SWK Holdings Corporation (NASDAQ:SWKH) Q2 2024 Earnings Conference Call August 16, 2024 10:00 AM ET

Company Participants

Jody Staggs - President & CEO
Ira Gostin - VP, IR

Conference Call Participants

Scott Jensen - Private Investor

Operator

Good day, and welcome to the SWK Holdings second quarter 2024 conference call. [Operator instructions]. I'll now turn the conference over to your host, Mr. Ira Gostin, Investor Relations. Sir, the floor is yours.

Ira Gostin

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

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

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

Jody Staggs

Thank you, Ira, and thanks, everyone, for joining our second quarter conference call. First, I'd like to welcome our new CFO, Adam Rice. Adam joins SWK from a private credit platform, and brings valuable loan and mortgage accounting and operational experience to SWK. During his first couple of months, Adam has familiarized himself with our financing structures, assisted our controller, Courtney, and our consultants with the 2Q accounting reporting, and started building a relationship with our partner banks. Adam will take a leading role with the financial reporting starting in 3Q, and you'll hear from him then. Welcome, Adam.

SWK’s core business is financing innovative commercial-stage life science product companies through first lien term loans and royalties, with a focus on $5 million to $25 million investments. During the second quarter, our core finance segment generated at 6.5 million of adjusted non-GAAP net income. The net finance receivables portfolio increased 19% year-over-year to $267 million, and the portfolio effective yield improved 10 basis points year-over-year and 40 bps sequentially to 14.6%. Segment revenue increased 15% year-over-year to $10.7 million as receivables growth was accompanied by a 15.4% realized yield. Second quarter 2024 financial segment results were negatively impacted by a net $4.1 million of impairments taken to two non-accrual borrowers, and positively impacted by a $2.4 million increase in the carrying value of our Iluvien royalty, as well as a $700,000 gain on the conversion of AOT private warrants to common stock, which was triggered by the company listing on the London AIM Exchange. As a reminder, SWK carries private warrants at zero on our books.