Burford Capital Limited · LSE:BUR
Burford Capital — FY2022 Earnings Presentation
49 slides from Burford Capital's earnings presentation, May 16, 2023
Slide 1: Burford Capital Full-Year 2022 Results
MAY 16, 2023 Burford Capital Full-Year 2022 Results This presentation is for the use of Burford’s public shareholders and is not an offering of any Burford private fund.
Slide 2: Notice & disclaimer
Notice & disclaimer This presentation (this “Presentation”) provides certain information to facilitate review and understanding of the business, results of operations and financial position of Burford Capital Limited and its subsidiaries (the “Company”, “Burford”, “we”, “our” or “us”) for the year e
Slide 3: Continued positive momentum shown by strong 2022 financial results
Continued positive momentum shown by strong 2022 financial results 1. Financial results for 2022 show meaningful improvement in business performance; expected to continue in 2023 • Net income attributable to shareholders per diluted share of $0.14, up from a loss of $(0.13) in 2021; increase primari
Slide 4: Growth in Burford-only capital provision income drives significant earnings
Growth in Burford-only Year ended December 31 capital provision income drives significant earnings Selected statement of operations data Burford-only 2022 2021 $ change improvement ($ in thousands, except per share data) (as restated) Capital provision income 202,878 156,043 46,835 • Revenue growth
Slide 5: 2023 portfolio activity continues at a brisk pace
2023 portfolio activity continues at a brisk pace1 • We continue to believe we could be at a turning point for the portfolio as the velocity of our portfolio appears to be accelerating • First quarter 2023 capital provision-direct portfolio activity was at the fastest pace Burford has experienced si
Slide 6: YPF summary judgment ruling a complete win against Argentina with respect to liability
YPF summary judgment ruling a complete win against Argentina with respect to liability1 • Awaiting court scheduling of evidentiary hearing and resolution of Argentina’s reconsideration motion • Release of decision on March 31, 2023 drove revaluation of YPF-related assets as of that date, from $823 m
Slide 7: Burford is harnessing the power of AI
Burford is harnessing the power of AI Burford has over time augmented its • Litigation historically has been labor-intensive, and many good lawyers do 1 lawyer-driven investment process with AI-powered enhancements, including in not have the human capital resources to manage large, complex cases our
Slide 8: Revised fair value approach applied to current and historical periods
Revised fair value approach applied to current and historical periods Engagement with the SEC - Constructive dialogue between Burford, the SEC staff and our external auditors resulted in a revised approach to fair value accounting for legal finance assets - We anticipate that this approach will beco
Slide 9: Comparison of revised fair value accounting to historical methodology
Comparison of revised fair Historical approach to fair value accounting for value accounting for capital capital provision assets provision assets to historical methodology • In this illustration: Unrealized Unrealized Realization - At t=0 and t=1, capital is gain as % of gain as % of deployed expec
Slide 10: Entitlement calibration at capital provision asset inception
Entitlement calibration at capital provision asset inception1 Expected outflows Expected inflows Discount rate and + expected duration 0 1 2 3 200 + 7% / 3 years 100 0 1 2 3 • Based on commitment amount and • Most likely expected entitlement • Rate adjusts each period based on expected timeline (upf
Slide 11: Adjustments to fair value over time
Adjustments to fair value over time1 Adjustments in subsequent periods • Litigation risk premium adjusted based on • Discount rate adjusted based on market observable case milestones observation PERIOD 1 – NO ACTIVITY PERIOD 2 – POSITIVE CASE MILESTONE OCCURS • No changes to cash flows or discount r
Slide 12: Aggregate impact of changes in discount rates
Aggregate impact of changes in discount rates • Composition of fair value will vary depending on changes in market observations for the discount rate - Fair value is also impacted by changes in the quantum and timing of expected cash flows and any market transactions • Rising discount rates over the
Slide 13: Comparison of carrying value under historical and revised fair value methodologies
Comparison of carrying value under historical and revised fair value methodologies • The revised fair value methodology has been applied to carrying values for all capital provision assets • Excluding the YPF-related assets, deployed cost still represents the majority of total carrying value • Compo
Slide 14: Low leverage and laddered maturities
Maturity of debt outstanding Low leverage and laddered ($ in millions) maturities WAL of debt: 4.9 years 400 WAL of capital provision-direct assets: 2.4 years 1 360 • Leverage remains well below covenant levels 211 - Consolidated net debt as a 180 percentage of consolidated tangible 120 assets of 25
Slide 15: Liquidity remains robust
Liquidity remains robust • Burford-only cash and cash equivalents and marketable securities of $210 million at December 31, 2023 and $183 million at March 31, 2023 - Marketable securities consist of short-duration and generally investment-grade fixed income assets • Liquidity position primarily refl
Slide 16: Four pillars of Burford's value proposition
Four pillars of Burford’s value proposition 1. Core portfolio 2. Origination platform • Burford-only capital provision-direct cumulative realizations • Clear market leader with significant scale and meaningfully larger since inception of more than $2 billion with an 88% ROIC and than any competitor1
Slide 17: Financial results
Financial results [Burford
Slide 18: Statement of operations for the year ended December 31, 2022
Statement of operations for the year ended December 31, 2022 Elimination of third-party interests Strategic Advantage ($ in thousands) Consolidated Value Fund BOF-C Colorado Fund Other Burford-only Revenues Capital provision income 319,108 3,709 (112,370) 661 (1,417) (6,813) 202,878 Asset management
Slide 19: Statement of operations for the year ended December 31, 2021 (as restated)
Statement of operations for the year ended December 31, 2021 (as restated) Elimination of third-party interests Strategic ($ in thousands) Consolidated Value Fund BOF-C Colorado Other Burford-only Revenues Capital provision income 194,554 (6,263) (26,125) 193 (6,316) 156,043 Asset management income
Slide 20: Statement of operations for the year ended December 31, 2020 (as restated)
Statement of operations for the year ended December 31, 2020 (as restated) Elimination of third-party interests Strategic ($ in thousands) Consolidated Value Fund BOF-C Colorado Other Burford-only Revenues Capital provision income 314,948 (4,665) (21,746) (5,169) (4,677) 278,691 Asset management inc
Slide 21: Statement of operations for the year ended December 31, 2019 (as restated)
Statement of operations for the year ended December 31, 2019 (as restated) Elimination of third-party interests Strategic ($ in thousands) Consolidated Value Fund BOF-C Colorado Other Burford-only Revenues Capital provision income 579,792 (16,036) (16,855) (71,951) (16,137) 458,813 Asset management
Slide 22: Statement of financial position at December 31, 2022
Statement of financial position at December 31, 2022 Elimination of third-party interests Strategic Advantage ($ in thousands) Consolidated Value Fund BOF-C Colorado Fund Other Burford-only Assets Cash and cash equivalents 107,658 (1,906) (7,003) (20) (23,635) (1,415) 73,679 Marketable securities 13
Slide 23: Statement of financial position at December 31, 2021 (as restated)
Statement of financial position at December 31, 2021 (as restated) Elimination of third-party interests Strategic ($ in thousands) Consolidated Value Fund BOF-C Colorado Other Burford-only Assets Cash and cash equivalents 180,255 (1,561) (38,983) - (33) 139,678 Marketable securities 175,336 - - - -
Slide 24: Statement of financial position at December 31, 2020 (as restated)
Statement of financial position at December 31, 2020 (as restated) Elimination of third-party interests Strategic ($ in thousands) Consolidated Value Fund BOF-C Colorado Other Burford-only Assets Cash and cash equivalents 322,085 (2,080) (1) - (418) 319,586 Marketable securities 16,594 - - - - 16,59
Slide 25: Supplementary data
Supplementary data [Burford
Slide 26: Consolidated statement of operations for the years ended December 31
Consolidated statement of operations for the years ended December 31 2021 2020 2019 Previously Previously Previously ($ in thousands, except share data) reported Restated reported Restated reported Restated Net income/(loss) 127,549 194,554 340,103 314,948 409,156 579,792 Gain/(loss) relating to thi
Slide 27: Consolidated statement of financial position for the years ended December 31
Consolidated statement of financial position for the years ended December 31 2021 2020 ($ in thousands, except share data) Previously reported Restated Previously reported Restated Capital provision assets 2,900,465 3,117,263 2,564,742 2,714,314 Total assets 3,524,706 3,741,504 3,118,013 3,267,585 O
Slide 28: Consolidated statement of cash flows for the years ended December 31
Consolidated statement of cash flows for the years ended December 31 2021 2020 2019 Previously Previously Previously ($ in thousands, except share data) reported Restated reported Restated reported Restated Cash flows from operating activities: Net (loss)/income (56,428) (6,938) 173,302 156,975 196,
Slide 29: Financial impact of revised fair value methodology
Financial impact of revised fair value methodology • The revised fair value methodology has been applied to fiscal years 2019 through 2022 • Changes in the carrying value of capital provision assets impact other balance sheet and income statement line items, including shareholders’ equity, capital p
Slide 30: Continued total Group-wide portfolio growth
Continued total Group-wide Group-wide total portfolio portfolio growth At period end ($ in millions) 6,147 889 • Group-wide total portfolio up 5,323 15% year-over-year in 2022 to 683 $6.1 billion 4,601 1,315 • Growth in Group-wide total 421 portfolio reflects increase in 1,200 new commitments and 1,
Slide 31: Capital provision-direct new commitments
Capital provision-direct new commitments • Record Burford-only capital provision-direct new commitments1, up 24% year-over-year, due to continued prioritization of balance sheet capital for potentially highest returning assets Group-wide capital provision-direct new commitments ($ in millions) Up 24
Slide 32: Capital provision-direct deployments
Capital provision-direct deployments • Largest ever Burford-only capital provision-direct deployments due to continued prioritization of balance sheet capital for potentially highest returning assets • Burford-only capital provision-direct deployments up 94% year-over-year excluding the global antit
Slide 33: Capital provision-direct realizations
Capital provision-direct realizations Group-wide capital provision-direct realizations ($ in millions) Up 33% year-over-year 608 591 6 66 265 175 381 354 337 60 21 19 105 54 337 350 321 264 228 2018 2019 2020 2021 2022 Burford-only Funds BOF-C Burford Capital 33
Slide 34: Weighted average life (WAL) of concluded portfolio
Weighted average life (WAL) of concluded portfolio Burford-only WAL of fully and partially concluded capital provision-direct portfolio From inception through period end ($ in millions, WAL in years) 2.4 2.3 2.3 2.3 2.1 2.1 1.9 1.9 1.7 1.7 2,211 1,861 1,597 1,260 1,081 2018 2019 2020 2021 2022 Cumul
Slide 35: Strong asset management income and private funds capital raising
Strong asset management Burford-only asset management income ($ in millions) 56 income and private funds capital raising 29 29 47 28 • Closed on two new private funds in 2022 9 12 12 1 - BAIF II ($350 million in 6 6 commitments) 18 2 - Advantage Fund ($360 million 11 11 7 in commitments1) 2019 2020
Slide 36: Operating expenses continue to be moderate and decline relative to portfolio
Operating expenses continue to be moderate and decline relative to portfolio • Total operating expenses on a Burford-only basis declined in 2022, primarily due to large legacy asset recovery incentive compensation expense in 2021 • Excluding legacy asset recovery incentive compensation expense, incr
Slide 37: Reconciliations
Reconciliations [Burford
Slide 38: Cash receipts reconciliation
Cash receipts reconciliation ($ in millions) For the year ended December 31, 2022 Consolidated proceeds from capital provision assets 388 Less: Elimination of third-party interests (82) Burford-only total proceeds from capital provision assets 306 Burford-only proceeds from capital provision-direct
Slide 39: Book value and Tangible book value per ordinary share
Book value and Tangible book value attributable to Burford Capital Limited per ordinary share reconciliations At December 31, ($ in thousands, except share data) 2022 2021 (as restated) Total Burford Capital Limited equity 1,742,584 1,695,872 Less: Goodwill (133,912) (134,019) Tangible book value at
Slide 40: Capital provision-direct realizations
Capital provision-direct realizations Reconciliation of consolidated to Group-wide Elimination of third-party interests to ($ in millions) Consolidated Burford only Burford-only Other funds BOF-C Group-wide At December 31, 2022 402 (52) 350 175 66 591 At December 31, 2021 374 (110) 264 54 19 337 At
Slide 41: YPF realizations and carrying value
YPF realizations and carrying value YPF cumulative realizations - reconciliation of consolidated to Burford-only Elimination of third-party Since deployment ($ millions) Consolidated interests Burford-only Realizations - 236 236 YPF carrying value - reconciliation of consolidated to Burford-only Eli
Slide 42: Capital provision-direct asset carrying value
Capital provision-direct asset carrying value Capital provision-direct asset carrying value- reconciliation of consolidated to Burford-only At December 31, 2022 Elimination of third-party ($ in thousands) Consolidated interests Burford-only Deployed cost (excluding YPF) 1,873,052 (441,527) 1,431,525
Slide 43: Asset management income
Asset management income (as restated) For the year ended December 31, 2022 For the year ended December 31, 2021 Elimination of Elimination of third-party third-party ($ in thousands) Consolidated interests Burford-only Consolidated interests Burford-only Management fee income 7,321 312 7,633 8,667 1
Slide 44: Capital provision-direct deployments
Capital provision-direct deployments Reconciliation of consolidated to Group-wide Elimination of third-party interests to ($ in millions) Consolidated Burford only Burford-only Other funds BOF-C Group-wide At December 31, 2022 605 (148) 457 31 148 636 At December 31, 2021 673 (226) 447 144 138 729 A
Slide 45: Liquidity
Liquidity Reconciliation of consolidated to Burford-only ($ in millions) Elimination of At December 31, 2022 Consolidated third-party interests Burford-only Cash and cash equivalents 108 (34) 74 Marketable securities 136 - 136 Total cash and cash equivalents and marketable securities 244 (34) 210 El
Slide 46: Cumulative realizations from capital provision-direct assets since inception
Cumulative realizations from concluded or partially concluded assets from capital provision-direct assets since inception Reconciliation of consolidated to Burford-only Elimination of third- ($ in millions) Consolidated party interests Burford-only At December 31, 2022 2,246 (35) 2,211 At December 3
Slide 47: Due from settlement
Due from settlement Reconciliation of consolidated to Burford-only Elimination of third- ($ in millions) Consolidated party interests Burford-only At December 31, 2022 117 (2) 115 At December 31, 2021 86 (23) 63 At December 31, 2020 31 - 31 At December 31, 2019 48 (29) 19 Burford Capital 47
Slide 48: Covenant reconciliations at December 31, 2022
Covenant reconciliations at December 31, 2022 $ '000s From the condensed consolidated statement of financial position and note 14, Debt issued Debt issued 1,271 less: Cash and cash equivalents 108 less: Marketable securities 136 Consolidated net debt 1,027 From the condensed consolidated statement o
Slide 49: [Burford
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