Q4 2021 Runway Growth Finance Corp Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Runaway growth Finance fourth quarter 2021 earnings Conference call. Please be advised that today's conference is being recorded I would now like to hand, the conference over to Alex strong Investor Relations. Please go ahead.
Thank you operator.
Afternoon, everyone and welcome to the runway growth Finance conference call for the fourth quarter and fiscal year ended December 31 2021.
With us on the call today from Onemain goes finance, David sprang Chairman, Chief Executive Officer, Chief Investment Officer, and founder and <unk>.
Rodman, Chief Financial Officer, and Chief operating Officer.
Runway growth finances fourth quarter and fiscal year 2021 financial results released just after today's market close and can be accessed from Onemain <unk> Investor Relations website at investors runway growth Dot com.
We have arranged for a replay of the call at the run rate growth webpage or by using the telephone number and pass code provided in todays earnings release.
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 the uncertainty surrounding the COVID-19 pandemic and other factors we identified 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 reasonable any.
Of those assumptions can prove to be inaccurate and as a result forward looking statements based on those assumptions can be incorrect.
You should not place undue reliance on these forward looking statements.
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.
Copies of FCC related filings. Please visit our website and with that I will turn the call over to David Dave.
David.
Thank you, Alex and welcome everyone to runway growth Finance Corp's fourth quarter earnings Conference call.
Before I begin my prepared remarks on behalf of the entire runway team our thoughts and prayers go out to all of those directly and indirectly impacted by the tragic events ongoing in Ukraine.
Today, I'll begin by providing some fourth quarter and full year 2021 highlights review how runway growth is uniquely positioned to compete for deals and then discuss our market outlook before passing it to Tom to review our financial results.
2021 was a monumental year for runway growth, we became a publicly traded company successfully raised capital through both debt and equity offerings achieved record quarterly and annual origination volume of $216 million and $563 million, respectively and.
Zero.
Credit losses for the year.
Before discussing our fourth quarter results further and sharing our market outlook I want to provide a quick overview of the runway growth platform and our investment process for those of you use it or not who are new to the runway story.
[noise] runaway growth isn't establish direct origination platform focused on sponsored and non sponsored senior secured first lien debt investments, we lend to late and growth stage businesses in technology Life Sciences health care, and information services and select consumer services and products industries.
Our investment process is credit driven and focused on principal protection with the potential for equity upside in short our portfolio has the downside protection of that and the upside of equity.
I started run rate growth in 2015, after 25 years as a BC and growth debt lender, because I saw the opportunity to empower entrepreneurs across to underserved segments of the growth lending market.
First late in gross stage venture back companies, we're outliving the ability of their VC partners to fund growth and we're looking for non dilutive growth capital and second non sponsored gross lending was an untapped vertical although these deals take more time to source they generally enjoying more favorable.
Terms and conditions for the lender.
These two segments have provided the initial foundation for runway growth track record of durable growth and stability across various economic backdrops.
A third vertical has started to emerge which we see as an integral segment other runway growth platform going forward.
Third vertical is growth focused P E back as opposed to venture back companies runway deployed loans to two such companies in Q4, which I'll touch on further in a moment.
Our originations team, which grew from three to six during 2021 has an average of 22 years of experience and along with our other investment professionals manage a portfolio of 39 late in growth stage companies in the technology life Sciences, and select consumer services and products.
<unk>.
Earlier this year, we added ratio Goldstein as senior Vice president of growth to our origination team Rachel.
Rachel is focused on enhancing our origination activities focused on top of funnel lead generation sales operations and analytics and market expansion.
Previously Rachel held a similar position at lighter capital a leading revenue base financing firm focused on early stage SaaS and technology companies.
Moving down the funnel I want to talk about our proprietary credit and underwriting process, which we believe differentiates runway growth from peers and makes us an ideal partner for entrepreneurs looking to raise growth capital while minimizing dilution.
Yeah.
We believe our team brings unparalleled thoughtfulness in terms of developing customized funding solutions to meet the borrowers needs rooted in our investment teams deep sector knowledge and intimate understanding of our borrowers businesses.
We leverage proprietary risk analytics and employ a credit discipline that matches company risks with loan risk in a dual sided pricing matrix to optimize deal terms for both parties.
[noise] runaway growth actively monitors our portfolio companies on the defensive side to prevent credit losses and on the offensive side to provide additional capital to companies that are meeting their objectives to fund further growth.
The end result for runway growth shareholders is an underlying portfolio that provides for a stable and attractive return from that investment.
Well, we believe taking on less risk than our peers.
In 2021 runway growth benefited from its warrant positions in three portfolio companies that entered the public market briley.
Brilliant Earth ouster and ports group.
These types of liquidity events highlight the benefit we experience on the equity side as we exercised our warrant positions, which are a part of nearly every loan refund.
Since inception runaway growth is rarely won deals based on pricing alone we win due to our investment team's deep sector knowledge thoughtfulness of our deal structures and credit discipline.
We believe we are quickly becoming a preferred lender in our markets due to our thorough understanding of our borrowers business and our reputation for being a solid partner with a steady hand.
Turning back to quarterly and full year results.
Runway gross fourth quarter was marked by strong execution against the strategy, we introduced on our third quarter call to thoughtfully deploy capital and utilize leverage to drive portfolio growth further empower management teams, we believe in and strengthen return on equity for our shareholders.
We further built upon our track record of strong return on investment in industry, leading low credit losses generating total investment income of $17 6 million and net investment income of $10 9 million in Q4 at 2% sequential increase in addition to experiencing no.
Credit losses in 2021 runway growth maintained an industry, leading low loss ratio up 20 basis points per year on a gross basis and one basis point per year on a net basis.
Based on cumulative commitments.
Our annualized yield on debt investments held roughly flat at 14% compared to the prior period.
We calculate the debt investment yield by taking the total related investment income during the period divided by the daily average of debt investments outstanding during the period.
Yeah.
Our originations team drove prudent portfolio growth in Q4, allowing us to fund six investments across new and existing portfolio companies growing runway gross total loan commitments and funded investments to 145 billion and 1.18 billion since inception.
Two of these investments in Q4 were made to late stage P. E back companies vertex won an epic I O as more tech oriented P E platforms emerge and invest in companies with great potential, but insufficient cash flow or assets to support loans from their traditional lending sources, we believe.
There will be even greater opportunities for run rate growth in the future.
Yes.
The investments we made in growing our originations team started to bear fruit in Q4, and we expect an even greater impact in 2022 has the team's integration into the runaway growth system comes into view and the team is fully up and running.
We will also selectively add to our originations team in 2022 to continue to enhance prudent portfolio growth.
In December we announced a $70 million debt private placement in the form of 425% senior unsecured notes due in 2026, and we completed the first closing in December and the second closing a few weeks ago.
As a reminder, runway gross leverage ratio target for the portfolio is between <unk> eight and one one times.
On the operational side in recognition of the growth and quality of our team Greg Greifeld managing director head of credit has also assumed the role of Deputy CIO Com.
Tom Ratterman now serves as C. O O. In addition to his role as CFO .
As mentioned earlier, we were pleased to recently welcome Rachel Goldstein Senior Vice President of growth to the runway growth team.
Before turning it over to Tom I want to spend a moment on the overall D C landscape and what we're seeing for 2022.
We've all seen the numbers from pitch book, but to rehash, we're coming off another consecutive record year for the PC market with 2021, USB C investment topping 300 billion for the first time in nearly doubling 2000, Twenty's total of $166 6 billion.
Which was the previous record.
The historically robust market over the past few years has created a large addressable market and laid the groundwork for lead lending opportunities in the future.
Our view is that in 2022, even in a rising rate environment.
That is going to remain cheaper than equity and the cost differential between debt and equity capital will be further magnified.
The Bottomline is that equity is getting more expensive and that remains cheaper than equity so borrowers, particularly late stage borrowers that in the past might have been attracted to high valued equity are now going to be even more interested in that.
I will now turn it over to Tom to review our financial results.
Thanks, David and to everyone for joining us today.
During the fourth quarter, we completed six investments in new and existing portfolio companies totaling $216 1 million compared to $154 1 million in the prior quarter at.
At year end, our total investment portfolio, excluding U S. Treasury bills had a fair value of approximately $684 5 million compared to $586 4 million at the end of the third quarter, an increase of 17%.
As of December 31, 2021 runway growth had net assets of $606 2 million, increasing 20% from 504.0 million at the end of Q3.
NAV per share increased to $14 65 at the end of Q4 from $14 60 at the end of Q3.
Proceeds received from principal payments decreased to $94 1 million in the fourth quarter from $101 2 million in the third quarter.
No principal repayments declined slightly some of the underlying factors that generate prepayments for the very late stage portfolio remained intact during Q4 2021.
On a GAAP basis, we recorded total investment income of $17 6 million during the fourth quarter comprised of approximately $16 9 million of interest income and approximately $8 7 million of other income.
Total investment income for the full year 2021 was $71 4 million compared to $57 6 million for 2020, representing a 24% increase.
Our dollar weighted average annualized yield on debt investments was 14% for Q4 and 13, 8% for the full year as compared to 15, 6% and 14, 9% for the prior year periods. The slight decline in yield is primarily due to tighter deal pricing across the markets.
We participate in and the refinancing of our earlier transactions, which had higher contractual interest rate floors than our newer investments.
Turning to our expenses for the fourth quarter of 2021 total operating expenses were $6 7 million compared to $5 8 million in the fourth quarter of 2020.
Total expenses for the full year 2021 were $26 9 million compared to $19 6 million for the prior year. The increase was driven primarily by expenses that tend to grow proportionately with portfolio growth, including debt financing and interest expense as well as the costs associated with becoming a publicly traded.
Company.
Our performance based incentive fee was $2 7 million for Q4, and $9 2 million for the full year compared to $2 4 million and $7 3 million for the prior year periods.
Interest expense decreased <unk> 3 million in the fourth quarter from <unk> 8 million in the third quarter due to a decline in average borrowings as we received approximately $93 million in net proceeds from our initial public offering.
Our base management fee was $2 3 million up from $1 8 million in last year's fourth quarter due to the increase in the average size of our portfolio.
During the quarter, we produced $8 2 million of realized gains due to the sale of our common shares of ouster, Inc, which compares favorably to <unk> 7 million of realized gains for the prior quarter.
We recorded net unrealized depreciation of <unk> 1 million in the fourth quarter, which was driven by adjustments to the equity portfolio.
One of the hallmarks of the runway growth model is our initial underwriting and due diligence process, coupled with active management and monitoring of our investments to provide continued stability across the portfolio.
A reflection of this runways weighted average portfolio rating improved to 2.04 in Q4 from $2 two or in Q3.
A reminder, that our risk rating system is based on a scale of one to five where one represents the most favorable credit rating.
At the end of 2021, <unk>, Inc. 's performance showed substantial improvement, which contributed to our improved portfolio rating. We're pleased to report that in January 2022, <unk> came off nonaccrual status.
Turning now to liquidity, our total available liquidity as of December 31, 2021 was $158 7 million, including unrestricted cash and cash equivalents and a borrowing capacity of $154 million under our credit facility subject to existing terms and conditions.
As David mentioned, we raised an additional $70 million with the issuance of five year $4, two 5% senior unsecured notes 20 million of which we closed on in December 'twenty, 'twenty, one and $50 million in early February 2022.
Our revolving credit facility provides cost effective debt capital with the ability to expand and fund continued portfolio growth our weighted average cost of debt was 354% at the end of Q4, increasing slightly from three 5% at the end of the prior period.
End of period leverage was 13, 4% in asset coverage was 582% as.
As compared to 16% and 461% at the end of the prior period respectively.
This short term decrease in leverage was due to net proceeds from our IPO of approximately 93 million after deducting underwriting discounts commissions and offering expenses.
It is our intent to fund portfolio growth with leverage and as David mentioned earlier, our core leverage target is between <unk> eight and $1 one times.
Before considering prepayments, we have the ability to grow our portfolio by nearly $600 million without exceeding our core leverage targets and returning to the equity markets.
On the topic of interest rate sensitivity. We believe runway is favorably positioned for any potential interest rate hikes in that rising rates will not have a strong impact on our ability to execute against our strategy.
Our loan portfolio is comprised of nearly 100% floating rate assets and will benefit from increasing interest rates is levels move beyond our contractual interest rate floors.
We will also continue to access the capital markets Opportunistically to lock in our longer term cost of funds.
Subsequent to quarter end runway Growth's board of directors approved a stock repurchase program to acquire up to $25 million of runaway gross common stock.
The program was approved on February 24th 2022, and expires February 23 2023.
Finally on February 24th 2022, our board declared a dividend distribution for the first quarter 22 of 27 per share an increase of 8% from our fourth quarter dividend of <unk> 25 per share.
As discussed on our last call our board intends to declare a regular quarterly dividend going forward and stabilize the distribution based on the estimated earnings for a given quarter.
I'll now turn the call back to David for closing remarks, Thanks, Tom.
Closing, we are encouraged by our progress in 2021, which by all accounts was runaway growth best year, yet we feel good about the pipeline going into 2022 is our new originators come online with signed term sheets across both life Sciences and tech, we expect to benefit from industry tailwind.
And feel confident that we are well positioned in the marketplace to compete for deals even in an inflationary environment with that we now open the call for questions.
Operator.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Melissa Wedel from Jpmorgan. Your line is now open.
Thanks, so much for taking my question.
First wanted to start with.
Your outlook in terms of sort of deployment and any visibility that you might have seen near term repayments.
For Q repayment activity, probably a little bit lower than what we had modeled just wanted to understand how you're seeing things right now.
Yeah, Hi, Melissa Thanks for the question.
As you know prepayments are very difficult to.
Forecast, we actually see in the current environment that we may have a lower than expected prepayments because of volatility in the public market.
Has kind of diminished a little bit of the M&A activity and the expectations for sellers arent, where they had hoped and then the other factor is that with specs kind of going out of favor.
That's made that roots, a little bit more difficult and regular way ipos or are not quite as easy as they were so we're seeing at least for the next couple of quarters that there may be lower than normal prepayment, but it is very very difficult to forecast.
On the new loan side.
One thing that we are seeing is that equity is becoming more expensive, particularly in the late stage a number of the most active late stage equity folks have kind of retreated and many borrowers still in need of growth capital or.
Hum.
Looking to avoid down rounds and that so in that respect.
The tailwind to really moving towards us.
Got it.
In terms of a new vertical like he just touched on sort of the late stage.
Hum.
Can you elaborate on sort of the yield expectations in that vertical person.
Others, where he's been more traditionally focus.
Thanks, So much David Yeah, absolutely, yeah, and first just to provide a little bit more color on it.
There's been really over the last decade, or so almost a new class of private equity firm. That's been formed in the model of silverlake or a thoma Bravo are avista, but but early stage or let's call. It mid market to lower middle market and they are now.
Buying and investing in companies that either are not yet profitable or are dipping into being cash flow negative.
For growth initiatives and that really takes it out of the realm of their traditional lending sources, so they're coming to us and the two deals that we closed in Q4.
Interest rates and terms that are pretty consistent with stuff we've done in the past.
We're getting we have fairly robust covenant packages. So I would say, they're very sophisticated counterparty, though in terms of the.
The loan agreements, but in terms of economic terms.
They are fairly similar to our traditional deals.
Got it thanks very much.
Of course.
Thank you. Our next question comes from the line of Casey Alexander from Compass Point. Your line is now open.
Pi on that same point about.
The new vertical I mean.
Would you still try to contain yourself to industries that you understand such as technology are or would you potentially move into consumer related or or some other type of manufacturing related industries. I mean, how broad are you willing to go in that category.
Yes, Casey Great question, and thanks for that and we are absolutely sticking to our categories that are tech broadly defined life Sciences, and health care broadly defined and then consumer products and services that are tech.
Tech enabled so generally e-commerce .
And tech enabled services. So we are not.
Going far afield, there's no strategy drift or anything like that it's just.
Getting into a different category of sponsor and quite honestly, continuing our migration towards larger less risky portfolio companies.
Okay. Thank you for that and secondly.
You know your <unk>.
Originations have grown are growing faster than ever before you're opening up new verticals I think what investors would like to hear is with such rapid growth and and moving into a new vertical.
Bdcs in the past have gotten into trouble from group by growing too fast and sort of getting out of their lane. So I think it would help investors to hear how you intend to stay credit disciplined.
While you experienced such rapid growth because there's obviously a lot of room for you to grow with a leverage ratio of one three times.
Yeah, absolutely and I'll, let Tom add in after giving some inner.
Introductory comments first of all we are credit first through and through that that will never change.
And we continue to add resources in the credit team in advance of adding to the origination team and the originators are.
Vertically focused so the same people that would originate a software deal from a late stage VC also originate software deals from.
PE sponsors so don't read too much into the new vertical it's just a new type of sponsor that we're working with our deep industry expertise and ability to create thoughtful and bespoke loan packages based on deep knowledge of the industry and the company.
We will not change and and neither will of course, our focus on principal preservation.
And.
And that is the reason for looking to these later stage companies, where we can do real underwriting on real businesses and Howard have substantial covenant packages, which give us the opportunity to mitigate NIST if needed.
Yeah. Thanks, David.
I think one of the important factors here is that we continue to demonstrate our disciplined yes, we have.
Substantial amount of capacity to build leverage to put capital to work $600 million.
But just to emphasize what David says we're not changing.
Our core.
No change for our core skills Tech.
Tech focused life Sciences focused it's really just a little bit of a different sponsor and what's really quite refreshing from our perspective as those sponsors are really embracing this because.
They're not met with the reception from their traditional lenders that really understand.
Underwriting ratios that are something other than just EBITDA multiples and one of the hallmarks that I think we've built our business on and why we're viewed as a steady hand as the amount of work, we do and understanding enterprise value and and right sizing facilities for the borrowers so that there is.
Sufficient capital to meet their business plans and be successful.
Alright, thank you for that.
It's just an add on to that before my last question is in these larger companies that are that are EBITDA driven as opposed to financing round driven generally should we expect like like.
Less equity co invest to go along with those because generally those type of loans for the most part tend to be loan only and have very little equity participation.
Yeah, that's a great observation and you know at the stage, where we're lending.
These companies are often.
Very near getting to cash flow positive or getting to exit or in the case of some of the life Sciences deals are fully cash collateralized for nearly the entirety of our loan.
So we are not lenders as you might see in the early stage, where there's a rule of thumb that there's you know.
Two parts equity for one part debt and then that just kind of goes on and you're really at the.
Yeah, youre dependent on future equity to survive that.
That's an element of financing risk that we try to avoid so we're typically lending to companies that will.
We will not lead need any additional capital and if they do it in a quantum that we could provide if we needed to.
And of course, we love it when the equity sponsors are there and will continue.
To support along the way, but we try to avoid taking a lot of downstream.
Cancer risk.
Okay. Thank you for that and my last question relates to the share repurchase program.
Is it your expectation that it would be active or is this more of a.
You know discretionary in case the market just gets totally out of hand, or how do you guys see the share repurchase program knowing that your stock is trading at a discount to NAV.
In a universe that everything trades at a premium to NAV.
But one should expect your stock to move to peer group multiples as your dividend grows into the peer group yield.
Thanks, Casey and thanks for the vote of confidence on the peer group multiples coming in line with coming in line with the peer group multiples.
I think.
As we sit down as a company and look at the share repurchase agreement and discuss that with our board.
It's.
We feel strongly that our stock is as its trading today is undervalued and we wanted to put a program in place that reflects that confidence of the board and of the company and.
We've got it there to act opportunistically.
And execute as we can.
See fit.
To take advantage of the market being undervalued.
Alright, great. Thank you for taking my questions I appreciate it.
Thank you.
Thank you. Our next question comes from the line of Brandon O'shea from Wells Fargo Securities. Your line is now open.
Hi, everyone. Good afternoon.
Can you help us think about the Oaktree op opportunistic funds ownership in the BDC.
How do you envision and what sort of timeline do you see.
Or their presumed ex that.
Also in there can you touch on how their secondaries might interplay with.
With your own growth plans as you seek to do secondaries of your own.
Assuming there would be some coordination between you.
And the funds there.
Yeah, Thanks, Ken so.
Oh tree compared to the rest of the shareholders. The pre IPO shareholders has an extended lockup, which continues over four quarters and they are a strong supporter of our business. There frankly more of a buyer when the shares are trading below book value as evidenced by their <unk>.
Can be five one program and the exhausting that full $15 million by the end of February so there, they're very thoughtful and when they do exit it will be in a very organized and efficient manner Theres no time frame on that right now they are smart investors.
<unk>.
We'll do everything in coordination with us what they do not want to do is impair our ability to raise capital.
So they wouldn't want to suck all the air out of the market. So that we werent able to tap the equity markets when when ready and as we see it now assuming.
Normalized prepayments and continuing our origination trend, we wouldn't expect to need to be back in the equity markets until 2023.
Okay, Yes, that's helpful.
And then as a follow up you.
I had a pretty good quarter in activity and earnings so congrats on that or are you able to.
Offer us any color on what your goals might be by this point.
As to where you were able to bring the dividend.
Say by year end or next year, just how you might be thinking about that given.
Given you've been moving pretty well.
Well, thanks and appreciate the.
Kind words on the quarter, we would expect to continue.
Driving our OE, which will drive the dividend and we are going to add to our origination teams to continue to back stop.
In support the trend that we have in the future originations.
We we have a lot of capital to deploy to deploy and we would.
To.
In our <unk>.
Lower end of our leverage range.
If things go according to plan by the end of Q4 or early Q1 2023.
Oh, sorry, I was on mute. Thank you so much.
Thanks, Dan Thank you.
Thank you. Our next question comes from the line of Bryce Rowe from holiday. Your line is now open.
Thanks, Good evening, I guess from the East coast.
Wanted to just touch on the I guess, the unrealized appreciation here in the quarter, obviously with the ouster gain might've expected.
A reversal of that unrealized as you as you realize that getting too could you speak to.
Is there any any particular investment that's driving.
The unrealized appreciation for our for the quarter here.
Yeah. So the aster was realized that was to date, our single largest equity gain the other gains came through a variety, but probably any single.
The single largest gain would have been in our public equity position and brilliant Earth.
Okay. That's helpful.
And then Tom just wanted to kind of follow up on your comments about asset sensitivity.
Where do you where do you see the weighted average floor within the portfolio at this point and.
And when you start to <unk>.
We're a point at which we get maybe exponential.
Our increasing benefit from.
From a rate increase.
Yes. So there are slide 20 of our Investor presentation gives a demonstration of the sensitivity there in terms of what happens to earnings but for the most part.
One every borrower is at their contractual floor, we've definitely seen the higher floors from.
2018, 2019 vintages be refinanced out just through the normal course of those businesses maturing. So the floor is pretty close to a 5% right now.
Okay. That's helpful.
And then maybe last one for me.
We're in the beginning of March here now two months into the quarter.
Any sign or any commentary on first quarter activity, so far whether it be origination activity or repayment activity.
Yeah, Brian and thanks for.
Hanging in there late on the East coast.
So as I as I said earlier, it's a it's very difficult to predict.
Predict prepayment.
Activity like I said, I think it's going to be lower than typical.
As far as origination goes there is the typical seasonality that we see every year and the typical within the quarter things all happened in the last month and unfortunately, often too much in the last couple of weeks, So and that's that's that's probably what we'll continue to see.
And in 2022.
And we do feel very good and I would say that we have the largest funnel that we've ever had.
And feel really good about.
The strength of our origination team as it stands today and as Tom mentioned, we're going to continue to invest in building that team and so.
Feel good about the outlook for 2022 overall.
One comment the prepayment characteristics as originations tend to come at the last day of the quarter.
So the prepayments so it's not unusual to get a prepayment notice.
Two weeks out and really really spoil your quarter end.
Alright, I appreciate the color.
Right.
Yes, you too.
Okay.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
Our next question comes from the line of Park in Serbia Chung from B Riley Securities. Your line is now open.
Hi, everyone. Thank you for taking my question here and a good quarter here that you put out the gate.
I wanted to kind of go back and revisit the comment you made on on borrowers needing growth capital, they're looking to avoid down rounds are you seeing venture debt become kind of a more.
Don't want to say a viable alternative but essentially a more preferred alternative to the V.
<unk> equity and if so.
Are you able to be more choosy and kind of the pipeline.
So that is a fantastic question and the answer is yes, and we have that as a trend it.
We've been.
Leveraging and writing for five years.
But we believe that what we're seeing in the market today with with equity, particularly late stage overvalued.
Over enthusiastic.
Equity participants kind of cooling off or at least cooling their heels for awhile.
That right now that is very much cheaper than equity and.
Is he is attractive and is particularly attractive for folks that want to avoid the down round.
So I think the way you described it is absolutely fair.
We haven't really started to see.
Dramatic changes in terms and conditions on our loan.
But we are extremely picky.
And that is not new.
Think it's one of the reasons that our credit losses are so low.
Testament to our.
Strategy in terms of focusing on late stage less risky companies and then underwriting to further filter them and then being really active and aggressive in our monitoring and portfolio management and so.
I think everything you said is true.
It's not new for us, but it's the ability to be even more picky I guess.
Got it thanks for that and just kind of.
A follow on to this thought.
Any changes on kind of the spreads youre able to capture as you look into this to this pipeline in this environment.
The spreads stable, increasing decreasing anything you can kind of help us with regarding pricing.
Yes, so it's interesting there's a chart I believe in the.
In the <unk>.
The deck that we provided to chose the spreads have been pretty pretty pretty pretty stable.
And we have as we have gone later stage larger less risky companies you know there is a little bit of the spread compression but.
It's not meaningful and we think that.
We're definitely getting the right end of the bargain and that in terms of the reduction in risk more than makes up for a few basis points lesson spread and then in terms of trends.
I'd say you know the <unk>.
Market is competitive there are some fantastic competitors out there.
Do a great job and I don't see that changing you know there was a period of time, where there were a number of.
I guess you could call them tourists that were in the market or folks that were just dabbling from another part of the credit spectrum and we don't see those as much today.
But the normal cast of characters are all very solid and doing a great job in.
And so I.
I don't really expect major.
Spread expansion, but we're also not seeing compression either.
Great. Thank you and wish you continued success.
Thanks, Thank you.
Thank you at this time I'm showing no further questions I would like to turn the call back over to David sprang for closing remarks.
Great. Thank you operator, and thank you all for your support of runaway growth and we hope you all stay along for the journey ahead.
We hope everyone is staying safe and healthy and we look forward to updating you on our first quarter results in may.
Good day.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Sure.