Runway Growth Finance Corp.

Ladies and gentlemen, thank you for standing by and welcome to the Runway Growth Finance fourth quarter 2021 earnings conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Alex Strong, Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone, and welcome to the Runway Growth Finance conference call for the fourth quarter and fiscal year ended December 31st, 2021. With us on the call today from Runway Growth Finance are David Sprang, Chairman, Chief Executive Officer, Chief Investment Officer and Founder, and Tom Raderman, Chief Financial Officer and Chief Operating Officer. Runway Growth Finance's fourth quarter and fiscal year 2021 financial results released just after today's market close and can be accessed from Runway Growth's Investor Relations website at investors.runwaygrowth.com. We have arranged for a replay of the call at the Runway Growth webpage or by using the telephone number and passcode provided in today's earnings release. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including, and without limitation, the uncertainty surrounding the COVID-19 pandemic and other factors we identified from time to time in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained on this call are made as of the date hereof, and Runway Growth Finance assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of SEC-related filings, please visit our website. And with that, I will turn the call over to David.

Thank you, Alex, and welcome everyone to Runway Growth Finance Corps' fourth quarter earnings conference call. Before I begin my prepared remarks, on behalf of the entire Runway team, our thoughts and prayers go out to all of those directly and indirectly impacted by the tragic events ongoing in Ukraine. Today, I'll begin by providing some fourth quarter and full year 2021 highlights, review how runway growth is uniquely positioned to compete for deals, and then discuss our market outlook before passing it to Tom to review our financial results. 2021 was a monumental year for runway growth. We became a publicly traded company, successfully raised capital through both debt and equity offerings, achieved record quarterly and annual origination volume of $216 million and $563 million respectively, and recognize zero credit losses for the year. Before discussing our fourth quarter results further and sharing our market outlook, I want to provide a quick overview of the Runway Growth platform and our investment process for those of you who are new to the Runway story. Runway Growth is an established direct origination platform focused on sponsored and non-sponsored senior secured first lien debt investments. We lend to late and growth-stage businesses in technology, life sciences, healthcare, and information services, and select consumer services and products industries. Our investment process is credit-driven and focused on principal protection with the potential for equity upside. In short, our portfolio has the downside protection of debt and the upside of equity. I started Runway Growth in 2015 after 25 years as a VC consultant and growth debt lender because I saw the opportunity to empower entrepreneurs across two underserved segments of the growth lending market. First, late and growth stage venture-backed companies were outliving the ability of their VC partners to fund growth and were looking for non-dilutive growth capital. And second, non-sponsored growth lending was an untapped vertical. Although these deals take more time to source, They generally enjoy more favorable terms and conditions for the lender. These two segments have provided the initial foundation for runway growth's track record of durable growth and stability across various economic backdrops. Recently, a third vertical has started to emerge, which we see as an integral segment of the runway growth platform going forward. The third vertical is growth-focused PE-backed, as opposed to venture-backed companies. Runway deployed loans to two such companies in Q4, which I'll touch on further in a moment. Our Originations team, which grew from three to six during 2021, has an average of 22 years of experience, and along with our other investment professionals, manage a portfolio of 39 late and growth stage companies in the technology, life sciences, and select consumer services and products industries. Earlier this year, we added Rachel Goldstein as Senior Vice President of Growth to our origination team. Rachel is focused on enhancing our origination activities, focused on top-of-funnel lead generation, sales operations and analytics, and market expansion. Previously, Rachel held a similar position at Leiter Capital, a leading revenue-based financing firm focused on early-stage SaaS and technology companies. Moving down the funnel, I want to talk about our proprietary credit and underrating process, which we believe differentiates runway growth from peers and makes us an ideal partner for entrepreneurs looking to raise growth capital while minimizing dilution. We believe our team brings unparalleled thoughtfulness in terms of developing customized funding solutions to meet the borrower's needs, rooted in our investment team's deep sector knowledge and intimate understanding of our borrowers' businesses. We leverage proprietary risk analytics and employ a credit discipline that matches company risk with loan risk in a dual-sided pricing matrix to optimize deal terms for both parties. Runway Growth actively monitors our portfolio companies on the defensive side to prevent credit losses and on the offensive side to provide additional capital to companies that are meeting their objectives to fund further growth. The end result for runway growth shareholders is an underlying portfolio that provides for a stable and attractive return from debt investments, all while, we believe, taking on less risk than our peers. In 2021, runway growth benefited from its warrant positions in three portfolio companies that entered the public market, Brilliant Earth, Ouster, and Porch Group. These types of liquidity events highlight the benefit we experience on the equity side as we exercise our warrant positions, which are a part of nearly every loan we fund. Since inception, runway growth has rarely won deals based on pricing alone. We win due to our investment team's deep sector knowledge, thoughtfulness of our deal structures, and credit disciplines. We believe we are quickly becoming a preferred lender in our markets due to our thorough understanding of our borrower's business and our reputation for being a solid partner with a steady hand. Turning back to quarterly and full-year results, runway growth's fourth quarter was marked by strong execution against the strategy we introduced on our third quarter call. To thoughtfully deploy capital and utilize leverage to drive portfolio growth, further empower management teams we believe in and strengthen return on equity for our shareholders. We further built upon our track record of strong return on investment and industry-leading low credit losses, generating total investment income of $17.6 million and net investment income of $10.9 million in Q4, a 2% sequential increase. In addition to experiencing no credit losses in 2021, Runway growth maintained an industry-leading low loss ratio of 20 basis points per year on a gross basis and one basis point per year on a net basis based on cumulative commitments. Our annualized yield on debt investments held roughly flat at 14% compared to the prior period. We calculate the debt investment yield by taking the total related investment income during the period divided by the daily average of debt investments outstanding during the period. Our originations team drove prudent portfolio growth in Q4, allowing us to fund six investments across new and existing portfolio companies, growing runway gross total loan commitments and funded investments to $1.45 billion and $1.18 billion since inception. Two of these investments in Q4 were made to late-stage PE-backed companies, Vertex One and Epic I.O. As more tech-oriented PE platforms emerge and invest in companies with great potential but insufficient cash flow or assets to support loans from their traditional lending sources, we believe there will be even greater opportunities for runway growth in the future. The investments we made in growing our originations teams started to bear fruit in Q4. and we expect an even greater impact in 2022 as the team's integration into the runway growth system comes into view and the team is fully up and running. We will also selectively add to our originations team in 2022 to continue to enhance prudent portfolio growth. In December, we announced a $70 million debt private placement in the form of 4.25% senior unsecured notes due in 2026, and we completed the first closing in December and the second closing a few weeks ago. As a reminder, runway gross leverage ratio target for the portfolio is between 0.8 and 1.1 times. On the operational side, in recognition of the growth and quality of our team, Greg Greifeld, Managing Director, Head of Credit, has also assumed the role of Deputy CIO. Tom Ratterman now serves as COO in addition to his role as CFO. As mentioned earlier, we were pleased to recently welcome Rachel Goldstein, Senior Vice President of Growth, to the Runway Growth Team. Before turning it over to Tom, I want to spend a moment on the overall VC landscape and what we're seeing for 2022. We've all seen the numbers from PitchBook, but to rehash, we're coming off another consecutive record year for the VC market. with 2021 US VC investment topping $300 billion for the first time and nearly doubling 2020's total of $166.6 billion, which was the previous record. The historically robust market over the past few years has created a large addressable market and laid the groundwork for lending opportunities in the future. Our view is that in 2022, Even in a rising rate environment, debt is going to remain cheaper than equity and the cost differential between debt and equity capital will be further magnified. The bottom line is that equity is getting more expensive and debt remains cheaper than equity. So borrowers, particularly late-stage borrowers that in the past might have been attracted to high-valued equity, are now going to be even more interested in debt. I will now turn it over to Tom to review our financial results.