Shareholder letter
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Shareholder letter John Sievwright Chair Christopher Halmy Vice Chair Christopher Bogart Chief Executive Officer Jonathan Molot Chief Investment Officer Burford had a splendid 2024. We achieved record-breaking cash realizations with returns well above our historical averages as well as strong growth in new business. We were also added to the Russell indices and cemented our transition to reporting as a US domestic issuer. After a period of strong pre-pandemic growth followed by frustrating pandemic court delays, 2024 felt like a turning point.1 On the balance sheet: • We brought in $699 million in cash, much more than ever before (and well over a billion dollars group-wide) • We produced $641 million of realizations and $327 million of realized gains, up 75% from 2023, our highest previous level • Our returns on matters that concluded in 2024 bounced up to 108%, almost double the 2023 level and well above our lifetime performance of 87% With 2024’s activity, we blew past the $3 billion mark of cash recovered just for the balance sheet since inception. All of these achievements demonstrate that this is a sustainable, repeatable business over time—at least the way we do it at Burford.2 To be sure, not every year will be like 2024 (or 2023, when we won the YPF case). But we have an enormous $7.4 billion group-wide portfolio, with more than a billion dollars of undrawn commitments waiting to go out the door. We feel very good about the future. We’re not just resting on our laurels and harvesting cash. We have a proven origination engine and we are putting it to good use. We have been building our data analytics and quantitative analysis capability since 2017, and we now have a dozen people engaged in coding and analytics. Our asset modeling, backed by our proprietary data, is a core part of our business – so much so that we now express goals for our people in terms of modeled target realizations as opposed to return-agnostic metrics of commitments and deployments, which do not tell the whole story. On a target realization basis, the level of new business written in 2024 was also splendid – up significantly from 2023 and the highest we have seen since we started tracking it. We will have more to say about that and our metrics at our forthcoming Investor Day in April, which we hope you will attend live or virtually. We put considerable effort into providing fresh, valuable content, and we hope that after listening to the array of team members you’ll meet at our Investor Day you will understand our enthusiasm for Burford’s future. Burford Capital Shareholder Letter 2024 i 1 All numbers in this letter are on a 2024 fiscal year Total Segments or Burford-only basis unless otherwise noted, and all comparisons are to the 2023 fiscal year. See our detailed earnings presentation furnished to the US Securities and Exchange Commission (the “SEC”) on a Current Report on Form 8-K on March 3, 2025 and our Annual Report on Form 10-K for the year ended December 31, 2024 to be filed with the SEC for more information on terminology. See Annex A for the most comparable measures calculated in accordance with US GAAP and related reconciliations. 2 We can’t help but note that the three other public legal finance businesses that are sometimes pointed to as “comps” all have market caps of less than 10% of ours, two of them far less than that, and the third with a more than 65% share price decline over the past two years, a period during which our stock is up more than 90%.
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We continue to face some realities of being in a nascent asset class. While we have made headway, the accounting principles for this asset class have yet to be perfected (which even the accountants concede3). Instead, we continue to manage and evaluate the business on a cash basis. Our accounting numbers move around based on interest rates, changes in duration and the achievement of litigation milestones, but cash is what we watch and use as the basis to pay our people. So when we see periods like the fourth quarter of 2024, which showed an accounting loss in the face of $253 million in realizations, including a $106 million settlement on December 31 against a $36 million deployment, we shrug our shoulders and go back to counting the cash. To save some powder for our Investor Day and avoid repeating the themes of last year’s detailed letter, we will keep this letter purposefully short. However, we did want to comment on some of the questions we get most frequently. Q: Despite positive results, the share price was, bizarrely, down 18% in 2024. What do you make of that? A: It is obviously disappointing and a deep frustration to the Burford team that the share price declined in a year of strong momentum around portfolio activity and performance and when other positive non-financial things were occurring, like being added to the Russell indices. However, we do understand that a number of our longstanding shareholders have been sitting on significant gains which some have chosen to realize. We have invested a substantial amount of effort into promoting the investment case to both current and prospective shareholders, but the Burford investment case is complicated and unique, requiring a commitment of time from prospective investors that can be difficult to garner in the near-term. We are optimistic about the success of our investor relations efforts over time. Q: So, faced with a share price you think is undervalued, a lot of cash on hand and an implied value for YPF well below any realistic outcome other than a complete loss, why don’t you buy back stock in quantity? Isn’t that the best investment you could make? A: We have been proud to be entrusted with shareholders’ capital for the last sixteen years and we believe we have demonstrated prudence and success in our approach to capital allocation. When faced with a share price we think is low and a portfolio we think has substantial future value, we have of course considered the question of a share buyback as a way of increasing fundamental asset value per share. We are not dogmatic about this; we think it is entirely appropriate to consistently re-examine our approach here. However, we also believe that there is a wider context than just a simple corporate finance analysis. Legal finance is a growing business, and we continue to see opportunities to deploy cash into new opportunities at attractive returns and to continue to grow the business and maintain our strong market position. Moreover, buying back stock cuts off the potential compounding of capital, which is both undesirable for investors and means that to grow the business beyond replacement cost we would need to raise incremental debt or equity capital. It is also prudent to reserve some cash against about $350 million in debt coming due from the UK market in two separate issues over the next 21 months, including $129 million due in August 2025. We also need to maintain cash liquidity to meet operating expenses, interest payments and to meet draws on our $774 million of undrawn definitive commitments. Q: You have announced an intention to expand beyond pure litigation finance into other parts of the legal ecosystem, such as law firm equity, the alternative delivery of legal services and technology. All those things are likely to have lower returns than your core litigation finance business. Why would you do that? A: We believe strongly in risk-weighted returns. And having built a preeminent brand and presence in the legal market, we also believe it would be a mistake not to take advantage of the myriad opportunities that offers. We believe we have proved that we are disciplined capital allocators - with management as the largest shareholders in this business - and our goal is to grow and create incremental shareholder value. We continue to expand our portfolio of high-octane legal finance assets, but they are not the only path to expansion; we think we can deliver desirable risk-adjusted returns that enhance ROE through a wider variety of investment and business opportunities in the legal space. Burford Capital Shareholder Letter 2024 ii 3 See FASB’s ongoing consultation: Proposed Accounting Standards Update, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for a Share-Based Payment from a Customer in a Revenue Contract.
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Q: You say you’re growing well but the traditional metrics of commitments and deployments don’t show that. What’s the disconnect? A: Those were our defining metrics some years ago, but we have largely retired them internally, principally because they do not account for the wide variety of risks and returns in the assets we finance. In other words, it is no longer meaningfully predictive to look at our deployments and impute some average return to every dollar we deploy. Inside the business today, the principal metric for our team is target realizations; that is how we set goals and evaluate performance. We augment that metric with a look at definitive commitments to ensure that we are doing deals where our capital will actually be deployed. The issue is really that different parts of the business now generate very different return profiles. For example, our patent business has comparatively small commitments and deployments for the returns it generates; that is because those assets are high risk and of unpredictable duration. On the other hand, our US commercial business regularly makes very large commitments and deployments, but because the assets are lower risk and of shorter and more predictable duration, the returns are lower. In our view, the right answer is to take every opportunity to leverage our brand and expertise to realize returns from a wide variety of legal assets. We look forward to seeing you live or online at our upcoming Investor Day, when we will go into the business and our future plans in detail and engage with your questions. We are grateful for the support of our shareholders and other stakeholders, and we look forward to the years ahead as we continue to grow this business in the many ways we see possible. John Sievwright Chair Christopher Halmy Vice Chair Christopher Bogart Chief Executive Officer Jonathan Molot Chief Investment Officer Burford Capital Shareholder Letter 2024 iii
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Annex A Non-GAAP financial measures This shareholder letter contains non-GAAP financial measures. These non-GAAP financial measures should not be considered in isolation from, as substitutes for, or superior to, financial measures calculated in accordance with the generally accepted accounting principles in the United States (“US GAAP”). The table below sets forth the non-GAAP financial measures contained in this shareholder letter, the most comparable measures calculated in accordance with US GAAP and related reconciliations. Description Non-GAAP financial measure GAAP financial measure Reconciliations Cash receipts for the year ended December 31, 2024 $699 million $1,024 million See schedule 1 item 1 Group-wide cash receipts for the year ended December 31, 2024 $1,236 million $1,024 million See schedule 1 item 2 Realizations for the year ended December 31, 2024 $641 million $907 million See schedule 1 item 3 Net realized gains/(losses) for the year ended December 31, 2024 $327 million $440 million See schedule 1 item 4 Net realized gains/(losses) for the year ended December 31, 2023 $187 million $252 million See schedule 1 item 4 Realizations since inception through the year ended December 31, 2024 $3 billion $4 billion See schedule 1 item 3 Undrawn commitments for the year ended December 31, 2024 $1.6 billion $2.0 billion See schedule 1 item 5 Realizations for the three months ended December 31, 2024 $253 million $348 million See schedule 1 item 3 Definitive undrawn commitments for the year ended December 31, 2024 $774 million $963 million See schedule 1 item 5 Burford Capital Shareholder Letter 2024 iv
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Schedule 1 1. Reconciliation of consolidated cash receipts to Burford-only cash receipts, for the period indicated ($ in thousands) For the year ended December 31, 2024 Consolidated proceeds from capital provision assets $ 991,292 Less: Third-party interests (340,232) Burford-only total proceeds from capital provision assets 651,060 Less: Funding of financial liabilities at fair value through profit or loss (2,583) Consolidated asset management income 8,340 Plus: Eliminated income from funds 36,287 Burford-only asset management income 42,044 Less: Non-cash adjustments(1) (18,136) Burford-only proceeds from asset management income 23,908 Burford-only proceeds from marketable securities interest and dividends 20,554 Burford-only proceeds from other income 3,625 Burford-only proceeds from other items 24,179 Cash receipts 699,147 1. Adjustments for the change in asset management receivables accrued during the applicable period but not yet received as of the end of such period. 2. Reconciliation of consolidated cash receipts to group-wide cash receipts, for the period indicated ($ in thousands) Consolidated Non-consolidated private funds interests Group-wide Cash receipts for the year ended December 31, 2024 1,023,901 211,753 1,235,654 3. Reconciliation of consolidated realizations to total segments (Burford-only) realizations, for the periods indicated ($ in thousands, except otherwise indicated) Consolidated Elimination of third-party interests and adjustments Total segments (Burford-only) Realizations for the three months ended December 31, 2024 348,023 (94,598) 253,425 Realizations for the year ended December 31, 2024 907,042 (265,918) 641,124 Realizations since inception through the year ended December 31, 2024 ($ in millions) 3,617 (286) 3,331 4. Reconciliation of consolidated net realized gains/(losses) to total segments (Burford-only) net realized gains/ (losses), for the period indicated ($ in thousands) Consolidated Elimination of third-party interests Total segments (Burford-only) Net realized gains/(losses) for the year ended December 31, 2024 439,665 (112,491) 327,174 Net realized gains/(losses) for the year ended December 31, 2023 251,618 (64,242) 187,376 Burford Capital Shareholder Letter 2024 v
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5. Reconciliation of consolidated capital provision undrawn commitments to total segments (Burford-only) capital provision undrawn commitments, as of the date indicated December 31, 2024 ($ in thousands) Consolidated Elimination of third-party interests Total segments (Burford-only) Definitive $ 962,808 $ (189,135) $ 773,673 Discretionary 1,032,433 (214,568) 817,865 Legal risk (definitive) 41,318 — 41,318 Total capital provision undrawn commitments 2,036,559 (403,703) 1,632,856 Burford Capital Shareholder Letter 2024 vi