Runway Growth Finance Corp.

Ladies and gentlemen, thanks for standby and welcome to the Runway Growth Finance First Quarter 2022 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Ms. Mary Frill, Assistant Vice President, Business Development and Investor Relations. Please go ahead.

Thank you, Operator. Good afternoon, everyone. and welcome to the Runway Growth Finance conference call for the first quarter ended March 31st, 2022. With us on the call today from Runway Growth Finance are David Spring, Chairman, Chief Executive Officer, Chief Investment Officer, and Founder, and Tom Raderman, Chief Financial Officer and Chief Operating Officer. Runway Growth Finance's first quarter 2022 financial results were released just after today's market closed and can be accessed from Runway Growth Finance's investor relation website at investors.runwaygrowth.com. We've arranged for a replay of the call at the Runway Growth Finance 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 identify 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 the 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. With that, I will turn the call over to David.

Thank you, Mary, and thank you all for joining us today. I'm pleased to provide an update on our first quarter results and our outlook for the rest of the year. Runway growth had a tremendous start to 2022, making significant progress towards our business objectives in the first quarter against a backdrop of volatility in the equity capital markets. We continue to originate high-quality loans in a competitive growth lending environment, increase our investment portfolios already market-leading credit quality, and thoughtfully utilize leverage to drive portfolio growth and expand ROE for our shareholders. The value of the runway growth band is gaining even more traction in the marketplace as more companies fully understand our differentiated and durable model. We believe we have a unique opportunity to further position our venture lending products as an attractive and optimal capital solution for rapidly growing companies given the slowdown in equity capital markets activities in the first quarter and concerns surrounding inflation, increasing interest rates, and geopolitical uncertainties. During the first quarter, we completed seven investments in new and existing portfolio companies representing $135 million in new commitments, including $83.5 million in funded loans. We funded all investments in the first quarter with proceeds from our revolving credit facility as a part of our ongoing strategy to fund prudent portfolio growth with leverage. Notably, we doubled our core leverage ratio quarter over quarter to 26.1%. We've recorded record total and net investment income of $19.3 million and $12.5 million at the end of the first quarter, up 17% and 8.5% respectively from the prior year period. Net assets were $597.5 million at the end of the first quarter, up 26% from $473.5 million at the end of the first quarter of 2021. Runway Growth is a credit-first organization with what we believe to be the latest stage lowest risk portfolio among the public venture debt PDCs, with a weighted average loan-to-value at origination of 16.3%. In addition, at the end of 2021, approximately 90% of our underlying investments were well-protected first lien senior secured loans, which compares to an average of 72% first lien loans for the other public venture debt BDCs. Runway Growth is building a prudent platform with best-in-class underwriting rigor, and we believe our portfolio composition underscores that. Our credit quality continues to be very strong. And in the first quarter, our weighted average risk rating for the portfolio improved again, down to 1.98 from 2.04 in the fourth quarter. Our risk rating system is based on a scale of one to five, where one represents the most favorable credit rating. This is a testament to our investment strategy, focusing on recession resistant late stage companies, as well as our team's disciplined diligence in the underwriting process and active monitoring of our investments to prevent losses and keep strong companies in the portfolio. Runway is as committed as ever to our overall investment strategy and focus on the fast-growing sectors of the economy we know best, including life sciences, technology, and select consumer service and product industries. We were particularly pleased to originate two new loans in the life sciences sector in the first quarter to Mustang Bio and Revell Aesthetics. Life sciences has been an integral part of our strategy from the beginning. Personally, I have a long history in life science investing. I was chairman of a publicly traded biotech company and helped found a medical device incubator with Medtronic. Runway made its first life sciences investments in 2018 when we financed CareCloud, Mingle Health, and Mobius Imaging. one of which is a healthcare IT company, one is a healthcare services company, and one is a medical device company. We continue to capitalize on strong Originations activity in the life sciences space through our deep bench, industry knowledge, extensive network, and unparalleled reputation. Runway growth has strategically grown our Originations team to enhance prudent portfolio growth, and our strategy remains the same going forward. A reminder that we source our investments across three distinct lending verticals. First, late and growth-stage VC-sponsored companies sinking an alternative or complement to equity to minimize dilution. Second, non-sponsored companies, which take more time to source but generally provide more favorable terms and conditions for the lender. And third, PE-backed companies with great potential but insufficient cash flow or assets to support loans from their traditional lending sources. We introduced the latter on our last call, and while we did not originate new loans to PE-backed companies in the first quarter, we remain excited about this new vertical. PE-backed companies are increasingly looking to flexible loan options to fund capital-efficient growth, and Runway can help structure the right loans to help to provide growth capital to get to the next level of operational success. In terms of what we're seeing in the market overall, the contraction of multiples in the public equity markets is impacting liquidity and terms for late-stage venture rounds, while having little material impact for us on loan-to-value and portfolio valuation. In the first quarter, as our dollar-weighted average portfolio enterprise value declined by 5.8 percent, our strong dollar-weighted loan-to-value was up only 3.9 percent. Remember that our valuation is based on our methods, not the value assigned by VCs in the last round. From a spread perspective, we continue to see a stable environment attributed to our focus on late and growth stage companies with sound fundamentals. Runway has proven risk mitigation methods that have provided consistent and attractive returns for shareholders during the previous times of stress. most recently during the COVID-related market volatility of 2020, and we are confident in our ability to execute against macroeconomic headwinds. I'd like to spend a moment on our outlook for 2022 before passing it to Tom to review our financial results. We believe the current market environment is set to benefit runway growth. According to PitchBook, U.S. venture-backed companies attracted $71 billion in financing in the first quarter indicating a slight downturn from the record levels seen in 2021, yet still well above 2020 activity. With funding starting to pull back, we're also seeing more conservative views when it comes to VC equity valuations. Every day we hear feedback from late-stage companies that they are being compared to public market valuations, making equity financing options much less attractive. Runway is strategically positioned to benefit from the decline in VC equity valuations as more late-stage companies turn to the private markets for the crucial capital needed to fund their next phase of growth. We want to reiterate our view that in the rising rate environment, debt remains cheaper than equity, and we believe that the cost differential between debt and equity capital will be further magnified going forward. Runway Growth is prepared to capitalize on these tailwinds and will continue to focus on driving value for our shareholders. I'll now turn it over to Tom.