Ladies and gentlemen, thank you for standing by and welcome to the Runway Growth Finance Second Quarter 2022 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mary Friel, Assistant Vice President, Business Development, and Investor Relations. Please go ahead.

Thank you operator. Good afternoon everyone and welcome to the Runway Growth Finance conference call for the second quarter ended June 30th, 2022. With us on the call today from Runway Growth Finance are David Spreng, Chairman, Chief Executive Officer, Chief Investment Officer, and Founder; and Tom Raterman, Chief Financial Officer and Chief Operating Officer. Runway Growth Finance's second quarter 2022 financial results were released just after today's market close and can be accessed from Runway Growth Finance's Investor Relations website at investors.runwaygrowth.com. We have arranged for a replay of this call at the Runway Growth Finance web page. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements. These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements including and without limitation uncertainties surrounding the COVID-19 pandemic and other factors we identify from time to time in our filings with the SEC. Although we believe that the assumptions on which these forward-looking statements are based are reasonablem any of those assumptions can prove to be inaccurate and as a result the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained on this call are made as of the date hereof and Runway Growth Finance assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of SEC related filings, please visit our website. With that, I will turn the call over to David.

Thank you, Mary and thank you all for joining us this evening. Today I will provide an overview of the quarter, some operational highlights, and a brief market outlook for the remainder of the year. Runway Growth had an outstanding quarter, delivering record net investment income and origination even in the face of persistent market volatility. We attribute the success to Runway Growth disciplined investment process which underpins our credit-first weatherproof platform. As the cost differential between debt and equity capital expands, Runway Growth's durable financing model continues to resonate with high-quality innovative companies. Our portfolio companies recognize we are not simply capital providers. Runway Growth ensures our partners are positioned for success from term sheet to final payment. Our origination team delivered strong portfolio growth in the second quarter completing nine investments in new and existing portfolio companies. This represents $200 million in new commitments including $151.7 million in completed deals. We funded all investments in the second quarter with proceeds from our revolving credit facility as part of our ongoing strategy to drive prudent portfolio growth with leverage. Notably, we increased our core leverage ratio from 0.26 times to 0.4 times. We delivered total investment income of $25.2 million and net investment income of $14.5 million in the quarter. This is up 35% and 28% respectively from the prior year period. Net assets were $579.4 million at the end of the second quarter up 21% from $477.7 million in the prior year period. Our record performance is paired with prudent underwriting strategy. We believe we have the lowest risk portfolio among public venture debt BDCs as demonstrated by our concentration in first lien senior secured loans and a weighted average loan-to-value at origination of 16.1%. Our strong credit quality is a testament to our focus on recession-resistant late-stage…

Thanks, David, and good evening, everyone. Runway Growth completed nine investments in new and existing portfolio companies in the second quarter, representing $200 million in new commitments, which resulted in $151.7 million in funded loans. Runway's weighted average portfolio rating remained strong for another quarter slightly increasing to 2.1 from 1.98 in the first quarter. This rating increase is largely procedural resulting from the payoff of our $65 million one rated loan to Brilliant Earth. The loan was replaced with new transactions all of which are initially booked with an internal credit rating of two. As a reminder, our risk rating system is based on a scale of one to five and where one represents the most favorable credit rating. We're pleased to partner with these new portfolio companies and believe our credit quality remains strong. At quarter end, we had only one portfolio company rated five and on non-accrual status. We attribute this to the strategic partnerships we form with portfolio companies as well as the patience and skill we exercise to create optimal outcomes for ourselves along with our borrowers. If one of our companies goes on non-accrual status, we evaluate ways we can work with management to bring it back to a performing loan while best protecting our interests as the lender. As we mentioned in our last call, that's exactly what we did with Mojix, the company was on non-accrual in 2021 went off in the first quarter of 2022 and repaid its loan in full in the second quarter. As someone who holds both the CFO and COO titles this is a story worth repeating because it truly shows how our credit first philosophy is present at the time of underwriting a deal through the complete repayment of a loan. At the end of second…

[Operator Instructions] Our first question comes from the line of Mickey Schleien from Ladenburg.

David in the conventional BDC space, we've seen that the market volatility is resulting in more attractive deal terms both in terms of spreads, and documentation, and multiples. Is that also the case in your market? And if it isn't, how would you characterize those trends?

Yeah, Mickey it's a great question. And I would say, we're at the early stages of starting to see more let's call it investor-friendly terms, lender-friendly terms, the dislocation in the public markets moved into venture equity. And we still haven't fully seen at least in the public numbers from Pitchbook and Crunchbase what we think is coming in terms of a pretty dramatic impact on valuations. There's a lot of challenging discussions happening behind the scenes. And venture equity fundraising is very difficult. And more-and-more of those companies are coming to venture debt lenders. But the venture debt lending sector remains very competitive. I think you will start to see a little bit better interest rates. Clearly rates are rising but spreads will probably widen a touch. I think we'll also start to see, a little bit more generous warrant coverage. And potentially and hopefully, better covenant packages, but we're really making still at the early stages of it. And we expect the conditions from our point of view to improve throughout the year.

That's interesting and helpful. I appreciate it. My next question maybe is for Tom. I think I heard you say there was an accrual of previously unrecognized interest income on Mojix. If that -- if I'm correct could you quantify that for us?

Yes. There was at the end of Q1 there was $3.2 million in deferred revenue that was accrued while that was recorded when Mojix was on non-accrual when it came off of non-accrual combined with the exit we recognized that deferred revenue of $3.2 million.

Okay. I understand. I appreciate. That's it for me this evening. I appreciate your time. Thank you.

Yeah. Thanks, Mickey.

Thank you. [Operator Instructions] Our next question comes from the line of Melissa Wedel from JPMorgan.

Thanks for taking my questions this afternoon. I appreciate you touching on the expected pace of repayments into the back half of this year. I think by virtue of reaching -- exciting to reach your target leverage range in the first quarter of next year. We might be able to back into sort of what that means for your expectations on capital deployment. It seems like 2Q was really productive. And just wondering if you think that was sort of an outlier or if that's sort of the new pace that you might be setting particularly with the new team members.

Well, so Melissa it's a great point that we do have now a significantly expanded origination team with Brad joining us in Silicon Valley, Ted in Boston, Jeff in Chicago and Brandon in Dallas. So we do expect that they will have an impact in terms of increased deal flow. But even before that, our deal flow has really never been stronger in terms of quantity and quality. So for all the reasons, that we mentioned in terms of venture-backed companies, looking to avoid raising equity at this point in time. Anybody who was planning to raise equity capital or sell their company in 2022 are probably thinking about ways that they can avoid doing a price from. That's not true for everybody. Of course there are fantastic companies that can much name their terms in any market. But for the vast majority of the 30,000 venture-backed companies out there they're looking to avoid it. And so the market is really moving towards us. So all of those things lead us to have a high level of confidence in our origination capability for the remainder of the year. It's fair to remind you all you know but the Q3 is usually quite seasonable and typically the lowest quarter for the year. But looking at our funnel right now we feel good about what we've said in the past and our ability to originate an even higher quality of loans. And as you know we strive to be latest stage lower, lowest risk largest company and more and more of those types of high-quality borrowers are coming to us.

Thanks, David. That's helpful. If I could follow-up with a question on the funding side of things. Obviously, you have the baby bond issuance earlier not long ago. As you continue to scale and ramp the leverage in the portfolio, can you help us think about how you're viewing funding that growth and sort of your target funding mix between revolvers and unsecured notes? Thank you.

Yes. Thanks, Melissa. We over time are going to use both unsecured and the secured markets. We've done two unsecured offerings, the 4.25% note offering last November and then just completed a baby bond offering. As those markets open up and are attractive, we'll continue to use those. At the same time, we're also in the process of the – evaluating the expansion of the accordion or drawing down on the accordion our revolver, which would take us up to $500 million. So we have market interest in that and we'll continue to do that. I wouldn't say that $500 million and $150 million is the mix that we're committed to over time. We'll probably tap into the unsecured at some point. Further, we also think that with the quality of our portfolio and even though we won't be in our target, the low end of our target range till first quarter of 2023, that target, that high-end range of 1.1 is pretty conservative relative to the quality of the portfolio and relative to many of our peers. And for certain periods of time we would feel comfortable exceeding that, so that we could look at a more opportune or the most opportune time if you will to reenter the equity markets but there's no plan to enter the equity markets at this point. I might also add that thinking about production and liquidity, we do have $274 million in unfunded commitments. We – that it first could seem like a big number but we take a very disciplined and sophisticated approach loan structuring and we're rigorous. And so while that might appear to be a big headline number and some borrowers like a big headline number. We don't take that approach. We right size our commitments for the business needs and credit quality and supportable enterprise value. But at any given point in time, probably 25% to 30% of those unfunded commitments are truly available because of the milestones. And then they obviously have to be drawn before the end of the interest-only period, which on a weighted average basis for that for the remaining portfolio is about 21 months. So there is a strong base to add to that productivity that our origination team will bring. And so kind of slow and steady wins the race to portfolio growth and that leverage target.

[Operator Instructions] I would now like to turn the conference back to David Spreng for closing remarks.

Thank you, operator and thank you all for joining us today and for your support of Runway Growth. We hope everyone stays safe and healthy, and look forward to updating you again on our third quarter results in November.

This concludes today's conference call. Thank you for participating. You may now disconnect.