RWAYL — Runway Growth Finance Corp. - 7

Runway Growth Finance Corp. (RWAYL) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Total investment income: $29.5 million, down from $30 million in Q1 2025.
• Net investment income: $10.6 million, a decrease from $11.6 million in the prior year.
• NAV per share: $12.13, down 9.6% from $13.42 at the end of 2025.
• Total investment portfolio fair value: $886.3 million, a 4.4% decline from $927.4 million in 2025.
• Weighted average portfolio risk rating increased to 2.67 from 2.45, primarily due to two loans (Marley Spoon and BlueShift) moving to nonaccrual status.
• Debt portfolio yield: 14.2%, consistent with 2025 but down from 15.4% in Q1 2025.
• Spillover income: Approximately $0.65 per share.

2. Strategic Updates and Business Highlights:

• Successful closing of the SWK transaction, enhancing the firm’s position in health care and diversifying the portfolio.
• Appointment of JD Thomas as managing director for health care and life sciences, and Avisha Kubani as chief credit officer.
• Thomas B. Raterman to transition to vice chairman, focusing on strategic initiatives, with Carmela Thompson set to become CFO.
• The SWK acquisition has restructured the portfolio, with health care and life sciences now comprising 32% of the portfolio at fair value.
• Continued focus on high-quality investments in technology, health care, and consumer sectors.

3. Forward Guidance and Outlook:

• Anticipated contributions from the SWK portfolio expected to positively impact net investment income (NII) by approximately $0.03 per share in Q2, although this may be offset by the impact of nonaccrual loans.
• Full accretion from the SWK acquisition expected by Q3 2026.
• The company remains optimistic about sourcing high-quality investments and maintaining a balanced portfolio.

4. Bad News, Challenges, or Points of Concern:

• The increase in the weighted average risk rating indicates rising credit risk, particularly due to Marley Spoon and BlueShift being placed on nonaccrual.
• NAV decline and the impact of elevated prepayments in 2025 have contributed to a smaller average portfolio size.
• Market scrutiny surrounding private credit and potential headwinds from economic conditions and interest rates.
• The company is facing challenges in replacing nonaccrual loans with earning assets, which may take time.

5. Notable Q&A Insights:

• Discussion on one-time expenses related to the SWK acquisition and accelerated debt costs, estimated to impact earnings by $0.02-$0.03.
• The balance between share repurchases and new investments was highlighted, with a focus on maintaining adequate liquidity and risk-return trade-offs.
• Clarification on unrealized depreciation charges primarily linked to market multiples and specific watch list names (BlueShift and Marley Spoon).
• Management indicated that the SWK acquisition would start contributing to earnings in Q2, with full effects expected in Q3.

Overall, while RWAYL is navigating some challenges with credit risk and portfolio adjustments, the strategic acquisition of SWK and leadership changes position the company for potential growth and improved returns in the future.