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RG

Runway Growth Finance Corp. (RWAY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 total investment income was $33.8M and net investment income (NII) was $14.6M ($0.39 per share); NAV per share rose to $13.79 with net assets of $514.9M .
  • Versus consensus, Q4 revenue of $33.8M missed $36.1M*, and EPS of $0.39 missed $0.418*; management attributed yield compression to base rate cuts and fewer prepayment accelerations, dampening fee income .
  • Prepayments surged to $152.6M and funded investments were $154.0M, signaling active capital rotation; portfolio FV increased to $1.08B with 56 portfolio companies and one JV .
  • Dividend policy reset: base dividend to $0.33 and supplemental $0.03 for Q1 2025, with targeted supplemental up to 50% of NII over base going forward; leverage target remains 1.2x–1.3x, and KeyBank credit facility extended by 3 years .
  • Strategic catalyst: advisory combination with BC Partners Credit closed Jan 30, 2025, expanding origination channels and product set while retaining current team and terms; Board expanded to eight members .

Values retrieved from S&P Global for estimates (*).

What Went Well and What Went Wrong

What Went Well

  • Elevated portfolio activity with $152.6M in prepayments and $154.0M in funded investments highlighted strong borrower performance and active redeployment .
  • NAV per share increased sequentially to $13.79 (from $13.39 in Q3), driven by $16.5M net unrealized gains (largest contributor: Gynesonics) and positive marks across affiliate/control investments .
  • Strategic platform enhancement: BC Partners Credit transaction closed, broadening origination reach and structured solutions; CEO emphasized “combined scale and expertise…to mitigate risk and drive heightened returns” .

What Went Wrong

  • Revenue/earnings missed Wall Street consensus: Q4 revenue $33.8M vs $36.1M*, EPS $0.39 vs $0.418*; softness tied to rate cuts and fewer prepayment-related fee accelerations .
  • Yield compression: dollar‑weighted annualized yield declined to 14.7% (from 15.9% in Q3 and 16.9% prior year), reflecting lower base rates and mix .
  • Two loans on non‑accrual (Mingle Healthcare and Snagajob), though total exposure is modest at ~0.5% of FV; realized losses of $2.9M in Q4 .

Financial Results

Key Financials (Actuals)

MetricQ2 2024Q3 2024Q4 2024
Total Investment Income ($USD Millions)$34.193 $36.651 $33.779
Net Investment Income ($USD Millions)$14.591 $15.875 $14.621
NII per Share ($USD)$0.37 $0.41 $0.39
Dollar-weighted Annualized Yield on Debt (%)15.1% 15.9% 14.7%
Total Operating Expenses ($USD Millions)$19.602 $20.776 $19.158
Net Realized & Unrealized Gains (Losses) ($USD Millions)-$6.300 $9.174 $13.601
Net Increase in Net Assets from Ops per Share ($USD)$0.21 $0.65 $0.75
NAV per Share ($USD)$13.14 $13.39 $13.79

Q4 2024 Actual vs Wall Street Consensus

MetricQ4 2024 ActualQ4 2024 ConsensusSurprise
Primary EPS ($USD)$0.39$0.418*Miss (–$0.028)
Revenue ($USD)$33.779M$36.095M*Miss (–$2.316M)
# of Estimates (EPS / Revenue)10 / 710 / 7—

Values retrieved from S&P Global for estimates (*).

Portfolio Composition (Q4 2024)

SegmentAmount ($USD Millions)Notes
Term Loans$970.2 97.9% senior secured
Warrants & Other Equity-Related$106.6 —
Total Investment Portfolio (FV)$1,076.8 56 companies + 1 JV

KPIs and Balance Sheet

KPIQ2 2024Q3 2024Q4 2024
Investment Portfolio FV ($USD Millions)$1,063.3 $1,066.1 $1,076.8
Portfolio Companies (Count)55 57 56 + 1 JV
Funded Investments ($USD Millions)$75.5 $75.3 $154.0
Principal Prepayments ($USD Millions)$25.3 $75.0 $152.6
Available Liquidity ($USD Millions)$249.8 $251.6 $244.8
Unrestricted Cash ($USD Millions)$8.8 $3.6 $5.8
Borrowing Capacity ($USD Millions)$241.0 $248.0 $239.0
Core Leverage Ratio (%)110% 108% 108%
Dollar-weighted LTV (selected loan group)—29.3% 26.6%
Non-Accrual Loans——2 (Mingle Healthcare; Snagajob)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Base Dividend per ShareQ1 2025$0.40 (Q4 2024) $0.33 Lowered
Supplemental DividendQ1 2025None formal (Q3: $0.05 supplemental) $0.03; targeted up to 50% of NII over base going forward Policy refined
Leverage TargetOngoing1.2x–1.3x (prior) 1.2x–1.3x Maintained
Credit FacilityOngoingPrior maturity/termsExtended by 3 years; expanded eligibility/borrowing base Extended/Amended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Origination Pipeline & Funded ActivityQ2: 2 new investments; $75.5M funded; pipeline strong . Q3: 7 investments; $75.3M funded; ongoing strength .$154.0M funded (2 new; 5 existing); expanded product set with BC platform .Up: larger checks, diversified structures with BC partners .
Portfolio Yield & Rate EnvironmentQ2 yield 15.1% ; Q3 yield 15.9% .Yield 14.7%; decline due to base rate cuts and fewer prepayment accelerations .Down: rate cuts and lower fee accelerations .
Prepayment ActivityQ2 prepayments $25.3M ; Q3 $75.0M .Q4 $152.6M prepayments; viewed as positive borrower health .Up: elevated exits/prepayments .
Credit Quality & Risk Ratings—Weighted average risk rating improved to 2.33 (from 2.48 in Q3); non‑accruals limited to 2 loans, 0.5% of FV .Improving overall; manageable issues in 2 loans .
Strategic Platform (BC Partners)Transaction announced post-Q3 .Closed Jan 30, 2025; broader origination channels and structures; team/terms intact .Structural positive: additive pipeline/solutions .
Dividend Policy & Capital AllocationQ3 declared $0.40 dividend .Base reset to $0.33 + supplemental; emphasis on NAV preservation and consistency .Reset: prioritizing stability/NAV .
Venture Debt Landscape—PitchBook: venture debt deal value >$53B in 2024 (vs ~$27B 2023); AI-driven activity .Tailwinds: growing sector scale .
Liquidity & LeverageQ2 liquidity $249.8M; leverage 110% . Q3 liquidity $251.6M; leverage 108% .Liquidity $244.8M; leverage 108%; facility extended .Stable leverage; facility support .

Management Commentary

  • “In 2024, Runway Growth advanced its strategy to optimize our portfolio, enhance our origination channels, and expand our product set…[BC Partners Credit] positions the Company to further diversify…mitigate risk and drive heightened returns.” — David Spreng, CEO .
  • “We are starting 2025 with an expanded product set…ability to take parts in larger deals and allocate the ideal allotments to Runway Growth Finance…a partnership with VertexOne…$131M of growth capital and $41M was allocated to the BDC.” — Greg Greifeld, CIO .
  • “Our lower base dividend will enable us to deliver consistent yield…even if we face rate environment volatility…targeted supplemental dividend up to 50% of the delta that our NII per share exceeds the base dividend.” — Thomas Raterman, CFO/COO .

Q&A Highlights

  • Originations timing: management noted back‑ended closings; near‑term deals may slip into next quarter given limited days remaining .
  • Yield drivers: decline attributed to Fed rate cuts and fewer accelerations/prepayment fees; book yield spikes tie to early terminations/prepayments .
  • Dividend policy and leverage: new Board prioritized stable, predictable base dividend; leverage target unchanged at 1.2x–1.3x; focus on building NAV while sustaining payouts .
  • Equity/warrant realizations: Gynesonics preferred equity produced gains largely reflected at 12/31 marks; plan to opportunistically realize equity positions .
  • Non‑accruals and exposure: two loans on non‑accrual (Mingle Healthcare, Snagajob) totaling ~0.5% of FV; Snagajob preferred is noninterest‑bearing .

Estimates Context

  • Q4 2024: EPS $0.39 vs $0.418* consensus (10 estimates) — miss; Revenue $33.8M vs $36.1M* consensus (7 estimates) — miss. Fewer prepayment accelerations and base rate declines reduced yield and fee income, driving the shortfall .
  • Forward quarters showed beats vs consensus in Q1–Q3 2025 actuals, but those are beyond Q4 scope; near‑term estimate paths should incorporate lower base rate and normalized prepayment fees dynamics (consensus revisions likely modest) *.

Values retrieved from S&P Global for estimates (*).

Key Takeaways for Investors

  • Revenue/EPS missed consensus amid rate‑driven yield compression and lower prepayment accelerations; monitor fee income and prepayment cadence for near‑term NII volatility .
  • Strong capital rotation: $152.6M prepayments and $154.0M fundings support active redeployment and portfolio optimization, reinforcing credit quality signals .
  • NAV accretion with $16.5M net unrealized gains (notably Gynesonics) and sequential NAV/share increase to $13.79 improves valuation support for income investors .
  • Dividend framework reset to $0.33 base plus targeted supplemental (up to 50% of NII delta) enhances payout consistency through rate cycles while preserving NAV .
  • Platform upside: BC Partners Credit combination broadens origination channels and structured solutions (e.g., revolvers, second‑lien/convertible), potentially improving win rates and diversification without altering core first‑lien strategy .
  • Leverage steady at ~1.08x with extended KeyBank facility; liquidity robust ($244.8M), supporting originations and optionality (including potential share repurchases subject to opportunity set) .
  • Watchlist for Q1/Q2: rate trajectory, originations run‑rate, non‑accrual resolutions, equity/warrant realizations, and prepayment trends as primary drivers of NII and supplemental dividend capacity .