Runway Growth Finance (US:RWAY)2021-11-04 19:59PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited consolidated financial statements show total assets of $651.3 million and net investment income of $10.7 million for the third quarter Statements of Assets and Liabilities Total assets grew to $651.3 million and net assets increased to $504.2 million as of September 30, 2021 Consolidated Statements of Assets and Liabilities | Financial Metric | September 30, 2021 (Unaudited) | December 31, 2020 | | :--- | :--- | :--- | | Total Investments at Fair Value | $646,353,037 | $621,826,650 | | Total Assets | $651,252,977 | $639,891,397 | | Total Liabilities | $147,051,992 | $173,647,712 | | Total Net Assets | $504,200,985 | $466,243,685 | | Net Asset Value per Share | $14.60 | $14.84 | Statements of Operations Total investment income for Q3 2021 rose to $18.6 million, resulting in a net increase in net assets of $10.2 million Consolidated Statements of Operations | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Investment Income | $18,610,066 | $14,215,723 | $53,778,440 | $40,837,634 | | Total Operating Expenses | $7,868,942 | $4,693,143 | $20,215,110 | $13,797,626 | | Net Investment Income | $10,741,124 | $9,522,580 | $33,563,330 | $27,040,008 | | Net Increase in Net Assets | $10,231,052 | $10,909,028 | $26,313,723 | $26,230,561 | | Net Investment Income per Share | $0.32 | $0.35 | $1.04 | $1.02 | | Net Increase in Net Assets per Share | $0.31 | $0.40 | $0.81 | $0.99 | Statements of Changes in Net Assets Net assets increased by $38.0 million to $504.2 million during the first nine months of 2021 Consolidated Statements of Changes in Net Assets | Description | Nine Months Ended Sep 30, 2021 | | :--- | :--- | | Net Assets at Beginning of Period | $466,243,685 | | Net Increase from Operations | $26,313,723 | | Distributions to Stockholders | ($34,597,684) | | Net Increase from Capital Share Transactions | $46,241,261 | | Net Assets at End of Period | $504,200,985 | Statements of Cash Flows The company experienced a net cash decrease of $13.9 million for the nine months ended September 30, 2021 Consolidated Statements of Cash Flows | Cash Flow Activity | Nine Months Ended Sep 30, 2021 | | :--- | :--- | | Net Cash Provided by Operating Activities | $4,955,802 | | Net Cash (Used in) Financing Activities | ($18,905,545) | | Net (Decrease) in Cash | ($13,949,743) | | Cash at Beginning of Period | $14,886,246 | | Cash at End of Period | $936,503 | Schedule of Investments Total investments reached $646.4 million, with a portfolio concentrated in senior secured term loans and key technology sectors Investment Portfolio Composition | Investment Type | Fair Value | % of Net Assets | | :--- | :--- | :--- | | Senior Secured Term Loans | $531,605,724 | 105.43% | | Warrants | $20,750,056 | 4.12% | | Common Stocks | $17,028,984 | 3.38% | | Preferred Stocks | $16,967,613 | 3.36% | | Total Portfolio Investments | $586,352,377 | 116.29% | | U.S. Treasury Bill | $60,000,660 | 11.90% | | Total Investments | $646,353,037 | 128.19% | Industry Concentration | Industry | % of Net Assets | | :--- | :--- | | Healthcare Technology | 28.26% | | Application Software | 21.18% | | Internet Retail | 17.58% | | Human Resource & Employment Services | 14.38% | | Internet Software & Services | 12.96% | Notes to Financial Statements Key disclosures cover the company's BDC status, accounting policies, unfunded commitments, and the subsequent IPO in October 2021 - The company is an externally managed, non-diversified, closed-end investment company regulated as a Business Development Company (BDC) and a Regulated Investment Company (RIC)56 - As of September 30, 2021, the company had $165.3 million in unfunded loan commitments to its portfolio companies115 - On October 25, 2021, the company closed its initial public offering (IPO), issuing 6,850,000 shares and receiving net cash proceeds of $92.0 million60187 - The company is actively managing the transition from LIBOR to alternative reference rates, which is expected to be completed by 2023 and may require renegotiation of existing loan agreements114303 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 2021 performance, including investment income growth, portfolio yield, and the impact of its recent IPO Q3 2021 Financial Performance | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Total Investment Income | $18,610,066 | $14,215,723 | | Total Operating Expenses | $7,868,942 | $4,693,143 | | Net Investment Income | $10,741,124 | $9,522,580 | | Net Increase in Net Assets | $10,231,052 | $10,909,028 | - The dollar-weighted annualized yield on the debt investment portfolio was 15.34% for Q3 2021, compared to 14.81% for Q3 2020207 - As of September 30, 2021, loans to Mojix, Inc and Pivot3 Holdings, Inc were on non-accrual status, representing 4.59% of the Company's net assets215 - During the nine months ended September 30, 2021, the company funded $140.1 million in nine new portfolio companies and $97.0 million in ten existing portfolio companies, while receiving $196.4 million in loan repayments210 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks include valuation of private investments and interest rate fluctuations, particularly the LIBOR transition - The company's main market risks are valuation risk for illiquid investments and interest rate risk299300 - As of September 30, 2021, 93.5% of the company's debt portfolio bore interest at variable rates, primarily based on LIBOR or the U.S. Prime Rate, and included interest rate floors301 - The company is managing the transition away from LIBOR, which will be discontinued for most settings after December 31, 2021, and for key USD settings after June 30, 2023, which could impact financial results303306 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes in internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021310 - No material changes to internal control over financial reporting occurred during the quarter311 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not currently a party to any material legal proceedings313 Item 1A. Risk Factors Key risks include the LIBOR transition, ESG scrutiny, new tax legislation, and potential stock price volatility post-IPO - The transition from LIBOR, with key USD settings ceasing after June 2023, poses a significant risk that may require renegotiating credit agreements and could impact financial results316317318 - The company faces increasing public and regulatory scrutiny related to Environmental, Social, and Governance (ESG) activities, which could damage its brand and reputation324 - Following the IPO, sales of substantial amounts of common stock after lock-up periods expire could adversely affect the market price of the stock326334 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were conducted during the period, except as previously disclosed - No unregistered sales of equity securities occurred during the quarter, except as previously reported or through the dividend reinvestment plan340 Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities during the period - None341 Item 4. Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable342 Item 5. Other Information No other material information is reported for this period - Not applicable343 Item 6. Exhibits This section lists all exhibits filed with the report, including required Sarbanes-Oxley certifications - The report includes required CEO and CFO certifications under Rules 13a-14 and Section 906 of the Sarbanes-Oxley Act346