Burford Capital Limited

Thank you for standing by and welcome to the Burford Capital third quarter 2024 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. I'd now like to turn the call over to Christopher Bogart, Chief Executive Officer. You may begin.

Thanks very much, and hello, everybody. Thank you for joining us today. As usual, with me on the call is John Malo, Burford's chief investment officer, and Jordan Leach, Burford's chief financial officer. And the three of us will take you through the slides that have been put up on the web site. I'm going to start on slide four. And it's obviously very nice when a strong quarter like this comes along and we can show you how the business is performing. You know, our business doesn't really fit neatly into quarters, and the third quarter is often slow, given the summer. So it's particularly nice to have this kind of result, even though we like to look at the business over a longer term than just on a quarter-by-quarter basis. But this slide is purely about the quarter. And so what you can see here are some real indications of activity. Realizations more than doubled compared to the comparative quarter. um net realized gains almost doubled we brought in a ton of cash during the quarter um decent income and uh and our deployments and commitment activity was was certainly consistent with this kind of period in fact new commitments went up more than five times over the over the comparative period but because courts and lawyers are often slow in the summer The third quarter is never, never what we look to for new business as some sort of bellwether of anything. I'm going to turn to slide five, which lets us talk a little bit more about the year to date. And I will say, just as we start going through these slides, we're going to try to do this at a reasonable pace for you because it was our intention on this call to give you a little bit more fulsome of an update when we come to talk about the YTF Pearson cases. So we prepared some material for that, including a new slide. And we're going to spend some time talking through that. So we're going to, while not giving short shrift to the quarter, I'm going to dwell on some of these points a little bit less than I might ordinarily. So on slide five, which is really more of a year to date, you know, the fundamental message here is that we're having a very strong year. We're seeing real portfolio activity. John's going to talk in some more detail about that. That's driving cases forward. It's creating realizations. You'll see sort of record cases here. Not only are the realizations on a record pace, but net realized gains just through three quarters are already basically hitting a record annual level. In addition to the cash that we brought in during the third quarter, we've now brought in during the course of the year well over half a billion dollars. And so we're sitting on some meaningful liquidity that Jordan will talk about in a moment. And we continue to be able to write a nice amount of new business in the market, notwithstanding the fact that the team is certainly also occupied by the fairly significant level of portfolio activity that we've got going on. So with those sort of opening remarks, let me turn you over to Jordan.

Thank you, Chris. Good morning and good afternoon to everyone on the call today. I'm on page six. This is just a quick summary of the financials for Burford only. As we talked about earlier this year, it's obviously difficult to make comparisons to the prior year periods. 2023, of course, included the positive news regarding summary judgment on the YPF cases. That drove a good portion of the 23 years overall results. But let's start first looking at the quarter and some of the totals. Overall, we had $136 million of net income for the second quarter, resulting in $0.61 per share. Net income was just over 60% of total revenues. On the asset side, we are slightly over $3.6 billion of capital provision assets. Of that, our non-YPF assets represent approximately $2.2 billion, in which there's approximately a 35% fair value uplift to deployed costs. Tangible book value for shares is over $11 now, and tangible book value is just shy of $10.50. I'm going to go into more details about revenue, expense, and some of the other key metrics now, so why don't we switch to page seven? On page seven, breaking down the various components to capital provision income, a couple of headlines to focus. If you exclude YPF, our net realized and unrealized gains were up 200% quarter-over-quarter, and 17 percent when looking at the year-to-date figures. I also want to highlight the net realized gains in the third quarter in particular were close to double the same quarter or same period last year. And as Chris had mentioned, and more importantly, the nine-month figure of 186 million is already in line with previous annual records. Inside the earnings, market interest rates did reverse course during the third quarter, and this impacts the discount rate that we use in valuation. That dropped approximately 90 basis points, which resulted in slightly less than $100 million of positive impact to fair value. As a point of comparison, we had seen rates rising through the first half of the year, which had created a headwind to unrealized fair value gains. The discount rates in general follow market trends and broader market volatility. But as I always say, we focus on the cash resolution of our assets and not the interim fluctuation created by rate volatility. And so that brings me back to the record results with respect to net realized gains in the year to date. I'm going to switch now to page eight. So, look, as Chris mentioned, third quarter sometimes can be slow given the summer, but it was a productive quarter to continue building the portfolio. Burford-only capital provision, direct new commitments remain consistent with what we traditionally see in first and third quarters. And as Chris mentioned, it significantly outpaced the third quarter of last year. From a Burford-only balance sheet perspective, the year-to-date figure is practically identical on new commitments between 2023 and 2024, around $450 million. Deployments remained in line with our expectations for the quarter. In comparing 2023, recall that in Q2 of last year, we had a large deal to support a Fortune 50 client. That resulted in a $325 million commitment, and $190 of that was for the Burford-only capital provision direct commitments. And it also had an immediately large deployment of $127 million by the balance sheet. So overall, Q3 looks good from that perspective and comparative. We expect deployments to continue to be robust, given that we've got approximately $700 million of definitive commitments to deploy on the existing portfolio. And so with that, I will move to page nine. Looking at page nine, you'll see that we have Burford-only capital provision direct realizations of $380 million, representing a 39% increase over the same period last year. which is obviously a great result. The bullet on the side of the slide highlights that this is driven from a diverse set of assets, not just one large item. We had 10 items that were greater than $10 million, five items that were greater than $20 million in realizations. And realizations is obviously then what turns in the critical component and what turns into creating cash and cash receipts. have been consistent if you look at the previous eight quarters at near or over $100 million. And of course, if you look at the most recent quarter, we had a record of $310 million of cash receipts. And if you look overall for the Burford-only capital provision direct, we're just shy of half a billion dollars coming back to the balance sheet. So bottom line, the portfolio continues to produce a lot of cash. And with that, I will turn it over to John for slide 10.