Runway Growth Finance Corp. (NASDAQ:RWAY) is included among the 15 Stocks with Highest Dividend to Invest in. Oppenheimer Cuts Runway Growth Finance (RWAY) Price Target After Q3 Results Photo by NeONBRAND on Unsplash On November 11‌, Oppe​nh​ei‍mer redu‍ced its​ price tar‌get on Runway Growth Finance Corp. (NASDAQ:RWAY) to $12 from $13 and maintained a⁠ Perform r⁠ating a​fter reviewing the company’s quarterly results‌, as reported by The Fly. The firm‍ now expects the company to genera‍te earni​ng‌s of ...

The Trade With Beta team has been submerged in the universe of preferred stocks and baby bonds for almost a decade, and we decided to share our knowledge and expertise through the inception of this service. We attempt to cover all aspects of these products, from IPOs to pair trades and portfolio picks and, last but not least, issues. Additionally, once a month, we go through all different groups of fixed-income instruments to make sure that nothing has gone unnoticed.Arbitrage Trader, aka Denislav Iliev has ...

Core Industry Insights - The Zacks SBIC & Commercial Finance industry is facing margin compression and lower investment income due to declining interest rates, as most loans are tied to floating rates [5][6] - Asset quality is at risk as prolonged high rates may strain borrowers' ability to repay, although initial support from stimulus packages helped mitigate delinquency rates post-COVID-19 [7][8] - Regulatory changes, particularly the amendment to the Investment Company Act of 1940, have provided funding flexibility and growth opportunities for industry players [9][10] Industry Performance - The Zacks SBIC & Commercial Finance industry has underperformed the S&P 500 and the broader finance sector, with a collective loss of 13% over the past year compared to gains of 14.2% for the S&P 500 [15] - The industry's Zacks Industry Rank is 209, placing it in the bottom 14% of over 250 Zacks industries, indicating a discouraging earnings outlook [11][12][13] Valuation Metrics - The industry has a trailing 12-month price-to-tangible book (P/TB) ratio of 0.96X, significantly lower than the S&P 500's ratio of 12.55X, indicating a substantial discount compared to the market [17][18] Company Highlights - **Ares Capital Corp. (ARCC)**: A specialty finance firm focused on U.S. middle-market companies, with a market cap of $14.5 billion and total debt of $15.6 billion as of September 30, 2025. The company has seen growth in total investment income and is expected to continue this trend [19][21] - **Hercules Capital, Inc. (HTGC)**: A specialty finance company providing venture capital to technology and life science firms, with a market cap of $3.3 billion. The company maintains a robust balance sheet and is expected to benefit from rising demand for customized financing [22][24][25] - **Runway Growth Finance Corp. (RWAY)**: Focused on providing senior secured loans to growth-stage companies, with a market cap of $357.4 million. The company has posted steady growth in total investment income and is well-positioned to sustain this momentum [26][28][29]

Core Viewpoint - The Zacks SBIC & Commercial Finance industry is facing challenges due to declining interest rates, which may lead to margin compression and lower investment income, while asset quality remains at risk from prolonged high rates affecting borrowers' repayment ability [1][5][8]. Industry Overview - The Zacks SBIC & Commercial Finance industry consists of companies that provide financing to small and mid-sized privately held firms, often underserved by traditional banks [3]. - These companies offer customized financing solutions, including senior debt instruments and equity capital, for various transactions such as buyouts and growth initiatives [4]. Key Themes - **Declining Interest Rates**: The Federal Reserve has lowered interest rates to 3.75–4%, which will likely reduce loan yields for many industry players with floating-rate loans, impacting net investment income [5]. - **Loan Origination and Refinancing**: Despite the challenges, loan origination and refinancing activities are expected to improve due to rising demand amid economic growth [6]. - **Asset Quality Concerns**: The industry may experience asset quality deterioration as prolonged high interest rates could hinder portfolio companies' ability to service debt [8]. - **Regulatory Changes**: The 2018 amendment to the Investment Company Act eased leverage limits, allowing companies to increase their debt-to-equity leverage, providing more funding flexibility [9][10]. Industry Performance - The Zacks SBIC & Commercial Finance industry ranks 209 out of over 250 Zacks industries, placing it in the bottom 14%, indicating underperformance in the near term [11][12]. - Over the past year, the industry has collectively lost 13%, while the S&P 500 and Zacks Finance sector have gained 14.2% and 9.7%, respectively [15]. Valuation Metrics - The industry has a trailing 12-month price-to-tangible book (P/TB) ratio of 0.96X, significantly lower than the S&P 500's 12.55X, indicating a substantial discount compared to the broader market [17][18]. Company Highlights - **Ares Capital Corp. (ARCC)**: A specialty finance firm focusing on U.S. middle-market companies, with a market cap of $14.5 billion and total debt of $15.6 billion as of Sept. 30, 2025. The company has seen growth in total investment income and is expected to continue this trend [19][21]. - **Hercules Capital, Inc. (HTGC)**: A specialty finance company providing venture capital to technology and life science firms, with a market cap of $3.3 million and a total investment portfolio valued at $4.31 billion as of Sept. 30, 2025. The company is expected to benefit from rising demand for customized financing [22][24]. - **Runway Growth Finance Corp. (RWAY)**: Focuses on providing senior secured loans to growth-stage companies, with a market cap of $357.4 million and a total investment portfolio valued at $946 million as of Sept. 30, 2025. The company is expected to sustain growth in investment income amid favorable regulatory trends [26][28].

Core Insights - The analysis focuses on future-oriented industries where culture, technology, and valuation intersect, particularly in gaming and digital assets [1] Group 1: Industry Focus - The sectors covered include gaming publishers such as Nintendo, Capcom, and Square Enix, which are pivotal in reshaping global entertainment [1] - Digital assets like XRP, Bitcoin, and Ethereum are highlighted as transformative forces in global finance [1] Group 2: Consumer Brands - Selected consumer brands such as Monster Beverage, Sprouts, and Macy's are analyzed, emphasizing the importance of brand and consumer behavior in driving long-term value [1] Group 3: Analytical Approach - The analytical methodology combines Discounted Cash Flow (DCF) and relative valuation with macroeconomic and narrative context, aiding in identifying early investment opportunities [1]

Core Insights - Runway Growth Finance Corp. reported revenue of $36.75 million for the quarter ended September 2025, marking a year-over-year increase of 0.3% and a surprise of +5.36% over the Zacks Consensus Estimate of $34.88 million [1] - The company's EPS for the same period was $0.43, compared to $0.41 a year ago, resulting in an EPS surprise of +13.16% against the consensus estimate of $0.38 [1] Financial Performance Metrics - Investment income from non-control/non-affiliate sources included interest income of $30.72 million, exceeding the average estimate of $30.06 million from two analysts [4] - Dividend income from non-control/non-affiliate sources was reported at $0.25 million, surpassing the two-analyst average estimate of $0.19 million [4] - Payment in-kind interest income was $4.22 million, compared to the estimated $4.01 million by two analysts [4] Stock Performance - Over the past month, shares of Runway Growth Finance Corp. have returned -1.7%, while the Zacks S&P 500 composite has changed by +1.3% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Financial Data and Key Metrics Changes - Total investment income for Q3 2025 was $36.7 million, up from $35.1 million in Q2 2025, while net investment income increased to $15.7 million from $13.9 million [15][16] - The weighted average portfolio risk rating rose to 2.42 in Q3 2025 from 2.33 in Q2 2025 [15] - The dollar-weighted loan-to-value ratio increased from 29.6% to 31.4% [15] - The total investment portfolio's fair value decreased by 7.7% to $946 million from $1.02 billion [16] - NAV per share decreased by 1.9% to $13.55 from $13.66 [18] Business Line Data and Key Metrics Changes - The company completed 11 investments totaling $128.3 million in Q3 2025, focusing on technology, healthcare, and select consumer sectors [7][10] - The acquisition of SWK Holdings is expected to scale the portfolio by approximately $242 million, increasing exposure in healthcare and life sciences from 14% to 31% [9][11] Market Data and Key Metrics Changes - The company noted a competitive environment in private markets, with increased competition affecting pricing and origination activity [9][34] - The venture debt space is experiencing spread compression, although not as severe as in broader markets [34] Company Strategy and Development Direction - The company aims to enhance its portfolio through both organic and inorganic growth, with a focus on diversification and risk mitigation [8][9] - The acquisition of SWK Holdings is seen as a strategic move to enhance earnings power and diversify the asset base [9][20] - The company is committed to maintaining a disciplined approach to growth while leveraging the BC Partners credit platform for sourcing opportunities [8][10] Management's Comments on Operating Environment and Future Outlook - Management expects a muted repayment activity in Q4 2025 compared to Q3, with origination opportunities being actively pursued [25] - The integration of SWK is anticipated to enhance the company's financial profile and shareholder value, with expected accretion in earnings [20][55] - The ongoing government shutdown may delay SEC regulatory approval for the merger, with a projected close in early 2026 [22][55] Other Important Information - The company repurchased 397,983 shares during the third quarter under a $25 million stock repurchase program [22] - A regular distribution of $0.33 per share was declared for Q4 2025 [23] Q&A Session Summary Question: Expected closing date of the SWK merger and origination activity in Q4 - Management indicated that repayments would be muted in Q4, with origination activity utilizing the existing pipeline and BC Partners credit platform [25] Question: Integration of SWK portfolio and yield profile - The SWK portfolio is expected to have a slightly higher yield than Runway's existing portfolio, with plans to explore upsizing the best loans post-merger [27][29] Question: Drivers of realized loss and unrealized portfolio depreciation - Losses were primarily in the equity portfolio, with no specific sector theme identified [30] Question: Prepayment activity and expectations for next year - Prepayment activity is driven by M&A and refinancing options, with expectations for normal prepayment rates moving forward [31] Question: Competitive dynamics in venture debt space - Management noted spread compression in the venture debt space, but not as severe as in other markets [34] Question: Integration of SWK team post-merger - The SWK team will assist with the transition and new originations during the integration period [35] Question: Dividend declaration and earnings power - The board's decision on the dividend was based on anticipated prepayment activity and the need to cover the base dividend with Q4 earnings [38][40] Question: Characteristics of loans added to the Kadma JV - Loans added to the Kadma JV are growth loans, suited for that vehicle due to specific characteristics [46] Question: Accretion from the SWK merger - The merger is expected to be accretive in the first full quarter after closing, with potential for OID accretion [55][56]

Financial Data and Key Metrics Changes - Total investment income for Q3 2025 was $36.7 million, an increase from $35.1 million in Q2 2025, while net investment income rose to $15.7 million from $13.9 million in the previous quarter [15][16] - The weighted average portfolio risk rating increased to 2.42 in Q3 2025 from 2.33 in Q2 2025, indicating a slight deterioration in credit quality [15] - The dollar-weighted loan-to-value ratio increased from 29.6% to 31.4% [15] - The total investment portfolio's fair value decreased by 7.7% to $946 million from $1.02 billion in Q2 2025 [16] - NAV per share decreased by 1.9% to $13.55 from $13.66 at the end of Q2 2025 [18] Business Line Data and Key Metrics Changes - The company completed 11 investments totaling $128.3 million in Q3 2025, focusing on technology, healthcare, and select consumer sectors [7][10] - The acquisition of SWK Holdings is expected to scale the portfolio by approximately $242 million, increasing exposure in healthcare and life sciences from 14% to 31% of the overall portfolio [9][11] Market Data and Key Metrics Changes - The debt portfolio generated a dollar-weighted average annualized yield of 16.8% in Q3 2025, up from 15.4% in Q2 2025 [16] - Total available liquidity was $371.9 million, including unrestricted cash and cash equivalents, with a borrowing capacity of $364 million [18] Company Strategy and Development Direction - The company aims to enhance its portfolio through both organic and inorganic growth, with a focus on diversification and risk mitigation [8][9] - The merger with SWK Holdings is seen as a strategic move to enhance earnings power and diversify the asset base [9][21] - The company is committed to maintaining a disciplined approach to growth while leveraging the BC Partners credit platform for sourcing opportunities [8][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the integration of SWK Holdings and its potential to enhance the company's market position [14][21] - The company anticipates a muted repayment activity in Q4 2025, with origination activity expected to remain strong [26] - Management acknowledged competitive pressures in the venture debt space but noted that spread compression has not been as severe as in broader markets [36] Other Important Information - The company declared a regular distribution of $0.33 per share for Q4 2025, with net investment income of $0.43 per share [24][40] - The merger with SWK is structured as a tax-free reorganization with an estimated purchase price of approximately $220 million [22] Q&A Session Summary Question: What is the expected closing date of the SWK merger and its impact on origination and repayment activity? - Management expects repayments to be muted in Q4 2025, with origination activity utilizing the existing pipeline and BC Partners credit platform [26] Question: What is the yield profile of the SWK portfolio compared to the existing portfolio? - The SWK portfolio has a slightly higher yield than the existing portfolio, with complete pro formas to be provided in the N-14 filing [27][29] Question: What were the main drivers of realized losses in the portfolio? - Losses were mainly in the equity portfolio, driven by idiosyncratic factors such as expirations of warrants and liquidations of IPO shares [31] Question: How does the company plan to integrate the SWK team? - The SWK team will assist with the transition and new originations during the integration period [37] Question: Will the merger be accretive in 2026? - Management expects the merger to be accretive in the first full quarter after closing [57]

Financial Data and Key Metrics Changes - Total investment income for Q3 2025 was $36.7 million, an increase from $35.1 million in Q2 2025, while net investment income rose to $15.7 million from $13.9 million [15][16] - The weighted average portfolio risk rating increased to 2.42 from 2.33 in the previous quarter [15] - The dollar-weighted loan-to-value ratio increased from 29.6% to 31.4% [15] - The total investment portfolio's fair value decreased by 7.7% to $946 million from $1.02 billion [16] - NAV per share decreased by 1.9% to $13.55 from $13.66 [18] Business Line Data and Key Metrics Changes - The company completed 11 investments totaling $128.3 million in Q3 2025, including new investments in Federal Hearings and Appeals Services and DigiCert Inc. [10][11] - The acquisition of SWK Holdings is expected to scale the portfolio by approximately $242 million, increasing exposure in healthcare and life sciences from 14% to 31% [9][11] Market Data and Key Metrics Changes - The debt portfolio generated a dollar-weighted average annualized yield of 16.8%, up from 15.4% in the previous quarter [16] - Total available liquidity was $371.9 million, including unrestricted cash and cash equivalents [18] Company Strategy and Development Direction - The company is focused on both organic and inorganic growth, with a definitive merger agreement to acquire SWK Holdings to enhance its portfolio and earnings power [5][9] - The strategy includes diversifying the portfolio through smaller position sizes and expanding financing solutions [7][11] - The company aims to maintain a disciplined approach to growth while leveraging the BC Partners credit platform for sourcing opportunities [6][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the merger with SWK Holdings, anticipating it will enhance earnings power and financial profile [20][21] - The company expects to see a normal course of prepayments and is optimistic about origination activity in Q4 2025 [26][33] - Management acknowledged competitive dynamics in the venture debt space, noting some spread compression but not as severe as in broader markets [37] Other Important Information - The company declared a regular distribution for Q4 2025 of $0.33 per share, with net investment income of $0.43 per share [24][42] - The merger is structured as a NAB-for-NAB transaction with an estimated purchase price of approximately $220 million [21] Q&A Session Summary Question: What should be expected regarding origination and repayment activity in Q4? - Management indicated that repayments would likely be muted compared to Q3, with ongoing origination opportunities available [26] Question: What is the yield profile expected after integrating the SWK portfolio? - The SWK portfolio is expected to have a slightly higher yield than the current portfolio, with pro formas to be provided in future filings [27][28] Question: What drove the realized loss and unrealized portfolio depreciation? - Losses were primarily in the equity portfolio, attributed to idiosyncratic factors rather than sector-wide issues [31][32] Question: What is driving prepayment activity, and is it expected to continue? - Prepayment activity is driven by M&A activity and companies finding cheaper refinancing options, with expectations for normal prepayment rates moving forward [33] Question: How will the SWK team be integrated into the company? - The SWK team will assist with the transition and new originations during the integration period [38] Question: Will the merger be accretive in 2026? - Management expects the merger to be accretive in the first full quarter after closing [59] Question: What stage of development do typical SWK investments target? - SWK targets growth-stage companies that are generating revenue but are generally pre-profit [62]

Runway Growth Finance Corp. Third Quarter 2025 Investor Presentation NASDAQ Listed I RWAY I RWAYL I RWAYZ November 2025 © Runway Growth Capital LLC 2025 Forward-looking Statements This presentation dated November 2025 is being provided by Runway Growth Finance Corp. ("Runway Growth" or the "Company") fordiscussion purposes only and is neither an offer to sell, nor a solicitation of an offer to purchase, an interest in the Company. It is solely intended to describe the general business, investment objectives ...