Burford Capital Limited (BUR) Q3 2023 Earnings Report, Transcript and Summary

Thank you all for joining and good morning. I would like to welcome you all to the Burford Capital Q3 2023 Results Call. My name is Brika and I'll be your moderator for today's call. All lines are on mute for the presentation portion of the call today with an opportunity for questions and answers at the end. [Operator Instructions] I would now like to pass the conference over to your host Christopher Bogart, CEO of Burford Capital to begin. So, Chris, please go ahead.

Thanks very much, and hello, everybody. Thank you for joining us today. As usual, with me are Jon Molot, Burford's Chief Investment Officer, and Jordan Licht, Burford's Chief Financial Officer. And each of us will speak a little bit on this quarterly call and then we'll be happy to take your questions. I'm going to start on slide two, sorry, slide three, which is sort of an overview synopsis of what we have to tell you today. And my fundamental message here is that we're having a blowout year. Things are just really going very, very well from our perspective. Just looking at the first number there on the slide, topline revenues are up five times. And the thing that is really important to reflect on is that, while our success in the YPF cases is driving some of this, so too is the rest of the portfolio. And so, while in YPF, we had an extraordinary win with a judgment for more than $16 billion, the largest in the history of the issuing court. And Jon is going to talk some more about YPF when we get to a specific slide on it. So while that's a fantastic outcome, I really want to focus on cash and on what's going on in the rest of the portfolio as well, because the portfolio really has been moving forward after its pandemic hiatus. And so what we've seen just in nine months is we've seen almost $400 million of cash come in. And again that's not a single dollar of that cash is coming from YPF. That's all coming from the rest of the portfolio, which has been sitting slightly dormant while courts coped with the pandemic and now we've seen a real resurgence in activity. And as you'll see later in these slides, more than half of our activity in the period is coming from matters that are pre-2020 in the portfolio. So exactly as we have predicted. We had a delay for a while, but we did not have any substantive impact from that delay. And that delay is now clearing itself and things are moving through the portfolio. Again you look at realized gains, basically doubling in the period. Again no contribution there from YPF. So in terms of performance, in terms of the portfolio's output and activity levels and again even looking at unrealized gains showing that things are moving, we're just very pleased with how things have been shaping up this year. The portfolio as a whole is also growing, as we see both continued new business coming into that portfolio as well as the continued development of the cases that are already in there. And then a couple of other key points as we move through this slide, one of them is our sovereign wealth fund partnership, which as we announced a little while ago has been extended and expanded. And sometimes it's not so easy, given the way that we account for this sovereign wealth fund arrangement, to see its leverage in the business. Because it's consolidated into our financial statements, but if you break that apart, we're now well over $100 million in income from doing that arrangement. So we're really very pleased with how that's going and with the asset management contribution to the overall profitability of the business. And of course we ended the period with very substantial cash on hand, with very significant liquidity, just because of all of the cash that we have generated, augmented by the notes that we issued earlier this year. So all-in-all very happy with where we sit nine months into 2023. Turning to slide four. This is fundamentally accounting. And it's obviously important and Jordan is going to talk to you about many of these issues in more detail. But I think that, while at the same time emphasizing the incredible growth that we've seen in so many of these numbers, just things going up by five times and more, I think you also can't take your eye off the cash and we generated lots of cash, as I said on the prior slide. And I would just as we when we run the business do this and just as you've seen in some of the analyst notes that have come out today, I would really continue to focus your attention on the cash performance of the business and not be taken in by all of the accounting dynamics and some of the accrual noise. So, for example, when you look at expenses on an accounting basis, and Jordan will talk more about this, the expenses look like they've gone up a fair bit, but that's largely because of non-cash items around, for example, the increase in our share price and the increase in the unrealized gain value associated with the YPF case. If you look at sort of run rate cash operating expenses, those really have barely budged. And as I said, Jordan will talk more about those. It's pretty nice to see these book value numbers on the slide, more than $10 a share in book value, $9.5 intangible book value. I think that when you look at those book value numbers and look at the combination of our growth and profitability, and then turn your eyes to the share price, you see a degree of mismatch there that we hope will continue to close in the context of the US market especially. And obviously we point out the significant impact on return on equity that these results have had over the last nine months. So with that let me turn you over to Jordan.

Thank you, Chris. Good morning and good afternoon to everyone. I'm on page five. So here, as Chris mentioned, we break down our capital provision income into the various components for both the three and nine-month periods. Looking at the year-to-date comparisons of 2023 versus 2022, they show nearly a doubling of all the income metrics. Realized gains this year to-date are $125 million and unrealized gains excluding YPF are $85 million. With respect to YPF, as everyone knows, we've had two milestones in the case so far this year and Jon will speak a little bit more to that shortly. The initial summary judgment and the subsequent award of damages, as a result, we have unrealized gains of $460 million over the first nine months of 2023 from our YPF related assets. Total capital provision income had a huge increase year-over-year from $676 million versus the $80 million last year. I'm going to switch now to page six and talk a little bit about asset management. Our asset management business continues to perform and we continue to reap the rewards of using the funds to augment our balance sheet efforts. In the first nine months of both 2022 and 2023, we earned $41 million of asset management income. And on the bottom of the slide, we highlight the mutually beneficial relationship we have with our sovereign wealth fund partner. As we announced earlier this fall, the relationship extended through the end of 2024. Total income from BOF-C has been steadily increasing year-over-year. And before I turn away from asset management, our cash receipts from asset management is double through the first nine months compared to last nine months -- compared to the nine months in last year at $29 million. So let me turn it over to Jon.

Thanks, Jordan. Thanks to everybody for joining. If you turn to slide seven, it's a familiar slide, but it bears emphasis and we update the numbers with each period. But it shows just how our portfolio has performed because when you're buying into Burford, and part of what you're buying is this diverse portfolio of investments and if you look at how that portfolio has performed in the past based on realizations, you see there's a large number. It's $2.5 billion worth of realizations over roughly 14 years. And that gives you a track record you can look at. And the numbers shift slightly from period-to-period, but they've been pretty consistent. You see a cumulative return on invested capital of 87%, you see an IRR of 27%. And, of course, that's broken down into three categories. We have investments that resolve through adjudication and we win more than we lose. And where we win, you see the returns are really quite attractive. But then a large segment of our investments resolves through settlement, and those returns too are attractive. The ROICs and IRRs are not as large, which is what we understand when we go into them. There's, of course, a discount for a settlement. But nonetheless, the numbers are quite attractive and this has led to consistently attractive performance, which is why we love this business so much. We see assets we can invest in, where we can help our counter-parties and it's a win-win. And you, our shareholders, bear the fruits of this and have in the past. If we turn the page, we turn to one particular asset that, of course, has the potential to generate considerable upside, actually outsized returns. And historically, I've not said very much about what to expect in the future of YPF. It was not in anybody's interest to do so. And I'll maintain that position but I can tell you what has happened so far and where we are, which is a lot. So we had the trial in July, and we won a final judgment. It was a complete win for the plaintiffs of a $16 billion judgment, which was at the high end of the possible range of damages. Argentina has filed a notice of appeal to the Second Circuit Court of Appeals for those who have followed the case for a while. There was a prior interlocutory appeal years ago about sovereign immunity, but this one will be a second appeal. And they will have the right then to seek discretionary review from the Supreme Court of the United States, which takes a very small portion of the cases that are petitioned for. In addition, Argentina has asked the trial court to stay enforcement of the judgment pending the appeal. In the United States, a final judgment is immediately enforceable when it's issued, typically unless the defendant posts a bond to secure the judgment, and Argentina has asked the court to relieve it of the bonding requirement and grant a stay without a bond. That is fully briefed before the judge in the Southern District. And we expect that to be decided soon. The appeal will take a little bit longer. That is not fully briefed, and it also includes a cross appeal by the plaintiffs against YPF. You'll recall that the judgment that was issued by the court was against Argentina only. YPF was not held liable and the plaintiffs have cross appealed, asking that the judgment extend to YPF as well. That would not change the damages amount, it would just include YPF as liable if it were to succeed. And that will go through the appellate process. Just as a reminder, the Burford only net entitlement is roughly 35% of proceeds from the Petersen case and roughly 73% of proceeds from the Eton Park case. So I've said a little bit about how the portfolio as a whole has performed because when you buy Burford stock, you are buying a portfolio. I've said a bit about how the YPF asset in particular has performed up to this date because we've always said that is one of the pillars you are buying. And then, of course, the other thing you are buying when you buy Burford stock is a business model that has been able to continually invest in new assets that we deem attractive and that we think have potential to generate returns. And so, for that portion of it, I'm going to turn it back over to Jordan to turn to slide nine.

Thank you, Jon. On slide nine, as you can see, we're ahead of last year's pace with respect to both commitments and deployments on a year-over-year basis. 2023 has been a productive year. As the global leader in litigation finance, we have the ability to support clients with significant commitments and deployments of capital, using both our balance sheet capacity and third-party funds. And so, we continue to deploy cash from the balance sheet into attractive assets, targeting returns north of 30%. And as I mentioned before, the partnership with BOF-C on these assets on a 75-25 split. With this continued deployment, our total deployed cost on the balance sheet has grown to over $1.6 billion. I'm switching to page 10 to outline some of the expenses for the first nine months of the year, and I know Chris had touched on a little bit of this and I'll go slightly deeper. At first glance, these seem a fair bit higher than the previous year, but we really need to separate out the cash and non-cash expenses and some of the idiosyncratic movement in these line items. So I'm going to pick on a couple examples. So the first is, while our salaries and benefits might appear to have grown by slightly over $10 million [Technical Difficulty] of that net change is directly related to retirement plans. So as a reminder, and I've mentioned this before, our employees have the ability to invest their deferred compensation in Burford stock, and when the share price increases, we have a corresponding accrual expense. The other example relates to the positive events associated with YPF. We have a net $21 million increase year-over-year in our carry plan, given the positive events from this year. And remember, that's only paid when the cash is received. And finally I want to remind folks that the legacy asset recovery accrual was related to a historical purchase of that business. Effectively, one could consider that like an earn-out and there's only one remaining asset left in that deal. So I'll now switch to the next page to talk a little bit more about cash. So I'm on page 11. This is our traditional liquidity page and I'll jump around and hit some of the highlights. On the top left, cash receipts were $380 million year-to-date, which surpasses the total for all of 2022. Our liquidity and receivables are in a strong position as of period-end, highlighted by $347 million of cash and securities as well as $70 million of receivables. We still don't intend to hold cash quite near these levels then our goal is to put it to work. But as Chris mentioned, we're digesting both the bond issuance and the cash realizations that have occurred. And then finally, on the bottom of the page, we outlined the nine month cash bridge for Burford only. To put it simply, we've had $380 million of cash against the cash spend of $159 million, which is the OpEx and interest expense. I'm then moving to page 12. Just a quick reminder on covenants and debt levels. So we continue to enjoy and have built a laddered debt schedule that extends out to 2031 and our next maturity is not until August 2025. The other takeaway that I have or that I see from this slide is that only 25% of our debt matures in the next four years. So we have kind of ample runway. On the bottom of the slide, our leverage levels remain well below covenant levels. And to wrap it up, you've seen the bullets on the left, both Moody's and S&P have both recently raised their outlook from stable to positive. With that I turn it back to Chris.

Great. Thanks, Jordan. And I'm now on slide 13. You've seen the format of this slide before, but the content of it has been updated for our current results. And what the slide really does is underline the point that Jon was making earlier. When you buy stock in Burford, you're buying four different things. You're buying an existing portfolio of litigation assets. We have given a lot of detail about what's in that portfolio and its activity levels. We've now got a very long and substantial track record in generating desirable returns from that portfolio, making it past -- making around $2.5 billion of cash recoveries. And again, these are all cash numbers. There's no accounting stuff going on in the portfolio return numbers. So you're starting off by buying a large, diversified portfolio with a long track record history of generating desirable returns. You're adding to that the industry leading origination platform, which has shown itself capable of generating new business on a very regular and reliable basis. And you see there the numbers of people that we have and our really global presence. We are also a very sizable asset manager, and we're delighted especially to see the performance of not only our funds in general, but of our BOF-C, our sovereign wealth fund arrangement, which, as I said earlier, has really started to throw off income for us. And finally, then you've got the YPF assets, which Jon touched on and which have the potential in the future to generate truly outsized returns for us. So that's the package that you get with an equity investment in Burford, and we're very pleased about where the business sits today. And with that, we're happy to take your questions.

Thank you.

I see that we have, go ahead, operator. Sorry.

[Operator Instructions]

And we'll start with a question from the webcast from Paul de Gruchy, which is basically while it has always been Burford's policy to not talk about individual cases, are there any cases currently progressing that have the potential to produce returns of a similar size to YPF? So you're right that we don't really talk about individual cases. But I think it's fair to say that when we contemplate a case that has at least the potential to deliver billions of dollars, plural, to Burford depending on the ultimate outcome of that case, that I think is an unusual case for us. And now I think we have a question on the phone.

Thank you. We have our first question on the line from Alexander Bowers of Berenberg.

Good afternoon, everyone. Can you hear me?

Yes, we can.

Brilliant, I just had one question on the value of the YPF asset. We've seen the YPF asset shift up after the summary judgment and the final judgment rulings this year. But I just wanted to ask about how you're thinking about the evolution of its valuation going forwards in terms of factoring the remaining litigation risk from the appeal process, the expected duration of any payout and then the other factors kind of factoring into that process.

I think probably all three of us have something to say about that. But let me just start by saying that, just to remind you that unlike most of our litigation finance assets, where we effectively are calibrating model valuations to the investment that we're making, or the investment terms that we're agreeing to, in the YPF case, we had a substantial and very profitable secondary sale of a portion of that -- of our interest in the matter in 2019. And that 2019 sale served as the basis for calibrating the model. So we're already starting with the -- effectively, a third-party validation. And then, then we go through our usual process to adjust the value based on events which drive the litigation risk premium. And Jon, Jordan, feel free to pick that up.

Well, I would just say, in terms of the events, the most prominent or the only one you can think of that's significant at this point, clear litigation event remaining would be the resolution of the appeal by the US Court of Appeals for the Second Circuit. And then, there is the discretionary circ petition to the Supreme Court, which is less of an event, but still an event. So those are the remaining US Court events. Of course, there is, as I mentioned, this stay application that is pending, and then there's an enforcement proceedings, discovery and all sorts of other stuff. But those don't necessarily drive valuation under our approach, in the same way that the litigation events that we've experienced so far, such as summary judgment and a trial victory do and as an appeal or the end of all appeals would. And we don't change valuations based on the sentiment. So the fact that there are discussions -- those are not the sorts of things that would drive a valuation change.

Chris, I know you said all three of us might have a comment on it, but I think the two of you did well. Like as you mentioned, we have a model for this. Jon outlined -- in case there are events that are observable with respect to milestones in the court case, those could obviously change value. And otherwise, I don't think there's a lot more to add.

Thank you.

Thank you.

We now have Portia Patel of Canaccord. You may proceed with your question.

Thank you for taking my question. I'm just looking at the Burford only data in your release, and I wondered if you could just provide some color on why, in Q3, the commitments and deployments were materially lower than in previous quarters and year-on-year. And any comment on how we should expect those commitments and deployments to trend in Q4 and Q1 would be helpful. And I think, if you could provide an indication of what you would suggest a reasonable expectation or objective is for an annual commitment and deployment figure on a Burford only basis. That would be very helpful? Thank you.

Sure. So as I've said before to this audience, I think quarterly reporting is for the birds and I pay really absolutely no attention to it. It's something that we have to do, with our US presence here. But I think it's roundly perceived as undesirable by lots and lots of people who are much more experienced than I am in the markets like Warren Buffett and Jamie Dimon. And so, we do it because we have to, but it's not something that we worry about driving the business to. And the fact that these numbers go up and down, a little bit from time-to-time has no particular meaning to us. We closed a really, really, really big deal in June of 2023. And we didn't close a really, really big deal in September of 2023 and that says nothing whatsoever to me about the overall state of the business. If you look in more general terms, we're putting out a meaningful amount of capital against new investment matters and I really look at a longer scale, broader approach to deployment of capital. And that sort of bleeds over into your broader question. When you think about what this business is doing today, it's different than what it was doing a few years ago. So if you go back to Burford's first few years, Burford was fundamentally working with law firms. And the dynamic in the business was that corporate clients were coming to law firms, wanting to hire them, but not wanting to pay their hourly fees, and they were looking for a financial alternative just to address that fee issue. In other words, just to provide some budget and some P&L relief for the corporate clients. And so, we would step into that matter, we would work with the law firm and we would find a financing arrangement that would pay the law firm's fees and give the corporate the contingent solution that it was seeking. And those deals tend to be smaller deals because they are, number one, they're single cases, and number two, they're just addressing the legal fees. And so, there's a natural limit to how much you can spend on cases. Even though lawyers are expensive and getting increasingly expensive, you're still not spending $100 million to litigate a single piece of litigation, except in the most extraordinary circumstances. So as the business has evolved -- and that -- we still do that business, and we do lots of it because that is effectively the starter deal. That's the litigation finance 101 transaction, if you will, because most companies don't show up out of the blue having never used capital like this before, and instead moving straight to doing large, complicated, multi-case portfolio transactions. So that's how things start, and we have a pretty steady run rate of those kinds of single case transactions in the business and they -- month-in, month-out, we do some volume of that. Then you add on to that the stuff that has evolved, and that's a combination of law firm portfolios and now larger corporate portfolios. And the amount of money that we're going to commit and then deploy in any particular period is going to be driven to some extent by the presence of a relatively small number of those large corporate transactions. So as I said, if you look at the second quarter of 2023, we did $325 million with a Fortune 50 company. I don't intend to -- I don't imagine that we will see that repeat on a reliable basis, like clockwork once a quarter. We might do one of those deals in a year, we might do two of them. And those are the deals that really have a fair bit of impact on the total numbers. And I'm not particularly concerned about any particular period because I know that we're continuing to grow that business. I know that it's a long sales cycle, often it's years, but I know that there are enough of those out there to provide us with a continued runway of future growth. So I don't really have a number to guide you to on a quarter-by-quarter basis or even a period-by-period basis, but hopefully that gives you a little bit of color about how the business actually operates.

Thank you very much. That's helpful.

Thank you. We now have the next question from the line of Matthew Howlett of B. Riley.

Thanks for taking my question. Just in the quarter, was there anything unique about milestones versus the other quarter? Anything lumpy that happened in the quarter or something that was pushed out? Just curious on the update on where things are tracking milestone wise, in aggregate?

Yeah. Jon can certainly speak to that in some more detail. But just as a headline matter, I think the answer is probably no as to just -- other than the ebb and flow of litigation generally. So what happens in litigation, it's hardly ever the case that litigation goes faster than planned or expected. And so, what inevitably happens is you start the year with a whole bunch of things that are calendared to do things at various points during the year and some portion of those events will occur as scheduled. And some portion of them will get delayed, just as you see in any sort of public trial that you're watching. If anyone's paying attention to the travails of Donald Trump right now, with multiple trials pending, you see one of the big things that is up in the air and being jockeyed about is the trial date. And that happens -- that's a famous example. But that happens just as clearly in civil litigation as well. And so that's a normal part of the business. But what you're seeing in our business right now is effectively some amount of supernormal portfolio activity. And that's driven by courts trying to push things through and catch up on the backlog that was created during COVID. So when I earlier gave you that number about a majority of our activity occurring in pre-2020 vintage matters, that's an example of that. If we hadn't had COVID, you probably wouldn't expect that to be the case. You would have expected those pre-2020 matters to have concluded more significantly than they have by now.

Yeah. I might add, just with respect to both of those questions, Chris' point about quarterly and not necessarily being a marker, I think about the underwriting team day-to-day and they're handling for the last two questions both the underwriting of new matters and, as Chris said, the sort of long sale cultivation of relationships with law firms over large portfolios or corporates over large monetization of portfolios. And at the same time, they're also dealing with existing clients on existing matters that are working their way through the litigation process. This one's going to trial, we're sitting and getting reports on this trial. This is in pre-trial motion. And that all goes on, and it's not like something magical happens at September 30th, a bunch of things happen and then October 1st there's a new thing. We have found over the 14 year history that counter-parties and courts do sometimes pay attention to year-end. That that does motivate some settlements and does motivate some deal closings, but otherwise, quarters in between don't really mark anything for our counterparties for the litigation process, for defendants and suits, and so they don't seem that significant.

Great. So just in summary, the courts are back to business. There's no legacy overhang from COVID that you're seeing.

Yeah, exactly. The courts are back to business in the sense that none of the courts that we deal with are not operating today at full capacity.

Okay.

That being said, the backlogs present very significantly by court. So there are some courts now that have no COVID backlog left. You can track this publicly, the US courts publish voluminous and frequent statistical information about what's going on in them. So if you look at the courts in the Northern District of Florida, for example, so Florida's capital, Tallahassee and so on, those courts are not -- those courts have caught up all of their pandemic delays and they're right back to a normal rhythm. On the other hand, the courts in and around Manhattan are not. So in Brooklyn, for example, which is a very busy US court, there are still multi-year delays in getting a case to trial, it'll take you about four times as long to get to trial in Brooklyn as it will in the Northern District of Florida. So you've got idiosyncratic things like that around the piece, but the system as a whole is not only fully functioning, but you see judges making real efforts to try to clear backlogs and push cases forward.

Makes complete sense. And thank you for clarifying that. Last question, I want to get two in here. But first, do you plan on updating the embedded realized gains of the portfolio ex-YPF? Are you going to do that annually for us, or when should we expect that time wise? And then the second question, with your cash build and the laddered maturities and the extension of the SWF arrangement, how do you think about capital return? You want to reinvest, clearly you're getting 30% returns. Do you think about the dividend? Do you think about buybacks? Does that enter into the equation with how well the balance sheet is positioned today?

Yeah. Jordan, do you want to take those?

Sure. So the first one, I think, was about the kind of portfolio value, second capital return. On the overall portfolio value and expected cash flows, I think we mentioned this before, and as part of the kind of revision to our valuation policy around the restatement process, it's not really appropriate to be putting out kind of different metrics with respect to a potential value metric that's differing from our fair value. So I think at this point, we're not going to be publishing out kind of that summary view of total cash flows. The -- with respect to then capital return, I think, look, we've talked about this a lot with respect to what we're going to do as we continue to see cash come back to the balance sheet. I think first and foremost, our focus is to continue to invest in 30% plus IRR assets. And we think that that brings long-term growth to our shareholders and to the balance sheet and compounds on a continuous basis. Will we look to do some form -- to the extent we get clarity around the YPF capital and that return, I think Chris has also spoken to that continuously about. We'll have visibility at that moment in time and in which all options are on the table with respect to both capital return, reinvesting in the business, liability management and so forth. So, hopefully, that answered everything. But if I missed one of the sub questions, let me know.

No, you answered it perfectly and I appreciate it. Thank you.

Great, thank you. So we've got a webcast question now from Trevor Griffiths. Legacy asset recovery incentive compensation appears to include a substantial cash component, with only one legacy asset remaining under this deal. Are you happy the individuals benefiting from this arrangement are sufficiently incentivized to continue their good work for Burford once this has paid out in full. So the background to this, just to remind people, is when we acquired the asset recovery business, which is now quite some time ago, perhaps 2015, if I'm not mistaken, we did so on what was basically a very, very small upfront cash payment because Burford was at the time much smaller and younger than it is today and didn't want to be writing big M&A checks. So we made a very small cash payment to acquire the business and then provided a back end associated with some case activity. And the nature of the litigation process when you -- extended by the pandemic, has meant that some of those cases have taken a long time to come to fruition. And, Trevor, you're correct that there's only one left now, but that case has been quite successful thus far, which is why you've seen accruals and increases in its fair value gain. As to what the future holds for people, I am but a speculator, but I'll say that we've got a very strong asset recovery team. And I think Burford is delighted with the position in the business, and we've now moved to the place where we probably weren't ten years ago, where I don't think that Burford as an institution is dependent on any single human being, whether that's Jon or me or anybody else in the business. I think we've got a very deep bench here of people and abundant resources to carry this business forward. At the same time, I'm not sure that anyone really intends to go anywhere, and certainly Jon and I are not intending to go anywhere in the foreseeable future. We really both love what we're doing and really enjoy this business. Now, I think we've got a question on the phone.

Thank you. We have a phone line question from Julian Roberts of Jefferies. You may proceed with question, Julian.

Hi. Thank you. I've got a couple if that's all right. One is, what kinds of things could we sort of think about -- how could you innovate more? And one of the things that Burford has done that perhaps most of your competitors and peers haven't is do novel things. Would you ever go back to doing class actions? I think you once looked at one in Australia, and I noticed there are a couple in the American news which might possibly be of the right kind of size. Or would you maybe go more directly into the practice of law or anything like that? And then the other one, which is really just my own interest. It looked like the fair value gain relating to the Q1 judgment was a bit smaller by about $90 million than the Q3 judgment. And that implies, potentially, that the winning of the litigation at trial was less of a value event than the confirmation that the award was going to be at the top end rather than the -- rather -- well, it's going to be the upper, not the lower kind of potential outcome. And so, is that the case or is it just that for the first one, you were working off an already high base because of the marks taken in 2019?

I'll do them in reverse order. So I think the answer on the valuation question is pretty simple. Winning cases is excellent and we obviously love it. But it's only once you get the numbers that you really know what has happened. And as you may recall, when we went to trial in July on the YPF case, even though we had won in March, the summary judgment, there was an extremely wide range of potential damages. Argentina was arguing for potential damages in the $4.8 billion or $4.9 billion range, whereas we were arguing for them in the $16 billion range. And so, with that level of unresolved uncertainty, I think you need to be pretty prudent about how you take on values. We knew it was going to be a significant award, but we didn't know how significant it was going to be. So that's really how that ended up happening. I'm always delighted to be offered the opportunity to speculate and pontificate a little bit about the future with your first question, and -- but I have an eye on the clock, so I will only do a little bit of this, and Jon might chime in as well. I think that when we think about innovation, it comes in a few categories. One is in the core business itself, where, as you say, we have really led the industry in developing a whole suite of offerings to clients that started with a very basic product that I outlined to Portia and has now turned into really a multi-hundred-million-dollar traditional set of corporate finance tools. And so, we continue to innovate in the core business. But couple of things that really do excite us. One of them is certainly around data science. We have made significant investments in this business in data science over the past half dozen years. We believe we have the -- by far the industry's largest data set. We are increasingly using machine learning and other artificial intelligence style tools to add quantitative rigor and the benefit of that data set into our investment process. We have a number of professionals in the firm who are not lawyers at all, who come from pure scientific and analytic backgrounds. And that -- every year that goes by, that becomes a more and more and more significant and valuable part of our investing process, and we now are very quantitative in addition to being legal and qualitative in terms of how we go about looking at things. So that is an area, I think, of continued growth. And because we've been ahead of the curve and spending time and money on that area, that equips us to go and look more broadly at continued disruptive opportunities caused by pretty rapid growth in the cycle times and in the capability of AI style technologies. So that's one clear area. Another is insurance. Insurance and litigation finance are really sort of two sides of the same coin. We have a small insurance business, as you know. And I think we regularly consider the question of whether there's more for us to do in the insurance space. Jon, you may want to comment and on the law firm equity.

Sure. So, I guess, I'd say as chief investment officer, I'm guided by two overarching principles that have fueled our development of new products and offerings in new areas. One is we are simply the best, and our abilities and offerings are unique when it comes to the intersection of law and finance. Meaning for years before we were around, the capital markets ignored the market for legal services, and the market for legal services didn't have access to finance. And so, we increasingly just see a broader array of opportunities of people in the legal space, whether it is corporates with claims, law firms with business that don't otherwise have access to capital for those claims, or that business that we can provide, and there's no doubt that because we are so prominent in the space, we do receive inquiries and we develop relationships with people who are doing things that are somewhat different, slightly different from what our traditional counterparties have done that are structured slightly differently, whether it's different kind of cases, different kinds of arrangements, and so that we can make money by bringing capital to legal risk. The second guiding principle is we don't ever want to lose our shareholders' money on something that we didn't understand. When I showed you the slide of the three outcomes, it goes to adjudication, we win or lose or it settles, as long as we have properly evaluated the risk beforehand and understand there will be some losses, but as you can see from our track record, those losses are manageable and much smaller than the wins, that is the result of us not making bets where we don't truly understand the risk. So those are the guiding principles. As Chris said, there are lots of tools we could bring to bear and lots of offerings -- insurance is a perfect example. As Chris said, the ability we have to bring capital and to analyze legal risk positions us to be able to do offerings that way. And we have deployed quite a bit of capital on the defense side in cases, and there is a respect, as I've talked about, in which the progression has been toward specific project finance for individual cases into larger portfolios, which is almost like finance for a business or business line for a law firm. It's a large chunk or perhaps all of their business, and for a corporate, it's for the general counsel's office or whatever the business unit is that has the claim. And equity financing can be the next step, as long as you understand the underlying risk and promise of the venture you're investing in.

Thanks very much. Very clear, very interesting.

Thanks, Julian. Now we've got a webcast question from Michael Bancroft. If Argentina aren't successful in getting a stay, when will they have to post a bond in order to appeal, and will this bond be the full amount of the award or a lesser amount? Finally, what is your best guess as to when we hear the outcome of the motion for a stay? I think the question misapprehends what is happening in the US a little bit. So let us step back and be very clear about this because these are unrelated dynamics. So Argentina has appealed and -- as have the Petersen plaintiffs and Eaton Park cross appealed. Those appeals are going to go forward regardless of bonding and regardless of any sort of stay. There's an unqualified right to appeal, and that right is not affected by what's going on with the judgment, the underlying judgment. The issue around a stay and a bond is that if you bond the appeal, if you post a bond for the amount of the judgment, then the judgment is not enforceable while the appeal is pending. If you don't post a bond, and Argentina has said here that they are not going to post a bond, if you don't post a bond, then generally the judgment is enforceable while the appeal is pending unless the court grants a discretionary stay. And so, the question before the district court right now is, will it exercise its discretion to grant a stay, even though Argentina has made it clear that it will not and cannot post a bond? Or will the judge adopt the usual practice of not staying enforcement of the judgment while the appeal is pending? So that's the issue before the court. And as to when it will be decided, it's impossible to predict the timing of judicial decisions in the United States. The judge in this case has been relatively prompt, as we've seen, this year. The last set of briefing was filed only yesterday in terms of the motion for stay. So, she could decide it in 10 minutes or she could decide it some weeks from now, and we'll just have to wait and see. And then, we have what I think will be our final question from the webcast from Andrew Shepherd Barron. Your cumulative lifetime IRR to end June was 29% and is now reported as 27%. Is this linked to the slightly longer duration reported or is it a definitional change? And the answer is it's linked to the slightly longer duration. It's not a definitional change at all. We've reported those numbers in exactly the same way for a very long time. So it's longer duration, but it's also the impact of some older vintage stuff resolving as well. And so those kinds of fairly small fluctuations are not particularly concerning to us, given that we're continuing to produce what we think are very desirable overall returns.

And so, with that, I would like to thank all of you very much on behalf of Jon and Jordan and the rest of the Burford team for attending another one of these calls with us, for your thoughtful questions and for your ongoing support of Burford. Thank you all very much.

Thank you all for joining. I can confirm this does now conclude today's call. Please have a lovely rest of your day, and you may now disconnect your lines.