Runway Growth Finance Corp.

Previous wording

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets;6

Current wording

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets;

Previous wording

an economic downturn or recession could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

Current wording

an economic downturn or recession, as well as the impairment or failure of financial institutions on both a domestic and global scale, could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

Previous wording

Runway Growth Finance Corp. ("we," "us," "our," or the "Company"), a Maryland corporation formed on August 31, 2015, is structured as an externally managed, non-diversified closed-end management investment company. On August 18, 2021, we changed our name to "Runway Growth Finance Corp." from "Runway Growth Credit Fund Inc." We are a specialty finance company focused on providing senior secured loans to high growth-potential companies in technology, life sciences, healthcare information and services, business services, financial services, select consumer services and products and other high-growth industries. Our goal is to create significant value for our stockholders and the entrepreneurs we support by providing high growth-potential companies with hybrid debt and equity financing that is more flexible than traditional credit and less dilutive than equity. Our investment objective is to maximize our total return to our stockholders primarily through current income on our loan portfolio, and secondarily through capital gains on our warrants and other equity positions. Our offices are in Chicago, Illinois; Menlo Park, California; and New York, New York.

Current wording

Runway Growth Finance Corp. ("we," "us," "our," or the "Company"), a Maryland corporation formed on August 31, 2015, is structured as an externally managed, non-diversified closed-end management investment company. On August 18, 2021, we changed our name to "Runway Growth Finance Corp." from "Runway Growth Credit Fund Inc." We are a specialty finance company focused on providing senior secured loans to high growth-potential companies in technology, healthcare, business services, financial services, select consumer services and products and other high-growth industries. Our goal is to create significant value for our stockholders and the entrepreneurs we support by providing high growth-potential companies with hybrid debt and equity financing that is more flexible than traditional credit and less dilutive than equity. Our investment objective is to maximize our total return to our stockholders primarily through current income on our loan portfolio, and secondarily through capital gains on our warrants and other equity positions. Our offices are in Chicago, Illinois; Menlo Park, California; and New York, New York.

Previous wording

We have elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "1940 Act"). We have also elected to be treated as regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). While we currently qualify, and intend to qualify annually, to be treated as a RIC, no assurance can be provided that we will be able to maintain our tax treatment as a RIC. If we fail to qualify for tax treatment as a RIC for any taxable year, we will be subject to U.S. federal income tax at corporate rates on any net taxable income for such year. As a BDC and a RIC, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source-of-income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our investment company taxable income and net tax-exempt interest.

Current wording

We have elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "1940 Act"). We have also elected to be treated as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). While we currently qualify and intend to qualify annually to be treated as a RIC, no assurance can be provided that we will be able to maintain our tax treatment as a RIC. If we fail to qualify for tax treatment as a RIC for any taxable year, we will be subject to U.S. federal income tax at corporate rates on any net taxable income for such year. As a BDC and a RIC, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying assets,” source-of-income limitations, asset diversification requirements, and the requirement to distribute annually at least 90% of our investment company taxable income and net tax-exempt interest.

Previous wording

We are externally managed by Runway Growth Capital LLC ("RGC"), an investment adviser that has registered with the SEC under the Investment Advisers Act of 1940, as amended. The Administrator, a wholly-owned subsidiary of RGC, provides all the administrative services necessary for us to operate.

Current wording

We are externally managed by Runway Growth Capital LLC ("RGC"), an investment adviser that has registered with the SEC under the Investment Advisers Act of 1940, as amended. Runway Administrator Services LLC (the "Administrator"), a wholly-owned subsidiary of RGC, provides all the administrative services necessary for us to operate.

Previous wording

On August 10, 2020, we, RGC, and certain other funds and accounts sponsored or managed by RGC and/or its affiliates were granted an order (the “Order”), as amended on August 30, 2022, that permits us greater flexibility than the 1940 Act permits to negotiate the terms of co-investments if our Board of Directors determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by RGC or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. We believe that the ability to co-invest with similar investment structures and accounts sponsored or managed by RGC or its affiliates will provide additional investment opportunities and the ability to achieve greater diversification. Under the terms of the Order, a majority of our independent directors are required to make certain determinations in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our and is consistent with our investment strategies and policies.

Current wording

On August 10, 2020, as amended on August 30, 2022, we, RGC, and certain other funds and accounts sponsored or managed by RGC and/or its affiliates were granted an order (the “Order”) that permits us greater flexibility than the 1940 Act permits to negotiate the terms of co-investments if our Board of Directors determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by RGC or its affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. We believe that the ability to co-invest with similar investment structures and accounts sponsored or managed by RGC or its affiliates provides additional investment opportunities and the ability to achieve greater diversification. Under the terms of the Order, a majority of our independent directors are required to make certain determinations in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment strategies and policies.

Previous wording

At December 31, 2023, we had investments in 52 portfolio companies, representing 22 companies in which we held loan and warrant investments, three companies in which we held loan investments and shares of common stock, preferred stock, or a combination with warrants, four companies in which we held a loan investment only, 16 companies in which we held warrant investments only, and seven companies in which we held shares of common stock, preferred stock, or membership interests only, or a combination with warrants. At December 31, 2022, we had investments in 49 portfolio companies, representing 28 companies in which we held loan and warrant investments, one company in which we held loan investments and shares of common, preferred stock, or a combination with warrants, six companies in which we held a loan investment only, nine companies in which we held warrant investments only, and five companies in which we held shares of common or preferred stock only, or a combination with warrants.

Current wording

As of December 31, 2024, we had investments in 57 portfolio companies, representing 23 companies in which we held debt and warrant investments, 5 companies in which we held debt investments and shares of common stock, preferred stock, or a combination with warrants, 4 companies in which we held a debt investment only, 17 companies in which we held warrant investments only, and 8 companies in which we held shares of common stock, preferred stock, equity interests only, or a combination thereof with warrants. As of December 31, 2023, we had investments in 52 portfolio companies, representing 22 companies in which we held debt and warrant investments, 3 companies in which we held debt investments and shares of common, preferred stock, or a combination with warrants, 4 companies in which we held a debt investment only, 16 companies in which we held warrant investments only, and 7 companies in which we held shares of common stock, preferred stock, or equity interests only, or a combination with warrants.

Previous wording

For the years ended December 31, 2023, December 31, 2022, and December 31, 2021, our debt investment portfolio had a dollar-weighted annualized yield of 15.8%, 13.7%, and 13.8%, respectively. We calculate the yield on dollar-weighted debt investments for any period measured as (1) total related investment income during the period divided by (2) the daily average of the fair value of debt investments outstanding during the period, including any debt investments on non-accrual status. As of December 31, 2023, our debt investments had a dollar-weighted average outstanding term of 58 months at origination and a dollar-weighted average remaining term of 39 months, or approximately 3.2 years. As of December 31, 2023, substantially all of our debt investments had an original committed principal amount of between $6.0 million and $85.0 million and pay cash interest at annual interest rates of between 8.0% and 15.6%.

Current wording

For the years ended December 31, 2024, December 31, 2023, and December 31, 2022, our debt investment portfolio had a dollar-weighted annualized yield of 14.9%, 15.8%, and 13.7%, respectively. We calculate the yield on dollar-weighted debt investments for any period measured as (1) total related investment income during the period divided by (2) the daily average of the fair value of debt investments outstanding during the period, including any debt investments on non-accrual status. As of December 31, 2024, our debt investments had a dollar-weighted average term of 58 months at origination and a dollar-weighted average remaining term of 37 months, or approximately 3.1 years. As of December 31, 2024, substantially all of our debt investments had a committed principal amount of between $6.0 million and $75.0 million and pay cash interest at annual interest rates of between 6.3% and 16.8%.

Previous wording

The value of our investment portfolio will change over time due to changes in the fair value of our underlying investments, as well as changes in the composition of our portfolio resulting from purchases of new and follow-on investments as well as repayments and sales of existing investments. For the year ended December 31, 2023, we funded, net of upfront fees at origination, $82.7 million in four new portfolio companies and $117.8 million in 14 existing portfolio companies. We also received $289.0 million in full or partial loan repayments from 12 portfolio companies and $7.3 million in scheduled principal payments from three portfolio companies. We received $44.0 thousand in proceeds from the termination of warrants, sale of preferred stock, and sale of common stock. For the year ended December 31, 2022 we funded, net of upfront fees at origination, $396.5 million in 14 new portfolio companies and $226.2 million in 12 existing portfolio companies. We also received $151.9 million in partial and full loan prepayments from eight portfolio companies and $2.5 million in scheduled principal payments from three portfolio companies. We received $7.2 million in proceeds from the termination of warrants, sale of preferred stock, and sale of common stock.

Current wording

The value of our investment portfolio will change over time due to changes in the fair value of our underlying investments, as well as changes in the composition of our portfolio resulting from purchases of new and follow-on investments as well as repayments and sales of existing investments. For the year ended December 31, 2024, we funded $220.4 million in 8 new portfolio companies, $5.6 million in one joint venture, and $28.1 million in 6 existing portfolio companies, net of upfront loan origination fees and refinances. We also received $224.4 million in sales and prepayments from 9 portfolio companies and $4.8 million in scheduled principal payments from two portfolio companies. There was $2.0 million in proceeds from the termination of warrants, sale of preferred stock, sale of equity interest, or sale of common stock during the year ended December 31, 2024. For the year ended December 31, 2023 we funded $82.7 million in four new portfolio companies, and $117.8 million in 14 existing portfolio companies, net of upfront loan origination fees and refinances. We also received $289.0 million in loan sales and prepayments from 12 portfolio companies and $7.3 million in scheduled principal payments from three portfolio companies. There was $44.0 thousand in proceeds from the termination of warrants, sale of preferred stock, sale of equity interest, or sale of common stock during the year ended December 31, 2023.

Previous wording

Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or due to a restructuring such that the interest income is deemed to be collectible. As of December 31, 2023, we had no loans on non-accrual status. As of December 31, 2022, we had one loan to Pivot3, Inc. on non-accrual status. The loan, with a cost basis of $19.2 million and a fair market value of $9.3 million represents 0.8% of the total investment portfolio. From being placed on non-accrual status through December 31, 2022, cumulative interest of $3.6 million would be payable and $0.3 million OID would be accreted into the cost basis, for a total of $3.9 million not recorded in Interest income from control investments on the Consolidated Statements of Operations. As of December 31, 2022, we have not written off any accrued and uncollected PIK interest.

Current wording

Generally, when interest and/or principal payments on a loan become past due, or if we otherwise do not expect the borrower to be able to service its debt and other obligations, we will place the loan on non-accrual status and will cease recognizing interest income on that loan for financial reporting purposes until all principal and interest have been brought current through payment or upon restructuring such that the interest income is deemed to be collectible. As of December 31, 2024, we had two senior secured term loans on non-accrual status; one loan to Mingle Healthcare Solutions, Inc. with a cost basis of $5.0 million and a fair value of $2.1 million, and one loan to JobGet Holdings, Inc. (fka Snagajob, Inc.), with a cost basis of $3.8 million and a fair value of $3.4 million, which together represent 0.5% our total investment portfolio. From being placed on non-accrual status through December 31, 2024, cumulative interest of $0.7 million would be receivable from Mingle Healthcare Solutions, Inc. and was not recorded in Interest income on the Consolidated Statements of Operations. From being placed on non-accrual status through December 31, 2024, cumulative interest of $4.2 million would be receivable from JobGet Holdings, Inc. (fka Snagajob, Inc.) and $0.3 million OID would be accreted into the cost basis, for a total of $4.5 million that was not recorded in Interest income on the Consolidated Statements of Operations. As of December 31, 2024, we had reversed interest income of $0.3 million related to the senior secured term loans on non-accrual status. As of December 31, 2023, we had no loans on non-accrual status and had not written off any accrued and uncollected interest income.

Previous wording

An important measure of our financial performance is net increase/(decrease) in net assets resulting from operations, which includes net investment income/(loss), net realized gain/(loss) and net change in unrealized gain (loss). Net investment income/(loss) is the difference between our income from interest, dividends, fees and other investment income and our operating expenses, including interest on borrowed funds. Net realized gain/(loss) on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost. Net change in unrealized gain (loss) on investments is the net change in the fair value of our investment portfolio.

Current wording

An important measure of our financial performance is "Net increase (decrease) in net assets resulting from operations" on the Consolidated Statements of Operations, which includes "Net investment income (loss)", "Net realized gain (loss) on investments" and "Net change in unrealized gain (loss) on investments". "Net investment income (loss)" is the difference between our income from interest, dividends, fees and other income and our operating expenses, including interest on borrowed funds. "Net realized gain (loss) on investments" is the difference between the proceeds received from dispositions of portfolio investments and U.S. Treasury Bills and their amortized cost. "Net change in unrealized gain (loss) on investments" is the net change in the fair value of our investment portfolio.

Previous wording

The basic per share figures noted above are based on weighted averages of 40,509,269, 40,971,242, and 34,183,358 shares outstanding for the years ended December 31, 2023, 2022, and 2021, respectively.

Current wording

The basic per share figures noted above are based on weighted averages of 38,852,271, 40,509,269, and 40,971,242 shares outstanding for the years ended December 31, 2024, 2023, and 2022, respectively.

Previous wording

Our investment objective is to maximize total return to our stockholders primarily through current income on our loan portfolio, and secondarily through capital gain on our warrants and other equity positions. We intend to achieve our investment objective by investing in high growth-potential, private companies. We typically invest in senior secured loans that generally fall into two strategies: Sponsored Growth Lending and Non-Sponsored Growth Lending. We generally receive warrants and/or other equity from our investments. We expect our investments in loans will generally range from between $10.0 million to $100.0 million, and the upper end of this range may increase as we raise additional capital.

Current wording

Our investment objective is to maximize total return to our stockholders primarily through current income on our loan portfolio, and secondarily through capital gain on our warrants and other equity positions. We intend to achieve our investment objective by investing in high growth-potential, private companies. We typically invest in senior secured loans that generally fall into two strategies: Sponsored Growth Lending and Non-Sponsored Growth Lending. We generally receive warrants and/or other equity from our investments. We expect our global loan originations will generally range from between $30-$150 million, with the Company's allocation being in the range of $20-$45 million.

Previous wording

We generate revenue in the form of interest on the debt securities that we hold and distributions and capital gains on other interests that we acquire in our portfolio companies. We expect that the debt we invest in will generally have stated terms of 36 to 60 months. Interest on debt securities is generally payable monthly, primarily based on a floating rate index, and subject to certain floors determined by market rates at the time the investment is made. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest will become due at the maturity date. Any original issue discount ("OID") or market discount or premium will be capitalized, and we will accrete or amortize such amounts as interest income. We record prepayment fees on debt investments as fee income. Dividend income, if any, will be recognized on an accrual basis to the extent that we expect to collect such amounts.

Current wording

Wegenerate revenue in the form of interest on the debt securities that we hold and distributions and capital gains on other interests that we acquire in our portfolio companies. We expect that the debt we invest in will generally have stated terms of 36 to 60 months. Interest on debt securities is generally payable monthly, primarily based on a floating rate index, and subject to certain floors determined by market rates at the time the investment is made. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest will become due at the maturity date. Any original issue discount ("OID") or market discount or premium will be capitalized, and we will accrete or amortize such amounts as interest income. We record prepayment fees on debt investments as fee income. Dividend income, if any, will be recognized on an accrual basis to the extent that we expect to collect such amounts.

Previous wording

Investment income for the year ended December 31, 2023, 2022 and 2021 was $164.2 million, $107.8 million, and $71.1 million, respectively, and includes non-recurring income of $11.4 million, $3.5 million, and $9.2 million, respectively. Non-recurring income includes, but is not limited to, acceleration of unaccreted OID, prepayment fees, and amendment fees. The increase in investment income for the years ended December 31, 2023 compared to the years ended December 31, 2022 and December 31, 2021 was primarily due to increased interest income driven by our deployment of capital and increased market interest rates.

Current wording

Investment income for the year ended December 31, 2024, 2023 and 2022 was $144.6 million, $164.2 million, and $107.8 million, respectively, and includes non-recurring income of $6.2 million, $11.4 million, and $3.5 million, respectively. Non-recurring income includes, but is not limited to, acceleration of unaccreted OID, prepayment fees, and amendment fees. The decrease in investment income for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to decreased interest income and payment-in-kind interest income. The increase in investment income for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to increased interest income driven by our deployment of capital and increased market interest rates.

Previous wording

Operating expenses for the years ended December 31, 2023, 2022 and 2021 were $85.9 million, $48.0 million, and $26.6 million, respectively. Operating expenses increased for the year ended December 31, 2023 from the years ended December 31, 2022 and 2021 primarily due to increased interest and other debt financing expenses, as well as increased management and incentive fees. Operating expenses per share for the years ended December 31, 2023, 2022 and 2021 were $2.12 per share, $1.17 per share and $0.78 per share, respectively.

Current wording

Operating expenses for the years ended December 31, 2024, 2023 and 2022 were $80.9 million, $85.9 million, and $48.0 million, respectively. Operating expenses decreased for the year ended December 31, 2024 from the year ended December 31, 2023 primarily due to a decrease in performance-based incentive fees and management fees. Operating expenses increased for the year ended December 31, 2023 from the year ended December 31, 2022, primarily due to increased interest and other debt financing expenses, as well as increased performance-based incentive fees and management fees. Operating expenses per share for the years ended December 31, 2024, 2023 and 2022 were $2.08 per share, $2.12 per share and $1.17 per share, respectively.

Previous wording

Management fees for the years ended December 31, 2023, 2022, and 2021 were $16.7 million, $11.9 million, and $9.0 million, respectively. Management fees increased for the year ended December 31, 2023 as compared to the years ended December 31, 2022 and 2021 due to an increase in gross assets, offset by a decrease in the base management rate from 1.6% per annum for 2021 and 2022 to 1.5% per annum in 2023.

Current wording

Management fees for the years ended December 31, 2024, 2023, and 2022 were $15.7 million, $16.7 million, and $11.9 million, respectively. Management fees decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to decreased daily average gross assets. Management fees increased for the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to an increase in the daily average gross assets offset by a decrease in the base management rate from 1.6% per annum in 2022 to 1.5% per annum in 2023.

Previous wording

Incentive fees for the years ended December 31, 2023, 2022, and 2021 were $19.0 million, $13.2 million and $9.2 million, respectively. Incentive fees increased for the years ended December 31, 2023 from the years ended December 31, 2022 and 2021 primarily due to an increase in net investment income. For the year ended December 31, 2023, $14.1 million of the incentive fees were earned and payable in cash, and $4.9 million were deferred and accrued. For the year ended December 31, 2022, $11.0 million of the incentive fees were earned and payable in cash, and $2.2 million were deferred and accrued. For the year ended December 31, 2021, $7.4 million of the incentive fees were earned and payable in cash, and $1.8 million were deferred and accrued. Incentive fees related to paid-in-kind or deferred interest are accrued and payment is deferred until such interest is collected in cash. Incentive fees per share for the years ended December 31, 2023, 2022, and 2021 were $0.47 per share, $0.32 per share, and $0.27 per share, respectively.

Current wording

Incentive fees for the years ended December 31, 2024, 2023, and 2022 were $14.6 million, $19.0 million and $13.2 million, respectively. Incentive fees decreased for the year ended December 31, 2024 from the year ended December 31, 2023 due to an decrease in net investment income. Incentive fees increased for the year ended December 31, 2023 from the year ended December 31, 2022 due to an increase in net investment income. For the year ended December 31, 2024, $13.6 million of the incentive fees were earned and payable in cash, and $1.0 million were deferred and accrued. For the year ended December 31, 2023, $14.9 million of the incentive fees were earned and payable in cash, and $4.1 million were deferred and accrued. For the year ended December 31, 2022, $11.8 million of the incentive fees were earned and payable in cash, and $1.4 million were deferred and accrued. Incentive fees related to PIK or deferred interest are accrued and payment is deferred until such interest is collected in cash. Incentive fees per share for the years ended December 31, 2024, 2023, and 2022 were $0.38 per share, $0.47 per share, and $0.32 per share, respectively.

Previous wording

Net investment income for the years ended December 31, 2023, 2022 and 2021 was $78.3 million, $59.8 million, and $44.5 million, respectively. Net investment income increased for the year ended December 31, 2023 from the year ended December 31, 2022 and 2021 primarily due to increased interest and fee income earned on our portfolio investments, partially offset by increased interest and other debt financing expenses, management fees, and incentive fees.Net investment income per share for the years ended December 31, 2023, 2022 and 2021 was $1.93 per share, $1.46 per share and $1.30 per share, respectively.

Current wording

Net investment income for the years ended December 31, 2024, 2023 and 2022 was $63.8 million, $78.3 million, and $59.8 million, respectively. Net investment income decreased for the year ended December 31, 2024 from the year ended December 31, 2023 primarily due to a decrease in investment income resulting from a decrease in the average outstanding principal on interest-earning debt investments and declining interest rates, partially offset by decreased performance-based incentive fees and management fees. Net investment income increased for the year ended December 31, 2023 from the year ended December 31, 2022 primarily due to increased investment income earned on our portfolio investments, partially offset by increased interest and other debt financing expenses, management fees, and incentive fees. Net investment income per share for the years ended December 31, 2024, 2023 and 2022 was $1.64 per share, $1.93 per share and $1.46 per share, respectively.

Previous wording

The net realized loss on investments of $18.4 million for the year ended December 31, 2023 was attributable to losses in our loan to Pivot3,Inc. that was previously on non-accrual status, as well as our warrant investments in CareCloud, Inc. and Gynesonics, Inc. The net realized loss on investments of $1.1 million for the year ended December 31, 2022 was primarily due to losses on our warrants in Aspen Group, Inc. and CareCloud, Inc. and a loss in our Pivot3 Holdings, Inc. preferred stock, offset by gains on the sale of Brilliant Earth Group, Inc. common stock. The net realized gain on investments of $4.2 million for the year ended December 31, 2021 was primarily attributable to the gains on the sale of common stock in Porch Group, Inc. and Ouster, Inc., partially offset by a realized loss on our preferred stock in CareCloud, Inc.

Current wording

The net realized loss on investments of $2.9 million for the year ended December 31, 2024 was attributable to losses in our senior secured term loan and convertible note to Jobget Holdings, Inc (fka Snagajob, Inc.), offset by a gain on the exercise of Dtex, Inc. warrants into preferred stock and subsequent sale. The net realized loss on investments of $18.4 million for the year ended December 31, 2023 was attributable to losses in our loan to Pivot3, Inc. that was previously on non-accrual status, as well as our warrant investments in CareCloud, Inc. and Gynesonics, Inc. The net realized loss on investments of $1.1 million for the year ended December 31, 2022 was primarily due to losses on our warrants in Aspen Group, Inc. and CareCloud, Inc. and a loss in our Pivot3 Holdings, Inc. preferred stock, offset by gains on the sale of Brilliant Earth Group, Inc. common stock.

Previous wording

Net change in unrealized loss on investments of $15.5 million for the year ended December 31, 2023 was primarily attributable to decreases in the fair value of CareCloud, Inc. and Gynesonics Inc. preferred stock, a decrease in the fair value of FiscalNote, Inc. common stock, decreases in the fair value of Aria Systems, Inc., INRIX, Inc., and ShareThis, Inc. warrants, and decreases in the fair value of our senior secured term loans to Gynesonics, Inc., FiscalNote, Inc., and Snagajob.com Inc., offset by an increase in fair value of Route 92 Medical, Inc. senior secured term loan and a release in prior unrealized loss in our loan to Pivot 3, Inc. Net change in unrealized loss on investments of $26.5 million for the year ended December 31, 2022 was primarily due to decreases in the fair value of a senior secured loan to Pivot3, Inc., and decreases in the fair value of our common stock in Brilliant Earth Group, Inc. and Quantum Corporation. Net change in unrealized loss on investments of $3.0 million for the year ended December 31, 2021 was primarily due to decreases in the fair value of senior secured loans to Pivot3, Inc. and Aginity Inc., and our warrants for common stock in CareCloud, Inc. This decrease was offset by the increase in the fair value of our senior secured loans to Mojix, Inc. and our units of Brilliant Earth LLC.

Current wording

Net change in unrealized gain on investments of $12.8 million for the year ended December 31, 2024 was primarily due to an increase in the fair value of our senior secured loans to Gynesonics, Inc., our preferred stock investments in Gynesonics, Inc. and CareCloud, Inc., as well as a release of prior unrealized loss on the senior secured loan to Jobget Holdings, Inc. (fka Snagajob, Inc.), offset by decreases in fair value of our senior secured loans to Vesta Payment Solutions, Inc., Mingle Healthcare Solutions, Inc., 3PL Central LLC (dba Extensiv), Marleyspoon SE, and Blueshift Labs, Inc. Net change in unrealized loss on investments of $15.5 million for the year ended December 31, 2023 was primarily attributable to decreases in the fair value of CareCloud, Inc. and Gynesonics Inc. preferred stock, a decrease in the fair value of FiscalNote, Inc. common stock, decreases in the fair value of Aria Systems, Inc., INRIX, Inc., and ShareThis, Inc. warrants, and decreases in the fair value of our senior secured term loans to Gynesonics, Inc., FiscalNote, Inc., and

Previous wording

We had a net increase in net assets resulting from operations of $44.3 million for the year ended December 31, 2023, as compared to a net increase in net assets resulting from operations of $32.3 million and $45.6 million for the years ended December 31, 2022 and December 31, 2021, respectively. The net increase in net assets resulting from operations for the year ended December 31, 2023 from the year ended December 31, 2022 is attributable to an increase in net investment income and a decrease in net change in unrealized losses, offset by an increase in net realized losses on investments. The net decrease in net assets resulting from operations for the years ended December 31, 2022 from the year ended December 31, 2021 was primarily attributable a net change in unrealized loss on investments compared to a gain in the prior year, as well as an increase in operating expenses, particularly increases in interest expense and debt financing fees due to an increase in borrowings. The decrease is partially offset by an increase in investment income.

Current wording

We had a net increase in net assets resulting from operations of $73.6 million for the year ended December 31, 2024, as compared to a net increase in net assets resulting from operations of $44.3 million and $32.3 million for the years ended December 31, 2023 and December 31, 2022, respectively. The increase for the year ended December 31, 2024 from the year ended December 31, 2023 is attributable to an increase net realized and unrealized gains on investments, offset by a decrease in net investment income. The net increase for the year ended December 31, 2023 from the year ended December 31, 2022 is attributable to an increase in net investment income and a decrease in net realized and unrealized gains on investments.

Previous wording

Financial Condition, Liquidity and Capital Resources

Current wording

Financial Condition, Liquidity, Capital Resources and Obligations

Previous wording

During the year ended December 31, 2023, our operating activities provided $112.4 million of cash and cash equivalents, compared to $359.8 million and $61.2 million used in operating activities during the years ended December 31, 2022 and 2021, respectively. The $472.3 million increase in cash provided by operating activities from December 31, 2022 to December 31, 2023 was primarily due to a $345.3 million decrease in purchases of investments and U.S. Treasury Bills and a $117.5 million increase in sales and repayments of investments and U.S. Treasury Bills.

Current wording

During the year ended December 31, 2023, our operating activities provided $112.4 million of cash and cash equivalents, compared to $359.8 million used in operating activities during the year ended December 31, 2022. The $472.3 million increase in cash flows from December 31, 2022 to December 31, 2023 was primarily due to a $345.3 million decrease in purchases of investments and U.S. Treasury Bills and a $117.5 million increase in sales and repayments of investments and U.S. Treasury Bills.

Previous wording

During the year ended December 31, 2023, our financing activities used $115.2 million of cash, compared to $360.9 million and $51.1 million provided by financing activities during the years ended December 31, 2022 and December 31, 2021, respectively. The $476.1 million decrease in cash flows provided by financing activities was primarily due to decreased net borrowing activity of $518.3 million, offset by decreased cash used in reverse repurchase agreements of $44.8 million and increased dividend distributions of $10.9 million. The $309.9 million increase in cash flows provided by financing activities was primarily due to increased net borrowing activity of $496.3 million, offset by decreased cash provided by reverse repurchase agreements of $149.2 million. The $298.6 million increase in cash used in operating activities from December 31, 2021 to December 31, 2022 was primarily due to a decrease of $324.7 million in sales, repayments, and maturities of investments and US Treasury bills, offset by an increase in purchases of investments and US Treasury bills of $11.7 million.

Current wording

During the year ended December 31, 2023, our financing activities used $115.2 million of cash and cash equivalents, as compared to $360.9 million provided by financing activities during the year ended December 31, 2022. The $476.1 million decrease in cash provided by financing activities was primarily due to a $518.3 million decrease in net borrowings activity offset by a decrease in repayments of reverse repurchase agreements of $44.8 million.

Previous wording

As of December 31, 2023, we had $281.0 million in available liquidity, including $3.0 million in cash and cash equivalents, and approximately $278.0 million available under our Credit Facility, subject to borrowing base capacity. As of December 31, 2023, we had $272.0 million of secured debt outstanding under our Credit Facility, which are floating interest rate obligations and $247.3 million of unsecured debt outstanding under 2026 and 2027 Notes, which are all fixed interest rate debt obligations. Refer to "Note 7 – Borrowings" to our consolidated financial statements in Part I, Item 8 of this Form 10-K for additional discussion of our debt obligations.

Current wording

As of December 31, 2024, we had $244.8 million in available liquidity, including $5.8 million in cash and cash equivalents, and approximately $239.0 million available under our Credit Facility, subject to borrowing base capacity. As of December 31, 2024, we had $311.0 million of secured debt outstanding under our Credit Facility, which are floating interest rate obligations and $247.3 million of unsecured debt outstanding under 2026 and 2027 Notes, which are all fixed interest rate debt obligations. Refer to "Note 7 – Borrowings" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for additional discussion of our debt obligations.

Previous wording

Pursuant to the 1940 Act, we are permitted to incur borrowings, issue debt securities, or issue preferred stock unless, immediately after the borrowings or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock is at least 150% (at least 200% prior to June 17, 2022). As of December 31, 2023 and December 31, 2022, our asset coverage ratio was 205% and 203%, respectively.

Current wording

Pursuant to the 1940 Act, we are permitted to incur borrowings, issue debt securities, or issue preferred stock unless, immediately after the borrowings or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock is at least 150% (at least 200% prior to June 17, 2022). As of December 31, 2024 and December 31, 2023, our asset coverage ratio was 192% and 205%, respectively.

Previous wording

Our significant contractual payment obligations relate to our borrowings and deferred incentive fees. As of December 31, 2023, we had $519.3 million of debt outstanding, none of which was due within the next year, $367.0 million within 1 to 3 years, and $152.3 million beyond 3 years. As of December 31, 2023, we had $9.2 million of deferred incentive fees, $2.6 million of which was due within the next year, $3.9 million within 1 to 3 years, and $2.7 million beyond 3 years.

Current wording

Our significant contractual payment obligations relate to our borrowings and deferred incentive fees. As of December 31, 2024, we had $558.3 million of debt outstanding, none of which was due within the next year, $558.3 million within 1 to 3 years, and none due beyond 3 years. As of December 31, 2024, we had $10.1 million of deferred incentive fees, $2.6 million of which was due within the next year, $4.9 million within 1 to 3 years, and $2.6 million beyond 3 years.

Previous wording

In addition to our on-balance sheet contractual obligations, in the normal course of business, we have future cash requirements related to our financial instruments with off-balance sheet risk. These consist of unfunded loan commitments to extend credit, in the form of loans, to our portfolio companies. Unfunded loan commitments to provide funds to portfolio companies are not reflected on our balance sheet.

Current wording

In addition to our on-balance sheet contractual obligations, in the normal course of business, we have future cash requirements related to our financial instruments with off-balance sheet risk. These consist of unfunded commitments to extend credit, in the form of loans, to our portfolio companies. Unfunded commitments to provide funds to portfolio companies are not reflected on our balance sheet.

Previous wording

Our unfunded loan commitments may be significant from time to time. As of December 31, 2023, we had $201.5 million in unfunded loan commitments to provide debt financing to its portfolio companies. Unfunded contractual commitments depend upon a portfolio company reaching certain milestones before the debt commitment is available to the portfolio company, which is expected to affect our funding levels. These commitments are subject to the same underwriting and ongoing portfolio maintenance as the on-balance sheet financial instruments that we hold. From time to time, unfunded contractual commitments may expire without being drawn and thus do not represent future cash requirements. We maintain sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded loan commitments should the need arise. As of December 31, 2023, we had approximately $42.0 million of available unfunded commitments eligible to be drawn based on achieved milestones. Refer to “Note 8 – Commitments and Contingencies” of our consolidated financial statements in Part I, Item 1 of this Form 10-Q for a summary of unfunded loan commitments by portfolio company as of December 31, 2023.

Current wording

Our unfunded commitments may be significant from time to time. As of December 31, 2024, we had a total of $176.7 million in unfunded commitments which was comprised of $147.3 million to provide debt financing to its portfolio companies and $29.4 million in unfunded commitments to provide equity financing to Runway-Cadma I LLC. Unfunded contractual commitments depend upon a portfolio company reaching certain milestones before the debt commitment is available to the portfolio company, which is expected to affect our funding levels. These commitments are subject to the same underwriting and ongoing portfolio maintenance as the on-balance sheet financial instruments that we hold. From time to time, unfunded contractual commitments may expire without being drawn and thus do not represent future cash requirements. We maintain sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded commitments should the need arise. As of December 31, 2024, we had approximately $24.8 million of available unfunded commitments eligible to be drawn based on achieved milestones. Refer to “Note 8 – Commitments and Contingencies” to our consolidated financial statements in Part II, Item 8 of this Form 10-K for a summary of unfunded commitments by portfolio company as of December 31, 2024.

Previous wording

On February 24, 2022, our Board of Directors approved a repurchase program (the “ Initial Repurchase Program”) under which we could have repurchased up to $25.0 million of our outstanding common stock. Under the Initial Repurchase Program, we could have repurchased shares at management’s discretion from time to time in open-market transactions, in accordance with all applicable securities laws and regulations. As of December 31, 2023 and December 31, 2022, we had repurchased 871,345 shares of our common stock under the Initial Repurchase Program for an aggregate purchase price of $10.8 million. The Board of Directors did not renew the Initial Repurchase Program, and it expired on February 24, 2023.

Current wording

On February 24, 2022, our Board of Directors approved a share repurchase program (the “First Repurchase Program”) under which we were authorized to repurchase up to $25.0 million of our outstanding common stock, at management’s discretion from time to time in open-market transactions and in accordance with all applicable securities laws and regulations. We repurchased 871,345 shares in connection with the First Repurchase Program for an aggregate purchase price of $10.8 million. The First Repurchase Program expired on February 24, 2023.

Previous wording

On November 2, 2023, our Board of Directors approved a new share repurchase program (the "Repurchase Program"), under which we may repurchase up to $25.0 million of our outstanding shares of common stock. Under the Repurchase Program, purchases may be made at management’s discretion from time to time in open-market transactions, in accordance with all applicable securities laws and regulations. As of December 31, 2023, we had repurchased 0 shares under the Repurchase Program. If not renewed, the Repurchase Program will terminate upon the earlier of (i) November 2, 2024 and (ii) the repurchase of $25.0 million of our shares of common stock.

Current wording

On July 30, 2024, our Board of Directors approved a share repurchase program (the "Third Repurchase Program") under which we may repurchase up to $15.0 million of our outstanding shares of common stock, at management's discretion from time to time in open-market transactions and in accordance with all applicable securities laws and regulations. If not renewed, the Third Repurchase Program will terminate upon the earlier of (i) July 30, 2025 or (ii) the repurchase of $15.0 million of our shares of common stock. As of December 31, 2024, we had repurchased 1,199,867 shares in connection with the Third Repurchase Program for an aggregate purchase price of $12.5 million.

Previous wording

For the years ended December 31, 2023, we declared and paid dividends in the amount of $73.3 million, of which $70.8 million was distributed in cash and the remainder distributed in shares to stockholders pursuant to our Dividend Reinvestment Plan. For year ended December 31, 2022, we declared dividends in the amount of $51.6 million, of which $40.7 million was distributed in cash and the remainder distributed in shares to stockholders pursuant to our dividend reinvestment plan (the "Dividend Reinvestment Plan"). For year ended December 31, 2021, we declared dividends in the amount of $44.9 million, of which $17.9 was distributed in cash and the remainder distributed in shares to stockholders pursuant to our Dividend Reinvestment Plan.

Current wording

For the years ended December 31, 2024, we declared and paid dividends in the amount of $69.9 million, of which $68.7 million was distributed in cash and the remainder distributed in shares to stockholders pursuant to our dividend reinvestment plan (the "Dividend Reinvestment Plan"). For year ended December 31, 2023, we declared dividends in the amount of $73.3 million, of which $70.8 million was distributed in cash and the remainder distributed in shares to stockholders pursuant to our Dividend Reinvestment Plan. For year ended December 31, 2022, we declared dividends in the amount of $51.6 million, of which $40.7 million was distributed in cash and the remainder distributed in shares to stockholders pursuant to our Dividend Reinvestment Plan.