Burford Capital Ltd
LSE:BUR
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Burford Capital Ltd
Earnings Call Analysis
Q2-2024 Analysis
Burford Capital Ltd
In the second quarter of 2024, Burford Capital reported a remarkable increase in capital provision income, up 237% year-over-year, reaching $119 million. This surge can primarily be attributed to realized gains from several concluded legal cases, culminating in net realized gains of nearly $100 million for the quarter. The return on invested capital (ROIC) was exceptionally high at 146% year-to-date, indicating a robust performance that surpasses historical averages. Such impressive figures underline the strength of Burford's investment strategy and the successful resolution of multiple cases across its diverse portfolio.
Burford's net income for the second quarter stood at $54 million, equating to $0.24 per share, which represents a significant increase from both the same period last year and the previous quarter. This net income accounted for approximately 40% of total revenues, signifying not just resilience but also operational efficiency. The company's tangible book value approaches $10 per share, including intangibles valued at $10.50 per share, portraying a solid financial foundation for future growth.
The second quarter also marked a productive period for portfolio expansion, as Burford secured $343 million in new capital provision commitments, a strong performance compared to historical averages. The company emphasized the importance of positioning itself to benefit from the typically busy fourth quarter, often resulting in increased case activity and revenue generation. Notably, Burford continues to attract significant business from law firms and corporate clients, reflecting a sustained demand for its litigation finance solutions.
Even with the challenges posed by rising discount rates, which increased by approximately 34 basis points over the first two quarters, Burford's asset values remained relatively stable. The management noted that a 50 basis point decrease in the discount rate could equate to a $50 million increase in asset value, signaling that the firm is well-prepared to navigate volatility in the bond market. Despite the headwinds, Burford has demonstrated consistency in cash resolutions, achieving approximately $100 million in cash receipts quarterly over the last eight quarters.
The management team remains optimistic about the future, highlighting a blend of consistent cash flow, diverse portfolio management, and the strategic capacity for continued growth. Burford is recognized for its market-leading origination platform, which enables the firm to maintain and expand its presence in the lucrative litigation finance sector. The transition to a domestic U.S. issuer status, effective January 1, 2025, positions Burford to leverage deeper markets and potentially enhance its trading volume and shareholder engagement.
Throughout the earnings call, the executives provided insights on the operational performance of Burford's extensive portfolio, which represents $7.4 billion, set to unwind as legal cases proceed. With a lifetime return rate demonstrated at a 27% IRR, the firm continues to manage risks effectively. Additionally, while market competition remains, regulatory challenges like those stemming from the U.K. PACCAR case have been acknowledged, yet Burford's leadership believes that the impact on its business will be minimal in the long term. The litigation funding sector is witnessing consolidation, with larger multi-strategy players gaining ground, which could reshape competitive dynamics favorably for established entities like Burford.
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Thank you for standing by. My name is Danica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Burford Capital Second Quarter 2024 Financial Results Conference Call. [Operator Instructions]
I would now like to turn the call over to Chris Bogart, Chief Executive Officer. Please go ahead.
Thanks very much, and hello, everybody. Thank you all for joining us today. As usual, I'm joined by Jon Molot, the Chief Investment Officer; and Jordan Licht, the Chief Financial Officer. And all 3 of us will talk to some of the slides that have been posted in what we hope will be a relatively brief presentation, and then we'll be happy to take whatever questions you might have.
Before turning to the numbers and the results, I was just sort of reflecting on the fact that the next time we talk to you in the fall, Burford will have turned 15 by that point. And it's pretty interesting to reflect back on what was going on in 2009. I think I was actually on this day in 2009 sitting on Guernsey, putting the business together. A little did we know then that we would be launching what has become a $2 billion company and fundamentally changing the way that the legal industry operates economically. It's been a terrific 15-year ride. We're really thrilled with what we've been able to accomplish, and we thank all of you for making that possible with your [indiscernible] and your patient capital.
So turning to the second quarter and the report that we put out this morning. We're very pleased to report a strong quarter as to both portfolio activity and cash generation on the one hand and new business to continue to refill the portfolio on the other. And I'm on Slide 4, and that slide will just call out a few key points that I'll just talk on briefly.
We were principally driven this quarter in terms of revenue and profits by strong capital provision income. In other words, the income that we generate from the core portfolio, that was up 237% from the comparable quarter in 2023. So a very strong showing. And that was driven mostly by realized gains. In other words, cases that had actually come to a conclusion. And not only is that nice to see but we saw returns on those cases that were well above our historical average, really about double our historical average. So returns of about 179% on those realizations.
But obviously, will be a number that will move around depending on the economics of particular cases and what happens in the portfolio. But I think that being able to produce returns at that level really does dispel any notion that we're seeing degradation or compression of returns as opposed to simple variation on a period-by-period basis.
We saw on the new business side, a robust level of new business. We exceeded our sort of trailing averages by a fair bit on both a 3-month and a 6-month basis. And so that's always pleasant in the middle of the year to see that kind of activity. As long-term investors will remember, this business does tend to have a fourth quarter dominance to it. I sometimes joke with investors as it feels like we're running a retailer.
And the reason for that is that lots of clients and lots of law firms, frankly, don't really need the money until you get close to the end of the year. And that's why the fourth quarter historically for us has been quite busy, but it was -- and the first quarter and the third quarter are often not busy at all. You can't force lawyers to engage when they don't otherwise want to. So it was very pleasant to see that kind of second quarter activity.
As I said earlier, these realizations were driven not just by one big thing. When you compare, obviously, our income statement results to 2023, 2023 was heavily influenced by our success in YPF, which is a wonderful development, but it is indeed just one big thing, whereas this period, we were demonstrating strength from multiple case activities, multiple case wins and settlements that really drove the overall numbers. And all of that turns into cash. These weren't just paper gains, these were actual cash receipts, and we've been pretty consistent in being able to demonstrate those kind of cash receipts.
So just stepping back from those numbers and before we go on, I think there are a couple of key points here. We've established that there is overall a real demand from both law firms and corporate clients for the solutions that we offer. And now that we are trying to put the pandemic in the rearview mirror, we have, I think, good runway both to continue to see the portfolio continue to perform and also to continue to add clients and develop new business. And that's where our market leadership really does count. We absolutely get business because of the quality of our team because of the size of our capital base and the overall experience that we have in the market.
So this is -- while this is always going to be a business with some period-to-period volatility I think we've shown that we also, over longer term, have made a very attractive [ tangible ] business model that can deliver desirable returns and a lot of cash.
So turning to Slide 5. What this slide really does is pull in some Q1 data to show a fair number of first half overall data points. But the fundamental message here about the first half of the year is the same. The portfolio is performing well and new business is being generated. And again, back to the client side of things, clients want these solutions -- try to find a CFO who says he or she is happy to be spending money on legal fees. We just don't exist. And so this is now -- we are set up now for what we hope is a multiyear ability to continue to grow the new business side of this business as we continue to add clients to the mix.
I'm not going to go through all of the bullet points here. Jordan instead is going to take you through in some detail, the things that call out here. But I would just as we go past this slide, note a couple of things as we go.
In addition to talking about realizations and new business, we not only have a strong liquidity position. But if you note the sort of coverage of cash against expenses, we're operating quite a high margin business, which is very pleasant as well.
Jon is going to show you in terms of the existing portfolio, how much we still have left to go and how consistent our performance has been with consistently low loss rates. And Jordan will talk about the asset management business. But as we've described over the last [indiscernible], we simply make a lot more money when we do our investments on the balance sheet, which is why you've seen us have [Technical Difficulty].
Hello, everyone. We lost our speaker line. Please hang tight for just 1 moment.
Okay. It's Jordan speaking. Sorry about that. It looks as though we lost Chris for a moment, but we lost them right at the moment, he was about to turn the slides to me. So I was going to start by saying thank you, Chris. And I'm going to jump to Page 6. So let's just keep going.
And I'm back from my mysterious departure, Apologies for that. I don't quite know what happened there. The line just went flat dead. But Jordan was about to take Slide 6, and I'll just make a couple of comments as we go into it. So on Slide 6, we announced earlier this week that the annual testing that we have to do at the end of June to see what percentage of U.S. holders we have had pushed us over 50% and not just by a whisker. So that means that we're no longer, as of January 1, 2025, we're no longer a foreign private issuer in the U.S. market. We're instead a full U.S. listed company. And that's really the culmination of what has been more than 5 years of planning and effort along the way.
We lay out here some of the things that we've done, and Jordan can speak to any of those that he chooses. But I think the overarching point here is that we've done this because we think that there is a benefit to all shareholders wherever you're located of being a full U.S. listed company. That's just a much larger and deeper capital market than anywhere else. You've seen the volume and trading benefit that comes with that. So we're happy with this outcome.
We'd ask all of you to support the forthcoming extraordinary general meeting in a few weeks, which is one of the last steps of the other bits and pieces of this to put the articles of the company in a more U.S. shareholder conventional form and we look forward to continuing to grow our market presence in the U.S.
And now to Jordan.
Well, Chris, you get a double thank you. I said thank you before, I'm not sure if you heard it. But we'll start again. Thank you, Chris. Good morning, everyone, and afternoon. So on Page 6, there's a lot of great accomplishments highlighted that the team has achieved over time, as Chris has described, with a lot more in the near future. So first, what you'll see over at the end of this year is the migration to a 10-K and proxy. We're going to look to continue to provide in that transition, similar depth of content that we've historically provided. But we're also going to try and make sure that the story is easy to access for new investors. Our dates for quarterly and full year reporting will accelerate to the more traditional U.S. schedules for financial periods.
So you'll see quarterly results within 40 days of the end of each quarter, full year results within 60 days of the end of each year. So more to come, but all productive items highlighted on the page.
I'm going to now switch to Page 7. A quick summary of select financials. This page is Burford only. Look, comparisons to the 6 months period in 2023 are going to be difficult given that at the end of March last year, we received positive news regarding the summary judgment on the YPF case, and Jon will speak more to that shortly. And of course, that caused a multi-hundred million dollar boost to unrealized gains and thus, to revenue.
So let me focus though on some of the key numbers, and then I go into greater detail on following pages. First, we'll just start $54 million of net income for the second quarter, which is $0.24 per share. Clearly, a big increase over the same period in 2023 as well as the first quarter of this year and net income was approximately -- or actually over -- or near 40% of total revenues.
On the capital provision asset side, we've now grown to slightly above $3.5 billion. Of that, our non-YPF related assets represent $2.1 billion. Included in that is a 30% fair value uplift to deployed cost. Tangible book value just shy of $10 per share, including the intangibles, we're now at $10.50 per share.
I'll talk more about revenue and expense composition in the coming pages and some of the other key metrics. So I'm going to jump now to Page 8.
This is where we highlight total capital provision income, and it's broken into the various components. The real headline is that the second quarter total capital provision income is up 237% over the same period last year. Look, in simple words, we've had a lot of positive outcomes in a number of cases.
Starting at the top of the table, net realized gains were up significantly period-over-period with just shy of $100 million of gains in the second quarter. And this was driven by strong performance in realizations with an ROIC of 146% year-to-date. First half net realized gains for capital provision direct was $128 million, which is nearly 70% of the whole of 2023 and the only 6-month period exceeding this year's result was the first half of 2020 at $183 million of net realized gains, and that was before the COVID-19 pandemic had started to clog the courts and legal processes.
Capital provision assets, as a reminder, are fair value quarterly, and we use the observation of case milestones, both positive and negative and discount rate in that calculation. It's notable that this period, we had a pretty low net realized -- net unrealized gains. Almost all of our revenue this quarter came from realizations where we've won cases. That's in part a function of cases concluding rather than just going through another milestone and in part due to changes in the discount rate.
Over the first 2 quarters, we've seen discount rates for our assets rise by about 34 basis points. And in the most recent period, that probably was a headwind of approximately $15 million to $20 million. The discount rates in the models generally follow market trends and bond market volatility. And as a frame of reference, our asset value on a Burford-only basis would increase around $50 million for a 50 basis point decrease in our discount rate.
But all that talk about discount rates up, let's focus on the cash resolution of our assets and not this interim fluctuation created by rate volatility. But wrapping up on this page, overall total capital provision income of $119 million was up sharply from Q2 2023 as well as the $18 million we saw in Q1 of this year.
Flipping to Page 9. Second quarter was a productive quarter for building the portfolio. Burford-only commitments have been significant as well as diversified across the sectors in 2024 with a total of $343 million of capital provision direct new commitments. Recall the 2023 metric includes a large deal to support a Fortune 50 client, and that was a $325 million deal overall with $190 million representing Burford-only capital provision direct commitments.
As it resolved quickly, and they had a good IRR, but it was a lower ROIC because of shorter duration, and we've spoken about that in previous calls. While we can't show you all of our internal expected profit figures business and we're working on a substitute with that. I can say that as a team, we're very pleased with the economics of the new business we're putting on. Just measuring dollars of commitments and deployments doesn't necessarily tell the full story.
Deployments did, however, rise significantly since the last several quarters. We expect deployments to continue to be robust. Yes, volatile and some volatility, but we have approximately $700 million of definitive commitments to deploy on the existing book. That's future profitability that we're looking forward to.
But while commitments and deployments are about putting the money out, let's move to Page 10, which highlights bringing the assets to resolution.
I'm on the top far right of the page, you'll see Burford-only realizations of $216 million year-to-date, representing an 11% increase over the first half of the year. This was driven by 8 matters achieving over $10 million each. 3 of those were $25 million or more each. Realizations are obviously the critical component to creating cash and cash receipts have been consistent at or near $100 million per quarter over the last 8 quarters. Our year-to-date numbers are keeping pace with last year's first half. Bottom line, the portfolio is performing and throwing off cash.
With that, I will hand it over to Jon to discuss YPF and the rest of the portfolio.
Thanks, Jordan. Thanks to you all for joining. I'm very pleased to be here. As Jordan says, the portfolio is just humming, lots of activity, and that's what ends up generating the realizations. .
Starting on Slide 11 with the YPF-related assets. There's not much to report other than that things are going through the litigation process on the time frame that we had explained. So the briefing is almost concluded in the court of appeals from the direct appeal. You recall Argentina has appealed its loss and the plaintiffs have appealed YPF's potential liability. And Argentina's final brief has been filed and the plaintiff's final brief has been filed. There's 1 brief remaining from YPF to be filed on August 23 and then oral argument and decision thereafter.
In the mean term, because you'll recall there was no stay granted pending appeal, the judgment of the trial court is final and enforceable and there are enforcement proceedings that are progressing, both in the United States and in multiple jurisdictions around the world. As always, we don't comment on the ongoing litigation aspect of this. All we can say is, as is true of all litigation, the process does move forward.
And in fact, it's a useful thing to -- if we turn to Slide 12 and step back and think about the business more broadly, and this is a -- this is something that you've seen before. But I feel like it's a useful thing to keep in mind at this moment, particularly in a moment of market volatility.
You asked the question, and Chris mentioned before, we're almost 15 years old now, we've seen high returns. How do you maintain these returns in excess of what you can get in other asset classes. And this slide kind of explains there's a natural process and an automatic resolution of all litigation. It's either going to go to adjudication and be decided by tribunal or court or it's going to settle. You see the historical numbers over a lifetime, 75% of our investments that have concluded through settlement.
Of the remainder, our gains, our wins have far exceeded our losses, and that has made for a very attractive return profile. It's kind of -- the lawyers understand this is how things work. But to a financial investor trying to understand how do you produce the returns you do that are uncorrelated with markets, which is quite important in a moment of volatility like this one, this kind of lays it out.
I mean it is interesting to note that was mentioned earlier that our ROIC actually lifetime has gone up this quarter despite, as we mentioned earlier, there was one large matter that resolved quickly with high IRRs, but then lower ROICs Nonetheless, just the sheer quantity of things that have resolved that were good, the ROIC ticked up from 82% to 86%. And I'm not bragging about that as a trend. I've already said that could bounce around depending on what resolves in a particular quarter, and we see higher ROICs from adjudication trial results versus settlements or they depend.
But I think almost 15 years old, and you look at the size of the capital investments that have resolved, right, this is based on $1.5 billion of deployments generating over $2.9 billion of realizations. You see the business model works and make sense, and we're very proud of it.
And if you turn from Slide 12 to Slide 13, you kind of see the intuitive explanation I described in Slide 12 about why the business model makes sense. I'm a firm believer and I've always told the team, you don't make money unless you've got something that's valuable to the market, and this sort of [indiscernible] explains why it makes sense.
But Slide 13 lays out the financial results in more pure financial terms. And you've seen this before, too, although I can say now that, as Chris said, we are effective January 1, no longer a foreign private issuer. We're just a domestic U.S. issuer, I could use a baseball analogy finally. And I'll say the slide came about because a very good investor asked me a question once some years ago about what's your batting average. And on the one hand, you could provide the simple answer, which the third bullet on the left shows that basically a 10.3% lifetime loss rate. You'd say, well, that's a pretty good batting average. But it's more nuanced than that. It's better than that number tells you because when you look at the dispersion of outcomes and the asymmetry between losses and gains, for one thing, the losses are smaller, but a portion of those gains are truly outsized home runs.
The way Jordan put it was -- it's not just your batting average. It's what your hip dispersion. It's like how many singles, how many doubles, how many home runs, you begin to understand why it's such an attractive business. And the numbers here we've laid out, you can see on the top left in the main graphic that it's roughly 15% of the total invested resulted in an ROIC of 0% or less, right? That's what results in the 10% loss rate. But if you look at the top right, you see that roughly a similar amount of money, 15% resulted in returns on invested capital in excess of 200% and that's money back plus more than 2x your money. And then there's lots of singles and doubles in between where we're earning attractive returns.
So that really is a key to understand the business. It's important to keep in mind, particularly at a moment of volatility because all those returns, all those borrowers are uncorrelated with market performance.
If we turn to Slide 14, it's a slide you've seen, but again, it just packs in a lot of information about the business, which I found useful. Some people like to look at this because they can see -- in the past, what we've done you look at the black bars and compare them to the red bars and you see how well our past resolutions have turned out. And then you look at the shaded gray bars and you see how much is left to be resolved in investments we've put on and you can see also at the bottom from 2009 to '23, yes, when you look at a vintage year of capital out, the IRRs do vary in the conclusions that it's not uniform. There's some lumpiness in terms of some years are outperformers and some are underperformers. But overall, it's a really great business model and that's what has produced the blended 27% lifetime IRR when you take into account both wins and losses.
So with that, I will turn it back over to Jordan to turn to Slide 15. Thanks.
Thanks, Jon. On Page 15, just some quick highlights from the asset management business, which continues to perform. As a reminder, we use these funds to augment our balance sheet efforts. The asset management business is a cash-on-cash business. The actual payout in the second quarter on a cash basis, we saw $11 million of cash receipts and $15 million year-to-date. We do, however, recognize income driven by the fair value movements in fund assets. BOF-C, which is currently the most significant driver of this business is close to $0.5 billion of active deployments on just shy of $900 million of active commitment.
I'm going to move now to Slide 16, and we'll switch briefly from the revenues to expenses. At $67 million for the first half of the year, our operating expenses are 31% lower than the same period last year. No, we see variations in the reported operating expenses that are driven by unrealized gains as well as other accounting elements. One in particular that we've discussed on previous calls is changes in our share price.
When employees elected defer their compensation and the fluctuation in our share price, that will manifest itself in the salaries and benefits line. And while we look to generally economically hedge that fluctuation by purchasing shares, increases and decreases in our share price do have an impact there and are not offset in the income statement. This period, unfortunately, the reduction in our share price was a benefit of approximately $3 million.
The annual incentive comp line represents the discretionary bonus for employees, and that's finalized in the fourth quarter. But all of that accounting and so forth on a cash basis, our OpEx is pretty steady. You'll see G&A is tracking lower and that's mainly due to the reduction in expenses from last year, which had been driven by the restatement in 2023.
Page 17. The next page is our -- highlights our liquidity. We remain in a strong liquidity position, ending the quarter with $443 million of cash and securities as well as another $200 million of receivables. I had mentioned before the strength in cash receipts in the first half of the year, we saw $245 million, which is consistent with the same period last year. We're committed -- on the right hand -- top right-hand side, we're committed to keeping the laddered debt schedule, our next maturity is in 2025. And we've been slowly chipping away at that outstanding balance. We've probably purchased around $23 million of that issuance below face value. Leverage metrics on the bottom or 0.8x leverage level is well below our covenant levels as well as our stated maximum of 1.25x. And we're continuously managing liquidity levels, our anticipated cash needs as well as cash receipts to manage the business appropriately.
And with that, I will hand it back to Chris.
Great. Thanks, Jordan. And we'll turn to Slide 18 to close this out before we take your questions. And you've seen this slide before, we keep it here really just as a reminder, what we call the 4 pillars of our value proposition. So the holder or the buyer of share of Burford stock is getting 4 different things, an interest in our current core portfolio, which has risen to $7.4 billion, and that will unwind over time as those cases continue to go through the litigation process. And as a reminder, unlike, for example, private equity or venture capital where you need a functioning market and a buyer to get exits, we don't need those things. We are delivered those exits automatically by the operation of the legal process.
So you've got the existing portfolio. You've got a market-leading origination platform that has been consistently capable of driving significant volumes of new business every year. You've got the asset management platform that we've already discussed. And finally, you've got the interest in the YPF assets, which, as John described, are slowly but steadily making their way through the legal process.
So with that, we thank you for your time, and we'll be happy to take questions.
[Operator Instructions] Our first question comes from the line of Julian Roberts with Jefferies.
I've got 2 questions if that's okay. The first one is on costs. Obviously, a bit on a cash basis, pretty flat year-on-year. How should we think about that in future? It seems to me that the inflation in salaries for lawyers and wider legal world might have tailed off a little bit, but how will that affect Burford. And the second one is, is there any other change in the litigation for funding market that we should think about? A different deals being done in different structures. Is there any kind of change in the competitive outlook? What should we think about in the future?
Sure. So let me actually take them in a reverse order. And in terms of the -- what's going on overall in the market. I think we've seen a few developments over the last couple of years. The delay that ran through the entire legal system because of the pandemic, has had a number of impacts both on litigation funding firms and also in law firms themselves, especially law firms that operate on risk. .
And so the simple fact of the matter, and you saw this with our business as well. There were a couple of years there where case resolutions were slowed dramatically and where cash was just not coming in. And what I think that did for some litigation funding firms is just make the fund management model that many of them use even more difficult because they were continuing to accumulate hurdle due to investors, they weren't generating cash. And I think that it made the ability to raise incremental capital more difficult. And I think in some cases, it probably called into question the viability of some of the firms.
And as a result, you have seen a progression in the market so that the smaller pure-play litigation finance firms that used to really drive the market are less of a factor today, I think, and the emergence of some of the larger multi-strategy players that we've been competing with for some time, I think -- and do have -- from there -- generally speaking, from their credit funds, do have capital available, have become more of a factor. That's actually from our perspective, positive for a couple of reasons.
One is that the multi-strat funds are better known to corporate clients. And so you now have more branded players out pitching this concept more broadly in the industry. And I think that drives incremental use of capital by corporate parties overall and that endures to our benefit often because even if we're not there making the pitch initially, the fact that we are so central in the market often leads clients to come around and chat with us as well because anyone who does 5 seconds of research about this market bangs right into us.
So that's one sort of overall market development that we've seen. And I would say, overall, that there's -- and you've seen this in our results as well, there has been a trend towards larger deals, more sophisticated deals, deals that include more of a component of corporate monetization than simply paying legal fees and expenses, although that remains a stalwart part of the business. So those are the kinds of market dynamics that we're seeing.
And the other thing that you've seen is some level of activity with some specialized insurance products, most notably with respect to what's called judgment preservation insurance, so this is after you have won a case at the trial court level and that case is up on appeal. Some insurers have been selling judgment preservation insurance to basically lock in the trial win and prevent against an appellate reversal.
And there was a period where insurers seems to be thinking that this was the latest great thing for them. I think they didn't do a great job on the underwriting. And so there have been some meaningful losses along the way. And so I think that market has retrenched a little bit. But it's -- to the extent that it continues to be available economically, it's an interesting addition to what we do because we have in the past, more than once financed the premium for the insurance. And so it actually creates an additional opportunity for us as well as the ability to lay off risk if we are inclined to do that.
With respect to your cost question, Look, our cash costs have historically risen alongside growth in the business. And I don't see any reason to not expect that to occur. We do have some level of operating leverage in the business. But there's also no question that we're not a hedge fund. We can't double the size of the portfolio without adding hedge to do some of that work. And so I think you'll continue to see the kind of moderate cost progression that we've seen during our entire history, but it's something that we've always managed pretty closely. What you do see in periods like last year is a pretty significant disconnect between the accounting version of operating expenses and the cash version of operating expenses that are driven by a whole lot of accounting accruals and value changes that Jordan talked about briefly.
Yes, makes very good sense. And one more follow-on question, if I may. Is there anything regulatory or legislative out there that we should think about. I'm sort of in my mind, thinking back to the PACCAR case in the United Kingdom, England & Wales? And is there anything else that we ought to think about along those lines?
Yes. I think PACCAR is sort of a unique situation because it's a U.K. Supreme Court interpretation in our view, sort of a strained interpretation of the statute that is being interpreted in a way that is inconsistent with its original intention. And that's something that is really unique to the U.K. and both the prior and the current U.K. government have indicated a preparedness to fix that statutorily coupled with some review that's going on today in the U.K. So that's sort of a one-off.
If you leave that aside, it's not surprising that corporate defendants are unhappy with the presence, the existence of litigation finance. And Jon Molot has written about this for years and years, even back to before the founding of Burford where repeat players, repeat corporate defense players in the litigation system have historically had an advantage, a benefit from that status. And we have been interfering with that benefit.
And so it's not surprising that there is lobbying activity and opposition to the concept of litigation finance from both companies that are historically dependence and from the insurance industry. That has been going on for our entire lives and hasn't been particularly successful. And I don't have any reason to expect that, that will change. In fact, the focus of a lot of that activity is on collateral issues now like disclosure as opposed to fundamental issues like should you be doing this in the first place. But I -- so that's sort of where we are on a regulatory matter. And we continue to have jousting matches with the organizations that represent the corporate defendants, most notably the U.S. Chamber of Commerce, which tries hard to preserve an uneven playing field in favor of their members. But I don't anticipate that having a material impact on our business.
Our next question comes from Matthew Howlett with B. Riley.
I just want to drill down on what drove the really impressive IRRs this quarter were the 179% on the realizations. I think you said it pretty well diverse among cases realizations, but was there anything chunky in driving that? Just some more details on why that was so impressive?
Chris, I'm happy to take...
Yes, I was going to say, Jon -- I was going to say maybe Jon would like to comment on that.
Yes. I -- the amazing thing is -- it's almost like what we saw this quarter is just a manifestation of what if you've been on these calls, you've heard me saying every quarter. There's lots going on in the portfolio. There are lots of cases proceeding through the litigation process and hitting positive milestone, whether that's winning trials, getting past summary judgment, winning on appeal, getting to the end. They're going into mediation on the eve of trial.
And so it just turns out in any particular quarter when the cases that are resolving what the smattering is? Are they resolving that there's been a successful trial outcome and then a quick settlement before an appeal. The appeal has concluded and you've won? Was it settling on the eve trial -- but we have just such a great team of underwriters, both who are there at the beginning to evaluate cases and negotiate deals but also to see them through working with the lawyers and clients who are running them to monitor and provide whatever feedback we can. And so just constantly getting feedback reports and questions from the team, not just on new matters, but also on the matters moving through.
And this is just a smattering of -- it's just a slice, a sample of what's in the portfolio that happens to have come due this quarter. And it's something that probably I kept telling you about, but we couldn't see because you only see realizations. And this time, this quarter was just realizations that reflect that activity.
If I can just [indiscernible] for investors, I mean, historically, you've done, what, 8 -- 90% ROICs, but I think the investment thesis or the best in case is, hey, sometimes we're going to get these great returns because of how we underwrite. Is that -- how do we think about it going forward? I guess, that's my...
So I mean it's a little bit like when you go back to Slide 12, which I talked about. There is -- when you have adjudication gains, you see our average ROIC there is 245%, whereas settlements is 65%. And -- so if you -- and of course, there's a variation among those, a settlement where it's a slam dunk case on the eve of trial, or an adjudication that has a sort of modest damages outcome compared to what we wanted, you could end up with a lower returning adjudication or high returning settlement.
But it's not -- there's no magic to this quarter. And yes, the thing that is magical about our team, I don't want to say word magical, but you asked is because we have a great team. The thing that's great about our team is our underwriting, the blocking and tackling and our case management to make sure nothing's gone off the rails is very disciplined and rigorous and sort of real world.
Yes, we have people who are well educated from top law schools that have great experience with law firms, but they also practically understand the litigation process. And that sets us up as to why our adjudication gains exceed our losses and why we have a lot of decent settlements.
But the smattering of which ones go trial and result in very large outcomes and which ones settle. That's not something that I can say was an outlier this quarter or that our team is just wonderful at picking. That is inherent in the process.
And so I wouldn't say you'd read -- all -- you could read into this quarter that all of the stuff Jon has been saying about is optimism in prior quarters. He wasn't just touting, it wasn't just an uninformed optimism, like now we're sort of seeing results from it. But -- and going forward, I'd expect, again, the ROICs and IRRs could bounce around in any given quarter depending on the -- whether the resolution skew towards more settlements or towards more adjudications. But overall, we should see performance -- well, I don't want to say what kind of performance we should see. But this quarter doesn't surprise me, I'd say, based on what I see in the portfolio for the future?
Look, I think equity investors get very excited when they start to see ROICs like that. Congratulations.
[Operator Instructions] Our next question comes from Alexander Bowers with Berenberg.
I just had 3 questions, if I may. Just starting on the larger case side, you committed to a Fortune 50 client in Q2 last year. I was just wondering whether there's any further progress have been made in terms of, I guess, taking on more Fortune 50 or larger case clients. My second question was around head count. I just want to understand how much headcount has grown so far this year. I think it was around 161 at the start of the year? And sort of longer term, what sort of expectations on headcount growth are you expecting? And then lastly, on the Sundance Resources, Republic Congo Mining segment, I don't believe the settlement was in the Q2 results. Are you able to confirm when you expect that to hit your P&L? And are you able to give us a sense of the magnitude in terms of how much Burford would realize from the case?
So let us divide those up among us. So I'll do the first, Jordan will do the second, and Jon will do the third. So on the first one, the answer is really, but it's episodic. We talk to lots of clients. It's a long process often to get people to do large deals with us. When we talked about the significant deal we did last second quarter, the $325 million deal that then went along and settled in 6 months, that was a long time in the making, that didn't just come together in the space of a month or 2.
And so we have -- we continue to engage with lots of potential clients and we continue to broaden the net. But in terms of -- we don't have sort of a quarter-by-quarter scorecard that says, okay, well, we've landed another Fortune 50 company. As you can see from the data on the website table, we did do a large deal in the second quarter, not as large as last year's second quarter, but we did do a $100 million monetization for our corporate client.
And so having the ability to continue to put those up is a desirable thing and something that we're trying hard to continue. And as Jon Molot just said, that's also why the returns bounce around because that big deal that we did, which we didn't expect to resolve necessarily in 6 months did. And so that was a very pleasant IRR, but not a particularly strong ROIC because the capital was only out for 6 months. But it was still a good deal for us to have done. Jordan do you want to take the head count point?
Sure. So look, I think head count broadly has stayed, give or take the same, Alex. We're measured in our growth. I think as Chris and John have talked about, we're constantly looking to add additional talent around the globe to support our origination efforts and we don't. But we don't -- we would signal to you or tell if we expected to see massive expansion or growth in 1 particular area.
[indiscernible] Sundance.
Yes. On Sundance, I think we have always said that we respect the priorities and needs of our clients, of our counterparties. We have a very good working relationship with Sundance. And it's the kind of deal that's not an outlier of what we would do when our company has invested tens of millions, in some cases, hundreds of millions in a project and then our government breaches a contract or expropriates an asset, don't have the financing to see it to conclusion through very expensive multiyear arbitration, we're a very useful resource. And we have a lot of experience doing it, which is a boon in addition to our capital. It's not just on money, it's very helpful.
That being said, many of our counterparties, our clients, there's no disclosure either at the moment that they do the deal with us. It's a confidential matter between us and there's no disclosure at the end as to what's going on. And you see the results on our investment table anonymized and can't figure out which matter it came from, and we respect the confidentiality of our clients' deals. In this case, Sundance had lawyers who gave them advice that suggested that it was a disclosable event when we did the financing, and that's how that was disclosed and that it was a disclosable event, when they reached an agreement in principle with the sovereign to potentially resolve the matter.
But if you can look at that disclosure, and I don't want to add to it because we reached the conclusion for us. This was not something material for us that would warrant a disclosure on our own, but of course, we're not standing in the way of our clients, our counterparty doing what it believes it needs to do. And so I guess to the extent it's about the accounting or the treatment of it, I would leave it to Chris or Jordan to answer to the extent about the litigation. I'm pleased with our relationship with the client and with how things are proceeding, but I don't really want to comment more than that.
Yes, I think that's right. I think, Alex, the short version is the only reason there's public disclosure, but this is because of the client. And so the client has to drive any public messaging about timing or size or anything like that. We're not in a position to do that.
So -- but thank you all for the questions. And with that, I think that brings us to a close. We, as always, enjoy talking to you, we're happy to engage directly with you if you have further questions for us through the IR team. And we look forward to presenting third quarter results to you sometime this fall. Thanks very much.