Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to the SWK Holdings Corporation Second Quarter 2023 Corporate and Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Jason Rando with Tiberend Strategic Advisors. Please go ahead.

Jason Rando

Good evening, and thank you for joining SWK Holdings Second Quarter 2023 Financial and Corporate Results Call. issued X release XXXX. months Holdings results its SWK the for ended today, a detailing press financial Earlier June XX, press Releases. found of be release Investor The section Relations in swkhold.com the News under can

following candidates candidates, Before These beginning would on plans expectations, forward-looking forward-looking should operations and for I our today's on consumer plans, certain and the events Today, making of about including and product and allocation statement resources. studies undue these regarding potential cash our statements strategy, drug statements capital make our we're reliance product not place about like and expectations statements. statements regarding future to based call, the future statements. current and development circumstances, future and expectations are

may and our Holdings statements make of filings section otherwise. update uncertainties materially risks whether Risk in future obligation these any SEC result new results events SWK with as information detailed SWK information, SEC differ time to contained to or the of forward-looking and other the in with due to those including time. from Holdings Factors disclaims the a we XX-K filed Actual

on ahead. CEO; are update Financial go today's SWK Staggs, President second Jody quarter and SWK's on Joining from They will me financial and and Jody, results. Holdings Chief Heinrichson, an Yvette call Officer. provide XXXX corporate

Jody Staggs

thanks, and Jason, everyone, for call. joining you, quarter Thank second our conference

and several turnaround workouts. we on credit a made key quarter, concluding continuing $XX During progress and two in facility, financial including second operational initiatives, million the new Enteris the long-running closing

implementation multiple Tangible value X% CECL. to per quarter during XX.X% a by per share the generated after year's and of an end. we yield book and healthy, remains closings business share, increase are for towards working financing financing adjusting the increased year-over-year $XX.XX new Our realized

about be quarter, There $XX.XX, million book much of to at XX% an we of $XX.XX. value repurchased of is the a price the to SWK. $X.X excited at average shares discount GAAP During

Second line representing financial net with largely tangible in $X.X segment expectations XX% million, were return a non-GAAP on internal totaled value. quarter results annualized as income book

pleased appropriate aim it While with leverage. with of through and coupled balance are we XX% improve return, life sheet to science diligent royalties, on the loans underwriting we

million XX, Our and assets $XXX $XXX third million XXXX. at million. primarily $XXX the XX, gross compared sale sequential a at of June loan totaled Acer with decline investment XXXX, our due March party million The to to approximately for $XX is

the due with The in portfolio divestiture the effective of of XX.X% compared to quarter first Our yield Acer the is decrease XX.X% loan. was primarily XXXX. sequential

compared the in Our quarter the was no realized early were quarter yield XXXX. quarter. prepayments XX.X% the first during with of XX.X% in There

as our ahead, new from Looking as yields pricing rate on reference well proposals. benefit the recent realized should increase financing discipline

to portfolio. Turning the

taking Flowonix we for situations, majority cash we loan. the future an the the the we from quarter, the royalties. at position recovery royalty. will for either anticipate do During we carrying Ideal time, expected At the workout Thus, finalized received value believe impairment royalties received this after cash of at with finalized close, combined quarter's estimated with exceed the workout we And not In the both close on position. future

remain will positions nonaccrual. on both However,

score. rate the quality, with being our X to X loans we Looking credit X, highest at

achieved several better. of rated quarter of score with the discussed which has During quarter, X at resolution Flowonix while been we the a or The remaining in loan, quarters had with X second the late scored for loans as loan X, X. workout were XXXX

green, yellow and our the green. rate rated royalties nonaccrued Ideal royalties royalties and were rated red, invest red remaining We while

service on XX% sequentially and to and third was internal our work Revenue and accelerate increased signed in were quarter we late expect pharma with expectations. based fourth April. in improve Results in in which Enteris continued $XXX,XXX, partnership, quarter generated revenue to from to line

we which bidding last from are of an on booked additional an $X projects increase $X $X projects, million and on CDMO were is quarter. bidding Year-to-date, had million of million projects we

$X.X first expense $X.X quarter operating million compared Enteris million of XXXX. as totaled of with quarter Second

included the R&D final as However, retention $X which employee as payments, totaled a second million. quarter payment cumulatively approximately well

We OpEx $X.X Enteris XXXX. quarterly the approximately per will quarter the of back expect be in million half

alternatives to with We are we'll an appropriate. working an provide and adviser strategic evaluate for when update Enteris,

prior we $XX facility During sheet capital SWK as committed as financing well The Horizon new options. replaced which with $XX a million the gives million additional to other closed quarter, liquidity First Bank, balance facility. flexibility pursue our

shares XXX,XXX have we $XX.XX. repurchasing year-to-date, at shareholders' use of view repurchased of We an shares $XX.XX. a at million $X.X And cost level XXX,XXX current During cost shares the attractive at of highly for an we as the average capital. quarter, approximately repurchased average

life X To quarter summarize, return additional plus pursuing workout expect transactions was XX% core of returns able nonaccrual financings with reasonable a equity. science a forward. on were credit solid financial the outcomes. segment for liquidity additional and for second provides to with conclude multiple of XXXX our quarter and facility going year-end, attractive close new loans We're our We our flexibility process tangible to by with

that, With our CFO, turn yours. for is quarter. call performance the Yvette, I to like Yvette on for call financial Heinrichson, an the to would our the update

Yvette Heinrichson

quarter $X.XX everyone. net afternoon, pretax today, you, GAAP the for we $X.X We diluted of earnings per second income Thank reported XXXX. share. million and of Earlier Jody, reported good or

of revenue. $X.X $X.X reported expense increase million income development our QX after million segment $X.X million of increase pharmaceutical finance receivables revenue income segment million and a $X.X tax in net XXXX a in included Our

year-over-year The rates X in was in increase new revenue and a million fees when that fees $X.X $X.X increase to interest, decrease the a Absent were any the off interest QX quarters and and increase XXXX. compared still receivables offset existing was loans, receivables income period next material unforeseen to paid interest in overall in to finance in $X.X $X.X partially increase year anticipate finance earned due and of the by due $X.X in in a XXXX receivables of be reference XXXX. primarily year. the million due revenue million comparable increase royalty to royalties funding previous to million payoff, revenue in to reported an segment we revenue the net in million finance same on The increase over earned

As million Jody mentioned manufacturing, as to expenses, QX well interest include were administrative during expense, $X.X million which pharmaceutical QX research earlier, overall development compared XXXX. operating as $X.X in XXXX expense general and and

QX million in slight QX average in $X.X increase QX due in in a to The were were $X.X $X.X expenses operating $X.X receivables $X.X operating compared was to expense receivables million XXXX. finance operating million expenses segment increase million in compared interest Enteris expenses XXXX in finance XXXX, and segment higher in to are balance expense as million for XXXX. employee QX primarily XXXX bonus million expected facility. $X.X as on final our these third of development vendor. quarter a retention to Neither second included to XXXX And pharmaceutical credit to quarter the segment operating CRO due our overall be well million repeated payment $X.X a expenses expenses of

QX a That quarter receivables our from for XXXX. to finance the portfolio first of our finally, by losses $XX.X million allowance XXXX. $X.X benefit in in credit decreased resulted million And

as As standard a adopted the reminder, known year, accounting in QX CECL. this we of

to our case as allowance in finance was changes in for of to size forward, the the change our result credit XXXX. QX a receivables percentage losses, will Going corresponding

changes initial not income establish statement. future the assumptions also our of will used Any the credit to do quarter XXXX. these losses. allowance credit the will in in to allowance through during Changes rate any changes changes underlying for our second to losses to loss run for result We have assumptions our

I will the call back now over to Jody. turn

Jody Staggs

goals Thank on our We half key the second for results initiatives of creating you, value material for Yvette. progress year, an with of let's we pursue aim for of will remainder In solid XXXX owners. with of was during the summary, open period line in the made and quarter XXXX, Operator, our questions. with the the expectations. call a first our

Operator

come Markets. Instructions] with Capital Stephan Street from Lake [Operator will question first Jacob Our

Jacob Stephan

quarter up impact loans? How the deploy ability over markets. your seen wanted here. to on this open does Just touch capital them modestly making your with tolerance capital the equity quite risk last We've and to

Jody Staggs

sort Yes. from dynamics say Thanks Appreciate I two the in. there's question. for would that. dialing of

portfolio The are those that burning of to situation pre-profit. a for a positive. equity all in of first tap markets Most public, companies the ability is is our cash of borrowers are

great for them. that's So

For we're competitor. loan, #X trying a where new pursue situations there always out almost to equity our is

sort of in of fairly of public, So those I strong, markets that, and material the material the ways, few speaking small but means. in companies negative, are with in we're access would access sort but companies -- speaking some the we're with a There's maybe pipeline to that's say really considering are they have our to most still don't that and capital any tough a for shape. it's any is modest that

Jacob Stephan

the that XX facilities? are deal here the First Bank Okay. to here. capital the loan you lendable you And additional maybe Horizon touch just months? about to Does access book grow change thinking Or of How base? need do capacity kind over your next on

Jody Staggs

absolutely. Yes,

by increases it So $XX our current million. capacity

$XX got now. we've So committed million Horizon by First

was facility prior $XX Our million.

partner, first I we're is, on bit terms allow more facility the I something going this us gives our to easily, syndicate facility focused what this think, all, and of it's now. that's think us a to

love them on banks working this take to our bring up facility, $XX or both partner would are So SWK into million focused partner $XX and we the with million. and potential to to

those it's I working challenge position, of now so focus. is but regional right in as a conversations a we're guess a on So hard take will time, somewhat really market the that. challenged bank

I we're issue is facility The bond. and positive as something well. considering other, does And think, us unsecured allow of this an it that's

facility believe than to support of a a but much is more this good bring we've that. capital. million that So The other leverage starting $XX spot, got we couple on and great business ways of should

Jacob Stephan

keep Or me about just forward? updated thoughts of last the to buying are kind that to book guys moving then here? thinking how And you discount Okay. just on at are planning one value you buyback? here. a for Or shares Any

Jody Staggs

Yes, absolutely.

buyback, the belief great, May, management that that shares and and shares are new in support their appreciate $XX authorize I we a So value Board million material, was did their and which view.

a is, a more bit our flexible we new say, we're I plan working new And than would plan. old So the have broker with.

we're and $X during quarter, almost you $X So saw repurchased probably million year-to-date. we million pushing $X.X million, the that

we'll attractive. tiers. is we to the think these But valuation period just plan the working the I current work price. we And back out, a got at the stock we'll bit terms price, We've being continue this reporting of quite So get the have the aggressive. plan to in seems more can quite as buying where maybe be open stock new And an at better. be

the so that's that will continue Board to something management And and do.

Operator

come from investor. will question next [Scott Jensen], [Operator a Our Instructions] private

Unidentified Analyst

you bids How what million $X metrics progress hit Jody idea quarter, some that least be to in an might the use reputation? looks is kind team, pleasantly when the Is on with the Good being of being bottom line, of hit ratio how as out? price? say made. at X I on It [compete] like future and just at kind It's not work buyback of and those? going workouts. out that is on good are mentioned surprised it guess, on Enteris. especially to there, everyone can the to we question, My the get And that it point. this Is to a you

Jody Staggs

a We're about question. bit Great still Yes. that. learning

II pharma from proposals for large our formal So certain April their but preferred supposed provider organization, the we've them are partnership we which service working Phase with since I'm with those services. majority stem I been arrangement, a of Phase a in name, and not those and to bids,

So they've got customers.

coming services. them us and help particular and of biotech small these their technologies, certain that to pharmas partner referring got develop for them they They've dosing is programs as for for to

partners, -- So really, need we're -- of our but It's once CDMO benefit the and would services clinical these revenue. these market. are is through it. keeping The patented quality the they them, to them they the partner is can check, so hopefully biotechs up really progression we're I technology, moving to use technology And warm of out picking that vast get majority leads. bit for a getting

up put proposals the pick those. we'll we're great I the And wish definitely you have rates mean we I fair of far. percent, I share been I some have we but win we'll number to winning out, our early tell lots think so bit of and that these that given working I a still Enteris But these new leads. team particularly this better the understand myself. ones, to percent, warm Paul rubric coming time, great have through with don't and the are of kind a at and I'm x of

Unidentified Analyst

things a strategic they're clearly, then past kind of royalties, from possibly the kind presented and of one on you're the the the their at depend with? some to as progress, Enteris, would report this some Cara bid would still access? the of that been number from just making say, that Oral maintain on paybacks for good Or the something have And over where options you'd like it continuation, seems years be least benefited future just of of week, that program, you options it or you'd royalty

Jody Staggs

time. I It's that. understand there's think we the like value is, think that. royalties. really asset point reason Yes, at We what so We it. we would in retain retain financial could we a no We this understand

really third interested that not to people the a we would I be party, that. think envision would royalty are business so retain in the might that a in from tend I interested that CDMO

as is much active on we proposals that well. working it. milestone just program -- about at talked going then It's haven't There And And another a there some as there's other Enteris we're it's well. actually on royalty, there. royalty an

SWK are I of really financial assets, So things, of all would those think keep. types which

really don't interested those. being just in CDMO see I buyer that

Operator

will question Group. Michael from Maxim with come Diana next Our

Michael Diana

about Now gone SVB X environment? competitive do that in for has the notice you any change been months,

Jody Staggs

Initially, I is answer yes. think the

time, was scarce. capital a So period therefore, of really

another we've I they've situation I sheets now, refi actually, speaking think SVB. -- another an one is got -- speaking our again SVB and my which we're signed And colleagues SVB is term are facility. when from with think a got of situation

So have seen we I opportunities. think those

lot on, and active. of really I professionals a think SBV, I those have Now, mean, now moved they're

out If and back you look there. of some at First people, getting Citizens these they're

the the opportunity, of has in probably and in play banks smaller particularly gather less definitely SVB of we folks some new channels. where quality the some an moving I sponsor-backed the the owner there are up places side of a So the been they're spectrum. those where going, lot

it is yes, an opportunity. So

I not under, went of think see Signature we flood if makes when that the sort might and it's we that SVB sense. thought

Operator

It further back This remarks. session. Staggs appears closing for are turn to like concludes I no the Jody over our there to would questions. any conference question-and-answer

Jody Staggs

we to the or Appreciate and in, myself, Hope ahead. feel everyone we've the speaking again. we've have out Hopefully, and appreciate you good in have to evening. so dialing excitement you and what expressed a feel questions. opportunities support for year this Again, the if free reach far Buh-bye. team achieved any Yvette your Tiberend

Operator

The Thank conference has now concluded. presentation. you for attending today's

now may disconnect. You

SWK (SWKH) 9 Aug 232023 Q2 Earnings call transcript