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WhiteHorse Finance, Inc. Announces First Quarter 2022 Earnings Results and Declares Quarterly Distribution of $0.355 Per Share

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Cision

NEW YORK, May 10, 2022 /PRNewswire/ -- WhiteHorse Finance, Inc. ("WhiteHorse Finance" or the "Company") (Nasdaq: WHF) today announced its financial results for the quarter ended March 31, 2022. In addition, the Company's board of directors has declared a distribution of $0.355 per share with respect to the quarter ending June 30, 2022. The distribution will be payable on July 5, 2022 to stockholders of record as of June 20, 2022.

First Quarter 2022 Summary Highlights

  • Net Asset Value of $347.9 million, or $14.99 per share

  • Investment portfolio(1) totaling $800.4 million

  • STRS JV investment portfolio totaling $312.8 million

  • Gross investment deployments(2) of $83.6 million for the first quarter, including new originations of $69.5 million and $14.1 million of fundings for add-ons to existing investments

  • Net investment income of $8.5 million, or $0.368 per share

  • Core net investment income of $7.9 million, or $0.344 per share(3)

  • First quarter distribution of $0.355 per share

Stuart Aronson, WhiteHorse Finance's Chief Executive Officer, commented, "This past quarter was another active period for capital deployments with WhiteHorse successfully deploying a total of $83.6 million, a record amount for any first quarter in our history. Following the exit from our position in Grupo HIMA and the restructuring of PlayMonster, we ended the quarter with no debt investment on non-accrual status, allowing us to focus all of our resources on managing our directly originated assets that make up the majority of our portfolio as well as sourcing future originations. Importantly, we believe our investment portfolio is well-positioned to benefit from a rising interest rate environment as nearly 100% of our debt portfolio is comprised of floating rate debt investments. We are likewise confident, given the modest leverage levels that we underwrite our loans to, that the majority of our portfolio companies will be able to service our debt in a rising interest rate environment. The lending market remains active and competitive, and our pipeline for future deal flow remains strong due in part to our differentiated three-tiered sourcing approach and relationship with the leading H.I.G. platform. This has allowed us to adhere to our disciplined deal sourcing and rigorous underwriting standards to maintain and grow a healthy portfolio, generating robust cash flows to support our dividend and ultimately creating value for our shareholders."

Portfolio and Investment Activity

As of March 31, 2022, the fair value of WhiteHorse Finance's investment portfolio was $800.4 million, compared with $819.2 million as of December 31, 2021. The portfolio as of March 31, 2022 consisted of 111 positions across 68 companies with a weighted average effective yield of 9.2% on income-producing debt investments. The average debt investment size (excluding investments in STRS JV (as defined below)) was $7.7 million with the overall portfolio comprised of approximately 81.0% first lien secured loans, 3.0% second lien secured loans, 3.4% equity and 12.6% in investments in STRS JV. Almost all loans were variable rate investments (primarily indexed to the London Interbank Offered Rate or Secured Overnight Financing Rate) with fixed rate securities representing only 0.4% of loans at fair value. Nearly all performing floating rate investments have interest rate floors.

During the three months ended March 31, 2022, WhiteHorse Finance made investments in six new portfolio companies for a total of $69.5 million, added a total of $14.1 million to existing portfolio companies, and made net fundings of $1.8 million to revolver loans. Proceeds from sales and repayments totaled approximately $45.1 million for the three months ended March 31, 2022, driven by five full realizations in LHS Borrower, LLC, DCA Investment Holding, LLC, Epiphany Business Services, LLC, AST-Applications Software Technology LLC and Grupo HIMA San Pablo, Inc.

In addition to the transactions discussed above, during the three months ended March 31, 2022, WhiteHorse Finance transferred assets comprised of six new portfolio companies, five add-ons and the remaining portion of three previously transferred deals totaling $82.7 million to STRS JV in exchange for a net investment in STRS JV of $25.0 million as well as cash proceeds of $57.7 million.

WHF STRS Ohio Senior Loan Fund LLC

As of March 31, 2022, STRS JV's portfolio totaled $312.8 million, consisted of 33 portfolio companies and had a weighted average effective yield of 7.9% on its portfolio.

Results of Operations

For the three months ended March 31, 2022, the Company's net investment income was approximately $8.5 million, compared with approximately $7.6 million for the same period in the prior year, representing an increase of approximately 11.8%. The increase in net investment income for the year-over-year period was primarily attributable to higher investment income from interest income and STRS JV due to a larger portfolio size in both the Company and STRS JV. This was partially offset by higher interest expense incurred due to higher leverage balances. For the three months ended March 31, 2022, the Company's investment in STRS JV generated an annualized, gross investment yield of approximately 12.0%.

For the three months ended March 31, 2022, core net investment income(3) was $7.9 million, or $0.344 per share, compared with $7.7 million, or $0.375 per share for the same period in the prior year.

For the three months ended March 31, 2022, WhiteHorse Finance reported a net realized and unrealized loss on investments and foreign currency transactions of $2.8 million. This compares with a net realized and unrealized gain on investments and foreign currency transactions of $0.6 million for the three months ended March 31, 2021. The decrease for the year-over-year period was primarily attributable to net losses generated from Grupo HIMA San Pablo, Inc. realization.

WhiteHorse Finance reported a net increase in net assets resulting from operations of approximately $5.7 million for the three months ended March 31, 2022, which compares with a net increase of $8.2 million the three months ended March 31, 2021.

WhiteHorse Finance's net asset value was $347.9 million, or $14.99 per share, as of March 31, 2022, compared with $349.8 million, or $15.10 per share, as of December 31, 2021.

Liquidity and Capital Resources

As of March 31, 2022, WhiteHorse Finance had cash and cash equivalents of $21.3 million, compared with $22.5 million as of December 31, 2021, inclusive of restricted cash. As of March 31, 2022, the Company also had $51.2 million of undrawn capacity under its revolving credit facility.

Distributions

The Company's Board of Directors has declared a distribution of $0.355 per share with respect to the quarter ending June 30, 2022. The distribution will be payable on July 5, 2022 to stockholders of record as of June 20, 2022.

On March 3, 2022, the Company declared a distribution of $0.355 per share for the quarter ended March 31, 2022, consistent with distributions declared for the thirty-eighth consecutive quarter since the Company's initial public offering. The distribution was paid on April 4, 2022 to stockholders of record as of March 25, 2022.

Distributions are paid from taxable earnings and may include return of capital and/or capital gains. The specific tax characteristics of the distributions will be reported to stockholders on Form 1099-DIV after the end of the calendar year and in the Company's periodic reports filed with the Securities and Exchange Commission.

Conference Call

WhiteHorse Finance will host a conference call to discuss its first quarter results for the period ended March 31, 2022 at 12:00 p.m. ET on Tuesday, May 10, 2022. To access the teleconference, please dial 866-518-6930 (domestic and international) approximately 10 minutes before the teleconference's scheduled start time and reference Conference ID #WHFQ122. Investors may also access the call on the investor relations portion of the Company's website at www.whitehorsefinance.com.

If you are unable to access the live teleconference, a replay will be available beginning approximately two hours after the call's completion through May 17, 2022. The teleconference replay can be accessed by dialing 800-938-2243 (domestic and international). A webcast replay will also be available on the investor relations portion of the Company's website at www.whitehorsefinance.com.

About WhiteHorse Finance, Inc.

WhiteHorse Finance is a business development company that originates and invests in loans to privately held, lower middle market companies across a broad range of industries. The Company's investment activities are managed by H.I.G. WhiteHorse Advisers, LLC, an affiliate of H.I.G. Capital, LLC, ("H.I.G. Capital"). H.I.G. Capital is a leading global alternative asset manager with over $47 billion of capital under management(4) across a number of funds focused on the small and mid-cap markets. For more information about H.I.G. Capital, please visit http://www.higcapital.com. For more information about the Company, please visit http://www.whitehorsefinance.com.

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Statements other than statements of historical facts included in this press release may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. 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 filings with the Securities and Exchange Commission. The Company undertakes no duty to update any forward-looking statement made herein. All forward-looking statements speak only as of the date of this press release.

(1) Includes investments in WHF STRS Ohio Senior Loan Fund LLC ("STRS JV"), an unconsolidated joint venture, totaling $100.8 million, at fair value.

(2) Excludes investments made in STRS JV.

(3) "Core net investment income" is a non-GAAP financial measure. The Company believes that core net investment income provides useful information to investors and management because it reflects the Company's financial performance excluding (i) the net impact of costs associated with the refinancing of the Company's indebtedness, (ii) the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and (iii) excise and other income taxes related to such net realized gains and losses (net of incentive fees). The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Additional information on core net investment income and a reconciliation of core net investment income to its most directly comparable GAAP financial measure, net investment income, are set forth in Schedule 1 hereto.

(4) Based on total capital commitments managed by H.I.G. Capital and affiliates.

SCHEDULE 1

As a supplement to GAAP financial measures, the Company has provided information relating to core net investment income, which is a non-GAAP measure. This measure is provided in addition to, but not as a substitute for, net investment income determined in accordance with GAAP. The Company's non-GAAP measures may differ from similar measures by other companies, even if similar terms are used to identify such measures. Core net investment income represents net investment income adjusted to exclude the net impact of costs associated with the refinancing of the Company's indebtedness, the accrual of the capital gains incentive fee attributable to net realized and unrealized gains and losses, and excise or other income taxes related to such net realized gains and losses (net of incentive fees). There were no excise or other income taxes related to net realized gains and losses nor did the Company incur any costs with refinancing any of its indebtedness for the quarters ended March 31, 2022 and March 31, 2021.

The following table provides a reconciliation of net investment income to core net investment income for the three months ended March 31, 2022 and March 31, 2021 (in thousands, except per share data):




















March 31, 2022



March 31, 2021




Amount



Per Share



Amount



Per Share








Amounts







Amounts


Net investment income


$

8,539



$

0.368



$

7,600



$

0.370


Net impact of costs associated with refinancing of indebtedness



-




-




-




-


Accrual for capital gains incentive fee



(566)




(0.024)




114




0.005


Net impact of excise tax expense related to net realized gains and losses



-




-




-




-


Core net investment income


$

7,973



$

0.344



$

7,714



$

0.375


WhiteHorse Finance, Inc.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)





March 31, 2022



December 31, 2021




(Unaudited)




Assets







Investments, at fair value







Non-controlled/non-affiliate company investments


$

686,253


$

736,727

Non-controlled affiliate company investments



13,342



6,874

Controlled affiliate company investments



100,776



75,607

Total investments, at fair value (amortized cost $798,251 and $831,960, respectively)



800,371



819,208

Cash and cash equivalents



2,454



12,185

Restricted cash and cash equivalents



18,262



9,814

Restricted foreign currency (cost of $550 and $464, respectively)



556



469

Interest and dividend receivable



6,767



7,521

Amounts receivable on unsettled investment transactions



7,916



Escrow receivable



1,309



515

Prepaid expenses and other receivables



879



1,307

Receivable for common stock issued



247



Total assets


$

838,761


$

851,019








Liabilities







Debt


$

467,857


$

475,958

Distributions payable



8,234



8,222

Management fees payable



3,952



3,766

Incentive fees payable



5,445



7,958

Interest payable



3,548



2,087

Accounts payable and accrued expenses



1,136



2,438

Advances received from unfunded credit facilities



666



839

Unrealized depreciation on foreign currency forward contracts



4



Total liabilities



490,842



501,268








Commitments and contingencies














Net assets







Common stock, 23,211,413 and 23,162,667 shares issued and outstanding, par value
$0.001 per share, respectively, and 100,000,000 shares authorized



23



23

Paid-in capital in excess of par



339,856



339,161

Accumulated earnings



8,040



10,567

Total net assets



347,919



349,751

Total liabilities and total net assets


$

838,761


$

851,019

Number of shares outstanding



23,211,413



23,162,667

Net asset value per share


$

14.99


$

15.10








WhiteHorse Finance, Inc.
Consolidated Statements of Operations
(Unaudited)
(in thousands, except share and per share data)





Three months ended March 31,




2022



2021

Investment income







From non-controlled/non-affiliate company investments







Interest income


$

16,741


$

14,812

Fee income



462



771

Dividend income



89



44

From non-controlled affiliate company investments







Interest income



60



Dividend income



131



250

From controlled affiliate company investments







Interest income



1,127



719

Dividend income



1,424



1,374

Total investment income



20,034



17,970

Expenses







Interest expense



4,774



3,802

Base management fees



3,952



3,344

Performance-based incentive fees



1,427



2,042

Administrative service fees



171



171

General and administrative expenses



947



821

Total expenses



11,271



10,180

Net investment income before excise tax



8,763



7,790

Excise tax



224



190

Net investment income after excise tax



8,539



7,600








Realized and unrealized gains (losses) on investments and foreign currency transactions







Net realized gains (losses)







Non-controlled/non-affiliate company investments



(18,184)



8,160

Non-controlled affiliate company investments





Foreign currency transactions



(281)



1

Foreign currency forward contracts





Net realized gains (losses)



(18,465)



8,161

Net change in unrealized appreciation (depreciation)







Non-controlled/non-affiliate company investments



17,117



(6,975)

Non-controlled affiliate company investments



(1,621)



(434)

Controlled affiliate company investments



169



(120)

Translation of assets and liabilities in foreign currencies



(28)



(62)

Foreign currency forward contracts



(4)



(1)

Net change in unrealized appreciation (depreciation)



15,633



(7,592)

Net realized and unrealized gains (losses) on investments and foreign currency transactions



(2,832)



569

Net increase in net assets resulting from operations


$

5,707


$

8,169








Per Common Share Data







Basic and diluted earnings per common share


$

0.25


$

0.40

Dividends and distributions declared per common share


$

0.36


$

0.36

Basic and diluted weighted average common shares outstanding



23,190,656



20,551,565

WhiteHorse Finance, Inc.
Consolidated Schedule of Investments (Unaudited)
March 31, 2022
(in thousands)