Q2 2024 SWK Holdings Corp Earnings Call

Operator: Mark Argento, Unknown Shareholder, Yvette Heinrichson [inaudible] Good day and welcome to the SWK Holdings second quarter 2024 conference call. At this time, all participants are in a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: Good day, and welcome to the SWK Holdings 2nd quarter 2024 conference call. At this time, all participants are in a listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.

Speaker Change: Good day and welcome to the SWK Holdings second quarter 2024 conference call.

Speaker Change: At this time, all participants are in a listen-only mode, and a question and answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Ira Gostin: Please note, this conference is being recorded. I will now turn the conference over to your host, to Ira Gostin, Investor Relations. Good morning, everyone, and thank you for joining the SWK Holdings second quarter 2024 Financial and Corporate Results Call. Yesterday, we issued a press release detailing financial results for the three months ending June 30, 2024. The press release can be found on the Investor Relations section of our website at SWKHold.com under the News Release section.

Speaker Change: Please note, this conference is being recorded.

Ira Gostin: I will now turn the conference over to your host, Mr. Ira Gostin, Investor Relations.

Speaker Change: I will now turn the conference over to your host, Mr Ira Gostin, Investor Relations. Sir, the floor is yours.

Ira Gostin: Sir, the floor is yours. Good morning, everyone, and thank you for joining the SWK Holdings, 2nd quarter, 2024 financial and corporate results call. Yesterday, we issued a press release detailing of financial results for the three months ending June 30, 2024.

Ira Gostin: Good morning, everyone, and thank you for joining the SWK Holdings Second Quarter 2024 Financial and Corporate Results Call.

Speaker Change: Yesterday we issued a press release detailing financial results for the three months ending June 30th 2024. The press release can be found on the investor relations section of our website at SWKhold.com under the news release section.

Ira Gostin: The press release can be found on the Investor Relations section of our website at SWK Hold.com under the News Release section. Before today's call, I would like to make the following statement regarding forward-looking statements. Today we will be making certain forward-looking statements about future expectations, plans, events, and circumstances, including statements about our strategy, future operations, and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations, and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factor section of the SWK Holdings 10-K filed with the SEC and other filings we make with the SEC from time to time.

Ira Gostin: Before today's call, I would like to make the following statement regarding forward-looking statements. Today we will be making certain forward looking statements about future expectations, plans, events, and circumstances, including statements about our strategy, future operations, and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations, and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk section.

Speaker Change: Before today's call, I would like to make the following statement regarding forward-looking statements.

Ira Gostin: Risk Factors section of the SWK Holdings 10-K filed with the SEC and other filings we make with the SEC from time to time. SWK Holdings disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise. Joining me from SWK Holdings on today's call is Jody Saggs, President and CEO, who will provide an update on SWK's second quarter, of Corporate and Financial Results. Thank you, Ira, and thanks everyone for joining our second quarter conference call. First, I'd like to welcome our new CFO, Adam Rice.

Speaker Change: Today we will be making certain forward-looking statements about future expectations, plans, events, and circumstances, including statements about our strategy, future operations, and our expectations regarding our capital allocation and cash resources.

Jody Saggs: Adam joins SWK from a private credit platform and brings valuable loan and mortgage accounting and operational experience to SWK. During his first couple of months, Adam has familiarized himself with our financing structures, assisted our controller Courtney and our consultants with the 2Q accounting reporting, and started building a relationship with our partner bank. Adam will take a leading role with the financial reporting starting in 3Q, and you will hear from him then. Welcome, Adam.

Speaker Change: These statements are based on our current expectations and you should not place undue reliance on these statements.

Speaker Change: Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factors section of the SWK holdings 10-K filed with the SEC and other filings we make with the SEC from time to time.

Ira Gostin: SWK Holdings disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise.

Speaker Change: SWK Holdings disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise.

Ira Gostin: Joining me from SWK Holdings on today's call is Jody Sags, President and CEO, who will provide an update on SWK's 2nd quarter, corporate and financial results.

Jody Saggs: SWK's core business is financing innovative, commercial-stage, life-science product companies through first-lane term loans and royalties with a focus on $5 million to $25 million investments. During the second quarter, our core finance segment generated $6.5 million of adjusted non-gap netting. The Net Financial Receivables Portfolio increased 19% year-over-year to $267 million.

Jody Saggs: Joining me from SWK Holdings on today's call is Jody Saggs, President and CEO, who will provide an update on SWK's second quarter corporate and financial results. And Jody, it's all yours. Go ahead, please.

Ira Gostin: And Jody, it's all yours. Go ahead, please.

Jody Saggs: And the Portfolio Effective Yield improved 10 basis points year-over-year and 40 BPS sequentially to 14.6%. Segment revenue increased 15% year-over-year to $10.7 million, as the receivables growth was accompanied by a 15.4% realized yield. Second quarter 2024 financial segment results were negatively impacted by a net $4.1 million of impairments taken to two non accrual borrowers and positively impacted by a $2.4 million increase in the carrying value of our alluvium royalty, as well as a $700,000 gain on the conversion of AOT private warrants to common stock, which was triggered by the company listing on the London AIM exchange. As a reminder, SWK carries private warrants at zero on our book.

Jody Sags: Thank you, Ira.

Jody Sags: And thanks everyone for joining our 2nd quarter conference call. First, I'd like to welcome our new CFO, Adam Rice. Adam joins SWK from a private credit platform and brings valuable loan and mortgage accounting and operational experience to SWK. During his first couple of months, Adam has familiarized himself with our financing structures, assisted our controller, Courtney, and our consultants with the 2Q accounting reporting, and started building a relationship with our partner banks.

Jody Saggs: Thank you, Ira, and thanks everyone for joining our second quarter conference call. First, I'd like to welcome our new CFO, Adam Rice. Adam joins SWK from a private credit platform and brings valuable loan and mortgage accounting and operational experience to SWK.

Speaker Change: During his first couple of months, Adam has familiarized himself with our financing structures, assisted our controller, Courtney, and our consultants with the 2Q accounting reporting.

Jody Sags: Adam will take a leading role with the financial reporting starting in 3Q, and you will hear from him then. Welcome, Adam.

Speaker Change: and started building a relationship with our partner banks. Adam will take a leading role with the financial reporting starting in 3Q, and you will hear from him then. Welcome, Adam.

Jody Saggs: During the second quarter, we advanced $7 million to two existing performing borrowers. And in August, we closed on an up to $11 million royalty monetization with Relief Therapeutics. We are pursuing loans and royalties to multiple innovative life science companies and have the capital available to close these, Our Interest Division is ramping work with our strategic partner, as evidenced by segment revenue nearly tripling sequentially to $800,000. Under the strategic agreement, Interest is entitled to receive low single-digit million minimum guaranteed revenue payments for each of the six-month periods.

Jody Sags: SWK's core business is financing innovative commercial state's life science product companies through personally term loan generalities with a focus on $5 million to $25 million investments. During the 2nd quarter, our core finance segment generated $6.5 million of adjusted non-GAAP net income. The net finance receivables portfolio increased 19% year-over-year to 267 million, and the portfolio effective yield improved 10 basis points year-over-year and 40 bips sequentially to 14.6%. Segment revenue increased 15% year-over-year to 10.7 million as the receivables growth was accompanied by a 15.4% realized year-over-year. 2nd quarter 2024 financial segment results were negatively impacted by a net $4.1 million of impairments taken to new to two non-accrual borrowers and positively impacted by a $2.4 million increase in the carrying value of our Luvian royalty, as well as a $700,000 gain on the conversion of AOT private orange to common stock, which was triggered by the company listing on the during the 2nd quarter. We advanced $7 million to two existing performing borrowers, and in August we closed on an up to $11 million royalty monetization with Relief Therapeutics. We are pursuing loans and royalties to multiple innovative life science companies and have the capital available to close these opportunities.

Speaker Change: SWK's core business is financing innovative, commercial-stage, life-science product companies through first-lane term loans and royalties, with a focus on $5 million to $25 million investments.

Speaker Change: During the second quarter, our core finance segment generated $6.5 million of adjusted non-GAAP net income.

Adam: The net financial receivables portfolio increased 19% year-over-year to 267 million and the portfolio effective yield improved 10 basis points year-over-year and 40 BIPs sequentially to 14.6%

Adam: Segment revenue increased 15% year-over-year to $10.7 million as the receivables growth was accompanied by a 15.4% realized yield.

Adam: Second quarter 2024 financial segment results were negatively impacted by a net $4.1 million of impairments.

Adam: taken to two non-accrual borrowers, and positively impacted by a $2.4 million increase in the carrying value of our Alluvian Royalty, as well as a $700,000 gain on the conversion of AOT private warrants to common stock, which was triggered by the company listing on the London AIM Exchange.

Adam: As a reminder, SBK carries private warrants at zero on our books.

Adam: During the second quarter we advanced seven million to two existing performing borrowers and in August we closed on an up to eleven million dollar royalty monetization with Relief Therapeutics. We are pursuing loans and royalties to multiple innovative life science companies and have the capital available to close these opportunities.

Jody Sags: Our Interest Division is ramping work with our strategic partner, as evidenced by segment revenue nearly tripling sequentially, $800,000. Under the strategic agreement, Interest is entitled to receive low single-digit millions minimum guaranteed revenue payments for each of the six-month periods. For the first six months of the year, we agreed that this requirement could be satisfied by bookings received at the end of the quarter. These bookings were deferred, and the revenue will be realized over the next few quarters. Our partner made the full cash payment after quarter close, satisfying the minimum guaranteed revenue payment requirement for the period.

Adam: Our Interest Division is ramping work with our strategic partner, as evidenced by segment revenue nearly tripling sequentially to $800,000. Under the strategic agreement, Interest is entitled to receive low single-digit million minimum guaranteed revenue payments for each of the six-month periods.

Jody Saggs: For the first six months of the year, we agreed that this requirement could be satisfied by bookings received at the end of the quarter. These bookings were deferred and the revenue will be realized over the next few quarters. Our partner made the full cash payment after quarter close satisfying the minimum guaranteed revenue payment requirement for the period. As a reminder, the Minimum Guaranteed Revenue Payment is intended to help fund the operating costs of a terrorist as revenue builds.

Adam: For the first six months of the year, we agreed that this requirement could be satisfied by bookings received at the end of the quarter. These bookings were deferred and the revenue will be realized over the next few quarters.

Adam: Our partner made the full cash payment after quarter closed, satisfying the minimum guaranteed revenue payment requirement for the period.

Jody Sags: As a reminder, the minimum guaranteed revenue payment is intended to help fund the operating cost of materials as revenue builds.

Speaker Change: As a reminder, the Minimum Guaranteed Revenue payment is intended to help fund the operating costs of a terrorist as revenue builds. We are pleased with the progress the terrorist is making, as evidenced by increased bookings and a growing pipeline of CDMO projects.

Jody Sags: We are pleased with the progress in terraces making, as evidenced by increased bookings in a growing pipeline of CDMO projects.

Jody Saggs: We are pleased with the progress in Terrace is making as evidenced by increased bookings and a growing pipeline of CDMO projects. Turning to our share repurchase program, we bought back 54,667 shares at a total cost of $1 million during the second quarter. Since quarter close, we repurchased an additional 155,000 shares for a total cost of $2.6 million. As of June 30, 2024, our GAAP book value per share was $22.75, a 4% increase compared to $21.79 as of June 30, 2020. Non-GAAP tangible financing book value per share total $20.17, a 6% increase compared to $18.95 as of June 30, 2020.

Jody Sags: Turning to our share repurchase program, we bought back 54,667 shares at a total cost of $1 million during the second quarter. Since quarter close, we have repurchased an additional $155,000 shares for a total cost of $2.6 million. As of June 30th, 2024, our gap book value per share was $22.75. A 4% increase compared to $21.79 as of June 30th, 2023. Non-GAAP tangible financing book value per share total $20.17, a 6% increase compared to $18.95 as of June 30th, 2023.

Speaker Change: Turning to our share repurchase program, we bought back 54,667 shares at a total cost of $1 million during the second quarter. Since quarter close, we have repurchased an additional 155,000 shares for a total cost of $2.6 million.

Speaker Change: As of June 30, 2024, our GAAP book value per share was $22.75, a 4% increase compared to $21.79 as of June 30, 2023.

Speaker Change: Non-GAAP tangible financing book value per share totaled $20.17, a 6% increase compared to $18.95 as of June 30, 2023.

Jody Sags: During the quarter, we wrote off the remaining value for potential future milestone and royalty payments associated with the Interest Pet Intelligence license to Care Therapeutics. This was in response to Care's decision to discontinue the clinical program for the underlying oral pursuit of a program. Post this, the write-off of the Interest segment has a book value of approximately $5 million, which consists almost entirely of PPNE.

Jody Saggs: During the quarter, we wrote off the remaining value for potential future milestone and royalty payment associated with the entire intelligence license to care therapeutic. This was in response to CARES' decision to discontinue the clinical program for the underlying oral Korsuva program. Post this write-off, the interior segment has a book value of approximately $5 million, which consists almost entirely of PP&E. In summary, during 2Q24, our financial segment had solid results, which were negatively impacted by impairments at two bars.

Speaker Change: During the quarter, we wrote off the remaining value for potential future milestone and royalty payments associated with the Interis Peptelgence license to CARE Therapeutics. This was in response to CARE's decision to discontinue the clinical program for the underlying oral Korsuva program.

Speaker Change: Post this write-off, the entire segment has a book value of approximately $5 million, which consists almost entirely of PP&E.

Jody Sags: In summary, during 2Q24, our financial statement has sold results which were negatively impacted by impairments at two bars. We are pursuing multiple financing opportunities and are working to close additional deals by year-end. Our terrorist business is seen growth in revenue and bookings with the assistance of our partner in his position to be casual break even or better through the strategic partnership period.

Speaker Change: In summary, during 2Q24, our financial statement had solid results, which were negatively impacted by impairments at two bars.

Jody Saggs: We are pursuing multiple financing opportunities and are working to close additional deals by year end. Our interest business has seen growth in revenue and bookings with the assistance of our partner, and is positioned to be cash flow break even or better through the strategic partnership period. With that, let's open up the line to questions. Thank you. At this time, we'll be conducting our question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. Your confirmation tone will indicate your line is in the question, and you may press star 2 if you would like to remove your question from the line.

Speaker Change: We are pursuing multiple financing opportunities and are working to close additional deals by year-end. Our terrace business has seen growth in revenue and bookings with the assistance of our partner and is positioned to be cashflow break-even or better through the strategic partnership period. With that, let's open up the line to questions.

Jody Sags: With that, let's open up the line to questions. Thank you.

Operator: At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. And you may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star. One moment, please. What we pull for questions. Thank you.

Speaker Change: Thank you. At this time, we'll be conducting our question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: The confirmation tone will indicate your line is in the question queue.

Speaker Change: And you may press star 2 if you would like to remove your question from the queue.

Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start, One moment, please, while we poll for questions. Thank you. We have a question from Scott Jensen, who is a private investor. Good morning, Jody.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: One moment, please, while we poll for questions.

Scott Jensen: We have a question from Scott Jensen, who is a private investor.

Speaker Change: Thank you. We have a question from Scott Jensen, who is a private investor. Your line is live.

Operator: Your line is life.

Scott Jensen: Good morning, Jody. Look, guys, nice quarter. I'm happy you took the carer up front charge, and it's nice to see within the line. Thank you, the up, the writing up of the Aluven. That's kind of nice to see one go the other direction.

Scott Jensen: Thanks, guys. Nice quarter. Thank you. I'm happy you took the CARA upfront charge and it's nice to see within the 10Q the, writing up of the Aluvin. It's kind of nice to see one go the other direction.

Scott Jensen: Good morning, Jody. Thanks, guys. Nice quarter.

Scott Jensen: I'm happy you took the CARA upfront charge, and it's nice to see within the 10-Q the writing up of the Aluvin. It's kind of nice to see one go the other direction. I guess my question is kind of twofold. One is what is

Scott Jensen: I guess my question is kind of twofold. One is what is that market looking like to you out there? And then how do you deal with the comp, the competition that's coming from larger players? bigger institutions all kind of coming out of different areas that they maybe used to stay in their their lane and now they're kind of coming in all over the lending map like in so what do you see out there? As far as that? Yeah, good question.

Scott Jensen: I guess my question is kind of twofold. One is, what is that market looking like to you out there? And then how do you deal with the competition that's coming from larger players, bigger institutions, all kind of coming out of different areas that they may be used to stay in their lane and now they're kind of coming in all over the lending map. What do you see out there as far as that?

Speaker Change: that market looking like to you out there? And then how do you deal with the competition that's coming from larger players, bigger institutions, all kind of coming out of different...

Speaker Change: areas that they maybe used to stay in their their lane and now they're kind of coming in all over the lending map like and so what do you see out there as far as that?

Jody Sags: Yeah, good question. If you look at our pipeline this year, our pipelines are at an all-time high. We've had more inflow at the top of the pipeline. I think part of that is due to Peter Bloomberg, our head of development, who has done a really good job and has started to hit his stride. In the funnel has been good. Our close rate has been down. I think perhaps the lowest has been the past few years. I mean, what we're seeing is I wouldn't say we're getting necessarily beat out by sort of the traditional players, but a lot of it's been things like equity; those have fallen through.

Jody Saggs: You know, so if you look at our pipeline this year, we've our pipelines at an all time high, we've had more inflow at the top of the pipeline. And I think part of that is due to, you know, Peter Bloomberg, our, our head of business development has done a really good job and has has started hit his stride. So in the funnel has been good. Our close rate has been down. It's been, you know, I think perhaps the lowest it's been the past few years.

Peter Bloomberg: Yeah, good question. So if you look at our pipeline this year, our pipeline's at an all-time high. We've had more inflow at the top of the pipeline, and I think part of that is due to Peter Bloomberg, our head of business development, has done a really good job.

Peter Bloomberg: has started to hit his stride. So in the funnel has been good. Our close rate has been down. It's been, I think, perhaps the lowest it's been in the past few years. And I mean, what we're seeing is.

Jody Saggs: And I mean, what we're seeing is, I wouldn't say we're getting necessarily beat out by sort of the traditional players, but a lot of it's been things like equity, bills have fallen through. There certainly is competition, you know, the royalty space and some others, but I think a lot of it has been sort of discrete one offs, you know, in terms of well, and just to state another sort of statement of fact, and you can look at the public competitors, the BDCs in our space, their bookings were down flat to down, kind of through the first six months of the year, many of them that the guys that are our size, and they've talked about less deal flow and kind of that sponsor backed, you know, sort of tier a space.

Peter Bloomberg: I wouldn't say we're getting necessarily beat out by the traditional players, but a lot of it's been things like equity, bills have fallen through. There certainly is competition in the royalty space and some others, but I think a lot of it has been discrete one-offs.

Jody Sags: There certainly is competition, the role to space and some others, but I think a lot of it has been sort of discrete one-offs.

Jody Sags: In terms of, well, in just to say to another sort of statement of fact, and you can look at the public competitors, the BDCs in our space, their bookings were down, flat to down kind of through the first six months of the year. Many of them, the guys that are our size, and they've talked about less bill flowing, kind of that sponsor backed sort of tier A space. So there are a lot of people out there looking to deploy capital.

Peter Bloomberg: You know in terms of well in just to state another sort of

Peter Bloomberg: statement of fact, and you can look at the public competitors, the BDCs in our space.

Peter Bloomberg: Their bookings were down, flat to down, kind of through the first six months of the year, many of them, the guys that are our size, and they've talked about less deal flow and kind of that sponsor-backed, you know, sort of Tier A space. So there are a lot of people out there looking to deploy capital. What we have to do, I think, is find unique opportunities. You know, I think this relief royalty being a good example where it's off the run.

Jody Saggs: So there are a lot of people out there looking to deploy capital. What we have to do, I think, is find unique opportunities. You know, I think this relief, royalty being a good example where it's off the run, you know, JD, who's our director of underwriting did a fantastic job of that one, kind of three unique royalties and some pretty hairy structuring, you know, different geographies.

Jody Sags: What we have to do, I think it's find unique opportunities. I think this relief world team being a good example where it's off the run, JD, who's our director of underwriting, did a fantastic job of that one. Kind of three unique world teams and some pretty hairy structuring different geographies. So we're going to have to be creative; we're going to have to find unique opportunities. We've got to go hustle, we've got to have excellent customer service, we've got to lean on the people we've worked with. We certainly can't discount on banks to call us and give us nice 20 million dollar sponsor-backed deals.

Peter Bloomberg: J.D., who's our director of underwriting, did a fantastic job of that one.

Peter Bloomberg: kind of three unique

Speaker Change: World He is in some pretty hairy structuring, you know, different geographies. So we're gonna have to be creative. We're gonna have to find unique opportunities.

Jody Saggs: So we're going to have to be creative. We're going to have to find unique opportunities. We've got to go hustle. We've got to have excellent customer service. We've got to lean on the people we've worked with. We certainly can't just count on banks to call us and give us nice $20 million sponsor backed deals. Like, we'll never put money to work that way.

Speaker Change: We've got to go hustle. We've got to have excellent customer service. We've got to lean on the people we've worked with

Speaker Change: We certainly can't just count on banks to call us and give us nice $20 million sponsor-backed deals. We'll never put money to work that way. So it's going to be hustling and finding ways to be helpful to folks.

Jody Sags: We'll never put money to work that way. So it's going to be hustling and finding ways to be helpful to folks.

Scott Jensen: Okay, thanks.

Jody Saggs: So it's going to be hustling and finding ways to be helpful to folks. Okay, thanks. And another question, as you said, in your opening statements about the buyback that you bought another $2.6 million. Does that then hit the $10 million? Or you have no capacity left under the current buyback? And then if so, are there any plans?

Jody Sags: And another question, as you said in your opening statements about the buyback that you bought another 2.6 million, does that then hit the 10 million? Are you have no capacity left under the buy current buyback? And then it will, are there any plans to do? Yeah, no, so we do, because we did renew our program. I believe I want to make sure about this. I see, I think it was in May. We paid 15, 16, 17; we renew the program. You know, the rate limiting factor is going to be our credit facility. So we are talking and working with them to increase the bucket.

Speaker Change: Okay, thanks. And another question, as you said in your opening statements about the buyback that you bought another $2.6 million, does that then hit the $10 million? Do you have no capacity left under the current buyback?

Jody Saggs: Yeah, no, so we do because we did renew our program, I believe, I want to make sure about this, I think it was in May, we May 15, 16, 17, we renewed the program, you know, the rate limiting factor is going to be our credit facility. So we are we are talking and working with them to increase the bucket. But that that is going to be I mean, as of today, the it's $5 million on an LTM period, we're working with them. And I prefer not to the same thing until we get that, you know, finalized. But yeah, that's going to be the rate limiting factor right now.

Speaker Change: And then, if so, are there any plans to?

Speaker Change: Yeah, no, so we do because we did renew our program I believe

Speaker Change: I want to make sure about this, but I think it was in May, we, May 15th, 16th, 17th, we renewed the program.

Speaker Change: The rate limiting factor is going to be our credit facility.

Speaker Change: So we are we are talking and working with them to increase the bucket But that that is going to be I mean as of today the the it's five million dollars

Jody Sags: But that is going to be, I mean, as of today, it's 5 million dollars on an LPM period.

Jody Sags: We're working with him, and I prefer not to say anything until we get that, you know, finalized. But that's going to be the rate limiting factor right now.

Speaker Change: on an LTM period. We're working with him and I prefer not to say anything until we get that, you know, finalized, but yeah, that's going to be the right limiting factor right now.

Scott Jensen: Okay, that's great. That's all I'll have. If anyone else has questions. Okay. Continue. Thanks, Scott. Appreciate the support.

Speaker Change: okay that's great that's all I'll have if anyone else has questions okay continue thanks Scott appreciate the support

Scott Jensen: Thank you.

Operator: Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star one on your telephone. Okay, sirs, we currently have no questions on the lines at this time. So I will hand it back to Mr. Staggs for any closing comments. Great. Thank you, Operator. Thanks, everyone, for joining our second quarter call, and I hope everyone has a great Friday and great weekend. Bye-bye. Thank you, ladies and gentlemen, this concludes today's conference and you may disconnect your lines at this time and we thank you for your participation.

Operator: Once again, ladies and gentlemen, if you have any questions or comments, please press star one on your telephone keypad.

Speaker Change: Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star 1 on your telephone keypad.

Jody Sags: Okay, so as we currently have no questions on the lines at this time, I will hand it back to Mr. Spags for any closing comments. Great, thank you, operator. Thanks everyone for joining our second quarter call, and hope everyone has a great Friday and great weekend.

Speaker Change: Okay, sirs, we currently have no questions on the lines at this time, so I will hand it back to Mr. Staggs for any closing comments.

Mr. Staggs: Great. Thank you, Operator. Thanks, everyone, for joining our second quarter call. I hope everyone has a great Friday and great weekend. Bye-bye.

Operator: Bye bye. Thank you, ladies and gentlemen. This concludes today's conference, and you may disconnect your lines at this time. And we thank you for your participation.

Speaker Change: Thank you ladies and gentlemen. This concludes today's conference and you may disconnect your lines at this time and we thank you for your participation.

Operator: Good day, and welcome to the SWK Holdings, 2nd quarter, 2024 conference call. At this time, all participants are in a listen-only mode, and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Ira Gostin: Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Ira Gostin, Investor Relations.

Ira Gostin: Sir, the floor is yours.

Ira Gostin: Good morning, everyone, and thank you for joining the SWK Holdings, 2nd quarter, 2024 financial and corporate results call. Yesterday, we issued a press release detailing of financial results for the three months ending June 30, 2024. The press release can be found on the Investor Relations section of our website at SWK Hold.com under the news release section.

Ira Gostin: Before today's call, I would like to make the following statement regarding forward-looking statements. Today we will be making certain forward-looking statements about future expectations, plans, events and circumstances, including statements about our strategy, future operations and our expectations regarding our capital allocation and cash resources. These statements are based on our current expectations and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factor section of the SWK Holdings 10K filed with the SEC and other filings we make with the SEC from time to time. SWK Holdings disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise.

Ira Gostin: Joining me from SWK Holdings on today's call is Jody Sags, President and CEO, who will provide an update on SWK's 2nd quarter, corporate and financial results. And Jody, it's all yours. Go ahead, please. Thank you, Ira. And thanks everyone for joining our 2nd quarter conference call.

Jody Sags: First, I'd like to welcome our new CFO, Adam Rice. Adam joins SWK from a private credit platform and brings valuable loan and mortgage accounting and operational experience to SWK. During his first couple of months, Adam has familiarized himself with our financing structures, assisted our controller Courtney and our consultants with the 2Q accounting reporting, and started building a relationship with our partner banks.

Jody Sags: Adam will take a leading role with the financial reporting starting in 3Q and you will hear from him then. Welcome, Adam.

Jody Sags: SWK's core business is financing innovative commercial state's life science product companies through personally term loan generalities with a focus on $5 million to $25 million investments. During the 2nd quarter, our core finance segment generated $6.5 million of adjusted non-gap net income. The net finance receivables portfolio increased 19% year-over-year to 267 million and the portfolio effective yield improved 10 basis points year-over-year and 40 bips sequentially to 14.6%. Segment revenue increased 15% year-over-year to 10.7 million as the receivables growth was accompanied by a 15.4% realized year-over-year.

Jody Sags: 2nd quarter 2024 financial segment results were negatively impacted by a net $4.1 million of impairments taken to new to two non accrual borrowers and positively impacted by a $2.4 million increase in the carrying value of our luvian royalty as well as a $700,000 gain on the conversion of AOT private orange to common stock which was triggered by the company listing on the during the 2nd quarter we advance $7 million to two existing performing borrowers and in August we closed on an up to $11 million royalty monetization with relief therapeutics we are pursuing loans and royalties to multiple innovative life science companies and have the capital available to close these opportunities.

Jody Sags: Our Interest Division is ramping work with our strategic partner as evidenced by segment revenue nearly tripling sequentially $800,000. Under the strategic agreement Interest is entitled to receive low single digit millions minimum guaranteed revenue payments for each of the six month periods. For the first six months of the year we agreed that this requirement could be satisfied by bookings received at the end of the quarter. These bookings were deferred and the revenue will be realized over the next few quarters.

Jody Sags: Our partner made the full cash payment after quarter close satisfying the minimum guaranteed revenue payment requirement for the period. As a reminder the minimum guaranteed revenue payment is intended to help fund the operating cost of materials as revenue builds. We are pleased with the progress in terraces making as evidenced by increased bookings in a growing pipeline of CDMO projects. Turning to our share repurchase program we bought back $54,667 shares and a total cost of $1 million during the second quarter.

Jody Sags: Since quarter close we have repurchased an additional $155,000 shares for a total cost of $2.6 million. As of June 30th 2024 our gap book value per share was $22.75. A 4% increase compared to $21.79 as of June 30th 2023. Non-gap tangible financing book value per share total $20.17 a 6% increase compared to $18.95 as of June 30th 2023. During the quarter we wrote off the remaining value for potential future milestone and royalty payments associated with the Interest pet intelligence license to care therapeutics.

Jody Sags: This was in response to care's decision to discontinue the clinical program for the underlying oral pursuit of a program. Post this write off the Interest segment has a book value of approximately $5 million which consists almost entirely of PPNE.

Jody Sags: In summary during 2Q24 our financial statement has sold results which were negatively impacted by impairments at two bars. We are pursuing multiple financing opportunities and are working to close additional deals by year in. Our terrorist business is seen growth in revenue and bookings with the assistance of our partner in his position to be casual break even or better through the strategic partnership period.

Operator: With that let's open up the line to questions. Thank you. At this time we will be conducting our question and answer session. If you would like to ask a question please press star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. And you may press star two if you would like to remove your question from the queue. For participants using speaker equipment it may be necessary to pick up your handset before pressing the star One moment, please. What we pull for questions. Thank you.

Scott Jensen: We have a question from Scott Jensen, who is a private investor. Your line is life.

Scott Jensen: Good morning, Jody. Look, guys, nice quarter. I'm happy you took the carer up front charge and it's nice to see within the line. Thank you, the up, the writing up of the Aluven. That's kind of nice to see one go the other direction.

Scott Jensen: I guess my question is kind of twofold. One is, what is that market looking like to you out there? And then how do you deal with the competition that's coming from larger players, bigger institutions, all kind of coming out of different areas that they may be used to stay in their lane and now they're kind of coming in all over the lending map. What do you see out there as far as that?

Jody Sags: Yeah, good question. If you look at our pipeline this year, our pipelines at an all-time high, we've had more inflow at the top of the pipeline. I think part of that is due to Peter Bloomberg, our head of development has done a really good job and has started to hit his stride. In the funnel has been good. Our close rate has been down. I think perhaps the lowest has been the past few years.

Jody Sags: I mean, what we're seeing is I wouldn't say we're getting necessarily beat out by sort of the traditional players but a lot of it's been things like equity, those have fallen through. There certainly is competition, the role to space and some others but I think a lot of it has been sort of discrete one-offs. In terms of, well, in just to say to another sort of statement of fact and you can look at the public competitors, the BDCs in our space, their bookings were down, flat to down kind of through the first six months of the year many of them, the guys that are our size and they've talked about less bill flowing kind of that sponsor backed sort of tier A space. So there are a lot of people out there looking to deploy capital.

Jody Sags: What we have to do, I think it's find unique opportunities. I think this relief world team being a good example where it's off the run, JD, who's our director of underwriting did a fantastic job of that one. Kind of three unique world teams and some pretty hairy structuring different geographies. So we're going to have to be creative, we're going to have to find unique opportunities. We've got to go hustle, we've got to have excellent customer service, we've got to lean on the people we've worked with.

Jody Sags: We certainly can't discount on banks to call us and give us nice 20 million dollar sponsor backed deals. We'll never put money to work that way. So it's going to be hustling and finding ways to be helpful to folks.

Jody Sags: Okay, thanks. And another question, as you said in your opening statements about the buyback that you bought another 2.6 million, does that then hit the 10 million? Are you have no capacity left under the buy current buyback? And then it will, are there any plans to do? Yeah, no, so we do, because we did renew our program. I believe, I want to make sure about this. I see, I think it was in May, we paid 15, 16, 17, we renew the program.

Jody Sags: You know, the rate limiting factor is going to be our credit facility. So we are talking and working with them to increase the bucket. But that is going to be, I mean, as of today, it's 5 million dollars on an LPM period. We're working with him and I prefer not to say anything until we get that, you know, finalized, but that's going to be the rate limiting factor right now.

Operator: Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star one on your telephone keypad.

Jody Sags: Okay, so as we currently have no questions on the lines at this time, so I will hand it back to Mr. Spags for any closing comments. Great, thank you operator. Thanks everyone for joining our second quarter call and hope everyone has a great Friday and great weekend. Bye bye.

Operator: Thank you, ladies and gentlemen, this concludes today's conference and you may disconnect your lines at this time. And we thank you for your participation.