SLR Investment Corp. (NASDAQ: SLRC) (the “Company”, “SLRC”,
“we”, “us”, or “our”) today reported net investment income (“NII”)
of $24.3 million, or $0.45 per share, for the second quarter
of 2024. On August 7, 2024, the Board declared a quarterly
distribution of $0.41 per share payable on September 27, 2024, to
holders of record as of September 13, 2024.
As of June 30, 2024, net asset value (“NAV”) was
$18.20 per share, compared to $18.19 per share as of March 31,
2024.
“NII per share in the second quarter reached the
highest level in 5 years, reflecting our deliberate approach to
rebuild the Company’s investment portfolio after a period of
conservatism during the pandemic. Importantly, SLRC’s portfolio
growth over the last couple of years has been driven by
originations in both sponsor finance and specialty finance
investments, enabling us to take advantage of our complementary
niches within the private credit market that are not as competitive
as the sponsor market,” said Michael Gross, Co-CEO. “Our
multi-strategy approach provides greater earnings stability across
cycles due to the relative consistency of the returns in our
specialty finance strategies.”
“Our portfolio continues to perform well, which
is evidenced by another quarter of NAV stability, a decline in
non-accrual investments, a low level of watch list investments, and
minimal payment-in-kind income,” said Bruce Spohler,
Co-CEO. “We believe the recent stability in the NAV reflects
our multi-strategy portfolio, which was substantially constructed
in 2023 and 2024 and underwritten to withstand higher interest
rates and a softening economy.”
FINANCIAL HIGHLIGHTS FOR QUARTER ENDED
JUNE 30, 2024: Investment portfolio fair value: $2.1
billionNet assets: $993.0 million or $18.20 per shareLeverage:
1.16x net debt-to-equity
Operating Results for the Quarter Ended
June 30, 2024:Net investment income: $24.3 million or
$0.45 per shareNet realized and unrealized losses: $1.1 million or
$0.02 per shareNet increase in net assets from operations: $23.2
million or $0.43 per share
COMPREHENSIVE
PORTFOLIO(1) HIGHLIGHTS AND
ACTIVITY(2) FOR QUARTER ENDED
JUNE 30, 2024:Portfolio fair value: $3.1 billionNumber of
unique issuers: approximately 800Investments made during the
quarter: $355.8 millionInvestments prepaid and sold during the
quarter: $292.7 million
(1) The Comprehensive Investment Portfolio for
the quarter ended June 30, 2024 is comprised of SLRC’s investment
portfolio and SLR Credit Solutions’ (“SLR-CS”) full portfolio, SLR
Equipment Finance’s (“SLR-EF”) full portfolio, Kingsbridge
Holdings, LLC’s (“KBH”) full portfolio, SLR Business Credit’s
(“SLR-BC”) full portfolio, SLR Healthcare ABL’s (“SLR-HC ABL”) full
portfolio owned by the Company (collectively, the Company’s
“Commercial Finance Portfolio Companies”), and the senior secured
loans held by the SLR Senior Lending Program LLC (“SSLP”)
attributable to the Company, and excludes the Company’s fair value
of the equity interests in SSLP and the Commercial Finance
Portfolio Companies and also excludes SLRC’s loans to KBH and
SLR-EF.(2) Comprehensive Portfolio Activity for the quarter ended
June 30, 2024, includes investment activity of the Commercial
Finance Portfolio Companies and SSLP attributable to the
Company.
Comprehensive Investment
Portfolio
Portfolio Activity
During the three months ended June 30, 2024,
SLRC had Comprehensive Portfolio originations of $355.8 million and
repayments of $292.7 million across the Company’s four investment
strategies:
|
|
|
|
|
|
Asset Class |
SponsorFinance(1) |
Asset-basedLending(2) |
EquipmentFinance(3) |
Life Science Finance |
TotalComprehensive InvestmentPortfolio
Activity |
Originations |
$44.5 |
$130.4 |
$177.9 |
$3.0 |
$355.8 |
Repayments /Amortization |
$33.2 |
$100.4 |
$159.1 |
$0.0 |
$292.7 |
Net PortfolioActivity |
$11.3 |
$30.0 |
$18.8 |
$3.0 |
$63.1 |
(1) Sponsor Finance refers to cash flow loans to
sponsor-owned companies including cash flow loans held in SSLP
attributable to the Company.(2) Includes SLR-CS, SLR-BC and SLR-HC
ABL’s full portfolios, as well as asset-based loans on the
Company’s balance sheet.(3) Includes SLR-EF’s full portfolio and
equipment financings on the Company’s balance sheet and Kingsbridge
Holdings’ (KBH) full portfolio.
Comprehensive Investment Portfolio
Composition
The Comprehensive Investment Portfolio is
diversified across approximately 800 unique issuers, operating in
over 110 industries, and resulting in an average exposure of $3.8
million or 0.1% per issuer. As of June 30, 2024, 99.2% of the
Company’s Comprehensive Investment Portfolio was invested in senior
secured loans of which 97.7% is held in first lien senior secured
loans. Second lien ABL exposure is 1.2% and second lien cash flow
exposure is 0.3% of the Comprehensive Investment Portfolio at June
30, 2024.
SLRC’s Comprehensive Investment Portfolio
composition by asset class as of June 30, 2024 was as follows:
Comprehensive InvestmentPortfolio Composition(at
fair value) |
Amount |
WeightedAverage AssetYield(5) |
($mm) |
% |
Senior Secured Investments Cash Flow Loans
(Sponsor Finance)(1) |
$759.0 |
24.3% |
11.7% |
Asset-Based Loans(2) |
$961.4 |
30.8% |
15.2% |
Equipment Financings(3) |
$1,034.1 |
33.1% |
8.1% |
Life
Science Loans |
$345.5 |
11.0% |
13.0% |
Total Senior Secured Investments |
$3,100.0 |
99.2% |
11.7% |
Equity and Equity-like Securities |
$24.8 |
0.8% |
|
Total Comprehensive InvestmentPortfolio |
$3,124.8 |
100.0% |
|
Floating Rate Investments(4) |
$2,058.1 |
66.3% |
|
First Lien Senior Secured Loans |
$3,054.0 |
97.7% |
|
Second Lien Senior SecuredAsset-Based Loans |
$38.2 |
1.2% |
|
Second Lien Senior Secured Cash Flow Loans |
$7.8 |
0.3% |
|
(1) Includes cash flow loans held in the SSLP
attributable to the Company and excludes the Company’s equity
investment in SSLP.(2) Includes SLR-CS, SLR-BC, and SLR-HC ABL’s
full portfolios, as well as asset-based loans on the Company’s
balance sheet, and excludes the Company’s equity investments in
each of SLR-CS, SLR-BC, and SLR-HC ABL.(3) Includes SLR-EF’s full
portfolio and equipment financings on the Company’s balance sheet
and Kingsbridge Holdings’ (KBH) full portfolio. Excludes the
Company’s equity and debt investments in each of SLR-EF and KBH.(4)
Floating rate investments are calculated as a percent of the
Company’s income-producing Comprehensive Investment Portfolio. The
majority of fixed rate loans are associated with SLR-EF and leases
held by KBH. Additionally, SLR-EF and KBH seek to match-fund their
fixed rate assets with fixed rate liabilities.(5) The weighted
average asset yield for income producing cash flow, asset-based and
life science loans on balance sheet is based on a yield to maturity
calculation. The yield calculation of Life Science loans excludes
the impact of success fees and/or warrants. The weighted average
yield for on-balance sheet equipment financings is calculated based
on the expected average life of the investments. The weighted
average asset yield for SLR-CS asset-based loans is an Internal
Rate of Return calculated using actual cash flows received and the
expected terminal value. The weighted average asset yield for
SLR-BC and SLR-HC ABL represents total interest and fee income for
the three month period ended on June 30, 2024 against the average
portfolio over the same fiscal period, annualized. The weighted
average asset yield for SLR-EF represents total interest and fee
income for the three month period ended on June 30, 2024 compared
to the portfolio as of June 30, 2024, annualized. The weighted
average yield for the KBH equipment leasing portfolio represents
the expected return on equity during 2024.
SLR INVESTMENT CORP.
PORTFOLIO
Asset Quality
As of June 30, 2024, 99.6% of SLRC’s portfolio
was performing on a fair value basis and 99.4% on a cost basis,
with one investment recognized as non-accrual.
The Company emphasizes risk control and credit
performance. On a quarterly basis, or more frequently if deemed
necessary, the Company formally rates each portfolio investment on
a scale of one to four, with one representing the least amount of
risk.
As of June 30, 2024, the composition of our
Investment Portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating |
Investments at Fair Value ($mm) |
% of Total Portfolio |
1 |
$656.0 |
30.7% |
2 |
$1,464.4 |
68.5% |
3 |
$8.4 |
0.4% |
4 |
$7.8 |
0.4% |
Investment Income Contribution by Asset
Class
Investment Income Contribution by Asset
Class(1)($mm) |
For the QuarterEnded: |
SponsorFinance |
Asset-basedLending |
EquipmentFinance |
Life ScienceFinance |
Total |
6/30/2024 |
$22.5 |
$14.6 |
$9.4 |
$12.5 |
$59.0 |
% Contribution |
38.2% |
24.7% |
15.9% |
21.2% |
100.0% |
(1) Investment Income Contribution by Asset
Class includes: interest income/fees from Sponsor Finance (cash
flow) loans on balance sheet and distributions from SSLP;
income/fees from asset-based loans on balance sheet and
distributions from SLR-CS, SLR-BC, SLR-HC ABL; income/fees from
equipment financings and distributions from SLR-EF and
distributions from KBH; and income/fees from life science loans on
balance sheet.
SLR Senior Lending Program LLC
(SSLP)
As of June 30, 2024, the Company and its 50%
partner, Sunstone Senior Credit L.P., had contributed combined
equity capital of $95.8 million of a total equity commitment of
$100 million to SSLP. At quarter end, SSLP had total commitments of
$236.4 million at par and total funded portfolio investments of
$220.8 million at fair value, consisting of floating rate senior
secured loans to 39 different borrowers and an average investment
of $5.7 million per borrower. This compares to funded portfolio
investments of $216.9 million at fair value across 39 different
borrowers at March 31, 2024. During the quarter ended June 30,
2024, SSLP invested $11.4 million in 7 portfolio companies and had
$7.7 million of investments repaid. The fair value of the portfolio
increased by 1.8% over the prior quarter.
In Q2 2024, the Company earned income of $1.9
million from its investment in the SSLP, representing an annualized
yield of 15.8% on the cost basis of the Company’s investment,
compared to income of $1.6 million in Q1 2024.
SLR Investment Corp.’s Results of
Operations for the Quarter Ended June 30, 2024 compared to the
Quarter Ended June 30, 2023
Investment Income
SLRC’s gross investment income totaled $59.0
million and $56.3 million, respectively, for the three months ended
June 30, 2024 and 2023. The year-over-year increase of 4.7% in
gross investment income was primarily due to a combination of an
increase in other income, the ramp of the SSLP, and an increase in
index rates.
Expenses
SLRC’s net expenses totaled $34.7 million and
$33.7 million, respectively, for the three months ended June 30,
2024 and 2023. The year-over-year increase in expenses of 3.0% was
primarily due to an increase in other general and administrative
expenses as well as an increase in management fees.
SLRC’s investment adviser agreed to waive
incentive fees resulting from income earned due to the accretion of
the purchase price discount allocated to investments acquired in
the Company’s merger with SLR Senior Investment Corp., which closed
on April 1, 2022. For the three months ended June 30, 2024 and
2023, $44 thousand and $125 thousand, respectively, of
performance-based incentive fees were waived, amounting to a
cumulative fee waiver of $2.1 million or $0.04 per share.
Net Investment Income
SLRC’s net investment income totaled $24.3
million and $22.7 million, or $0.45 and $0.42 per average share,
respectively, for the fiscal quarters ended June 30, 2024 and
2023.
Net Realized and Unrealized
Loss
Net realized and unrealized losses for the
fiscal quarters ended June 30, 2024 and 2023 totaled $1.1 million
and $3.7 million, respectively.
Net Increase in Net Assets Resulting
from Operations
For the three months ended June 30, 2024 and
2023, the Company had a net increase in net assets resulting from
operations of $23.2 million and $19.0 million, respectively. For
the same periods, earnings per average share were $0.43 and $0.35,
respectively.
Liquidity and Capital
Resources
Unsecured Debt
At June 30, 2024, 41% of the Company’s funded
debt was comprised of fixed rate unsecured notes. We expect to
opportunistically access the investment-grade debt market.
Credit Facilities and Available Capital
As of June 30, 2024, the Company had $588.9
million drawn on the $860 million of commitments that the Company
has under its revolving credit facilities, $100 million of term
loans, and $470 million of unsecured notes. Also as of June 30,
2024, including anticipated available borrowing capacity at the
SSLP and our specialty finance portfolio companies, subject to
borrowing base limits, SLRC, SSLP and our specialty finance
portfolio companies had over $750 million of available capital in
the aggregate.
Leverage
As of June 30, 2024, the Company’s net
debt-to-equity ratio was 1.16x, within the Company’s target range
of 0.9x to 1.25x.
Unfunded Commitments
As of June 30, 2024, excluding commitments to
SLR-CS, SLR-HC ABL and SSLP, over which the Company has discretion
to fund, the Company had unfunded commitments of approximately
$136.1 million.
Subsequent Events
Distributions
On August 7, 2024, the Board declared a
quarterly distribution of $0.41 per share payable on September 27,
2024 to holders of record as of September 13, 2024.
Conference Call and Webcast Information
The Company will host an earnings conference
call and audio webcast at 10:00 a.m. (Eastern Time) on Thursday,
August 8, 2024. All interested parties may participate in the
conference call by dialing (800) 267-6316 approximately 5-10
minutes prior to the call, international callers should dial (203)
518-9783. Participants should reference SLR Investment Corp. and
Conference ID: SLRC2Q24. A telephone replay will be available until
August 22, 2024 and can be accessed by dialing (800) 839-2418.
International callers should dial (402) 220-7210. This conference
call will also be broadcast live over the Internet and can be
accessed by all interested parties from the Event Calendar within
the “Investors” tab of SLR Investment Corp.’s website,
https://slrinvestmentcorp.com/Investors/Event-Calendar. Please
register online prior to the start of the call. For those who are
not able to listen to the broadcast live, a replay of the webcast
will be available soon after the call.
Financial Statements and Tables
SLR INVESTMENT CORP.CONSOLIDATED STATEMENTS OF ASSETS AND
LIABILITIES(in thousands, except share amounts) |
|
|
|
|
June 30, 2024 |
|
December 31, 2023 |
|
Assets |
|
|
|
|
|
|
|
|
Investments at fair
value: |
|
|
|
|
|
|
|
|
Companies less than 5% owned (cost: $1,232,964 and $1,260,205,
respectively)………………………………. |
$ |
1,247,747 |
|
|
$ |
1,271,442 |
|
|
Companies 5% to 25% owned (cost: $61,055 and $60,064,
respectively)…..……….……………………………… |
|
45,242 |
|
|
|
44,250 |
|
|
Companies more than 25% owned (cost: $875,473 and $870,128,
respectively)……….……………………….. |
|
843,561 |
|
|
|
839,074 |
|
|
Cash…………………………………………………………………………………………….……………………………………………………………………… |
|
11,031 |
|
|
|
11,864 |
|
|
Cash equivalents (cost:
$274,126 and $332,290,
respectively)……………………………….……........................................ |
|
274,126 |
|
|
|
332,290 |
|
|
Dividends
receivable…………………………………………………………………………………………………………………………………………… |
|
12,114 |
|
|
|
11,768 |
|
|
Interest
receivable…………………………………………………………………………….……………………………………………………………….. |
|
11,759 |
|
|
|
11,034 |
|
|
Receivable for investments
sold……………………………………………………………….………………………………………………………… |
|
1,755 |
|
|
|
1,538 |
|
|
Prepaid expenses and other
assets…………………………………………………………………………………………………………………….. |
|
943 |
|
|
|
608 |
|
|
Total
assets………………………………………………………………………………………………………………………………………… |
$ |
2,448,278 |
|
|
$ |
2,523,868 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Debt ($1,158,850 and
$1,183,250 face amounts, respectively, reported net of unamortized
debt issuance costs of $4,497 and $5,473,
respectively).………………………………………………………………………………………………….. |
$ |
1,154,353 |
|
|
$ |
1,177,777 |
|
|
Payable for investments and
cash equivalents purchased……………...……………………………………………………………….…. |
|
274,126 |
|
|
|
332,290 |
|
|
Management fee payable
…………..…………………………………………………………………………………………………………………….. |
|
7,874 |
|
|
|
8,027 |
|
|
Performance-based incentive
fee payable …………..……………………………………………………………………………………………. |
|
6,024 |
|
|
|
5,864 |
|
|
Interest payable
………….…………………………………………………………………………………………………………………………………….. |
|
6,752 |
|
|
|
7,535 |
|
|
Administrative services
payable ………….……………………………..……………………………………………………………………………… |
|
3,111 |
|
|
|
1,969 |
|
|
Other liabilities and accrued
expenses……………………………………………………………………………………………………………….. |
|
3,035 |
|
|
|
3,767 |
|
|
Total
liabilities…………………………………………………………….…………………………………………………………..……….… |
$ |
1,455,275 |
|
|
$ |
1,537,229 |
|
|
|
|
|
|
|
|
|
|
|
Net
Assets |
|
|
|
|
|
|
|
|
Common stock, par value $0.01
per share, 200,000,000 and 200,000,000 common shares authorized,
respectively, and 54,554,634 and 54,554,634 shares issued and
outstanding, respectively………………… |
$ |
546 |
|
|
$ |
546 |
|
|
Paid-in capital in excess of
par …………….………………………...…………………………………………………………………………………. |
|
1,117,930 |
|
|
|
1,117,930 |
|
|
Accumulated distributable net
loss ……………….…………………………………………………………………………………………………… |
|
(125,473 |
) |
|
|
(131,837 |
) |
|
Total net
assets……………………………………………………………..…………………………………………………………………… |
$ |
993,003 |
|
|
$ |
986,639 |
|
|
Net Asset Value Per
Share…..…………………………………………………………………………………………………………………………….. |
$ |
18.20 |
|
|
$ |
18.09 |
|
|
|
|
SLR INVESTMENT CORP. CONSOLIDATED
STATEMENTS OF OPERATIONS(in thousands, except
share amounts) |
|
|
|
|
Three months ended |
|
|
June 30, 2024 |
|
June 30, 2023 |
|
INVESTMENT INCOME: |
|
|
|
|
|
|
|
|
Interest: |
|
|
|
|
|
|
|
|
Companies less than 5% owned
........................................................................................................ |
$ |
40,015 |
|
|
$ |
41,267 |
|
|
Companies 5% to 25%
owned............................................................................................................ |
|
856 |
|
|
|
265 |
|
|
Companies more than 25% owned
.................................................................................................... |
|
3,306 |
|
|
|
2,814 |
|
|
Dividends: |
|
|
|
|
|
|
|
|
Companies more than 25% owned
.................................................................................................... |
|
12,482 |
|
|
|
11,177 |
|
|
Other
income: |
|
|
|
|
|
|
|
|
Companies less than 5% owned
........................................................................................................ |
|
2,184 |
|
|
|
757 |
|
|
Companies more than 25% owned
.................................................................................................... |
|
135 |
|
|
|
57 |
|
|
Total investment
income.................................................................................................... |
$ |
58,978 |
|
|
$ |
56,337 |
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
Management fees
……………................................................................................................................................ |
$ |
7,875 |
|
|
$ |
7,878 |
|
|
Performance-based incentive fees
…………......................................................................................................... |
|
6,068 |
|
|
|
5,638 |
|
|
Interest and other credit facility expenses
…………….......................................................................................... |
|
18,179 |
|
|
|
17,842 |
|
|
Administrative services expense
…………….......................................................................................................... |
|
1,376 |
|
|
|
1,480 |
|
|
Other
general and administrative expenses
...................................................................................................... |
|
1,206 |
|
|
|
948 |
|
|
Total
expenses.................................................................................................................... |
|
34,704 |
|
|
|
33,786 |
|
|
Performance-based incentive fees waived
…………….......................................................................................... |
|
(44 |
) |
|
|
(125 |
) |
|
Net expenses
..................................................................................................................... |
|
34,660 |
|
|
|
33,661 |
|
|
Net investment income
............................................................................................. |
$ |
24,318 |
|
|
$ |
22,676 |
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH
EQUIVALENTS: |
|
|
|
|
|
|
|
|
Net
realized gain on investments and cash equivalents (companies less
than 5% owned) .............................. |
$ |
105 |
|
|
$ |
498 |
|
|
Net
change in unrealized gain (loss) on investments and cash
equivalents: |
|
|
|
|
|
|
|
|
Companies less than 5% owned
........................................................................................................ |
|
63 |
|
|
|
5,181 |
|
|
Companies 5% to 25% owned
........................................................................................................... |
|
- |
|
|
|
(3,216 |
) |
|
Companies more than 25%
owned.................................................................................................... |
|
(1,258 |
) |
|
|
(6,144 |
) |
|
Net change in unrealized loss on investments and cash equivalents
................................... |
|
(1,195 |
) |
|
|
(4,179 |
) |
|
Net realized and unrealized loss on investments and cash
equivalents.................... |
|
(1,090 |
) |
|
|
(3,681 |
) |
|
NET
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS…………………………………………………………………. |
|
|
|
|
|
|
|
|
$ |
23,228 |
|
|
$ |
18,995 |
|
|
EARNINGS PER SHARE
…………........................................................................................................................... |
$ |
0.43 |
|
|
$ |
0.35 |
|
|
|
|
About SLR Investment Corp.
SLR Investment Corp. is a closed-end investment
company that has elected to be regulated as a business development
company under the Investment Company Act of 1940. A specialty
finance company with expertise in several niche markets, the
Company primarily invests in leveraged, U.S. upper middle market
companies in the form of cash flow, asset-based, and life sciences
senior secured loans.
Forward-Looking Statements
Some of the statements in this press release
constitute forward-looking statements because they relate to future
events, future performance or financial condition. The
forward-looking statements may include statements as to: the
expected stability of the Company’s earnings; the excess spread of
the Company’s investments; the Company’s ability to
opportunistically access the investment grade debt market; the
market environment and its impact on the business prospects of SLRC
and the prospects of SLRC’s portfolio companies; prospects for
additional portfolio growth of SLRC; and the quality of, and the
impact on the performance of SLRC from the investments that SLRC
has made and expects to make. In addition, words such as
“anticipate,” “believe,” “expect,” “seek,” “plan,” “should,”
“estimate,” “project” and “intend” indicate forward-looking
statements, although not all forward-looking statements include
these words. The forward-looking statements contained in this press
release involve risks and uncertainties. Certain factors could
cause actual results and conditions to differ materially from those
projected, including the uncertainties associated with: (i) changes
in the economy, financial markets and political environment,
including the impacts of inflation and changing interest rates;
(ii) risks associated with possible disruption in the operations of
SLRC or the economy generally due to terrorism, war or other
geopolitical conflicts, natural disasters, or pandemics; (iii)
future changes in laws or regulations (including the interpretation
of these laws and regulations by regulatory authorities); (iv)
conditions in SLRC’s operating areas, particularly with respect to
business development companies or regulated investment companies;
and (v) other considerations that may be disclosed from time to
time in SLRC’s publicly disseminated documents and filings. SLRC
has based the forward-looking statements included in this press
release on information available to it on the date of this press
release, and SLRC assumes no obligation to update any such
forward-looking statements. Although SLRC undertakes no obligation
to revise or update any forward-looking statements, whether as a
result of new information, future events or otherwise, you are
advised to consult any additional disclosures that it may make
directly to you or through reports that SLRC in the future may file
with the Securities and Exchange Commission, including annual
reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K.
Contact
SLR Investment Corp.
Investor Relations
slrinvestorrelations@slrcp.com | (646) 308-8770
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