Realized gains as part of that were up more than 250%. Setting aside YPF for a moment, just looking at the business ex YPF, we're really pleased with what we're seeing in terms of portfolio activity, in terms of what we're seeing in terms of revenue generation.

Of course, on March 31st, the last day of the quarter, we had the additional bonus of a strongly positive liability decision from the federal court in the YPF case. That obviously caused an upward revaluation of that asset to some extent. In addition to that $125 million of Burford-only revenue, we've added about another $190 million from YPF, those two numbers together resulted in that extraordinary outcome for the quarter. The portfolio, at the same time, is continuing to grow. We'll talk in a minute about what we're seeing in terms of new business in the market. Jordan will take you through liquidity and OpEx.

Bottom line, we couldn't be happier with how the first quarter, our first ever reporting quarter, turned out, especially since the first quarter in this business can certainly, have periods of historical slowness. We're gonna jump around with these slides a little bit, and with that, Jordan is gonna take you through slide four.

Jordan Licht (CFO)

Thank you, Chris. Good morning, good afternoon, to everyone on the call. A little bit of housekeeping, since this is our first time sharing quarterly results, we wanna make sure everyone understands the comparative periods. On the income statement side, we're going to be comparing first quarter of 2023 to the first quarter of 2022. With respect to the balance sheet information, we are comparing the closing balance sheet at March 31, 2023, to the year-end balance sheet of 2022. I'm on slide four. This page highlights results for Burford only, and consolidated information can be found in the reconciliations in the appendix of the deck. Also note that all of the information for each quarter is presented under the revised fair value approach, which we've previously discussed.

As Chris mentioned, this was a good first quarter, driven by significant progress across the portfolio and further bolstered by the YPF case and the related assets. Our business, you know, is episodic, but we hope to impress upon you today the momentum we're seeing in addition to the progress from YPF. From a top-line perspective, total revenues were up more than 200%, driven by higher capital provision income, as well as improved asset management income. Realized gains were up more than 250%, but when you exclude YPF, unrealized gains were up 55%. Burford-only net income was nearly $260 million, $1.17 per share. That's up more than $200 million or $0.92 per share, compared to the first quarter of last year.

Right now we sit at total equity, just shy of $2 billion, and a book value of $9.10. That's a quick preview of the numbers. We'll go deeper on some other pages, and I'll flip it back to Chris for slide five.

Christopher Bogart (CEO)

Thanks, Jordan. Slide five talks about new business. Again, just to emphasize, the first quarter for us is often very, very sleepy in terms of new business. There is no good reason, frankly, for this business to be seasonal, but sometimes I joke in the fourth quarter, it feels sometimes like I'm running a retailer. The simple fact of the matter is that lawyers are driven by deadlines. Many law firms have their fiscal year ending at the end of December. Since we've been in this business, December has historically been remarkably busy for us. Then, having done that, which often includes closing a number of deals on the 31st of December itself, lawyers then tend to sort of go to sleep for a while.

I'm quite pleased with these trajectories that we see here. In terms of new commitments, overall, on a group-wide basis, we almost doubled new commitments first quarter over first quarter. Even more significantly, Burford-only new commitments went up significantly more than that, by about 130%. That's a function of the fact that the balance sheet is now taking 75% of the high octane deals, and BOF-C is taking the BOF-C, our sovereign wealth fund, is taking 25%, whereas previously, the balance sheet was at lower numbers, sometimes 42%, sometimes 50%. We're pleased both with the overall trajectory, and also with the relative share of that new business that the balance sheet was taking, which ultimately accrues to equity shareholders.

You know, I think the fundamental factor that we're seeing in play here is some economic stress and anxiety in the market. We've talked about this before, just to recap, you know, businesses tend to engage in, you know, difficult conduct when they are under economic stress. That economic stress is obviously caused by things like high interest rates and uncertain economic environments. That, that questionable conduct turns into both litigation and insolvency, both of which we benefit from. Not that we, not that we sit here wishing for a recession or a grave economic downturn for all sorts of other obvious reasons, but there's certainly no question that our business certainly does well in these kinds of times. That's where we are on the new business front.

Jon is gonna talk a little bit more, moving to slide six, about the portfolio activity itself.

Jon Molot (Chief Investment Officer)

Sure. Thanks, Chris, and thanks to you all for joining. On slide six, you see sort of bearing out what I've been saying on the last few calls we've had, which is that the portfolio is quite active. You know, we had a sleepy period during COVID after having grown the book significantly, and we were seeing things move through, these numbers bear that out. You're seeing growth in all metrics. In addition to, as Chris mentioned, the YPF success at the end of the first quarter, just putting that aside for a moment, there's a growth in unrealized gains in the rest of the portfolio as well, and in realized gains. Unrealized gains were up significantly, realized gains were triple what they were in the first quarter of 2022.

There is an impact, you'll recall, from how we walked you through the approach with under the SEC's valuation of litigation assets, where interest rates, discount rates, do factor in. There was a decline in interest rates or in the discount rate by 52 basis points in the first quarter of 2022, a more modest decline of 28 basis points in the first quarter of 2023. Those would have had an upward effect on fair value, though it would have been a more muted effect in the first quarter of this year because the move in interest rates was less. The other thing I wanted to mention is on the asset management income side, you really start to see the benefits of the BOF-C relationship.

Management fees and performance fees from other funds haven't really moved much, in part due to the European waterfall structure, which postpones the earnings performance fees. With BOF-C, as the portfolio performs and BOF-C makes money, so does the balance sheet, and you see that bear out with a significant increase in our asset management income from the BOF-C relationship. With that, I will turn it back over to Jordan on slide seven.

Jordan Licht (CFO)

Thanks, John. On slide seven, I'm gonna walk through our operating expenses for the year. An important point that we've talked about before, but want to reemphasize, is that we pay people on cash profits. However, we do take accounting charges when capital provision asset values increase, as they did this period. None of those charges are paid in cash until we have the cash profit in hand. You're seeing a lot of movement in the operating expense that is just an accrual and doesn't necessarily reflect an outlay. As a result, looking at the income statement then, we thought it would be helpful to put some of the line items in context and discuss the reasons for differences quarter versus quarter.

Looking at the slide, first, our deferred compensation plan expense, which is compensation that employees had previously elected to defer and invest in Burford stock. We routinely buy shares in the market to offset employee dilution, although it has varying degrees of P&L impact based on the underlying programs. Second is the Asset Recovery business, which includes two remaining assets in which the original owners had a contingent interest tied to our purchase of the business. If you recall, back in 2021, we had an outsized expense on this line item related to the conclusion of the Akhmedov case, and only two assets still remain in that deal. Again, this line only goes up when something positive has happened in the underlying asset that we own, and we only pay the cash when we receive the proceeds.

The third is our carry expense, which shows up in the long-term incentive compensation line. This is driven by fair value movements in our assets. Again, it's not paid to employees until we actually see the cash realizations. While we're seeing a broad-based pickup in the portfolio, the majority of this change was driven in the markup to the YPF related assets, and it's formulaic. I also want to point out then, just understanding the annual incentive compensation line, which represents traditional discretionary corporate bonuses. These are determined in the fourth quarter based on a number of qualitative and quantitative targets for our employees. Thus, the quarterly expense is driven by an accrual percentage based on last year, and we'll finalize that expense at year-end. The last ...

I'm sorry, the last piece that I did want to remind folks of is that the construct of some of our capital provision assets end up then with litigation expense that we're not able to capitalize into the asset, and rather it runs into the P&L, and that's going to vary over time. Overall, while the headline total of operating expenses might appear to be significantly higher, adjusting for some of the less routine items and particularly strong unrealized gains, this quarter is in line with how we anticipated it, and it maps to the Q1 2022 expense total. I'm going to flip now to slide eight. We already discussed our liquidity position at the end of the first quarter when we did our most recent call just a couple of weeks ago.

On the top end, the top left-hand side of the slide, we show the $183 million of cash and marketable securities, which consists of $53 million of cash and cash equivalents and $130 million of securities. In addition, we mentioned $99 million of receivables due from case conclusions. Our group-wide realizations were $147 million, compared to $34 million in the same period last year, and on a Burford-only basis, realizations more than tripled from $20 million to $62 million. Realizations in Q1 2023 stemmed predominantly from our 2019 vintage. Finally, down below, on the covenant level, we're well within the major covenants for both our U.K. and 144A bond issuances, and continue to maintain significant debt capacity.

As always, we'll continue to balance our liquidity, anticipated realizations and debt issuance with demand for our capital to fund new business. With that, I will turn it to Chris for slide nine.

Christopher Bogart (CEO)

Thanks. This is a slide that you've seen before, and I'm not going to go through it again since I did that just a few weeks ago. It's a nice way to close out the presentation and just to sort of remind people that the business, from our perspective, is really firing on all cylinders. The core portfolio, now over $6.5 billion, is continuing to increase in velocity and throw off cash at desirable returns. The origination platform is doing its job. The asset management business, as we've discussed, is growing in terms of its fee load, and we've obviously had a successful period with YPF. With that, we are delighted to take your questions. Operator, we're ready for you.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, you can press star, followed by one on your telephone keypad. If you'd like to remove your question, you may press star followed by two. Please ensure you're unmuted locally when asking your question. If you have joined us via the webcast for today, you can also type your question into the Q&A box. Our first question for today comes from James Hamilton of Numis. James, your line is now open. Please go ahead.

James Hamilton (Speciality and Finance Research)

Thank you for the presentation. You mentioned sort of portfolio activity, and obviously, Q1 was very busy. On slide three, you sort of talk about, you know, 40 milestone events that occurred up to the 9th of June. I was just wondering if you could split that out, how many of those were actually in Q1 and how many dropped into Q2? Sort of following on from that, in the sort of pipeline of milestone events, how many more do you have lined up for 2023? Finally, on this topic,

Could you tell us how much deployed capital has been, allocated to cases that have milestone events this year, to give us some sort of ability to scale what may or may not flow through the the the P&L? I've got a fourth. Apologies, but I've got a fourth. I'm just curious, if you'd used your previous valuation methodology, what would the adjustment in the carrying value of the YPF case have been?

Jordan Licht (CFO)

A number of questions there. I'll try and take some of them. Thank you. First, we're not gonna comment on the previous methodology. We've adopted the new approach, and I think it would be inappropriate for us to continue to kind of use numbers from the old methodology. I'll leave that at that. With respect to the milestone question, in Q1, we had approximately 25 milestone factors that occurred. I think you also asked about what is our deployed cost relative to projected milestone factors. I can see why that information would be nice to have, but I don't think we're gonna start tying specific milestone and giving out expectations of milestone events on a vintage basis. We do give out vintage information.

We have the large vintage table that we outline in, the annual, and for the quarterly, we do outline the incremental deployed costs and realizations by vintage, but I don't think we're gonna start tracking or projecting out, future milestone events to a vintage level.

Christopher Bogart (CEO)

Yeah. I do think it's worth pointing to that table because I think that table is new, if I'm not mistaken. On, on page 48 of the 6-K, there is a table that shows vintage by vintage, what the deployed costs and the realized proceeds were with respect to our realized gains. James, you may find that to be of some interest.

James Hamilton (Speciality and Finance Research)

Thank you. The pipeline of milestone events for the rest of 23, how many do you have in the in coming up?

Christopher Bogart (CEO)

Without wanting to be held to this number, since I don't think that we've included it in the disclosures. I think we think the number is north of 50, possibly even larger than that. I should say something, though, about the concept of milestones. You know, we provided this data when we were trying to sit back and think about how to convey to people the short-term information about what we saw happening in the courts and the return of velocity. We hit upon this idea of using milestone factors to show people the sheer level of difference that we were feeling in the 23 year, as opposed to the 21 and 22 years.

You know, Jordan's only been here since the beginning of September last year. You know, he's said I've heard him say to people sometimes, you know, when he first got here, you know, there was sort of one email every once in a while about something happening in a case, and now there's, like, emails all the time. Like, it's that sort of feeling in the business that we were trying to convey in some sort of numerical way. We came upon the because before I'd been using just the aggregate court statistics, you know, backlog statistics and so on. The problem with those is that they don't really capture accurately, necessarily, what's going on with complex cases. We came up with this concept of milestone factors just to try to convey to you the velocity.

I want to be clear that I don't think it's a financial metric. I don't think that people should be all of a sudden trying to tie these milestone factors to other numbers in the business, and I don't intend to continue to provide them. The reason that we didn't disclose this 50 or 60 or whatever the number is for the rest of the year, is it's not something that we track. It's not a KPI that I look at on a weekly basis. We just used it as a proxy because I think it was difficult for us to get all of you as investors to understand the dynamics of what was going on in the court system without having you actually be sitting inside the business.

That's where these came from, but don't think of them as something that you take to the analytical grail now.

James Hamilton (Speciality and Finance Research)

Thank you very much. Great set of numbers.

Christopher Bogart (CEO)

Thank you.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. Our next question comes from Julian Roberts of Jefferies. Your line is now open. Please go ahead.

Julian Roberts (Senior Associate)

Thanks very much. James asked a few of mine, and I might just be putting one of his another way, so apologies if the answer to this is just no. Can you split the gain on the YPF assets, between the time value of money effect and litigation risk reduction? I've got another couple, which are.

... presumably what's left in the due-from-settlement line is very largely what was there at the start of the year. Do we still expect quite a lot of that to be collected in the balance of 2023? Can you give us, and maybe it's in the, in what you've released already, can you tell us or give us an idea of how much of what has been realized so far this year has been a settlement versus the results of adjudication? That's all I had. Thanks.

Christopher Bogart (CEO)

Sure. Let me take a whack at them, and then John and Jordan can fill in if I go astray. First of all, the due-from-settlement question. Let me comment on this for just a second because it's slightly unusual for us. Historically, the way this business has worked is that you get to the end of a case, and in most cases, you immediately get paid. Settlements, you know, almost always pay right at the time you conclude the settlement. And if you have won a case against a... and the appeals are over against a creditworthy defendant, they're gonna pay the judgment because otherwise you can go and start pretty easily taking their assets. That represents the considerable majority of our business. There are obviously exceptions to that, as you've seen in the past.

Sometimes those exceptions are when our client has agreed to a structured settlement with payments being made over time. We've had those occur from time to time, but those have always been successful for us because the reality is your leverage is greatest when you're entering into the settlement, and so you're not gonna take the structured settlement unless you're confident that it's gonna be paid. Then we've had the occasional settlement where non-cash assets have come into the mix, and we've had to turn them into cash, as was the case in, for example, some years ago, a big case that we won in Arizona over some real estate. What you generally see when there's a receivable is those receivables turn over pretty quickly because they're usually just timing-based.

Something settles towards the end of a period. It doesn't get paid until into the next period. We've got a pretty long history of most of those receivables being collected rapidly, and all of the receivables, except one tiny one, when the guy died, being collected ultimately. I don't have any anxiety about collectability of the current receivables, but there is one item in the due for settlement that is basically being held up for payment because of some collateral litigation that doesn't really relate to our piece of the litigation. We are basically in the hands of the court about the speed of the court resolving the other collateral matter.

We're at the point in that where I certainly have a, you know, a considerable degree of optimism that that'll get paid this year, but not a certainty because we're in the hands of the court process just for that one, chunky piece of that receivable, which is, you know, which represents about $37 million of the receivable balance. The rest of it just rolls forward on a consolidated basis. That's due from settlement.

Julian Roberts (Senior Associate)

Right.

Christopher Bogart (CEO)

Your question about can we split, time value of money and litigation risk reduction? Can we? Yes. Will we? No. For the reason that Jordan gave earlier, we just don't think that, you know, there's a level of detail that is probably appropriate for the valuation process. What was realized, I believe, and you can check this, looking at that table on page 48 that I just adverted to, of the realized proceeds, you know, a fairly, fair chunk of it was from the 2019 vintage, $46 million of realizations. That was. How do I best describe it? I think I'd probably describe it as a hybrid of adjudication and resolution.

It was not a pretrial settlement, you know, in the sense of some traditional litigation goes along, you know, gets close to trial, and that is the impetus for the parties to settle. There was an element of adjudication here, and that led to the resolution.

Jordan Licht (CFO)

Chris, just a clarification. The $37 million is actually group-wide. Burford only on the due from settlement was, $23 million of with respect to the example that you described. Yes, we feel good about collecting the rest.

Christopher Bogart (CEO)

Yeah. We feel good about collecting that, too.

Jordan Licht (CFO)

Yeah.

Christopher Bogart (CEO)

We're just not in control of the timing of it.

Julian Roberts (Senior Associate)

Yeah. Understood. Understood. Just one minor follow-on. The, your one that, where you said that it's partly sort of a hybrid of settlements and adjudication, could it possibly be that maybe there's a family of cases and there's been a bit of price discovery because one of them has been adjudicated and other things are kind of following suit? Is that the kind of thing that might have happened or?

Christopher Bogart (CEO)

No, it's more, it's more the... Jon, did you want to chime in there?

Jon Molot (Chief Investment Officer)

Yeah, I was just gonna say, you know, the line between settlement and adjudication can be a scenario where, you know, as Chris said, settlements in the most conventional U.S. commercial litigation sense are what precedes a trial. In order to avoid a trial, the parties strike a settlement for an amount that eliminates the risk. There could be pieces of litigation, and you might win some. The defendant can read the writing on the wall and know it's going to have to pay up. It still has a chance for some sort of appeal or collateral attack. You could therefore have a resolution through what's called a settlement, but there's already a judgment potentially saying you owe that amount.

You know, that's why it's hard to draw the distinction between, You know, what happens if you win a trial and there's an appeal pending, and there's a settlement at a very slight discount based on appellate risk and timing? Do you call that a settlement? I guess, technically you do, but there has been an adjudication as well.

Julian Roberts (Senior Associate)

Understood. Thanks very much.

Christopher Bogart (CEO)

A webcast question, and then we'll go to the next question on the phone. The webcast question is: When do we anticipate a full New York Stock Exchange listing? We have today, we're what's called a foreign private issuer because more than 50% of our shares are held by non-U.S. investors. We test that 50% number every June 30th, so we'll test it for the next time in 17 days. If the number of U.S. shareholders has increased to above 50%, that will represent the final leg of the process to become a sort of a full U.S. 10-K filer. Although nothing will actually change on the New York Stock Exchange. This is an SEC dynamic, not a New York Stock Exchange dynamic.

Nothing would change on the New York Stock Exchange, but it would cause us to begin to file 10-Ks, instead of these 20-Fs. Frankly, you won't notice very much difference when that happens, especially now that we have gone voluntarily to quarterly reporting, because the previously, the principal difference between those two regimes would have been that foreign private issuers are not required to do quarterly reporting. Because we've now opted in the quarterly reporting anyway, you're not gonna notice a big difference when that happens. We don't know if it'll happen this year or not. We won't know until we do the testing for it. You know, I think we're in the 40s, in terms of U.S. holders, the last time we looked.

We're certainly getting close if we don't cross the line today. I think we have something more on the phone, operator.

Operator (participant)

Our next question comes from Matthew Howlett of B. Riley Securities. Matthew, your line is now open. Please go ahead.

Christopher Bogart (CEO)

Yeah, operator, we didn't hear anything.

Matthew Howlett (Senior Equity Research Analyst)

Oh, hi, can you hear me now?

Christopher Bogart (CEO)

Oh, yes.

Matthew Howlett (Senior Equity Research Analyst)

Yeah. Apologies. The question is regarding return on equity. Your return on equity and tangible equity, I look at somewhere in the high teens, normalizing for YPF and some expenses. When you look at that, I mean, historically, pre-COVID, you've been in that range, how do you look at the return profile, the return on tangible book value this quarter versus, you know, what you think is normalized, what you think is fully deployed? Just in that context. I know you talk a lot about IRRs and things of that nature. I want to kind of move it to return on equity.

Jon Molot (Chief Investment Officer)

Look, I think it is difficult to look quarter by quarter at ROTCE. We definitely. You know, we had stated, I think in the Investor Day, that we target a 20%+ return on equity. I think we continue to see that. It will be, you know, episodic or a little bit bumpy, but I think you need to look at that on an annualized, kind of a rolling average basis, as opposed to just one spot in time. I think, you know, we said that back then, we still believe it.

Christopher Bogart (CEO)

Yeah, exactly. We believe that that's the earnings power of the business, judged on a multi-year rolling basis.

Matthew Howlett (Senior Equity Research Analyst)

Got you.

Christopher Bogart (CEO)

COVID first.

Matthew Howlett (Senior Equity Research Analyst)

Go ahead.

Jon Molot (Chief Investment Officer)

I will say the underwriters have internalized that. When we are looking at deals and thinking about whether to do them, we're not just looking at the you know, the gross IRR. We think about expense load of the business, and we're, you know, the team's very mindful of that.

Matthew Howlett (Senior Equity Research Analyst)

Got you. Well, got you.

Christopher Bogart (CEO)

Now we've.

Matthew Howlett (Senior Equity Research Analyst)

And then-

Christopher Bogart (CEO)

Go ahead, Matt.

Matthew Howlett (Senior Equity Research Analyst)

Go ahead. The other question was just on, you know, what you're writing in terms of new business today as it relates to by case type, by industry. Has there been any sort of shift that you've seen in either of those categories?

Jon Molot (Chief Investment Officer)

I'm happy to take that one.

Christopher Bogart (CEO)

You know.

Jon Molot (Chief Investment Officer)

Oh.

Christopher Bogart (CEO)

Okay, go ahead, Jon.

Jon Molot (Chief Investment Officer)

What I was mostly going to say is, we've said from the beginning that we are opportunistic, we basically, because we have patent experts, international arbitration experts, commercial litigation experts, we can look at insolvency, we can look at like, you name it, we can look at it. That means particularly because the large law firms that bring us business have practice groups in many of those areas, we've developed relationships with pockets and with entire firms, they bring us that. That creates diversification regardless. As we've also said, though, when we see an opportunity we like, where we've done one investment, another investment, we begin to see an industry where a number of companies have been, you know, suffered the same legal wrongdoing and have claims, they would be in need of capital, we will expand in that area.

I wouldn't say it necessarily happens to coincide with a particular economic moment or theme in the economy. It can be a theme because there could be, in one industry, a particular set of wrongdoing that results in claims. I don't know that I would, I would consider it a trend. That being said, we clearly have enjoyed geographic expansion, right? We've done much more in other jurisdictions when you think back on us having been just North American, you know, U.S. litigation and U.K. litigation and some arbitration. We've gone way beyond that. Chris, you had something to say as well then.

Christopher Bogart (CEO)

You know, I think that really did capture it. You know, obviously, litigation trends are also affected by exogenous events. You know, we're looking at some COVID business now. We didn't do any COVID business, obviously, before COVID. Bankruptcies are returning in a way that they haven't for the last half dozen years, that will tend to skew some more bankruptcy activity. Antitrust enforcement or competition enforcement tends to be driven to some extent by political winds. When you've got Democrats in the White House and aggressive antitrust enforcement in Europe, you tend to see more competition and antitrust cases than you might with a Republican administration.

Those kinds of dynamics are in the mix as well, and as I said earlier, as we head into a period of economic stress, you know, we're likely to see some more insolvency-related activity too, but those are sort of broad trends.

Matthew Howlett (Senior Equity Research Analyst)

Right, exactly. As the default market picks up, you expect to see more litigation. Then on that, on just the geography question, I mean, are you, are you saying that you're seeing more growth, outsized growth in the non-North America or non-European regions that you do business in?

Christopher Bogart (CEO)

We're seeing more activity because we're starting from a smaller base. it's

Matthew Howlett (Senior Equity Research Analyst)

Right.

Christopher Bogart (CEO)

I'm not trying to suggest, John and I are not trying to suggest that there's some falloff in the U.S., that is being compensated for by some increase in Europe. We're seeing, you know, somewhat more activity in Europe and the Middle East because we devoted some more resources to those. That also is a, you know, as you all know, it's a multi-year process. It's not, you know, we opened an office in Dubai not very long ago. I'm pleased with the volume of business that we have seen, that we're starting to look at out of the Middle East. That doesn't turn into, you know, cash for some years.

Matthew Howlett (Senior Equity Research Analyst)

Gotcha. Thanks for taking my question.

Christopher Bogart (CEO)

Sure, thanks. We've got a couple of questions on the webcast. To begin with, from Alastair Lindsay, you report a continued strong flow of milestone events through to 9 June. Are any of the milestone events so far in Q2 noteworthy in terms of significant wins or unexpected losses? Nothing that comes to mind, you know, I would call it business as usual. At the same time, though, you know, back to my sort of longish riff about milestones, we, especially now that we're doing quarterly reporting, we're not proposing effectively to pre-report on the current quarter when we report on the prior quarter. I think we're gonna have to wait until our soon-to-be forthcoming second quarter quarterly report, since this one was obviously somewhat delayed by the delay in our full-year results, to talk about Q2.

Another question from Miguel Gonzalez: Are you involved in the litigation claims relating to the Credit Suisse subordinated debt write-off, and do you have any legal view about that? I don't know if John has a general comment that he'd like to make. We, of course, don't comment on specific cases, whether we're involved in them or not, you know, unless they have become public through some other course.

Jon Molot (Chief Investment Officer)

Yeah, I don't think it's something that we should comment on. We prefer not to comment.

Christopher Bogart (CEO)

Okay

Jon Molot (Chief Investment Officer)

specific litigation.

Christopher Bogart (CEO)

Yeah. It's obviously a tangled situation. Yeah, it's obviously a tangled situation and shows as well the benefit of a close and careful reading of the documents. Another question: At what point would your stock be considered for index inclusion? We are already included in the relevant U.K. indices. In terms of the U.S. indices, the criteria are basically a combination of where your shares are trading and what index you'd fall in. We would hope, as we continue to build our U.S. liquidity and U.S. trading volume, that along with that would come U.S. index inclusion. It's a process. It's not something that happens overnight. The next step along the way is really that test that I mentioned before at June 30th.

With that, I think that we are gonna keep to our plan of this not taking too much of your time every quarter. We hope that you found getting quarterly data from us useful and helpful. As I said, we'll be back in the not-too-distant future to share Q2 with you. Thank you again, everyone, for your support. We're thrilled with how Q1 went and the ability to print these truly extraordinary numbers, and we'll talk to you soon.

Jon Molot (Chief Investment Officer)

Thank you.