Runway Growth Finance (RWAY) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Consolidated Financial Statements This section presents the unaudited consolidated financial statements, including assets, operations, cash flows, and investment schedules, for Q2 2025 Consolidated Statements of Assets and Liabilities Total assets decreased to $1.04 billion by June 30, 2025, reducing net assets to $498.9 million and NAV per share to $13.66 Consolidated Statements of Assets and Liabilities (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total investments at fair value | $1,024,951 | $1,076,840 | | Total assets | $1,041,257 | $1,091,355 | | Total debt, less unamortized deferred financing costs | $515,948 | $552,332 | | Total liabilities | $542,383 | $576,486 | | Total net assets | $498,874 | $514,869 | | Net asset value per share | $13.66 | $13.79 | Consolidated Statements of Operations Q2 2025 total investment income was $35.1 million, with net investment income at $13.9 million, and a net increase in net assets of $16.8 million Financial Performance Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Investment Income | $35,147 | $34,193 | $70,545 | $74,202 | | Net Investment Income | $13,948 | $14,591 | $29,547 | $33,255 | | Net Realized and Unrealized Gain (Loss) | $2,849 | $(6,300) | $(10,884) | $(12,917) | | Net Increase (Decrease) in Net Assets | $16,797 | $8,291 | $18,663 | $20,338 | | Net Investment Income per Share | $0.38 | $0.37 | $0.79 | $0.84 | | Net Increase (Decrease) in Net Assets per Share | $0.45 | $0.21 | $0.50 | $0.51 | Consolidated Statements of Changes in Net Assets Net assets decreased by $16.0 million for the six months ended June 30, 2025, primarily due to distributions and stock repurchases Reconciliation of Net Assets for the Six Months Ended June 30, 2025 (in thousands) | Description | Amount | | :--- | :--- | | Balances at December 31, 2024 | $514,869 | | Net increase in net assets from operations | $18,663 | | Repurchase of common stock | $(8,141) | | Dividends paid to stockholders | $(26,517) | | Balances at June 30, 2025 | $498,874 | Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $73.3 million for H1 2025, with $6.0 million cash at period-end Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $73,265 | $29,953 | | Net cash (used in) provided by financing activities | $(73,058) | $(24,113) | | Net increase (decrease) in cash and cash equivalents | $209 | $5,840 | | Cash and cash equivalents at end of period | $5,960 | $8,810 | Consolidated Schedule of Investments The investment portfolio totaled $1.025 billion as of June 30, 2025, primarily in debt investments (93.9%), with top concentrations in Application Software Portfolio Composition by Investment Type (June 30, 2025) | Investment Type | Cost ($k) | Fair Value ($k) | % of Total Portfolio | | :--- | :--- | :--- | :--- | | Senior Secured Loans | 955,354 | 941,705 | 91.88% | | Second Lien Loans | 20,902 | 20,778 | 2.03% | | Preferred Stock/Units | 51,920 | 39,549 | 3.86% | | Warrants | 23,804 | 14,500 | 1.41% | | Other | 14,084 | 8,419 | 0.82% | | Total | 1,066,064 | 1,024,951 | 100.00% | Top 5 Industry Concentrations by Fair Value (June 30, 2025) | Industry | Investments at Fair Value ($k) | Percentage of Net Assets | | :--- | :--- | :--- | | Application Software | $225,083 | 45.12% | | Commercial & Professional Services | $177,181 | 35.51% | | Health Care Equipment & Services | $145,164 | 29.10% | | Systems Software | $133,628 | 26.79% | | Technology Hardware & Equipment | $86,645 | 17.37% | Notes to Consolidated Financial Statements This section details accounting policies, fair value measurement, related party agreements, debt facilities, and tax status as a RIC Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, portfolio activity, and liquidity, highlighting stable credit quality and strong liquidity with $297.0 million available - For the six months ended June 30, 2025, the company funded $54.0 million in new and existing portfolio companies and received $107.9 million in sales and repayments[229] - The dollar-weighted annualized yield on the debt investment portfolio was 15.4% for Q2 2025, compared to 15.1% for Q2 2024[227] - As of June 30, 2025, the company had $297.0 million in available liquidity, including cash and availability under its Credit Facility, and an asset coverage ratio of 195%[263][264] Portfolio Composition and Investment Activity The $1.025 billion investment portfolio, primarily senior secured loans, saw $54.0 million funded and $107.9 million from repayments in H1 2025 Investment Portfolio Reconciliation (in thousands) | | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Beginning investment portfolio | $1,076,840 | $1,067,009 | | Purchases of investments | $54,039 | $100,025 | | Sales and repayments of investments | $(107,873) | $(61,507) | | Net realized/unrealized & other | $(9,455) | $(12,036) | | Ending investment portfolio | $1,024,951 | $1,063,324 | Asset Quality Debt portfolio credit quality remained strong, with 93.9% in top categories and only one investment on non-accrual status as of June 30, 2025 Debt Investment Rating Distribution by Fair Value | Investment Rating | June 30, 2025 (% of Portfolio) | December 31, 2024 (% of Portfolio) | | :--- | :--- | :--- | | 1 (Strong Performance) | 2.18% | 2.53% | | 2 (Acceptable Performance) | 66.05% | 62.39% | | 3 (Below Plan, Monitored) | 21.83% | 21.50% | | 4 (Materially Below Plan) | 3.62% | 3.17% | | 5 (Going Concern Issues) | 0.23% | 0.52% | - As of June 30, 2025, only one investment, Mingle Healthcare Solutions, Inc., was on non-accrual status, with a fair value of $2.4 million. This is an improvement from two investments with a fair value of $5.6 million at the end of 2024[233] Results of Operations Q2 2025 net investment income was $13.9 million, impacted by higher expenses, with a net unrealized gain of $4.4 million Comparison of Results of Operations (in thousands) | | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total investment income | $35,147 | $34,193 | | Total operating expenses | $21,199 | $19,602 | | Net investment income | $13,948 | $14,591 | | Net realized gain (loss) | $(1,512) | $0 | | Net change in unrealized gain (loss) | $4,361 | $(6,300) | | Net increase in net assets | $16,797 | $8,291 | Financial Condition, Liquidity, Capital Resources and Obligations The company maintains robust liquidity with $297.0 million available and a 195% asset coverage ratio, continuing its capital return strategy - As of June 30, 2025, the company had $297.0 million in available liquidity, including $6.0 million in cash and $291.0 million available under its Credit Facility[263] - The asset coverage ratio was 195% as of June 30, 2025, exceeding the regulatory requirement of 150%[264] - On May 7, 2025, the Board approved a new $25.0 million share repurchase program. Through June 30, 2025, the company repurchased 815,408 shares for $8.1 million under this program[275] Quantitative and Qualitative Disclosures About Market Risk The company faces valuation and interest rate risks, with 96.7% of performing debt at variable rates, sensitive to rate changes - The company's investments are primarily illiquid Level 3 investments and valued in good faith by the Board of Directors, creating valuation risk as these values may differ significantly from those in a ready market[284] - As of June 30, 2025, 96.7% of the company's performing debt portfolio bore interest at variable rates, primarily tied to SOFR and Prime rates[286] Annualized Interest Rate Sensitivity Analysis | Scenario | Maximum Impact on Investment Income | | :--- | :--- | | 200 basis point increase | +$17.3 million | | 200 basis point decrease | -$10.9 million | Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures are effective in timely alerting them to material information required for SEC reporting[293] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[294] PART II. OTHER INFORMATION Legal Proceedings The company and its adviser are not currently subject to any material legal proceedings - The Company and its adviser, RGC, are not currently subject to any material legal proceedings[297] Risk Factors No material changes to previously disclosed risk factors have occurred - No material changes to the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2024, have occurred during the period ended June 30, 2025[299] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 815,408 shares under its Fourth Repurchase Program, with $16.9 million remaining for future repurchases - During the three and six months ended June 30, 2025, the company repurchased 815,408 shares under its Fourth Repurchase Program[302] - As of June 30, 2025, approximately $16.9 million remained available for share repurchases under the Fourth Repurchase Program[302] Defaults Upon Senior Securities No defaults upon senior securities were reported during the period - None[303] Other Information No other material information was required, and no director or officer entered into Rule 10b5-1 trading plans - For the period covered by the report, no director or officer of the Company has entered into any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements[306] Exhibits Exhibits include CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications pursuant to Rule 13a-14 and Section 906 of the Sarbanes-Oxley Act, along with Inline XBRL documents[307] Signatures The report was duly signed and authorized on August 7, 2025, by the CEO and CFO - The report was duly signed and authorized on August 7, 2025, by R. David Spreng, President and Chief Executive Officer, and Thomas B. Raterman, Chief Financial Officer[309][311]