10-Q
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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2022

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 814-01180

 

Runway Growth Finance Corp.

(Exact name of registrant as specified in its charter)

 

Maryland

47-5049745

(State of incorporation)

(I.R.S. Employer Identification No.)

 

205 N. Michigan Ave., Suite 4200

 

Chicago, IL

60601

(Address of principal executive offices)

(Zip Code)

 

(312) 281‑6270

(Registrant’s telephone number, including area code)

 

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

7.50% Notes due 2027

RWAY

RWAYL

NASDAQ Global Select Market LLC

NASDAQ Global Select Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ☐ No

The issuer had 40,759,727 shares of common stock, $0.01 par value per share, outstanding as of August 3, 2022.

 

 

 


Table of Contents

RUNWAY GROWTH FINANCE CORP.

FORM 10‑Q FOR THE QUARTER ENDED June 30, 2022

Table of Contents

 

 

INDEX

 

PAGE
NO.

 

 

 

 

 

PART I.

 

FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

 

 

 

 

 

Statements of Assets and Liabilities as of June 30, 2022 (unaudited) and December 31, 2021

 

1

 

 

 

 

 

 

 

Statements of Operations for the three and six months ended June 30, 2022 and 2021 (unaudited)

 

2

 

 

 

 

 

 

 

Statements of Changes in Net Assets for the three and six months ended June 30, 2022 and 2021 (unaudited)

 

3

 

 

 

 

 

 

 

Statements of Cash Flows for the three and six months ended June 30, 2022 and 2021 (unaudited)

 

4

 

 

 

 

 

 

 

Schedule of Investments as of June 30, 2022 (unaudited)

 

5

 

 

 

 

 

 

 

Schedule of Investments as of December 31, 2021

 

17

 

 

 

 

 

 

 

Notes to Financial Statements (unaudited)

 

27

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

51

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

69

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

71

 

 

 

 

 

PART II.

 

OTHER INFORMATION

 

72

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

72

 

 

 

 

 

Item 1A.

 

Risk Factors

 

72

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

72

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

72

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

72

 

 

 

 

 

Item 5.

 

Other Information

 

72

 

 

 

 

 

Item 6.

 

Exhibits

 

73

 

 

 

 

 

SIGNATURES

 

74

 

 

 


Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RUNWAY GROWTH FINANCE CORP.

Statements of Assets and Liabilities

 

 

 

June 30, 2022

 

 

December 31, 2021

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investments at fair value:

 

 

 

 

 

 

 

 

Non-control/non-affiliate investments at fair value (cost of $805,247,907 and $647,448,895, respectively)

 

$

 

799,855,284

 

 

$

 

655,384,403

 

Affiliate investments at fair value (cost of $4,551,235 and $0, respectively)

 

 

 

2,352,019

 

 

 

 

 

Control investments at fair value (cost of $21,172,353 and $34,873,847, respectively)

 

 

 

5,521,301

 

 

 

 

29,130,371

 

Investment in U.S. Treasury Bills at fair value (cost of $0 and $45,001,250, respectively)

 

 

 

 

 

 

 

45,001,500

 

Total investments at fair value (cost of $830,971,495 and $727,323,992, respectively)

 

 

 

807,728,604

 

 

 

 

729,516,274

 

Cash and cash equivalents

 

 

 

6,809,818

 

 

 

 

4,696,693

 

Accrued interest receivable

 

 

 

3,419,067

 

 

 

 

2,368,680

 

Other accounts receivable

 

 

 

81,018

 

 

 

 

816,065

 

Prepaid and deferred expenses

 

 

 

401,909

 

 

 

 

949,768

 

Total assets

 

 

 

818,440,416

 

 

 

 

738,347,480

 

Liabilities

 

 

 

 

 

 

 

 

Debt:

 

 

 

 

 

 

 

 

Credit facilities

 

 

 

163,000,000

 

 

 

 

61,000,000

 

2026 Senior Notes

 

 

 

70,000,000

 

 

 

 

20,000,000

 

Deferred debt costs (net of accumulated amortization of $1,249,583 and $855,295, respectively)

 

 

 

(4,394,010

)

 

 

 

(1,511,540

)

Total debt, less unamortized deferred debt costs

 

 

 

228,605,990

 

 

 

 

79,488,460

 

Reverse repurchase agreement

 

 

 

 

 

 

 

44,774,963

 

Accrued incentive fees

 

 

 

7,415,334

 

 

 

 

6,010,250

 

Due to affiliate

 

 

 

184,759

 

 

 

 

221,243

 

Interest payable

 

 

 

1,030,660

 

 

 

 

249,247

 

Accrued expenses and other liabilities

 

 

 

1,791,669

 

 

 

 

1,408,826

 

Total liabilities

 

 

 

239,028,412

 

 

 

 

132,152,989

 

Commitments and contingencies (Note 3)

 

 

 

 

 

 

 

 

Net assets

 

 

 

 

 

 

 

 

Common stock, par value

 

 

 

413,806

 

 

 

 

413,806

 

Additional paid-in capital

 

 

 

606,063,671

 

 

 

 

606,047,671

 

Distributable (losses)

 

 

 

(21,786,236

)

 

 

 

(266,986

)

Treasury stock

 

 

 

(5,279,237

)

 

 

 

 

Total net assets

 

$

 

579,412,004

 

 

$

 

606,194,491

 

 

 

 

 

 

 

 

 

 

Shares of common stock outstanding ($0.01 par value, 100,000,000 shares authorized)

 

 

 

40,967,122

 

 

 

 

41,380,614

 

Net asset value per share

 

$

 

14.14

 

 

$

 

14.65

 

 

See notes to financial statements.

1


Table of Contents

RUNWAY GROWTH FINANCE CORP.

Statements of Operations

(Unaudited)

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Investment income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From non-control/non-affiliate investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

$

 

20,430,136

 

 

$

 

17,229,488

 

 

$

 

37,192,810

 

 

$

 

32,250,053

 

Payment in-kind interest income

 

 

 

1,042,832

 

 

 

 

1,045,527

 

 

 

 

2,049,065

 

 

 

 

1,989,558

 

Other income

 

 

 

75,448

 

 

 

 

126,678

 

 

 

 

265,433

 

 

 

 

240,970

 

Interest income from U.S. Treasury Bills

 

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

25

 

Dividend income

 

 

 

317,674

 

 

 

 

343,755

 

 

 

 

703,092

 

 

 

 

687,510

 

From affiliate investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

4,654

 

 

 

 

 

 

 

 

4,654

 

 

 

 

 

Payment in-kind interest income

 

 

 

6,689

 

 

 

 

 

 

 

 

96,291

 

 

 

 

 

Other income

 

 

 

8,311

 

 

 

 

 

 

 

 

8,311

 

 

 

 

 

From control investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

618,099

 

 

 

 

 

 

 

 

1,112,421

 

 

 

 

 

Payment in-kind interest income

 

 

 

2,654,039

 

 

 

 

 

 

 

 

2,984,450

 

 

 

 

 

Other income from non-investment sources

 

 

 

208

 

 

 

 

139

 

 

 

 

463

 

 

 

 

260

 

Total investment income

 

 

 

25,158,090

 

 

 

 

18,745,602

 

 

 

 

44,416,990

 

 

 

 

35,168,376

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees

 

 

 

2,862,303

 

 

 

 

2,276,341

 

 

 

 

5,422,239

 

 

 

 

4,345,550

 

Incentive fees

 

 

 

3,621,139

 

 

 

 

2,836,303

 

 

 

 

4,965,135

 

 

 

 

3,812,007

 

Interest expense

 

 

 

1,609,132

 

 

 

 

761,815

 

 

 

 

2,482,617

 

 

 

 

1,489,730

 

Professional fees

 

 

 

888,114

 

 

 

 

498,913

 

 

 

 

1,247,921

 

 

 

 

820,505

 

Overhead allocation expense

 

 

 

218,294

 

 

 

 

208,736

 

 

 

 

455,266

 

 

 

 

406,119

 

Insurance expense

 

 

 

268,618

 

 

 

 

23,275

 

 

 

 

537,236

 

 

 

 

46,551

 

Administration fee

 

 

 

168,078

 

 

 

 

92,760

 

 

 

 

336,651

 

 

 

 

240,860

 

Debt financing fees

 

 

 

726,568

 

 

 

 

419,216

 

 

 

 

1,432,534

 

 

 

 

709,201

 

Directors’ fees

 

 

 

82,500

 

 

 

 

69,250

 

 

 

 

171,000

 

 

 

 

134,000

 

Tax expense

 

 

 

823

 

 

 

 

41

 

 

 

 

1,073

 

 

 

 

41

 

Other expenses

 

 

 

233,939

 

 

 

 

218,475

 

 

 

 

426,848

 

 

 

 

341,601

 

Total operating expenses

 

 

 

10,679,508

 

 

 

 

7,405,125

 

 

 

 

17,478,520

 

 

 

 

12,346,165

 

Net investment income

 

 

 

14,478,582

 

 

 

 

11,340,477

 

 

 

 

26,938,470

 

 

 

 

22,822,211

 

Realized and unrealized gain (loss) on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized gain (loss) on non-control/non-affiliate investments, including U.S. Treasury Bills

 

 

 

903,787

 

 

 

 

(4,595,853

)

 

 

 

532,526

 

 

 

 

(4,795,077

)

Realized gain (loss) on control investments

 

 

 

(65

)

 

 

 

 

 

 

 

(65

)

 

 

 

 

Net change in unrealized appreciation (depreciation) on non-control/non-affiliate investments, including U.S. Treasury Bills

 

 

 

(8,164,497

)

 

 

 

(1,683,287

)

 

 

 

(12,319,166

)

 

 

 

(4,121,553

)

Net change in unrealized appreciation (depreciation) on affiliate investments

 

 

 

(42,673

)

 

 

 

 

 

 

 

(3,208,432

)

 

 

 

 

Net change in unrealized appreciation (depreciation) on control investments

 

 

 

(7,992,468

)

 

 

 

1,650,006

 

 

 

 

(9,907,576

)

 

 

 

2,177,090

 

Net realized and unrealized gain (loss) on investments

 

 

 

(15,295,916

)

 

 

 

(4,629,134

)

 

 

 

(24,902,713

)

 

 

 

(6,739,540

)

Net increase (decrease) in net assets resulting from operations

 

$

 

(817,334

)

 

$

 

6,711,343

 

 

$

 

2,035,757

 

 

$

 

16,082,671

 

Net increase in net assets resulting from operations per common share

 

$

 

(0.02

)

 

$

 

0.21

 

 

$

 

0.05

 

 

$

 

0.50

 

Net investment income per common share

 

$

 

0.35

 

 

$

 

0.35

 

 

$

 

0.65

 

 

$

 

0.71

 

Weighted-average shares outstanding

 

 

 

41,215,664

 

 

 

 

32,396,396

 

 

 

 

41,294,985

 

 

 

 

31,953,287

 

See notes to financial statements.

2


Table of Contents

RUNWAY GROWTH FINANCE CORP.

Statements of Changes in Net Assets

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net increase (decrease) in net assets from operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

$

 

14,478,582

 

 

$

 

11,340,477

 

 

$

 

26,938,470

 

 

$

 

22,822,211

 

Realized gain (loss) on non-control/non-affiliate investments, including U.S. Treasury Bills

 

 

 

903,787

 

 

 

 

(4,595,853

)

 

 

 

532,526

 

 

 

 

(4,795,077

)

Realized gain (loss) on control investments

 

 

 

(65

)

 

 

 

 

 

 

 

(65

)

 

 

 

 

Net change in unrealized appreciation (depreciation) on non-control/non-affiliate investments, including U.S. Treasury Bills

 

 

 

(8,164,497

)

 

 

 

(1,683,287

)

 

 

 

(12,319,166

)

 

 

 

(4,121,553

)

Net change in unrealized appreciation (depreciation) on affiliate investments

 

 

 

(42,673

)

 

 

 

 

 

 

 

(3,208,432

)

 

 

 

 

Net change in unrealized appreciation (depreciation) on control investments

 

 

 

(7,992,468

)

 

 

 

1,650,006

 

 

 

 

(9,907,576

)

 

 

 

2,177,090

 

Net increase (decrease) in net assets resulting from operations

 

 

 

(817,334

)

 

 

 

6,711,343

 

 

 

 

2,035,757

 

 

 

 

16,082,671

 

Distributions to stockholders from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends paid to stockholders

 

 

 

(12,382,340

)

 

 

 

(11,859,731

)

 

 

 

(23,555,007

)

 

 

 

(23,482,930

)

Total distributions to stockholders

 

 

 

(12,382,340

)

 

 

 

(11,859,731

)

 

 

 

(23,555,007

)

 

 

 

(23,482,930

)

Capital share transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acquisition of treasury shares

 

 

 

(4,870,014

)

 

 

 

 

 

 

 

(5,279,237

)

 

 

 

 

Issuance of shares of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

306,911

 

Issuance of shares of common stock under dividend reinvestment plan

 

 

 

 

 

 

 

9,410,371

 

 

 

 

 

 

 

 

18,593,591

 

Offering costs

 

 

 

16,000

 

 

 

 

(310

)

 

 

 

16,000

 

 

 

 

(4,831

)

Net increase (decrease) in net assets resulting from capital share transactions

 

 

 

(4,854,014

)

 

 

 

9,410,061

 

 

 

 

(5,263,237

)

 

 

 

18,895,671

 

Total increase (decrease) in net assets

 

 

 

(18,053,688

)

 

 

 

4,261,673

 

 

 

 

(26,782,487

)

 

 

 

11,495,412

 

Net assets at beginning of period

 

 

 

597,465,692

 

 

 

 

473,477,424

 

 

 

 

606,194,491

 

 

 

 

466,243,685

 

Net assets at end of period

 

$

 

579,412,004

 

 

$

 

477,739,097

 

 

$

 

579,412,004

 

 

$

 

477,739,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital share activity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury shares acquired

 

 

 

(381,710

)

 

 

 

 

 

 

 

(413,492

)

 

 

 

 

Shares issued

 

 

 

 

 

 

 

637,127

 

 

 

 

 

 

 

 

1,276,403

 

Shares outstanding at beginning of period

 

 

 

41,348,832

 

 

 

 

32,053,327

 

 

 

 

41,380,614

 

 

 

 

31,414,051

 

Shares outstanding at end of period

 

 

 

40,967,122

 

 

 

 

32,690,454

 

 

 

 

40,967,122

 

 

 

 

32,690,454

 

 

See notes to financial statements.

3


Table of Contents

RUNWAY GROWTH FINANCE CORP.

Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net increase in net assets resulting from operations

 

$

 

2,035,757

 

 

$

 

16,082,671

 

Adjustments to reconcile net increase in net assets resulting from operations to net cash
provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Purchases of investments

 

 

 

(233,472,843

)

 

 

 

(133,681,004

)

Purchases of U.S. Treasury Bills

 

 

 

 

 

 

 

(54,999,849

)

Payment in-kind interest

 

 

 

(5,129,806

)

 

 

 

(1,989,558

)

Sales or repayments of investments

 

 

 

94,058,934

 

 

 

 

96,783,551

 

Sales or maturities of U.S. Treasury Bills

 

 

 

44,999,747

 

 

 

 

94,999,162

 

Realized (gain) loss on investments, including U.S. Treasury Bills

 

 

 

(532,461

)

 

 

 

4,795,077

 

Net change in unrealized appreciation (depreciation) on investments, including U.S. Treasury Bills

 

 

 

25,435,174

 

 

 

 

1,944,463

 

Amortization of fixed income premiums or accretion of discounts

 

 

 

(3,571,075

)

 

 

 

(3,660,438

)

Amortization of deferred debt costs

 

 

 

394,289

 

 

 

 

232,034

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accrued interest receivable

 

 

 

(1,050,387

)

 

 

 

449,244

 

Other accounts receivable

 

 

 

735,047

 

 

 

 

129,250

 

Prepaid and deferred expenses

 

 

 

547,859

 

 

 

 

(271,779

)

Accrued incentive fees

 

 

 

1,405,084

 

 

 

 

1,066,789

 

Due to affiliate

 

 

 

(36,484

)

 

 

 

(26,971

)

Interest payable

 

 

 

781,413

 

 

 

 

293,110

 

Accrued expenses and other liabilities

 

 

 

382,843

 

 

 

 

210,164

 

Net cash provided by (used in) operating activities

 

 

 

(73,016,909

)

 

 

 

22,355,916

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Payment of deferred financing costs

 

 

 

(3,276,759

)

 

 

 

(12,320

)

Borrowings under credit facilities

 

 

 

173,000,000

 

 

 

 

93,000,000

 

Repayments under credit facilities

 

 

 

(71,000,000

)

 

 

 

(75,000,000

)

Proceeds from 2026 Senior Notes

 

 

 

50,000,000

 

 

 

 

 

Proceeds from reverse repurchase agreements

 

 

 

 

 

 

 

44,774,914

 

Repayments of reverse repurchase agreements

 

 

 

(44,774,963

)

 

 

 

(94,524,914

)

Acquisition of treasury shares

 

 

 

(5,279,237

)