Participants

Susan Xu; IR; Alliance Advisors IR

Jody Staggs; President, Chief Executive Officer, Interim Chief Financial and Accounting officer; SWK Holdings Corp

Adam Rice; Chief Financial Officer; SWK Holdings Corp

Scott Jensen

Presentation

Operator

Greetings. Welcome to the SWK Holdings fourth-quarter 2024 conference call. (Operator Instructions)
Please note, this conference is being recorded. I will now turn the conference over to your host, Susan Xu, Investor Relations. You may begin.

Susan Xu

Thank you. Good morning, everyone and thank you for joining SWK Holdings' fourth-quarter 2024 financial and corporate results call. Yesterday, SWK Holdings issued a press release detailing its financial results for the three months ended December 31, 2024. The press release can be found in the Investor Relations section of swkhold.com under News Releases.
Before beginning today's call, I would like to make the following statement regarding forward-looking statements. Today, we will make 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 risks and uncertainties factors section of 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; and Adam Rice, CFO, who will provide an update on SWK fourth-quarter 2024 corporate and financial results. Jody, go ahead.

Jody Staggs

Thank you, Susan and thanks, everyone, for joining our fourth-quarter conference call. We are pleased with SWK's fourth-quarter performance and the company enters 2025 on solid footing. Our fourth quarter was highlighted by solid financial performance, including $8.2 million of finance segment net income, improvement in the portfolio's credit quality and $44 million of capital deployed into yielding finance receivables to life science companies.
Our non-GAAP tangible financing book value per share increased 8% year over year to $21.15 and with shares trading at a discount to book and given our excess capital, we have been active purchasers of our shares having repurchased approximately 100,000 shares for $1.6 million since September 30, 2024. During the fourth quarter, we closed an up to $8 million senior secured term loan to Triple Ring Technologies, upsized the Eton loan to $30 million and advanced a cumulative $10.6 million to four performing borrowers.
In January, we closed an up to $15 million term loan with ImpediMed, with $10 million advance at close. These are all core SWK financings to commercial stage life science companies. Each is either public and has demonstrated the ability to raise capital or private with the support of sponsor.
Since we last spoke, three SWK finance receivables were repaid at premiums to the GAAP carrying value. In December, Veru made a $4.2 million payment to fully satisfy the FC2 loyalty. The FC2 royalty generated a 45% IRR and a 2.7x MOIC. In December, Moleculight made a final payment totaling $12.2 million to repay its term loan to SWK.
The Moleculight term loan generated a 20% IRR and a 1.6 MOIC. SWK continues to hold equity in Moleculight, which is carried at zero on our books. In March, ANI Pharma made a $17.25 million payment to exercise an option to buy out the Iluvien royalty. The Iluvien royalty generated a 20% IRR and a 1.8x MOIC. At December 31, 2024, we had $13.8 million of gross finance receivables on non-accrual. The nonaccrual receivables have a 15% CECL reserve, thus, our net nonaccrual totaled $11.7 million.
This morning, we announced the signing of a transaction to sell our remaining performing royalty portfolio for $34 million. The deal is expected to close in approximately two weeks. In combination with the Iluvien buyout, the $51.3 million of proceeds from the two monetization transactions is approximately $1 million more than the carrying value at December 31, 2024. Upon closing of the transaction, we also expect to close out a Japanese yen hedge, which will free up an additional $4.5 million of cash.
Pro forma for these changes as well as a $3 million principal repayment from 4WEB in the first quarter of 2025 and using the 12/31/2024 balances, our go-forward gross portfolio consists of approximately $218 million of performing loans, $14 million of nonaccruals and approximately $5 million of equities and warrants.
Our fourth-quarter 2024 portfolio effective yield was 15.5%. The effective yield is a yield assuming all financial receivables pay as modeled. This figure is not adjusted for the post quarter changes but should be in the neighborhood of the go-forward portfolio yield even considering the royalty sale.
Finally, as of yesterday, our cash totaled over $30 million and we have no borrowings under our revolver. Assuming closing of the final royalty transaction and release of the FX hedge, our gross cash will total nearly $70 million. We anticipate the Board will declare a dividend on the closing of the final royalty transaction.
Turning to our Enteris CDMO division, which has been rebranded as MOD3 Pharma to signify its transformation into a pure-play CDMO business. We are pleased with MOD3's 2024 results as segment division revenue totaled $3.6 million, tripling from $1.2 million in 2023.
We expect continued growth in 2025 and the team is focused on positioning the business for unsubsidized profitability by year-end. We are in regular contact with our strategic partner and believe they are pleased with MOD3's performance.
With that, I will turn the call to our CFO, Adam Rice, to review the quarter's financial results.

Adam Rice

Thank you, Jody and good morning, everyone. Yesterday, we reported earnings for the fourth quarter of 2024. We reported GAAP pretax net income of $8.6 million or $0.70 per diluted share. Our reported fourth-quarter 2024 net income of $5.9 million after income tax expense of $2.7 million included a $1.1 million increase in finance receivables segment revenue and a $1.3 million increase in pharmaceutical development segment revenue.
The $1.1 million increase in revenue -- or in year-over-year finance receivables segment revenue was primarily due to a $2.3 million increase in interest and fees earned on newly funded loans and royalties, the accelerated fees on early payoffs -- and accelerated fees on early payoffs. The increase in finance receivables segment revenue was partially offset by $900,000 as a result of two investments entering non-accrual status this year.
As of December 31, 2024, our GAAP book value per share was $23.45, a 5% increase compared to $22.33 as of December 31, 2023. Additionally, non-GAAP tangible finance book value per share totaled $21.15 as of December 31, 2024, an 8.3% increase compared to $19.53 as of December 31, 2023.
Overall operating expenses which -- overall operating expenses, which include interest expense, pharmaceutical manufacturing, research and development expense, general and administrative expense and provision for credit losses were $6.6 million during fourth quarter 2024 compared to $6.8 million in fourth quarter 2023.
MOD3 operating expenses were $1.6 million in fourth quarter 2024 compared to $1.8 million in fourth quarter 2023 and finance receivables segment operating expenses were $5.3 million in the fourth quarter 2024 compared to $5.6 million in fourth quarter 2023.
The finance receivable operating segment expenses further breakdown for fourth quarter 2024 to general and administrative expenses of $2.1 million, provision for credit losses of $2 million, and interest expense of $1.2 million. And for fourth quarter 2023, general and administrative expenses of $2.1 million, provision for credit losses of $2.4 million, and interest expense of $1.1 million.
The decrease in finance receivables segment operating expenses was mainly due to a $400,000 decrease in provision for credit losses. The decrease in provision for credit losses is most notably attributed to the strategic exit of three non-accrual investments during the quarter.
Turning to our share repurchase program. We bought back roughly 50,000 shares at a total cost of $800,000 during the quarter. Since quarter close, we have repurchased an additional 47,000 shares for a total cost of $800,000.
Lastly, for financial reporting purposes, we have transitioned the MOD3 segment to held for sale as of December 31, 2024. The transition to held-for-sale status was based on criteria set forth in GAAP accounting guidance and is related to the option purchase agreement entered into between MOD3 and a strategic partner effective January 1, 2024.
With that, I'll turn it back over to Jody.

Jody Staggs

Thank you, Adam. We entered 2025 with a healthy loan portfolio yielding in the mid-teens as well as $30 million of gross cash. The sale of our remaining performing royalty portfolio and closeout of the FX hedge will add an additional $39 million of cash to our balance sheet and we anticipate declaring a dividend on the closing of the final royalty transaction.
Our MOD3 CDMO division is self-sufficient and working with our strategic partner to address the sizable need for Phase I and Phase II nasal CDMO services.
With that, let's open the call to questions.

Question and Answer Session

Operator

(Operator Instructions) [Scott Jensen], Private Investor.

Scott Jensen

Good morning, Jody and team. Congratulations on so much progress since we last spoke.

Jody Staggs

Thank you.

Scott Jensen

I guess I got a couple questions for you. When you're thinking about a dividend, since it's such a large pile of cash, are you thinking about ongoing dividend or a special dividend, returning some of that cash, that cash pile to shareholders?

Jody Staggs

Yeah, Scott, thanks. So the Board is still considering our options. I would anticipate initially a one-time special dividend. That doesn't mean that there might not be additional special dividends in the future. But at this time, I don't anticipate a recurring dividend.

Scott Jensen

Yeah. Love it. Love it. That's what I would hope for as well. Second, as far as the buyback, where are you on the current buyback? And then again, is that going to be something the Board is going to consider about renewing or increasing the buyback?

Jody Staggs

Yeah. And Adam, if you have the email pulled up, I might -- from Courtney, I might have you look and check how much room we have. But we do have room -- enough room on our buyback. It's been interesting trying to navigate this with our blackout period. So once we go into the blackout period, the algorithm takes over and we don't really have control over how many shares are repurchased.
When we're not in the blackout period, we can direct it and be more aggressive or less aggressive. So I would say we're still active repurchasers of our shares. We think particularly with the news we announced today, shares are trading at a 20% discount. That's an attractive use of capital. So we'll continue to do that.
We should be out of the blackout period when we report first quarter roughly May 15, in that ballpark. And the program will expire. I think it expires roughly that date. I don't -- we have not discussed it but I think the Board views the buyback as an attractive use of capital. And I would expect, assuming everything else is equal, that the Board would strongly consider reauthorizing the program for another year.

Scott Jensen

Excellent. Thank you. And I just also want to say congratulations on all those workouts, Biolase, et cetera. Those were excellent and cleaning it up, you've been doing a great job (technical difficulty)

Jody Staggs

Thank you, Scott.

Scott Jensen

I will get out of queue and see if somebody else but keep up the good work and thank you again and love reading the progress.

Jody Staggs

Thank you. Appreciate the support.

Operator

(Operator Instructions) Okay. We have no further questions in the queue. I would like to turn the floor back to Jody for any closing remarks.

Jody Staggs

Thanks, John. Thank you for joining us today and for your continued support of SWK. We hope everyone has a great day. Thanks.

Operator

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.