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Alcentra Capital Corporation Announces First Quarter Earnings and declares regular dividend of $0.34 Per Share

NEW YORK, May 4, 2017 /PRNewswire/ -- Alcentra Capital Corporation (ABDC) ("Alcentra" or the "Company"), a provider of customized debt and equity financing solutions primarily to lower middle-market companies based in the United States, today announced its financial results for the first quarter March 31, 2017.

First Quarter 2017 Financial Highlights

  • Total investment income of $9.2 million
  • Net investment income of $4.6 million, or $0.34 per share
  • Invested $31.9 million in debt and equity securities, including investments in 2 new portfolio companies and five add-on investments
  • Received proceeds from repayments of $22.2 million
  • Paid regular quarterly dividend of $0.34 per share and special dividend of $0.03 per share on April 6, 2017
  • Net asset value (NAV) of $180.4 million, or $13.43 per share, which is down from $13.72 in the fourth quarter;
  • Weighted Average Portfolio Leverage – 3.65x, which is down from the prior quarter of 3.93x
  • Weighted Average Portfolio Yield – 11.7%

Management Commentary

"As stated in our fourth quarter earnings announcement, we will be deploying capital prudently over the first six months of the 2017 fiscal year, as a series of pre-payments in the fourth quarter of 2016 left the portfolio at a lower level of AUM than planned. Based on our pipeline, we are on target to achieve the targeted level of AUM by the end of the second quarter of 2017; with steady portfolio growth expected thereafter."

We achieved our earnings goals for the quarter – net investment income - while maintaining portfolio yield and weighted average leverage within the portfolio. The number of portfolio companies written up during the quarter exceeded the number of portfolio companies written down by two-fold, with 10 of our 31 portfolio companies experiencing a write-up. Volatility was largely isolated to one portfolio company, where there is a plan in place to manage this issue. We are seeing strong performance in several of our portfolio companies – in semiconductor services, environmental and recycling services, and technology services - with the expectation that this dynamic will continue for the rest of the year."

First Quarter 2017 Financial Results

For the three months ended March 31, 2017, total investment income was $9.2 million, a decrease of $0.7 million, or 7.5% over the $9.9 million of total investment income for the three months ended March 31, 2016. This decrease was primarily attributable to the shift in timing of the closing of new deals relative to repayments. Interest and PIK income comprised $7.3 million and other income was $0.6 million.

For the three months ended March 31, 2017, total expenses were $4.6 million. Interest and financing expenses for the quarter was $1.9 million and the base management fee was $1.2 million. The income based incentive fee for the three months ended March 31, 2017 was $0.6 million and there was no capital gains incentive fee accrual. Professional fees and other general and administrative expenses totaled $0.8 million for the three months ended March 31, 2017.

Net investment income for the three months ended March 31, 2017 was $4.6 million ($0.34 per share).

During the three months ended March 31, 2017, we recorded a net realized loss on investments of $1.0 million largely due to the secondary sale of Wholesome Sweeteners.  During the quarter, we recorded a net change in unrealized depreciation from portfolio investments of $1.8 million attributable to net unrealized depreciation on debt investments.

As a result of these events, our net increase in net assets resulting from operations during the three months ended March 31, 2017 was $1.0 million.

Per share results for the first quarter ended March 31, 2017 are based on average shares outstanding of 13.44 million.

Portfolio and Investment Activities

As of March 31, 2017, the fair value of our investment portfolio totaled $283.3 million and consisted of 31 portfolio companies. The average portfolio investment on a cost basis was $9.5 million and equity constituted 7.7% of the portfolio, down from 29% at the time of the IPO. During the first quarter, we invested $31.9 million in debt and equity investments, including two new portfolio companies and five add-on investments, and received proceeds from repayments and amortizations on investments of $22.2 million. As of March 31, 2017, the weighted average yield on debt investments was 11.7%, which is the same as the weighted average yield from the December 31, 2016 period.

First quarter 2017 investment activity included the following new portfolio company investments:

  • Pharmalogics Recruiting ("PLR") is a provider of recruiting process outsourcing and staffing services for life science and pharma companies. Alcentra invested $10.0 million in Senior Notes on January 31, 2017.
  • Champion ONE ("C1") resells third party optical transceivers and related fiber optic network components primarily to telephone and CATV network operators in the U.S. Alcentra invested $7.5 million in Senior Notes and $1.125 million in equity on March 17, 2017.

Add-on investments during the quarter included the following:

  • Superior Controls - $5.85 million investment in 1st lien notes
  • LRI - $2.27 million investment in 1st lien notes
  • Pharmalogic - $2.12 million investment in subordinated notes
  • Black Diamond - $466k investment in tranche C super senior notes
  • My Alarm Center - $1.01 million investment in subordinated notes

As of March 31, 2017, Alcentra has one investment on non-accrual – an out of home media and advertising company based in Las Vegas – which has been on our Watch List intermittently and represents less than 1.5% of our portfolio. We added My Alarm Center to our Watch List during the first quarter.

Liquidity and Capital Resources

At March 31, 2017, Alcentra had $4.7 million in cash and cash equivalents.  Alcentra had $46.9 million of borrowings outstanding on its $135 million senior secured revolving credit facility and $55.0 million outstanding of Alcentra Capital InterNotes.

Subsequent Events

  • On April 6, 2017, Alcentra paid a dividend to shareholders of record as of March 31, 2017 of $0.34 per share and a special dividend of $0.03 per share.
  • On April 12, 2017, Alcentra funded an additional $0.144 million in Black Diamond.
  • On April 28, 2017, Alcentra funded an additional $0.295 million to My Alarm Center.
  • On May 4, 2017, the Board of Directors approved the 2017 second quarter dividend of $0.34 per share for shareholders of record date June 30, 2017 and payable July 6, 2017.

Second Quarter 2017 Regular Dividend of $0.34 Per Share Declared

On May 4, 2017, the Company's Board of Directors declared a regular quarterly dividend of $0.34 per share for the Second Quarter of 2017 payable on July 6, 2017 to stockholders of record as of June 30, 2017.

Alcentra has adopted a dividend reinvestment plan ("DRIP") that provides for reinvestment of dividends on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, when the Company declares a cash dividend, stockholders who have not "opted out" of the DRIP at least three days prior to the dividend payment date will have their cash dividends automatically reinvested in additional shares of the Company's common stock. Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election.

First Quarter 2017 Financial Results Conference Call

Management will host a conference call to discuss the operating and financial results at 10:30 am ET on Friday, May 5, 2017. To participate in the conference call, please dial (844) 832-0218 approximately 10 minutes prior to the call. International callers should dial (484) 756-4314. Please reference conference ID 15961792#.

A live webcast of the conference call will be available at http://investors.alcentracapital.com/events-presentations. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.

An archived webcast replay will be available on the Company's website until May 5, 2018.

ABOUT ALCENTRA CAPITAL CORPORATION

Alcentra Capital Corporation provides customized debt and equity financing solutions to lower middle-market companies, which the Company generally defines as U.S. based companies having revenues between $10.0 million and $250.0 million. Alcentra' investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Alcentra seeks to partner with business owners, management teams and financial sponsors by providing customized financing for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives.

Alcentra is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940, as amended. In addition, for tax purposes, Alcentra has elected to be treated as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code.

FORWARD-LOOKING STATEMENTS

This press release may contain certain forward-looking statements. Any such statements, other than statements of historical fact, are based on management's current expectations, estimates, projections, beliefs and assumptions about the Company, its current and prospective portfolio investments, and its industry. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Company's control, difficult to predict and could cause actual results to differ materially from those expected or forecasted in such forward-looking statements. Actual developments and results are likely to vary materially from these estimates and projections as a result of a number of factors, including those described from time to time in Alcentra' filings with the Securities and Exchange Commission. Such statements speak only as of the time when made, and Alcentra undertakes no obligation to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

 

 

Alcentra Capital Corporation and Subsidiary


Consolidated Statements of Assets and Liabilities



As of
March 31, 2017
(Unaudited)


As of
December 31,
2016

Assets







Portfolio investments, at fair value







Non-controlled, non-affiliated investments, at fair value (cost of $256,478,870 and
$248,479,039, respectively)


$

246,605,747


$

239,722,117

Non-controlled, affiliated investments, at fair value (cost of $30,411,793 and $29,734,859,
respectively)



21,952,856



22,094,203

Controlled, affiliated investments, at fair value (cost $15,288,617 and $15,122,171,
respectively)



14,770,075



14,456,630

Total of portfolio investments, at fair value (cost $302,179,280 and $293,336,069,
respectively)



283,328,678



276,272,950

Cash



4,719,733



3,891,606

Dividends and interest receivable



1,765,812



3,240,640

Receivable for investments sold



705,733



2,139,463

Deferred financing costs



1,014,244



1,287,807

Deferred tax asset



1,511,687



1,264,811

Income tax liability



795,587



Prepaid expenses and other assets



50,642



100,770

Total Assets


$

293,892,116


$

288,198,047



Liabilities


Credit facility payable


$

46,933,273


$

39,133,273

Notes payable (net of deferred note offering costs of $1,399,009 and $1,495,062, respectively)



53,600,991



53,504,938

Payable for investments purchased



71,221



Other accrued expenses and liabilities



322,664



282,165

Directors' fees payable



81,000



95,000

Professional fees payable



417,713



331,867

Interest and credit facility expense payable



1,564,311



1,008,127

Management fee payable



2,551,159



1,301,591

Income-based incentive fees payable



1,849,135



2,071,661

Distributions payable



4,971,712



4,586,816

Unearned structuring fee revenue



1,110,494



1,175,319

Income tax liability





182,699

Total Liabilities


$

113,473,673


$

103,673,456



Commitments and Contingencies (Note 12)




Net Assets


Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,437,059 and
13,451,633 shares issued and outstanding, respectively)



13,437



13,452

Additional paid-in capital



196,124,849



196,290,348

Accumulated net realized loss



(2,228,899)



(776,548)

Undistributed net investment income



4,914,081



4,890,065

Net unrealized appreciation (depreciation) on investments, net of benefit/(provision) for taxes of
$445,577 and $1,170,393 as of March 31, 2017 and December 31, 2016, respectively



(18,405,025)



(15,892,726)

Total Net Assets



180,418,443



184,524,591

Total Liabilities and Net Assets


$

293,892,116


$

288,198,047



Net Asset Value Per Share


$

13.43


$

13.72

 

 

Alcentra Capital Corporation and Subsidiary


Consolidated Statements of Operations



For the three months
ended  March 31, 2017
(Unaudited)


For the three months
ended  March 31, 2016
(Unaudited)


Investment Income:

From non-controlled, non-affiliated investments:

Interest income from portfolio investments


$

7,004,677


$

5,267,543


Paid-in-kind interest income from portfolio investments



348,192



1,351,088


Other income from portfolio investments



609,965



918,664


Dividend income from portfolio investments



27,520




From non-controlled, affiliated investments:

Interest income from portfolio investments



251,778



910,323


Paid in-kind income from portfolio investments



387,036



851,139


Other income from portfolio investments





105,882


From controlled, affiliated investments:

Interest income from portfolio investments



405,835



381,747


Paid in-kind income from portfolio investments



166,445



160,005


Other income from portfolio investments






Total investment income



9,201,448



9,946,391



Expenses:

Management fees



1,249,569



1,289,036


Income-based incentive fees



653,911



790,727


Professional fees



266,339



354,002


Valuation services



101,396



70,986


Interest and credit facility expense



1,526,907



1,308,944


Amortization of deferred financing costs



285,563



264,630


Directors' fees



68,136



64,923


Insurance expense



64,481



66,610


Amortization of deferred note offering costs



98,410




Other expenses



294,120



131,641


Total expenses



4,608,832



4,341,499


Waiver of capital gains incentive fees






Net expenses



4,608,832



4,341,499


Net investment income


$

4,592,616


$

5,604,892



Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) From Portfolio Investments

Net realized gain (loss) on:

Non-controlled, non-affiliated investments



(1,049,239)



1,876,638


Non-controlled, affiliated investments





394,733


Controlled, affiliated investments





(11,154,495)


Net realized gain (loss) from portfolio investments



(1,049,239)



(8,883,124)


Net change in unrealized appreciation (depreciation) on:

Non-controlled, non-affiliated investments



(1,116,201)



(5,985,001)


Non-controlled, affiliated investments



(818,281)



2,579,941


Controlled, affiliated investments



146,999



11,206,914


Net change in unrealized appreciation (depreciation) from portfolio investments



(1,787,483)



7,801,854


Benefit/(Provision) for taxes on unrealized gain (loss) on investments



(724,816)



(209,864)


Net realized gain (loss) and net change in unrealized appreciation (depreciation) from portfolio investments



(3,561,538)



(1,291,134)


Net Increase (Decrease) in Net Assets Resulting from Operations


$

1,031,078


$

4,313,758



Basic and diluted:

Net investment income per share


$

0.34


$

0.41


Earnings per share


$

0.08


$

0.32


Weighted Average Shares of Common Stock Outstanding



13,438,800



13,515,498


Dividends declared per common share


$

0.370


$

0.340


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