• SLR Investment Corp. Announces Quarter Ended June 30, 2022 Financial Results; Reports Net Investment Income of $0.37 Per Share

    Source: Nasdaq GlobeNewswire / 02 Aug 2022 16:18:55   America/New_York

    NEW YORK, Aug. 02, 2022 (GLOBE NEWSWIRE) -- SLR Investment Corp. (NASDAQ: SLRC) (the “Company” or “SLRC”), today reported net investment income of $20.3 million, or $0.37 per share, for the second fiscal quarter of 2022 compared to net investment income, pre-merger related expenses, of $14.8 million, or $0.35 per share, in Q1, 2022. The Company completed its acquisition of SLR Senior Investment Corp. (“SUNS”) on April 1, 2022.

    At June 30, 2022, net asset value (NAV) was $18.53 per share compared to $19.56 per share at March 31, 2022. Approximately one-third of the decline in NAV is the result of merger accounting of the purchase price discount.

    In April 2022, after the closing of the merger with SUNS, SLRC modified the frequency of its distributions from quarterly to monthly. For the quarter ended June 30, 2022, the Company paid monthly distributions totaling $0.41 per share.

    On August 2, 2022, the Company’s Board of Directors (the “Board”) declared a monthly distribution of $0.136667 per share payable on September 1, 2022 to stockholders of record as of August 18, 2022. The specific tax characteristics of the distribution will be reported to stockholders on Form 1099 after the end of the calendar year.

    HIGHLIGHTS:

    At June 30, 2022:
    Comprehensive Investment Portfolio* fair value: $2.7 billion
    Number of portfolio companies: >780
    Net assets: $1.0 billion
    Net asset value per share: $18.53
    Net debt-to-equity: 0.96x
    Available capital**: approximately $850 million, subject to borrowing base availability
     
    Comprehensive Investment Portfolio Activity*** for the Quarter Ended June 30, 2022:
    Investments made during the quarter: $274.8 million
    Investments prepaid and sold during the quarter: $199.3 million
     
    Operating Results for the Quarter Ended June 30, 2022:
    Net investment income: $20.3 million
    Net investment income per share: $0.37
    Net realized and unrealized loss: $35.9 million
    Net decrease in net assets from operations: $15.6 million
    Loss per share: $0.29

    * The Comprehensive Investment Portfolio for the quarter ended June 30, 2022 is comprised of SLRC’s investment portfolio and the full portfolios of SLR Credit Solutions (“SLR-CS”), SLR Equipment Finance (“SLR-EF”), Kingsbridge Holdings, LLC (“KBH”), SLR Business Credit (“SLR-BC”) and SLR Healthcare ABL (“SLR-HC ABL”) owned by the Company (collectively, the Company’s “Commercial Finance Portfolio Companies”), and excludes the Company’s fair value of the equity interests in the Commercial Finance Portfolio Companies and the Company’s loans to SLR-EF and KBH.

    ** Please see Liquidity and Capital Resources below.

    *** Comprehensive Investment Portfolio Activity for the quarter ended June 30, 2022 includes the gross originations through the Company’s Commercial Finance Portfolio Companies and excludes the $624.3 million fair value of the Comprehensive Investment Portfolio acquired in the acquisition of SUNS.

    “The realization of merger synergies, the permanent reduction of the annual base management fee, the announced share repurchase plan, and the increase in yields are expected to accelerate growth in SLRC’s net investment income and ROE. Additionally, our $566 million of unsecured fixed rate debt limits the impact of rising rates on our borrowing cost,” said Michael Gross, Co-CEO of SLR Investment Corp. “As a result, we expect our quarterly NII to fully cover our distributions sooner than we had projected at the time of the merger announcement.”

    “We have over $800 million of available capital to invest and the current market dislocation creates the opportunity to grow our portfolio with investments across our asset classes at higher yields and better terms,” said Bruce Spohler, Co-CEO of SLR Investment Corp. “Our diversified investment strategies focused on senior secured first lien lending are well positioned to thrive in the current volatile market environment.”

    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 3, 2022. All interested parties may participate in the conference call by dialing (800) 245-3047 approximately 5-10 minutes prior to the call, international callers should dial +1 (785) 424-1699. Participants should reference SLR Investment Corp. and Conference ID: SLRC2Q22. A telephone replay will be available until August 17, 2022 and can be accessed by dialing (800) 839-9374. International callers should dial +1 (402) 220 6087. This conference call will also be broadcast live over the Internet and can be accessed by all interested parties through SLR Investment Corp.’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, 2022, SLRC had total originations of $274.8 million excluding the acquisition of the SUNS portfolio and repayments and amortization of $199.3 million across its four core asset classes: sponsor finance, asset-based lending, equipment finance, and life science finance resulting in net originations of $75.5 million to the Comprehensive Investment Portfolio.

    The investment activity of our Comprehensive Investment Portfolio by asset class for the quarter ended June 30, 2022 was as follows:

    Asset ClassSponsor Finance(1)Asset-based
    Lending(2)    		Equipment
    Finance(3)    		Life Science
    Finance    		Total
    Comprehensive Investment Portfolio Activity
    Originations(4)$71.9$98.1$101.2$3.6 $274.8
    Repayments / Amortization$10.4$52.3$90.7$45.9 $199.3
    Net Portfolio Activity$61.5$45.8$10.5$(42.3)$75.5
                

    (1) Sponsor Finance refers to cash flow loans to sponsor-owned companies.
    (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.
    (4) Total Originations does not include the $624.3 million fair value of the Comprehensive Investment Portfolio acquired in the acquisition of SUNS.

    Portfolio Composition

    SLRC’s Comprehensive Investment Portfolio composition by asset class at June 30, 2022 was as follows:

    Comprehensive Investment Portfolio Composition
    (at fair value)    		AmountWeighted Average Asset Yield(4)
     ($mm)%
    Senior Secured Investments

    Cash Flow Loans (Sponsor Finance)

    $

    646.5

    23.9

    %

    8.1

    %
    Asset-Based Loans(1)$857.631.8%10.4%
    Equipment Financings(2)$896.533.2%9.8%
    Life Science Loans$293.710.9%10.4%
    Total Senior Secured Investments$2,694.399.8%9.6%
    Equity and Equity-like Securities$5.50.2% 
    Total Comprehensive Investment Portfolio$2,699.8100.0% 
    Floating Rate Investments(3) $1,744.664.6% 
    First Lien Senior Secured Loans$2,624.897.2% 
    Second Lien Senior Secured Cash Flow Loans$10.00.4% 
    Second Lien Senior Secured Asset-Based Loans$59.52.2% 
          

    (1) 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.
    (2) 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.
    (3) 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.
    (4) 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 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 loan. 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 June 30, 2022 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 June 30, 2022 against the portfolio as of June 30, 2022, annualized. The weighted average yield for the KBH equipment leasing portfolio represents the expected return on equity during 2022.

    The Comprehensive Investment Portfolio is diversified across over 780 unique borrowers in over 100 industries and with an average exposure of $3.5 million, or 0.1% per issuer.

    At June 30, 2022, 99.8% of the Company’s Comprehensive Investment Portfolio was invested in senior secured loans, comprised of 97.2% first lien senior secured loans and approximately 2.6% second lien senior secured loans, of which 0.4% were second lien cash flow loans and 2.2% were second lien asset-based loans.

    The weighted average yield at fair value of the income-producing investments in the Comprehensive Investment Portfolio was 9.6% at June 30, 2022.

    SLR Investment Corp. Portfolio

    Asset Quality

    As of June 30, 2022, on a fair value basis, 99.4% of the Company’s portfolio was performing.

    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, 2022, the composition of our portfolio, on a risk ratings basis, was as follows:

    Internal Investment RatingInvestments at Fair Value ($mm)% of Total Portfolio
    1$374.618.8%
    2$1,580.979.3%
    3$26.91.3%
    4$11.30.6%

    Investment Income Contribution by Asset Class(1)

    For the Quarter
    Ended:    		Sponsor
    Finance    		Asset-based
    Finance    		Equipment
    Finance    		Life Science
    Finance    		Total
    ($mm)
    6/30/2022$12.0 $11.2 $8.7 $10.9 $42.8 
    % Contribution 28.0% 26.1% 20.3% 25.6% 100%
                    

    (1) Investment Income Contribution by Asset Class includes: interest income/fees from Sponsor Finance (cash flow) loans on balance sheet; income/fees from Asset-based loans on balance sheet and distributions from SLR-CS, SLR-BC and SLR-HC ABL; income/fees from equipment financings on balance sheet and distributions from SLR-EF and distributions from KBH; and income/fees from life science loans on balance sheet.

    SLR Investment Corp.’s Results of Operations for the Quarter Ended June 30, 2022 compared to the Quarter Ended June 30, 2021.

    Investment Income

    For the fiscal quarters ended June 30, 2022 and 2021, gross investment income totaled $42.8 million and $35.6 million, respectively. The increase in gross investment income for the year over year three month periods was primarily due to a larger portfolio size as a result of the merger with SUNS, as well as due to an increase in LIBOR and SOFR.

    Expenses

    Net expenses totaled $22.5 million and $20.1 million, respectively, for the fiscal quarters ended June 30, 2022 and 2021. The increase in expenses for the year over year period was primarily due to higher interest expense associated with the increase in LIBOR and SOFR.

    Net Investment Income

    The Company’s net investment income totaled $20.3 million and $15.5 million, or $0.37 and $0.37 per average share, respectively, for the fiscal quarters ended June 30, 2022 and 2021.

    Net Realized and Unrealized Gain (Loss)

    Net realized and unrealized gains (losses) for the fiscal quarters ended June 30, 2022 and 2021 totaled ($35.9) million and $3.0 million, respectively.

    Net Increase (Decrease) in Net Assets Resulting From Operations

    For the quarters ended June 30, 2022 and 2021, the Company had a net increase (decrease) in net assets resulting from operations of $(15.6) million and $18.6 million, respectively. For the quarters ended June 30, 2022 and 2021, earnings (loss) per average share were $(0.29) and $0.44, respectively.

    Liquidity and Capital Resources

    Unsecured Notes Repayment

    On May 8, 2022, the Company repaid in full at maturity the $150.0 million of 2022 Unsecured 5-year Notes which was issued at a blended rate of approximately 4.5%.

    Credit Facilities and Available Capital

    With the closing of the merger, the Company assumed SUNS’ $225 million SPV revolver credit facility and $85 million of senior unsecured notes. At June 30, 2022, the Company had $340.6 million drawn on its $825 million revolving credit facilities, $100 million of term loans and $566 million of unsecured senior notes.

    Including $28.9 million of cash on hand and credit facility capacity at SLRC and its Commercial Finance Portfolio Companies, the Company had access to approximately $850 million of available capital, subject to borrowing base limitations.

    Leverage

    On June 30, 2022, the Company’s net debt-to-equity was 0.96x. 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, 2022, excluding commitments to SLR-CS, SLR-HC ABL, and SLR-EF, the Company had unfunded commitments of $317.2 million, including $35.1 million of revolver commitments.

    Share Repurchase Program

    On May 3, 2022, SLRC’s Board authorized the Company to adopt a program for the purpose of repurchasing up to $50 million of SLRC’s outstanding shares of common stock. Under the repurchase program, the Company may, but is not obligated to, repurchase shares of SLRC’s outstanding common stock in the open market from time to time provided the Company’s compliance with its code of ethics and the guidelines specified in Rule 10b-18 of the Securities Exchange Act of 1934, as amended, including certain price, market volume and timing constraints. In addition, any repurchases will be conducted in accordance with the Investment Company Act of 1940, as amended. Unless amended or extended by our Board, the repurchase program is expected to be in place until the earlier of May 1, 2023 or until $50 million of our outstanding shares of common stock have been repurchased. The timing and number of shares to be repurchased will depend on a number of factors, including market conditions. There are no assurances that the Company will engage in any repurchases. As of June 30, 2022, no repurchases have taken place.

    Subsequent Events

    Distributions

    On July 6, 2022, the Company’s Board declared a monthly distribution of $0.136667 per share payable on August 2, 2022 to stockholders of record as of July 21, 2022.

    On August 2, 2022, the Company’s Board declared a monthly distribution of $0.136667 per share payable on September 1, 2022 to stockholders of record as of August 18, 2022.

    The specific tax characteristics of the distributions will be reported to stockholders on Form 1099 after the end of the calendar year.

    Financial Statements and Tables

    SLR Investment Corp.
    CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
    (in thousands, except share amounts)

     June 30, 2022 (unaudited)
    		 December 31,
    2021
    Assets       
    Investments at fair value:       
    Companies less than 5% owned (cost: $1,248,727 and $985,088, respectively)$1,197,877  $964,379 
    Companies more than 25% owned (cost: $819,161 and $711,865, respectively) 795,833   706,203 
    Cash 28,885   2,935 
    Cash equivalents (cost: $348,892 and $320,000, respectively) 348,819   320,000 
    Dividends receivable 10,643   9,028 
    Interest receivable 8,384   6,521 
    Receivable for investments sold 1,085   1,378 
    Prepaid expenses and other assets 927   567 
    Total assets$2,392,453  $2,011,011 
            
    Liabilities       
    Debt ($1,006,600 and $818,500 face amounts, respectively, reported net of unamortized debt issuance costs/market discount of $8,519 and $6,462, respectively.)$998,081  $812,038 
    Payable for investments and cash equivalents purchased 348,912   320,041 
    Distributions payable 7,486   17,327 
    Management fee payable 6,916   7,435 
    Performance-based incentive fee payable 3,376   1,864 
    Interest payable 7,110   4,492 
    Administrative services payable 956   2,689 
    Other liabilities and accrued expenses 4,463   2,844 
    Total liabilities$1,377,300  $1,168,730 
            
    Net Assets       
    Common stock, par value $0.01 per share, 200,000,000 and 200,000,000 common shares authorized, respectively, and 54,772,651 and 42,260,826 shares issued and outstanding, respectively$548  $423 
    Paid-in capital in excess of par 1,163,713   936,999 
    Accumulated distributable net loss (149,108)  (95,141)
    Total net assets$1,015,153  $842,281 
    Net Asset Value Per Share$18.53  $19.93 
            

    SLR Investment Corp.
    CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
    (in thousands, except share amounts)

     Three months ended
     June 30, 2022
    		 June 30, 2021
    INVESTMENT INCOME:       
    Interest:       
    Companies less than 5% owned$28,855  $22,483 
    Companies more than 25% owned 1,922   2,886 
    Dividends:       
    Companies more than 25% owned 11,083   9,832 
    Other income:       
    Companies less than 5% owned 925   356 
    Companies more than 25% owned (5)  15 
    Total investment income 42,780   35,572 
            
    EXPENSES:       
    Management fees$6,913  $6,890 
    Performance-based incentive fees 4,734   3,879 
    Interest and other credit facility expenses 10,352   7,146 
    Administrative services expense 1,369   1,375 
    Other general and administrative expenses 476   763 
    Total expenses 23,844   20,053 
    Performance-based incentive fees waived (1,358)  — 
    Net expenses 22,486   20,053 
    Net investment income$20,294  $15,519 
            
    REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND CASH EQUIVALENTS:       
    Net realized gain (loss) on investments and cash equivalents (companies less than 5% owned)$(105) $561 
    Net change in unrealized gain (loss) on investments and cash equivalents:       
    Companies less than 5% owned (11,764)  1,745 
    Companies more than 25% owned (24,071)  742 
    Net change in unrealized gain (loss) on investments and cash equivalents (35,835)  2,487 
    Net realized and unrealized gain (loss) on investments and cash equivalents (35,940)  3,048 
            
    NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(15,646) $18,567 
    EARNINGS (LOSS) PER SHARE $(0.29) $0.44 
            

    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

    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: future operating results of SLRC and distribution projections; business prospects of SLRC and the prospects of its portfolio companies; and the impact of the investments that SLRC 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) the expected synergies and savings associated with the two-step merger of SUNS with and into SLRC (the “Merger”); (ii) the ability to realize the anticipated benefits of the Merger, including the expected elimination of certain expenses and costs due to the Merger; (iii) changes in the economy, financial markets and political environment; (iv) risks associated with possible disruption in the operations of SLRC or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic; (v) future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities); (vi) conditions in SLRC’s operating areas, particularly with respect to business development companies or regulated investment companies; (vii) general considerations associated with the COVID-19 pandemic; and (viii) 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
    (646) 308-8770


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