Burford Capital Limited

Thank you for standing by. My name is Bailey and I will be your conference operator today. At this time, I would like to welcome everyone to the Burford Capital fiscal year 2025 and fourth quarter 2025 financial results conference call and audio webcast. 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 star and one. I would now like to turn the call over to Josh Wood, Head of Investor Relations. You may begin.

Thank you, Bailey. Good morning, everyone. And thank you for joining us to discuss Burford's fourth quarter and full year 2025 results. On the call, we have our Chief Executive Officer, Chris Bogart, our Chief Investment Officer, John Malone, and our Chief Financial Officer, Jordan Leach. Earlier this morning, we posted a detailed earnings presentation, which we'll refer to during the call, as well as our annual shareholder letter, and we also filed our Form 10-K for 2025. If you haven't already, you can find all of these materials on our Investor Relations website. Before we get started, just a reminder that today's call may contain forward-looking statements that involve certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed during the call. For information regarding these risk factors, please refer to our earnings materials relating to this call posted on our website and our filings with the SEC. We will also be referring to certain non-GAAP financial measures during the call. Please refer to today's earnings materials and our filings with the SEC for additional information, including reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, I will turn the call over to Chris.

Thanks, Josh, and thanks, everybody, for joining us today. I'm going to take you through some key messages, and I'm going to start on slide nine of the presentation deck. And what I really emphasize about what happened in 2025 is that we had a standout year when it came to new business, which is the thing that we really have the largest amount of control over in this business. So we saw, you know, as you can see here, we saw very significant numbers taking us well on our way to meeting our longer-term goals of doubling the base portfolio by 2030. If we were to keep on on this clip, we would significantly exceed that goal. So that was just a terrific performance across the board. New definitive commitments, deployments. We added a net of $700 million of additional model realizations to the overall portfolio, taking that number to north of $5 billion now. So we're very pleased with how the year went from that perspective. As all of you will be aware, our realization activity, while still robust, was not as strong as it was last year. And that, of course, was a disappointment to us. That's, of course, also something that we have less control over. And it's something that, you know, as longtime observers of this business know, it's something that can ebb and flow with the level of activity going on in the courts. And we've been describing to you over the past several years a world where we have a significant volume of older cases in the portfolio, which are simply not moving through the court system, the court process, at quite the pace that we would wish. We think that's probably still a hangover from the portfolio. In our shareholder letter this year, which I'd encourage you all to go and have a look at, We refer to, we try to refer to it as, you know, four lanes of highway traffic trying to merge into two. But the good news there is that the portfolio still had a significant level of activity, a good level of cash generation, and a good level of realizations. And most importantly, we're not seeing degradation in portfolio quality. The loss rates are stable. Our returns are stable. So the issue from our perspective is much more an issue of throughput and timing than it is anything else, and we'll take you through some more detail about that. However, that obviously impacted our income, which was down somewhat, and we'll take you through, and Jordan will take you through in more detail just exactly how all of the numbers looked. So I'm going to turn to slide 10, and this really highlights what happened on the new business front. It really was just a terrific year. You saw there a 39% increase in new definitive commitments. And that was coming off a year that was already relatively robust. That enabled us to significantly increase our portfolio base. That's the metric that we're using to look at our goal of doubling the business by 2030. And you see there, we've not only had a multi-year significant level of growth, But this past year, we were able to put up a 20% growth rate in that number. So that's really very exciting for us. And it positions the business very, very well for the years ahead. Slide 11 takes you through realizations. Excuse me. And what you see in realization activity here is on the right side of this slide, you see that the world is continuing to go pretty well. You know, we had a new high of rolling three year average realizations and so we're pleased with the level of portfolio activity that we're seeing. And you can also see there that we saw a number of portfolio events basically right on top of the number of portfolio events that we saw in the prior year, but what really did happen there. that caused the numbers not to be as robust as they were in the prior year is we simply didn't have as many big, chunky wins. You see that if you look at the graphic on the very left side of the slide. You see there that even though we had a roughly similar number of large-ish outcomes, we didn't have those big, big outcomes that drove the 2024 performance. And so when that doesn't happen, when we're missing one of those big, big, or one or two of those big, big outcomes, you just inevitably see a decline in the overall realizations that the portfolio is driving. So if you look across here, you know, we, we saw, you know, lots of activity, 69 assets, add realization activity. in fiscal 25 compared to 71 in fiscal 24. So that's an insignificant difference. But the dollars per realization event were just lower. That doesn't reflect portfolio quality. It just reflects the fact that we didn't have one of those big cases that we've been waiting for to show up and conclude and generate cash. It doesn't affect our enthusiasm for the portfolio, as John is going to go through in some detail. Um, and again, our, our loss rates have been stable. Our returns have been stable. Um, but it just reflects the fact that we didn't have the kind of throughput that we had. The good news is all that stuff is still out there waiting. So it's not as though these things are gone. It's simply that, you know, when you look at our larger cases, we didn't, we simply didn't have as much activity in them as one might've wished on a single year basis. And if you turn to slide 12. you really see this illustrated in more graphical format. Interestingly, we even saw, if you look at gains year by year, we even saw an overall higher level of gains in fiscal 25 against fiscal 24. That's those two green bars on the left, 508 to 579. But at the same time as we saw those higher gains, we also saw a somewhat higher level of losses. Now, what does that mean? That doesn't mean case losses. Case losses, when you look at realized losses, those numbers are still pretty low. And you see those numbers there over on the right-hand side. Those numbers are low. Our loss rates are acceptably low and consistent with historical practice. So what's going on there? What's going on there is we have some unrealized losses. And I'm going to take you through a few examples of what creates an unrealized loss in our book. Because the reality is that while bad case events can also cause unrealized losses, so too can a number of things that don't speak to the underlying merits of the cases. Things like changes in duration, changes in cost, and other extrinsic factors. And so it's important when you look at these numbers and you go into the accounting numbers as opposed to the cash numbers, it's important to bear in mind that there's quite a lot going on in the accounting, which is why we've always said, we like to look at the cash performance of the business instead of the accounting performance. But since we have these accounting numbers, we're going to unpack them a little bit for you so that you can really see some of the dynamics in play. And before I delve into this, I'd also just encourage everybody to go and read our shareholder letter. I'm not going to go through every theme orally that we hit in that letter, but we talked there in some detail about topics like AI and our technology initiatives. We talk about our continuing market expansion, including our launches in Madrid and in Seoul, South Korea. And we talk at the end about Burford's overall role in the justice system and how we've become a very significant part of that overall process. But turning now to some actual examples. so that you can see what's actually going on there. Slide 13 talks about a collection of cases that we call the proteins cases. These are US antitrust cases involving allegations of price-fixing in the proteins, the proteins foods cases. So the reality of these cases is that they're going pretty well. You can see four different proteins there, all seeing positive outcomes and forward momentum. And in fact, we just had a significant win in one of these cases in the Seventh Circuit Court of Appeals, where one of the major proteins players had been trying very hard to cling to a settlement that was in their mind done before we became actively involved in the cases. And the Seventh Circuit rejected that effort, basically signaling that the cases were worth more than the settlement had been done for at the time. But the reality of these cases is that this is complex litigation and it's taking somewhat longer than one would have wished. And the way that our accounting works, and Jordan is happy to answer questions about this later or offline, the way that our accounting works is that if duration extends past our original expectations, that's going to cause a reduction in our fair value. And so we, in fact, took a $22 million charge to earnings from nothing more than the fact that these cases are taking longer and costing more, even though they are proceeding well and we're quite optimistic about their ultimate outcomes. So there's that sort of interim action in the numbers there that the complexity of our accounting now is causing. And it's important that when you look at these numbers, you separate the things that are these interim, time-based, non-merits-based dynamics from what's actually going on in the underlying merits portfolio. Turning the page to slide 14, which is still a little bit in the proteins world, this is another example of where our earnings can be depressed from things that don't actually go to the underlying merits of the cases. One of the counterparties that we financed here a very large wholesale distributor, has gone into Chapter 11, into the sort of operating bankruptcy regime of the U.S. And that means that we and other creditors of this business are jockeying for a position. Now, it's obviously not great when your counterparties go into bankruptcy. But here, the underlying claims that are collateral are proceeding well and actually are continuing to be settled and to pay cash. So even though we, for accounting purposes, have taken a significant charge to earnings because of the pendency of this Chapter 11 proceeding, the reality is that the underlying collateral is continuing to perform, and we have reason for optimism that we're going to not suffer the kind of loss that you would normally associate with being particularly a potentially unsecured creditor in bankruptcy. So again, this is divorced from the underlying merits of the case, And it's an issue where it's a place where we actually expect cash to flow to the business over time. And a third example on slide 15 is a mining arbitration where we see the benefits of having cross-collaboralized portfolios. Because here we have two cases in play. One of those cases has had an initial unfavorable outcome. But the other case has yet to be decided. And the first one is on appeal. And either one of those cases, if successful, is sufficient to make up our whole entitlement out of these cases. However, the accounting reality is, and the market reality, we're not trying to walk away from the market reality, is that when you have two chances to win as opposed to one chance to win, the asset is probably somewhat more valuable. And so having had a negative impact on one of the two chances to win, that causes appropriately a decline in the accounting carrying value of that asset. But it doesn't mean that we don't necessarily have every opportunity to both win the second case and get our full entitlement out of that two-case cross-collateralized portfolio. So the purpose in going through all of these is really just to show you There's a fair bit going on under the covers. It's not as simple as us just saying, okay, well, here's the case. We either win it or we lose it and money comes in. That's how we look at the business on a cash basis. And on that basis, the business is doing very nicely. I would have liked some more cash in 2025 than we generated. But overall, when you think about the strength of the new business that we were able to create, the progress that we're making towards achieving our long-term goals, and the fact that both our returns and our loss rates have remained steady, that all tells me that this cash basis is a waiting game. And what's important to me is not to have the accounting get too much in the way of understanding that basic cash principle about the business. So we're happy to take your questions on that, but before I turn you over to Jordan, I don't think any Burford presentation these days would be complete without talking briefly about YPF. So turning to slide 16, this is a slide that you've all seen before. I'm not going to go through it in any great detail. I think just about every Burford shareholder is pretty familiar by now with YPF and what's going on with it. And that slide is really there just to remind you of the basics. We did, however, add a new slide, slide 17. And on that slide, we tried to pull together the threads of everything that is going on right now because there is quite a lot happening. So the main, the big issue is that we're awaiting a decision from the Second Circuit Court of Appeals on what we call the main appeal. So Argentina's appeal of the underlying 16 plus billion dollar judgment that has been growing now with pre-judgment interest and post-judgment interest added to it. That appeal was argued on the 29th of October. And we're waiting for a decision that decision, you know if if past practices any guide you would expect that decision during the course of this year. Although there's no requirement for that to occur and and, like everything else about litigation nothing is nothing about that is certain. And some litigation risk always remains in these cases, but in addition to playing a waiting game for that decision is actually a fair bit going on elsewhere. The district court, the trial court that gave us the judgment in the first place, has been actively enforcing the judgment, has had many hearings over the past months, has been actively engaged in the process, has now scheduled a further evidentiary hearing on a whole variety of topics, including contempt and sanctions and Argentina's gold reserves for late April. So that's upcoming. There are some other collateral appeals floating around in the system. One of them is around the order that Argentina turn over its YPF shares as partial satisfaction of the judgment. There are some discovery issues around the senior Argentine administration official's use of off-channel communications like WhatsApp and Gmail. And there are some procedural appeals. Those are not entirely calendared yet. The way the process works is that The Second Circuit tries to respect lawyers' schedules, and so it sends out sort of a preliminary idea of when it might like to try to hear the appeals, and it's done that suggesting the week of April the 13th. It's had feedback from the lawyers about their availability, and now we're all waiting to see if they will pick a date during that week or if they will push it off to some other sitting of the court. And then we have enforcement proceedings going on in eight different foreign jurisdictions in which there's likely, in fact, to be a reasonable amount of activity in 2026. So with that, let me bring my sort of introduction to a close and hand you off to Jordan. Just with the overarching theme though, that while I know people will have been looking for some more cash and some more realizations, and of course we would have liked that too, The simple reality is that there's not much we can do about the pace of the conveyor belt, but we're very happy with the state of the business and the amount of new business we were able to generate, which sets us up very nicely for the future. And we're happy with what's left in the portfolio, as you'll hear from John.