SWK Holdings Corporation

Good day, everyone. Welcome to the SWK Holdings first quarter 2025 conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Susan Hsu, Investor Relations. The floor is yours.

Thank you, Kelly. Good morning, everyone. And thank you for joining SWK Holdings' first quarter 2025 financial and corporate results call. Yesterday, SWK Holdings issued a press release detailing its financial results for three months and then March 31st, 2025. The press release can be found in the investor relations section of swkhold.com under news releases. Before beginning 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, 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 factor section of 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 Staggs, President and CEO, and Adam Rice, CFO, who will provide an update on SWK's first quarter 2025 corporate and financial results. Jody, you may go ahead.

Thank you, Susan, and thanks, everyone, for joining our first quarter conference call. We are pleased with SWK's first quarter performance Headlined by strong financial segment profitability as well as a successful monetization of the majority of our royalty portfolio. First quarter SWK highlights include $8.6 million of finance segment adjusted non-GAAP net income, bringing the trailing 12-month total to $26 million, a new $15 million financing to an innovative life science company, and continued partnership advancement between our Mod 3 pharma division and its strategic partner. Our non-GAAP tangible financing book value per share grew to $21.73, achieving our stated goal of 10% year-over-year growth. Mod 3 adds an additional $0.38 per share of tangible book value, bringing our total tangible book value per share to $22.11. Pro forma for the May 2025 $4 per share special dividend, our total tangible book value per share was $18.11. Year-to-date, we have repurchased $1.1 million of our shares, and with the stock trading at a discounted book value and given our excess capital, I expect the Board will authorize a new share repurchase program in coming days. At March 31, 2025, our gross finance receivables portfolio consisted of approximately $220 million of performing first lien loans and $13 million of non-accruals, against which we have a $9 million CECL reserve. bringing net financial receivables to $224 million, and that is pro forma for the sale of the royalty portfolio. We also hold $5 million of public equities and warrants, as well as private warrants and post-workout contingent economic interest carried at zero on our books. Finally, gross cash as of today totaled approximately $22 million, and our revolving credit facility is undrawn. At March 31, 2025, the finance receivable portfolio had an effective or modeled yield of 14.5%. So if the portfolio repays as modeled, it should generate approximately $32 million of annual interest income. We are pursuing additional financings, including upsizing existing performing borrowers as well as agreements with new partners. The market for high-quality borrowers remains competitive, and we will pick our spots to maintain a high-quality portfolio that can earn a mid-teens return. We believe the portfolio remains strong and the most recent credit score reached an all-time high. As a reminder, we rank our portfolio from one to five with five the highest score. At March 31st, we had the three non-accruals totaling $13 million and two two-rated credits totaling roughly $20 million. The two-rated credits are both accrual and we are in regular conversations with both borrowers. We continue to monitor the ongoing health care and general economic regulatory changes. And at this time, we don't believe any of these changes pose outsized risk to our portfolio. Turning to how we are thinking about the pro forma finance segments go forward economics. As previously mentioned, the current portfolio should generate approximately $32 million of interest income if it repays as modeled. On the expense side, we are targeting approximately $8 million of normalized annual OPEX The bond interest expense totals $3 million, and our revolver carrying cost is approximately half a million dollars. So a reasonable target is approximately $20 million of the finance segment adjusted non-GAAP net income based on the current portfolio size. To be clear, this is not guidance and does not consider impairments, early payoffs, warrant gains, abnormal OPEX, additional deployments, et cetera, and is really just intended to provide a framework for how to think about go-forward profitability. Turning to our Mod 3 CDMO division, first quarter segment revenue was $1 million and segment EBITDA was a loss of half a million dollars. During the quarter, we received a $1.8 million option fee from our strategic partner, which is carried in deferred revenue. The partnership remains strong with both sides collaborating to grow the business. Our team at Mod 3 is also working to monetize non-core IP. With that, I will turn the call to our CFO, Adam Rice, to review the quarter's financial results.