Runway Growth Finance Corp. 7.50% Notes due 2027 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good morning, everyone, welcome to the Runway Growth Finance conference call for the second quarter ending June 30th, 2026. Joining us on the call today are David Spreng and Mike Rovner, Co-Chief Executive Officers of Runway Growth Finance, and Co-Chief Investment Officers of Runway Growth Capital LLC, our investment advisors. Also joining us are Carmela Thomson, Chief Financial Officer, Avisha Kubani, Chief Credit Officer, and Tom Raterman, Vice Chairman. Runway Growth Finance's second quarter 2026 financial results were released just after market close yesterday and can be accessed from Runway Growth Finance's investor relations website at investors.runwaygrowth.com. We have arranged for a replay of the call to be available on the Runway Growth Finance webpage. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements.

These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including, without limitation, market conditions caused by uncertainties surrounding interest rates, changing economic conditions, and other factors we identify in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained on this call are made as of the date hereof, and Runway Growth Finance assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of SEC-related filings, please visit our website.

With that, I will turn the call over to David.

Thank you, Quinlan, and thank you everyone for joining us this morning to discuss our second quarter 2026 results. I'm pleased to be joined by our recently appointed Co-Chief Executive Officer, Mike Rovner, our CFO, Carmela Thomson, our Chief Credit Officer, Avisha Kubani, and Tom Raterman, who joins us in his new capacity as Vice Chairman. Today, I will discuss notable developments from the quarter and provide color on our capital allocation strategy and portfolio activity. Avisha will discuss our portfolio evaluation process and credit monitoring framework. Carmela will provide a deeper dive into our financial and portfolio metrics. Mike and Tom will join us later for Q&A.

Before I turn to these items, I'd like to introduce Mike Rovner, who has been appointed Co-Chief Executive Officer of Runway Growth Finance and Runway Growth Capital, and Co-Chief Investment Officer of Runway Growth Capital, serving alongside me in leading the platform. Since partnering with BC Partners in 2025, we have remained focused on building a stronger, more diversified platform that is well-positioned to generate attractive long-term returns for our shareholders. One of the important strategic benefits of that partnership is access to the breadth of BC Partners' credit capabilities, investment resources, and talent. Mike's appointment reflects that advantage. Mike brings more than 30 years of experience spanning technology, venture capital, private credit, and growth lending. Prior to joining BC Partners through its acquisition of Ovation Partners, the private credit platform he co-founded and led, Mike spent his career investing in financing and helping grow innovative businesses.

That breadth of experience gives him a unique perspective on the venture ecosystem, from entrepreneur to venture investor to lender, which we believe will be invaluable to Runway. Throughout his career, he has deployed over $2 billion while maintaining a highly selective underwriting philosophy focused on investing in only the highest conviction opportunities. This philosophy closely aligns with the credit-first culture we've built at Runway. We believe Mike's experience, judgment, and connectivity across the broader BC Partners platform will meaningfully strengthen our investment capabilities. While I remain fully committed to Runway, I also want to ensure that we are building a leadership team capable of guiding the company through its next chapter. Tom and I have been deliberate in that effort, focusing on creating continuity and positioning Runway for long-term success. I'm excited to welcome Mike and confident that he will be an outstanding partner as we lead Runway forward.

Our strategy and priorities remain unchanged. We will continue to emphasize disciplined underwriting, active portfolio management, and a relentless focus on generating attractive long-term returns for shareholders. I founded Runway with the goal of building a differentiated venture lending platform. Today, with Mike joining our leadership team, the expanded resources of BC Partners, a more diversified portfolio, and an exceptionally talented organization, I believe we are entering our next chapter from a position of strength and are well positioned to capitalize on the opportunities ahead. Turning to the results. During the first half of 2026, we remained focused on executing our long-term strategy despite a challenging operating environment shaped by heightened scrutiny of credit quality, evolving interest rate expectations, and cautious sentiment towards software. These dynamics continue to weigh on BDC sector performance and contribute to a disconnect between market pricing and underlying performance.

In Runway's case, we believe our share price materially undervalues the fundamentals of our portfolio, the outlook for credit performance, and the long-term benefits of the SWK transaction, which has significantly enhanced our portfolio diversification by both industry and loan size. At an over 49% discount to our second quarter net asset value, or NAV, as of August 4th, 2026, we believe the market is pricing in a level of stress that is not supported by the fundamentals of our portfolio. Our capital allocation strategy is designed holistically to maximize long-term total shareholder return. We believe our ability to deliver attractive returns over time depends on maintaining an appropriately sized investment portfolio and strong earnings capacity. Together, these attributes provide the foundation for supporting an attractive dividend backed by earnings and growing net asset value over time.

With this in mind, the recent announcement that BC Partners and its affiliates have committed to purchasing up to 10% of the company's outstanding common stock over the next two years, while our shares trade below 70% of NAV, reflects their conviction in our strategy and the long-term value of the business. These purchases demonstrate meaningful alignment with shareholders and may provide incremental demand for our shares without reducing the company's capital base, investment portfolio, or future earnings capacity. At the company level, we continue to believe disciplined repurchases remain an attractive use of capital while our shares trade at a meaningful discount to intrinsic value. Once our trading blackout period ends on August 11th, we will be able to execute a new Rule 10b5-1 plan and evaluate additional repurchase opportunities through open market purchases or tender offers as appropriate.

At the same time, our strong origination pipeline allows us to remain highly selective in deploying capital. By continuing to originate high-quality investments and recycle capital into attractive opportunities, we can further diversify the portfolio, enhance overall quality, and preserve the earnings power necessary to support the current dividend and grow it over time. This disciplined approach also positions the portfolio to absorb normal credit losses over the course of the investment cycle while maintaining financial flexibility. We believe that meaningful affiliate purchases, disciplined company repurchases, and selective originations together provide the most balanced path towards reducing the discount to NAV. More importantly, they preserve the portfolio quality, earning capacity, and financial flexibility that are essential to our primary objective of delivering attractive long-term total returns to shareholders. Turning now to portfolio activity for the quarter.

As we've discussed, we intentionally slowed origination activity during the first part of the year to focus on closing our acquisition of SWK Holdings. As such, origination activity increased meaningfully from the first quarter. We see second quarter activity as more representative of originations across the first half of 2026 than of the second quarter alone. We focused on further diversifying the portfolio through investments in companies across healthcare and life sciences and select consumer sectors, completing four investments in new and existing portfolio companies and follow-on investments to six portfolio companies, representing $85.8 million in total fundings. Following the completion of our acquisition of SWK on April sixth, we also funded approximately $239.6 million of investments acquired in the transaction through a mix of cash and equity. As I mentioned earlier, diversification remains a key strategic priority. We have made meaningful progress over the last several quarters.

For example, since June 30, 2025, we have reduced average loan size by a percentage of cost by approximately 28%. The SWK transaction was an important step in advancing this objective, but we have multiple avenues to further diversify the portfolio over time, including refinancing loans at lower balances and selectively syndicating portions of new originations to third parties while retaining smaller hold positions on Runway's balance sheet. Looking ahead, I remain confident in the strength of our portfolio, the execution of our strategy, and the expertise of our seasoned investment team. Together, these qualities position us well to deliver positive outcomes for both our borrowers and our shareholders. I will turn it over to Avisha, who's joining us on the call today to provide a deeper dive into our portfolio valuation and credit monitoring processes. Avisha, over to you. Thank you, David.