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Income before income tax expense for the quarter was $5.4 million for both the three months ended June 30, 2024 and 2023. Although consistent, second quarter 2024 income before income tax expense benefited from a $2.0 million increase in consolidated revenue from interest and fees earned due to funding new loans, a $4.9 million gain from the write off of acquisition-related contingent consideration previously due under the Cara licensing agreement, and a $2.5 million gain on revaluation of Iluvien royalty resulting from an amendment signed in 2Q24, offset by a $5.8 million impairment of the Cara License intangible asset due to cancellation of the related clinical trial, a $2.1 million impairment on our Trio loan, and a $2.2 million impairment on our Exeevo loan directly recorded to the provision for credit losses during 2Q24.

GAAP net income for the quarter ended June 30, 2024, increased to $4.4 million, or $0.35 per diluted share, from $3.9 million, or $0.31 per diluted share, for the second quarter 2023.

For the second quarter 2024 and 2023, non-GAAP adjusted net income was $5.8 million, or $0.47 per share. Non-GAAP adjusted net income for the Finance Receivables segment was $6.5 million, a decrease from $7.6 million for the second quarter 2023.

Total investment assets (defined as finance receivables, marketable investments, and warrant assets less the allowance for credit losses) totaled $267.0 million as of June 30, 2024. A 19.0% increase compared with total investment assets of $224.5 million as of June 30, 2023. The allowance for credit loss at quarter's end totaled $13.1 million, an increase from $11.1 million in the second quarter of 2023.

GAAP book value per share was $22.75 as of June 30, 2024, a 4.4% increase compared to $21.79 as of June 30, 2023. Non-GAAP tangible financing book value per share totaled $20.17, a 6.4% increase compared to $18.95 at June 30, 2023. Management views non-GAAP tangible financing book value per share as a relevant metric to value the Company's core finance receivable business. Non-GAAP tangible financing book value per share removes the value of the deferred tax assets and Enteris net asset value.

Portfolio Status

SWK did not close any new financings during the quarter ended June 30, 2024 and advanced $7.0 million to existing borrowers. Subsequent to June 30, 2024, SWK closed an up to $11.0 million royalty monetization with $5.8 million advanced at close.

The second quarter 2024 realized yield was 15.4%, unchanged from the second quarter of 2023. The realized yield is inclusive of all fees, including all realized unamortized fees, amendment fees, and prepayment fees, and is calculated based on the simple average of finance receivables at the beginning and end of the period. The realized yield may differ from the effective yield due to actual cash collections being greater or lesser than modeled.

As of June 30, 2024, non-accrual finance receivables totaled $22.4 million. Of the total $22.4 million, $10.4 million consisted of a non-accrual financing originally to Flowonix Medical, $4.5 million consisted of a loan to Exeevo, $3.6 million consisted of a royalty purchase originally to Ideal Implant, and $2.4 million consisted of a royalty to Best ABT, Inc, and $1.5 million consisted of a loan to Trio Healthcare.

As of June 30, 2024, SWK had $5.0 million of unfunded commitments, and after quarter close SWK added an additional $10.3 million of unfunded commitments.

Total portfolio investment activity for the three months ended June 30, 2024, and 2023 was as follows (in thousands):

Adjusted Non-GAAP Net Income

The following table provides a reconciliation of SWK's reported (GAAP) consolidated net income to SWK's adjusted consolidated net income (Non-GAAP) for the three-month periods ended June 30, 2024 and 2023. The table eliminates provisions for income taxes, non-cash mark-to-market changes on warrant assets and equity securities, amortization of Enteris intangible assets, foreign currency transaction losses, and any non-cash impact on the remeasurement of contingent consideration.

In the table above, management has deducted the following non-cash items: (i) change in the fair-market value of equities and warrants, as mark-to-market changes are non-cash, (ii) income taxes, as the Company has substantial net operating losses to offset against future income, (iii) amortization expense associated with Enteris intangible assets, and (iv) impairment/write off of Cara license and associated change in fair value of contingent considerable payable, and (v) foreign currency gain.

Finance Receivables Adjusted Non-GAAP Net Income

The following table provides a reconciliation of SWK's consolidated adjusted income before provision for income tax expense, listed in the table above, to the non-GAAP adjusted net income for the Finance Receivable segment for the three-month periods ended June 30, 2024 and 2023. The table eliminates Enteris operating loss. The adjusted income before income tax expense is derived in the table above and eliminates income tax expense, non-cash mark-to-market changes on equity securities, amortization of Enteris intangible assets, intangible asset impairment expense, foreign currency transaction gains, and any non-cash impact on the remeasurement of contingent consideration.

Non-GAAP Tangible Finance Book Value Per Share

The following table provides a reconciliation of SWK's GAAP book value per share to its non-GAAP tangible finance book value per share as of June 30, 2024 and 2023. The table eliminates the deferred tax assets, intangible assets, goodwill, Enteris property and equipment and acquisition-related contingent consideration (in thousands, except per share data):

Non-GAAP Financial Measures

This release includes non-GAAP adjusted net income, non-GAAP finance receivable segment net income, and non-GAAP tangible financing book value per share, which are metrics that are not compliant with generally accepted accounting principles in the United States (GAAP).

Non-GAAP adjusted net income is adjusted for certain items (including (i) changes in the fair-market value of public equity-related assets and SWK's warrant assets as mark-to-market changes are non-cash, (ii) income taxes as the Company has substantial net operating losses to offset against future income, (iii) changes in the fair-market value of contingent consideration associated with the Enteris acquisition as these changes are non-cash, (iv) intangible asset impairment expense, and (v) depreciation and amortization expenses, primarily associated with the Enteris acquisition.

In addition to the adjustments noted above, non-GAAP finance receivable segment net income also excludes Enteris operating losses.

Non-GAAP tangible financing book value per share excludes the deferred tax asset, intangible assets, goodwill, Enteris PP&E, and contingent consideration associated with the Enteris transaction.

These non-GAAP measures may not be directly comparable to similar measures used by other companies in the Company's industry, as other companies may define such measures differently. Management believes that these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends and provides useful additional information relating to our operations and financial condition. The Company encourages investors to carefully consider its results under GAAP, as well as its supplemental non-GAAP information and the reconciliation between these presentations, to better understand its business. Non-GAAP financial results are reported in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Further, non-GAAP financial measures, even if similarly titled, may not be calculated in the same manner by all companies, and therefore should not be compared.

Conference Call Information

SWK Holdings will host a conference call on Friday, August 16, 2024, at 9:00 a.m. CST, to discuss its corporate and financial results for the second quarter 2024.

Interested participants and investors may access the conference call telephonically by dialing either:

1. 888-506-0062 (U.S.)

2. 973-528-0011 (International)

3. Participant Access Code: 282310

An archive of the webcast will remain available on SWK Holdings' website for 12 months beginning at approximately 11:00 a.m. CT, on August 16, 2024.

About SWK Holdings Corporation

SWK Holdings Corporation is a life science focused specialty finance company partnering with small- and mid-sized commercial-stage healthcare companies. SWK provides non-dilutive financing to fuel the development and commercialization of lifesaving and life-enhancing medical technologies and products. SWK's unique financing structures provide flexible financing solutions at an attractive cost of capital to create long-term value for all SWK stakeholders. SWK's solutions include structured debt, traditional royalty monetization, synthetic royalty transactions, and asset purchases typically ranging in size from $5.0 million to $25.0 million. SWK also owns Enteris BioPharma, a clinical development and manufacturing organization providing development services to pharmaceutical partners as well as innovative formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence® platform. Additional information on the life science finance market is available on the Company's website at www.swkhold.com.

Safe Harbor For Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements including words such as "believes," "expects," "anticipates," "intends," "estimates," "plan," "will," "may," "look forward," "intend," "guidance," "future" or similar expressions are forward-looking statements. Because these statements reflect SWK's current views, expectations and beliefs concerning future events, these forward-looking statements involve risks and uncertainties. Investors should note that many factors, as more fully described under the caption "Risk Factors" and elsewhere in SWK's Form 10-K, Form 10-Q and Form 8-K filings with the Securities and Exchange Commission and as otherwise enumerated herein, could affect the Company's future financial results and could cause actual results to differ materially from those expressed in such forward-looking statements. The forward-looking statements in this press release are qualified by these risk factors. These are factors that, individually or in the aggregate, could cause the Company's actual results to differ materially from expected and historical results. You should not place undue reliance on any forward-looking statements, which speak only as of the date they are made. We assume no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise .

For more information, please contact:

Investor Relations and Media
Ira M. Gostin
investorrelations@swkhold.com

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SOURCE: SWK Holdings Corp.

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