SLR Investment Corp. (NASDAQ: SLRC) (the “Company”, “SLRC”,
“we”, or “our”) today reported net investment income (“NII”)
of $23.9 million, or $0.44 per share, for the first quarter of
2024. On May 8, 2024, the Board declared a quarterly distribution
of $0.41 per share payable on June 27, 2024 to holders of record as
of June 13, 2024.
As of March 31, 2024, net asset value (“NAV”)
was $18.19 per share, compared to $18.09 as of December 31,
2023.
“With credit quality being top of mind for
private credit investors, we are pleased to report that the
financial condition of our portfolio companies remains solid, as
evidenced by the increase in net asset value, low level of
non-accruals, and minimal PIK income,” said Michael Gross,
Co-CEO.
“The investment environment remains attractive,
especially in our specialty finance lending verticals,” said Bruce
Spohler, Co-CEO. “In Q1 2024, close to 90% of SLRC’s comprehensive
originations were in our specialty finance strategies, reflecting
our multi-strategy portfolio construction which allows us to
allocate capital to the most attractive risk/reward investments
across economic cycles.”
FINANCIAL HIGHLIGHTS FOR QUARTER ENDED MARCH 31,
2024:
Investment portfolio fair value: $2.1
billionNet assets: $992.1 million or $18.19 per shareLeverage:
1.16x net debt-to-equity
Operating Results for the Quarter Ended March 31,
2024:
Net investment income: $23.9 million
or $0.44 per share Net realized and unrealized gains: $4.0 million
or $0.07 per shareNet increase in net assets from operations: $27.9
million or $0.51 per share
COMPREHENSIVE PORTFOLIO(1)
HIGHLIGHTS AND ACTIVITY(2)
FOR QUARTER ENDED MARCH 31, 2024:
Portfolio fair value: $3.1
billionNumber of unique issuers: approximately 800Investments made
during the quarter: $260.9 millionInvestments prepaid and sold
during the quarter: $313.9 million
(1) The Comprehensive Investment Portfolio for
the quarter ended March 31, 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
March 31, 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 March 31, 2024,
SLRC had Comprehensive Portfolio originations of $260.9 million and
repayments of $313.9 million across the Company’s four investment
strategies:
For the Quarter Ended
March 31, 2024($mm) |
Asset Class |
Sponsor Finance(1) |
Asset-basedLending(2) |
EquipmentFinance(3) |
Life Science Finance |
TotalComprehensive Investment Portfolio
Activity |
Originations |
$32.6 |
$53.1 |
$151.3 |
$23.9 |
$260.9 |
Repayments /Amortization |
$15.9 |
$102.8 |
$143.2 |
$52.0 |
$313.9 |
Net PortfolioActivity |
$16.7 |
$(49.7) |
$8.1 |
$(28.1) |
$(53.0) |
(1) Sponsor Finance refers to cash flow loans to
sponsor-owned companies including cash flow loans held in the SLR
Senior Lending Program LLC 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 $3.8
million or 0.1% per issuer. As of March 31, 2024, 99.3% of the
Company’s Comprehensive Investment Portfolio was invested in senior
secured loans of which 97.8% is held in first lien senior secured
loans. Second lien ABL exposure is 1.2% and second lien cash flow
exposure is 0.3% of the Comprehensive Investment Portfolio at March
31, 2024.
SLRC’s Comprehensive Investment Portfolio
composition by asset class as of March 31, 2024 was as follows:
Comprehensive Investment Portfolio Composition (at
fair value) |
Amount |
Weighted Average Asset Yield(5) |
($mm) |
% |
Senior
Secured Investments Cash Flow Loans (Sponsor
Finance)(1) |
$750.1 |
24.5% |
11.8% |
|
Asset-Based Loans(2) |
$931.4 |
30.5% |
15.7% |
|
Equipment Financings(3) |
$1,015.1 |
33.2% |
7.9% |
|
Life Science Loans |
$338.0 |
11.1% |
12.9% |
|
Total Senior
Secured Investments |
$3,034.6 |
99.3% |
11.8% |
|
Equity and Equity-like
Securities |
$22.8 |
0.7% |
|
|
Total
Comprehensive Investment Portfolio |
$3,057.4 |
100.0% |
|
|
Floating Rate
Investments(4) |
$2,009.8 |
66.2% |
|
|
First Lien Senior
Secured Loans |
$2,988.7 |
97.8% |
|
|
Second Lien Senior
SecuredAsset-Based Loans |
$38.1 |
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 ending on March 31, 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 ending on March 31, 2024 against
the portfolio as of March 31, 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 March 31, 2024, 99.4% of SLRC’s portfolio
was performing on a fair value basis and 99.2% on a cost basis,
with two investments on 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 March 31, 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 |
$661.0 |
31.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
$1,414.2 |
66.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
$50.9 |
2.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
3/31/2024 |
$19.9 |
$14.5 |
$10.6 |
$13.1 |
$58.1 |
% Contribution |
34.3% |
24.9% |
18.3% |
22.5% |
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 March 31, 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
$237.8 million at par and total funded portfolio investments of
$216.9 million at fair value, consisting of floating rate senior
secured loans to 39 different borrowers and an average position of
$5.6 million. This compares to portfolio investments of $187.3
million at fair value across 32 different borrowers at December 31,
2023. During the quarter ended March 31, 2024, SSLP had net
portfolio growth of $29.1 million with $0.8 million of investments
repaid. The fair value of the portfolio increased by 16% over the
prior quarter.
In Q1 2024, the Company earned $1.6 million from
SSLP compared to earnings of $1.1 million in Q4 2023, representing
an annualized yield of 13.6% on the cost basis of the Company’s
investment. SSLP quarterly earnings are expected to increase with
further portfolio ramp and the investments achieving full run
rate.
SLR Investment Corp.’s Results of
Operations for the Quarter Ended March 31, 2024 compared to the
Quarter Ended March 31, 2023
Investment Income
For the fiscal quarters ended March 31, 2024 and
2023, gross investment income totaled $58.1 million and $53.5
million, respectively. The year-over-year increase in gross
investment income was due to a combination of net growth of the
income producing portfolio, an increase in index rates, and the
ramp of the SSLP.
Expenses
SLRC’s net expenses totaled $34.2 million and
$31.4 million, respectively, for the three months ended March 31,
2024 and 2023. The year-over-year increase in expenses was
primarily due to an increase in interest expenses from a larger
investment portfolio and higher index rates as well as an increase
in management fees.
The investment advisor 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. For the three
months ended March 31, 2024 and 2023, $46 thousand and $110
thousand, respectively, of performance-based incentive fees were
waived.
Net Investment Income
SLRC’s net investment income totaled $23.9
million and $22.1 million, or $0.44 and $0.41 per average share,
respectively, for the fiscal quarters ended March 31, 2024 and
2023.
Net Realized and Unrealized Gain
(Loss)
Net realized and unrealized gains / (losses) for
the fiscal quarters ended March 31, 2024 and 2023 totaled $4.0
million and $(15.3) million, respectively.
Net Increase in Net Assets Resulting
from Operations
For the three months ended March 31, 2024 and
2023, the Company had a net increase in net assets resulting from
operations of $27.9 million and $6.8 million, respectively. For the
same periods, earnings per average share were $0.51 and $0.13,
respectively.
Liquidity and Capital
Resources
Unsecured Debt
At March 31, 2024, approximately 40% of the
Company’s funded debt was comprised of fixed rate unsecured
notes.
Credit Facilities and Available Capital
As of March 31, 2024, the Company had $592.3
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 March 31,
2024, including anticipated available credit facility capacity at
the SSLP and our specialty finance portfolio companies, subject to
borrowing base limits, SLRC, SSLP and our specialty finance
portfolio companies had approximately $800 million of available
capital.
Leverage
As of March 31, 2024, the Company’s net
debt-to-equity was 1.16x, within the Company’s target range of 0.9x
to 1.25x.
Unfunded Commitments
As of March 31, 2024, excluding commitments to
SLR-CS, SLR-EF, SLR-HC ABL and SSLP, over which the Company has
control of such funding, the Company had unfunded commitments of
approximately $179.1 million.
Subsequent Events
Distributions
On May 8, 2024, the Board declared a quarterly
distribution of $0.41 per share payable on June 27, 2024 to holders
of record as of June 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,
May 9, 2024. All interested parties may participate in the
conference call by dialing (800) 445-7795 approximately 5-10
minutes prior to the call, international callers should dial (785)
424-1789. Participants should reference SLR Investment Corp. and
Conference ID: SLRC1Q24. A telephone replay will be available until
May 23, 2024 and can be accessed by dialing (800) 925-9394.
International callers should dial (402) 220-5386. 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,
www.slrinvestmentcorp.com. 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) |
|
|
March 31, 2024 |
|
December 31, 2023 |
Assets |
|
|
|
Investments at fair
value: |
|
|
|
Companies less than 5% owned (cost: $1,229,225 and $1,260,205,
respectively) |
$ |
1,243,944 |
|
|
$ |
1,271,442 |
|
Companies 5% to 25% owned (cost: $60,891 and $60,064,
respectively) |
|
45,078 |
|
|
|
44,250 |
|
Companies more than 25% owned (cost: $875,569 and $870,128,
respectively) |
|
844,916 |
|
|
|
839,074 |
|
Cash |
|
15,254 |
|
|
|
11,864 |
|
Cash equivalents (cost:
$292,869 and $332,290, respectively) |
|
292,869 |
|
|
|
332,290 |
|
Dividends receivable |
|
11,792 |
|
|
|
11,768 |
|
Interest receivable |
|
12,131 |
|
|
|
11,034 |
|
Receivable for investments
sold |
|
1,549 |
|
|
|
1,538 |
|
Prepaid expenses and other
assets |
|
930 |
|
|
|
608 |
|
Total assets |
$ |
2,468,463 |
|
|
$ |
2,523,868 |
|
|
|
|
|
Liabilities |
|
|
|
Debt ($1,162,250 and
$1,183,250 face amounts, respectively, reported net of unamortized
debt issuance costs of $4,927 and $5,473, respectively) |
$ |
1,157,323 |
|
|
$ |
1,177,777 |
|
Payable for investments and
cash equivalents purchased |
|
292,869 |
|
|
|
332,290 |
|
Management fee payable |
|
7,882 |
|
|
|
8,027 |
|
Performance-based incentive
fee payable |
|
5,906 |
|
|
|
5,864 |
|
Interest payable |
|
6,913 |
|
|
|
7,535 |
|
Administrative services
payable |
|
2,283 |
|
|
|
1,969 |
|
Other liabilities and accrued
expenses |
|
3,144 |
|
|
|
3,767 |
|
Total liabilities |
$ |
1,476,320 |
|
|
$ |
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 |
|
(126,333 |
) |
|
|
(131,837 |
) |
Total net assets |
$ |
992,143 |
|
|
$ |
986,639 |
|
Net Asset Value Per
Share |
$ |
18.19 |
|
|
$ |
18.09 |
|
|
SLR INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except share amounts) |
|
|
Three months ended |
|
March 31, 2024 |
|
March 31, 2023 |
INVESTMENT
INCOME: |
|
|
|
Interest: |
|
|
|
Companies less than 5% owned |
$ |
41,004 |
|
|
$ |
37,338 |
|
Companies 5% to 25% owned |
|
831 |
|
|
|
— |
|
Companies more than 25% owned |
|
3,338 |
|
|
|
2,711 |
|
Dividends: |
|
|
|
Companies more than 25% owned |
|
12,227 |
|
|
|
11,176 |
|
Other income: |
|
|
|
Companies less than 5% owned |
|
574 |
|
|
|
2,322 |
|
Companies more than 25% owned |
|
125 |
|
|
|
— |
|
Total investment income |
$ |
58,099 |
|
|
$ |
53,547 |
|
|
|
|
|
EXPENSES: |
|
|
|
Management fees |
$ |
7,882 |
|
|
$ |
7,706 |
|
Performance-based incentive
fees |
|
5,952 |
|
|
|
5,509 |
|
Interest and other credit
facility expenses |
|
18,188 |
|
|
|
15,286 |
|
Administrative services
expense |
|
1,376 |
|
|
|
1,508 |
|
Other general and
administrative expenses |
|
895 |
|
|
|
1,501 |
|
Total expenses |
|
34,293 |
|
|
|
31,510 |
|
Performance-based incentive
fees waived |
|
(46 |
) |
|
|
(110 |
) |
Net expenses |
|
34,247 |
|
|
|
31,400 |
|
Net investment income |
$ |
23,852 |
|
|
$ |
22,147 |
|
REALIZED AND
UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH
EQUIVALENTS: |
|
|
|
Net realized gain on
investments and cash equivalents (companies less than 5%
owned) |
$ |
135 |
|
|
$ |
687 |
|
Net change in unrealized gain
(loss) on investments and cash equivalents: |
|
|
|
Companies less than 5% owned |
|
3,484 |
|
|
|
(14,271 |
) |
Companies 5% to 25% owned |
|
1 |
|
|
|
— |
|
Companies more than 25% owned |
|
399 |
|
|
|
(1,739 |
) |
|
|
|
|
Net change in unrealized gain (loss) on investments and cash
equivalents |
|
3,884 |
|
|
|
(16,010 |
) |
|
|
|
|
Net realized and unrealized gain (loss) on investments and cash
equivalents |
|
4,019 |
|
|
|
(15,323 |
) |
|
|
|
|
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS |
$ |
27,871 |
|
|
$ |
6,824 |
|
EARNINGS PER
SHARE |
$ |
0.51 |
|
|
$ |
0.13 |
|
|
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: an
increase in the size of SLRC’s income producing comprehensive
portfolio; an increase in the size of SSLP’s investment portfolio;
the expected dividend yield payable to SLRC from SSLP; 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 rising 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.
ContactSLR Investment Corp.Investor Relations
slrinvestorrelations@slrcp.com | (646) 308-8770
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