Q1 2025 SWK Holdings Corp Earnings Call

Operator: Good day, everyone.

Good day, everyone welcome to the S. W. K holdings first quarter 'twenty 'twenty five conference call at.

Operator: Welcome to the SWK Holdings first quarter 2025 conference call. At this time, all participants have been placed on a listen only mode, and the floor will be open for questions and comments after the presentation.

At this time, all participants have been placed on a listen only mode and the floor will be opened for questions and comments after the presentation.

Susan Hsu: It is now my pleasure to turn the floor over to your host, Susan Hsu, Investor Relations. The floor is yours.

Susan: It is now my pleasure to turn the floor over to your host Susan <unk> Investor Relations the floor is yours.

Susan Hsu: Thank you, Kelly.

Speaker Change: Thank you Kelly and good morning, everyone and thank you for joining us Debbie Kaye Holdings first quarter, 2025 financial and corporate results call.

Susan Hsu: Good morning, everyone. And thank you for joining SWK Holdings first quarter 2025 financial and corporate results call. Yesterday, SWK Holdings issued a press release detailing its financial results for three months, and then March 31 2025. The press release can be found in the Investor Relations section of SWK Holds.com under News Release.

Speaker Change: Yesterday as to BK Holdings issued a press release detailing its financial results for three months ended March 31st 2025.

Speaker Change: The press release can be found in the Investor Relations section of Debbie Kaye hold dot com under news releases.

Susan Hsu: Before beginning today's call, I would like to make the following statement regarding forward looking statement. Today we will make or we will be making certain for 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 resource. 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 SWK Holdings 10-K filed with the SEC and other filings we make with the SEC from time to time.

Speaker Change: Before beginning todays call I would like to make the following statement regarding forward looking statements today, we will make.

Speaker Change: We will be making certain forward looking statements about future expectations plans events and circumstances.

Speaker Change: Statements about our strategy future operations, and our expectations regarding our capital allocation and cash resources.

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 S. W. K holding 10-K filed with the SEC and other filings, we make with the SEC from time to time.

Susan Hsu: 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: That's W. K holding disclaims any obligation to update information contained in these forward looking statements, whether as a result of new information future events or otherwise.

Jody Staggs: Joining me from SWK Holdings on today's call is Jody Staggs, President and CEO, and Adam Rice, CFO, who will provide an update on SWK's first quarter 2025 corporate and financial results. Jody, you may go ahead. Thank you, Susan. And thanks, everyone, for joining our first quarter conference. We are pleased with STBK's first quarter performance, headlined by strong financial segment profitability, as well as a successful monetization of the majority of our royalty portfolio. First quarter SWK highlights include $8.6 million of finance segment adjusted non gap net income, bringing the trailing 12 month total to 26 million, a new $15 million financing to an innovative life science company, and continued partnership advancement between our mod three pharma division and its strategic partner.

Speaker Change: Joining me from S. W. K holdings on today's call is Jody stays president and CEO and auto race CFO.

Speaker Change: Provide an update on SD Vacates first quarter 2025, corporate and financial results. Jody you May go ahead.

Speaker Change: Thank you Susan and thanks, everyone for joining our first quarter conference call.

Speaker Change: We are pleased with <unk> first quarter performance headlined by strong financial segment profitability as well as the successful monetization of the majority of our royalty portfolio.

Speaker Change: First quarter as to vacate highlights include $8 $6 million of finance segment adjusted non-GAAP net income, bringing the trailing 12 month total to $26 million.

Speaker Change: The new $15 million of financing to an innovative life science companies.

Speaker Change: Two new partnership advancement between our Mark III, former division and its strategic partner.

Jody Staggs: Our non gap tangible financing book value per share grew to $21.73, achieving our stated goal of 10% year over year growth. My three as an additional 38 cents per share of tangible book value bringing our total tangible book value per share to $22 and 11 pro forma for the May 2025 $4 per share special dividend. Our total tangible book value per share was $18 and 11 Year to date we have repurchased $1.1 million of our shares and with the stock trading at a discount to book value and given our excess capital, I expect the board will authorize a new share repurchase program in coming days.

Speaker Change: non-GAAP tangible financings and value per share grew to $21 73.

Speaker Change: Achieving our stated goal of 10% year over year growth.

Speaker Change: Badri adds an additional 38 cents per share of tangible book value, bringing our total tangible book value per share to $22 in 11 states.

Speaker Change: Pro forma for the May 20 to 25 $4 per share special dividend, our total tangible book value per share was $18 11.

Speaker Change: Year to date, we have repurchased one $1 million of our shares and with the stock trading at a discount to book value and given our excess capital I expect the boardwalk authorize a new share repurchase program in coming days.

Jody Staggs: At March 31, 2025, our gross finance receivables portfolio consisted of approximately $220 million of performing performing first lien loans, and $13 million of non accruals, against which we have a $9 million CECL reserve, bringing net finance receivables to 224 million. And that is pro forma for the sale of the royalty portfolio. We also hold $5 million of public equities and warrants, as well as private warrants and post-workout contingent economic interest carried at zero on our book. Finally, gross cash as of today totaled approximately $22 million and our revolving credit facility is undrawn. At March 31st 2025, the finance receivable portfolio had an effective or model yield of 14.5%.

Speaker Change: At March 31, 2025, our gross finance receivables portfolio consisted of approximately $220 million of affirming conforming first lien loans and $13 million of non accruals against which we have $89 million seasonal reserve, bringing net finance receivables to 224 million and that is pro forma.

Speaker Change: For the sale of the royalty portfolio.

Speaker Change: We also hold a $5 million of public equities and warrants as well as private rewards and post workout contingent economic interest carried at zero on our books.

Speaker Change: Finally, gross cash gross cash as of today totaled approximately $22 million and a revolving credit facility is undrawn.

Speaker Change: At March 31, 2025, the finance receivable portfolio had an effective yield of 14, 5%.

Jody Staggs: So if the portfolio repays as modeled, it should generate approximately $32 million of annual We are pursuing additional financing, including upsizing existing performing borrowers, as well as agreements with new partners. The market for high quality bars remains competitive and we will pick our spots to maintain a high quality portfolio that can earn a mid-teens return. We believe the portfolio remains strong and the most recent credit score reached an all time high. As a reminder, we rank our portfolio from one to five with five the highest score. At March 31st, we had the three non-accruals totaling $13 million and two two-rated credits totaling roughly $20 million.

Speaker Change: So if the portfolio repays his model it should generate approximately $32 million in annual interest income.

Speaker Change: We are pursuing additional financing financings, including upsizing existing performing borrowers as well as agreements with new partners.

Speaker Change: The market for high quality borrowers remains competitive and we will pick our spots to maintain a high quality portfolio that can earn a mid teens return.

Speaker Change: Yeah.

Speaker Change: We believe the portfolio remains strong and the most recent credit score reached an all time high as a reminder, we rank our portfolio from one to five with five the highest score.

At March 31, we had the three non accruals totaling $13 million and two two rated credits totaling roughly $20 million.

Jody Staggs: The two rated credits are both accrual and we are in regular conversations with both borrowers. We continue to monitor the ongoing health care and general economic regulatory changes. And at this time, we don't believe any of these changes pose outsized risk to our portfolio.

Speaker Change: Two rated credits are bolt accrual and we are in regular conversations with ballparks.

Speaker Change: We continue to monitor the ongoing health care in general economic regulatory changes and at this time, we don't believe any of these changes pose outsized risk to our portfolio.

Jody Staggs: Turning to how we are thinking about the pro-forma finance segment's go-forward economics. As previously mentioned, the current portfolio should generate approximately $32 million of interest income if it repays as modeled. On the expense side, we are targeting approximately $8 million of normalized annual OPEC. The bond interest expense totals three million dollars and our revolver carrying cost is approximately half a million dollars. So a reasonable target is approximately $20 million in the finance segment adjusted non-GAAP net income based on the current portfolio size. To be clear, this is not guidance and does not consider impairments, early payoffs, warrant gains, a normal OPEX, additional deployments, et cetera, and is really just intended to provide a framework for how to think about go-forward profitability.

Speaker Change: Turning to how we were thinking about the pro forma finance segments go forward economics.

Speaker Change: As previously mentioned the current portfolio should generate approximately $32 million of interest income if it repays asphalt.

Speaker Change: On the expense side, you're targeting targeting approximately $8 million of normalized annual opex.

Speaker Change: Interest expense totaled $3 million.

Speaker Change: All revolver carrying cost is approximately half a million dollars.

Speaker Change: So a reasonable target is approximately $20 million of finance segment adjusted non-GAAP net income based on the current portfolio size to.

Speaker Change: To be clear this is not guidance and does not consider impairment early payoffs warrant gains of normal opex additional appointments et cetera.

Speaker Change: And it was really just intended to provide a framework for how to think about go forward profitability.

Jody Staggs: Turning to our Mod 3 CDMO division, first quarter segment revenue was $1 million and segment EBITDA was a loss of half a million dollars.

Speaker Change: Turning to our Mod three CD Moe Division first quarter segment revenue was $1 billion and segment EBITDA was a loss of half a million dollars.

Jody Staggs: During the quarter, we received a $1.8 million option fee from our strategic partner, which is carried in deferred revenue. The partnership remains strong with both sides collaborating to grow the business.

Speaker Change: During the quarter, we received a $1.8 million option fee from our strategic partner, which is carried in deferred revenue.

Speaker Change: The partnership remains strong with both sides collaborating to grow the business. Our team at lottery is also working to monetize non core IP.

Jody Staggs: Our team at Mod3 is also working to monetize non-core IT.

Adam Rice: With that, I will turn the call to our CFO, Adam Rice, to review the quarter's financial results. Thank you, Jody. And good morning, everyone.

Speaker Change: With that I will turn the call to our CFO, Adam Rice to review the quarter's financial results.

Thank you Jody and good morning, everyone.

Adam Rice: Yesterday, we reported earnings for the first quarter of 2020. reported gap pre tax net income of 5.8 million or 48 cents per diluted share. are reported first quarter 2025 net income is 4.5 million after income tax expense of 1.3 This includes the $300,000 decrease in finance receivable segment revenue. and a $700,000 increase in pharmaceutical development segment. The $300,000 decrease in year-over-year finance receivable segment revenue. primarily due to a $2.4 million decrease in interest and fees earned due to partial pay downs and payoffs. The decrease was largely offset by a $2.1 million increase in interest and fees earned due to add-on fundings and newly funded finance receipts.

Speaker Change: Yesterday, we reported earnings for the first quarter of 2025.

Speaker Change: We reported GAAP pre tax net income of $5 8 million or <unk> 48 per diluted share.

Speaker Change: Our reported first quarter 2025, net income is $4 5 million after income tax expense of $1 3 million.

Speaker Change: This includes the $300000 decrease in finance receivables segment revenue.

Speaker Change: And a $700000 increase in pharmaceutical development segment revenue.

Speaker Change: $300000 decrease in year over year Finance receivable segment revenue was primarily due to a $2 4 million dollar decrease in interest and fees earned.

Due to partial paydowns and payoffs.

The decrease was largely offset by a $2 1 million increase in interest and fees earned due to the add on fundings and newly funded finance receivables.

Adam Rice: The previously mentioned pay down and funding activity is typical as SWK continually manages return of capital and capital deployment. As of March 31, 2025, our GAAP book value per share was $23.94. 6.8% increase compared to $22.42 as of March 31, 2020. Additionally, non-GAAP tangible book value per share total $21.73 as of March 31st, 2020. a 10.5% increase compared to $19.66 as of March 31st, 2020. Overall operating expenses, which include interest, pharmaceutical manufacturing, research, and development. General and administrative expense and provision for credit losses were $3.7 million during the first quarter of 2025, compared to $10.3 million in first quarter of 2025.

Speaker Change: The previously mentioned pay down and funding activity as typical as S. W. K continually manages return of capital and capital deployment.

Speaker Change: As of March 31, 2025, our GAAP book value per share was $23.94 a.

Speaker Change: Six 8% increase compared to $22.42 as of March 31, 2024.

Speaker Change: Additionally, non-GAAP tangible book value per share totaled $21 73 as of March 31, 2025.

Speaker Change: A 10, 5% increase compared to $19 66 as of March 31 2024.

Speaker Change: Overall operating expenses, which include interest pharmaceutical manufacturing research and development expense.

Speaker Change: General and administrative expense and provision for credit losses were $3 7 million during the first quarter of 2025.

Speaker Change: Compared to $10 3 million in first quarter of 2024.

Adam Rice: Mod 3 operating expenses were $1.5 million in first quarter of 2025 compared to $1.7 million in first quarter of 2020. and Finance Receivable Segment Operating Expenses. $2.2 million in first quarter of 2025 compared to $8.6 million in Q1 of 2025. The finance receivable operating expenses further break down for first quarter of 2025, the general and administrative expenses of $2.6 million, provision for credit losses, in this case a gain of $1.5 million. and interest expense of 1.1 And for first quarter of 2024 general and administrative expenses of 2 million provision for credit losses of 5.3 million and interest expense of 1.3 The decrease in finance receivable segment operating expenses was mainly due to a $6.8 million decrease in provision for credit loss.

Speaker Change: My three operating expenses were $1.5 million in first quarter of 2025 compared to $1 7 million in first quarter of 2024.

Speaker Change: And finance receivables segment operating expenses.

Speaker Change: $2 2 million in first quarter of 2025 compared to $8 6 million in Q1 2024.

Speaker Change: The finance receivable operating expenses further breakdown for the first quarter of 2025, the general and administrative expenses of $2 6 million provision for credit losses. In this case, a gain of $1 5 million.

Speaker Change: And interest expense of $1 1 billion.

Speaker Change: And for first quarter of 2020 core general and administrative expenses of 2 million provision for credit losses of $5 3 million and interest expense of $1 3 million.

Speaker Change: The decrease in finance receivables segment operating expenses was mainly due to a $6 $8 million decrease in provision for credit losses.

Adam Rice: The decrease in provision for credit losses is most notably attributed to $1 million $1 million of asset impairments in first quarter of 2025 versus $6 million of asset impairments in Q1 of 2020.

Speaker Change: The decrease in provision for credit losses, as most notably attributable to $1 million.

Speaker Change: $1 million of asset impairments and first quarter of 2025 versus $6 million of asset impairments in Q1 of 2024.

Adam Rice: Turning to our share repurchase program, we bought back approximately 52,000 shares at a total cost of $900,000 during the quarter. And since quarter close, we have repurchased an additional 11,000 shares for a total cost of $200,000.

Speaker Change: Turning to our share repurchase program, we bought back approximately 52000 shares at a total cost of $900000 during the quarter and since quarter close we repurchased an additional <unk>.

Speaker Change: 11000 shares for a total cost of 200.

Jody Staggs: With that, I'll turn it back over to Adam. Thanks, Adam. We are pleased with our first quarter results and believe we are positioned for a successful 2025. We have simplified the business and are focused on earning an appropriate return on our equity capital. The management team aboard are focused on achieving value for our share.

Jodi: With that I'll turn it back over to Jodi.

Jodi: Thanks, Adam we're pleased with our first quarter results and believe we are positioned for a successful 2025, we have simplified the business and are focused on earning an appropriate return on our equity capital and the management team aboard a focus on achieving value for our shareholders.

Operator: With that, let's open the call to questions. Certainly, the floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold a moment while we pull for any questions. Once again, if you do have any questions or comments, please press star one, please hold just a moment while we pull for any questions.

Jodi: Let's open up the call to questions.

Jodi: Certainly the floor is now opened for questions. If you have any questions or comments. Please.

Jodi: Please press star one on your phone at this time, we ask that while posing a question you. Please pickup your handset if listening on a speaker phone to provide the optimal sound quality. Please hold while we poll for any questions.

Jodi: Once again, if you do have any questions or comments. Please press star one please hold just a moment, while we poll for any questions.

Operator: We have a question coming from Scott Jensen. Please pose your question. Your line is live.

Scott Jensen: We have a question coming from Scott Jensen. Please pose your question your line is live.

Scott Jensen: Good morning, and congratulations, Jody, to you and the team. Great progress. Again, and thank you for the special dividend. Return of capital is great.

Scott Jensen: Good morning.

Speaker Change: Congratulation Jody to you and the team Great progress Scott again, and thank you for the special dividend.

Speaker Change: Our return on capital was great I guess my first.

Jody Staggs: I guess my first Question is on those you you mentioned the two that scored a number two on your credit the 20 million are those loans or those royalties or is it a combination? Unknown Speaker. Yes. Unknown Speaker. Yeah, those are both loans. So we have three, the three non accruals are post reorg royalties is how I'll define them. And those are situations that where we've taken them through some type of process, and really, we're just largely passive check collectors at this point in time. The two loads are still first lien term loans, that you know, where we have the full lien, covenants, etc.

Scott Jensen: Question is on those you you mentioned the.

Scott Jensen: To that scored a number two on your credit the $20 million or those loans or are those royalties or is it a combination.

Scott Jensen: Uhm.

Scott Jensen: Yeah.

Speaker Change: Yes, those are both loans. So we have three the three non accruals are post reward royalties at how old to find them and those are situations, where we've taken them through some type of process and really we're just largely passive chat collectors at this point in time.

Scott Jensen: The two loads are still first lien term loans.

Scott Jensen: That you know, where we have the full lien covenants et cetera.

Scott Jensen: Okay, excellent.

Scott Jensen: Um, and I just, you know, congratulations on seeing some of these big upsize borrowers, Eton, Journey, you know, both have, yeah, I wish I owned both of stocks this week. You know, and I'm glad that you at least have equity warrants on Eaton or Eton, pushing 20 and Durham up what 19% yesterday. And they have an at the market offering open so they can keep raising, you know, capital and they've got a pretty good cash balance. So congratulations. Unknown Borrowers Performing Well. So when we when you talk about competition out there, you know, clearly, there's a lot of focus on private credit and and other people.

Scott Jensen: Excellent.

Scott Jensen: And I just you know congratulations I've seen some of these big Upsized bar.

Speaker Change: Borrowers Ito on journey, Yeah, Bose, it's yeah, I wish I own both those stocks. This week you know what I'm glad that you at least have the equity warrants on E. E. R E. Todd that's correct.

Scott Jensen: Pushing 20 in Durham up 19% yesterday.

Scott Jensen: And they have an at the market offering open so they can keep raising capital and they've got a pretty good cash balance so congratulation seeing those borrowers are performing well.

Scott Jensen:

Scott Jensen: So when we.

Scott Jensen: We when you talk about competition out there you know.

Scott Jensen: Clearly, there's a lot of focus on private credit and and other people are you seeing people.

Jody Staggs: Are you seeing people? just in the space in general. leaking in to your space? Or are you at the sides where it doesn't really, you know, benefit them? The clients that you're you talk to? Yes, so I think our space is still very interesting, the kind of 10 to $25 million space and, but there, there's other folks in our space. And you know, you can imagine some of these, some of the names, the types of names that you mentioned, those people are going to get hit up to reply to reprice, I mean, those are big enough to definitely catch people's attention.

Scott Jensen: In this space in general.

Scott Jensen: Leaking into your space or are you at the size, where it doesn't really.

Scott Jensen: Benefit them the clients that you're you talked to.

Scott Jensen: Yes, so I think our space is still very interesting are the kind of $10 million to $25 million space and but there. There's other folks in our space and you can imagine some of these some of the knee. The types of names that you mentioned those people are going to get hit up to refi to reprice I mean, those are big enough.

Scott Jensen: Definitely catch People's attention. So you know we've got a really be good partners and be proactive in those situations and you know a new names.

Jody Staggs: So, you know, we've got to really be good partners, be proactive in those situations. And, you know, a new names Howard Freiman, if it's a 20 or 25 million-dollar loan, that's just obvious, obviously over-collateralized, there's gonna be folks around that. So we have won some of those. We have to really be creative and thoughtful with the proposals and show excellent customer service. And then we need to find some of the 10s and 15s that maybe aren't quite as obvious on day one to you know, where we feel, hey look, it fits our underwriting criteria. We're underwriting to a sub 40% LTV, we feel like this is a loan, not an equity piece, but maybe it's not just so obvious where you can just sort of say, hey look, this is a 200 million-dollar market cap and you know, they've got a bid on the company and it's a no-brainer, if that makes sense.

Scott Jensen: I mean, how would you frame it if it's a 20 or $25 million loan. That's just obvious you know obviously over collateralized, there's gotta be folks around that so we we had won some of those are we have to really be creative and thoughtful with the proposals and show excellent customer service and then we we need to apply some of the tens and fifteens that maybe art.

Scott Jensen: Quite as obvious on day, one to where we feel like it fits our underwriting criteria, we're underwriting to a sub 40% LTV. We feel like this is a low not an equity piece, but maybe it's not just so obvious where you can just sort of say Oh. This is the 200 million dollar market cap and they've got a bid on the company.

Scott Jensen: It's a no brainer if that makes sense right yeah no. It does.

Scott Jensen: Right, yeah, no, it does.

Scott Jensen: And so when you talk about like tangible book and you look on your 10 Qs or Ks and you see things like, you know, to be determined like molecular, you know, it says, you know, you might have some warrants. That was a really interesting company. I'm not surprised they paid you back. You know, how are those things or zebra with you get CDR rights? Like, are those just carried at zero, like a lot of things? So my point being that there's, there can be both up and downside, it could stay at zero, but there's potential that some of that stuff could, you know, help cover up when challenging times arise.

Scott Jensen: And so when you talk about like tangible book and I. You know you look at your 10, Qs or case and you see things like you know to be determined like molecular life. You know it says you know you you might have some warrants that was a really interesting company.

Scott Jensen: I'm not surprised they pay you back.

Scott Jensen:

Scott Jensen: Or are those things are exempt draw with you get CVR rights like are those just carry that zero like a lot of things so yeah.

Scott Jensen: My point being that there's there can be both up and downside it could stay at zero, but there's potential that some of that stuff could you know help cover up when challenging times. There is a is that kind of how I should read those.

Jody Staggs: Is that kind of how I should read those? Unknown Speaker, Unknown Attendee, Unknown Shareholder, Adam Rice, Unknown Shareholder, instruments, I'll call them that are either private warrants, or, you know, we've got you mentioned this TBR, we've got a couple of reorg tail payments, those are all carried at zero. And some of them are not going to be worth anything. But they're, presumably, I think they are worth more than zero. You know, there's a couple of there's could be pretty interesting. The challenge is a private companies until they sell, you really don't know what they're worth.

Scott Jensen: Sets or you know potential assets warrants yeah, yeah, that's right. So I've got to fall pulled up here, we have 12 discrete.

Scott Jensen: Instrumental to call them that are either private words or we've got you mentioned the T. V are we've got a couple of re org.

Scott Jensen: All payments those are all carried at zero and some of them are not can be worth anything but yeah.

Speaker Change: But I think they are worth more than T. Rowe.

Scott Jensen: Yeah, there's a couple where there could be pretty interesting that the challenges a private.

Scott Jensen: Private companies until they sell you really don't know what they're worth so I think it's just a fool's errand to try to value them like we probably would say yeah 10000, a year and stuff. So we carry those at zero.

Jody Staggs: So I think it's just a fool's error to try to value them like we probably could spend 1000 a year on stuff. So we carry those at zero. And then, you know, Some of these will work out, some of them won't. But yeah, we do think there is some value there, and again, those are all carried at zero.

Scott Jensen: And then you know.

Scott Jensen: Some of these will work out some of them won't but yeah. We do think there there is some value there and again those are all carried it at zero and then the other thing we haven't talked much about this and again. This is a this is not a.

Jody Staggs: You know, and then the other thing, and we haven't talked much about this, and again, this is not a huge piece of value, but we do have a couple of pieces of IP at mod three in terrorist, actually. Well, the current mod three that would fall outside the APA of the purchase option agreement that we've set is out there, and there's a couple of interesting things there. Can we find a way to get something for those? I don't know, and I doubt it would be a big chunk up front, but maybe there's some tail payments there as well.

Scott Jensen: A huge piece of value, but we do have a couple of pieces of IP at.

Scott Jensen: Badri it terrorist actually well yeah. The the current lottery that yeah, well outside the E P a of.

Scott Jensen: The purchase option agreement that you know we we've said is is out there.

Scott Jensen: And there's a couple of interesting things there can we find a way to get something for those I don't know.

Scott Jensen: I doubt it would be a big chunk up front, but.

Scott Jensen: Maybe there's some tell payments there as well so yeah to your point there are some.

Scott Jensen: So yeah, to your point, there's some, you know, some of the portfolio, you know, there's always some risk there versus how we think things play out, but there's also, you know, there's a number of things marked at zero on our books where there could be some upside, too. Awesome. Thank you. I'll get out of the queue. And congratulations again. Nice part.

Scott Jensen: So some of the portfolio you know theres always some some risk there and.

Scott Jensen: Versus versus how we think things play out but there's also you know theres a number of things market zero on our books, where there could be some upside to it.

Speaker Change: Awesome. Thank you I'll get out of the queue and a congratulations again nice progress there Scott.

Operator: Once again, if you do have any questions or comments, please press star one at this time.

Speaker Change: Once again, if you do have any questions or comments. Please press star one at this time, please hold them on that while we poll for any additional questions.

Defano Latteby: Please hold a moment while we pull for any additional You have a question from Defano Latteby with Canal. Please pose your question. Your line is live.

Scott Jensen: You have a question from to find out a lot of people with canal. Please pose your question. Your line is live.

Jody Staggs: Hey, is this for me, Stefano? Hey, how are you, Joey? Good, good. Thanks for the question. Of course. So what is the best use of capital at this point for you guys? Great question. That kind of is the question. You know, look, we're kind of mentioned that the proforma book values, tangible book values 1811 and laid out where there could be some upside. So I think it's buying back stock is really interesting here. You know, we know the portfolio we can buy into a situation that we know that's diversified. So I think that's a great use of capital for us.

Scott Jensen: Hey, this one is the funnel for me I used to call. Her hey, how are you Julien good. Good. Thanks for the question of course, so what is the best use of capital at this point for you guys.

Scott Jensen: Yeah, Great. Great question that kind of is the question are you know look where you kind of mentioned that the pro forma book value tangible book value was 811 and laid out where there could be some upside. So I think it's buying back stock is is really interesting here you know, we we know the portfolio we can buy into a.

Scott Jensen: It's a situation that we know that's diversified so I think that's a great use of capital for us.

Jody Staggs: We, of course, have a fair amount of excess capital to do that. And I don't think that we're in a position to use all that capital on that. So that would be one I think we should do. We did pay a special dividend. I think that shows that the board is open to that. You know, and at this time there's nothing else like that plan, but I think the board showed you that they'll do that. And so that could be a use. And the third I think is, you know, selective additional loans, really keeping kind of right in our sweet spot to make sure we've got a portfolio that is stable to maybe modestly growing, that is sort of somewhat homogenous, and that is easy for everyone to see that, hey, look, this is value what we say it's valued at and should trade there.

Scott Jensen: We of course have a fair amount of excess excess capital to do that and I don't think that we're in a position to use all of that capital on that so that would be one I think we should do well.

Scott Jensen: We did pay the special dividend I think that shows that the board is open to that are you know in <unk>.

Scott Jensen: At this time Theres there, there's there's nothing else like that play in but I think the board showed you that they'll do that oh, so that that could be of use.

Scott Jensen: And the third I think is is you know selective additional loans are really keeping kind of right in our sweet spot to make sure. We've got a portfolio that is.

Scott Jensen: Stable to maybe modestly growing that is sort of somewhat homogenous in it and that is that it's easy for everyone to see that hey look this is valued what we say it's valued at and should trade. There. So I mean, I think it's kind of those those three things that's pretty it's pretty simple.

Defano Latteby: So, I mean, I think it's kind of those three things. It's pretty simple.

Defano Latteby: Thank you, Jordan.

Speaker Change: Thank you Jody and one more in terms of you know possible loan. He can doing here how would you couldnt figure out of the current situation and the current pipeline of possible loans versus let's say you know sequential quarter over quarter and last year. Do you think you have seen Bruce there are more opportunities the same.

Defano Latteby: One more in terms of you know, possible loans you can do in here, how will you configure the current situation and the current pipeline of possible loans versus let's say, you know, sequential quarter over quarter and last year? Do you think it has improved? There are more opportunities? The same? Yeah, you know, if you'd asked me to two months ago, I would have said, Wow, it's it's actually really pretty interesting. I want to pull back. There was a little bit of fear, you know, we've we've kind of in 60 days switch to okay, that's a little bit more animal spirits have pulled back in.

Scott Jensen: Yeah, you know [laughter], if you'd have asked me to two months ago I would've said Wow. It is actually really pretty interesting I don't want to pull back.

Speaker Change: There was a little bit of fear you know, we've we've kind of it in 60 days switch too okay. That's a little bit more animal spirits have pulled back and so the pipeline is probably I would say roughly the same as it's been over the past year, it's not a I'll call. It neutral it's not extremely attractive.

Jody Staggs: So the the pipeline is probably, I would say, roughly the same as it's been over the past year. It's not, I'll call it neutral. It's not extremely attractive, like it might have been, you know, 75 days ago, 60 days ago. But there's still there are still some opportunities, particularly in, you know, our neck of the woods, where, you know, some of the smaller companies still have a hard time getting capital. So I would call it kind of neutral over the past 12 months, and maybe modestly worse opportunity set sequentially, given that we've we've kind of moved away from some of the fear around the tariffs.

Scott Jensen: It might have been you know 75 days ago 60 days ago, but there's still there are still some opportunities, particularly in.

Scott Jensen: Our neck of the woods where are.

Scott Jensen: Some of the smaller companies still have a hard time getting capital. So I would call it kind of neutral over the past 12 months and maybe modestly worse opportunity set sequentially given that we've we've kind of moved away from some of the fear around it.

Scott Jensen:

Scott Jensen: Tariffs.

Defano Latteby: Okay, thank you, Jody. Thank you for taking my question. Absolutely. Thank you.

Charlie: Okay. Thank you Charlie and thank you for taking my question absolutely. Thank you.

Operator: There appear to be no further questions in queue at this time.

Charlie: They appear to be no further questions in queue. At this time I would now like to turn the floor back over to Jodi <unk> for closing remarks.

Jody Staggs: I would now like to turn the floor back over to Jody Staggs for closing remarks. Hey, great. Thank you for joining the call. Thank you for the questions. Adam and myself will be around today. Feel free to call if you have any questions. And just to say it, if anyone does have blocks that they want to talk about as it relates to capital allocation, please call myself or Adam. Happy to take those calls and discuss it with you. Hope everyone has a great Friday. Bye-bye. Thank you, everyone.

Speaker Change: Hey, great. Thank you for joining the call. Thank you for the questions Adam and myself will be around today feel free to call. If you have any questions and just to say it if.

Speaker Change: You know if anyone if and when it does how blocks that they want to talk about as it relates to capital allocation. Please call myself or Adam happy to take those calls and discuss it with you hope everyone has a great Friday bye bye.

Speaker Change: Okay.

Operator: This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Speaker Change: Thank you everyone. This does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.