Thank you for standing by and welcome to the Burford Capital's Third Quarter 2024 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'd now like to turn the call over to Christopher Bogart, Chief Executive Officer. You may begin.

Thanks very much and hello everybody. Thank you for joining us today. As usual, with me on the call is: Jon Molot, Burford's Chief Investment Officer; and Jordan Licht, Burford's Chief Financial Officer. And the three of us will take you through the slides that have been put up on the website. I'm going to start on Slide 4, and it's obviously very nice when a strong quarter like this comes along and we can show you how the business is performing. Our business doesn't really fit neatly into quarters and the third quarter is often slow, given the summer. So it's particularly nice to have this kind of result, even though we like to look at the business over a longer term than just on a quarter-by-quarter basis. But this slide is purely about the quarter. And so, what you can see here are some real indications of activity, realizations more than doubled compared to the comparative quarter. Net realized gains almost doubled. We brought in a ton of cash during the quarter, decent income, and our deployments and commitment activity was certainly consistent with this kind of period. In fact, new commitments went up more than 5x over the comparative period. But because courts and lawyers are often slow in the summer, the third quarter is never what we look to for new business as some sort of bellwether of anything. I'm going to turn to Slide 5, which lets us talk a little bit more about the year-to-date. And I will say, just as we start going through these slides, we're going to try to do this at a reasonable pace for you because it was our intention on this call to give you a little bit more fulsome of an update when we come to talk…

Thank you, Chris. Good morning and good afternoon to everyone on the call today. I'm on Page 6. This is just a quick summary of the financials for Burford-only. As we talked about earlier this year, it's obviously difficult to make comparisons to the prior year periods. 2023, of course, included the positive news regarding summary judgment on the YPF cases that drove a good portion of the 23 years overall results. But let's start first looking at the quarter and some of the totals. Overall, we had $136 million of net income for the second quarter, resulting in $0.61 per share. Net income was just over 60% of total revenues. On the asset side, we are slightly over $3.6 billion of capital provision assets. Of that, our non-YPF assets represent approximately $2.2 billion in which there's approximately a 35% fair value uplift to deployed cost. Tangible book values over -- excuse me, book value per share is over $11 now and tangible book value is just shy of $10.5. I'm going to go into more details about revenue, expense and some of the other key metrics now. So why don't we switch to Page 7? On Page 7, breaking down the various components to capital provision income, a couple of headlines to focus. If you exclude YPF, our net realized and unrealized gains were up 200% quarter-over-quarter and 17% when looking at the year-to-date figures. I also want to highlight the net realized gains in the third quarter, in particular, were close to double the same quarter or same period last year. And as Chris had mentioned, and more importantly, the 9-month figure of $186 million is already in line with previous annual records. Inside the earnings, market interest rates did reverse course during the third quarter and this…

Before we turn the slide, I just wanted to say thanks Jordan back on Slide 9 and thanks to you all for joining. And, in fact, I just want to give some color, my perspective on the two slides Jordan just spoke to. On the one hand, commitments and deployments and on the other hand, realized gains because that's the bread and butter of what our team does. And on the commitments and deployments front, I would just observe, as Chris said early, generally the third quarter, 2/3 of it is summer, July and August. Lawyers often take their holidays during that period. It's slower. They try to get work done in June and deals done in June before going away. But this year, I just felt like the pipelines were robust. The team was busy all the way through the summer into September. So we weren't playing that kind of September catch up to make up for slower quarters -- I mean, slower months before. And the other thing about it is, it was very active in a broad, diverse way geographically and by types of cases. It's been years since we were a New York-based U.S. commercial litigation funder that happened to have satellite offices. Like we are a global provider. When I think about how active the EMEA and Asia Pacific groups have been, how active our patent team in the U.S. has been with intellectual property litigation. So that whether it's run out of Chicago, out of London, it's Asia or it's New York, there's just has been a ton going on consistently throughout the year and that's really fabulous. And on the realizations point that Jordan just talked to on Slide 9, I'd just say, I've been saying on these calls for many years, particularly…

Thanks, Jon. Yes, it's been a little while since we talked at any length about YPF. And so, we thought that it was about time to give a little bit of an update about what we could say. Look, we understand that there's a lot of shareholder interest in the YPF case. That's obvious given its size and its significance for the business. And we know that investors find it frustrating not to be able to get chapter and verse from us about our strategies and their progress. Unfortunately, that is simply the reality of conflict litigation. And none of you, no rational investor, would want us to disclose publicly any information that would give Argentina an edge in that ongoing litigation. But what we can do is, provide here a bunch of information that is publicly available if you dig for it. So nothing I'm about to say is new or not already public, but we're just making it a bit easier than having you had to pour through court documents and media reports on your own. And we're also going to bring together some of what we've said in the past about what we're doing here and how it really relates to the end game. There are essentially three buckets of activity going on right now in the case. The first bucket of activity is the appeal. Argentina has an appeal as of right from the trial court's judgment against it. That appeal is taken to the Second Circuit Court of Appeals, which is the federal appellate court that covers New York and some other states. And in addition to Argentina appealing its loss, the plaintiffs have also appealed the dismissal of YPF from the case. Those appeals are now fully briefed. In other words, all of the…

Thanks, Chris. And I'll get through the next couple of slides, and then we can wrap up and turn to questions. Page 14, which is our traditional asset management slide. Look, that continues to perform. As I've discussed before, asset management business is predominantly driven by the partnership with the BOF-C, which takes a pro rata share of our balance sheet investments. As a reminder, the asset management business is a cash-on-cash business. So predominantly, we receive cash when our investments are realized. If you look at the payout over the first nine months of the year, we've had a cash inflow of $17 million. However, on the income statement for Burford-only, you'll see positive fair value movements are going to move the recognition of some income for us. Switching to Page 15. I'm going to discuss the expenses rather than revenues. At $113 million during the nine months ended this September 30, our operating expenses are down 25% versus the same period last year. Of course, we see a lot of variations in the reported operating expenses that are driven by unrealized gains, as well as some of the other accounting items. One of the things that I know I've spoken about before on the call is that, we can't control the impact of our share price and how that then impacts deferred compensation. We economically hedge deferred comp, but that hedge doesn't actually offset the movement of the share price in our P&L. And so, what you're seeing here in the salaries and benefits line, it appears to have reduced meaningfully when you're comparing the nine months of 2024 versus 2023 on the year-to-date periods, where, in actuality, the 2024 period would be slightly larger than 2023, and that would have been around $32 million. So, again, that's…

Thanks. So I'll just close on Slide 17 and before we take your questions, and you've all seen this slide before, it's just a reminder of the overall value proposition that we think exists here, which comes with these 4 points. The first being the value of the portfolio that we've assembled. Jon talked at some length and eloquently about that earlier. And even if we did nothing else, that portfolio is going to throw off a lot of cash in the years to come. We twin that with a significant origination platform, market-leading, again, that Jon described as being now a truly global platform that is feeding us business all over the world. An asset management business that supplies a little bit of ongoing leverage, although, as you know, we have been increasingly favoring using our own balance sheet capital instead of relying on what we feel is pretty expensive fund management capital and, obviously, the YPF assets that we've talked at significant length about today and which we believe will provide significant value to the business. So we're excited about where the business stands. We're very pleased with how the portfolio is progressing, and we'd be delighted to take your questions.

[Operator Instructions] Your first question comes from the line of Mark DeVries from Deutsche Bank. Your line is open.

Thanks and I appreciate all the comments on YPF. That was really helpful. I had a couple of follow-ups, though. And Chris, you may have answered this kind of indirectly, but has Argentina indicated that they're not willing to come to the table until this appeal is fully adjudicated?

So, again, I think we're constrained in being able to discuss with you any of our discussions or our advisers' discussions with Argentina. But what I can say, I suppose, as a more general proposition is, when you think about this purely as a logical matter, it's pretty unlikely from my perspective that while there's ongoing active litigation about a case that a government is going to find it particularly easy to resolve it. And so, I think the question is about positioning yourself to be in as good a position as possible when you get to the end of that process.

Okay. Makes sense. And did you indicate when you would expect the oral arguments to get scheduled?

No, we don't have a date for oral argument yet. The way this works is, the case gets fully briefed first, and that happened towards the end of August. And so, then it becomes eligible to be assigned for oral argument. And we just simply don't yet have a date from the court for that. If you're one of the people who watches the docket closely in this case, you will have noticed that just in the last couple of days, there have been updated filings by the lawyers setting out the dates they are and aren't available for argument over the next few months. So it's -- you can sort of read into that an expectation that this is something that should happen, if not this year, then in the early part of next year.

Okay. That's helpful. And then just turning to your core business. Could you just talk about kind of the recent environment for deployments and identifying any new opportunities? Any kind of color on the types of new commitments made in the quarter?

Yes. And I think as we do that, it's important for everybody to bear in mind because I'm going to sort of link your question to a question from Rakesh from Veld Capital that's been put in on the website. And that question is about cash versus commitments and deployments as well. And I think the thing that's important to bear in mind is that, and Jordan referred to this earlier, we do a couple of things, right? We do new business where we're signing up a new case. And that new case may result in a large deployment immediately when we're monetizing a position, or it may result in deployments over time as the case goes through the litigation process. And so, we do new business that doesn't necessarily result in immediate deployments, and that's the $775 million number that Jordan gave you of definitive undrawn commitments. In other words, these come in a couple of flavors. We might say to you as a client, yes, we're going to be there for you when you come with your next case. That's a discretionary commitment because we don't like the case, we don't have to finance it. And we have hundreds of millions of dollars of those kinds of deals, which bond law firms and corporate clients to us in long-term relationships. But the more precise version of these are definitive commitments. And that's when we actually have agreed to fund the case and the case exists and is alive and it's going through the litigation process. And we are looking at spending real money in that case over the years to come. So that second category, the definitive commitments is now pretty big at $775 million. So that's money all or most of which we expect to deploy over…

Your next question comes from the line of Alexander Bowers from Berenberg. Your line is open.

Just two questions for me. Firstly, just starting with the core business. Commitments kind of tracking year-to-date, not far away from what they did in 2023. Could you just give us a bit of color on the competitive environment and what you're seeing? And, I guess, in terms of new client wins from your side, how those are going this year? And then the second question, just on the DOJ YPF topic. Do you know why the DOJ decided to wait until the outcome of the U.S. election to [Technical Difficulty]

Speakers, we just lost connection with the analyst.

I think I got enough of the gist of the question. So let me touch on both of those. And let me actually do them in reverse order because the answer to the second one is very easy. There's no connection between the U.S. election and the timing of the DOJ's filing. We made this motion some time ago. It's gone through the briefing process. The DOJ told the court some time ago that it wanted to think about whether it was going to weigh in on that particular motion. And the court agreed to not decide the motion until the DOJ weighed in as long as it did so by November 6, which is yesterday. So the timing has absolutely nothing to do with the election and the decision about the DOJ position would have been made by career DOJ people. As we said, there's nothing particularly new or novel about this position, like DOJ here is acting as an advocate for its client, which is the U.S. government. And the U.S. government, on the one hand, has an interest in the enforceability of its court's judgments. But on the other hand, the U.S. government does not want a world in which the reverse could be true, where an Argentine court could come along and issue an order that says, "Hey, U.S. government, please bring some of your property into Argentina so that we can take it." And that's why, as I said in my sort of longer presentation earlier, that's why even when we filed the motion, I said to Bloomberg, it's not at all impossible that the U.S. government will take the view on this that we have gone further than they would like. That doesn't settle the question. The court ultimately gets to decide how far…

Sure. So the question was on the gain with respect to YPF in Q3. Just for clarity, YPF asset is held on our balance sheet the same as all of our other capital provision assets, which means there's an underlying model associated with it. And those models are impacted, of course, as I mentioned, by discount rate given the discounting and then with respect to duration. And so, you are going to see movement in a period when there was 90 basis points of movement in the discount rate that we saw given market volatility on rates. In the third quarter, you see some of that activity, just like you see the reverse when rates were to rise and the asset would change in value. So, almost similar to bond math, except for here, we are discounting our capital provision assets.

So the next question on the webcast is from Richard Smith, who asks, is there a minimum amount that Burford are expected to make from the Argentina case? And I think the one word answer to that is no. This is litigation and negotiation. So the parameters here are we've got a judgment that issue was for $16.1 billion, now worth $17 billion with some more accrued interest in it. And ultimately, our expectation, as we've said, is that, there's going to be a negotiation with Argentina about settling that judgment on some discounted basis. But I don't think that there's anything we can say about the -- our expectations or what the parties would be prepared to accept in settlement. That's sort of a core example of what wouldn't be good to have out in the public domain. And I think we may have exhausted the pool of questions.

We do have a phone question. We have the line of Alex Bowers back from Berenberg.

Chris, sorry, I think my line got cut off midway through my second question. I'm not sure whether you answered or not, so let me know if this case. But it was more just on the DOJ announcement last night, just the rationale for why they wait until...

I did actually answer your question. So I didn't know -- so you -- yes, we did answer that in full, and we'll circle around with you, Alex, if need be afterwards.

Sure. No problem.

And we have another phone question from the line of Julian Roberts from Jefferies.

Just one quick one for me. Is there anything on the regulatory or legislative front in the either near term, but in the medium term that we should be thinking about that might affect litigation finance more broadly that we -- that is foreseeable?

So there -- in the U.S. -- let's start with the U.S. market just because -- just surely because of its size. So what we've said for years is, not surprisingly, there's a certain lack of enthusiasm for the existence of litigation finance from companies that are regularly litigation defendants because what we've done here is, we've come and by applying capital into the litigation system, we have altered what used to be a historical advantage that those companies had in dealing with plaintiffs. And, in fact, the very roots of this business and this industry can be traced back to Jon Molot's early academic work on this where he's written a number of papers analyzing this issue and the litigation advantages that go along with repeat established litigation players. And so, because we've disrupted that and because nobody likes to be sued, there has always been some degree of pressure around our business in the U.S. That pressure today takes the form really of only a fair bit of fussing about the level of disclosure of the presence of a litigation funder that should be made in an ongoing court proceeding. And we engage with the various regulatory bodies, most notably the committee that oversees the Federal Rules of Civil Procedure, but also with state governments about these issues. And I am not today particularly concerned about the ultimate outcome of those discussions. There's probably a trend towards similar disclosure. And as long as that disclosure comes in an appropriate way, the way that it has outside the U.S., where we are routinely disclosed, I don't think that, that's particularly concerning. It's just a question of the sausage making to move in that direction. There's no other concerning regulatory activity in the United States. In the U.K., as you…

Sure. Just there have been positive developments in the trend we've seen insofar as there -- it's increasingly possible for there to be group actions where groups of businesses or consumers have been injured in a similar way by misconduct. And there's an EU directive that the member states have to pass legislation implementing to facilitate those group actions. That obviously creates great opportunity for litigation finance because those actions need finance. So that's a positive legislative development that's been taking place.

So -- and that's sort of where we stand. Sure. Thanks, Julian. And with that, I think we have reached the hour. We hope you found that useful and helpful. And as always, we're delighted to talk to anybody off-line as well. Thank you all for your time and support, and we look forward to talking to you again in a few months when we can report to you on what the year-end looks like. Thanks, everybody.

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