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SWK Holdings (SWKH) Q4 2024 Earnings Call March 20, 2025 07:04 PM ET Company Participants Susan Xu - Investor RelationsJody Staggs - CEO & PresidentAdam Rice - CFO Conference Call Participants None - Analyst Operator Greetings. Welcome to the SWK Holdings Fourth Quarter twenty twenty four Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. Susan Xu Thank you. Good morning, ...

Financial Performance - For Q4 2024, SWK reported total revenue of $12.4 million, a 25.0% increase from $9.9 million in Q4 2023[6] - GAAP net income for Q4 2024 was $5.9 million, up from $2.8 million in Q4 2023, representing a 110.7% increase[8] - SWK's adjusted non-GAAP net income for Q4 2024 was $6.6 million, compared to $2.8 million for Q4 2023, reflecting a significant growth[9] - Total revenues for the year ended December 31, 2024, increased to $44,987,000, up 19% from $37,760,000 in 2023[34] - Net income for the year ended December 31, 2024, was $13,488,000, a decrease of 15% from $15,887,000 in 2023[34] - Net income for 2024 was $13,488,000, a decrease of 15.1% from $15,887,000 in 2023[35] Assets and Liabilities - As of December 31, 2024, net finance receivables were $277.8 million, a 1.2% increase from the previous year[8] - Total investment assets as of December 31, 2024, were $282.7 million, a 2.3% increase from $276.3 million in the previous year[10] - Total current assets increased significantly to $20,254,000 in 2024, compared to $11,869,000 in 2023, representing a growth of 70%[32] - Total liabilities decreased to $43,545,000 as of December 31, 2024, down from $53,939,000 in 2023, a reduction of approximately 19%[32] - The company’s total stockholders' equity increased to $288,690,000 in 2024 from $280,315,000 in 2023, reflecting a growth of 3%[32] Cash Flow and Financing - Net cash provided by operating activities rose to $23,049,000, up 54.5% from $14,888,000 in the previous year[35] - Net cash used in investing activities improved to $(10,134,000) from $(48,948,000), reflecting better investment management[35] - Net cash used in financing activities was $(12,224,000), a significant decrease from $33,140,000 in 2023, indicating reduced financing costs[35] - The company’s cash and cash equivalents increased to $5,927,000 in 2024 from $4,503,000 in 2023, marking a growth of 32%[32] - Cash, cash equivalents, and restricted cash at the end of the period increased to $5,927,000 from $5,236,000[35] Credit and Provisions - The company reported a provision for credit losses of $12,756,000 for the year ended December 31, 2024, compared to $1,912,000 in 2023, indicating a substantial increase in credit loss provisions[34] - Provision for credit losses increased significantly to $12,756,000 from $1,912,000, indicating a rise in expected credit losses[35] Financing Activities - SWK closed a term loan with Triple Ring totaling $8.0 million and expanded its credit facility with Eton to $30.0 million during Q4 2024[12] - The effective yield for Q4 2024 was 15.5%, a 150 basis points increase from 14.0% in Q4 2023[15] - Non-GAAP tangible financing book value per share increased by 8.3% to $21.15 from $19.53 as of December 31, 2023[11] - Interest paid increased to $3,082,000 from $1,351,000, reflecting higher borrowing costs[35] - The amortization of debt issuance costs rose to $1,054,000 from $493,000, indicating increased financing activities[35] Other Notable Events - The company anticipates declaring a dividend following the closing of a larger royalty monetization transaction expected in March 2025[5] - The company experienced a foreign currency transaction gain of $1,414,000, compared to a loss of $1,876,000 in the previous year[35] - The company reported a loss on impairment of intangible assets amounting to $5,771,000, with no such loss reported in 2023[35] - SWK Holdings plans to continue providing non-dilutive financing solutions to healthcare companies, focusing on long-term value creation[28]

Financial Performance - Revenues increased to $45.0 million for the year ended December 31, 2024, up from $37.8 million in 2023, representing a 19.0% increase[179]. - The provision for credit losses rose significantly to $12.8 million in 2024 from $1.9 million in 2023, primarily due to an $8.1 million impairment on the Trio loan[180]. - Interest expense increased to $4.7 million in 2024 from $1.8 million in 2023, a rise of 161.1%, mainly due to the issuance of approximately $32.9 million in Notes[182]. - Pharmaceutical manufacturing, research and development expenses decreased to $2.2 million in 2024 from $3.4 million in 2023, a decline of 35.3%[183]. - Other income, net increased to $6.8 million in 2024, compared to immaterial levels in 2023, driven by various gains including a $2.5 million gain on revaluation related to the Iluvien royalty[187]. - Income tax expense increased to $4.9 million in 2024 from a benefit of $1.3 million in 2023, reflecting a change in the effective tax rate to 26.6%[188]. - The finance receivables portfolio contained $277.8 million of net finance receivables as of December 31, 2024, expected to generate positive cash flows in 2025[192]. - The company generated $40.8 million in finance receivable interest income for the year ended December 31, 2024[212]. Financial Position - As of December 31, 2024, the company had $5.9 million in cash and cash equivalents, an increase of 31.1% from $4.5 million in 2023[189]. - Total current assets increased to $20.3 million in 2024 from $11.9 million in 2023, representing a growth of approximately 71.5%[217]. - Total liabilities decreased to $43.5 million in 2024 from $53.9 million in 2023, a reduction of about 19.2%[217]. - Stockholders' equity increased to $288.7 million in 2024 from $280.3 million in 2023, reflecting a growth of approximately 3.0%[217]. - The company reported a decrease in accumulated deficit from $4.14 billion in 2023 to $4.13 billion in 2024, indicating a slight improvement[217]. - The company’s marketable investments increased significantly from $48,000 in 2023 to $580,000 in 2024[217]. - The company’s deferred tax assets decreased from $28.3 million in 2023 to $23.5 million in 2024, a decline of approximately 16.9%[217]. Business Segments - The company operates in two segments: Finance Receivables and Pharmaceutical Development, reflecting its business performance evaluation[154]. - The Finance Receivables segment focuses on transactions under $50 million, filling an underserved niche in the market[21]. - The majority of finance receivables transactions are structured similarly to factoring transactions, providing capital in exchange for an interest in existing revenue streams[24]. - The Pharmaceutical Development segment was initiated with the acquisition of Enteris BioPharma, which provides development services and innovative formulation solutions[28]. - The pharmaceutical development segment engages in collaboration and licensing agreements, which include upfront license fees and royalties on net sales[168]. Risks and Challenges - The company faces competition from larger entities with greater financial resources in both Finance Receivables and Pharmaceutical Development segments[29][30]. - The pharmaceutical industry faces risks related to competition, government regulation, product liability, and patent exclusivity, which could adversely affect the commercial success of products and services[49]. - The company relies on third-party payors for adequate reimbursement, and any changes in reimbursement policies could compromise product success[46]. - The performance of the Finance Receivables segment is heavily dependent on the underlying performance of partner companies, which are subject to various risks[55]. - The company may experience significant gains or losses based on management's assumptions and estimates regarding valuations, interest rates, and investment returns[50]. - The transition from LIBOR to alternative reference rates could materially impact the value and liquidity of portfolio securities[65]. - Limited access to information about privately-held royalty streams may hinder informed investment decisions[56]. - The company may face challenges in completing transactions without co-investments from third parties, impacting operational results[58]. - The allowance for credit losses may prove inadequate if the credit quality of partner companies declines[64]. - Prepayments of debt investments by partner companies could adversely affect results of operations and return on equity[57]. - The company does not control partner companies, which may make decisions that do not align with its interests, potentially leading to adverse financial consequences[51]. - The company faces risks related to product liability claims from human testing and manufacturing, which could result in significant costs and adverse publicity[70]. - Changes in tax laws could adversely affect the company and its shareholders, with potential retroactive applications impacting tax liabilities[78]. - The company may encounter difficulties in integrating acquisitions or separating divested segments, affecting anticipated benefits from such transactions[80]. - The company must effectively manage growth in its Finance Receivables segment to achieve business objectives, with failure potentially leading to adverse effects on financial condition[69]. Capital and Financing - The company plans to fund transactions through its own working capital, revolving credit facility, and by raising additional third-party capital[20]. - As of December 31, 2024, the company had $5.8 million in unfunded commitments, indicating potential future financial obligations[196]. - The company entered into a $45.0 million revolving credit facility in June 2023, which was increased to $60.0 million in October 2023[190]. - The new Credit Agreement provides for a revolving credit facility with an initial maximum principal amount of $45.0 million, which can be increased to a total of $80.0 million[88]. - The company completed a public offering of $30.0 million of 9.00% Senior Notes due 2027, with net proceeds of approximately $31.9 million after discounts and commissions[90]. - The company's liquidity may be significantly reduced if it cannot secure new debt or equity financing on commercially reasonable terms[91]. - The company may face substantial liquidity problems if it cannot generate sufficient cash flow to service its debt obligations[94]. Shareholder Matters - Funds affiliated with Carlson own 68.7% of the company's common stock, giving them significant influence over management and policies[99]. - The company has entered into a Stockholders' Agreement that allows funds affiliated with Carlson to approve specific transactions, including incurring debt and selling assets over specified amounts[100]. - The trading price of the company's common stock could decline due to substantial sales by significant stockholders, including funds associated with Carlson[101]. - The company has successfully regained compliance with Nasdaq listing standards but cannot assure continued compliance[97]. - The company has not paid any cash dividends on its capital stock and intends to retain cash without anticipating future dividends[148]. - As of December 31, 2024, the company has repurchased a total of 793,411 shares at a cost of $13.5 million, averaging $16.99 per share[151]. - The company has a maximum dollar value of approximately $5.4 million of shares that may yet be purchased under the Current Repurchase Program[151]. Management and Governance - As of December 31, 2024, the company had 24 full-time employees, with no representation by labor unions[32]. - The company is dependent on key management personnel for future success, and the loss of any key personnel could materially affect operations[81]. - The company has experienced changes in senior leadership in 2024, which may create uncertainty and impact business performance[82]. - The company has been audited by BPM LLP since 2006, ensuring compliance with PCAOB standards[215]. Cybersecurity and Compliance - The company has implemented cybersecurity policies and procedures, including an incident response plan, to manage risks from cybersecurity threats[139]. - The company has not identified any cybersecurity incidents that have materially affected its business or financial condition[140]. - Cybersecurity incidents could adversely impact the company's financial condition and business operations, with potential liabilities arising from data breaches[114]. - The company operates without information barriers in its Finance Receivables segment, which may expose it to risks related to material non-public information[112]. Market and Economic Conditions - The ongoing COVID-19 pandemic has resulted in significant disruptions to the global economy, affecting the company's ability to raise capital and the operations of partner companies[117]. - Economic recessions could lead to an increase in non-performing assets and a decrease in the value of the company's portfolio, adversely affecting results of operations[121]. - Changes in healthcare laws and regulations may increase compliance costs for partner companies, potentially impacting their profitability and operations[132]. - The company may face increased scrutiny from regulatory authorities, which could delay or prevent the approval of products developed by partner companies[130]. - The complexity of intellectual property laws poses risks for partner companies, potentially leading to costly litigation and impacting their financial performance[126]. - Future legislation may increase the time and cost required for partner companies to conduct clinical trials, affecting their ability to market products[128]. - The company anticipates that changes in healthcare delivery and payment systems may significantly impact the business model and financial condition of partner companies[133].

Core Insights - Zacks Premium provides tools and resources to help investors make informed decisions and invest confidently in the stock market [1][2] Zacks Style Scores - Zacks Style Scores are indicators that rate stocks based on value, growth, and momentum, helping investors identify stocks likely to outperform the market in the next 30 days [2][3] - Stocks are rated from A to F, with A indicating the highest potential for outperformance [3] Value Score - The Value Style Score focuses on identifying undervalued stocks using metrics like P/E, PEG, Price/Sales, and Price/Cash Flow [3] Growth Score - The Growth Style Score assesses a company's financial health and future outlook, analyzing projected and historical earnings, sales, and cash flow [4] Momentum Score - The Momentum Style Score identifies optimal times to invest based on price trends and earnings estimate changes [5] VGM Score - The VGM Score combines Value, Growth, and Momentum Scores, serving as a comprehensive indicator for stock selection [6] Zacks Rank - The Zacks Rank is a proprietary model that uses earnings estimate revisions to guide investors in building successful portfolios [7] - Stocks rated 1 (Strong Buy) have historically achieved an average annual return of +25.41%, significantly outperforming the S&P 500 [8] Stock Selection Strategy - To maximize returns, investors should focus on stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B [9] - Stocks with lower ranks but high Style Scores may still carry risks due to downward earnings outlooks [10] Company Spotlight: Stanley Black & Decker - Stanley Black & Decker (SWK) is rated 3 (Hold) with a VGM Score of A and a Value Style Score of B, indicating attractive valuation metrics [11] - The company has seen two analysts revise earnings estimates higher for fiscal 2025, with the Zacks Consensus Estimate increasing to $5.19 per share [12] - SWK has an average earnings surprise of 16.2%, making it a noteworthy option for investors [12]

New round will help fuel commercialization efforts in support of ImpediMed's platform technology for the detection and monitoring of lymphedema.CARLSBAD, Calif., Feb. 7, 2025 /PRNewswire/ -- ImpediMed, a leader in medical technologies to clinically monitor and manage fluid and body composition, today announced an agreement for a five-year $15 million growth capital facility with SWK Holdings (NASDAQ:SWKH), a life science-focused specialty finance company catering to small- and mid-sized commercial-stage com ...

Core Insights - Stanley Black & Decker reported revenue of $3.72 billion for the quarter ended December 2024, a decrease of 0.4% year-over-year, but exceeded the Zacks Consensus Estimate by 4.15% [1] - The company's EPS was $1.49, significantly higher than the $0.92 reported in the same quarter last year, and surpassed the consensus estimate of $1.28 by 16.41% [1] Financial Performance - Net Sales for Tools & Outdoor segment reached $3.23 billion, exceeding the average estimate of $3.08 billion by analysts, reflecting a year-over-year increase of 2.3% [4] - Net Sales for the Industrial segment were reported at $492.90 million, slightly above the average estimate of $488.22 million, but represented a significant decline of 15.4% year-over-year [4] - Normalized Operating Profit for Tools & Outdoor was $330.20 million, surpassing the average estimate of $317.53 million [4] - Normalized Operating Profit for Corporate overhead was reported at -$59.60 million, worse than the average estimate of -$53.43 million [4] - Normalized Operating Profit for Industrial was $52.90 million, below the average estimate of $56.37 million [4] Stock Performance - Over the past month, shares of Stanley Black & Decker have returned +6.1%, outperforming the Zacks S&P 500 composite's +1.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Stanley Black & Decker (SWK) came out with quarterly earnings of $1.49 per share, beating the Zacks Consensus Estimate of $1.28 per share. This compares to earnings of $0.92 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 16.41%. A quarter ago, it was expected that this tool company would post earnings of $1.03 per share when it actually produced earnings of $1.22, delivering a surprise of 18.45%.Over the last four quarters, t ...

Core Viewpoint - Analysts forecast that Stanley Black & Decker (SWK) will report quarterly earnings of $1.28 per share, reflecting a year-over-year increase of 39.1%, while revenues are expected to decline by 4.4% to $3.57 billion [1] Earnings Estimates - The consensus EPS estimate has been revised downward by 8.8% over the past 30 days, indicating a collective reassessment by analysts [2] - Revisions to earnings estimates are significant indicators for predicting investor actions regarding the stock, with empirical research showing a strong correlation between earnings estimate trends and short-term stock price performance [3] Key Metrics Forecast - Analysts project 'Net Sales- Tools & Outdoor' to reach $3.08 billion, a decrease of 2.4% from the previous year [5] - The estimated 'Net Sales- Industrial' is $488.22 million, indicating a year-over-year decline of 16.2% [5] - 'Operating profit- Tools & Outdoor- Normalized' is expected to be $317.53 million, slightly up from $315.80 million reported in the same quarter last year [5] - The consensus for 'Operating profit- Industrial- Normalized' is $56.37 million, down from $64.40 million in the same quarter last year [6] Stock Performance - Stanley Black & Decker shares have increased by 9.1% over the past month, outperforming the Zacks S&P 500 composite, which rose by 2.7% [7] - The company holds a Zacks Rank 3 (Hold), suggesting it is expected to closely follow overall market performance in the near term [7]

Core Viewpoint - Wall Street anticipates a year-over-year increase in earnings for Stanley Black & Decker despite lower revenues, with actual results being crucial for stock price movement [1][2]. Earnings Expectations - The upcoming earnings report is expected on February 5, 2025, with an estimated EPS of $1.28, reflecting a +39.1% change year-over-year, while revenues are projected at $3.57 billion, down 4.4% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has been revised down by 7.4% over the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows a positive Earnings ESP of +3.82% for Stanley Black & Decker, suggesting a potential earnings beat, although the stock holds a Zacks Rank of 4, complicating predictions [10][11]. Historical Performance - In the last reported quarter, Stanley Black & Decker exceeded EPS expectations by +18.45%, having beaten consensus estimates in all of the last four quarters [12][13]. Market Reaction Factors - An earnings beat or miss may not solely dictate stock movement, as other factors can influence investor sentiment [14]. Investment Considerations - While Stanley Black & Decker may not appear as a strong candidate for an earnings beat, investors should consider additional factors before making investment decisions [16].