SLR Investment Corp. Announces Quarter Ended June 30, 2021 Financial Results
Stable Net Asset Value
Robust Q3 Pipeline Should Drive Meaningful Portfolio Growth
Declares Quarterly Distribution of $0.41 Per Share for Q3, 2021
NEW YORK, Aug. 03, 2021 (GLOBE NEWSWIRE) -- SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”), today reported net investment income of $15.5 million, or $0.37 per share, for the second quarter 2021.
At June 30, 2021, net asset value (NAV) was $20.29 per share, an increase of $0.03 per share from March 31, 2021.
As of June 30, 2021, the Company’s portfolio was 100% performing.
The Board declared a third quarter distribution of $0.41 per share payable on October 5, 2021 to stockholders of record as of September 23, 2021. The specific tax characteristics will be reported to stockholders on Form 1099 after the end of the calendar year.
HIGHLIGHTS:
At June 30, 2021:
Comprehensive Investment portfolio* fair value: $1.92 billion
Number of portfolio companies: >600*
Net assets: $857.4 million
Net asset value per share: $20.29
Net debt-to-equity: 0.73x
Available capital**: $744 million, subject to borrowing base availability
Comprehensive Investment Portfolio Activity*** for the Quarter Ended June 30, 2021:
Investments made during the quarter: $173.2 million
Investments prepaid and sold during the quarter: $301.5 million
Operating Results for the Quarter Ended June 30, 2021:
Net investment income: $15.5 million
Net investment income per share: $0.37
Net realized and unrealized gain: $3.0 million
Net increase in net assets from operations: $18.6 million
Earnings per share: $0.44
* The Comprehensive Investment Portfolio for the quarter ended June 30, 2021 is comprised of SLRC’s investment portfolio, SLR Credit Solutions’ (“SLR-CS”) full portfolio, SLR Equipment Finance’s (“SLR-EF”) full portfolio and Kingsbridge Holdings, LLC’s (“KBH”) full portfolio, and excludes the Company’s fair value of the equity interests in SLR-CS, SLR-EF and KBH and also excludes SLRC’s loan to KBH.
** Please see Liquidity and Capital Resources.
*** Comprehensive Portfolio Activity for the quarter ended June 30, 2021 includes gross originations through SLR-CS, SLR-EF and KBH.
“SLRC’s portfolio continued to perform well during the second quarter, driven by our conservative underwriting and focus on investing in upper middle-market companies and our specialty finance strategies,” said Michael Gross, Co-CEO of SLR Investment Corp. “Our stable foundation positions us to capitalize on the increased sponsor-driven activity.”
“Our third quarter activity is strong and the pipeline is robust. We expect investments across our strategies to result in meaningful portfolio growth during Q3,” said Bruce Spohler, Co-CEO of SLR Investment Corp. “The third quarter investments should bring SLRC’s net leverage close to its target range.”
Conference Call and Webcast
The Company will host an earnings conference call and audio webcast at 10:00 a.m. (Eastern Time) on Wednesday, August 4, 2021. All interested parties may participate in the conference call by dialing (844) 889-7786 approximately 5-10 minutes prior to the call, international callers should dial (661) 378-9930. Participants should reference SLR Investment Corp. and the participant passcode of 2376837 when prompted. A telephone replay will be available until August 18, 2021 and can be accessed by dialing (855) 859-2056 and using the passcode 2376837. International callers should dial (404) 537-3406. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties through SLR Investment’s website, www.slrinvestmentcorp.com. To listen to the webcast, please go to the Company's website prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay of the webcast will be available soon after the call.
Comprehensive Investment Portfolio
Investment Activity
During the three months ended June 30, 2021, SLRC had total originations of $173.2 million and repayments and amortization of $301.5 million across its five core business units: cash flow, asset-based, equipment finance, life science lending, and corporate leasing resulting in a net portfolio reduction of $128.3 million to the comprehensive portfolio.
The investment activity of our Comprehensive Investment Portfolio for the quarter ended June 30, 2021 was as follows:
Comprehensive Investment Portfolio Activity (1) – Q2 2021 | ||||||||
Asset Class | Cash Flow | Asset-based | Equipment | Life Science | Corporate Leasing / KBH(4) | Total | ||
Originations | $48.0 | $27.3 | $23.7 | $5.6 | $68.6 | $173.2 | ||
Repayments / | $40.8 | $99.7 | $31.2 | $64.5 | $65.3 | $301.5 | ||
Net Portfolio | $7.2 | ($72.4) | ($7.5) | ($58.9) | $3.3 | ($128.3) | ||
(1) Total Portfolio Activity includes gross originations/repayments across each business unit.
(2) Includes SLR-CS’ full portfolio and asset-based loans on the Company’s balance sheet.
(3) Includes SLR-EF’s full portfolio and equipment financings on the Company’s balance sheet.
(4) Gross origination and repayment activity for KBH’s portfolio.
Portfolio Composition
Our Comprehensive Investment Portfolio composition by business unit at June 30, 2021 was as follows:
Comprehensive Investment Portfolio Composition | Amount | Weighted Average | |
($mm) | % | ||
Cash Flow Senior Secured Loans | $338.6 | 17.6% | 8.4% |
Asset-Based Senior Secured Loans / SLR-CS1) | $389.8 | 20.3% | 10.3% |
Equipment Senior Secured Financings / SLR-EF(2) | $313.8 | 16.4% | 9.9% |
Life Science Senior Secured Loans | $270.7 | 14.1% | 9.7%(6) |
Corporate Leasing / KBH(3) | $592.2 | 30.9% | 10.2%(7) |
Total Senior Secured Loans | $1,905.1 | 99.3% | 9.8% |
Equity and Equity-like Securities | $13.6 | 0.7% | |
Total Comprehensive Investment Portfolio | $1,918.7 | 100% | |
Floating Rate Investments(4) | $1,002.4 | 52.5% | |
First Lien Senior Secured Loans | $1,821.9 | 95.0% | |
Second Lien Senior Secured Cash Flow Loans | $46.8 | 2.4% | |
Second Lien Senior Secured Asset-Based Loans | $36.4 | 1.9% | |
(1) Includes SLR-CS’ full portfolio and asset-based and lender finance loans on the Company’s balance sheet and excludes the Company’s equity investment in SLR-CS.
(2) Includes SLR-EF’s full portfolio and equipment financings on the Company’s balance sheet and excludes the Company’s equity investments in SLR-EF.
(3) Includes KBH’s full portfolio and excludes the Company’s equity and debt investments in KBH.
(4) Floating rate investments 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 associated with 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 cash flow, asset-based and life science loans on balance sheet is based on a yield to maturity calculation. The weighted average yield for equipment financing and SLR-CS asset-based loans is calculated based on the expected average life of a loan for each asset class.
(6) Life Science yields exclude the impact of success fees and/or warrants.
(7) Represents the annualized Q2 2021 dividend yield at cost on SLRC’s equity investment in KBH.
The Comprehensive Investment Portfolio is diversified across over 600 unique borrowers in over 75 industries and with an average exposure of $3.1 million, or 0.2% per issuer.
At June 30, 2021, 99.3% of the Company’s Comprehensive Investment Portfolio was invested in senior secured loans, comprised of 95.0% first lien senior secured loans and approximately 4.3% second lien senior secured loans of which 2.4% were second lien cash flow loans and 1.9% were second lien asset-based loans.
The weighted average yield at fair value of all income-producing investments in the Comprehensive Portfolio was 9.8% at June 30, 2021.
SLR Investment Corp. Portfolio
Asset Quality
As of June 30, 2021, 100% on a fair value basis and cost basis of the Company’s portfolio was performing, with no investments on non-accrual status at quarter end.
The Company puts its greatest emphasis on risk mitigation and credit performance. On a quarterly basis, or more frequently if deemed necessary, the Company formally rates each portfolio investment on a scale of one to four, with one representing the least amount of risk.
As of June 30, 2021, the composition of our portfolio, on a risk ratings basis, was as follows:
Internal Investment Rating | Investments at Fair Value ($mm) | % of Total Portfolio | |
1 | $243.4 | 16.2% | |
2 | $1,194.6 | 79.7% | |
3 | $61.0 | 4.1% | |
4 | $0.0 | 0.0% | |
Investment Income Contribution by Business Unit
Business Unit Contribution to Gross Investment Income (1) | |||||||
For the Quarter | Cash Flow | Asset-based | Equipment | Life Science | Corporate Leasing | Total | |
6/30/2021 | $7.6 | $8.7 | $4.0 | $10.2 | $5.1 | $35.6 | |
% Contribution | 21.4% | 24.4% | 11.3% | 28.5% | 14.4% | 100.0% | |
(1) Investment Income Contribution by Business Unit includes interest income/fees from cash flow loans on balance sheet, income/fees from asset-based loans on balance sheet and distributions from SLR-CS, income/fees from equipment financings and distributions from SLR-EF, distributions from KBH, and income/fees from life science loans.
SLR Investment Corp.’s Results of Operations for the Quarter Ended June 30, 2021 compared to the Quarter Ended June 30, 2020.
Investment Income
For the fiscal quarters ended June 30, 2021 and 2020, gross investment income totaled $35.6 million and $28.6 million, respectively. The increase in gross investment income for the year over year three month periods was primarily due to growth in the income producing portfolio.
Expenses
Expenses totaled $20.1 million and $14.4 million, respectively, for the quarters ended June 30, 2021 and 2020. The increase in expenses for the year over year period was primarily due to higher management and incentive fees resulting from a larger income producing investment portfolio on average.
Net Investment Income
The Company’s net investment income totaled $15.5 million and $14.2 million, or $0.37 and $0.34 per average share, respectively, for the fiscal quarters ended June 30, 2021 and 2020.
Net Realized and Unrealized Gain Net realized and unrealized gains for the fiscal quarters ended June 30, 2021 and 2020 totaled $3.0 million and $39.8 million, respectively.
Net Increase in Net Assets Resulting From Operations
For the quarters ended June 30, 2021 and 2020, the Company had a net increase in net assets resulting from operations of $18.6 million and $54.0 million, respectively. For the quarters ended June 30, 2021 and 2020, earnings per average share were $0.44 and $1.28, respectively.
Liquidity and Capital Resources
Unsecured Debt
At June 30, 2021, approximately 67% of the Company’s funded debt, or $446 million, was comprised of fixed rate unsecured notes.
Credit Facilities and Available Capital
At June 30, 2021, the Company had borrowings of $194 million and $30 million, respectively, under its $620 million and $50 million revolving credit facilities. The $194 million drawn on the Company’s $620 million credit facility is comprised of $119 million revolver and $75 million term loan. When including undrawn capital on the SLR-CS, SLR-EF, and KBH non-recourse credit facilities, total available capital is $744 million, subject to borrowing base availability at June 30, 2021.
Leverage
On June 30, 2021, the Company’s net debt-to-equity was 0.73x. SLRC’s current leverage provides a significant cushion to its regulatory asset coverage limit of 2.0x debt-to-equity as well as its target leverage ratio of 0.9x – 1.25x.
Unfunded Commitments
At June 30, 2021, excluding commitments to SLR-CS and SLR-EF, the Company had unfunded commitments of approximately $82.4 million, including $15.8 million of revolver commitments.
Financial Statements and Tables
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share amounts)
June 30, 2021 (unaudited) | December 31, 2020 | |||
Assets | ||||
Investments at fair value: | ||||
Companies less than 5% owned (cost: $795,447 and $832,507, respectively) | $ | 793,029 | $ | 822,298 |
Companies more than 25% owned (cost: $719,600 and $724,428, respectively) | 705,931 | 709,653 | ||
Cash | 42,739 | 8,779 | ||
Cash equivalents (cost: $424,987 and $379,997, respectively) | 424,987 | 379,997 | ||
Dividends receivable | 9,010 | 7,927 | ||
Interest receivable | 6,519 | 6,478 | ||
Receivable for investments sold | 161 | 255 | ||
Prepaid expenses and other assets | 699 | 571 | ||
Total assets | $ | 1,983,075 | $ | 1,935,958 |
Liabilities | ||||
Debt ($670,000 and $677,000 face amounts, respectively, reported net of unamortized debt issuance costs of $4,752 and $5,549, respectively.) | $ | 665,248 | $ | 671,451 |
Payable for investments and cash equivalents purchased | 425,267 | 380,038 | ||
Distributions payable | 17,327 | 17,327 | ||
Management fee payable | 6,890 | 6,535 | ||
Performance-based incentive fee payable | 3,880 | 792 | ||
Interest payable | 3,551 | 3,416 | ||
Administrative services payable | 981 | 1,946 | ||
Other liabilities and accrued expenses | 2,485 | 2,430 | ||
Total liabilities | $ | 1,125,629 | $ | 1,083,935 |
Commitments and contingencies | ||||
Net Assets | ||||
Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 42,260,826 and 42,260,826 shares issued and outstanding, respectively | $ | 423 | $ | 423 |
Paid-in capital in excess of par | 962,481 | 962,481 | ||
Accumulated distributable net loss | (105,458) | (110,881) | ||
Total net assets | $ | 857,446 | $ | 852,023 |
Net Asset Value Per Share | $ | 20.29 | $ | 20.16 |
SLR Investment Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except share amounts)
Three months ended | |||||
June 30, 2021 | June 30, 2020 | ||||
INVESTMENT INCOME: | |||||
Interest: | |||||
Companies less than 5% owned | $ | 22,483 | $ | 20,573 | |
Companies more than 25% owned | 2,886 | 1,339 | |||
Dividends: | |||||
Companies less than 5% owned | — | 10 | |||
Companies more than 25% owned | 9,832 | 6,215 | |||
Other income: | |||||
Companies less than 5% owned | 356 | 485 | |||
Companies more than 25% owned | 15 | 3 | |||
Total investment income | 35,572 | 28,625 | |||
EXPENSES: | |||||
Management fees | $ | 6,890 | $ | 5,971 | |
Performance-based incentive fees | 3,879 | — | |||
Interest and other credit facility expenses | 7,146 | 6,623 | |||
Administrative services expense | 1,375 | 1,148 | |||
Other general and administrative expenses | 763 | 682 | |||
Total expenses | 20,053 | 14,424 | |||
Net investment income | $ | 15,519 | $ | 14,201 | |
| |||||
Net realized gain (loss) on investments and cash equivalents (companies less than 5% owned) | $ | 561 | $ | (24,794) | |
Net change in unrealized gain (loss) on investments, cash equivalents and unfunded commitments and net change in unrealized (gain) loss on debt: | |||||
Companies less than 5% owned | 1,745 | 47,491 | |||
Companies more than 25% owned | 742 | 25,787 | |||
Debt | — | (9,000) | |||
Unfunded commitments | — | 361 | |||
Net change in unrealized gain on investments, cash equivalents, debt and unfunded commitments | 2,487 | 64,639 | |||
Net realized and unrealized gain on investments, cash equivalents, debt and unfunded commitments | 3,048 | 39,845 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 18,567 | $ | 54,046 | |
EARNINGS PER SHARE | $ | 0.44 | $ | 1.28 | |
About SLR Investment Corp.
SLR Investment Corp. is a closed-end investment company that has elected to be treated 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 directly and indirectly in leveraged, U. S. middle market companies in the form of cash flow senior secured loans including first lien and second lien debt instruments and asset-based loans including senior secured loans collateralized on a first lien basis primarily by current assets.
Forward-Looking Statements
Statements included herein may constitute “forward-looking statements,” which relate to future events or our future performance or financial condition. These statements are not guarantees of our future performance, financial condition or results and involve a number of risks and uncertainties, including the impact of COVID-19 and related changes in base interest rates and significant market volatility on our business, our portfolio companies and the global economy. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in our filings with The Securities and Exchange Commission. SLR Investment Corp. undertakes no duty to update any forward-looking statements made herein, unless required to do so by applicable law.
Contact
SLR Investment Corp.
Investor Relations
(646) 308-8770
