RWAY — Runway Growth Finance Corp.

Summary of Runway Growth Finance Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Investment Income: $36.7 million, up from $35.1 million in Q2 2025.
• Net Investment Income: $15.7 million, compared to $13.9 million in Q2 2025.
• Weighted Average Portfolio Risk Rating: Increased to 2.42 from 2.33 in the previous quarter.
• Loan-to-Value Ratio: Rose to 31.4% from 29.6% in Q2 2025.
• Total Investment Portfolio Fair Value: $946 million, down 7.7% from $1.02 billion in Q2 2025.
• NAV per Share: Decreased to $13.55 from $13.66 in Q2 2025.
• Operating Expenses: $21 million, slightly down from $21.2 million in Q2 2025.
• Net Realized Loss on Investments: $1.3 million, an improvement from $1.5 million in Q2 2025.
• Debt Portfolio Yield: Increased to 16.8% from 15.4% in Q2 2025.

2. Strategic Updates and Business Highlights

• Completed 11 investments totaling $128.3 million in Q3 2025, focusing on technology, healthcare, and select consumer sectors.
• Announced a definitive merger agreement to acquire SWK Holdings, expected to scale Runway's portfolio by approximately $242 million and enhance its capabilities in healthcare and life sciences.
• The acquisition is anticipated to provide mid-single-digit run rate net investment income accretion in the first full quarter post-close.
• Continued focus on portfolio optimization through diversification and smaller position sizes, leveraging the BC Partners Credit ecosystem for sourcing opportunities.

3. Forward Guidance and Outlook

• Anticipate the SWK merger closing in early 2026, pending SEC regulatory approval, which may be delayed due to the ongoing government shutdown.
• Expect muted repayment activity in Q4 2025 compared to Q3 2025, with origination activity continuing through the BC Partners network.
• The merger is expected to enhance earnings power, improve dividend coverage, and support modest ROE expansion.

4. Bad News, Challenges, or Points of Concern

• Portfolio Fair Value Decline: The total investment portfolio's fair value decreased by 7.7%, indicating potential challenges in the market.
• Single Loan on Nonaccrual Status: Only one loan (Mingle Healthcare) is on nonaccrual status, but it represents a small portion of the portfolio.
• Competitive Pressures: Noted spread compression in the venture debt space, although not as severe as in broader markets.
• Realized Losses: The company reported realized losses primarily in its equity portfolio, attributed to idiosyncratic issues rather than sector-wide problems.

5. Notable Q&A Insights

• Integration of SWK: The SWK team will assist with portfolio transitions and new originations post-merger.
• Dividend Strategy: The declared dividend of $0.33 per share reflects a cautious approach, considering anticipated prepayment activity and earnings power.
• Prepayment Activity: Driven by M&A activity and companies refinancing with cheaper options, expected to normalize moving forward.
• Merger Accretion: The merger is expected to be accretive in 2026, with potential for OID accretion following the deal close.

Overall, while Runway Growth Finance demonstrated solid financial performance and strategic growth initiatives, it faces challenges in portfolio valuation and competitive pressures in the venture debt market. The upcoming merger with SWK Holdings is viewed as a significant opportunity for scaling and diversification.