SWK Holdings Corporation

Good day and welcome to the SWK Holdings second quarter 2024 conference call. At this time all participants are in a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Ira Gostin, Investor Relations. Sir, the floor is yours.

Good morning, everyone, and thank you for joining the SWK Holdings Second Quarter 2024 Financial and Corporate Results Call. Yesterday, we issued a press release detailing financial results for the three months ending June 30th, 2024. The press release can be found on the investor relations section of our website at swkhold.com under the news release section. Before today's call, I would like to make the following statement regarding forward-looking statements. Today, we will be making certain forward-looking statements about future expectations, plans, events, and circumstances related including statements about our strategy, future operations, and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations, and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factors section of the SWK Holdings 10-K filed with the SEC and other filings we make with the SEC from time to time. SWK Holdings disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Joining me from SWK Holdings on today's call is Jody Saggs, President and CEO, who will provide an update on SWK's second quarter corporate and financial results. And Jody, it's all yours. Go ahead, please.

Thank you, Ira. and thanks everyone for joining our second quarter conference call. First, I'd like to welcome our new CFO, Adam Rice. Adam joins SWK from a private credit platform and brings valuable loan and mortgage accounting and operational experience to SWK. During his first couple of months, Adam has familiarized himself with our financing structures, assisted our controller Courtney and our consultants with the 2Q accounting reporting, and started building a relationship with our partner banks. Adam will take a leading role with the financial reporting starting in 3Q, and you will hear from him then. Welcome, Adam. SWK's core business is financing innovative commercial stage life science product companies through first-line term loans and royalties with a focus on $5 million to $25 million investments. During the second quarter, our core finance segment generated $6.5 million of adjusted non-GAAP net income. The net finance receivables portfolio increased 19% year-over-year to $267 million. and the portfolio effective yield improved 10 basis points year-over-year and 40 BIPs sequentially to 14.6%. Segment revenue increased 15% year-over-year to $10.7 million as the receivables growth was accompanied by a 15.4% realized yield. Second quarter 2024 financial segment results were negatively impacted by a net $4.1 million of impairments taken to two non-accrual borrowers and positively impacted by a $2.4 million increase in the carrying value of our alluvium royalty, as well as a $700,000 gain on the conversion of AOT private warrants to common stock, which was triggered by the company listing on the London AIM Exchange. As a reminder, SWBK carries private warrants at zero on our books. During the second quarter, we advanced $7 million to two existing performing borrowers, and in August, we closed on an up to $11 million royalty monetization with Relief Therapeutics. We are pursuing loans and royalties to multiple innovative life science companies and have the capital available to close these opportunities. Our Interest Division is ramping work with our strategic partner as evidenced by segment revenue nearly tripling sequentially to $800,000. Under the strategic agreement, Interest is entitled to receive low single-digit million minimum guaranteed revenue payments for each of the six-month periods. For the first six months of the year, we agreed that this requirement could be satisfied by bookings received at the end of the quarter. These bookings were deferred and the revenue will be realized over the next few quarters. Our partner made the full cash payment after quarter closed, satisfying the minimum guaranteed revenue payment requirement for the period. As a reminder, the minimum guaranteed revenue payment is intended to help fund the operating costs of a terrorist as revenue builds. We are pleased with the progress the terrorist is making as evidenced by increased bookings and a growing pipeline of CDMO projects. Turning to our share repurchase program, We bought back 54,667 shares at a total cost of $1 million during the second quarter. Since quarter closed, we have repurchased an additional 155,000 shares for a total cost of $2.6 million. As of June 30, 2024, our GAAP book value per share was $22.75, a 4% increase compared to $21.79 as of June 30, 2023. Non-GAAP tangible financing book value per share totaled $20.17, a 6% increase compared to $18.95 as of June 30, 2023. During the quarter, we wrote off the remaining value for potential future milestone and royalty payments associated with the Interest Peptelligence License to CARE Therapeutics. This was in response to CARE's decision to discontinue the clinical program for the underlying oral Coursera program. Post this write-off, the Antares segment has a book value of approximately $5 million, which consists almost entirely of PP&E. In summary, during 2Q24, our financial segment had solid results, which were negatively impacted by impairments at two borrowers. We are pursuing multiple financing opportunities and are working to close additional deals by year-end. Our Antares business has seen growth in revenue and bookings with the assistance of our partner and is positioned to be cash flow breakeven or better through the strategic partnership period. With that, let's open up the line to questions.