World News: 22:47 GMT Friday 10th August 2018. [SWK Holdings Corporation via Globe Newswire via SPi World News]
DALLAS, Aug. 10, 2018 (GLOBE NEWSWIRE) -- SWK Holdings Corporation (SWKH.OB) (“SWK” or the “Company”), a life science focused specialty finance company, announced its second quarter 2018 financial results.
“We had a very active first half of 2018, closing four new transactions year to date through July and deploying $46.7 million into new opportunities,” stated Winston Black, Chief Executive Officer of SWK. "We are encouraged by the quality of and activity in our pipeline. We believe we have built a high-quality platform in the life science finance sector, becoming a reliable partner for companies seeking non-dilutive finance alternatives to focus our efforts on executing our long-term strategy. With our new credit facility, we are well positioned to continue growing our finance receivables portfolio.”
As of June 30, 2018, the Company's total income producing assets were approximately $171.8 million, an 11.6% increase as compared to $153.9 million as of December 31, 2017.
During the quarter, the Company closed a new royalty financing for $7.6 million and realized $9.2 million of proceeds on an exit of a loan position. Subsequent to quarter end, the Company closed a new loan transaction for $12.2 million and received another loan payoff, receiving $16.4 million in proceeds. On a gross basis, the Company has deployed $62.3 million year to date through August 10, 2018. Net of payoffs, the Company has deployed $36.7 million year to date through August 10, 2018.
As of August 10, 2018, the Company and its partners have executed transactions with 30 different parties under its specialty finance strategy, funding an aggregate $445 million since 2012 in various financial products across the life science sector. At the end of the second quarter, the weighted average projected effective yield of the finance receivables portfolio was 13.1%. The projected effective yield is the rate at which income is expected to be recognized pursuant to the Company’s revenue recognition policies, if all payments are received pursuant to the terms of the finance receivables. The decrease in the effective yield from the first quarter of 2018 is primarily due to the payoff of a loan position and another loan position becoming non-accrual during the quarter.
Total portfolio investment activity as of and for the three and six months ended June 30, 2018 and June 30, 2017 was as follows (in thousands):
We generated revenues of $6.8 million for the three months ended June 30, 2018, which consisted primarily of interest and fees earned on our finance receivables. We generated revenues of $6.1 million for the three months ended June 30, 2017, driven primarily by $5.7 million in interest and fees earned on our finance receivables. The increase in revenue is primarily due to a $1.0 million increase in interest and fees earned on new and existing finance receivables and a larger portfolio. Revenue also reflects a $0.6 million decrease in royalty revenue on our Narcan® investment. Royalty revenue from our Narcan® investment will be substantially less going forward, as we reached the 1.5x cash on cash royalty cap during the three months ended March 31, 2018. The increase is partially offset by a $0.3 million decrease in income from our investment in an unconsolidated entity, which sold its US marketing rights to its underlying intellectual property.
We did not recognize an allowance for credit losses during the three months ended June 30, 2018 and 2017.
General and administrative expenses consist primarily of compensation, stock-based compensation and related costs for management, staff, Board of Directors, legal and audit expenses, and corporate governance. General and administrative expenses increased to $1.2 million for the three months ended June 30, 2018 from $1.0 million for the three months ended June 30, 2017, which was primarily due to an increase in the performance-based bonus accrual payable to Company management and employees.
Other income (expense), net for the three months ended June 30, 2018 and 2017, respectively, reflected a net fair market value loss of $(0.2) million and $(0.1) million on our warrant derivatives and a net fair market value loss of $(0.5) million and $0 on our equity securities.
We recognized $1.1 million of deferred income tax expense for the three months ended June 30, 2018. We recognized $1.4 million of deferred income tax expense for the three months ended June 30, 2017. The decrease in deferred income tax expense was primarily due to a reduction in the Federal statutory tax rate signed into law on December 22, 2017. The new legislation decreased the U.S. corporate federal income tax rate from 35 percent to 21 percent, effective January 1, 2018.
As of June 30, 2018, we had $21.3 million in cash and cash equivalents, compared to $30.6 million in cash and cash equivalents as of December 31, 2017. The primary driver of the net decrease in our cash balance was new and add-on investment funding of $46.7 million, partially offset by interest and fee payments of $28.5 million earned on our finance receivables, including $13.7 million of royalty-related receipts from our Narcan® investment.
As of June 30, 2018, we had $11.9 million of unfunded commitments outstanding.
Net income in accordance with GAAP for the three-month period ended June 30, 2018, was $3.7 million, or $0.28 per diluted share. During the same period adjusted net income was $5.6 million, or $0.43 per share.
The table below provides a reconciliation of SWK’s reported (GAAP) consolidated net income to SWK’s adjusted net income attributable to SWK Holdings Corporation Stockholders (Non-GAAP) for the three and six ended June 30, 2018 and June 30, 2017. The table eliminates provisions for income taxes, non-cash mark-to-market changes on warrant assets and marketable investments and SWK's warrant liability.
SWK Holdings Corporation is a specialized finance company with a focus on the global healthcare sector. SWK partners with ethical product marketers and royalty holders to provide flexible financing solutions at an attractive cost of capital to create long-term value for both SWK’s business partners and its investors. SWK believes its financing structures achieve an optimal partnership for companies, institutions and inventors seeking capital for expansion or capital and estate planning by allowing its partners to monetize future cash flow with minimal dilution to their equity stakes. Additional information on the life science finance market is available on the Company’s website at www.swkhold.com.
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” 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 or therein, 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.
CONTACT: SWK Investor Relations at (972) 687-7250 or firstname.lastname@example.org.
Globe Newswire: 22:47 GMT Friday 10th August 2018
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