Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This annual report on Form 10‑K contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as "anticipates," "expects," "intends," "plans," "will," "may," "continue," "believes," "seeks," "estimates," "would," "could," "should," "targets," "projects," "outlook," "potential," "predicts" and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
changes in political, economic or industry conditions, trade policies, restrictions and tariffs, the interest rate environment or conditions affecting the financial and capital markets;
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;
such an economic downturn could disproportionately impact the companies that we intend to target for investment, potentially causing us to experience a decrease in investment opportunities and diminished demand for capital from these companies;
a contraction of available credit and/or an inability to access the equity markets that could impair our lending and investment activities;
interest rate volatility that could adversely affect our results, particularly to the extent that we use leverage as part of our investment strategy;
the impact of changes in interest and inflation rates on our business prospects and the prospects of our portfolio companies;
our business prospects and the prospects of our portfolio companies;
our contractual arrangements and relationships with third parties;
the ability of our portfolio companies to achieve their objectives;
competition with other entities and our affiliates for investment opportunities;
the speculative and illiquid nature of our investments;
the use of borrowed money to finance a portion of our investments;
the adequacy of our financing sources and working capital;
the loss of key personnel and members of our management team;
the timing of cash flows, if any, from the operations of our portfolio companies;
the ability of our external investment adviser, Runway Growth Capital LLC, to locate suitable investments for us and to monitor and administer our investments;
the ability of Runway Growth Capital LLC to attract and retain highly talented professionals;
our ability to qualify and maintain our qualification as a RIC under subchapter M of the Code, and as a BDC;
the occurrence of a disaster, such as a cyber-attack against us or against a third-party that has access to our data or networks, a natural catastrophe, an industrial accident, failure of our disaster-recovery systems, or consequential employee error;
the effect of legal, tax, and regulatory changes;
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the ability of the parties to consummate the proposed transactions that will result in SWK Holdings Corporation ("SWK") merging with and into us (the "Mergers") pursuant to an Agreement and Plan of Merger (the "Merger Agreement"), dated October 9, 2025, by and among us, RWAY Portfolio Holding Corp., RWAY Portfolio Corp., Runway Growth Capital LLC and SWK Holdings Corporation, on the expected timeline or at all;
our ability to realize the anticipated benefits of the Mergers;
the effects of disruption on our business from the Mergers;
the combined company's plans, expectations, objectives and intentions as a result of the Mergers;
any potential termination of the Merger Agreement;
the actions of our shareholders or the shareholders of SWK with respect to the proposals submitted for their approval in connection with the Mergers;
the possibility that competing offers or acquisitions proposals will be made;
risk that stockholders litigation in connection with the Mergers may result in significant costs of defense and liability; and
the other risks, uncertainties and other factors we identify under "Risk Factors" in Part I, Item 1A of this Form 10‑K and in our other filings with the SEC.
Although we believe the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this annual report on Form 10‑K should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in "Risk Factors" in Part I, Item 1A of this Form 10‑K.
We have based the forward-looking statements included in this Form 10‑K on information available to us on the date of this Form 10‑K, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including our annual reports on Form 10‑K, quarterly reports on Form 10‑Q and current reports on Form 8‑K.
The following analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes thereto contained elsewhere in this annual report on Form 10‑K.
Overview
Runway Growth Finance Corp. ("we," "us," or "our,"), 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. Certain of the loans in which we may invest or obtain exposure to through our investments in structured securities may be deemed "Covenant-Lite Loans," which means the loans contain fewer or no maintenance covenants compared to other loans and do not include terms which allow the lender to declare a default if certain covenants are breached. We are managed by Runway Growth Capital, an experienced provider of growth financing for dynamic, late and growth-stage companies. As of December 31, 2025, we had an investment portfolio of $927.4 million at fair value, and a net asset value of $485.0 million. Our offices are in Chicago, Illinois; Menlo Park, California; and New York, New York.
We have elected to be regulated as a 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 RIC under subchapter M of 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.
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federal income tax at the regular corporate rate on any net taxable income for such taxable 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.
We are an "emerging growth company," as defined in the JOBS Act. We expect to remain an emerging growth company until December 31, 2026, the last day of our fiscal year following the fifth anniversary of our IPO, which closed on October 25, 2021, or until the earliest of (i) the last day of the first fiscal year in which we have total annual gross revenue of $1.235 billion or more, (ii) December 31 of the fiscal year in which we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (together with the rules and regulations promulgated thereunder, the "Exchange Act"), (which would occur if the market value of our common stock held by non-affiliates exceeds $700.0 million, measured as of the last business day of our most recently completed second fiscal quarter, and we have been publicly reporting for at least 12 months), or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period. During the time that we are an emerging growth company under the JOBS Act, we will be subject to reduced public company reporting requirements. When we are no longer an emerging growth company, we will be subject to additional public company reporting requirements, including auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, and we will no longer be able to take advantage of the extended transition periods available to emerging growth companies for complying with new or revised accounting standards.
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.
We, RGC, and certain other funds and accounts sponsored or managed by RGC and/or its affiliates, including BC Partners Advisors L.P. (collectively our "Affiliates"), rely on an order (the "Order") granted by the SEC 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 and/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. On September 12, 2025, we, RGC and certain Affiliates applied for a new co-investment exemptive order from the SEC. There can be no assurances that the SEC will grant such relief. See "Business – Exemptive Relief" in Part I, Item 1 of this Form 10-K for additional information.
Portfolio Composition and Investment Activity
Portfolio Composition
As of December 31, 2025, we had investments in 56 companies, representing 23 companies in which we held a combination of debt and equity investments, eight companies in which we held debt investments only, 23 companies in which we held equity investments only, and two companies in which we held equity interests only. At December 31, 2024, we had investments in 57 companies, representing 28 companies in which we held debt and equity investments, four companies in which we held debt investments only, 23 companies in which we held equity investments only, and two companies in which we held equity interests only.
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The following table shows the fair value of our investments, by asset class, as of December 31, 2025 and December 31, 2024 (in thousands):
Cost
Fair Value
% of Total Portfolio
As of December 31, 2025
Senior Secured Loans
Second Lien Loans
Preferred Stock/Units
Common Stock/Units
Equity Interest
Warrants
Total
As of December 31, 2024
Senior Secured Loans
Second Lien Loans
Preferred Stock/Units
Common Stock/Units
Equity Interest
Warrants
Total
For the years ended December 31, 2025, December 31, 2024, and December 31, 2023, our debt investment portfolio had a dollar-weighted annualized yield of 14.6%, 14.9%, and 15.8%, 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, 2025, our debt investments had a dollar-weighted average term of 53 months at origination and a dollar-weighted average remaining term of 31 months, or approximately 2.6 years. As of December 31, 2025, substantially all of our debt investments had a committed principal amount of between $2.0 million and $68.5 million and pay cash interest at annual interest rates of between 6.3% and 14.3%.
The following table shows our dollar-weighted annualized yield by investment type for the years ended December 31, 2025, December 31, 2024, and December 31, 2023:
Fair Value (1)
Cost (2)
Year Ended December 31,
Year Ended December 31,
Investment type:
Debt investments
Equity interest
All investments
We calculate the dollar-weighted annualized yield on average investment type for any period as (a) total related investment income during the period divided by (b) the daily average of the fair value of the investment type outstanding during the period, including any investments on non-accrual status. The dollar-weighted annualized yield represents the portfolio yield and will be higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
We calculate the dollar-weighted annualized yield on average investment type for any period as (a) total related investment income during the period divided by (b) the daily average of the investment type outstanding during the period, at amortized cost, including any investments on non-accrual status. The dollar-weighted annualized yield represents the portfolio yield and will be higher than what investors will realize because it does not reflect our expenses or any sales load paid by investors.
Investment Activity
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, 2025, we funded $85.2 million in seven new portfolio companies and $65.1 million in nine existing companies, including one joint venture, net of upfront loan origination fees and refinances. We also received $11.6 million in scheduled principal repayments from five portfolio companies as well as $287.0 million in sales and prepayments, which is comprised of (i) $248.4 million in loan proceeds from 13 portfolio companies and (ii) $38.6 million in proceeds from the sale of equity investments during the year ended December 31, 2025. For the year ended December 31, 2024, we funded $220.4 million in
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eight new portfolio companies, $5.6 million in one joint venture, and $28.1 million in six existing portfolio companies, net of upfront loan origination fees and refinances. We also received $4.8 million in scheduled principal repayments from two portfolio companies as well as $226.4 million in sales and prepayments, which is comprised of (i) $224.4 million in loan proceeds from nine portfolio companies and (ii) $2.0 million in proceeds from the sale of equity investments during the year ended December 31, 2024.
Portfolio Reconciliation
The following is a reconciliation of our investment portfolio for the years ended December 31, 2025 and 2024 (in thousands):
Year Ended December 31,
Beginning investment portfolio
Purchases of investments
PIK interest
Sales and prepayments of investments
Scheduled repayments of investments
Sales and maturities of U.S. Treasury Bills
Amortization of fixed income premiums or accretion of discounts
Net realized gain (loss) on investments
Net change in unrealized gain (loss) on investments
Ending investment portfolio
Asset Quality
In addition to various risk management and monitoring tools, RGC uses an investment rating system to characterize and monitor the quality of our debt investment portfolio. Equity securities and Treasury Bills are not graded. This debt investment rating system uses a five-level numeric scale. The following is a description of the conditions associated with each investment rating:
Investment
Rating
Rating Definition
Performing above plan and/or strong enterprise profile, value, financial performance/coverage. Maintaining full covenant and payment compliance as agreed.
Performing at or reasonably close to plan. Acceptable business prospects, enterprise value, and financial coverage. Maintaining key covenant and payment compliance as agreed. Generally, all new loans are initially graded Category 2.
Performing below plan of record. Potential elements of concern over performance, trends and business outlook. Loan-to-value remains adequate. Potential key covenant non-compliance. Full payment compliance.
Performing materially below plan. Non-compliant with material financial covenants. Payment default/deferral could result without corrective action. Requires close monitoring. Business prospects, enterprise value and collateral coverage declining. These investments may be in workout, and there is a possibility of loss of return but no loss of principal is expected.
Going concern nature in question. Substantial decline in enterprise value and all coverages. Covenant and payment default imminent if not currently present. Investments are nearly always in workout. May experience partial and/or full loss.
The following table shows the investment ratings of our debt investments at fair value as of December 31, 2025 and December 31, 2024 (in thousands):
December 31, 2025
December 31, 2024
Investment Rating
Fair Value
% of Total Portfolio
Number of Portfolio Companies
Fair Value
% of Total Portfolio
Number of Portfolio Companies
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Non-Accrual Status
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.
The following table summarizes the cost, fair value, and types of income not recorded in "Interest income" on the Consolidated Statements of Operations related to senior secured term loans or non-accrual status as of December 31, 2025 and December 31, 2024 (in thousands):
Date of Non-Accrual
Forgone Interest Income
Forgone Accretion of OID and ETP
Total Forgone Income
Cost Basis
Fair Value
Fair Value as a % of Total Portfolio
As of December 31, 2025
Investment
Mingle Healthcare Solutions, Inc.
Total
As of December 31, 2024
Investment
JobGet Holdings, Inc. (fka Snagajob.com, Inc.)
Mingle Healthcare Solutions, Inc.
Total
Results of Operations
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," "Net realized gain (loss)" and "Net change in unrealized gain (loss)." "Net investment income" 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)" is the difference between the proceeds received from dispositions and the amortized cost of portfolio investments and U.S. Treasury Bills, as well as any realized gain (loss) on forward contracts and foreign currency transactions. "Net change in unrealized gain (loss)" is the net change in the fair value of our investment portfolio and the effect of fluctuations in foreign currency exchange rates on forward contracts and foreign cash held.
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Comparison of the Years Ended December 31, 2025, 2024 and 2023
The following table compares the results of our operations for the years ended December 31, 2025, 2024, and 2023 (in thousands):
Years Ended December 31,
Total
Per Share (1)
Total
Per Share (1)
Total
Per Share (1)
Investment income
Interest, fee and dividend income
Other income
Total investment income
Operating expenses
Management fees
Incentive fees
Interest and other debt financing expenses
Professional fees
Administration agreement expenses
Insurance expense
Tax expense
Other expenses
Total operating expenses
Net investment income
Realized gain (loss)
Net change in unrealized gain (loss)
Net increase (decrease) in net assets resulting from operations
The basic per share figures noted above are based on weighted averages of 36,697,936, 38,852,271, and 40,509,269 shares outstanding for the years ended December 31, 2025, 2024, and 2023, respectively.
Investment Income
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 our allocation being in the range of $20-$45 million.
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.
Investment income for the year ended December 31, 2025, 2024 and 2023 was $137.3 million, $144.6 million, and $164.2 million, respectively, and includes non-recurring income of $8.4 million, $6.2 million, and $11.4 million, respectively. Non-recurring income includes, but is not limited to, acceleration of unaccreted OID and ETP, prepayment fees, and amendment fees. The decrease in investment income for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to decreased interest income from falling interest rates and a decrease in the average outstanding principal on interest-earning debt investments. 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.
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Operating Expenses
Our primary operating expenses include the payment of fees to RGC under the Advisory Agreement, our allocable portion of overhead expenses under the Administration Agreement, professional fees, and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and transactions, including those relating to:
our pro-rata portion of fees and expenses related to an initial public offering in connection with a Spin-Off transaction, meaning either a transaction whereby (a) we offer our stockholders the option to elect to either (i) retain their ownership of shares of our common stock, or (ii) exchange their shares of our common stock for shares of common stock in a newly formed entity that will elect to be regulated as a BDC under the 1940 Act and treated as a RIC under subchapter M of the Code; or (b) we complete a listing of our securities on any securities exchange;
fees and expenses related to public and private offerings, sales and repurchases of our securities;
calculating our net asset value (including the cost and expenses of any independent valuation firm);
fees and expenses payable to third parties, including agents, consultants or other advisers, in connection with monitoring financial and legal affairs for us and in providing administrative services, monitoring our investments and performing due diligence on our prospective portfolio companies or otherwise relating to, or associated with, evaluating and making investments;
interest payable on debt incurred to finance our investments;
sales and purchases of our common stock and other securities;
management fees and incentive fees;
administration fees payable under the Administration Agreement;
transfer agent and custodial fees;
federal and state registration fees;
all costs of registration and listing our securities on any securities exchange;
U.S. federal, state and local taxes;
independent directors’ fees and expenses;
costs of preparing and filing reports or other documents required by the SEC, the Financial Industry Regulatory Authority or other regulators;
costs of any reports, proxy statements or other notices to stockholders, including printing costs;
our allocable portion of any fidelity bond, directors’ and officers’ errors and omissions liability insurance, and any other insurance premiums;
direct costs and expenses of administration, including printing, mailing, long distance telephone, copying, secretarial and other staff, independent auditors and outside legal costs; and
all other expenses incurred by us, our Administrator or RGC in connection with administering our business, including payments under the Administration Agreement based on our allocable portion of our Administrator’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our Chief Compliance Officer and Chief Financial Officer and their respective staffs.
Operating expenses for the years ended December 31, 2025, 2024 and 2023 were $80.4 million, $80.9 million, and $85.9 million, respectively. Operating expenses decreased for the year ended December 31, 2025 from the year ended December 31, 2024, primarily due to a decrease in interest and other debt financing expenses partially offset by an increase in administration agreement expenses, excise tax expenses, and directors fees. 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 per share for the years ended December 31, 2025, 2024 and 2023 were $2.20 per share, $2.08 per share and $2.12 per share, respectively.
Management fees for the years ended December 31, 2025, 2024, and 2023 were $15.7 million, $15.7 million, and $16.7 million, respectively. Management fees remained relatively unchanged for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Management fees decreased for the year ended December 31, 2024 as compared to the year ended December 31, 2023, due to decreased average daily gross assets. For the year ended December 31, 2025, RGC earned base management fees at an
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annual rate of 1.50%. As of September 30, 2025, ending gross assets temporarily fell below $1.0 billion, increasing the quarterly rate from 0.375% to 0.40%. With Board approval, RGC voluntarily waived the incremental fee for that period. The waiver was not subject to recoupment and did not amend the Advisory Agreement. Total fees waived for the quarter ended December 31, 2025 were approximately $253.8 thousand. For the years ended December 31, 2024 and December 31, 2023, RGC earned base management fees at an annual rate of 1.50%.
Incentive fees for the years ended December 31, 2025, 2024, and 2023 were $14.5 million, $14.6 million and $19.0 million, respectively. Incentive fees remained relatively unchanged for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Incentive fees decreased for the year ended December 31, 2024 from the year ended December 31, 2023 due to a decrease in net investment income. For the year ended December 31, 2025, $12.4 million of the incentive fees were payable in cash and $2.1 million were deferred and accrued. For the year ended December 31, 2024, $13.6 million of the incentive fees were 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 payable in cash and $4.1 million were deferred and accrued. Incentive fees per share for the years ended December 31, 2025, 2024, and 2023 were $0.39 per share, $0.38 per share, and $0.47 per share, respectively.
Net Investment Income
Net investment income for the years ended December 31, 2025, 2024 and 2023 was $56.9 million, $63.8 million, and $78.3 million, respectively. Net investment income decreased for the year ended December 31, 2025 from the year ended December 31, 2024 primarily due to a decrease in investment income resulting from declining interest rates and a decrease in the average outstanding principal on interest-earning debt investments. 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 per share for the years ended December 31, 2025, 2024 and 2023 was $1.55 per share, $1.64 per share and $1.93 per share, respectively.
Net Realized Gain (Loss) on Investments
The net realized gain on investments of $2.8 million for the year ended December 31, 2025 was attributable to a realized gain on our investment in Gynesonics, Inc. partially offset by realized losses on our investments in Quantum Corporation common stock, JobGet Holdings, Inc. (fka Snagajob.com, Inc.) term loan, zSpace, Inc. common stock, and Epic IO and Vero Biotech success fees. 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.
Net Change in Unrealized Gain (Loss) on Investments
Net change in unrealized loss on investments of $25.7 million for the year ended December 31, 2025 was primarily due to a release of prior unrealized gain on our preferred stock investment in Gynesonics, Inc. and a decrease in the fair value of our preferred stock investment in JobGet Holdings, Inc. (fka Snagajob.com, Inc.) and a decrease in fair value of our senior secured loans to Marley Spoon SE, 3PL Central, LLC, and Blueshift Labs, Inc. The decrease in fair value was partially offset by an increase in fair value of our senior secured loans to Piano Software, Inc., Autobooks, Inc., FiscalNote, Inc., and Brivo, Inc. and a release of prior unrealized loss on our common stock investment in Quantum Corporation. 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 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.
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Net Increase (Decrease) in Net Assets Resulting from Operations
We had a net increase in net assets resulting from operations of $34.0 million for the year ended December 31, 2025, when compared to a net increase in net assets resulting from operations of $73.6 million and $44.3 million for the years ended December 31, 2024 and December 31, 2023, respectively.
Financial Condition, Liquidity, Capital Resources and Obligations
Our liquidity and capital resources are derived from net proceeds from the offering of our securities, debt borrowings and cash flows from operations, including investment sales and repayments, and income earned. We have used, and expect to continue to use, our debt and the proceeds from the turnover of our portfolio and from public and private offerings of securities to finance our investment objectives. We expect that we may also generate cash from any financing arrangements we may enter into in the future and any future offerings of our equity or debt securities. Financing arrangements may come in the form of borrowings from banks or issuances of senior securities, which may be secured or unsecured, through registered offerings or private placements. Our primary use of funds is to make investments in eligible portfolio companies, pay our operating expenses and make distributions to holders of our common stock.
During the year ended December 31, 2025, we principally funded our operations from (i) cash receipts from interest, dividend, and fee income from our investment portfolio, (ii) cash proceeds from the realization of portfolio investments through the repayments of debt investments and the sale of debt and equity investments, (iii) net borrowings under our Credit Facility and (iv) net proceeds from our April 2028 Notes which replaced our December 2026 Notes and our August 2027 Notes.
During the year ended December 31, 2024, we principally funded our operations from (i) cash receipts from interest, dividend, and fee income from our investment portfolio, (ii) cash proceeds from the realization of portfolio investments through the repayments of debt investments and the sale of debt and equity investments, and (iii) net borrowings under our Credit Facility.
During the year ended December 31, 2023, we principally funded our operations from (i) cash receipts from interest, dividend, and fee income from our investment portfolio, (ii) cash proceeds from the realization of portfolio investments through the repayments of debt investments and the sale of debt and equity investments and (iii) proceeds from our 2026 Notes.
During the year ended December 31, 2025, our operating activities provided $186.3 million of cash and cash equivalents, compared to $69.8 million in cash and cash equivalents provided operating activities during the year ended December 31, 2024. The $116.6 million increase in cash and cash equivalents provided by operating activities from December 31, 2024 to December 31, 2025 was primarily due to a $103.8 million decrease in purchases of investments and a $25.4 million increase in sales and repayments of investments and U.S. Treasury Bills.
During the year ended December 31, 2024, our operating activities provided $69.8 million of cash and cash equivalents, compared to $112.4 million in cash and cash equivalents provided operating activities during the year ended December 31, 2023. The $42.7 million decrease in cash and cash equivalents provided by operating activities from December 31, 2023 to December 31, 2024 was primarily due to a $58.2 million decrease in sales or repayments of investments and U.S. Treasury Bills and a $14.5 million decrease in net investment income, offset by a $23.3 million decrease in purchases of investments and U.S. Treasury Bills.
During the year ended December 31, 2025, our financing activities used $173.9 million of cash, compared to $67.0 million used in financing activities during the year ended December 31, 2024. The $106.9 million increase in cash flows used in financing activities from December 31, 2024 to December 31, 2025 was primarily due to a decrease in net borrowing activity of $160.0 million, offset by an increase in secured borrowings of $14.6 million, a decrease in share repurchases of $23.5 million, and a $18.4 million decrease in dividends paid to stockholders.
During the year ended December 31, 2024, our financing activities used $67.0 million of cash, compared to $115.2 million used in financing activities during the year ended December 31, 2023. The $48.3 million decrease in cash flows used in financing activities from December 31, 2023 to December 31, 2024 was primarily due to an increase in net borrowings activity of $79.0 million, offset by an increase in share repurchases of $36.0 million.
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Available Liquidity and Capital Resources
As of December 31, 2025, we had $395.2 million in available liquidity, including $18.2 million in cash and cash equivalents, and $377.0 million available under our Credit Facility, subject to borrowing base capacity. As of December 31, 2025, we had $173.0 million of secured debt outstanding under our Credit Facility, which is a floating interest rate obligation and $264.3 million of unsecured debt outstanding under the 2026, 2027, and 2028 Notes, which are all fixed interest rate debt obligations. Refer to "Note 7 – Borrowings" of our consolidated financial statements in Part II, Item 8 of this Form 10-K for additional discussion of our debt obligations.
Pursuant to the 1940 Act, we are permitted to incur borrowings, issue debt securities, or issue preferred stock if, 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%. As of December 31, 2025 and December 31, 2024, our asset coverage ratio was 211% and 192%, respectively.
As detailed above, our diverse and well-structured balance sheet is designed to provide a long-term focused and sustainable investment platform. Currently, we believe we have sufficient liquidity to support our near-term capital requirements.
Commitments and Obligations
Our significant contractual payment obligations relate to our borrowings and deferred incentive fees. As of December 31, 2025, we had $437.3 million in debt outstanding, $25.0 million of which is due within the next year, $239.3 million is due within one to three years, and $173.0 million is due beyond three years. As of December 31, 2025, we had $12.2 million of deferred incentive fees, $4.2 million of which is due within the next year, $5.3 million is due within one to three years, and $2.7 million is due beyond three years. Refer to "Note 13 – Subsequent Events" of our consolidated financial statements in Part II, Item 8 of this Form 10-K for more information.
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.
Our unfunded commitments may be significant from time to time. As of December 31, 2025, we had a total of $145.5 million in unfunded commitments which was comprised of $122.8 million to provide debt financing to our portfolio companies and $22.7 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, 2025, we had $32.4 million of available unfunded commitments to portfolio companies that are eligible to be drawn based on achieved milestones and $22.7 million in unfunded capital commitments to Runway-Cadma I LLC. Refer to "Note 8 – Commitments, Contingencies, and Off-Balance Sheet Arrangements" of 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, 2025.
The fair value of our unfunded commitments is considered to be immaterial as the yield determined at the time of underwriting is expected to be materially consistent with the yield upon funding, given that interest rates are generally pegged to market indices and given the existence of milestones, conditions and/or obligations embedded in the borrowing agreements .
Repurchase Program
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.
On November 2, 2023, our Board of Directors approved a share repurchase program (the "Second Repurchase Program"), under which we were authorized to repurchase up to $25.0 million of our outstanding shares of common stock, at management’s discretion from time
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to time in open-market transactions and in accordance with all applicable securities laws and regulations. We repurchased 1,961,938 shares in connection with the Second Repurchase Program for an aggregate purchase price of $23.5 million. The Second Repurchase Program expired on November 2, 2024.
On July 30, 2024, our Board of Directors approved a share repurchase program (the "Third Repurchase Program"), under which we were authorized to repurchase up to $15.0 million of our outstanding shares of common stock. Pursuant to the terms of the repurchase agreement, we were authorized to repurchase up to $12.5 million of 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. We repurchased 1,199,867 shares in connection with the Third Repurchase Program for an aggregate purchase price of $12.5 million, exhausting the full approved amount of repurchases under the program, and the Third Repurchase Program terminated in accordance with its terms.
On May 7, 2025, our Board of Directors approved a share repurchase program (the "Fourth Repurchase Program"), under which we may repurchase up to $25.0 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 Fourth Repurchase Program will terminate upon the earlier of (i) May 7, 2026 or (ii) the repurchase of $25.0 million of our shares of common stock. From the inception of the Fourth Repurchase Program through December 31, 2025, we repurchased 1,213,391 shares for an aggregate purchase price of $12.5 million.
Cumulative repurchases under all four repurchase programs totaled 5,246,541 shares at an aggregate purchase price of $59.3 million.
Distributions and Dividend Reinvestment Plan
To the extent that we have funds available, we intend to make quarterly distributions to our stockholders. Our stockholder distributions, if any, will be determined by our Board of Directors. Any distribution to our stockholders will be declared out of assets legally available for distribution. We anticipate that distributions will be paid from income primarily generated by interest and dividend income earned on investments made by us.
For the year ended December 31, 2025, we declared and paid dividends in the amount of $51.4 million, of which $50.4 million was distributed in cash, with the remainder distributed in the form of 104,804 shares of our common stock purchased by us in the open market and distributed to stockholders pursuant to our dividend reinvestment plan (the "Dividend Reinvestment Plan"). For the year 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, with the remainder distributed in the form of 96,092 shares of our common stock purchased by us in the open market and distributed to stockholders pursuant to our Dividend Reinvestment Plan. For the year 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, with the remainder distributed in the form of 204,658 shares of our common stock purchased by us in the open market and distributed to stockholders pursuant to our Dividend Reinvestment Plan.
The timing and amount of our distributions, if any, will be determined by our Board of Directors and will be declared out of assets legally available for distribution. Refer to "Note 9 – Net Assets" of our consolidated financial statements in Part II, Item 8 of this Form 10-K for a summary of the distributions declared and paid since inception.
Critical Accounting Estimates
The preparation of the consolidated financial statements and related disclosures in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the period reports. On an ongoing basis, our management evaluates its estimates and assumptions, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could materially differ from those estimates, including as a result of changes in the economic environment, financial markets, and any other parameters used in determining such estimates. Changes in our estimates and assumptions could materially impact our results of operations and financial condition. Our critical accounting estimates, including those relating to valuations of our investment portfolio, are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in "Item 1A. Risk Factors." Please refer to "Note 2 – Summary of Significant Accounting Policies" to our consolidated financial statements in Part II, Item 8 of this Form 10-K for a discussion of our significant accounting policies. We consider the most significant critical accounting estimates and significant accounting policies to be those related to the valuation of our investment portfolio (Fair Value Measurements).
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Investment Valuation
The most significant estimate inherent in the preparation of our consolidated financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded. We measure the value of its financial instruments at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosure ("ASC 820"), issued by the FASB. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Our investment portfolio is reported at fair value on our consolidated statements of assets and liabilities. All assets and liabilities approximate fair value on our consolidated statements of assets and liabilities, with the exception of our borrowings, which are reported at amortized cost. For more information on financial instruments reported at cost, refer to "Item 8A. Consolidated Financial Statements and Supplementary Data – Note 5 – Fair Value of Financial Instruments."
ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. ASC 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level within the hierarchy of information used in the valuation. In accordance with ASC 820, these inputs are summarized in the three levels listed below:
Level 1 - Valuations are based on quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2 - Valuations are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly and model-based valuation techniques for which all significant inputs are observable.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models incorporating significant unobservable inputs, such as discounted cash flow models and other similar valuations techniques. The valuation of Level 3 assets and liabilities generally requires significant management judgment due to the inability to observe inputs to valuation.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument’s level within the fair value hierarchy is based on the lowest level of observable or unobservable input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the instrument.
Under ASC 820, the fair value measurement also assumes that the transaction to sell an asset or liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset, which may be a hypothetical market, and excludes transaction costs. The principal market for any asset or liability is the market with the greatest volume and level of activity for such asset or liability in which the reporting entity would or could sell or transfer the asset or liability. In determining the principal market for an asset or liability under ASC 820, it is assumed that the reporting entity has access to such market as of the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable and willing and able to transact.
Rule 2a-5 under the 1940 Act established additional requirements for determining the fair value of our investments in good faith for purposes of the 1940 Act. Rule 2a-5 permits boards, in compliance with certain conditions, to designate certain parties to perform fair value determinations, subject to board oversight. Rule 2a-5 also defines when market quotations are "readily available" for purposes of the 1940 Act and the threshold for determining whether a fund must determine the fair value of a security. Rule 31a-4 under the 1940 Act established additional recordkeeping requirements related to fair value determinations. Although we adopted certain revisions to its valuation policies and procedures to comply with Rule 2a-5 and Rule 31a-4, the Board of Directors has not elected to designate a valuation designee. See “Item 8A. Consolidated Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies” for additional information on our valuation process and procedures.
The Board of Directors makes fair value determinations on a quarterly basis and any other time when a decision regarding the fair value of the portfolio investments is required. There is no single standard for determining the fair value of investments that do not have an active public market. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. A determination of fair value of investments, particularly those of privately held companies, involves subjective judgments and estimates and depends on the facts and circumstances, including at discrete points in time. In some cases, the fair value of such investments is best expressed as a range of values derived utilizing different methodologies from which a fair value may then be determined. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market value, the fair
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value of the investments may fluctuate from period to period and/or differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. The carrying amounts of our financial instruments, consisting of cash, investments, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments.
Recent Developments
We evaluated events subsequent to December 31, 2025 through March 12, 2026, the date the consolidated financial statements were issued. There have been no subsequent events that occurred during such period that would require recognition or disclosure, except as disclosed below.
Distributions
On February 25, 2026, the Board of Directors declared a regular distribution of $0.33 per share for stockholders of record as of March 10, 2026 payable on or before March 24, 2026.
Repayment of April 2026 Notes
The 8.54% Series 2023A Senior Notes due 2026 (the “April 2026 Notes”) bore an interest rate of 8.54% per year and were due on April 13, 2026, unless redeemed, purchased or prepaid prior to such date by us or our affiliates in accordance with their terms. The April 2026 Notes were repaid in full on January 21, 2026 and are no longer outstanding. Interest on the April 2026 Notes was due semiannually in arrears on April 13 and October 13 of each year.
Baby Bond Offering 7.25% Notes due 2031
On February 3, 2026, we issued and sold $103.25 million in aggregate principal amount of 7.25% interest-bearing unsecured Notes due February 3, 2031 (the "February 2031 Notes") under its shelf Registration Statement on Form N-2. The February 2031 Notes were issued pursuant to the Base Indenture and Third Supplemental Indenture, dated February 3, 2026, between us and the Trustee, U.S. Bank Trust Company, National Association.
Interest on the February 2031 Notes will be due quarterly in arrears on March 1, June 1, September 1, and December 1 of each year. The February 2031 Notes may be redeemed in whole or in part at any time or from time to time at our option on or after February 3, 2028, at a redemption price of $25 per February 2031 Notes plus accrued and unpaid interest payments otherwise payable for the then-current quarterly interest period accrued to the date fixed for redemption. The February 2031 Notes are general unsecured obligations that rank pari passu with our existing and future unsecured, unsubordinated indebtedness.
Redemption of July 2027 Notes and December 2027 Notes
On March 6, 2026, we redeemed $40.25 million of the $80.5 million in aggregate principal of the July 2027 Notes in accordance with the terms of the indenture governing the July 2027 Notes. Additionally, we redeemed all of the $51.75 million in aggregate principal of the December 2027 Notes in accordance with the terms of the indenture governing the December 2027 Notes.
Recent Portfolio Activity
From January 1, 2026 through March 12, 2026, we completed $54.3 million of additional debt commitments, of which $5.5 million was funded upon closing, and purchased $2.0 million in equity positions. In addition, we funded $5.5 million in unfunded commitments on existing investments. We also received $15.0 million in debt prepayments.
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