Good morning and good afternoon. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Burford Capital Fourth Quarter and Full Year 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the conference over to Christopher Bogart, Chief Executive Officer. Christopher, you may begin your conference.

Thanks very much, and welcome, everybody. Thanks for taking some time to be with us today. As usual, I'm joined by Jon Molot, Burford's Chief Investment Officer; and Jordan Licht, Burford's Chief Financial Officer, and you're going to hear from all three of us, as we walk through the slides that have been put up on the website already, and after that, we'd be delighted to take your questions. When you look at these numbers, and I'm starting on Slide Four. When you look at these numbers, we're just so very pleased to be able to produce numbers like this for you and to have -- to be able to report on what was such a fantastic year. The last few years have been a little frustrating for us. We really started growing very rapidly in 2016. And if you look -- if you look back in history, in 2017, for example, we did a 11 times as much new business as we had done only four years earlier in 2013. And so given the life of our assets, we expected to be delivering great results a few years later from that growth. And instead of being able to do that, we ran headlong into COVID, headlong into the global pandemic. And so instead of delivering the results that we were expecting from that burst of growth that we've continued, we instead have spent the last two or three years saying to you, well, just wait for it, it's coming, trust us. And now this year, we can really say, instead of having another year of that, we can really show you what we've been so excited about over the last few years. Terrific results on sort of every quadrant of the business and these sort of speak for themselves.…

Thanks, Chris, and thanks to you all for joining. I'm going to start with Slide 11 and like Chris, I'm very pleased and proud of what we're reporting here today. And there's a lot in here. But more than anything, I want to emphasize a point that Chris made that for a number of these calls now, I have said, I think the word is that I'm bullish about our portfolio, that I am very pleased with the matters that our team has rigorously underwritten and included in the portfolio and the deals we've closed and also monitoring closely the cases that we've already put on and watching them through the litigation process, I've been quite pleased with how they've been progressing. For a number of calls now, as Chris said, we've had to say yes, COVID slowed things down. We did have enormous growth some years ago that has increased the size of our portfolio and investors were waiting to see when would we see the realizations that would be a product of that growth. And my feeling was be patient, I'm bullish. There's been nothing negative. It's all been positive. And now finally, we can show you that, that is actually starting to kick in. I'm glad we can actually share those results with you, and you can see them with the tangible results. So from 2022 to 2023 on Slide 11, you see that our capital provision direct realizations just for the balance sheet, just for Burford-only were up 42% and were $496 million worth of those realizations. That's -- it's just a much bigger number and it reflects the growth in our portfolio and those matters, finally making their way through the process. And keep in mind, as the third bullet on the page shows, this…

Thanks, Jon, and thank you, Chris for before. Good morning, everyone, and I think we flipped over into afternoon. I know we're a little bit earlier today, but good afternoon to everyone in Europe. I'm on Page 16, and I'll start going through some of the financials. 16 is on Burford-only basis. To reiterate some of the numbers that we hit on before, capital provision income more than quadrupled in 2023 versus 2022. That's driven by the strength in both realized and unrealized gains, and it's up close to $700 million year-over-year. We saw an increase in asset management revenue, which I'll go into more detail later, but that's primarily driven by the growth in BOF-C, which, as a reminder, is our arrangement with the sovereign wealth fund. In the fall of 2023, we were happy to announce the extension and expansion of that relationship through the end of this year and look forward to continuing that opportunity in the years to come. Net income for the year was a record, $2.74 and that drove tangible book value per share close to $10 at year-end. Overall, our capital provision assets finished the year at now $3.4 billion to dive a little bit deeper into that number, $1.6 billion of that is our deployed cost and $1.4 billion of that represents the YPF assets. As you recall, our valuation model or methodology now takes into account duration and time value of money. And so average discount rate for our portfolio over the year, decreased about 30 basis points since the end of last year. Certainly, volatility throughout the year, but point to point, it was 30 basis points. That resulted in approximately $50 million of positive impact on the fair value of the asset. But just as a reminder, the change…

Thanks, Jordan. And since we've gone on for more than 40 minutes, I think, I rather than talking at you anymore, I think it will be better for us to take your questions. But I think you've heard from all three of us how very pleased we are to be able to deliver this kind of this set of results to you. But with that, operator, we can take some questions, and we'll do them either from the phone or the webinar.

Thank you. [Operator Instructions]

Well, we'll start with the webcast. And we have a pair of questions from Rakesh at Bell that basically relates to OpEx, and Rakesh is trying to sort of determine how much of the OpEx base is sort of maintenance or existing and how much of it is for growth? And sort of as a follow-on, how much of the OpEx is fixed versus variable? So in reverse order, a lot of our OpEx is variable. So as Jordan was just saying a moment ago when he was talking to the slide on this, we have cash OpEx going out the door, which is basically base salaries and then the existence cost of the business. And since we're a professional services business, basically, those non-compensation costs are the usual existence cost, office rent, audit fees, listing and so on. But we don't have an enormous number of fixed costs in this business. And so -- and base salaries, virtually all of our compensation is variable. Its annual bonus, the compensation structure here is base salaries that are consistent with sort of the financial services model, in other words, not particularly high. And then annual bonuses and stock and long-term carry. And the reason you're seeing these pretty volatile accounting expense numbers is because of the portfolio performance. So when an asset goes up in value, we also accrue for a potential future carry payment, but we're obviously not making those payments until we get cash in the door. And that's why you see such a sharp disparity, as Jordan pointed out, between the carry payments we actually made across the business this year, which were sort of $10-ish million as opposed to the kind of accruals that you saw, which were many multiples of that. So that's the dynamic going…

Your first question comes from the line of David Chiaverini from Wedbush Securities. Please go ahead.

Hi. Thanks. Great to see the realizations come through in 2023, you mentioned about seasonality in the business. Now is it fair to assume 2023 was an outlier on the high side? And can you talk about the realizations pipeline looking forward?

Yes. I don't know that you can assume that in terms of seasonality. When you think about what drives lawyers and litigation, we've talked before, there's the new business side and then there's the realization side. The new business side, it's simply the case that there's a big year-end rush in this business, and that drives year-end traffic. And that means as well that the people who are going to do a deal are almost certainly going to do it in November and December as opposed to doing it in January or February. And so we've got this phenomenon of having a very busy November, December, on every single year we've been in business, we have closed multiple deals on -- literally on the last day of the year. But nobody then turns around and says, oh, well, I didn't bother during December, so I'm going to come in January and do my deal with you that. And so the first quarter tends to be fairly sleepy and the summer and September tends to be extremely sleepy because lawyers are simply trying not to do anything that they don't have to do during that time. And so you can see that -- and that's been a trend that you've seen in our numbers for years and years. It hasn't been as visible because we've only started reporting quarterly in the last little while. But it's the fourth quarter dominance has certainly been a trend that you've seen in the numbers for a long time. In terms of realizations, it's a little bit less predictable than that. Because some realizations are driven by just the court schedule. So if you've got a case that is likely to settle as it's heading into trial and it's heading into trial in May, you might well extract a settlement rather than having that case go to trial in May. But the other dynamic that you see in corporate litigation matters is that companies will regularly wait to see what their year is looking like. And then at the end of the year, sort of figure out how much money they're going to make available to subtle cases. And years ago when I was the General Counsel of Time Warner, this was a dynamic that I had. So Time Warner at any given time had a huge portfolio of litigation. And the CFO would sort of come along in November and say, okay, I've got a pretty good sense of the year. I can give you x million dollars this year to go and see what are these cases you can buy off. And to some extent, that's what you do, you go out to a bunch of the cases being litigated, and you'd say, look, I've got a finite pool of money. And so whoever hits my bid the first, you're going to be getting it. And so we do see a fourth quarter level of activity for that reason as well.

That's helpful. And my follow-up, could you talk about the new deal pipeline, how it compares to prior periods?

I think the answer is one, I guess, the way that I talk about new deals is the constant evolution of what's going on in the market in this business. And you heard Jon say when he was talking through the slides about the increase in our average ticket size. And so what we see in new deals is an increasing trend towards corporate use of our capital for monetizations and portfolios in addition to our traditional more law firm driven litigation financing model. And so we see both things in the pipeline. The corporate stuff probably has a longer gestation period. Because you're still at a stage in the market where people are, for the most part, doing it for the first time. So when I took you through that sort of mini case study of the Fortune 50 company that did a deal with us last June, that's not a deal that walked in, in May, and we just did it in the space for a couple of weeks. That was a relationship that we have been cultivating, we have been working with the client to help our contacts with the clients, educate their internal peers more broadly about the use of legal finance. And so it's a process. And so that's what we're excited to see when we go and have ongoing interaction with people. So we're constantly building relationships to turn them into matters that will ultimately close.

And so I would just add in any one period like right now, we'll have matters that come in that are more conventional, single-case litigation finance, they could have come in, in late in the year and not closed by year-end, and then there's the ability to close them now. And there could be larger opportunities where you're putting out much larger ticket sizes and the cultivation may have started in the fall or even we have some that the cultivation has been going on a long time, and we're working on those and progressing them through.

Your next question comes from the line of Julian Roberts from Jefferies. Please go ahead.

Hi guys. Thanks very much for the presentation. I'm afraid I missed the first few minutes, and so this could be something that you've already covered. Am I right in thinking that the large investment that realized quite quickly, only accounted for about half of the realized gains in Q4 looking at the schedule of capital provision direct asset data?

I think that, that is right. Although Jordan, can you check the amount?

Yes, that's correct. Not -- give or take. I mean, yes, it's around that.

Yes, sorry, my point being that actually, that means that even in Q4 with a pretty big realization, you still had quite diverse sources of realized gains. Sorry, that's all I had actually. Thank you very much.

Well, thank you very much, Julian.

I would just say that is consistent with, as Chris said, the number of trials going on at any given time. There's just a lot going on in the portfolio. And as Chris also said, some number of them may settle on the courthouse steps and some number will go through and then companies will take a time to pay through the appellate process often. And so it makes sense that the money is coming from diverse sources.

Your next question comes from the line of Alex Bowers from Berenberg. Please go ahead.

Hi, everyone. Just three questions from me, if I may. Just firstly, can we get sort of a latest update on the sort of COVID-related case backlog and sort of how much further you believe there is to go on that? And sort of more specifically to Burford, what your sort of outlook is for '24 in terms of cases that are sort of nearing completion? So the first one. Second one is, I think you mentioned in the presentation that sort of transaction size has doubled since 2019. How do you think about sort of mix or diversification of the portfolio between sort of larger and smaller cases? And then just sort of lastly on YPF. I think you saw a small markup in Q4 get sort of the understanding of what drove that? Is that sort of primarily the sort of post-judgment interest accruing on that? And then sort of secondly on YPF, sorry, I guess it makes me four questions. But in terms of the appeal, I think, we've seen Argentina's opening briefing come out. Was there anything in there that sort of surprised you? Thanks.

So we're going to split these up. And Jon will take the last two, the two YPF-related questions. I'll do the COVID backlog and Jordan can speak to diversification. In terms of the COVID backlog, I think that where you really -- if you look back at Slide 14, that slide is really there to try to illustrate the backlog in the portfolio. And as I said at the outset of the presentation, you would -- all things being equal, without COVID, you would expect the middle of that slide to be further along towards realization of this. Now we've made big strides this year, but we've still got more to do in terms of clearing that backlog. And that's why we said that we expected a continued -- I forget the language we use, but a continued robust level of activity in 2024 as yet more of those cases move through the litigation process. We've got -- as we had last year, we've got a significantly larger number of trials scheduled, for example, in 2024 than we did in, let's say, 2022. So I think that's sort of where we're headed for clearing the COVID backlog. And then before I turn it over to Jordan, the numbers there, just my sort of macro comment about diversification is that yes, we've got increases in transaction size. But of course, we've also got increases in total business volume and portfolio side. So in some ways, the business is as diversified as it's ever been in terms of the relative share of the portfolio that any single thing represents when we were much smaller, we had a world where we were actually somewhat less diversified because we simply didn't have that much capital. So even if you were only putting a comparatively smaller amount of capital on the things they were taking more of total portfolio. But Jordan, do you want to carry on with that and then we'll turn to Jon?

Yes. Look, Chris, I think you hit on some of the right points. Obviously, from a mass perspective, the increasing in transaction size is going to slowly over time, increase the average size of an asset. That being said, I think, Chris, you hit on the right point, which is that overall diversification when you think about it with respect to client concentration or the asset type in terms of commercial versus arbitration versus patent and so forth. We consistently monitor that and I don't think that we have any undue or different exposure levels now than we've reported in the past and that, that diversification is consistent with years past. I'm actually going to steal from Jon one part of the YPF question and which was how did the values change in the fourth quarter. And I'll just remind folks that like every asset, given our valuation methodology, the change in discount rates and duration have slight changes to the change in value. And so you're going to see that in every asset class in every asset, regardless period-over-period, regardless if you saw a specific milestone occur in that period.

And actually, just before turning to the YPF specific question, I did want to address the question about diversification and ticket size, which is I wanted to remind everyone that we -- I'm often asked this question about are we looking for a particular kind of case? Are we too full on one case and looking for another. And we have built this business by making sure for everyone in the market for legal assets, whether it's companies or law firms, we are a taker if the risk reward on the individual matter is attractive. And so we have teams that are able to underwrite in various jurisdictions, various subject matters, whether it is investors state arbitration, commercial arbitration and I trust intellectual property contract breach in various jurisdictions. We have people that can underwrite and evaluate those matters and shepherd them through. And so we achieved diversification because it's a robust, diverse legal market. And I found there's a nice mix of small and large matters. There's a nice mix by jurisdiction. Does it ebb and flow one quarter to the next, where we'll have a very rich arbitration pipeline for a couple of months, and then there's a whole bunch of patent matters that come in. Yes, but generally, we're firing on all cylinders in all the pipelines. On the YPF point, I can't get into as much as I'd love nothing more than to keep you on the phone for hours talking about the merits of the case. I can't really get into it, and I don't want to sort of preview our pellet briefing, but all I can say is it shouldn't come as a surprise to you that we've been litigating this for nine years. We would be very familiar with all the traps that Argentina would run and all the points their lawyers would make. And so I don't think there's going to be anything surprising, but I can't really comment on the merits. And you'll see our brief will be filed, and you'll get to see all the responses.

So operator, we are two minutes past the hour, but I think we have time for one more question.

Our last question today will come from Andrew Shepherd-Barron from Peel Hunt. Please go ahead.

Okay. Thank you very much and thanks for the presentation. Well, actually, I had three questions, so let's see how we do. One is on IRRs. I don't think you've actually published what IRR was for the cases completing this last year. But if I look at lifetime, lifetime has dropped from 29% a year ago to 27% now, which suggests that IRRs were probably somewhere around 23%, 24% for last year. So can you talk a little bit about that? And if that is right, and if you're thinking -- if you're going to be taking the advantage funds in-house, which I think you said we are teen IRRs, what does that say about future IRRs? Second question, if I may. As you said that -- I think you said that you throttle back effectively a new business because you have a sort of resource constraint, and so much of your team was focused on settlement. Isn't that going to repeat next year when logic continue there? And thirdly, if we have time, I wonder if you could talk about at all about what are the large deals might be out there outside of YPF? Thank you.

Sure. So maybe I'll take them in reverse order. So I think we're not really in a position to talk about individual matters that are out there. But just looking at the nature of even if you just look at the US, looking at the nature of the US litigation market, there are a significant number of large matters there. And if the premise of your question is what we wrote in the shareholder letter, about basically being able -- being willing to take on to consider to take on a couple more Pearsons, if you will. What we're seeing there is that there are matters that are very potentially large, but also come with probably outsized risk and we are very careful about how much risk we're prepared to take in the business and we calibrate it very carefully. But when we can find something like Pearson that has such an asymmetry between the risk that we're taking, the capital risk that we're taking and the potential upside, those are potentially attractive to us. And so we keep our eyes open for things like that. In terms of the new business point, I think the answer is sort of yes, but. And what I mean by that is we have a finite number of people I'll keep on using the patent group that I just described. And those people are, as I said a moment ago, they're sort of doing it all. And so it's a natural outcome, but if they have a lot of time being spent on a case in a particular week that because that case is going into trial, they're probably going to spend less time during that particular week on originating new business. But the week following that, they might not have a case going to trial and they can be full bore on new business. And we don't -- they would never be in a position of being 100% full bore on new business anyway. So is it a constraint? Sure. It's a constraint. If I were to double or trouble the size of the patent group and devote all the new people that we've just hired to only trying to find and originate new business, would we probably do somewhat more new business, yes. But is that a sensible way to run the business? Jon and I have not historically taken that view. We've been pretty moderate in how we've expanded both with an eye to cost base and with an eye to not trying to get it over our skis. And so if the price of that is that in some periods, when we're breaking in the cash, we're not doing quite as much new business activity, that's from our perspective of sort of an acceptable short-term compromise. But the stuff always from our perspective, comes back and rights itself.

I would just add to that, we are hiring. And as Chris said, the idea is hiring a new patent Pearson, you don't want to double the size of the team in a short period of time and change the quality control. But integrating people one by one is a good way to do it. And we're in the process of doing that now. Not just in patent, but in various areas too.

Yes, on the IRR point, we don't and we never have produced sort of annual IRRs, we produce vintage IRRs, which you see on Slide 14. And the 2023 vintage IRR right now, even though it's early on in its life is 32%. You see the IRRs and the ROICs moving around in this business. And they are affected by a variety of factors, including actual performance, obviously, but also time and duration. And so as Jon noted earlier, we're going to see and what we did, in fact, see a reduction in our ROICs because of the fairly rapid settlement of that large matter. And so when you settle a case that quickly, you're inherently going to take a hit on your ROIC because we're not going to double our money with capital that's only out for six months, wish that it were. No, I hope that was responsive.

And with that, since we're now materially pass time, I think, we'll call it a day. As usual, we're always delighted to engage with investors directly as well. So please don't be shy about being in touch with us. Thank you very much for taking more than an hour today with us and helping us celebrate a little bit what was a terrific year. And now we're excited to see what we can do in 2024. So thank you all.

This concludes today's conference call. Thank you for your participation and you may now disconnect.