Burford Capital(BUR) - 2024 Q1 - Quarterly Report

Executive Summary & Highlights Burford Capital reported an extraordinary 2023, with substantial growth in earnings, revenues, and tangible book value CEO Commentary CEO Christopher Bogart highlights an "extraordinary year" for Burford Capital in 2023, with earnings per share rising 19x to $2.74, consolidated total revenues tripling to $1.1 billion, and a Burford-only net income margin of 63% - Burford had an extraordinary year. Our earnings per share rose 19x to $2.74, driven by a tripling of consolidated total revenues to $1.1 billion in 2023 due to significant growth in capital provision income, with and without our YPF-related assets[21] - We achieved a Burford-only net income margin of 63%[21] - Our ROTE soared to 32% in 2023 from 2% in 2022, and we increased tangible book value by 34% to $9.85[21] Key Consolidated Financial Highlights (Unaudited) Consolidated financial results for 2023 showed substantial growth across key metrics, with capital provision income increasing by 321%, total revenues by 240%, and net income attributable to shareholders by 1,901% Consolidated Income Statement Metrics (US GAAP, $ in thousands) | Metric (US GAAP, $ in thousands) | 2023 | 2022 | % Change | | :------------------------------- | :---------- | :---------- | :------- | | Capital provision income | 1,341,923 | 319,108 | 321% | | Total revenues | 1,086,902 | 319,227 | 240% | | Operating expenses | 271,236 | 124,272 | 118% | | Net income attributable to Burford Capital Limited shareholders | 610,522 | 30,506 | 1,901% | | Per diluted ordinary share | 2.74 | 0.14 | 1,857% | Consolidated Balance Sheet Metrics (US GAAP, $ in thousands) | Metric (US GAAP, $ in thousands) | Dec 31, 2023 | Dec 31, 2022 | % Change | | :------------------------------- | :----------- | :----------- | :------- | | Capital provision assets | 5,045,388 | 3,735,556 | 35% | | Total Burford Capital Limited equity | 2,290,858 | 1,742,584 | 31% | | Book value per ordinary share | 10.46 | 7.97 | 31% | | Total shareholders' equity | 3,207,780 | 2,387,070 | 34% | | Total liabilities and shareholders' equity | 5,837,394 | 4,288,359 | 36% | Key Burford-only Operational & Financial Highlights (Non-GAAP) Burford-only results for FY23 demonstrated strong operational performance, with realized gains up 40% to $186 million, realizations up 42% to $496 million, and cash receipts up 49% to $489 million, alongside significant earnings growth and a 32% ROTE Burford-only Operational Metrics (Non-GAAP, $ in thousands) | Metric (Burford-only, $ in thousands) | 2023 | 2022 | % Change | | :------------------------------------ | :-------- | :-------- | :------- | | Realized gains | 186,443 | 133,357 | 40% | | Realizations | 496,216 | 350,209 | 42% | | Cash receipts | 489,209 | 327,986 | 49% | | Deployments | 382,195 | 457,106 | -16% | | New commitments | 691,086 | 726,273 | -5% | - Realized gains in FY23 up 40% to $186 million from the prior year (FY22: $133 million), with no contribution from the YPF-related assets[50] - Cash receipts in FY23 up 49% to $489 million (FY22: $328 million) and meaningfully exceeded total operating expenses and finance costs[50][84] - Group-wide total portfolio increased 17% to $7.2 billion at December 31, 2023 (December 31, 2022: $6.1 billion), due to significant fair value gains and growth in deployments and undrawn commitments[50] Burford-only Income Statement Metrics (Non-GAAP, $ in thousands) | Metric (Burford-only, $ in thousands) | 2023 | 2022 | % Change | | :------------------------------------ | :-------- | :-------- | :------- | | Total revenues | 976,542 | 250,605 | 290% | | Operating expenses | 268,538 | 122,696 | 119% | | Operating income/(loss) | 708,004 | 127,909 | 454% | | Net income/(loss) | 610,522 | 30,506 | 1901% | | Net income per diluted share | $2.74 | $0.14 | 1901% | - Tangible book value attributable to Burford Capital Limited per ordinary share increased 34% to $9.85 at December 31, 2023 (December 31, 2022: $7.36), primarily reflecting strong earnings[52] - Burford-only ROTE for FY23 of 32% (FY22: 2%)[52] Financial Statements & Reconciliations This section presents detailed consolidated and Burford-only financial statements, covering operations, financial position, and key performance metrics Consolidated Statements of Operations (GAAP) The consolidated statements of operations show significant growth in 2023 compared to 2022, with capital provision income increasing by 321%, total revenues by 240%, and net income attributable to Burford Capital Limited shareholders by 1,901% Consolidated Statements of Operations (US GAAP, $ in thousands) | Metric (US GAAP, $ in thousands) | 2023 | 2022 | % Change | | :------------------------------- | :---------- | :---------- | :------- | | Capital provision income | 1,341,923 | 319,108 | 321% | | Asset management income | 7,642 | 9,116 | -16% | | Services and other income | 16,600 | (8,503) | N/A | | Total revenues | 1,086,902 | 319,227 | 240% | | Total operating expenses | 271,236 | 124,272 | 118% | | Operating income/(loss) | 815,666 | 194,955 | 318% | | Net income attributable to Burford Capital Limited shareholders | 610,522 | 30,506 | 1,901% | Burford-only Statements of Operations (Non-GAAP) Burford-only operations also demonstrated strong performance in 2023, with capital provision income increasing by 342%, total revenues by 290%, operating income by 454%, and net income by 1901% to $610.5 million Burford-only Statements of Operations (Non-GAAP, $ in thousands) | Metric (Burford-only, $ in thousands) | 2023 | 2022 | % Change | | :------------------------------------ | :-------- | :-------- | :------- | | Capital provision income | 896,371 | 202,878 | 342% | | Asset management income | 63,712 | 56,080 | 14% | | Services and other income | 16,459 | (8,353) | N/A | | Total revenues | 976,542 | 250,605 | 290% | | Operating expenses | 268,538 | 122,696 | 119% | | Operating income | 708,004 | 127,909 | 454% | | Net income | 610,522 | 30,506 | 1901% | | Net income per diluted share (Diluted)| $2.74 | $0.14 | 1857% | - Total operating expenses in 2023 include almost $130 million of non-cash accruals and one-time or case expenses[52][40] Consolidated Statements of Financial Position (GAAP) The consolidated balance sheet shows significant growth from December 31, 2022, to December 31, 2023, with total assets increasing by 36% to $5.8 billion, total liabilities by 38% to $2.6 billion, and total shareholders' equity by 34% to $3.2 billion Consolidated Statements of Financial Position (US GAAP, $ in thousands) | Metric (US GAAP, $ in thousands) | Dec 31, 2023 | Dec 31, 2022 | % Change | | :------------------------------- | :----------- | :----------- | :------- | | Total assets | 5,837,394 | 4,288,359 | 36% | | Total liabilities | 2,629,614 | 1,901,289 | 38% | | Total Burford Capital Limited equity | 2,290,858 | 1,742,584 | 31% | | Non-controlling interests | 916,922 | 644,486 | 42% | | Total shareholders' equity | 3,207,780 | 2,387,070 | 34% | Burford-only Statements of Financial Position (Non-GAAP) Burford-only financial position at December 31, 2023, shows total assets of $4.2 billion, total liabilities of $1.9 billion, and total shareholders' equity of $2.3 billion, derived after various eliminations and adjustments Burford-only Statements of Financial Position (Non-GAAP, $ in thousands) | Metric (Burford-only, $ in thousands) | Dec 31, 2023 | | :------------------------------------ | :----------- | | Total assets | 4,215,864 | | Total liabilities | 1,925,006 | | Total shareholders' equity | 2,290,858 | Realizations Total Group-wide realizations for the year ended December 31, 2023, increased to $1.1 billion from $734.6 million in 2022, while Burford-only realizations rose 42% to $496.2 million Group-wide Realizations ($ in thousands) | Metric ($ in thousands) | 2023 (Group-wide) | 2022 (Group-wide) | % Change | | :---------------------- | :---------------- | :---------------- | :------- | | Total realizations | 1,117,791 | 734,609 | 52.2% | Burford-only Realizations ($ in thousands) | Metric ($ in thousands) | 2023 (Burford-only) | 2022 (Burford-only) | % Change | | :---------------------- | :------------------ | :------------------ | :------- | | Total realizations | 530,626 | 360,531 | 47.2% | | Capital provision-direct| 496,216 | 350,209 | 41.7% | | Capital provision-indirect| 34,410 | 10,322 | 233.4% | Q4 Group-wide Realizations ($ in thousands) | Metric ($ in thousands) | Q4 2023 (Group-wide) | Q4 2022 (Group-wide) | % Change | | :---------------------- | :------------------- | :------------------- | :------- | | Total realizations | 511,570 | 303,866 | 68.4% | Deployments Group-wide total deployments for the year ended December 31, 2023, were $791.8 million, a decrease from $927.8 million in 2022, with Burford-only deployments also decreasing by 16% to $382.2 million Group-wide Deployments ($ in thousands) | Metric ($ in thousands) | 2023 (Group-wide) | 2022 (Group-wide) | % Change | | :---------------------- | :---------------- | :---------------- | :------- | | Total deployments | 791,757 | 927,826 | -14.6% | Burford-only Deployments ($ in thousands) | Metric ($ in thousands) | 2023 (Burford-only) | 2022 (Burford-only) | % Change | | :---------------------- | :------------------ | :------------------ | :------- | | Total deployments | 411,551 | 477,429 | -13.8% | | Capital provision-direct| 382,195 | 457,106 | -16.3% | - Deployments in FY23 down 16% to $382 million (FY22: $457 million). Current vintage year Burford-only capital provision-direct deployments were ~40% of 2023 total compared to ~60% in 2022 – this is simply a business mix variation as 2022 had more monetizations and the rapid settlement of a large 2023 matter, producing 37% IRR, meant there was a $100 million of available commitment not deployed[50] Cash & Liquidity Burford's liquidity position significantly improved in 2023, with total liquidity increasing by 44% to $303.5 million, cash and cash equivalents surging by 166% to $195.9 million, and cash receipts up 49% to $489.2 million Burford-only Cash and Liquidity ($ in thousands) | Metric (Burford-only, $ in thousands) | Dec 31, 2023 | Dec 31, 2022 | % Change | | :------------------------------------ | :----------- | :----------- | :------- | | Cash and cash equivalents | 195,915 | 73,679 | 166% | | Marketable securities | 107,561 | 136,358 | -21% | | Total liquidity | 303,476 | 210,037 | 44% | | Due from settlement of capital provision assets | 185,267 | 114,650 | 62% | Burford-only Cash Receipts ($ in thousands) | Metric (Burford-only, $ in thousands) | 2023 | 2022 | % Change | | :------------------------------------ | :-------- | :-------- | :------- | | Cash receipts | 489,209 | 327,986 | 49% | - Robust liquidity position at December 31, 2023 primarily reflects continued solid Burford-only cash receipts and issuance in June 2023 of $400 million of senior notes due 2031. Liquidity position enhanced in January 2024 by $275 million tack-on offering of senior notes originally issued in June 2023[31] YPF-related Assets YPF-related assets significantly contributed to unrealized gains in 2023, generating $542.9 million for Burford-only, primarily due to favorable judgments, with their fair value reaching $1.37 billion Burford-only YPF-related Income ($ in thousands) | Metric (Burford-only, $ in thousands) | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | YPF-related income | 542,909 | (2,213) | | Capital provision income-unrealized | 700,838 | 69,557 | - YPF-related assets generated $543 million of unrealized gains in FY23, due mainly to favorable summary judgment in the first quarter of 2023 and favorable final judgment in the third quarter of 2023[52] Burford-only YPF-related Assets Fair Value ($ in thousands) | Metric (Burford-only, $ in thousands) | Dec 31, 2023 | Dec 31, 2022 | | :------------------------------------ | :----------- | :----------- | | YPF-related assets (Fair Value) | 1,371,657 | 823,035 | Tangible Book Value & ROTE Tangible book value attributable to Burford Capital Limited increased by 34% to $2.16 billion, with tangible book value per ordinary share rising to $9.85, and ROTE significantly improving from 2% to 32% Tangible Book Value ($ in thousands, except per share data) | Metric ($ in thousands, except per share data) | Dec 31, 2023 | Dec 31, 2022 | % Change | | :--------------------------------------------- | :----------- | :----------- | :------- | | Tangible book value attributable to Burford Capital Limited | 2,156,893 | 1,608,672 | 34% | | Tangible book value per ordinary share | $9.85 | $7.36 | 34% | Return on Tangible Equity (ROTE) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | ROTE | 32% | 2% | - Total Burford Capital Limited equity at end of period increased to $2,290,858 thousand in 2023 from $1,742,584 thousand in 2022[12] SEC Reporting & Corporate Information This section outlines Burford's SEC reporting plans, provides a company overview, and lists investor and media contacts SEC Reporting Update Burford anticipates filing its annual report on Form 20-F within 30 days, expecting it to be its last before transitioning to Form 10-K for the 2024 fiscal year, while also reporting a material weakness in internal control over financial reporting without identified material accounting errors - We anticipate filing our annual report on Form 20-F with the US Securities and Exchange Commission within the next 30 days. We expect that to be our last filing on Form 20-F, used by foreign private issuers. Even if we do not lose foreign private issuer status by having more than 50% US investors on June 30, 2024, we nevertheless intend to move to reporting as a full US issuer and using Form 10-K for the 2024 fiscal year[56] - In our forthcoming Form 20-F, we will be reporting a material weakness in our internal control over financial reporting and that our disclosure controls and procedures were not effective in the aftermath of the adoption of our new valuation policy. To be clear, this is an issue of internal documentation of a management process; no material accounting errors were identified as a result[32] About Burford Capital Burford Capital is a leading global finance and asset management firm specializing in law, offering litigation finance, risk management, asset recovery, and various legal finance and advisory services, publicly traded on the NYSE and LSE with worldwide offices - Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities[59] - Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its offices in New York, London, Chicago, Washington, DC, Singapore, Dubai and Hong Kong[59] Investor & Media Contacts Provides contact information for investor relations, press inquiries, and joint brokers (Deutsche Numis, Jefferies International Limited, Berenberg) for Burford Capital - Contact information for investor and analyst inquiries: Robert Bailhache, Head of Investor Relations, EMEA and Asia (+44 (0)20 3530 2023); Jim Ballan, Head of Investor Relations, Americas (+1 (646) 793 9176)[57] - Contact information for press inquiries: David Helfenbein, Vice President, Public Relations (+1 (212) 235 6824)[57] - Joint Brokers: Deutsche Numis, Jefferies International Limited, Berenberg[57][33][34] Definitions and Non-GAAP Measures This section defines Burford's capital provision asset categories, key performance metrics, and non-GAAP financial measures Capital Provision Asset Categories Burford categorizes its financial reporting and capital provision assets into "Consolidated" (US GAAP), "Burford-only" (proprietary basis), and "Group-wide" (totality of assets managed), further dividing capital provision assets into "Direct" and "Indirect" - Burford reports its consolidated financial results in accordance with US GAAP. US GAAP requires us to present financial statements that consolidate some of the limited partner interests in private funds we manage as well as assets held on our balance sheet where we have a partner or minority investor[13] - Consolidated refers to assets, liabilities and activities that include those third-party interests, partially owned subsidiaries and special purpose vehicles that we are required to consolidate under US GAAP[93] - Burford-only refers to assets, liabilities and activities that pertain only to Burford on a proprietary basis, excluding any third-party interests and the portions of jointly owned entities owned by others[93] - Group-wide refers to the totality of assets managed by Burford, including those portions of the private funds owned by third parties and including private funds that are not consolidated within Burford's consolidated financial statements[93] - Direct, which includes all of our capital provision assets that we have originated directly (i.e., not through participation in a private fund) from our balance sheet[13] - Indirect, which includes our balance sheet's participations in one of our private funds (i.e., Burford Advantage Master Fund LP)[13] Key Performance Metrics Definitions This section defines key performance metrics used by Burford, including Internal Rate of Return (IRR), Return on Invested Capital (ROIC), and YPF-related assets - Internal rate of return ("IRR") is a discount rate that makes the net present value of a series of cash flows equal to zero and is expressed as a percentage figure[74] - Return on invested capital ("ROIC") from a concluded asset is the absolute amount of realizations from such asset in excess of the amount of expenditure incurred in financing such asset divided by the amount of expenditure incurred, expressed as a percentage figure[74] - YPF-related assets refers to our Petersen and Eton Park legal finance assets, which are two claims relating to the Republic of Argentina's nationalization of YPF S.A., the Argentine energy company[75] Non-GAAP Financial Measures Definitions This section defines specific non-GAAP financial measures used by Burford, including Book value per ordinary share, Cash receipts, Return on tangible equity (ROTE), and Tangible book value attributable to Burford Capital Limited - Book value per ordinary share is calculated by dividing total Burford Capital Limited equity by the number of ordinary shares issued and outstanding[75] - Cash receipts provide a measure of the cash that our capital provision and other assets generate during a given period as well as cash from certain other fees and income[75] - Return on tangible equity ("ROTE") is Burford-only net income/(loss) divided by the average of tangible equity at the beginning and end of the relevant period, with tangible equity calculated as total Burford Capital Limited equity less goodwill[75] - Tangible book value attributable to Burford Capital Limited is calculated by subtracting intangible assets (such as goodwill) from total Burford Capital Limited equity[96] Forward-Looking Statements & Disclaimers This section includes standard disclaimers for forward-looking statements and clarifies that the announcement is not an offer of securities or private funds Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, noting that they involve known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from expectations, and Burford undertakes no obligation to update them - This announcement contains "forward-looking statements" within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, regarding assumptions, expectations, projections, intentions and beliefs about future events[17] - By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future. Burford cautions that forward-looking statements are not guarantees of future performance and are based on numerous assumptions, expectations, projections, intentions and beliefs and that Burford's actual results of operations... may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements[17] - Except as required by applicable law, Burford undertakes no obligation to update or revise the forward-looking statements contained in this announcement, whether as a result of new information, future events or otherwise[99] General Disclaimers This section includes disclaimers stating that the announcement does not constitute an offer to sell or solicit securities, nor an offer of any Burford private fund, and clarifies that the 2023 financial information is unaudited and subject to material variation - This announcement does not constitute an offer to sell or the solicitation of an offer to buy any ordinary shares or other securities of Burford[16] - This announcement does not constitute an offer of any Burford private fund... The information provided in this announcement is for informational purposes only. Past performance is not indicative of future results[97] - The 2023 financial information contained in this release and the accompanying earnings presentation is unaudited; our final audited numbers could vary materially from the information contained herein[79]